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Coverage Pointers - Volume XIII, No. 8

Dear Coverage Pointers Subscribers:

Summer really came to an end for me as I closed up my Lake Erie, Ontario beach house and moved back to NY.  For those who know the geography, my commute to the office from Canada was about 17 minutes in each direction.  It is six months here and six months there and now I begin to count the days to my move back to the beach on Friday the 13th of April -- a lucky day, indeed.

For new subscribers, understand that this missive is only the cover letter to the issue.  Coverage Pointers is attached and past issues can be found on the Hurwitz & Fine, P.C. website, the address you’ll  find in the signature block at the bottom of this letter.

Upcoming Educational Program:

I am delighted to be joining Tom Segalla, from Goldberg, Segalla, John Fitts from Progressive, and moderator Steve Barney, from Plunkett & Cooney, on the “Attacks on Privileges” panel in the Federation of Defense & Corporate Counsel’s I3 – Insurance Industry Institute in New York City:

FDCC’s Insurance Industry Institute
“Addressing Industry-Wide Challenges in Unsettled Times”
November 16-18, 2011
New York Athletic Club
New York, NY

Institute Topics

The Changing Regulatory Landscape
Medicare Secondary Payer Act Compliance Issues
Protecting Privileges in a Globalized World
Attacks on Privileges in the United States
Big Developments in Small Policies - Micro-Insurance and What It Means for the Industry
The Erosion of Borders in Insurance Claims
Privacy - Does It Exist in the 21st Century - and What Does Its Erosion Mean for Insurers?

Click here for brochure and registration material

NO FAULT RED ALERT:  Thursday, October 13:
Court of Appeals Adheres to the Letter of the No-Fault Regulation: The Medical Provider’s Submission of Proof of Claim within 45 Days Does Not Satisfy the 30-Day Notice of Accident Requirement

We have all heard the saying that the assignee stands in the shoes of its assignor.  In the no-fault arena,  a denial of payment to a medical services provider based on its assignor’s, the eligible injured person’s, failure to attend two scheduled independent medical examinations will generally be upheld.  The assignor’s breach of the policy entitles the no-fault insurer to deny all benefits not only to the eligible injured party, but also to those standing in his or her shoes.

Now, this week the New York Court of Appeals has reiterated these well-known precepts in New York & Presbyterian Hospital v. Country Wide Insurance Co. (for those interested, in the lower courts the action was entitled Wyckoff Heights Medical Center aao Ramona Rodriguez, New York & Presbyterian Hospital aao Joaquin Benitez v. Country Wide Insurance Co., 71 AD3d 1009 [2d Dept 2010]).  This is an important decision for those of us who practice in the no-fault area not only because the Court adheres to the exact language of the regulations, but because it additionally makes crystal clear that the 30-day notice of accident provision is “carved in stone.”  In my humble opinion, the Court hit the nail on the head.

The summary and full decision is in the attached issue.

Law School for Insurance Professionals

I was really fortunate to be asked by my good friend, and insurance coverage maven, Elizabeth Fitzpatrick from Lewis Johs to join her on the dais at the Long Island session of the NYS Bar’s program, Law School for Insurance Professionals with her talented partner Fred Johs.  Beth was the state wide chair of the program and spoke on bad faith issues in Long Island.  She has long been my “go-to” person on Long Island if I need help or local counsel.  What a treat to meet about 50 claims professionals and attorneys, many of whom I have known by e-mail contact but never met and to renew acquaintances with old friends.

It was particularly special to finally meet and shake hands with guru of UM/SUM coverage, one of the most prolific insurance writers in the state, Jonathan Dachs of the Shayne Dachs firm in Mineola.  Jonathan, and his father Norman, have long written the Insurance Law column in the New York Law Journal and are known by lawyers and courts alike, for their insightful and scholarly approach to coverage issues.  Jonathan and I have been e-mail friends for year but we had never met before.

And a special welcome to the newest Coverage Pointers subscribers, some of whom was in the audience in Long Island.

It’s always nice to come out ahead on a coverage decision at the Appellate Division.  See: Farm Family v. Brady Farms in the issue attached.

Resting in Peace

This week marks the ninth anniversary of the passing of our good friend, my mentor and our firm’s co-founder, Sheldon Hurwitz.  Shelly loved insurance and trial law, loved our clients, loved education, loved our profession and inspired us all.  He got such a kick out of the concept of an electronic coverage newsletter – and we knew of NONE that existed at that time -- when we crafted the first issue of Coverage Pointers for our 25 original subscribers 12+ years ago.  His lessons of excellence and professionalism still guide all that we do here at H&F.  

From Audrey Seeley, the No Fault Queen:

It is finally fall in Western New York.  The leaves are changing rapidly and it is getting cold enough to start the fireplace at night. 

The courts, which were busy all summer, are pretty quiet.  Enjoy the few decisions this edition and thank you to those who contacted me recently with your use and operation questions after the NBI seminar.  This is one of my favorite topics and I always enjoy listening to the fact pattern presented in the discussion.  As many know, changing one fact or omitting one fact can completely change the analysis on this issue.

I look forward to catching up with some of you at the DRI Annual meeting the end of this month in Washington, DC.  If you have not signed up yet it is not too late.  Send me an email if you need the information. 

Also, early registration for the DRI Insurance Law Committee’s, Insurance Coverage and Practice Symposium from December 15-16 in New York is still open.  Two topics of interest that are being discussed at this program are the top 10 practice tips for a national insurance coverage practice and the top property and casualty coverage and claims decisions in 2011.  The Insurance Law Committee’s Chair, Tony Zelle, Esq. of Zelle McDonough & Cohen, LLP will be moderating a panel of two adjusters from Ironshore Inc. and Chartis Claims, Inc. discussing the top property and casualty coverage and claims decisions this year.  Ray DeMeo of Ironshore will sit on this panel and supervised the property litigation for the World Trade Center as well as oversaw claims arising out of Hurricane Katrina while he was at Travelers Insurance.  Andrew Nadolna of Chartis is also participating on this panel.  Mr. Nadolna spoke at this program before and his wit and common sense approach to complex litigation commanded another presentation.  Mr. Nadolna is responsible for asbestos and environmental claims as well as health care professional liability and excess workers’ compensation matters at Chartis. 

The Insurance Law Committee’s Vice Chair, Mike Marick, Esq. of Meckler Bulger Tilson Marick & Pearson LLP, a dynamic speaker who has a national coverage practice, will provide the top 10 issues national coverage claims personnel and litigators face in navigating through the diverse, complex, and often mindboggling rules and procedures in insurance coverage.

If you would like to sign up for the conference and need a brochure sent to you please send me an email at [email protected]

Audrey
 
Book Review – Reprise

In our March 4, 2011 edition, I reviewed a very handy reference book on insurance coverage issues.  Because I kept that book by my desk and a call came in on an issue covered very well by that publication, I am reprinting the book review with a thanks to the editors:

General Liability Insurance Coverage - Key Issues in Every State

Authors: Randy Maniloff and Jeffrey Stempel

Publisher: Oxford University Press

You and I get the phone calls and e-mails all the time. The random coverage question about our state or others: Does Texas follow the "four corners" rule or allow "extrinsic evidence" when considering the duty to defend? What's the current state of the law in Oklahoma relating to the insured's right to independent counsel? Can defense costs be recouped in Pennsylvania? Is New York an "injury-in-fact" state or a "triple trigger" jurisdiction? Is emotional injury a "bodily injury" in South Carolina? Is prejudice required to sustain a late notice disclaimer in California?

Sometimes, you happen to know the answer and you achieve immediate hero status. However, more often than not, you may know the local rule in your own jurisdiction (or you may not) but you have no idea whether that other state follows the same approach or take an entirely different tact.

So, you get on the phone and use a lifeline or as they say in Cash Cab¸ use a telephone or office shout-out and hope that the individual you contact is just a bit more knowledgeable than you. What you would really rather do is reach for that coverage handbook on the shelf next to you to get both the answer to the question and the back-up citation to the statute or court decision that provides support.

Well, thanks to the good work of Randy Maniloff, a nationally respected coverage lawyer with the Philadelphia firm of White & Williams, LLP and scholar Jeffrey W. Stempel, a Professor of Law at the William S. Boyd School of Law, University of Nevada Las Vegas, that resource is now available.

General Liability Insurance Coverage - Key Issues in Every State, published by Oxford University Press, is a coverage compendium, a 500-page "first place to look" handbook that provides 50-state surveys on key issues of general liability coverage. Twenty-one chapters in length, you'll find the rules relating to "choice of law," late notice defenses, faulty workmanship as an occurrence, recovery of attorney's fees, coverage triggers and bad faith standards, just to name a few. Short, crisp and well-supported summaries of each state's positions are provided in a well-indexed and organized soft-covered offering.

For each state and each coverage issue, you'll find a one paragraph, concise summary of the current state of the law with reference to the key appellate cases, if that state's appellate courts have so ruled. If not, and the authors have found a lower court decision. For example, I wasn't aware of a 1993 Southern District of NY opinion allowing recoupment of defense costs when specifically reserved, but I'll use that citation the next time the issue comes to the forefront.

Priced at $125 and available on the Oxford University Press website, you'll make up the cost the first time you can avoid a LEXIS or WESTLAW search for that one important citation.

Editor’s Note:  I have been advised that the second edition of the publication is schedule for release in early February 2010.  It adds 800 new cases, a 40% increase.

From the Liening Tower of Perley:

As we approach All Hallow’s Eve, I offer an update in our never-ending quest to sleep through the night, unhaunted by the Marley’s Ghost of unresolved Medicare Secondary Payer issues.  I continue to look for creative and effective approaches to untie this Guardian Knot.  Look for my article in the attached issue. Let me know your thoughts and suggestions before I add a third unrelated metaphor to this paragraph.

Michael F. Perley
[email protected]

One Hundred Years Ago Today

US Supreme Court Justice John Marshall Harlan passed away. Not to be confused with the grandson who served on the Court as well, Justice Harlan was appointed to the high court by Rutherford B. Hayes and served from 1877–1911.

A man of strong and independent convictions and, on the whole, a strict constructionist, Harlan became known as a dissenter. A firm defender of civil liberties and civil rights, Justice Harlan dissented vigorously in Plessy v. Ferguson (1896), in which the Supreme Court enunciated the “separate but equal” doctrine justifying segregation.

In Plessy, the US Supreme Court upheld a Louisiana statute that required separate but equal accommodations in railroad cars in a 7-1 vote.  That statute also prohibited whites from entering the cars where the African American passengers were riding and vice-versa. In his vigorous dissent, Harlan eloquently argued in favor of civil rights:

In respect of civil rights common to all citizens, the Constitution of the United States does not, I think, permit any public authority to know the race of those entitled to be protected in the enjoyment of such rights. Every true man has pride of race, and, under appropriate circumstances, when the rights of others, his equals before the law, are not to be affected, it is his privilege to express such pride and to take such action based upon it as to him seems proper. But I deny that any legislative body or judicial tribunal may have regard to the race of citizens when the civil rights of those citizens are involved. Indeed, such legislation as that here in question is inconsistent not only with that equality of rights which pertains to citizenship, National and State, but with the personal liberty enjoyed by everyone within the United States

One Hundred Years Ago Today:

Syracuse Herald
October 14, 1911

ASK DIVORCES FOR WIVE’S EXTRAVAGANCES

Pittsburgh, Pa., Oct. 14.—The season for fall divorces opened with 100 women and 98 men asking for divorces. Exactly fifty of the men asked divorces on the ground of extravagance. Nearly all coincided in the view that their wives spent too much money on fashionable gowns and hats.

"Someone ought to murder these Paris freaks who are continually creating fashions and subsequently making the poor men of America. My wife has bought forty-four hats and twenty-nine gowns in one year,” dramatically declared Harry Worthlngton in asking for a divorce from his wife Pauline.

One Hundred Years Ago: New York State Factory Investigating Commission Established

The New York State Factory Investigating Commission was established following the Triangle Shirtwaist Factory fire of March 25, 1911.

This Commission was "to investigate the conditions under which manufacturing is carried on." The legislature gave it unusual powers and scope. The commission had the power to summon witnesses to testify under oath and had a mandate to look into fire hazards, unsanitary conditions, occupational diseases, and effectiveness of factory inspection, tenement manufacturing and many other matters. At first the investigation was limited to the nine largest cities in the state, but that restriction was later lifted. Based on its findings, the commission was to recommend protective programs. Originally created for only one year, the commission was extended three years beyond that, but its last two years were devoted to matters other than safety and health.

The New York commission was by far the broadest, most thorough study of workers' safety and health done up to that point. It was comparable to the Pittsburgh Survey, only covering an entire state. Through the commission, in the words of reformer Frances Perkins, the flames of the Triangle fire were magnified into "a torch that lighted up the industrial scene."

Besides a total of 20 laws providing stricter regulation of occupational safety and health conditions, the Factory Investigating Commission fostered a greater public awareness of the nature and extent of the problem. Many of the manufacturers investigated had not known about conditions in their own plants. Public authorities in several cities were prompted to do investigations of their own. As the commission put it, "A general awakening has taken place throughout the State." As a delayed result of the commission's work, in 1919 the state adopted an industrial commission to set safety and health rules administratively. Frances Perkins was named to this body. Years later, Perkins termed the Factory Investigating Commission a "turning point" in American attitudes toward social responsibility."

In This Week’s Issue of Coverage Pointers:

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

  • Collision With Cardboard Box That Flies Off Unidentified Motor Vehicle Is Not the Kind of Physical Contact That Permits an Uninsured Motorist Claim
  • Excess Carrier Is Estopped from Denying Coverage Three Years After Getting Notice and Helping to Coordinate Defense, When It Could Have Learned That Its Policy Did Not Apply by Asking to Review Primary Policy
    Notice of an Accident Given to an Agent, Rather Than a Broker, Sufficient to Be Considered Notice to the Insurer, Even Though Agent Was Told Not to Notify Carrier.  Issues of Fact Exist on Questions of Residency and Timeliness of Claim and Presence of Prejudice
  • Carrier’s Failure to Deny Coverage Based on Late Reporting of Accident by Injured Party Defeats Effective Disclaimer
    Employee Exclusion in Auto Policy Did Not Exclude Contribution Claims, and Even if It Did, It Was Untimely Raised
  • Application to Stay UM Arbitration Must Be Filed Within 20 Day of Original Notice of Intention
  • Default Entered in Declaratory Judgment Action
  • Claim for Uninsured Workers Compensation Benefits Is Not a Claim for “Bodily Injury” -- A Win for the Good Guys
  • Company Required to Provide Liability Coverage and Indemnity Becomes “Insurer” for Anti-Subrogation Considerations and Amount of Self-Insured Retention
  • In Agent E&O Claim, Question of Fact About “Course of Dealing”

 

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

[email protected]

  • Failure to Perform Range of Motion Testing at the Time of the Accident 8 Years Earlier Defeats Attempt to Connect Present-Day Injuries With the Accident
  • Defendant Wins Reversal Where Plaintiff Fails to Explain Pre-Existing Conditions

 

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

Searching for Safe Harbors from the Medicare Storm

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

COURT OF APPEALS

  • Court of Appeals Adheres to the Letter of the No-Fault Regulation: The Medical Provider’s Submission of Proof of Claim within 45 Days Does Not Satisfy the 30-Day Notice of Accident Requirement

ARBITRATION

  • Lack of Discussion Regarding Diagnostic Testing and Applicant’s Job Insufficient to Support Denial of Lost Wages
  • Both Insurers’ Denials of Chiropractic Services from Two Accidents Upheld

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

Property

  • Snow, Rain or Sleet Damage NOT Covered Unless Driven by Wind; Bowing and Sagging Ceiling NOT Collapse Under the Policy

 

Potpourri

  • Subsequent Third-Party Action Dismissed on Res Judicata Grounds Where Plaintiff’s Earlier First-Party Suit Was Dismissed on Summary Judgment
  • No Depositions of an Expert Absent “Special Circumstances”
  • Installation of Telephone Wires Qualifies as “Alteration” Under Labor Law § 240(1); Also “Construction” for Labor Law § 241(6) Purposes

 

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

  • OGC Opinion No. 11-09-02
  • Medicare Secondary Payer (MSP)

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

  • Can the Retained Limit Provision Be Enforced Where Underlying Layer Is an SIR and the Insured Is Bankrupt?

 

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

  • How Do You Calculate a SUM Award?
  • When the Insured Cancelled her Cruise, she was not “Sick” as that Term was Used In Her Travel Protection Insurance
  • Construction Manager’s Suit Is Dismissed Against General Contractor’s Excess Carrier
  • Is a Claims File Discoverable In a SUM Action?
  • Injured Homeowner’s Action Against Contractor’s Insurer Dismissed

 

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

Legal Liability for Drug Testing

All for now.  Best wishes.

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”
The Liening Tower of Perley

 Audrey’s Angles on No Fault
Peiper on Property and Potpourri
Cassie’s Capital Connection
Fijal’s Federal Focus
Earl’s Pearls
Across Borders

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

10/13/11         State Farm Mutual Automobile Insurance Company v. Beddini
Appellate Division, First Department
Collision With Cardboard Box That Flies Off Unidentified Motor Vehicle Is Not the Kind of Physical Contact That Permits an Uninsured Motorist Claim
Beddini and another were riding on a motor scooter behind a pickup truck operated by an unidentified driver.  As fate would have it, a cardboard box, measuring five feet by four feet, flew off the truck and lodge in the motor scooter’s wheel.  The cycle operator’s sustained serious injuries when they were ejected from their vehicle and thereafter fled an uninsured motorists (UM) claim under Beddini’s policy, seeking arbitration.  New York requires physical contact between the unidentified vehicle and the claimant’s vehicle for UM coverage

In a 1991 Court of Appeals case, the claimant was killed when a tire and rim from an unidentified vehicle struck the claimant's vehicle, causing it to crash. The Court of Appeals held that physical contact occurs "when the accident originates in collision with an unidentified vehicle, or an integral part of an unidentified vehicle."  As the tire and rim were essential to the operation of the truck, UM coverage was available.

