Attached you will find Vol. XIV, No.1 of Coverage Pointers. For those who studied other ancient languages rather than Roman, we bring you to the first issue of our fourteenth year of publication. The beat goes on.
We will be starting our “slow” season, as the appellate courts go into their summer recesses. Accordingly, as we remind you each year, the volume of appellate decisions will be dramatically reduced between the Fourth of July and the end of September. However, we go out with a “bang,” only appropriate for the Independence Day revilers, and you’ll find a couple of (Yankee Doodle?) dandies in this week’s issue.
The iPad does make it easy to acquire books. This summer I’ve been swallowing books whole, including a few must reads: Steve Jobs biography, The Art of Fielding, The Presidents Club and Gone Girl along with Einstein, a rather weak Killing Lincoln and a couple of must misses, including Girl By The Road At Night, and the Wicked Business. Tonight I’ll start Jonah Lehrer’s Imagine – How Creativity Works. Other than the Shades of Gray trilogy, any suggestions on good reads?
Big Happenings in the World of Underinsured (SUM) Coverage:
We draw your attention to the Day v. OneBeaconcase from the Fourth Department, which is a must-read for any lawyer or claim professional handing SUM claims where the injured party is considering or has interposed a claim against another potentially responsible non-motor vehicle defendant (e.g. bar, restaurant, municipality, construction company or product manufacturer).
The Fourth Department has held that IF the plaintiff has settled with that non-motor vehicle defendant without preserving the SUM carrier’s subrogation rights, the right to SUM benefits may well be compromised. Your editor represented OneBeacon on this one.
Legislation Passes Both Houses Changing Cadence of Securing SUM Coverage; New York May Join the Universe of Opt Out States:
Historically, uninsured motorists coverage has been mandatory, Supplementary Uninsured/Underinsured Motorist Coverage (SUM) coverage has been optional. Under legislation which received final legislative approval on June 21 (and will soon be awaiting the Governor’s signature), SUM coverage will be automatically added to auto insurance policies, at the level matching liability limits, unless the policyholder opts out. See Cassie’s column for a full review of the legislation. Again, this legislation has not yet been signed into law but has passed both houses.
I hope everyone had a great Fourth of July and is surviving the heat.
The message this edition continues to be the sufficiency of IME and peer review reports. With regard to peer review reports, it is noted that the arbitrators do not have a problem with seeing the same physician or chiropractor rendering the opinion, but do have a problem with that expert relying upon old journal articles to support their position. We submit that the arbitrators also notice when that expert’s reliance upon certain journal articles never seem to change from report to report. One arbitrator noted that the expert relied upon a very old article when the treating chiropractor presented a more recent article supporting the use of a piece of durable medical equipment. The arbitrator did not find the peer review persuasive and noted that the medicine changes and the suggestion is that the expert should be relying upon current material to persuade the arbitrator. If not done, perhaps it should be considered that a review and comparison of an expert’s report be made to prior reports to ensure that the expert is keeping up to date with the changes in medicine, if they exist. Turning to IME reports, the continued criticism is that the expert does not provide a substantive discussion on why an injury is pre-existing or whether it is possible that the pre-existing injury was exacerbated by the accident. This is particularly troubling when the treating medical reports comment on the pre-existing injury and how no treatment was rendered for some time for that injury prior to an accident.
Finally, there is a good decision on a lost wage claim which also brings forward a point for consideration. If the expert opines the eligible injured person has the ability to work with restrictions yet has found numerous objective findings, there should be a discussion as to what the eligible injured person’s job requires to support an opinion that a return to work is warranted. Further, it is recommended that the expert inquire whether the eligible injured person attempted to return to work and what occurred as well as whether the eligible injured person could receive an accommodation at work to implement the restrictions. An expert’s opinion that the eligible injured person can return to work with a 15-pound lifting and no bending restriction is not going to be persuasive if the eligible injured person testifies at an arbitration that he or she can only return to the workplace if able to lift in excess of 15 pounds. Likewise, the insurer could as part of verification inquire of the employer whether the eligible injured person would be afforded an accommodation based upon the expert’s recommended work restrictions.
Fifth Olympic Games in Stockholm Opens -- Donald Fithian "Don" LippincottClaims First 100 Meter World Record
Don Lippincott was an American athlete who competed mainly in the sprints. He was part of the United States Olympic Team in the 1912 Summer Olympics held in Stockholm, Sweden where he won the silver medal in the 200 meters. He also ran in the 100 meters where he finished third behind Alvah Meyer and winner Ralph Craig who had also been the person to beat Don in the 200 meters.
Lippincott is the first record holder over 100 meters as recognized by the International Amateur Athletics Federation, now known as the International Association of Athletics Federations. He broke that record on the opening day of the Olympics, 100 years ago today.
I had the pleasure of tracking down and chatting with his gracious granddaughter, Trish Lippincott Woods. Trish is a medium and a psychic and her website can be found at http://www.trishwoods.com/.
She told me that her dad was the only sibling that ran track, like her grandfather. Both grandfather and father won relay records running for the University of Pennsylvania.
At the Olympics, her grandfather ran the 100 and 200 meter. In discussing her grandfather’s record, she mentioned that it occurred after more than 20 false starts. When the false starts took place, it was not always clear to the runners that one had occurred. Accordingly, her grandfather ran the lap several times for naught and then they ran the race as scheduled.