However, a cardboard box is not an integral part of the pickup truck. Accordingly, respondents' collision with the box does not constitute the type of physical contact required to impose uninsured motorist coverage

10/13/11         Yoda, LLC v. National Union Fire Ins. Co. of Pittsburgh, PA
Appellate Division, First Department
Excess Carrier Is Estopped from Denying Coverage Three Years After Getting Notice and Helping to Coordinate Defense, When It Could Have Learned That Its Policy Did Not Apply by Asking to Review Primary Policy
Yoda and Riverhead, the general contractor and owner of a construction site, seek coverage under an excess insurance policy issued by defendant National Union to their subcontractor, Queens Stainless, with respect to an underlying Labor Law action. Their insurer, United National, seeks a declaration that its coverage follows that of National Union.

The National Union excess policy follows the form of a commercial general liability policy, issued by First Specialty to Queens Stainless, that provides coverage to its insured for damages arising from bodily injury, and excludes coverage for liability arising from a contractual "agreement," except if the insured has assumed liability for such damages under an "insured contract," such as the subcontract between Yoda and Queens Stainless.

The First Specialty policy also provides that its employer's liability exclusion "does not apply to liability assumed by the insured under an insured contract,' and requires the insurer to defend an indemnitee of the insured in certain circumstances. 

In 2003, Yoda tendered the defense and indemnity in the underlying action to Queens Stainless and its insurers, and First Specialty accepted the tender. National Union actively participated in and monitored the litigation for the next three years, without issuing any disclaimer. In 2006, First Specialty tendered of its policy to National Union and National Union accepted and it attended the unsuccessful mediation.  Still later, and only after Yoda and Riverhead were found liable for the Labor Law violations, and the damages trial was scheduled, did National Union disclaim coverage, asserting that it had just "discovered" that the certificate of insurance provided to it by Yoda, which names Yoda and Riverhead as additional insureds, was false.

National Union's failure to timely disclaim coverage after tender was made by a party claiming indemnification from its insured, as required by Insurance Law § 3420(d), precludes it from disclaiming based on the employer's liability exclusion but does not create coverage if the policy did not intend to provide it.

Yoda argued that National Union was estopped from denying coverage because of their control of the litigation and the resulting prejudice to its insureds. Had National Union denied coverage, Yoda argues, Yoda would have impleaded Queens Stainless and triggered its coverage.

National Union claimed that it had been misled by Yoda's tender of a certificate of insurance showing coverage. The court rejected that argument, noting that National Union could have looked at the primary policy in the three years it was involved.  National Union is estopped from denying that it provides excess coverage for Yoda and Riverhead in the underlying action.

However, United National is not entitled to summary judgment against National Union on the issue of priority of coverage inasmuch as issues of fact exist as to whether United National reasonably relied to its detriment on National Union's conduct.
Editor’s Note: “You must feel the Force around you; here, between you, me, the tree, the rock, everywhere, yes, even between the land and the ship.” Oh, that was the OTHER Yoda.

10/13/11         Waldron v. New York Central Mutual
Appellate Division, Third Department
Notice of an Accident Given to an Agent, Rather Than a Broker, Sufficient to Be Considered Notice to the Insurer, Even Though Agent Was Told Not to Notify Carrier.  Issues of Fact Exist on Questions of Residency and Timeliness of Claim and Presence of Prejudice

William Waldron purchased a policy that provided $300,000 in supplementary uninsured/underinsured (SUM) coverage from NY Central Mutual (NYCM) through the Knox Agency.  On February 24, 2003, Alexandra Waldron, William’s daughter, a 22-year-old college student who had not been listed as a member of the household on the insurance policy, sustained serious injuries while in Florida when the motorcycle on which she was a passenger was struck by an automobile that crossed into the motorcycle's lane. Two months later, in late April 2003, Dad first advised Knox of the accident, but he indicated to Knox that he did not want to file a claim with NYCM at that time. Two months later, he changed his mind and asked Knox to file a claim with NYCM. The claim was filed and NYCM denied coverage on the grounds of late notice and that Alexandra was not an insured under the policy.

Plaintiffs commenced this action seeking a declaratory judgment that Alexandra Waldron was entitled to SUM coverage.

The policy in this case was issued before January 17, 2009 so there is no consideration of whether or not the “prejudice” rules apply to this case. Even before the statutory amendment, when an insurer received notice of an accident in a timely fashion, the insurer could not properly disclaim a late SUM claim absent a showing of prejudice under Rekemeyer v State Farm Mut. Auto. Ins. Co,

The court concludes that the notice given to Knox in late 2003 was notice to NYCM because Knox was an agent of the insurer and not a broker.

As to the timeliness of the notice, it being given 60 days after the accident (well beyond the 30 day period specified in the policy endorsement), William had an excuse for his delay.  His daughter had sustained very serious injuries in the accident and that he had immediately left New York to be with his daughter in Florida. Even two months after the accident when he notified Knox, his daughter was still hospitalized and there was continuing concern that she might lose a leg as a result of her injuries. Although William Waldron indicated to Knox — ostensibly because of concern of a premium increase — not to file a claim with NYCM, the agency relationship between Knox and NYCM resulted in the notice to Knox constituting notice to NYCM. The evidence is sufficient to raise a factual issue as to whether the delay of about one month beyond the 30-day notice requirement was sufficiently justified under the circumstances.

As to the SUM claim, notice of that claim must be made “as soon as reasonably possible” and NYCM failed to establish that the July 2004 notice of a SUM claim was untimely as a matter of law and that it was prejudiced.

As to whether or not Alexandra was an insured, she would need to establish that she was a resident of her parents’ household.  Although she was renting an apartment off campus while attending college, the record reflects that she maintained a bedroom in her parents' house, where she kept clothing, visited on weekends and lived on school holidays and semester breaks. Moreover, her college considered her parents' address to be her permanent one and she retained her parents' address for voting and tax purposes.

10/07/11         National Grange Mut. Ins. Co. v. Croyle
Appellate Division, Fourth Department
Carrier’s Failure to Deny Coverage Based on Late Reporting of Accident by Injured Party Defeats Effective Disclaimer
Hoffert sued Croyle, a construction manager, seeking damages under the Labor for a June 26, 2008, during the course of his employment on a construction project for which Croyle was the construction manager. Croyle was served on November 29, 2008, along with a letter from Hoffert's attorney requesting that Croyle deliver the pleadings to its liability insurance carrier.  

Croyle's liability insurance carrier, National Grange, received the pleadings from Croyle’s insurance agent on December 9, 2008.  Hoffert's attorney thereafter communicated with a representative of plaintiff, both orally and in writing, concerning the underlying action. National Grange, the carrier send a letter to Croyle disclaiming coverage based on Croyle’s untimely notice of the accident. On January 5, 2009, Hoffert's attorney requested plaintiff to reconsider its decision in light of Hoffert's notice to plaintiff.  Grange then commenced this declaratory judgment action to sanction its disclaimer.

Hoffert, as the injured party, had an independent right to give notice to Grange and is not bound by Croyle's allegedly late notice.  Since Grange never denied coverage based on Hoffert’s notice, it has waived (the court used the term “estopped”) from doing so.

Croyle did not appeal from that part of the judgment denying its motion for summary judgment so cannot recover legal fees for successful defending a DJ action brought by an insurer.  Likewise, Hoffert, who does not have a contractual relationship with Grange, cannot recover legal fees in defending a DJ action.

Editor’s Note: Lots of “stuff” in this decision, most of which we agree with, a little of which we may not.

There is no doubt that an injured party has a separate and distinct right under Insurance Law Section 3420(a) to give notice of an accident to an insured’s liability carrier.  Likewise, if an insurer is denying coverage based on the injured party’s untimely reporting, the insurer must specify that ground for denial in its disclaimer.  What is not clear from the opinion is whether Grange ever received notice directly from the injured party.  We have a pleading and a letter directed to the defendant-insured, but no communication from underlying plaintiff or his counsel directly to the insurer.  If no notice was given directly, Grange would not have an obligation to deny coverage based on that notice.  So when did the injured party give notice?

The court notes that the injured party’s counsel had “communications with a representative” of Grange, but it is unclear whether those conversations were initiated by Grange or the attorney.

The counseling point is clear, though, that when a carrier is denying coverage on a late report, it should specify “lateness” by both the insured and the injured party. 

We do agree that legal fees in defending the declaratory judgment action were not recoverable by either the insured or the injured party for the reasons stated.   

10/04/11         Fish King Enterprises v. Countrywide Insurance Company
Appellate Division, Second Department
Employee Exclusion in Auto Policy Did Not Exclude Contribution Claims, and Even if It Did, It Was Untimely Raised

Yang was involved in a car accident while making deliveries for his employer, Fish King.  Yang’s co-worker, a passenger in the car, was injured and sued the vehicle manufacturer.  The manufacturer commenced a third-party action against Fish King, the employer, for contribution and indemnity.

Fish King had a business auto insurance policy with the defendant Countrywide Insurance Company (hereinafter Countrywide).  Countrywide was given notice on January 9, 2002, and the police report and summons and complaint in the underlying action were received by Countrywide on January 17, 2002.  On March 6, 2002, Countrywide disclaimed coverage, citing an employee exclusion.

The plaintiffs moved for summary judgment declaring that Countrywide was obligated to defend and indemnify them as third-party defendants in the underlying action, and Countrywide cross-moved, in effect, for summary judgment declaring that it was not obligated to defend and indemnify them.  Prior to the motions being submitted, the underlying action was settled, with Countrywide contributing the policy limits.  The only issue therefore remaining was that of defense costs.

The appellate court found that Countrywide’s disclaimer was untimely.  The carrier argued that after it received the summons and complaint in the underlying action, an investigation was required to evaluate the full extent of the actions and the identity of all relevant parties.

However, the reason for the disclaimer was the employee exclusion and Countrywide knew of the claim of employment status when it received the complaint.  A delay of 49 days after receipt of the complaint was untimely as a matter of law.  In any event, they relied-upon employee exclusion, which excluded coverage for "[b]odily injury to any employee of the insured arising out of and in the course of his or her employment by the insured," did not exclude coverage for third-party claims for contribution and indemnity related to such injury.

Editor’s Note:  We can only imagine that the exclusion was not the standard ISO Business Auto exclusion which not only excludes employee injuries but also “any obligation to share damages with or repay someone else who must pay damages because of the injury.”

10/04/11         Matter of Auto One Insurance Co. v. Lopez
Appellate Division, Second Department
Application to Stay UM Arbitration Must Be Filed Within 20 Day of Original Notice of Intention

CPLR 7503(c) requires that an application to stay arbitration be made within 20 days after service of a notice of intention to arbitrate.  “The timeliness of a proceeding for a stay of arbitration is measured with respect to the earlier filing of the petition, not with respect to its later service.”  The appellants served their notice of intention to arbitrate on April 20, 2010.  The petitioner submitted proof that the instant proceeding was commenced on May 3, 2010, by the filing of a petition.  Accordingly, it was timely.

Editor’s Note: We have one of “these” every couple of months and it’s important to remember the shortest statute of limitations on the book.  In the context of a Uninsured Motorist or Supplementary Uninsured Motorists Claim (SUM), a carrier that believes it has legal issues that preclude arbitration (breach of the policy, timeliness, etc.), cannot litigate those issues in the arbitration but must seek judicial intervention to stay arbitration in State Supreme Court within 20 days of the first notice requesting arbitration.

10/04/11         Integon National Insurance Company v. Noterile
Appellate Division, Second Department
Default Entered in Declaratory Judgment Action
The Kims commenced an action against Whitestone to recover damages for personal injuries.  Integon, that insured a Whitestone-owned tow-truck, commenced this declaratory judgment action claiming that it had no obligation to defend or indemnify Whitestone or its driver.  The Kims were named in the lawsuit but did not appear and a default judgment was sought against the Kims.

Integon established its entitlement to a default judgment against the Kims by submitting proof of service of the summons and complaint, the facts constituting the claim, and the Kims' default.  Kims’ two excuses for the entry of default were unacceptable to the court.  First, they argued that they thought their own insurance company would defend them in the declaratory judgment action and it took a while for their carrier to deny coverage.  Secondly, the Kims blamed their prior attorney for failing to pass the paperwork on to their new attorney.  The court didn’t buy either excuse as justifying the Kims’ delay in answering.

09/30/11         Farm Family Casualty Insurance Company v Brady Farms
Appellate Division, Fourth Department
Claim for Uninsured Workers Compensation Benefits Is Not a Claim for “Bodily Injury” -- A Win for the Good Guys
An employee was killed in a farming accident.  His employer, Brady Farms, was supposed to provide workers compensation benefits, but did not.  The employee did not sue Brady Farms but instead filed a claim for uninsured workers compensation benefits.  He chose the latter option.  A claim was then made by the Uninsured Workers Compensation Fund against Brady Farms for reimbursement for benefits paid.  It was that claim that was turned over to Brady Farm’s farm liability carrier for payment.  The Farm Package Policy provided coverage for claims made against an insured for “bodily injury” caused by an occurrence.  The Fourth Department, in reversing the motion judge, held that in interpreting the plain language of the policy, it was clear that the claim against Brady Farms was not a claim for bodily injury.  Instead, it was a claim for liability arising out the Brady Farms’ failure to meet its statutory insurance procurement obligation.

Editor’s Note:  We represented Farm Family in this appeal.

09/30/11         Stranz v New York State Energy Research and Devel. Auth.
Appellate Division, Fourth Department

Company Required to Provide Liability Coverage and Indemnity Becomes “Insurer” for Anti-Subrogation Considerations and Amount of Self-Insured Retention
Stranz was hurt when she slipped on fell on an icy staircase in the Western New York Nuclear Service Center (“Site”), owned by the State and within the control of the New York State Energy Research and Development Authority (NYSERDA).  West Valley Nuclear Services Company, LLC (West Valley) managed and operate the Site, and under a contract contained in two purchase orders with West Valley, Burns Security (“Burns”) provided security services on the Site.
Burns was required to indemnify and hold harmless West Valley from and against claims and liabilities resulting from any injury to any person alleged to have occurred as a result of or in connection with the performance of Burns' contractual duties, except for any injuries that resulted "directly from the sole negligence" of West Valley.  Moreover, Burns was required to "procure . . . and . . . maintain . . ., while any work or Services are being performed, and for such periods thereafter as may be necessary under the circumstances' . . . insurance sufficient to protect . . . [West Valley] . . . against any and all liability, or alleged liability, with respect to bodily injury . . . arising pursuant to [the purchase orders]." The insurance policy was to contain a provision stating that the insurer agreed to waive "any rights of subrogation against [West Valley] . . . which might arise by reason of any payment under this policy.'  " West Valley was to be named as an additional insured in the insurance policy.

Burns secured such a policy with $1 million in limits, but that policy was in excess of a self-insured retention (SIR) of $250,000

Plaintiff sued NYSERDA and Burns, and they commenced separate third-party actions against West Valley.  NYSERDA asserted a cross claim against Burns for common-law indemnification.  West Valley asserted two counterclaims, the first seeking contractual indemnification from Burns, and the second seeking a defense from Burns or its insurer in the NYSERDA third-party action. 
West Valley contended that the claims by Burns were barred by both the contractual waiver of subrogation provision and the anti-subrogation rule.
The court found that the contract stated only that the insurance policy must contain a waiver of subrogation clause that would bar the insurer providing the insurance policy from seeking subrogation against West Valley.  That contractual provision does not preclude Burns from seeking subrogation against West Valley.  While the anti-subrogation rule does constitute a basis for granting that part of the motion for summary judgment dismissing Burns' claim because "an insurance carrier has no right of subrogation against its own insured to recover for a claim the insurer has paid that arose out of the very risk for which the insured was covered," the court found that since Burns procured an insurance policy that has an SIR, Burns has become an insurer and therefore is not entitled to seek payment from its insured, West Valley.

West Valley is entitled to recover from Burns defense costs up to the sum of $250,000, the amount of the SIR.  Since Burns was to provide coverage to West Valley and also agreed to indemnify it, Burns has to cover the defense costs and indemnity within the SIR.

09/27/11         Axis Construction Corp. v O’Brien Agency
Appellate Division, Second Department
In Agent E&O Claim, Question of Fact About “Course of Dealing”
In our March 4, 2011 edition, we reported on the Second Department ruling:

02/22/11 Axis Construction Corp. v. O'Brien Agency, Inc.
Appellate Division, Second Department
In Agent E&O Claim, Question of Fact About “Course of Dealing”
An insurance agent or broker has a common-law duty to obtain requested coverage for a client within a reasonable amount of time, or to inform the client of the inability to do so.  However, absent a specific request for coverage not already in a client's policy or the existence of a special relationship with the client, an insurance agent or broker has no continuing duty to advise, guide, or direct a client to obtain additional coverage.  How do you know when there is a “special relationship”? There must be a “course of dealing over an extended period of time that would have put the reasonable broker on notice that their advice was being sought and relied upon.  Here, a question of fact was raised on that issue precluding summary judgment.

The Second Department altered some citations in a revised decision, but not the substantive holding.

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

10/13/11         Anderson v, Zapata
Appellate Division, First Department
Failure to Perform Range of Motion Testing at the Time of the Accident 8 Years Earlier Defeats Attempt to Connect Present-Day Injuries With the Accident

Defendant’s experts showed that plaintiff, Anderson, had no range-of-motion limitations and that her alleged knee injuries were due to a pre-existing degenerative condition.  In addition, the fact that no range-of-motion testing was performed contemporaneously with the accident , which occurred eight years earlier, results in any attempt to causally relate the alleged injuries to the accident speculative.  Furthermore, and with regard to the two co-plaintiffs, defendant’s orthopedist and neurologist, although using slightly different standards of measurement, both concluded that they had normal ranges-of-motion.  As such, the trial court was reversed and summary judgment dismissing the complaint granted.

09/30/11         D’Angelo v Litterer
Appellate Division, Fourth Department
Defendant Wins Reversal Where Plaintiff Fails to Explain Pre-Existing Conditions

On appeal, the court determined that defendant met her burden by submitting IME medical records and reports establishing that the injuries allegedly sustained in the accident were actually pre-existing conditions.  This shifted the burden to plaintiff to prove causation which plaintiff failed to do because her opposing submission did not address how, given her medical history, her current condition was causally related to the accident.

LIENING TOWER OF PERLEY

Michael F. Perley
[email protected]

Searching for Safe Harbors from the Medicare Storm

All parties to a personal injury lawsuit including the insurance companies, continue to seek ways that will ensure that any future Medicare Set-Aside, or the decision not to create one, will survive the inevitable second-guessing when unanticipated expenses arise.  The frustrating component in seeking such approval lies in the failure of the Center of Medicare and Medicaid Services (CMS), to respond to any request for review and approval in liability cases, leaving practitioners searching for the elusive safe harbor.  Below are two recent developments

Schexnayder v. Scottsdale Insurance Company & Smith v. Marine terminals or Arkansas

Recently litigants in the Western District of Louisiana crafted a solution.  In Schexnayder v. Scottsdale Insurance Company, et al, (2011 U.S. Dist. LEXIS 83687)the plaintiffs and defendants reached a mediated settlement that contained a provision for a CMS approved Medicare Set-Side as well as for reimbursement of any past conditional payments.  Obtaining no response from CMS to the request for approval of the set-aside, the parties sought the intercession of the court in a declaratory action to fulfill the condition of the settlement.  Magistrate Judge Hannah of the Western District of Louisiana notified the U.S. Attorney that the parties were seeking a declaratory judgment from the court approving the future Medicare Set-Aside in the amount of $239,253.84.  The U.S. Attorney’s Office declined to appear, leaving the court to conduct an evidentiary hearing after which the parties provided the court with proposed findings of fact and conclusions of law.  The parties mutually presented these proposals to the court which adopted them, including adopting that amount as an amount that, “Reasonably and fairly takes Medicare’s interest into account in that figures are based on reasonably foreseeable medical needs, based upon the most recent information from the treating physicians, utilizing fee schedules that would be acceptable to CMS according to the expert who provided the MSA evaluation.”  In making this finding the court noted that CMS has no procedure for approving Medicare Set-Asides, leaving the court to make this determination which the court was happy to do noting the strong public interest in resolving lawsuits through settlement.

Judge Hannah then ordered the creation of future care allocation account to be funded from the proceeds of the settlement and to be administered by Mr. Schexnayder.

Similarly, in Smith v. Marine Terminals (2011 U. S. Dist. Lexis 90428) the plaintiff and defendants reached a settlement in a liability suit brought pursuant to the Longshore Harbor and Workers’ Compensation Act  in the Eastern District of Arkansas.  Once again, when CMS failed to approve a Medicare Set –Aside, United States District Judge J. Leon Holmes determined that the proposal submitted, jointly, by the parties reasonably considered the interests of Medicare.  The amount of the Set-Aside was determined by a qualified consultant and submitted to CMS and, later, to the Court.  Judge Holmes approach differed from Magistrate Judge Hanna in Schexnayder, in that Judge Holmes considered CMS in default and, apparently, made no attempt to involve the U.S. Attorney.  Rather the Judge focused on the propriety of the settlement and the failure of CMS to become involved that was the last impediment to disposing of the case.

Far be it from me to tell a Judge what to do.  That said, I would suggest that practitioners who have the ability to involve the Federal Court, request that the Court exercise its jurisdiction over Medicare by an Order to Show Cause, or, at least, an invitation for the U.S. Attorney to appear.

CMS MEMO DATED SEPTEMBER 29, 2011

CMS has now agreed to accept a certification from a treating physician that “future medical items and/or services for [the injury] will not be required.”  Stating that, under those circumstances, “Medicare considers its interest, with respect to future medicals for that particular ‘settlement,’ satisfied.” 

There is no need, nor will it do you any good, to send any of these documents to CMS at the time of the settlement.  Rather, CMS states that “the beneficiary and/or their representative are encouraged to maintain the physician’s certification.” 

Obviously, the best practice for all concerned is to maintain copies of such a physician’s certification.  This includes the plaintiffs, plaintiff’s attorneys, defendants, insurance companies and counsel retained by the insurance companies in connection with any lawsuit.  In addition, these documents should not be subject to the normal document destruction policy.  There is a strong possibility that the injured plaintiff may require medical treatment more than 10 or 15 years after the settlement is consummated and, if the documents are otherwise destroyed, no one will have proof of the physician’s certification.

Nonetheless, the memo from CMS appears to be a good first step in creating a legitimate safe harbor for individuals no longer requiring medical treatment.  If you want a copy of the actual memo, drop me an e-mail, [email protected] and I will send it along.

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

COURT OF APPEALS

10/13/11         New York & Presbyterian Hosp. v. Country Wide Ins. Co.
New York Court of Appeals
Court of Appeals Adheres to the Letter of the No-Fault Regulation: The Medical Provider’s Submission of Proof of Claim within 45 Days Does Not Satisfy the 30-Day Notice of Accident Requirement
The question before the Court was whether a medical provider can recover no-fault benefits by submitting a timely proof of claim where its assignor failed to provide written notice of the accident within 30 days as required.  The Court unanimously answers “No.”

Joaquin Benitez was involved in an accident on July 19, 2008 and was treated in New York and Presbyterian until July 26, 2008.  He and Presbyterian completed an Assignment of Benefits and the NF-5 (hospital facility form), but neither provided written notice of the accident to the No-Fault carrier, Country Wide Insurance, within the 30 days as required under 11 NYCRR 65-1.1.

On August 25, 2008, Presbyterian, as assignee of Benitez, submitted a bill for its services to Country Wide and included the required NF-5.  Country Wide denied the claim because it had not received timely written notice of the accident.  Presbyterian then commenced an action asserting that its billing was timely submitted within the 45 days after services were rendered.  Both the trial court and the Appellate Division, Second Department, granted Presbyterian’s motion for summary judgment, holding that Presbyterian’s submission of the hospital facility form within the 45 days complied with the notice requirements in 11 NYCRR 65-1.1.  The Court of Appeals granted leave to Country Wide to appeal and reversed the lower courts.

Country Wide argued nothing in the regulations allows a health care provider to submit a proof of claim within 45 days and allowing that to excuse the failure to provide the threshold notice within 30 days, in effect “eviscerates” the 30-day written notice requirement.  In opposition, Presbyterian construed the regulation as exempting health care providers from the 30-day requirement and that by submitting the NF-5 within 45 days of the date of service, the facility complied with the “proof of claim” and “notice of the accident”.  The Court disagreed with Presbyterian.

Section 65-1.1 provides that written notice with the particulars of the accident must be given by, or on behalf of, each eligible injured person “in no event more than 30 days after the date of the accident.”  Written proof of claim for health service expenses, providing details of the extent of the injuries and treatment, however, must be submitted “in no event later than 45 days after the date services are rendered”.  “Notice” and “proof of claim” are separate and independent conditions precedent to the carrier’s liability.  The regulations first require written notice of the accident.  After notice of the accident, then proof of the claim for treatment is submitted.  The Court found that the Appellate Division disregarded the separate and distinct nature and purpose of the two requirements.  Moreover, the Court stated that “[e]ven more troubling, such a construction effectively reads the 30-day written notice of accident requirement out of the no-fault regulations.” 

The NF-5 form may constitute the written notice required under the notice of accident provision, but only if it is submitted within the 30 days.  Nothing in the regulations excuses the failure to provide the threshold notice within 30 days of the accident and submission of the NF-5 after the 30-day period has expired will not satisfy the 30-day notice requirement. 

Presbyterian, as assignee of Benitez, was entitled only to those rights, privileges and remedies to which Benitez was entitled under the No-Fault law.  Presbyterian cannot have greater rights than its assignor.  Because no written notice of the accident was provided, the policy was breached, and the assignment became worthless as Benitez had no right to benefits to assign. 

The Court reversed the Appellate Division and held that “the submission of the proof of claim within 45 days of the date health care services are rendered may no serve as timely written notice of accident after the 30-day period for providing such written notice has expired.”
Editor’s Note:  Special Thanks to Margo Lagueras for this review.

ARBITRATION

10/04/11         Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Lack of Discussion Regarding Diagnostic Testing and Applicant’s Job Insufficient to Support Denial of Lost Wages

The Applicant, eligible injured person, sought lost wages arising out of an April 13, 2010, accident.  The Applicant treated with Dr. Baez on May 20, 2010, and was diagnosed with backache, mid-foot sprain and a lumbar sprain.  On July 19, 2010, the Applicant underwent a cervical MRI and it revealed a C5/6 disc bulge with annular tear.  On August 16, 2010, an upper extremity EMG/NCV study confirmed C6 radiculopathy.

The Applicant was a machine operator for a food company and was unable to return to work as her employer could not find her another position.

The insurer denied Applicant’s lost wage claim based upon the September 17, 2010, orthopedic IME conducted by Dr. Ronald Horvath.  Dr. Horvath found cervical tenderness with bilateral spasm and diffuse thoracic pain without spasm.  The Applicant’s cervical spine range of motion was limited.  Dr. Horvath diagnosed the Applicant with cervical and thoracic strain.  He concluded she was capable of working.

The Applicant’s treating physician, Dr. Williams, rebutted Dr. Horvath’s conclusions.  Dr. Williams recounted the Applicant’s C5/6 annular disc tear which he opined was the cause of the Applicant’s neck and upper back pain.  Dr. Williams rendered the Applicant with a temporary partial disability and was capable of only sedentary work.

The assigned arbitrator did not find Dr. Horvath’s report persuasive as to the denial of lost wages.  Specifically, Dr. Horvath’s findings were significantly different from the treating physicians’ findings and Dr. Horvath did not review or comment on the cervical spine MRI.  Also, Dr. Horvath did not discuss what Applicant’s job requirements were and why she could return to same. 

10/03/11         Applicant v. Respondent
Arbitrator Mary Anne Theiss, Onondaga County
Both Insurers’ Denials of Chiropractic Services from Two Accidents Upheld

The Applicant sought payment of chiropractic services rendered to the assignor from April 21, 2010 through July 28, 2010, arising out of two separate accidents on January 3, 2008 and December 11, 2009.  The assignor had separate insurers for each accident and both insurers denied chiropractic services based upon separate chiropractic IMEs.

The assignor claimed injury to her thoracic spine from the first accident and her lumbar and cervical spine from the second accident.  The first insurer had Paul Krishner, DC conduct a chiropractic IME.  Mr. Krishner indicated that the assignor advised she was not receiving any benefit from chiropractic care.  The assignor did not begin chiropractic care until seven months post-accident and continued treating for three years.  The assigned arbitrator determined that the denial was justified. 

With regard to the second accident, the chiropractic treatment notes reveal she stopped treating on July 28, 2010, because “patient to return to first crash status.”  The second insurer had the assignor examined by Chiropractor Ferrante who, upon examination, determined that the assignor had normal range of motion in the cervical spine.  He found her subjective complaints were not supported by objective testing.  The assigned arbitrator also found that denial justified.

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

Property

09/30/11         Viscosi v Preferred Mutual Ins. Co.
Appellate Division, Fourth Department
Snow, Rain or Sleet Damage NOT Covered Unless Driven by Wind; Bowing and Sagging Ceiling NOT Collapse Under the Policy
Plaintiff commenced this action for damages sustained to his premises when water seeped into “several rooms of the covered premises.”  However, where, as here, the policy excluded water damage unless it entered the premises due to damage caused by wind or hail, no such coverage was found.

Further, the Court ruled that although the ceilings at issue were noticeably bowing due to water that accumulated, it did not fall within the “collapse” coverage provided by the policy.  In relevant part, the Preferred policy at issue specifically provided that “cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion” did not constitute a state of “collapse.”  Accordingly, plaintiff’s claims for coverage were appropriately denied by Preferred.

Peiper’s Point – This case is notable only because of the Court’s previous decision in Khuns v Bay State Ins. Co. (reported in our 11/26/10 Coverage Pointers).  In Khuns, the Court held that a building fell within collapse coverage even though it was still standing.  Here, note, the Court states that because the ceiling did not “abrupt[ly] fall down or cave in” collapse coverage was not triggered. 

Potpourri

10/04/11         Uffer v. Travelers Companies, Inc.
Appellate Division, Second Department
Subsequent Third-Party Action Dismissed on Res Judicata Grounds Where Plaintiff’s Earlier First-Party Suit Was Dismissed on Summary Judgment
Plaintiff commenced an action against Travelers under the first party portion of the Travelers’ policy at issue.  After that matter was dismissed on summary judgment, plaintiff attempted a second bite at the apple by commencing the instant action seeking coverage under the third-party portion of the policy. 

Not so fast sayeth the Second Department.  Where, as here, a party elects not to include all of its potential causes of action in an initial lawsuit, it will not be permitted to raise alternative claims in a subsequent action.  As noted by the Second Department under established res judicata principles “once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy.”

10/04/11         McGowan v Great Northern Ins. Co.
Appellate Division, Second Department
No Depositions of an Expert Absent “Special Circumstances”
The tagline says it all.  Great Northern sought a deposition of non-party expert witnesses.  The subpoenas were properly quashed by the trial court, where, as here, Great Northern did not establish the existence of special circumstances.
What are “special circumstances” you might ask?  Although there is no set rule, the Court has recently stated that a “party's inability to obtain the requested disclosure from his or her adversary or from independent sources to be a significant factor in determining the propriety of discovery from a nonparty.”

10/04/11         Schick v 200 Blydenburgh, LLC
Appellate Division, Second Department
Installation of Telephone Wires Qualifies as “Alteration” Under Labor Law § 240(1); Also “Construction” for Labor Law § 241(6) Purposes
Plaintiff was employed as a technician for Verizon.  In this capacity, he was dispatched to defendant’s premises to install three telephone lines.  Plaintiff testified that the job required him to run a line from the telephone pole outside of the premises to a serving terminal located within the premises. 

Plaintiff testified that an employee of the lessee of the premises then requested him to run a telephone line from the serving terminal to an area near the office doorway.  Plaintiff was instructed to run the wire along the ceiling.  To accomplish this, plaintiff secured the wire to existing structural trusses using zip ties.  He accessed the area, which was approximately 20 feet above the floor, but using a ladder.  Unfortunately, the ladder shifted, and plaintiff sustained injury when he fell. 

Defendants moved for summary judgment on the basis that the activity in which plaintiff was engaged did not fall within the enumerated tasks of Labor Law §§ 240(1) or 241(6).  Although granted by the trial court, the Second Department concluded that plaintiff’s actions qualified as an “alternation.”  Therefore, it reversed the trial court and found a question of fact as to the defendants’ potential liability under Labor Law § 240(1). 

Finally, the Court also noted that plaintiff’s activities constituted “construction” under Labor Law § 241(6).  Accordingly, the trial court’s decision to grant summary judgment to the defendant was likewise denied on a question of fact. 

 

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

OGC Opinion No. 11-09-02

The Department of Financial Services (DFS) was once again asked whether licensing as an independent adjuster was required.  In this scenario, ABC Company is a wholly-owned subsidiary of a self-insured automobile rental company, DEF Company.  DEF pays ABC’s employees to investigate and adjust claims on behalf of DEF and its self-insured affiliates.

ABC asked DFS whether ABC and its employees must be licensed as independent adjusters to investigate and adjust liability claims solely on behalf of DEF and its self-insured affiliate companies.

DFS reviewed Insurance Law §2102 in order to determine whether ABC was required to be licensed in this instance, and found ABC did not need to be licensed.  The key to this decision is that ABC would need to be licensed if its actions were on behalf of an insurer.  DFS found that DEF and its self-insured affiliates are not insurers, and the provisions of §2102 do not apply to ABC in this instance. 

Medicare Secondary Payer (MSP)

The Centers for Medicare & Medicaid Services issued two bulletins with regard to reporting under the Medicare Secondary Payer Act.

The first alert has amended the reporting timelines for TPOC (Total Payment Obligation to Claimant) claims.  TPOC reporting is being phased in based on the settlement amount.