She described Don Lippincott as a “very hard man,” a Philadelphia Blue Blood who married another Blue Blood.
After his passing, most of the track medals and plaques went to her brothers as did his bronzed track shoes.
From his life, she learned to never give up and remain open-hearted. “He wasn’t an easy man, but he achieved a great deal.”
Greetings and Happy 4th of July. Despite the summer swelter, good stuff continues to roll out of the Appellate Divisions. This issue is no exception. For those of you who are property aficionados, and I know there are two or three of you out there, set aside some time to review the Fourth Department’s lengthy review of business interruption coverage. We would encourage you to read Justice Carney’s dissent which parses the language of the business interruption endorsement.
If business interruption income isn’t your thing, or even if it is, then take a moment to review the decision of Ural v. Encompass Ins. Co. The First Department provides a lengthy discussion of GBL 349 violations, and also provides a nice overview of who bears what burden when it comes to insurance coverage disputes. Here’s a cheat sheet, if it is in the claims file – the burden is on the carrier. If it is anything else – the burden is on the insured.
Finally, we would also point you to the decision of the Second Department in Roddy v. Nederlander which deals with legal conflicts and attorney disqualification. Fortunately, this issue does not arise all that often. However, when it does, we would submit that the decision in Roddy will be nice to have as a quick reference.
Among the numerous unsettled issues that arise under the Medicare Secondary Payer Act, is the status of Medicare Advantage Organizations or MAOs. Previously, courts have held that MAOs are not afforded the rights that the government is under the Medicare Secondary Payer Act. The Third Circuit disagrees and in a recent opinion holds that an MAO is accorded the same rights as the Center for Medicare and Medicaid Services with respect to enforcement of the provisions of the Medicare Secondary Payer Act. See my column in this week’s issue
One Hundred Years Ago: Oldest Yankee Plays Final Game and Then Turns to the Insurance Business:
Paul Franklin “Bill” Otis appeared in a mere four games for the New York Highlanders (the team’s name changed to the Yankees the following year) in 1912 -- but more than three-quarters of a century later, he made national news as the oldest living major leaguer. When he turned 100 on Christmas Eve, 1989, the Williams College graduate became just the third centenarian among former big-leaguers. One of the well-wishers who telephoned as Otis reached the century mark was the Commissioner of Baseball and fellow Williams’ alumnus Fay Vincent. In addition, Yankees owner George Steinbrenner, another famous Williams alum, sent a telegram.
That was a pretty impressive array of congratulations for a man who went just 1 for 17 (.059) with three walks in the majors -- and whose nickname was something of a misnomer.
When Paul Otis went to Williams, which is located in the very northwestern corner of Massachusetts, he was a scholar-athlete in the school’s tradition of liberal arts. Among other things, he was elected assistant manager of the Williams Literary Monthly, having won a competition for the place.
Otis attracted the Highlanders’ attention during a strong senior season. In 1989, he recalled, “I hit over .400 and had a triple and home run one day against Harvard, and they approached me. I was 22 and I was flattered.” He added, “We made a deal that I would be paid $350 a month. I graduated from Williams, and went right to the big leagues. Made my debut as a left fielder on July 4, 1912.”
Actually, the box score shows that Otis played center field and batted second that day, and the next two -- which accounted for his entire big-league game experience. Independence Day 1912 featured a doubleheader at Griffith Stadium in Washington. The next day, the Senators came up to the Polo Grounds in New York. The New York Times noted, “Otis, who comes from Williams College, made a rather difficult catch which saved trouble in the sixth inning.” However, the Highlanders lost in 16 innings.
Otis also got his only hit in the majors on July 5. It came off Hall of Famer Walter “Big Train” Johnson, who had entered the game in relief in the fourth inning and pitched the last 122/3 frames for the Senators. “I remember it very distinctly,” said Otis in 1989. “It was a drive over second base, a clean single to center field. Johnson could throw the ball right by you, he was so fast. But maybe he threw me an easy one, I don’t know.”
Interestingly, the Saturday, July 6, 1912, issue of the Washington Post described the hit this way: Otis lifted a little fly back of third and McBride misjudged it and lost it. Not quite the “drive over second” as Otis remembered, but he did get a hit off of Johnson, in a year when Johnson won 33 games
Otis had been sent to Wilkes-Barre in the New York State League and after a couple of games, broke an ankle on a slide, never to play in the majors again.
He served state-side during World War I and then worked in the insurance business. In addition to his work with Manley-McLennan, -- which eventually became part of insurance giant Marsh & McLennan -- Paul served as vice president of the Insurance Federation of Minnesota. In 1958, he started his own agency, retiring in 1967. Altogether, Otis worked in insurance for nearly 50 years.
Paul Otis died nine days short of his 101st birthday. He was laid to rest in Duluth’s Forest Hill Cemetery. Earlier that year, a memento of his made it to Cooperstown: the little Highlanders cap that he wore back in 1912.