TPOC Amount

TPOC Date On or After

Begin Reporting

TPOCs over $100,000

10/1/11

01/1/12

TPOCs over $50,000

04/1/12

07/1/12

TPOCs over $25,000

07/1/12

10/1/12

All TPOCs over min. threshold

10/1/12

01/1/13

CMS also issued an alert clarifying when reporting and recovery will occur when the injury is the result of exposure, ingestion and/or implantation.  The alert stresses that Medicare focuses on the date of last exposure or ingestion, and whether the exposure or ingestion occurred on or after 12/05/1980.  If the exposure or ingestion occurred prior to that date, there is no obligation to report and Medicare may not assert a recovery.  CMS further states that for claims involving ruptured implants that led to a toxic exposure, the date of last exposure is used to determine whether it is reportable.  For non-ruptured implanted medical devices, the focus is on the date the implant was removed.  The alert goes on to provide some examples of when reporting is and is not necessary. 

 

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

10/07/11         Rosciti v. Insurance Company of Pennsylvania
First Circuit Court of Appeals – Rhode Island
Can the Retained Limit Provision Be Enforced Where Underlying Layer Is an SIR and the Insured Is Bankrupt?
The Roscitis sued Monaco Coach Corporation [“Monaco”] over alleged defects in a motor home Monaco manufactured.  Monaco was self-insured for liability up to $500,000, and the Insurance Company of the State of Pennsylvania [“ICSOP”] provided excess insurance for liability above $500,000.  Monaco went bankrupt shortly after the Roscitis filed suit.  Thereafter, the Roscitis added ICSOP as a defendant, invoking a Rhode Island statute allowing tort victims to recover damages directly from liability insurers of a bankrupt tortfeasor, but only within the limits of the insurance policy.

During the relevant time period, ICSOP provided “Special Excess Liability Policies” [“Excess Policies”] to Monaco.  The Excess Policies provided liability coverage for claims above $500,000, up to limits ranking from $1.5 million to $2.5 million, depending on the policy.  As noted above, Monaco was self-insured for liability up to a “retained limit” of $500,000.

ICSOP’s insurance policies issued to Monaco contained two provisions that are central to the Court’s analysis.  The first is the “Retained Limit Provision” which provides: “ICSOP’s duty to pay any sums [Monaco] become[s] legally obligated to pay arises only after there has been a complete expenditure of [Monaco’s] retained limit(s) by means of payments for judgments, settlements, or defense costs.

The second is the “Bankruptcy Provision” which provides:  “[Monaco’s] bankruptcy, insolvency or inability to pay any of [Monaco’s] underlying insurers shall not relieve [ICSOP] from the payment of any claim covered by this Policy.  But under no circumstances shall such bankruptcy, insolvency, or inability to pay require [ICSOP] to drop down or in any way replace [Monaco’s] retained limit or assume any obligation associated with [Monaco’s] retained limit.

The Roscitis argued that Monaco’s insurers were liable under Rhode Island’s “direct action” statute, which provides: “ any person having a claim because of damages of any kind caused by the tort of any other person, may file a complaint directly against the liability insurer of the alleged tortfeasor seeking compensation by way of a judgment for money damages whenever the alleged tortfeasor files for bankruptcy, involving a chapter 7 liquidation, a chapter 11 reorganization for the benefit of creditors or a chapter 13 wage earner plan, provided that the complaining party shall not recover an amount in excess of the insurance coverage available for the tort complained of.”  R.I. Gen. Laws §27-7-2.4.

ICSOP argued that it was not liable for any portion of the Roscitis’ claim under $500,000, because the Bankruptcy Provision explicitly stated that ICSOP would not have to “drop down” and pay anything under the retained limit.  ICSOP also argued that it was not liable for the part of Roscitis’ claim above the $500,000 limit because its payment obligation had never been triggered.  ICSOP pointed out that the Retained Limit Provision specified that ICSOP’s obligation to pay arose “only after there had been a complete expenditure of Monaco’s retained limit.” 

In response, the Roscitis conceded that ICSOP was not liable for any portion of their claim below $500,000.  However, they argued that because the Bankruptcy Provision stated that Monaco’s bankruptcy would not relieve ICSOP of any payment obligations, ICSOP was still liable above $500,000, despite the fact that Monaco had not yet exhausted the retained limit.  They also argued that to the extent the Retained Limit Provision conflicted with the Bankruptcy Provision, Rhode Island law required the conflict be resolved in favor of the insured.

The district court granted ICSOP’s motion for summary judgment finding no conflict between the Retained Limit Provision and the Bankruptcy Provision, and further holding that the direct action statute did not void the Retained Limit Provision.

Although the First Circuit Court of Appeals [“Court”] agreed with the district court and ICSOP that the policy was not ambiguous, it reversed the district court’s decision based on Rhode Island law which holds that a contract term will not be enforced if it violates public policy.  Gorman v. St. Raphael Acad., 853 A.2d 28 (2004).  Noting the arguments of both parties, the court examined the broader public policy context surrounding the direct action statute and explored how other courts have resolved the policy question present in this matter. After its analysis, the court concluded that it was clear that Rhode Island’s public policy is to prevent insurance companies from avoiding their obligations when an insolvent insured cannot make an expenditure towards discharging liability.  The Court determined that the direct action statute reflects the Legislature’s intent to preserve a tort victim’s right to recovery when the insured becomes insolvent.  Moreover, the court noted that the Rhode Island Supreme Court has recognized the generally agreed rule that the debtor’s discharge does not affect the liability of the debtor’s insurer for damages caused by the debtor.

Accordingly, in light of this public policy, the Court concluded that the Retained Limit Provision could not be enforced.  The Court reasoned that to do so would have the ultimate effect of allowing ICSOP to avoid its obligations thanks to Monaco’s bankruptcy, a result contrary to the public policy of Rhode Island.

 

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

10/04/11         Claudia Flores v. Allstate Insurance Company
Supreme Court, County of New York
How Do You Calculate a SUM Award?
This is a petition to vacate an Uninsured/Underinsured Motorist arbitration award on the basis that the arbitrator, who found petitioner pedestrian child comparatively negligent when he was struck by a car, exceeded his authority by granting adjournments to respondent, in order to obtain evidence.  Petitioner also contended that the arbitrator’s finding that the damages totaled the policy limit was arbitrary and capricious because higher damages should have been awarded.  Petitioner further maintained that the arbitrator’s method of calculation of damages was improper.  

The arbitrator found that petitioners’ damages totaled $100,000, which he then reduced by the 50 percent fault, leaving $50,000.  He then applied the offset of $50,000 (the amount paid by the driver of the car) resulting in an award of zero.  Petitioner asserted that the offset should have been applied prior to the percentage reduction for fault. 

In considering the issues raised, the court determined that petitioner’s argument that the arbitrator exceeded his power by granting two adjournments was without merit.  The decision to grant an adjournment is within the discretion of the arbitrator.  Evening assuming that the arbitrator abused his discretion, there was no evidence that had the adjournments been denied the child would not, and could not, have been partially responsible for his injuries. 

Further, with regard to the claim that the amount of damages was arbitrary and capricious; the court dismissed it noting that petitioner did not submit any expert evidence indicating that that injuries should have been valued higher than $100,000.

However, with regard to the last argument made by petitioner, the court ordered additional briefing on this issue.  It held that respondent did not demonstrate that the method of calculation was in accordance with the terms of the policy. The policy merely provided that the maximum SUM payment was the difference between the SUM limit ($100,00 here) and payments received by the insured on behalf of the other legal liable persons ($50,000).  No mention was made of reductions for the insured’s fault.  Also, the court was not persuaded by petitioner’s assertion that CPLR §1411 supported its argument.   

Note:  The moral of this case is:  read the regulations.  Title 11 Insurance Regulation § 60-2.2 sets forth an almost identical example. 

(4)       Example Four:

Insured’s Bodily Injury Damages              $150,000
Insured’s Liability Limit                               $100,000
Insured’s SUM Limit                                                $100,000
Other Motor Vehicle Liability Limit                        $ 25,000

Result:  Suppose the insured and the other motor vehicle owner or operator were each 50 percent at fault for the accident, then the insured’s total recovery would be $75,000, in light of comparative negligence of the parties involved in the accident.  The insured would recovery $25,000 from other negligence motor vehicle owner or operator and $50,000 under the SUM coverage.

In other words, the arbitrator was right.

10/03/11         Menowitz v. National Union Fire Ins. Co. of Pittsburgh, PA
Supreme Court, New York Count
When the Insured Cancelled Her Cruise, She Was Not “Sick” as That Term Was Used in Her Travel Protection Insurance
On July 9, 2007, Harold and Lila Menowitz booked a cruise/vacation package on the “Crystal Serenity” cruise.  Unfortunately, after booking, Lila began to feel ill and they were forced to cancel the trip.

After cancelling, they were advised by the travel agent that “thankfully because [they] had purchased the travel protection insurance [their] entire trip cost in the sum of $34,480.00 would be reimbursed.”  However, their claim was subsequently denied by National Union, the insurer.

Under the terms of the “National Union” policy, “sickness” is defined as “an illness or disease which is diagnosed or treated by a physician.”  Further, the policy’s cancellation provision provided, in relevant part:

We will pay benefits if the Insured is prevented from taking the Trip due to:

  • Sickness…occurring prior to the Contracted Departure Date, of the            

(1)       Insured; [or]
(2)       Traveling companion…

                        Prevented from taking the Trip means:

  • With regard to Sickness…of the Insured or Traveling Companion, a Physician has recommended that due to the severity of the Insured’s or Traveling Companion’s condition it is Medically Necessary that the Insured or Traveling Companion cancelled the Trip…

            In this action, Harold and Lila moved for summary judgment on their claim.  The court held that, upon reviewing the policy, the denial of coverage was appropriate where an insured cancelled his or her trip on the grounds of sickness, but failed to obtain medical treatment or a diagnosis during the period of coverage (i.e., subsequent to purchasing the insurance and prior to the trip’s commencement).  As it was unclear from the record whether Lila obtained medical treatment or a diagnosis in connection with the conditions prompting cancellation of the trip within the relevant time period, the court could not grant summary judgment. 

10/03/11         Turner Construction Co. v. RLI Insurance Co.
Supreme Court, New York County
Construction Manager’s Suit Is Dismissed Against General Contractor’s Excess Carrier
Turner Construction Company entered into a contract with the Dormitory Authority of the State of New York (“DASNY”) to act as its construction manager on a project known as the Brooklyn Quad West project.  Thereafter, DASNY also entered into a contract with AMCC Corporation (“AMCC”), whereby AMCC agreed to act as the general contractor on the project.  The DASNY/AMCC contract required AMCC to procure and maintain insurance.

AMCC complied with this provision and obtained a CGL policy from QBE Insurance Company.  Turner was listed as an additional insured on this policy.  AMCC also obtained an excess policy through RLI Insurance Company.  Turner qualified as an additional insured on the RLI policy as well due to a provision that defined an “insured” as any entity which qualifies under the terms of the underlying policy.   

Thereafter, an employee of a subcontractor was injured in the course of his employment and commenced an action against Turner.  QBE agreed to defend Turner in the underlying action. 

With respect to RLI, Turner brought this action seeking a declaration that (1) “[b]y virtue of the Indemnification Provision in the DASNY/AMCC contract, RLI is obligated to pay any indemnity imposed on Turner prior to any insurance available to Turner as a named insured” and (2) “[b]y virtue of the additional insured endorsements in the RLI Policy, RLI is obligated to pay any indemnity imposed on Turner prior to any insurance available to Turner as a named insured.”

The court granted RLI’s motion to dismiss.  With regard to Turner’s first cause of action, the court dismissed it based on, essentially, a lack of standing.  The court asserted that a party cannot bring a declaratory judgment action against a tortfeasor’s insurer without first complying with the statutory requirements of Insurance Law 3420.

With regard to the second cause of action, in dismissing it as well,  the court reasoned that the RLI policy makes clear that it applies only (1) in excess, and after exhaustion of, the QBE Policy; and (2) in excess of any “other insurance…other than insurance that is specifically excess of” the RLI Policy. 

09/27/11         Santoro v. GEICO
Supreme Court, Nassau County
Is a Claims File Discoverable In a SUM Action?
In this action to recover SUM benefits, the plaintiff moved for an order compelling defendant to produce:  its insurance claims file; the claims examiner responsible for handling Plaintiff’s SUM file for a second time; and the claim supervisor.   

With regard to the claims file, the court held that the burden of demonstrating that specific material is not subject to discovery under 3101[d][2] because it was prepared in anticipation of litigation is upon the party opposing such disclosure.  The court felt that the defendant set forth merely a blanket assertion of privilege without demonstrating that such documents were prepared for litigation. 

Also, the court rejected defendant’s argument that the claims file was unwarranted since it did not reject the claim.  The court reasoned that defendant’s offer of $75,000 (where the policy limit was $300,000) was akin to a partial rejection of the claim.  Thus, disclosure of the file up until the time defendant made the $75,000 offer was material and necessary for the prosecution of plaintiff’s claim.   

With regard to the additional depositions, the court held that an additional deposition of the claims examiner was warranted, limited in scope to the contents of the claims file prepared prior to the date that defendant conveyed its offer.  However, the court denied plaintiff’s request to depose the claim’s supervisor as he merely set the reserve.  He did not handle the claim. 

Note:  In my opinion, the claims file should be no more discoverable in a SUM case than a claim file in a liability case.  It is material that is prepared and maintained for the purpose of litigation.  Also, I believe the court confused itself by relying on coverage cases (which are not applicable) to set an end date for discovery of the claims file in this SUM action.              

09/27/11         Josma v. Interboro Ins. Co.
Supreme Court, Nassau County
Injured Homeowner’s Action Against Contractor’s Insurer Dismissed
Plaintiff entered into a contract with Nubia, Inc. to perform work in connection with the addition of a second story onto plaintiff’s premises.  The work required Nubia to remove the house’s roof and place a tarp over the open portions.  As always happens in these cases, a wind storm came along and caused portions of the tarp to be removed and exposed portions of plaintiff’s interior to the elements.    

At the time of the incident, Nubia was insured under a CGL policy issued by Kingston Insurance Co.  Upon receipt of Nubia’s claim, it denied coverage based on a provision which removed coverage for “property damage…arising out of your work which involved the removal and/or replacement of roof materials.” 

Plaintiff then sought coverage under her own homeowners’ policy with Interboro Insurance Company, but it denied coverage because the premises was not occupied by the homeowner, contrary to information contained in plaintiff’s insurance application.  Accordingly, plaintiff commenced this action against Kingstone and Interboro, among others. 

Kingstone immediately moved to dismiss the complaint on the grounds that plaintiff lacked standing and documentary evidence foreclosed the plaintiff’s action against it as a matter of law.   Notably, beyond seeking coverage for a claim against Nubia, plaintiff also claimed that she qualified as an additional insured under Kingstone’s policy pursuant to a provision that granted AI status to those Nubia was contractually obligated to insure.  

In considering this matter, the court stated that a judgment is a statutory condition precedent to a direct suit against the tortfeasor’s insurer.  Since plaintiff did not have a judgment, it had no standing to commence this action.  Further, plaintiff was not an intended third-party beneficiary to the insurance contract. 

Lastly, the court noted that regardless of plaintiff’s position as an AI, all of plaintiff’s claims were barred by the same exclusion for roofing operations as applied to Nubia.  Thus, Kingstone’s motion was granted.  

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

LEGAL LIABILITY FOR DRUG TESTING

As drug testing becomes more and more a part of the economic and employment landscape, legal cases are occurring interpreting the rights and obligations of various parties.  Once such case was Webster vs. Psychemedics Corporation, 2011 TENN. App. LEXIS 335 (Tennessee Court of Appeals June 24, 2011).  An employee’s random drug test required by his employer was positive for cocaine use.  The plaintiff was fired.  He alleged that he was harmed by a “false positive” and sued the drug testing company for negligence.  The Court held that the drug testing company owed the plaintiff a duty of care in administering the drug test, and that a release from liability which covered “reporting” of the test results to the employer did not release the drug testing company for liability with respect to handling and testing the plaintiff’s sample.

Plaintiff Webster was subject to a random drug testing program by his employer, TRW Koyo Steering.  Webster signed a consent form wherein he agreed to hold his employer and its agents harmless from liability in connection with the drug testing program.  In August, 2005, Webster was randomly selected to submit for drug testing.  A hair sample was submitted to Psychemedics, a biotechnology company.  Webster did sign a release with Psychemedics agreeing to release it from liability arising from “reporting” of the test results to the employer.

The hair sample tested positive for cocaine use, and Webster’s employment was terminated.  Webster sued his employer and Psychemedics for negligence, defamation and breach of contract.  The trial court granted Psychemedics’ Motion for Summary Judgment finding first that Psychemedics owed a duty of care to Webster, but that he had waived his claim by agreeing to the release language. 

On appeal, the Tennessee Court of Appeals affirmed that the doctrine of employment at- will was a longstanding rule in Tennessee which recognizes the right of the employer and the employee to terminate the employment relationship at any time for good cause, bad cause, or no cause at all.  The Court reviewed a prior wrongful discharge case which held that an employer’s policy of terminating employees who tested positive for drugs did not violate any state statute or public policy.  The law of Tennessee was stated to be that an employee can be terminated on the basis of testing positive on a drug screen, even if negligently performed by the testing facility.  The court stated that it was aware of no common law duty imposed on employers concerning substance abuse testing performed by third party laboratories. 

The court then had to decide whether Psychemedics had any liability to Webster.  Psychemedics argued that Webster could have no negligence claim against it for facilitating conduct for which the at-will employer could not be held legally liable.  The Court then reviewed a number of cases coming to differing conclusions concerning the duty of care of testing facilities to employees who are drug tested at their employer’s behest. 