In Case of First Impression, Insured Loses Claim for SUM Benefits Based on Non-Consent Settlement With Products Liability Defendant and Loss of Carrier’s Subrogation Rights
Successor Corporation Permitted to Use Liability Coverage from Predecessor Company for Risks Incurred Pre-Transfer
Employee Exclusion Says What It Means and Means What It Says
An Easy One: While Insurer Had Notice of the Accident and Claim, It Did Not Receive Notice of the Lawsuit Until After a Default Judgment Was Entered Against Its Insured. Carrier Promptly Disclaimed and Coverage Was Lost
Excess Carrier Did Not Have Sublimit for Assault and Battery Coverage, Unlike Primary Policy
Well, that does it for this week. Next week I’ll in Chicago, as Program Chair for the National Foundation for Judicial Excellence’s Symposium for State Appellate Judges (130 registered), where the topic is Class Actions and Aggregate Litigation. We’ll see you in two weeks and please keep sending us the wonderful feedback. We love to hear from our readers.
Remember: If you have a situation, we LOVE situations.
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06/29/12 Day v. OneBeacon Insurance Company Appellate Division, First Department In Case of First Impression, Insured Loses Claim for SUM Benefits Based on Non-Consent Settlement with Products Liability Defendant and Loss of Carrier’s Subrogation Rights
Stick with us on this one. It’s an important decision and requires a close reading.
Day was injured in a car accident while a passenger in a Ford Windstar. The Ford was struck by another car driven by a State Farm insured (“Other Driver”). Day was insured by OneBeacon and had a policy of underinsured motorist’s coverage with limits of $500,000. Other Driver’s policy with State Farm carried liability limits of $100,000. Accordingly, if this was a simple UIM claim, Day would be entitled to up to $400,000 in SUM benefits ($500,000 - $100,000).
Day also brought a claim against Ford, asserting that the seat in which she was sitting in the Windstar detached from the floor of the minivan and became airborne, enhancing her injuries. Ford eventually offered $475,000 in settlement and State Farm offered its $100,000 in liability limits.
OneBeacon was asked to consent to the settlement with the Other Driver. OneBeacon advised that it would not consent but would exercise its rights under Condition 10 of the SUM policy to advance the funds in exchange for Day cooperating in a claim against the Other Driver AND Ford. Day claimed that OneBeacon had no subrogation rights against a non-motor vehicle defendant such as Ford and refused to cooperate.
OneBeacon warned Day that if she settled with Ford and/or Other Driver and gave either a release, she would lose her rights to SUM benefits by virtue of the condition in the SUM policy that forbids an insured from destroying the SUM carrier’s subrogation rights. Since Day claimed that OneBeacon had no subrogation rights, she could settle with Ford. Day also claimed that since 30 days has transpired since she advised of her intention to settle and since OneBeacon had not advanced the $100,000, she could settle with the Other Driver and issue a release.
She did both: issued a release to Ford for $475,000 and to Other Driver for $100,000. She claimed that the injuries involved were worth seven figures so there was no duplication of benefits received.
OneBeacon took the position that issuing the releases and destroying the carrier’s subrogation rights was a breach of the SUM policy and therefore Day lost her rights to SUM benefits. The Fourth Department agreed.
It held that the plain language of the SUM policy gave the UIM insurer a right of subrogation against any responsible party, not just motor vehicle defendants. OneBeacon had a right to pursue the claim against Ford to recover dollars paid under the SUM policy and the issuance of the release to both the Other Driver and Ford destroyed those subrogation rights. SUM coverage was lost. Editor’s Note: Your editor, with able assists from Diane Bosse and Margo Lagueras, represented OneBeacon in this action.
06/28/12 Arrowood Indemnity Co. v. Atlantic Mut. Ins. Co. Appellate Division, First Department Successor Corporation Permitted to Use Liability Coverage from Predecessor Company for Risks Incurred Pre-Transfer
St. Louis Flavors Corp. (“St. Louis”) operated a flavorings business in which it manufactured diacetyl and diacetyl-containing products used in artificial butter flavoring. Kerry purchased virtually all of St. Louis's assets under an Asset Purchase Agreement (“APA”). Underlying plaintiffs alleged personal injuries arising from exposure to St. Louis's products, and claimed that Kerry was liable under a de facto merger or continuation theory.
The APA states that pre-merger product liability claims remain excluded liabilities, and the APA also contains a "no-transfer" clause; however, New York law follows the majority rule that a no-transfer provision in an insurance contract is "valid with respect to transfers that were made prior to, but not after, the insured-against loss".
The Travelers policies provide coverage to Kerry here because the losses occurred prior to the transfer, so there is no increased risk to the insurer. Editor’s Note: Surely the right decision. Had the injuries or damage occurred after the transfer because of conduct of the acquiring company, the results of this case would be different.
06/27/12 Herrnsdorf v. Bernard Janowitz Construction Corporation Appellate Division, Second Department Employee Exclusion Says What It Means and Means What It Says
Janowitz was the General Contractor for the construction of100 housing units known as "Harbor View". Janowitz subcontracted with Allright to install metal trimming on the roofs of the houses. Allright obtained an insurance policy from Utica First Insurance Co, which policy excluded coverage for lawsuits arising out of injuries to employees of any insured who were injured in the course of their employment. The plaintiff was employed by Allright. He was injured while working on the Harbor View project on January 11, 2005. He then commenced this action against Janowitz to recover damages for his injuries.