The trial court had found that Psychemedics did owe a duty of care to Webster in undertaking the drug test at the request of his employer.  The court based its conclusion on Tennessee common law regarding the legal duty owed by one party to another and its application to drug testing companies.  The Court ruled that when an individual is required as a condition of employment to submit a sample for testing, a duty of care is imposed between the professional testing firm and the employee.  As the company contracting with employers across the county to perform substance abuse testing, Psychemedics would know that the likely effect of a false positive result would be significant and devastating to an employee.

However, the trial court had also found that Webster had waived his negligence claim against Psychemedics by agreeing to the exculpatory clauses presented by both Psychemedics and his employer.  He released Psychemedics from all liability arising from the “reporting” of my results to the authorized recipient and the recipient’s use thereof.  The Court limited this language only to any liability arising from the reporting of Webster’s results, not from alleged negligence in handling and testing of the hair sample.  The Appellate Court therefore found that the exculpatory clause was not applicable to the issue before it.  The Appellate Court also rejected language in the employer’s release which would apply to Psychemedics only if it was deemed the employer’s agent, but the Court found that Psychemedics was in an independent contractor relationship with the employer, so that release language did not apply either. 

Therefore, the summary judgment granted by the trial court in favor of Psychemedics was reversed and the case was remanded for further proceedings to proceed on the negligence claim against Psychemedics. 

The Webster case explores the duties of employers and testing companies to employees and testing companies to employees with respect to common drug testing programs and protocols.  It also analyzed whether release language presented by both the employer and the testing company could deny any cause of action.  The Appellate Court ruled that the particular release language at issue only applied to negligence in reporting results as opposed to actual negligent handling and testing of samples.  A further interesting issue would have been whether the employee would have been bound by any release language which did bar a claim against the testing company based upon some theory that would have been a contract of adhesion, void against public policy, or otherwise a violation or abuse of employee rights. 

The Webster case reinforces the notion that courts will strictly construe release and waiver language and limit them according to their terms.  It also suggests that even in at-will employment states such as Tennessee, courts and legislatures may find protections for employees with respect to drug testing, privacy, disabilities and other special situations.  The courts are apparently split nationally on the circumstances and extent of a drug testing company’s liability.

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

10/11/11         Austin Insurance Company v. Denogean
Arizona Court of Appeals, Division Two, Dept. A.
Drowning Deaths Trigger Two Occurrences under Homeowner’s Policy Where One Homeowner Opened the Pool Gate and The Other Failed to Supervise Children

Two children drowned while swimming, unsupervised, in their grandparents’ swimming pool. The childrens’ parents brought a wrongful death action against the grandparents and Austin Ins. Co., the grandparents’ insurer, defended. Austin offered $500,000, the “per occurrence” liability limit, asserting there was only one occurrence. The parents demanded $1 million, arguing there were two occurrences covered by the policy. The parents and Austin agreed to present the issue in a declaratory judgment action. The trial court held, and the appellate court affirmed, there were two separate occurrences: the grandmother leaving the pool gate unlocked the previous day and the grandfather falling asleep the day of the drowning. Both courts further reasoned that the policy’s repeated exposure clause does not apply and does not merge the separate acts of the grandparents into a single occurrence.
Submitted by: Sharone Kornman and Rebecca Levy-Sachs of Robinson & Cole, LLP.

10/07/11         Rosciti v. Ins. Co. of the State of Pennsylvania
First Circuit Court of Appeals
Public Policy Requires Insurer to Defend and Indemnify a Bankrupt Insured for Sums Over $500,000 Self-Insured Retention Limit, Even if Policy Says
Otherwise
The Roscitis filed a product liability action against Monaco. Monaco was insured by Ins. Co. of the State of PA (“ICSOP”) subject to a $500,000 self-insured liability limit. Monaco filed for bankruptcy and the Roscitis added ICSOP as a defendant pursuant to a R.I. statute allowing plaintiffs to sue liability insurers of bankrupt tortfeasors. ICSOP moved for summary judgment, arguing there was no duty to defend/indemnify Monaco until Monaco paid the first $500,000, and the policy did not require ICSOP to “drop down” and defend/indemnify a bankrupt insured. The Roscitis asserted there was a policy ambiguity to be construed in favor of coverage, because the policy also stated an insured’s bankruptcy does not relieve ICSOP of its defense/payment obligations. The Roscitis also argued the R.I. statute reflects public policy that insurers cannot avoid obligations when insolvent insureds cannot pay their self-insured limits. The district court granted ICSOP’s motion, but the appellate court reversed, reasoning: (1) public policy requires coverage for bankrupt insureds; (2) the policy is not ambiguous and just requires ICSOP to defend claims in excess of $500,000 and pay sums in excess of $500,000.

10/07/11         Mitchell v. State Farm Auto. Ins. Co.
Court of Civil Appeals of Alabama
To Defeat the “Common Fund Doctrine,” and Avoid Paying a Portion of the Insured’s Attorney’s Fees, the Subrogating Insurer Must Actively Generate Funds Not Merely Assert Independent Claim
Under Alabama’s “common fund” doctrine, an insurer who brings a subrogation claim may share in the insured’s recovery against a tortfeasor but also must pay a pro rata portion of the insured’s attorneys’ fees. The doctrine applies when two conditions are met: (1) there is “fund” from which to compensate the insured and subrogating insurer; and (2) the work of the insured’s services directly benefits the fund. After a car accident, the insured collected $5000 in med pay coverage from State Farm and also retained counsel and went after the other driver. State Farm pursued a separate subro. claim against the other driver’s insurer, Cotton. The insured settled with Cotton for $35,000, agreed to satisfy all subrogation claims, and offered State Farm $5000 less the 1/3 attorney contingency fee pursuant to the “common fund” doctrine. State Farm refused and demanded $5000, contending it hired its own attorney, had its own claim, and there was no “common fund.” The trial court ruled in favor of State Farm, but the appellate court reversed, reasoning: (1) the $35,000 was a common fund to pay the insured and State Farm; (2) the work of the insured’s attorney directly benefited State
Submitted by: Sharone Kornman and Rebecca Levy-Sachs of Robinson & Cole, LLP.

 

Reported Decisions

New York and Presbyterian Hospital v. Country Wide Insurance Company


Thomas A. Torto, for appellant.
Joseph Henig, for respondent.

JONES, J.:
The question before the Court is whether a health care services provider, as assignee of a person injured in a motor vehicle accident, can recover no-fault benefits by timely submitting the required proof of claim after the 30-day period for providing written notice of the accident has expired. We hold it cannot.
On July 19, 2008, Joaquin Benitez was injured in a traffic accident which took place in Manhattan, and treated at New York and Presbyterian Hospital (Presbyterian) from that date through July 26, 2008. On the date of Benitez's discharge, he and Presbyterian executed an Assignment of No-Fault Benefits form under which he assigned to Presbyterian "all rights, privileges and remedies to payment for health care services provided by [Presbyterian] to which [Benitez is] entitled under Article 51 (the No-Fault statute) of the Insurance Law." Benitez and Presbyterian also executed a completed NYS Form NF-5 (i.e., a hospital facility form). Neither Benitez nor Presbyterian provided the required written notice of accident to his no-fault insurer, Country Wide Insurance Company (Country Wide), within 30 days of the accident as required by the New York insurance regulations (11 NYCRR 65-1.1).
On August 25, 2008, Presbyterian, as assignee of Benitez, billed Country Wide (i.e., sought no-fault benefits) for the sum of $48,697.63. In billing Country Wide, Presbyterian submitted a number of documents, including the required proof of claim (the NF-5 form). Country Wide received the bill and other documents on August 28, 2008, 40 days after the accident. Country Wide denied Presbyterian's claim on the ground it had not received timely notice of the accident under 11 NYCRR 65-1.1, which requires an "eligible insured person" to give written notice to the insurer "in no event more than 30 days after the date of the accident."
Presbyterian brought this action against Country Wide to compel payment of no-fault benefits in the amount of its bill, plus statutory interest and attorney's fees, alleging it had provided timely notice and proof of claim under 11 NYCRR 65-1.1, which requires an insured person's assignee to submit written proof of claim no later than 45 days after the date health care services are rendered. Presbyterian and Country Wide each moved for summary judgment.
Supreme Court granted Presbyterian summary judgment, ruling that the hospital satisfied its notice obligation by timely submitting the proof of claim. Citing 11 NYCRR 65-3.3 (d), the Appellate Division affirmed (71 AD3d 1009 [2d Dept 2010]), stating "[c]ontrary to the insurer's contention, the hospital's submission of a completed hospital facility form . . . within 45 days after services were rendered satisfied the written notice requirement set forth in 11 NYCRR 65-1.1." This Court granted Country Wide leave to appeal and we now reverse.
Country Wide argues that the Appellate Division decision eviscerates the 30-day written notice of accident requirement and that the aforementioned regulations do not contain any language which provides that submission of a proof of claim for health care services within 45 days excuses the failure to give the threshold notice of accident within 30 days of the accident. In response, Presbyterian construes the stated no-fault regulations as exempting health care providers from the 30-day notice of accident requirement. In Presbyterian's view, its filing of the hospital facility form within 45 days of the date services were rendered constitutes both "proof of claim" and timely "notice of accident". For the reasons that follow, we agree with Country Wide's position.
The primary goals of New York's no-fault automobile insurance system are "to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists" (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003]). In furtherance of these objectives, "the Superintendent of Insurance has adopted regulations implementing the No-Fault Law (Insurance Law art 51), including circumscribed time frames for claim procedures" (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 [2007] [emphasis added]).
11 NYCRR 65-1.1, the mandatory personal injury protection endorsement for motor vehicle liability insurance policies, provides:
"Conditions
"Action Against [Insurance] Company. No action shall lie against the Company unless, as a condition precedent thereto, there shall have been full compliance with the terms of this coverage.
"Notice. In the event of an accident, written notice setting forth details sufficient to identify the eligible injured person, along with reasonably obtainable information regarding the time, place and circumstances of the accident, shall be given by, or on behalf of, each eligible injured person, to the Company, or any of the Company's authorized agents, as soon as reasonably practicable, but in no event more than 30 days after the date of the accident . . .
"Proof of Claim; Medical, Work Loss, and Other Necessary Expenses. In the case of a claim for health service expenses, the eligible injured person or that person's assignee or representative [e.g., a health care services provider] shall submit written proof of claim to the Company, including full particulars of the nature and extent of the injuries and treatment received and contemplated, as soon as reasonably practicable but, in no event later than 45 days after the date services are rendered. . . ."

(emphasis added). In addition, 11 NYCRR 65-3.3 (d) states:
"The written notice required by . . . the mandatory and additional personal injury protection endorsement(s) shall be deemed to be satisfied by the insurer's receipt of a completed prescribed application for motor vehicle no-fault benefits (NYS Form N-F 2) forwarded to the applicant pursuant to subdivision 65-3.4 (b) of this subpart or by the insurer's receipt of a completed hospital facility form (NYS Form N-F 5)"

(emphasis added).
The "notice of accident" and "proof of claim" under 11 NYCRR 65-1.1 are independent conditions precedent to a no-fault insurer's liability (see Hospital for Joint Diseases, 9 NY3d at 317 ["These regulations require an accident victim to submit a notice of claim to the insurer as soon as practicable and no later than 30 days after an accident. Next, the injured party or the assignee (typically a hospital . . .) must submit proof of claim for medical treatment no later than 45 days after services are rendered" (9 NY3d at 317 [emphasis added] [internal citations omitted])]). By ruling that the notice of accident condition was satisfied based on the plain language of 11 NYCRR 65-3.3 (d), the Appellate Division disregarded the separate and distinct nature and purpose of these requirements. Even more troubling, such a construction effectively reads the 30-day written notice of accident requirement out of the no-fault regulations. But nothing in 11 NYCRR 65-3.3 (d) explicitly dispenses with the 30-day notice of accident requirement. Rather, 11 NYCRR 65-3.3 (d) merely provides that a NF-5 form may constitute the written notice required under the notice of accident provision.
In other words, these regulations (read alone or in tandem) cannot be interpreted to mean that a hospital/assignee's timely submission of a proof of claim for health services within 45 days of discharge of the injured person excuses the insured/assignor's failure to give the threshold notice of accident within 30 days of the accident, or that health care service providers are exempt from the written 30-day notice of accident requirement. Neither 11 NYCRR 65-1.1 nor 11 NYCRR 65-3.3 (d) contains such language. That is, while 11 NYCRR 65-3.3 (d) allows a completed hospital facility form to satisfy the written notice of accident requirement, the regulation does not provide (or suggest) that a "proof of claim" in that form filed within 45 days of treatment satisfies the 30-day notice of accident requirement where, as here, the form was submitted to Country Wide after the 30-day period has expired.
Although the Department of Insurance has not issued any interpretive statements or opinions regarding the subject regulations, our case law provides some guidance as to the importance of the "notice of accident" and "proof of claim" requirements to the no-fault regulatory scheme. In Serio, the Court explained that in 2001, the Superintendent of Insurance, in response to an alarming increase in insurance fraud over the preceding nine years, amended these regulations (see 100 NY2d at 861-863). Specifically, the notice of accident requirement was reduced from 90 days to 30 days, and the time to provide proof of claim was reduced from 180 days to 45 days (id. at 860, 862) in order to, among other things, prevent the fraud and abuse the Superintendent linked to the lengthy time frames (id. at 862) — for example, there were numerous cases where individuals were "exploiting the time lag between the alleged loss and the deadline for submitting proof of the loss, coupled with the reality that insurers are given only 30 days to review and investigate claims before paying them without risk of penalties for denying or delaying a claim" (id. at 861). Thus, it is clear that the Superintendent of Insurance — the official responsible for administering the Insurance Law and promulgating the insurance regulations — viewed both the "notice of accident" and "proof of claim" as integral requirements/time periods that further the goals of the no-fault system. Moreover, Presbyterian's interpretation of 11 NYCRR 65-3.3 (d) would undercut the anti-fraud purpose of the reduced time periods, particularly in cases where treatment does not occur until months or years after the accident.
Based on the foregoing, the proper construction of the subject regulations is that an NF-5 form (or other form that can serve as proof of claim) may constitute timely notice of an accident, as permitted by 11 NYCRR 65-3.3 (d), only if such proof of claim is given within the 30-day period prescribed by 11 NYCRR 65-1.1. Any other construction is unwarranted and would undermine the importance of the 30-day time period to the no-fault system.
Presbyterian nevertheless argues that interpreting 11 NYCRR 65-3.3 (d) in Country Wide's favor "would severely impact the hospital's ability to submit a timely bill" in cases where the insurer is not readily identifiable. But the Superintendent has addressed these concerns. The regulations allow late notices of accident if there is "written proof providing clear and reasonable justification for the failure to comply with such time limitation" (11 NYCRR 65-1.1)[FN1]. Indeed, the regulations specifically direct carriers to consider whether the injured person was a pedestrian or an occupant of a vehicle who may have difficulty identifying the proper carrier in assessing untimely notices of accident:
"The insurer shall establish standards for review of its determinations that applicants have provided late notice of claim or late proof of claim. In the case of notice of claim, such standards shall include, but not be limited to, appropriate consideration for pedestrians and non-related occupants of motor vehicles who may have difficulty ascertaining the identity of the insurer"

(11 NYCRR 65-3.5 [l]).
Finally, as an assignee of all the rights, privileges and remedies to which Benitez was entitled under the No-Fault law, Presbyterian stood in the shoes of Benitez and acquired no greater rights than he had (see Matter of International Ribbon Mills [Arjan Ribbons], 36 NY2d 121, 126 [1975] [Chief Judge Breitel wrote, "[i]t is elementary ancient law that an assignee never stands in any better position than his assignor."]). Here, because no written notice of accident was given, there was a failure to fully comply with the terms of the no-fault policy, which is a condition precedent to insurer liability. As a result, the assignment effectively became worthless (i.e., Benitez assigned nothing to Presbyterian) — you cannot assign your right to benefits if your right to those benefits has not been triggered, or if you had no right to those benefits in the first place.
For the foregoing reasons, the submission of the proof of claim within 45 days of the date health care services are rendered may not serve as timely written notice of accident after the 30-day period for providing such written notice has expired.
Accordingly, the order of the Appellate Division should be reversed, with costs, defendant's motion for summary judgment granted and the complaint dismissed.
* * * * * * * * * * * * * * * * *
Order reversed, with costs, defendant's motion for summary judgment granted and the complaint dismissed. Opinion by Judge Jones. Chief Judge Lippman and Judges Ciparick, Graffeo, Read, Smith and Pigott concur.
Decided October 13, 2011
Footnotes

Footnote 1: See also 11 NYCRR 65-3.3 (e), which provides: "When an insurer denies a claim based upon the failure to provide timely written notice of claim or timely submission of proof of claim by the applicant, such denial must advise the applicant that late notice will be excused where the applicant can provide reasonable justification of the failure to give timely notice."

Farm Family Casualty Insurance Company v. Brady Farms, Inc.


Appeal from a judgment of the Supreme Court, Genesee County (Robert C. Noonan, A.J.), entered March 31, 2010 in a declaratory judgment action. The judgment declared that plaintiff is obligated to indemnify defendant for certain payments.

HURWITZ & FINE, P.C., BUFFALO (DAN D. KOHANE OF COUNSEL), FOR PLAINTIFF-APPELLANT.
CHAMBERLAIN D'AMANDA OPPENHEIMER & GREENFIELD LLP, ROCHESTER (HENRY R. IPPOLITO OF COUNSEL), FOR DEFENDANT-RESPONDENT. It is hereby ORDERED that the judgment so appealed from is unanimously reversed on the law without costs, the motion is denied and judgment is granted in favor of plaintiff as follows:

It is ADJUDGED and DECLARED that plaintiff has no duty to defend or indemnify defendant with respect to any financial liabilities incurred in connection with the death of John T. Nichols under the Special Farm Package "10" policy.
Memorandum: Plaintiff commenced this action seeking a declaration that it has no duty to defend or indemnify defendant, the owner and operator of a farm, in connection with fatal injuries sustained by defendant's employee (hereafter, decedent) while working at the farm. At the time of the accident, defendant was insured under a primary policy issued by plaintiff, entitled the Special Farm Package "10" policy (hereafter, Package policy), as well as an umbrella policy also issued by plaintiff. Defendant did not have workers' compensation insurance at that time. Supreme Court thereafter granted defendant's motion for summary judgment seeking a declaration that, inter alia, plaintiff is obligated to defend and indemnify defendant under the Package policy "for all losses arising out of the death of" decedent. In granting the motion, the court agreed with defendant that the Package policy exclusions on which plaintiff relied do not operate to defeat coverage for defendant. According to defendant's attorney, however, the court indicated that it would not rule on the issue whether the workers' compensation award issued against defendant in connection with decedent's death falls within the coverage of the Package policy because there was no such motion before it seeking that relief.

After multiple chambers conferences, defendant made a second motion for summary judgment seeking a declaration that, inter alia, the workers' compensation award was covered by the Package policy. The court granted the motion, declaring that plaintiff is obligated under the Package policy to indemnify defendant, inter alia, for payments required to be made to decedent's widow in accordance with the workers' compensation award, as well as for funeral expenses expended by the widow and for reasonable fees and expenses paid by defendant to its attorneys in connection with both the workers' compensation proceedings and this action. We reverse.

We note at the outset that we reject plaintiff's contention that the court erred in entertaining defendant's second motion for summary judgment. Although it is well settled that "successive motions for summary judgment are generally disfavored" (Rupert v Gates & Adams, P.C., 83 AD3d 1393, 1395), such motions for summary judgment are permitted where there is "newly discovered evidence or other sufficient cause" (Giardina v Lippes, 77 AD3d 1290, 1291, lv denied 16 NY3d 702). Here, the court did not rule on the issue whether the subject workers' compensation award is within the coverage of the Package policy because there was no motion then before it seeking that relief, and the record establishes that the second motion was, if not encouraged, certainly not discouraged by the court. We thus conclude that " there was sufficient cause for defendant['s] [second]
motion' " (Tallie v Rochester Gas & Elec. Corp., 68 AD3d 1808, 1810).

We further conclude, however, that the court erred in granting defendant's second motion. "In determining a dispute over insurance coverage, we first look to the language of the policy . . . We construe the policy in a way that affords a fair meaning to all of the language employed by the parties in the contract and leaves no provision without force and effect' " (Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 221-222; see Raymond Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 5 NY3d 157, 162, rearg denied 5 NY3d 825). "As with the construction of contracts generally, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court' " (Vigilant Ins. Co. v Bear Stearns Cos., Inc., 10 NY3d 170, 177).

Here, the Package policy sets forth in relevant part that plaintiff "provide[s] coverage . . . if a claim is made or a suit is brought against an INSURED for damages because of BODILY INJURY or PROPERTY DAMAGE caused by an OCCURRENCE to which [the] coverage [in the policy] applies." The workers' compensation claim made on decedent's behalf establishes that his estate elected to forego the recovery of damages through a civil action and instead sought to pursue what was essentially a claim for the workers' compensation insurance benefits defendant should have secured for him. Pursuant to Workers' Compensation Law § 26-a (1) (a), an employer that failed to secure workers' compensation benefits for an injured worker is liable for the payment of benefits awarded to the injured worker. Thus, in effect, defendant employer is substituted for the insurer it failed to hire as the party responsible for payment of the workers' compensation benefits awarded to decedent. Consequently, the liability of defendant to decedent arises from defendant's failure to meet its statutory insurance procurement obligation rather than from the bodily injury sustained by decedent, and we conclude that there is no coverage for such liability under the Package policy (cf. Charles F. Evans Co. v Zurich Ins. Co., 95 NY2d 779).
Finally, in view of the uncontroverted proof in the record that the workers' compensation award issued against defendant in connection with decedent's death is outside the scope of coverage for defendant under the Package policy, we exercise our power to search the record and grant summary judgment to plaintiff (see CPLR 3212 [b]; Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106, 111).

 

Stranz v. New York State Energy Research and Development Authority (NYSERDA)

Appeal from an order of the Supreme Court, Erie County (Diane Y. Devlin, J.), entered April 26, 2010 in a personal injury action. The order, insofar as appealed from, denied that part of third-party defendant's motion seeking summary judgment against defendant-third-party plaintiffs Burns International Security Services Corporation and Securitas Security Services USA, Inc.

PHILLIPS LYTLE LLP, BUFFALO (WILLIAM D. CHRIST OF COUNSEL), FOR THIRD-PARTY DEFENDANT-APPELLANT.
EDWARD C. COSGROVE, BUFFALO (J. MICHAEL LENNON OF COUNSEL), FOR THIRD-PARTY PLAINTIFFS-RESPONDENTS.

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by granting those parts of the motion of third-party defendant West Valley Nuclear Services Company, LLC for summary judgment dismissing the second third-party complaint of third-party plaintiffs Burns International Security Services Corporation and Securitas Security Services USA, Inc. and for summary judgment on its counterclaim against those third-party plaintiffs for up to the sum of $250,000 in costs incurred in defending itself in the third-party action with respect to third-party plaintiff New York State Energy Research and Development Authority (NYSERDA) and as modified the order is affirmed without costs.

Memorandum: Plaintiff commenced this action seeking damages for injuries she sustained when she slipped and fell on an icy staircase at the Western New York Nuclear Service Center (hereafter, Site). Although the Site was owned by New York State, defendant-third-party plaintiff New York State Energy Research and Development Authority (NYSERDA) assumed jurisdiction over it. Pursuant to a "cooperative agreement" between NYSERDA and the United States Department of Energy (DOE), the DOE operated a high level radioactive waste management project at the Site. The record establishes that the DOE contracted with third-party defendant West Valley Nuclear Services Company, LLC (West Valley) to manage and operate the Site, and that West Valley in turn contracted with defendant-third-party plaintiff Burns International Security Services Corporation and its successor in interest, defendant-third-party plaintiff Securitas Security Services USA, Inc. (collectively, Burns), for Burns to provide security services on the Site. Incorporated into the two purchase order contracts between West Valley and Burns for the provision of the security services were West Valley's General Provisions for Commercial Items (General Provisions).

Two provisions in the General Provisions are relevant to this appeal taken by West Valley. Section 13A required Burns to indemnify and hold harmless West Valley from and against, inter alia, any and all claims, actions, causes of action, expenses and liabilities resulting from any injury to any person alleged to have occurred as a result of or in connection with the performance of Burns's contractual duties, except for any injuries that resulted "directly from the sole negligence" of West Valley. Section 13B required Burns to "procure . . . and . . . maintain . . ., while any work or Services are being performed, and for such periods thereafter as may be necessary under the circumstances' . . . insurance sufficient to protect . . . [West Valley] . . . against any and all liability, or alleged liability, with respect to bodily injury . . . arising pursuant to [the purchase orders]." Also pursuant to the General Provisions, the insurance policy was to contain a provision stating that the insurer agreed to waive" any rights of subrogation against [West Valley] . . . which might arise by reason of any payment under this policy.' " West Valley was to be named as an additional insured in the insurance policy.

The insurance policy obtained by Burns contained the requisite waiver of subrogation clause, named West Valley as an additional insured and provided single incident coverage of $1 million. That coverage, however, was in excess of a self-insured retention (SIR) of $250,000.  After plaintiff commenced her action against NYSERDA and Burns, they commenced separate third-party actions against West Valley. In its third-party answer in the NYSERDA third-party action, West Valley asserted a cross claim against Burns for common-law indemnification. In its amended third-party answer in the Burns third-party action, West Valley asserted two counterclaims, the first seeking contractual indemnification from Burns and the second seeking a defense from Burns or its insurer in the NYSERDA third-party action. West Valley thereafter moved for, inter alia, summary judgment dismissing the Burns "second third-party complaint" and for summary judgment on its two counterclaims. We conclude that Supreme Court erred in denying West Valley's motion with respect to Burns in its entirety. Rather, we conclude that the court should have granted those parts of the motion for summary judgment dismissing Burns's second third-party complaint and for summary judgment on the counterclaim seeking defense costs in the NYSERDA third-party action, but only up to the sum of $250,000. We therefore modify the order accordingly.

With respect to that part of its motion for summary judgment dismissing Burns's second third-party complaint, West Valley contends that the second third-party complaint is barred by both the contractual waiver of subrogation provision and the antisubrogation rule. Contrary to the contention of Burns, West Valley's assertion with respect to the contractual waiver of subrogation is preserved for our review. Furthermore, although Burns is correct that the assertion with respect to the antisubrogation rule is not preserved for our review, West Valley may raise that assertion for the first time on appeal because it involves " [a] question of law appearing on the face of the record . . . [that] could not have been avoided by [Burns] if brought to [its] attention in a timely manner' " (Art Capital Partners, LP v Tyco Acquisition Corp. XVIII, 71 AD3d 1404, 1405, quoting Oram v Capone, 206 AD2d 839, 840).

Nevertheless, although both assertions are properly before us, we conclude that the contractual waiver of subrogation provision does not constitute a basis for granting that part of the motion for summary judgment dismissing Burns's second third-party complaint. Here, the contract stated only that the insurance policy must contain a waiver of subrogation clause that would bar the insurer providing the insurance policy from seeking subrogation against West Valley. That contractual provision does not preclude Burns from seeking subrogation against West Valley.

We further conclude, however, that West Valley's assertion with respect to the antisubrogation rule does constitute a basis for granting that part of the motion for summary judgment dismissing Burns's second third-party complaint. It is well established that "an insurance carrier has no right of subrogation against its own insured to recover for a claim the insurer has paid that arose out of the very risk for which the insured was covered' " (Fitch v Turner Constr. Co., 241 AD2d 166, 170; see North Star Reins. Corp. v Continental Ins. Co., 82 NY2d 281, 294-295; McMann v A.R. Mack Constr. Co., Inc., 8 AD3d 1083, 1084). Because Burns procured an insurance policy that has an SIR, Burns has become an insurer (see New York State Thruway Auth. v KTA-Tator Eng'g Servs., P.C., 78 AD3d 1566, 1567-1568), and therefore is not entitled to seek payment from its insured, West Valley.

With respect to the counterclaim seeking to require Burns or its insurer to provide West Valley with a defense in the NYSERDA third-party action, we conclude that West Valley is entitled to recover from Burns defense costs up to the sum of $250,000, the amount of the SIR. Pursuant to section 13B of the General Provisions of the two purchase order contracts in question, Burns was to procure and maintain insurance that would insure West Valley, as an additional insured, against "any and all liability" that arose pursuant to the contracts. The phrase "[a]ny and all liability" includes the cost of a defense. "[I]t is well settled that an insurer's duty to defend [its insured] is exceedingly broad and an insurer will be called upon to provide a defense whenever the allegations of the complaint suggest . . . a reasonable possibility of coverage . . . The duty to defend [an] insured[] . . . is derived from the allegations of the complaint and terms of the policy. If [a] complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend" (BP A.C. Corp. v One Beacon Ins. Group, 8 NY3d 708, 714 [internal quotation marks omitted]; see Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137; Henderson v New York Cent. Mut. Fire Ins. Co., 56 AD3d 1141, 1142). Because the allegations of the complaint in the main action potentially bring the claims within the protection of the insurance coverage purchased, the insurer would be required to provide West Valley with a defense (see National Union Fire Ins. Co. of Pittsburgh, Pa. v City of Oswego, 295 AD2d 905, 905-906; see also Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169, 175). In the motion underlying the appeal, however, West Valley is seeking to require Burns, rather than the insurer from whom Burns purchased the insurance, to provide West Valley with a defense. Although West Valley bases its contention on the argument that Burns breached the contracts by obtaining an insurance policy that had a SIR of $250,000, our conclusion is the same regardless of the argument that Burns breached the contract. In the event that Burns in fact breached the contracts, then it is responsible for any damages that would have been avoided had the correct insurance policy been obtained (see Kinney v G. W. Lisk Co., 76 NY2d 215, 219; Lima v NAB Constr. Corp., 59 AD3d 395, 397; Moll v Wegmans Food Mkts., 300 AD2d 1041, 1042; Nrecaj v Fisher Liberty Co., 282 AD2d 213, 214). If, on the other hand, Burns did not breach the contracts because the SIR may be deemed to constitute insurance covering West Valley for any and all liability, then Burns has become an insurer for any liability up to the sum of $250,000.
As an insurer, Burns therefore must provide up to the sum of $250,000 in defense costs to West Valley in the NYSERDA action.
We note that, to the extent that West Valley contends for the first time on appeal that it is entitled to a defense in the Burns third-party action as well, that contention is not properly before us (see generally Hyde v North Collins Cent. School Dist., 83 AD3d 1557, 1558; Ciesinski v Town of Aurora, 202 AD2d 984, 985).

Finally, we conclude that the court properly denied that part of West Valley's motion for summary judgment on its counterclaim for contractual indemnification. There is an issue of fact whether Burns and/or West Valley were negligent, and thus any determination whether Burns must provide contractual indemnification to West Valley would be premature (see Bellefleur v Newark Beth Israel Med. Ctr., 66 AD3d 807, 808-809; Niagara Frontier Transp. Auth. v City of Buffalo Sewer Auth., 1 AD3d 893, 895).

 

Axis Construction Corp.v. O'Brien Agency, Inc..

DECISION & ORDER

Motion by the defendants for leave to reargue appeals from an order of the Supreme Court, Suffolk County, dated October 21, 2009, and a judgment of the same court entered December 22, 2009, which were determined by decision and order of this Court dated February 22, 2011.

Upon the papers filed in support of the motion and the papers filed in opposition thereto, it is

ORDERED that the motion is granted and, upon reargument, the decision and order of this Court dated February 22, 2011 (see Axis Constr. Corp. v O'Brien Agency, Inc., 81 AD3d 863), is recalled and vacated, and the following decision and order is substituted therefor:

Ackerman, Levine, Cullen, Brickman & Limmer, LLP, Great Neck, N.Y. (John M. Brickman and Benjamin S. Kaplan of counsel), for appellant.
Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, White Plains, N.Y. (Nancy Quinn Koba of counsel), for respondents.
In an action, inter alia, to recover damages for breach of a contract to procure insurance, the plaintiff appeals from (1) an order of the Supreme Court, Suffolk County (Emerson, J.), dated October 21, 2009, which granted the defendants' motion for summary judgment dismissing the complaint, and (2) a judgment of the same court entered December 22, 2009, which, upon the order, is in favor of the defendants and against it dismissing the complaint.

ORDERED that the appeal from the order is dismissed; and it is further,

ORDERED that the judgment is reversed, on the law, the defendants' motion for summary judgment dismissing the complaint is denied, and the order is modified accordingly; and it is further,

ORDERED that one bill of costs is awarded to the plaintiff.

The appeal from the intermediate order must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see Matter of Aho, 39 NY2d 241, 248). The issues raised on the appeal from the order are brought up for review and have been considered on the appeal from the judgment (see CPLR 5501[a][1]).

An insurance agent or broker has a common-law duty to obtain requested coverage for a client within a reasonable amount of time, or to inform the client of the inability to do so (see Hoffend & Sons, Inc. v Rose & Kiernan, Inc., 7 NY3d 152, 157; Murphy v Kuhn, 90 NY2d 266, 270; Core-Mark Intl. v Swett & Crawford Inc., 71 AD3d 1072; Verbert v Garcia, 63 AD3d 1149). Absent a specific request for coverage not already in a client's policy or the existence of a special relationship with the client, an insurance agent or broker has no continuing duty to advise, guide, or direct a client to obtain additional coverage (see Hoffend & Sons, Inc. v Rose & Kiernan, Inc., 7 NY3d at 157-158; Murphy v Kuhn, 90 NY2d at 270-271; Verbert v Garcia, 63 AD3d 1149). A special relationship which gives rise to a duty to advise may exist, inter alia, where "there is a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on" (Murphy v Kuhn, 90 NY2d at 272).

Here, the defendants made a prima facie showing of their entitlement to judgment as a matter of law by submitting evidence which established that the plaintiff did not specifically request that they procure construction management professional liability insurance coverage (see Verbert v Garcia, 63 AD3d 1149; Fremont Realty Inc. v P & N Iron Works, Inc., 39 AD3d 586, 587). Contrary to the Supreme Court's determination, however, the plaintiff's evidentiary submissions in opposition were sufficient to raise a triable issue of fact as to whether there was a course of dealing between the parties over an extended period of time which gave rise to a special relationship between them, such that the defendants would have been required to advise the plaintiff to obtain the subject coverage (cf. Hoffend & Sons, Inc. v Ross & Kiernan, Inc., 7 NY3d 152; Murphy v Kuhn , 90 NY2d 266). Accordingly, the defendants' motion for summary judgment should have been denied.

 

D’Angelo v. Litterer


Appeal from an order of the Supreme Court, Erie County (Diane Y. Devlin, J.), entered September 17, 2010 in a personal injury action. The order, insofar as appealed from, denied in part the motion of defendant for summary judgment.