Janowitz sought coverage. Here, the exclusion was clear. Here, the plain meaning of the exclusion is to relieve Utica of liability "when an insured or additional insured was sued or contribution was requested for damages arising out of bodily injury to an employee sustained in the course of employment. Although the certificate of insurance submitted by Janowitz raised a triable issue of fact as to whether Janowitz was an additional insured under the policy, that issue of fact is irrelevant in light of the exclusion.
06/27/12 O'Garro v. State Farm Fire & Casualty Insurance Company Appellate Division, Second Department An Easy One: While Insurer Had Notice of the Accident and Claim, It Did Not Receive Notice of the Lawsuit Until After a Default Judgment Was Entered Against Its Insured. Carrier Promptly Disclaimed and Coverage Was Lost
Plaintiff was hurt in a two-vehicle car accident on September 6, 2003, with a State Farm insured driving the other car. Plaintiff sued the State Farm insured in November 2003 and the defendant defaulted. After an inquest on the issue of damages, a judgment was entered on August 17, 2006, in favor of the plaintiff and against the defendant's insured in the total sum of $184,563.
In December 2006, plaintiff’s counsel sent a copy of the judgment to the State Farm insured and, three weeks later, the State Farm insured notified State Farm. State Farm denied coverage on late notice of the suit and the plaintiff commenced a direction action pursuant to Insurance Law Section 3420 to recover the unsatisfied judgment.
Insurer wins this one. While it had notice of the accident and claim, it did not have notice of the commencement of the lawsuit until after the default judgment was entered against its insured.
06/26/12 Santa v. Capitol Specialty Insurance, Ltd. Appellate Division, First Department Excess Carrier Did Not Have Sublimit for Assault and Battery Coverage, Unlike Primary Policy
The underlying personal injury action by plaintiffs claimed that they were assaulted at a Manhattan nightclub. The primary insurance policy in question had a $50,000 sublimit applicable to assault and battery coverage in the primary policy applied to all the coverage that was available under the policy.
Although the injured plaintiffs, strangers to the insurance policy, may only bring a direct action against the alleged tortfeasor's insurance company for a determination of coverage issues after a judgment had been secured against the tortfeasor, the parties stipulated that plaintiffs could commence a declaratory judgment action for a determination of the scope of coverage.
The record also establishes that plaintiffs were not aware of a dispute with respect to the excess policy at the time they entered into the stipulation.
While the excess policy provided coverage in "like manner" to the primary policy, it was silent as to this sublimit and therefore ambiguous.
Even if the excess policy was not ambiguous, plaintiffs have demonstrated "detrimental reliance, a necessary element of equitable estoppel". Had plaintiffs learned that defendants took a position of no coverage with respect to the excess policy on a timely basis, they would have had the option of trying to settle their claims within the $50,000 sublimit, instead of learning that the sublimit had substantially eroded by the time they appeared for trial.
06/26/12 Goel v. Tower Insurance Company of New York Appellate Division, First Department Non-Cooperation Not Established
Tower sought to dismiss a lawsuit commenced against it because its insured did not sit for a scheduled EUO and did not produce all of the documents the carrier requested. The court found that the insured’s conduct was not so willful as to require excusing defendants from liability where there was evidence to suggest that the insurer may have also breached the terms of the policy. The court also found that the insurer did not act diligently to obtain plaintiff's cooperation in a manner that was reasonably calculated to bring it about.
THIRD CIRCUIT GRANTS MEDICARE ADVANTAGE ORGANIZATIONS THE SAME RIGHTS AS THE GOVERNMENT UNDER THE MEDICARE SECONDARY PAYER ACT
In re Avandia Marketing (2012 WL 2433508)
This case arises out of an application by Humana Medical Plan, Inc. (“Humana”) to obtain reimbursement from GlaxoSmithKline, PLC (“Glaxo”) arising out of a settlement in the Avandia litigation. Glaxo argued that Humana, as a Medicare Advantage Organization, or MAO, was not entitled to the same enforcement rights as the government under the Medicare Secondary Payer Act. Rather, Glaxo claimed that the MOAs enforcement rights would be governed by its contract with the insured. The Third Circuit disagreed holding that “the plain text of the provision sweeps broadly enough to include MOAs and that, even if we determined the statute too ambiguous on this point, deference to CMS regulations would require us to find that MOAs have the same right to recover as the Medicare Trust Fund does.” In so holding, the Court found that Humana had standing to commence a lawsuit against Glaxo seeking double damages in the same fashion that Medicare would under the Secondary Payer Act.
The Court carefully distinguished decisions in other circuits that apparently hold otherwise, noting that the other decisions did not involve the direct provision of Medicare services by an MAO. A reading of those cases may lead one to a different conclusion, namely, that the Third Circuit has moved in a different direction with regard to the Medicare Secondary Payer Act.
Under the circumstances, the status of an MAO must now be judged on a circuit by circuit basis pending a decision by the United States Supreme Court or clarifying legislation.
06/28/12 Womack v. Wilhelm Appellate Division, Third Department Unsworn Report, Not Relied on by Defendants, Will Not Support Plaintiff’s Claim
Plaintiff allegedly injured her cervical, thoracic and lumbar spine, including bulging and protruding discs, numbness and swelling of her hands and sprains of her neck, back and left wrist, in a 2007 accident. She claimed her symptoms were exacerbated as a result of a subsequent 2009 accident. Although she initially claimed under the permanent loss of use, permanent consequential and/or significant loss of use, and 90/180-day categories, her appeal was limited to the significant limitation of use and 90/180-day categories.
In support of their motion, defendants submitted plaintiff’s deposition testimony, the report of their IME orthopedic surgeon, and unsworn records from the ER and from several of plaintiff’s treating and consulting physicians. Defendants’ proof established that plaintiff went to the ER six days after the 2007 accident and was diagnosed with a neck and back strain and a sprained wrist. The IME doctor found full range-of-motion and no evidence of a significant limitation of use of her spine or other orthopedic disability. He concluded any injuries were resolved. Defendants also established that plaintiff did not sustain an injury under the 90/180-day category as she did not allege during her deposition that the was unable to perform her work duties such as vacuuming, sweeping, cleaning or assisting clients in her job as a home health aide at any point in time.
In opposition, plaintiff did not submit any affidavit from a medical expert, relying instead on her own affidavit, a 2008 MRI, and an unsworn 2009 report from her treating physician. Cumulatively, her submissions only documented mild spinal narrowing and mild disc degeneration. There was no competent medical evidence that causally related her alleged limitations to the 2007 accident. Furthermore, the unsworn report of her treating physician was of no probative value because defendants did not rely on it in support of their motion. In addition, it did not raise an issue of fact with respect to the 2007 accident because it only reflected data subsequent to the 2009 accident. With regard to the 90/180-day claim, none of plaintiff’s submissions referenced any limitations on her usual activities during the relevant period. As such, the trial; court correctly granted defendants’ motion.
06/27/12 Fiore v. Reimer Jie Li v. Triboro Coach Corp. Appellate Division, Second Department Plaintiffs Fail to Successfully Oppose Summary Judgment
In two cases without any details, plaintiffs appealed the trial courts’ awards of summary judgment to defendants but failed to raise triable issues of fact in opposition. As such, the trial court decisions were affirmed.
06/27/12 David v. Caceres Appellate Division, Second Department Appellate Court Finds Causal Relationship Established
Plaintiff alleged serious injuries to his cervical and lumbar spines under the permanent consequential and significant limitation of use categories. Although defendant met her prima facie burden, in opposition plaintiff submitted competent medical evidence in support of his claims and the causal relationship of the claimed injuries to the accident, as well as a reasonable explanation for the cessation of treatment. Therefore, on appeal, the trial court’s decision was reversed and defendant’s motion denied.
06/27/12 Oliver v. New York City Transit Auth. Appellate Division, Second Department New Trial Ordered on the Issue of Damages
Plaintiff, who had a history of rheumatoid arthritis as well as one hip and two knee replacements, fell backwards when the bus in which she was a passenger stopped. A pelvic fracture and dislocation of the hip were discovered. Over the next few years, she underwent hip replacement revisions and lumbar surgeries.
The jury found defendant 50% at fault and that the accident was a substantial factor in causing plaintiff’s injuries, but it also found that she did not sustain a serious injury under the permanent loss of use, significant limitation of use or permanent consequential limitation of use categories. Plaintiff then moved to set aside the verdict on the issue of damages arguing that the court erred in not including the category of fracture in the jury charge or on the verdict sheet.
The Appellate Court found that plaintiff submitted evidence that she sustained a hip fracture and her expert opined that it was caused by the accident. Defendants’ expert, on the other hand, opined that the facture was caused by medical personnel when they tried to fix the dislocation. The trial court should have submitted the fracture category to the jury for consideration and the failure to do so was error. As such, the case was remanded for a new trial on the issue of damages at which plaintiff may again seek to prove serious injury under all the categories.
06/27/12 Hayes v. Vasilios Appellate Division, Second Department Expert Is Not Required to Review Medical Records Where Objective Range-of-Motion Testing Is Performed
Plaintiff alleged injuries to her cervical, thoracic and lumbar spines. In support of their motion, defendants submitted a report from their examining neurologist who examined plaintiff and performed objective range-of-motion testing which showed that plaintiff’s spine had full range-of-motion. Because the examining neurologist performed objective tests, it was not necessary for her to review plaintiff’s medical records.
In opposition, plaintiff submitted the report of her treating radiologist which revealed only a disc bulge at L3-4 and a tiny protrusion of L4-5. Without evidence of the extent of the alleged physical limitations resulting from those alleged injuries and their duration, these are not evidence of a serious injury and plaintiff’s complaint was properly dismissed.
06/27/12 Stepnoski v. Brito Appellate Division, Second Department Defendants Fail to Adequately Address 90/180-Day Claim
On appeal, the court affirmed the trial court’s denial of defendant’s motion but on the grounds that defendants failed to adequately address the plaintiff’s claim under the 90/180-day category. As defendants failed to meet their prima facie burden, it was not necessary to consider the sufficiency of plaintiff’s opposing papers.
ARBITRATION 07/02/12 Applicant v. Respondent Arbitrator Kent L. Benziger, Erie County
Treating Surgeon and Applicant’s Testimony More Persuasive on Lost Wage Claim
The Applicant, eligible injured person, sought lost wages from November 3, 2011 through December 21, 2011, as a result of a February 21, 2011, motor vehicle accident. The Applicant complained of low back and right leg pain from the accident and it was noted that the Applicant had a history of an August 2010, L5/S1 spinal fusion.