Hagelin Kent LLC, Buffalo (Victor M. Wright of Counsel), for Defendant-Appellant.
Brown Chiari LLP, Lancaster (Bradley D. Marble of Counsel), for Plaintiff-Respondent.

It is hereby ORDERED that the order insofar as appealed from is unanimously reversed on the law without costs, the motion is granted in its entirety and the complaint is dismissed.
Memorandum: Plaintiff commenced this action seeking damages for injuries she allegedly sustained when the vehicle she was driving collided with a vehicle driven by defendant. Supreme Court erred in denying in part defendant's motion seeking summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d). Defendant met her initial burden by submitting medical records and the report of the physician who conducted a medical examination on defendant's behalf establishing that the injuries allegedly sustained by plaintiff in the accident were preexisting. "Because defendant submitted persuasive evidence that plaintiff's alleged pain and injuries were related to . . . preexisting condition[s], plaintiff had the burden to come forward with evidence addressing defendant's claimed lack of causation' " (Clark v Perry, 21 AD3d 1373, 1374, quoting Pommells v Perez, 4 NY3d 566, 580). Plaintiff, however, failed to meet that burden. Indeed, her "submissions in opposition to the motion did not adequately address how plaintiff's current medical problems, in light of [plaintiff's] past medical history, are causally related to the subject accident' " (Anania v Verdgeline, 45 AD3d 1473, 1474; see Hartman-Jweid v Overbaugh, 70 AD3d 1399, 1400).

Fish King Enterprises v. Countrywide Insurance Company


Cullen and Dykman LLP, Brooklyn, N.Y. (Andrew Giuseppe
Vassalle, Frank Lourenso, and Djordje Caran of counsel), for appellants.
Thomas Torto, New York, N.Y., for respondent.

DECISION & ORDER

In an action, inter alia, for a judgment declaring that the defendant Countrywide Insurance Company is obligated to defend and indemnify the plaintiffs as third-party defendants in an underlying action entitled Lee v Hino Motors, Ltd., commenced in the Supreme Court, Kings County, under Index No. 8263/99, the plaintiffs appeal, as limited by their brief, from so much of an order of the Supreme Court, Kings County (Ruchelsman, J.), dated August 31, 2009, as denied that branch of their motion which was for summary judgment declaring that the defendant Countrywide Insurance Company is obligated to defend them as third-party defendants in the underlying action and granted that branch of the cross motion of the defendant Countrywide Insurance Company which was, in effect, for summary judgment declaring that the defendant Countrywide Insurance Company is not obligated to defend them as third-party defendants in the underlying action.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, that branch of the plaintiffs' motion which was for summary judgment declaring that the defendant Countrywide Insurance Company is obligated to defend them as third-party defendants in the underlying action is granted, that branch of the cross motion of the defendant Countrywide Insurance Company which was, in effect, for summary judgment declaring that it is not obligated to defend the plaintiffs as third-party defendants in the underlying action is denied, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that the defendant Countrywide Insurance Company is obligated to defend the plaintiffs as third-party defendants in the underlying action.  

The plaintiff Jian Bin Yang was involved in a traffic accident while making deliveries for his employer, the plaintiff Fish King Enterprises (hereinafter Fish King). Yang's coworker, who was a passenger in the vehicle, allegedly suffered injuries and commenced a personal injury action against, among others, the manufacturers of the vehicle (hereinafter the underlying action). The defendants in the underlying action commenced a third-party action against the plaintiffs here for contribution and indemnification.

Fish King had a business auto insurance policy with the defendant Countrywide Insurance Company (hereinafter Countrywide). Through its broker, Fish King timely notified Countrywide of the accident. The broker also forwarded copies of the second third-party complaint, received by Countrywide on January 9, 2002, and the police report and summons and complaint in the underlying action, received by Countrywide on January 17, 2002. On March 6, 2002, Countrywide disclaimed coverage, citing an employee exclusion.

The plaintiffs commenced this action, inter alia, for a judgment declaring that Countrywide is obligated to defend and indemnify them as third-party defendants in the underlying action. The plaintiffs moved for summary judgment declaring that Countrywide was obligated to defend and indemnify them as third-party defendants in the underlying action, and Countrywide cross-moved, in effect, for summary judgment declaring that it was not obligated to defend and indemnify the plaintiffs as third-party defendants in the underlying action. Prior to the motions being submitted, the underlying action was settled, with Countrywide contributing the policy limits. The issue of indemnification was thereby rendered academic, leaving the remaining issue of Countrywide's liability for legal fees, costs, and disbursements incurred relative to the defense of the underlying action. The Supreme Court, among other things, denied that branch of the plaintiffs' motion which was for summary judgment declaring that Countrywide is obligated to defend them as third-party defendants in the underlying action and granted that branch of Countrywide's cross motion which was, in effect, for summary judgment declaring that it was not obligated to defend the plaintiffs as third-party defendants in the underlying action. The plaintiffs appeal, and we reverse the order insofar as appealed from.

Countrywide did not waive its defenses to the issue of defense costs by settling the underlying action for the policy limits. "Waiver is an intentional relinquishment of a known right and should not be lightly presumed" (Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d 966, 968). There was no "clear manifestation of intent" on Countrywide's part to abandon its defenses to the issue of defense costs (id. at 968). Countrywide did, however, waive its current standing defense by failing to either make a pre-answer motion to dismiss on that basis or assert such as an affirmative defense in its answer (see CPLR 3211[a][3]; 3211[e]; Matter of Fossella v Dinkins, 66 NY2d 162, 167; Country Pointe at Dix Hills Home Owners Assn., Inc. v Beechwood Org., 80 AD3d 643, 651).

The Supreme Court erred in determining that Countrywide's disclaimer of coverage was timely pursuant to Insurance Law § 3420(d). "The timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage" (Matter of New York Cent. Mut. Fire Ins. Co. v Steiert, 68 AD3d 1120, 1121 [internal quotation marks omitted]; see Continental Cas. Co. v Stradford, 11 NY3d 443, 449; First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 68-69). An insurer who delays in giving written notice of disclaimer bears the burden of justifying the delay (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d at 69; Quincy Mut. Fire Ins. Co. v Uribe, 45 AD3d 661). Here, Countrywide argued that, after its receipt of the summons and complaint in the underlying action, an investigation was required to evaluate the full extent of the actions and the identity of all relevant parties. However, the proffered basis for the disclaimer was that the plaintiff in the underlying action was an employee of Fish King, a fact which was readily ascertainable from the face of the complaint in the underlying action. Accordingly, the disclaimer, issued 49 days after Countrywide's receipt of that complaint, was untimely as a matter of law (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d at 66-69; City of New York v St. Paul Fire & Mar. Ins. Co., 21 AD3d 978; Uptown Whole Foods v Liberty Mut. Fire Ins. Co., 302 AD2d 592; City of New York v Northern Ins. Co. of N.Y., 284 AD2d 291; cf. Halloway v State Farm Ins. Cos., 23 AD3d 617).

Contrary to Countrywide's contention, the plaintiffs' request for defense and indemnity did not constitute a request by a co-insurer for contribution. Therefore, the requirements of Insurance Law § 3420(d) applied (cf. Sixty Sutton Corp. v Illinois Union Ins. Co., 34 AD3d 386). Moreover, the plaintiffs are correct that the relied-upon employee exclusion, which excluded coverage for "[b]odily injury to any employee of the insured arising out of and in the course of his or her employment by the insured," did not exclude coverage for third-party claims for contribution and indemnity related to such injury (see North Riv. Ins. Co. v United Natl. Ins. Co., 81 NY2d 812; Graphic Arts Mut. Ins. Co. v Bakers Mut. Ins. Co. of N.Y., 45 NY2d 551; Doyle v Pawtucket Mut. Ins. Co., 243 AD2d 603; cf. Commissioners of State Ins. Fund v Insurance Co. of N. Am., 80 NY2d 992). While the plaintiffs failed to raise this contention before the Supreme Court, it may be reached by this Court as it is an issue of law that appears on the face of the record which, had it been brought to the attention of the Supreme Court, could not have been avoided (see Romain v Grant, 60 AD3d 838; Lischinskaya v Carnival Corp., 56 AD3d 116; Matter of Besedina v New York City Tr. Auth., 47 AD3d 924).

Since this is a declaratory judgment action, the matter must be remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that Countrywide is obligated to defend the plaintiffs as third-party defendants in the underlying action (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

 

Integon National Insurance Company v. Noterile


McCabe, Collins, McGeough & Fowler, LLP, Carle Place, N.Y.
(Patrick M. Murphy of counsel), for respondent.

DECISION & ORDER
In an action for a judgment declaring that the plaintiff is not obligated to defend and indemnify the defendants Anthony C. Noterile and Whitestone Automotive, Inc., in an underlying personal injury action entitled Kim v Noterile, pending in the Supreme Court, Kings County, under Index No. 37669/05, the defendants Young Hoon Kim, Jan Di Kim, and Seul K. Kim appeal, as limited by their brief, from so much of an order of the Supreme Court, Kings County (Spodek, J.), dated April 26, 2010, as granted that branch of the plaintiff's motion which was, in effect, for leave to enter judgment upon their default in appearing or answering the complaint.

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

The defendants Young Hoon Kim, Jan Di Kim, and Seul K. Kim (hereinafter collectively the Kims) commenced an action against Anthony C. Noterile and Whitestone Automotive, Inc. (herinafter Whitestone), who are not parties to this appeal, to recover damages for personal injuries. The plaintiff Integon National Insurance, Co. (hereinafter Integon), which insured a tow-truck owned by Whitestone and operated by Noterile, commenced this action for a judgment declaring that it is not obligated to defend and indemnify Noterile and Whitestone in the underlying personal injury action. The Supreme Court granted that branch of Integon's motion which was, in effect, for leave to enter a default judgment against the Kims. We affirm insofar as appealed from.

Integon established its entitlement to a default judgment against the Kims by submitting proof of service of the summons and the complaint, the facts constituting the claim, and the Kims' default (see CPLR 3215[f]; George v Yoma Dev. Group, Inc., 83 AD3d 776; Miterko v Peaslee, 80 AD3d 736). "A defendant who has failed to appear or answer the complaint must provide a reasonable excuse for the default and demonstrate a meritorious defense to the action to avoid the entering of a default judgment or to extend the time to answer" (Ennis v Lema, 305 AD2d 632, 633; see also Equicredit Corp. of Am. v Campbell, 73 AD3d 1119, 1120-1121). The Kims' contention that their insurance company delayed in informing them that it would not defend them in the instant declaratory judgment action is an insufficient excuse for their default (see Juseinoski v Board of Educ. of City of N.Y., 15 AD3d 353; Hegarty v Ballee, 18 AD3d 706). Further, their contention that their prior attorneys failed to forward their case file to their current attorneys until November 2009 does not constitute a reasonable excuse, as the record reveals that their current attorneys were in possession of the summons and complaint as early as March 2009. Accordingly, the Supreme Court properly granted that branch of Integon's motion which was, in effect, for leave to enter a default judgment against the Kims.

 

In the Matter of Auto One Insurance Co. v. Lopez


Cannon & Acosta, LLP, Huntington Station, N.Y. (June Redeker
and Gary Small of counsel), for appellants.
Picciano & Scahill, P.C., Westbury, N.Y. (Albert Galatan of
counsel), for petitioner-respondent.

DECISION & ORDER
In a proceeding, inter alia, pursuant to CPLR article 75, to permanently stay arbitration of an uninsured motorist claim, Juan Lopez, Larry M. Aparicio, and Cruz Lopez-Guzman appeal from an order of the Supreme Court, Suffolk County (Whelan, J.), dated September 22, 2010, which granted the petition to the extent of temporarily staying the arbitration pending the joinder of certain additional respondents.

ORDERED that the order is affirmed, with costs.

CPLR 7503(c) requires that an application to stay arbitration be made within 20 days after service of a notice of intention to arbitrate (see Matter of Fiveco, Inc. v Haber, 11 NY3d 140, 144). "[T]he timeliness of a proceeding for a stay of arbitration is measured with respect to the earlier filing of the petition, not with respect to its later service" (Matter of Government Empl. Ins. Co. v Morris, 83 AD3d 709, 710; see CPLR 304, 7502[a]; Matter of Mendon Ponds Neighborhood Assn. v Dehm, 98 NY2d 745; Matter of Scott v Allstate Ins. Co., 45 AD3d 690; Matter of Allstate Indem. Co. v Martinezn, 4 AD3d 422). Here, it uncontested that the appellants served their notice of intention to arbitrate on April 20, 2010. The petitioner submitted proof that the instant proceeding was commenced on May 3, 2010, by the filing of a petition. Accordingly, contrary to the appellants' contention, the action was commenced within the 20-day limitation period, and thus was timely.

The appellants' remaining contentions are either improperly raised for the first time on appeal (see Jara v New York Racing Assn., Inc., 85 AD3d 1121; Panteleon v Amaya, 85 AD3d 993), or without merit.

 

National Grange Mut. Ins. Co. v. Croyle

Appeal from an amended judgment of the Supreme Court, Oneida County (Samuel D. Hester, J.), entered August 27, 2010 in a declaratory judgment action. The amended judgment, inter alia, granted the motion of defendant Jared A. Hoffert for summary judgment and denied the cross motion of plaintiff for summary judgment.

COSTELLO, COONEY & FEARON, PLLC, SYRACUSE (CHRISTINA F. DEJOSEPH OF COUNSEL), FOR PLAINTIFF-APPELLANT.
ROSSI AND MURNANE, NEW YORK MILLS (VINCENT J. ROSSI, JR., OF COUNSEL), FOR DEFENDANT-RESPONDENT CROYLE, INC.
SMITH, MINER, O'SHEA AND SMITH, LLP, BUFFALO (TERRY D. SMITH OF COUNSEL), FOR DEFENDANT-RESPONDENT JARED A. HOFFERT.
WILSON, ELSER, MOSKOWITZ, EDELMAN & DICKER LLP, WHITE PLAINS (DEBRA A. ADLER OF COUNSEL), FOR DEFENDANT-RESPONDENT JEFFREY M. KATZ.
HISCOCK & BARCLAY LLP, SYRACUSE (ROBERT A. BARRER OF COUNSEL), FOR DEFENDANT-RESPONDENT NATIONAL GRID USA SERVICE COMPANY, INC.

It is hereby ORDERED that the amended judgment so appealed from is unanimously modified on the law by denying that part of the motion of defendant Jared A. Hoffert seeking attorneys' fees and expenses and that part of the cross motion of defendant Croyle, Inc. seeking attorneys' fees incurred in defending this action, and as modified the amended judgment is affirmed without costs.

Memorandum: Defendant Jared A. Hoffert commenced the underlying Labor Law and common-law negligence action against, inter alia, defendant Croyle, Inc. (Croyle) seeking damages for injuries he sustained on June 26, 2008, during the course of his employment on a construction project for which Croyle was the construction manager. The summons and complaint in that action were served on Croyle on November 29, 2008, along with a letter from Hoffert's attorney requesting that Croyle deliver the pleadings to its liability insurance carrier. Plaintiff, Croyle's liability insurance carrier, received the summons and complaint and a letter from Croyle's insurance agent on December 9, 2008. Hoffert's attorney thereafter communicated with a representative of plaintiff, both orally and in writing, concerning the underlying action. Plaintiff subsequently sent a letter to Croyle disclaiming coverage based upon Croyle's failure to provide notice pursuant to the terms of the insurance policy. By letter dated January 5, 2009, Hoffert's attorney requested plaintiff to reconsider its decision in light of Hoffert's notice to plaintiff. Thereafter, plaintiff commenced the instant action seeking a declaration that, inter alia, it has no obligation to defend and indemnify Croyle in the underlying action.

Supreme Court properly granted that part of Hoffert's motion seeking summary judgment declaring that plaintiff has an obligation to defend and indemnify Croyle in the underlying action and properly denied plaintiff's cross motion seeking summary judgment declaring that it did not have such an obligation. Hoffert, as the injured party, exercised his independent right to provide written notice to plaintiff, and he is not bound by Croyle's allegedly late notice (see Insurance Law § 3420 [a] [3]; Utica Mut. Ins. Co. v Gath, 265 AD2d 805, 806). Plaintiff, however, never disclaimed coverage based on Hoffert's alleged failure to provide timely notice, and thus it is "estopped from raising [Hoffert's] alleged failure to provide timely notice of the claim as a ground for disclaiming coverage" (Utica Mut. Ins. Co., 265 AD2d at 806; see generally General Acc. Ins. Group v Cirucci, 46 NY2d 862, 863-864; Vacca v State Farm Ins. Co., 15 AD3d 473, 474-475).

Croyle failed to appeal from that part of the amended judgment denying its cross motion seeking summary judgment declaring that plaintiff has an obligation to defend and indemnify it in the underlying action. We therefore do not address Croyle's contention that the court erred in rejecting its contention that its failure to provide prompt notice to plaintiff is excused by its reasonable belief in nonliability (see generally Matijiw v New York Cent. Mut. Fire Ins. Co., 292 AD2d 865). Inasmuch as Croyle did not prevail on the merits, we conclude that the court erred in granting that part of its cross motion seeking attorneys' fees incurred in defending this action (see generally RLI Ins. Co. v Smiedala, 77 AD3d 1293, 1294-1295). The court also erred in granting that part of the motion of Hoffert seeking attorneys' fees inasmuch as he does not have a contractual relationship with plaintiff (see De Vore v Balboa Ins. Co., 118 AD2d 989, 991-992). We therefore modify the amended judgment accordingly.