The insurer denied the lost wage claim upon the independent examination conducted by Dr. Edward Mills. Dr. Mills’ examination revealed positive, significant loss of range of motion of the lumbar spine. There was a normal neurologic examination. Dr. Mills opined that the Applicant had a resolving lumbar spine strain/sprain superimposed over a pre-existing lumbar spine surgery. Dr. Mills recommended continued medical care but found the Applicant capable of working with a no bending or lifting over 15 pound restriction.
The Applicant’s treating surgeon, Dr. Gullickson, submitted a letter of medical necessity opining that after the Applicant’s August 2010, surgery the Applicant was feeling good and treated for an unrelated condition. The February 2011, accident re-exacerbated the Applicant’s pain. Dr. Gullickson also submitted disability slips rendering the Applicant unable to lift anything greater than five pounds.
The Applicant also testified and the assigned arbitrator found her testimony credible. The Applicant returned to work following her August 2010, surgery. After the February 2011, accident she attempted to return to work and was unable to bend to pick up documents. She was unable to continue working after the February 2011, accident.
The assigned arbitrator did not uphold the insurer’s denial. The assigned arbitrator found that Dr. Mills’ examination report was not persuasive. Specifically, it noted significant loss of range of motion in the lumbar spine and acknowledged that the Applicant had not reached pre-accident status. Dr. Mills did not document a thorough review of her prior surgery and physical requirements of the Applicant’s job to support his conclusion that she could return to work with restrictions.
06/28/12 Applicant v. Respondent Arbitrator Kent L. Benziger, Erie County
Independent Exam Insufficient as Failed to Substantively Discuss Pre-Existing Injury
On June 28, 2010, the Applicant’s assignor was involved in a bus accident. The Applicant sought reimbursement for chiropractic care rendered to the assignor as a result of neck, low back and right upper extremity pain. The assignor was diagnosed with ligamentous instability, cervical disc herniation, right rotator cuff tear, and cervical, lumbar, and right should sprain/strain. The assignor was recommended to undergo chiropractic care, physical therapy, and acupuncture treatment three to five times per week.
The self-insured respondent denied the claim upon the independent chiropractic examination conducted by George Lisjak, D.C. Mr. Lisjak’s examination revealed lumbar forward flexion limited to 60 degrees. Also, there were positive orthopedic and neurologic tests. Mr. Lisjak concluded that the assignor’s current complaints were not causally related to the accident and the resolved strains were related to the accident. Further, the herniations and osteoarthritic degenerative changes predated the January 2010 accident and were chronic and prone to exacerbation.
The insurer also submitted in support of its case a newspaper article that the assignor was arrested for assaulting an individual with a small tree branch and plastic lawn chair after a game of beer pong. The assigned arbitrator would not provide the article much weight as there was no evidence that the article was speaking of the assignor. Also, the assigned arbitrator noted “further, alcohol can enable individuals to perform some unusual physical acts, and anyone arrested is entitled to the presumption of innocence.” The insurer was required to submit a certified copy of conviction and a physician’s report incorporating the facts of the article to an analysis on why no further treatment was necessary.
The insurer further stated that a video exists of the assignor on the bus showing the impact and that the assignor barely moved. The assigned arbitrator rejected this statement claiming that the video would need to be produced and a biomechanical engineer would need to testify as to the impact not having caused the alleged injuries.
The assigned arbitrator did not find Mr. Lisjak’s report persuasive. This is because it contained numerous positive findings and there was no substantive discussion whether the pre-existing degenerative changes that are asymptomatic could be symptomatic through trauma from this accident.
06/28/12 Applicant v. Respondent Arbitrator Kent L. Benziger, Erie County
Reliance Upon Old Journal Article Fatal to Peer Reviewer’s Opinion
The Applicant sought reimbursement for an LSO brace and TENS unit prescribed to the assignor as a result of a January 15, 2011, pedestrian/motor vehicle accident. The durable medical equipment was prescribed by August Domenico, D.C. to treat chronic low back pain, radiculopathy and lumbar subluxations.
The insurer denied the claim upon the peer review conducted by Chester Bodgan, D.C. Mr. Bodgan, relying upon a 1994 journal article, opined that the LSO brace was not warranted as it is only reserved for patients who have not responded to conservative care. With regard to the TENS unit, Mr. Bodgan opined that based upon multiple journal articles from the early to mid-1990s, the unit will not provide any greater benefit that exercise.
The assigned arbitrator found the peer review unpersuasive due to Mr. Bodgan’s reliance upon an 18 year old medical journal article. The assigned arbitrator reasoned that the medical rehabilitation field is constantly changing and reliance upon such an old article is not convincing. Further, Mr. Domenico’s rebuttal letter referenced a theory on TENS unit usage that Mr. Bodgan did not address. In addition, the rebuttal letter referenced a more recent authoritative source that recommended using an LSO brace.
06/22/12 Applicant v. Respondent Arbitrator Thomas J. McCorry, Erie County
Intracranial Hemorrhage Caused Accident and Was Not Caused by the Accident
The Applicant sought reimbursement for hospitalization of the assignor after an intracranial hemorrhage. In this unfortunate fact scenario, on January 24, 2011, the 47 year old assignor was at the gym and as she was leaving noted weakness. She drove her car out of the parking lot and struck two cars. Thereafter, she complained of severe headache and had left hemiparesis and left facial weakness. The assignor was taken to and admitted to the hospital with severe headache, intracranial bleed and left facial droop.
The insurer denied the hospital bill upon a causality review by Dr. William Ross and a peer review by Dr. Gary Florio. Both physicians opined that the assignor’s admission to the hospital was not related to any injury from a motor vehicle accident. Rather, it was due to an intracranial hemorrhage which caused the accident. Thus the treatment was not causally related to the accident. The assigned arbitrator found the physician’s opinions to be unrebutted and persuasive.
07/05/12 Ural v Encompass Ins. Co. of Am. Appellate Division, Second Department GBL 349 Survives Motion to Dismiss, but Unchecked, Scattershot Discovery Demands are Stricken
The instant litigation traces its origins to a burst pipe at plaintiff’s residence which caused water damage. Plaintiff placed a claim with his homeowners’ insurance carrier, Encompass. After the passage of approximately one year, plaintiff commenced the instant action alleging, among other things, breach of contract, violation of Insurance Law 2601, violation of General Business Law 349, negligent infliction of emotional distress and intentional infliction of emotional distress.
Encompass moved to dismiss plaintiff’s extra-contractual claims. The first portion of Encompass’ motion was focused on the alleged violation of the General Business Law.
Upon review of the arguments and evidence presented, Second Department ruled that plaintiff had sufficiently pled a bad faith lawsuit. The court focused particular attention on the fact that plaintiff’s Complaint alleged injury as a result of a consumer-oriented deceptive trade practice that was part of a general policy adopted by Encompass to delay and discourage policy holders into ultimately accepting inadequate settlements. The Court did not rule that the claim was, in fact, a violation of GBL 349. Rather, the Court only noted that, when taken in a light most favorable to the non-moving party, a sufficient cause of action for this stage of the litigation had been presented.
Although this is not overly surprising, Appellate Division’s reference that a violation of GBL 349 could lead to an award of punitive damages is troubling. In referencing its previous decision in Willner v Allstate Ins. Co., the Court noted that punitive damages can be awarded where it is established the conduct “may be considered to be ‘so flagrant as to transcend mere carelessness'.” For those curious, we would direct you to our write up of Willner from January of 2010 (see /news/coverage-pointers-volume-xi-no-15)
The Court also refused to dismiss plaintiff’s claim under Insurance Law 2601. As many of you know, Insurance 2601, entitled Unfair Claims Settlement Practices, provides certain monetary penalties for violations of any of several enumerated requirements. Importantly, however, New York courts have uniformly rejected the notion that a violation of Insurance Law 2601 can give rise to a private cause of action. Recognizing this, the First Department simply noted that the alleged Insurance Law 2601 claim is not a direct claim, per se, but rather bolsters plaintiff’s existing breach of contract claim.
In addition, as with any extra-contractual claim, this case also created a sizable discovery dispute. The ruling of the Court is consistent with several other discovery decisions that have come down in recent years. For starters, the claims file is discoverable in an insurance dispute. If a carrier seeks to withhold any information, it must present evidence (in admissible form) which details the specific items withheld, along with a specific description as to what, why and how a privilege attaches to exempt their disclosure. Failure to identify the withheld items in a privilege log may well lead to the loss of the objections.
On the other hand, shotgun discovery demands that are overly broad may be voided in their entirety. The Court was clear that it will not play the role of arbitrator of a discovery dispute by picking through massive discovery demands to parse those demands which are appropriate and those which are overly broad and/or impermissibly vague. The preferred method of addressing this type of discovery demand is to strike the entire demand, and force the party seeking discovery to write a more tailored request.
Using these premises as guidelines, the Court ruled that the claims file was discoverable less any items withheld on the basis of a privilege. Those items were to be provided for an in camera inspection with the Trial Court to determine whether the asserted privilege applied. With regard to other demands, related to “trade secrets” the Court ruled that the demands were overly broad and lacking in specificity. Accordingly, all other demands, outside of the claims file, were voided by the Court.
06/14/12 Voss v. Netherlands Insurance Company Appellate Division, Fourth Department Actual Knowledge of Policy Terms Months Prior to a Loss Dooms Insured’s Attempt to Sue Its Agent/Broker for Negligence
Plaintiff maintained its business at a commercial warehouse that it also, presumably, owned. From the decision of the Court, it is revealed that plaintiff’s facility sustained water damage on at least three different occasions. It was alleged that all three water damage incidents resulted in a cessation of plaintiff’s business. The first two of these shutdowns resulted in business interruption payments of $3,197 and $30,000, respectively. The final incident did not result in a business interruption payment because it appears that plaintiff never “re-started” operations.
Plaintiff commenced the instant lawsuit against Netherlands (as BI carrier) and CBI (as agent/broker). With respect to its claim against CBI, plaintiff argued that CBI handled all of its insurance procurement needs. Thus, plaintiff reasoned that the CBI had breached its obligations when it failed to procure sufficient business income coverage on the premises. In so arguing, plaintiff noted that it had previously questioned the sufficiency of the coverages obtained by CBI. However, CBI assured plaintiff the amounts of coverage procured were appropriate, and CBI acknowledged that it would re-assess plaintiff’s insurance needs as the company evolved over time.