 

Waldron v. New York Central Mutual


Calendar Date: February 17, 2011
Before: Peters, J.P., Lahtinen, Malone Jr., Kavanagh and Garry, JJ.

DeGraff, Foy & Kunz, L.L.P., Saratoga Springs
(Christine M. Carsky of counsel), for appellants.
Boeggeman, George & Corde, P.C., Albany (Cynthia
Dolan of counsel), for New York Central Mutual Fire Insurance
Company, respondent.
Keidel, Weldon & Cunningham, White Plains
(Stephen C. Cunningham of counsel), for Knox Insurance Agency,
Inc. and another, respondents.
MEMORANDUM AND ORDER

Lahtinen, J.

Appeal from an amended order and judgment of the Supreme Court (O'Connor, J.), entered November 30, 2009 in Albany County, which, among other things, granted defendants' motions for summary judgment dismissing the complaint.

This case involves a dispute as to whether plaintiff Alexandra Waldron is entitled to coverage under the $300,000 supplementary uninsured/underinsured motorists (hereinafter SUM) provision of the insurance contract that her father, plaintiff William Waldron, purchased from defendant New York Central Mutual Fire Insurance Company (hereinafter NYCM) through defendant Knox Insurance Agency, Inc. On February 24, 2003, Alexandra Waldron, a 22-year-old college student who had not been listed as a member of the household on the insurance policy, sustained serious injuries while in Florida when the motorcycle on which she was a passenger was struck by an automobile that crossed into the motorcycle's lane. Two months later, in late April 2003, William Waldron first advised Knox of the accident, but he indicated to Knox that he did not want to file a claim with NYCM at that time. In mid-July 2004, William Waldron told Knox to file a claim with NYCM. Shortly thereafter, NYCM denied coverage on various grounds, including that notice of the claim was untimely and that Alexandra Waldron was not an insured under the policy. Plaintiffs commenced this action seeking a declaratory judgment that Alexandra Waldron was entitled to SUM coverage, as well as asserting, among other things, negligence and breach of contract causes of action against defendants. Following discovery, all parties moved for summary judgment. Supreme Court denied plaintiffs' motion, granted defendants' motions, dismissed the complaint and declared that NYCM was not obligated to provide SUM coverage for the accident. Plaintiffs appeal.[FN1]

Historically, New York adhered to the position that "an insurer that does not receive timely notice in accordance with a policy provision may disclaim coverage, whether it is prejudiced by the delay or not" (Briggs Ave. LLC v Insurance Corp. of Hannover, 11 NY3d 377, 381-382 [2008]; see Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339 [2005]). Recent legislation amended the Insurance Law, which now requires an insurer to show prejudice (see Insurance Law § 3420 [a] [5], as added by L 2008, ch 388, § 2 [eff Jan. 17, 2009]). The new statutory language does not, however, apply in the current case as the pertinent policy was issued before the effective date of the statute (see Board of Mgrs. of the 1235 Park Condominium v Clermont Specialty Mgrs., Ltd., 68 AD3d 496, 497 [2009]). Nonetheless, even prior to the statutory amendment, when an insurer received notice of an accident in a timely fashion, the insurer could not properly disclaim a late SUM claim absent a showing of prejudice (see Rekemeyer v State Farm Mut. Auto. Ins. Co., 4 NY3d 468, 476 [2005]; see also Matter of Brandon [Nationwide Mut. Ins. Co.], 97 NY2d 491, 498 [2002]; Bhatt v Nationwide Mut. Ins. Co., 61 AD3d 1406, 1406-1407 [2009]).

We address first whether William Waldron's communication with Knox in late April 2003 constituted timely notice of the accident to NYCM. The relationships of a purchaser of insurance, an agent or broker, and an insurance company are not always easily categorized (see People v Wells Fargo Ins. Servs., Inc., 16 NY3d 166, 171 [2011]). Generally, notice to an insurance broker is not necessarily considered notice to the carrier (see Board of Hudson Riv.-Black Riv. Regulating Dist. v Praetorian Ins. Co., 56 AD3d 929, 930 [2008]; but cf. Travelers Ins. Co. v Raulli & Sons, Inc., 21 AD3d 1299, 1300 [2005]), whereas notice to an agent of the insurer typically constitutes notice to the insurer (see Insurance Law § 3420 [a] [3]; D.C.G. Trucking Corp. v Zurich Ins. Co., 81 AD2d 990, 991 [1981], lv denied 54 NY2d 605 [1981]). The proof in the record established that Knox was an agent of NYCM.

NYCM's policy required that notice of the accident be given as soon as reasonably practicable, but in no event more than 30 days after the accident, absent proof providing justification for the delay. William Waldron's first communication with Knox was two months after the accident and, thus, beyond the 30-day limit in the policy. However, it is undisputed that his daughter had sustained very serious injuries in the accident and that he had immediately left New York to be with his daughter in Florida. Even two months after the accident when he notified Knox, his daughter was still hospitalized and there was continuing concern that she might lose a leg as a result of her injuries. Although William Waldron indicated to Knox — ostensibly because of concern of a premium increase — not to file a claim with NYCM, the agency relationship between Knox and NYCM resulted in the notice to Knox constituting notice to NYCM. In addition to verbal communication with Knox about the accident, William Waldron also provided a police accident report of the accident to Knox. The evidence is sufficient to raise a factual issue as to whether the delay of about one month beyond the 30-day notice requirement was sufficiently justified under the circumstances.

With regard to the SUM claim, the policy required notice of a SUM claim "as soon as practicable," which in the SUM context means "with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured [or uninsured]" (Matter of Metropolitan Prop. & Cas. Ins. Co. v. Mancuso, 93 NY2d 487, 495 [1999]; see Rekemeyer v State Farm Mut. Auto. Ins. Co., 4 NY3d at 474; Matter of State Farm Mut. Auto. Ins. Co. [Jackson], 6 AD3d 1029, 1030 [2004]). Here, the police accident report provided to Knox by William Waldron two months after the accident left blank the section for driver's insurance. Even if this did not constitute notice of a potential SUM claim, NYCM failed to establish that the July 2004 notice of a SUM claim was untimely as a matter of law. NYCM did not submit proof addressing whether it was prejudiced by the delay and, in the event the factual issue about the timeliness of the initial notice of the accident is resolved favorably to plaintiffs, NYCM will be required to show prejudice (see Rekemeyer v State Farm Mut. Auto. Ins. Co., 4 NY3d at 476).

Lastly, we are unpersuaded by NYCM's argument that plaintiffs have failed to raise an issue of fact as to whether Alexandra Waldron was a resident of her parents' household at the time of the accident. Although she was renting an apartment off campus while attending college, the record reflects that she maintained a bedroom in her parents' house, where she kept clothing, visited on weekends and lived on school holidays and semester breaks. Moreover, her college considered her parents' address to be her permanent one and she retained her parents' address for voting and tax purposes (see Konstantinou v Phoenix Ins. Co., 74 AD3d 1850, 1851 [2010], lv denied 15 NY3d 712 [2010]; Dutkanych v United States Fid. & Guar. Co., 252 AD2d 537, 538 [1998]).

Peters, J.P., Malone Jr., Kavanagh and Garry, JJ., concur.

ORDERED that the amended order and judgment is modified, on the law, without costs, by reversing so much thereof as granted the motion of defendant New York Central Mutual Fire Insurance Company for summary judgment dismissing the complaint against it and declared that said defendant is not obligated to provide supplementary uninsured/underinsured motorist coverage for the claim arising out of the February 24, 2003 motor vehicle accident; said motion denied; and, as so modified, affirmed.
Footnotes

Footnote 1: Plaintiffs focus solely in their appellate brief upon NYCM's potential liability to them, and we accordingly deem any issues regarding Supreme Court's grant of summary judgment to Knox and defendant Paul Knox to be abandoned (see Gray v R.L. Best Co., 78 AD3d 1346, 1348 n 2 [2010]).

 

Yoda, LLC v. National Union Fire Ins. Co. of Pittsburgh, PA


Sedgwick Detert Moran & Arnold LLP, New York (J. Gregory
Lahr of counsel), for appellant-respondent.
Miranda Sambursky Slone Sklarin Verveniotis LLP, Mineola
(Michael A. Miranda of counsel), for respondents-appellants.
Law Offices of Kenneth A. Wilhelm, New York (Barry
Liebman of counsel), for respondents.

Order, Supreme Court, New York County (Doris Ling-Cohan, J.), entered July 8, 2010, which, denied defendant National Union's motion for summary judgment and plaintiffs' cross motion for summary judgment, unanimously modified, on the law, to grant the cross motion to the extent of declaring, on the fourth cause of action, that National Union is equitably estopped from denying plaintiffs Yoda and Riverhead excess coverage in the underlying personal injury action, and otherwise affirmed, without costs. Appeal from order, same court and Justice, entered September 15, 2010, which, upon reargument, adhered to the original determination, unanimously dismissed, without costs, as academic.

Plaintiffs Yoda and Riverhead, the general contractor and owner of a construction site, seek coverage under an excess insurance policy issued by defendant National Union to their subcontractor, Queens Stainless, with respect to the underlying Labor Law action. Their insurer, plaintiff United National, seeks a declaration that its coverage follows that of National Union.

The National Union excess policy follows the form of a commercial general liability policy, issued by First Specialty to Queens Stainless, that provides coverage to its insured for damages arising from bodily injury, and excludes coverage for liability arising from a contractual "agreement," except if the insured has assumed liability for such damages under an "insured contract," such as the subcontract between Yoda and Queens Stainless. The First Specialty policy also provides that its employer's liability exclusion "does not apply to liability assumed by the insured under an insured contract,'" and requires the insurer to defend an indemnitee of the insured in certain circumstances.

In 2003, Yoda tendered the defense and indemnity in the underlying action to Queens Stainless and its insurers, and First Specialty accepted the tender, although no action for indemnification had been commenced against Queens Stainless. National Union actively participated in and monitored the litigation for the next three years, without issuing any disclaimer. In 2006, it accepted First Specialty's tender of its policy in connection with a court-ordered mediation, and attended the mediation with authority to settle the underlying action. Only after partial summary judgment was awarded in favor of the plaintiffs in the underlying action, and the damages trial was scheduled to begin, did National Union disclaim coverage, asserting that it had just "discovered" that the certificate of insurance provided to it by Yoda, which names Yoda and Riverhead as additional insureds, was false.

National Union's failure to timely disclaim coverage after tender was made by a party claiming indemnification from its insured, as required by Insurance Law § 3420(d), precludes it from disclaiming based on the employer's liability exclusion. However, the failure to disclaim "does not create coverage which the policy was not written to provide" (Zappone v Home Ins. Co., 55 NY2d 131, 134 [1982]; National Abatement Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 33 AD3d 570, 571 [2006]). The First Specialty policy does not provide automatic additional insured coverage for parties indemnified under an "insured contract" (compare Kassis v Ohio Cas. Ins. Co., 12 NY3d 595 [2009]). However, in convoluted fashion, it provides "insured contract" coverage to the named insured through an exception to an exclusion (see 17A Couch on Insurance 3d § 254:13). Even were we to find that the policy is ambiguous, the issue of the parties' intent is one of fact not resolved by the extrinsic evidence in this record (see Katz v American Mayflower Life Ins. Co. of N.Y., 14 AD3d 195, 207-208 [2004], affd 5 NY3d 561 [2005]).

Although Insurance Law § 3420(d) does not create coverage, an insurance company may be estopped "from denying or disclaiming coverage where the proper defending party relied to its detriment on that coverage and was prejudiced by the delay of the insurance company in denying or disclaiming coverage based on the loss of the right to control its own defense" (Liberty Ins. Underwriters, Inc. v Arch Ins. Co., 61 AD3d 482 [2009] [internal quotation marks and citation omitted]; Federated Dept. Stores, Inc. v Twin City Fire Ins. Co., 28 AD3d 32, 38 [2006]). The doctrine may be applied in disputes between insurers (see Liberty Ins. Underwriters, 61 AD3d at 482). However, "[p]rejudice is established only where the insurer's control of the defense is such that the character and strategy of the lawsuit can no longer be altered" (Federated Dept. Stores, 28 AD3d at 39).

In support of their motion for summary judgment, plaintiffs submitted evidence that National Union acknowledged coverage in correspondence and actively participated in the defense, culminating in its lead role in the mediation, and that plaintiffs had been prejudiced in the defense of the underlying action. If National Union had disputed coverage in a reasonably timely manner, plaintiffs could have impleaded Queens Stainless, thereby triggering insured contract coverage or, at least, timely resolution of any disclaimer. Plaintiff United National asserts that it relied on National Union's conduct and allowed its file to become inactive, believing that the matter would settle within the limits of the insurance provided by Queens Stainless's insurers. In opposition, National Union claimed that it had been misled by Yoda's tender of a certificate of insurance showing coverage.

However, there is no evidence that Yoda acted in bad faith, and nothing prevented National Union from obtaining a copy of the primary policy during the three years following the tender (see Utica Mut. Ins. Co. v 215 W. 91st St. ]Corp., 283 AD2d 421 [2001]; compare Federated Dept. Stores, 28 AD3d at 34-35 [purported insured failed to comply with insurer's requests for a copy of its contract with the insured, which would trigger "insured contract" coverage]). In the absence of any material issues of fact, National Union is estopped from denying that it provides excess coverage for Yoda and Riverhead in the underlying action. However, United National is not entitled to summary judgment against National Union on the issue of priority of coverage inasmuch as issues of fact exist as to whether United National reasonably relied to its detriment on National Union's conduct.

 

State Farm Mutual Automobile Insurance Company v. Beddini

Richard T. Lau & Associates, Jericho (Joseph G. Gallo of
counsel), for appellant.
Ronemus & Vilensky, LLP, New York (Michael B. Ronemus
of counsel), for respondents.
Order, Supreme Court, New York County (Joan B. Lobis, J.), entered February 1, 2011, which denied the petition to permanently stay arbitration of respondents' uninsured motorist claim and dismissed the proceeding, unanimously reversed, on the law, without costs, and the petition granted.

Respondents were traveling on a Vespa motorscooter behind a pickup truck being operated by an unidentified driver. A large, cardboard box measuring approximately five feet by four feet, flew off of the pickup truck and became lodged in the front wheel of the Vespa. This caused respondents to be ejected from the motorcycle and to sustain serious injuries. Respondents filed an uninsured/underinsured motorist claim under respondent Beddini's automobile insurance policy issued by petitioner and they demanded arbitration of the claim.

In Matter of Allstate v Killakey (78 NY2d 325 [1991]), relied upon by the motion court, the claimant was killed when a tire and rim from an unidentified vehicle struck the claimant's vehicle, causing it to crash. The Court of Appeals reversed the stay of arbitration of the uninsured motorist claim, holding that physical contact occurs "when the accident originates in collision with an unidentified vehicle, or an integral part of an unidentified vehicle" (id. at 329). The Court implicitly found that the tire and rim that caused the accident were essential to the operation of the truck, and thus, an integral part of it. Here, however, the cardboard box is not an integral part of the pickup truck. Accordingly, respondents' collision with the box does not constitute the type of physical contact required to impose uninsured motorist coverage (see e.g. Matter of Smith [Great Am. Ins. Co.], 29 NY2d 116 [1971]; Matter of Insurance Co. of N. Am. [Carrozo], 203 AD2d 210 [1994]).

Anderson v. Zapata


Baker, McEvoy, Morrissey & Moskovits, P.C., New York
(Stacy R. Seldin of counsel), for appellant.
Law Offices of Eric H. Green and Associates, New York (Hiram
A. Raldiris of counsel), for respondents.
Order, Supreme Court, Bronx County (George J. Silver, J.), entered December 7, 2010, which denied defendant's motion for summary judgment dismissing the complaint on the ground that plaintiffs did not sustain a serious injury within the meaning of Insurance Law § 5102(d), unanimously reversed, on the law, without costs, and the motion granted. The Clerk is directed to enter judgment in defendant's favor dismissing the complaint.
Defendant's orthopedist found no limitations of motion regarding plaintiff Rebecca Anderson. Although defendant's neurologist found that she had limitations in 2010, there is no objective evidence to support a cervical injury (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 353 [2002]). Any alleged injuries to her knees were shown to be the result of a preexisting degenerative condition, which was confirmed, rather than refuted, by her radiologist (see Valentin v Pomilla, 59 AD3d 184 [2009]). Moreover, the failure to perform any range of motion testing contemporaneous with the accident eight years earlier renders any attempt to connect her present day injuries to the 2002 accident speculative (see Batts v Medical Express Ambulance Corp., 49 AD3d 294, 295 [2008]).
Defendant satisfied his initial burden of establishing, prima facie, the absence of any triable questions of fact so as to entitle him to judgment as a matter of law as to plaintiffs Strawberry and Mychal Isaac by submitting the affirmed reports of an orthopedic surgeon and a neurologist (see DeJesus v Paulino, 61 AD3d 605 [2009]). The differences between the standards for normal ranges of motion cited by defendant's orthopedic and neurologic reports are not significant. Both doctors concluded that plaintiffs Strawberry and Mychal Isaac had normal ranges of motion, and the minor differences in what they regarded as normal ranges do not affect defendant's entitlement to summary judgment (see Feliz v Fragosa, 85 AD3d 417 [2011]).
We have considered plaintiff's remaining arguments and find them unavailing.

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