CBI moved to dismiss plaintiff’s claims on the basis that it owed no legal duty to plaintiff. Plaintiff opposed CBI’s motion on the basis that it had usurped plaintiff’s control over its insurance program, and as such a “special relationship” between the companies was consummated. Moreover, plaintiff argued that CBI’s decision to obtain $75,000 in business interruption coverage in Policy Term 1 and 2, coupled with CBI’s decision to obtain only $30,000 of business interruption coverage in Policy Term 3 established CBI’s breach of its obligations.
The Appellate Division began by noting that it was convinced that, at a minimum, a special relationship may have existed between plaintiff and CBI. However, even if CBI owed a duty to plaintiff, there was no viable claim presented in the instant lawsuit. Plaintiff argued, in essence, that CBI failed to procure an appropriate amount of coverage in Policy Term 3. In dismissing plaintiff’s Complaint, the Court noted that plaintiff was in possession of the actual policy for months prior to the loss. As such, relying upon the old adage that an insured is deemed to know what coverage they have, the Court reasoned that if plaintiff had an objection to the amount of coverage procured by CBI said objection had to have been raised well prior to the loss event.
Moreover, even if CBI had breached an obligation to the plaintiff, and plaintiff had timely raised the issue, there was still no claim. As noted above, Netherlands did not issue payment under Policy Term 3, and issued substantially less than the limits of Policy Terms 1 and 2, respectively. Accordingly, even if CBI had been negligent, its negligence was not the proximate cause of any loss sustained by plaintiff.
We note that Justice Carney penned a well-reasoned dissent in this matter. Essentially, Justice Carney noted that it was incongruous for the Court, on one hand, to note that CBI had usurped plaintiff’s insurance program, and, on the other hand, state that the plaintiff still had an obligation to read its policy. If, in fact, CBI had taken that role for plaintiff, it follows that CBI should be required to look out for plaintiff’s concerns.
In addition, Justice Carney also noted that an insured need not return to operations in order to qualify for coverage. Accordingly, it appears that Justice Carney also did not concur with the majority’s assessment that CBI’s negligence, if any, was a proximate cause. Indeed, Justice Carney noted that the measure of potential damages against CBI was the amount of total business income losses when measured against the amount of procured coverage. In light of this, Justice Carney would have denied CBI’s motion on a question of fact.
06/28/12 All American Moving and Storage, Inc. v. W. Reilly Andrews Appellate Division, First Department Mandatory Mediation/Arbitration Clause Not Applicable on a Motion to Dismiss
Defendant Nikko and SDM moved to dismiss the instant action on the basis of a mandatory mediation/arbitration clause found within their contracts. In denying the motion, however, the First Department noted that a Motion to Dismiss, under CPLR 3211, was not the appropriate vehicle for attempting to enforce a mandatory mediation/arbitration clause. In any event, even if such clause were subject to a Motion to Dismiss, in the instant matter plaintiff was not a party to the contracts of either Nikko, or SDM. Where, as here, there was no privity between the plaintiff and the moving parties, it followed that the clause at issue had no impact on the viability of plaintiff’s action.
6/27/12 Ventimiglia v. Thatch, Ripley & Co., LLC Appellate Division, Second Department Question of Fact on Negligence = Question of Fact on Contractual Indemnity
Plaintiff, an employee of a third-party defendant subcontractor, was allegedly injured when he fell while he was working on a project to construct a new condominium building. According to the plaintiff, a trench approximately 10 feet wide and 8 feet deep surrounded the work site and three or four 10 foot planks were placed across the trench at a “slight decline,” and served as the only way into and out of the site. The plaintiff alleged that he was instructed by his foreman to bring some lumber onto the site. As he was walking across the planks, carrying lumber on his shoulders, the planks “opened up,” causing him to fall into the trench.
The Second Department reversed the trial court and denied summary judgment to the owner on common-law negligence/Labor Law § 200 claims, finding that the plaintiff raised a triable issue of fact as to whether the owner had constructive notice of a dangerous premises condition by adducing evidence that the trench and planks from which plaintiff allegedly fell had existed for approximately six months prior to the occurrence of the accident.
Where there remains a question as to the defendant’s own negligence, it follows that any motion for contractual indemnity is likewise premature. Recall, that under General Obligations Law 5-322.1 a contractor may not be indemnified for its own negligence. Where, as here, that negligence is still at issue, it follows that relief under an indemnity claim cannot be afforded.
06/13/12 C & M 345 North Main Street, LLC v. Nikko Construction Corp. Appellate Division, Second Department Ditto - Question of Fact on Negligence = Question of Fact on Contractual Indemnity
The owner of a warehouse commenced the instant action after its building was severely damaged by fire. Plaintiff named, among others, the tenant D’Agostino and the sprinkler company, Allstate, as direct defendants. Allstate eventually moved for summary judgment on the basis of the age old argument that it was simply a service contractor, and thus did not owe any duty to plaintiff. In the alternative, Allstate sought contractual indemnification from D’Agostino pursuant to its sprinkler service contract.
In denying Allstate’s motion, the Court noted that plaintiff was a third-party beneficiary of the sprinkler service agreement entered into between D’Agostino and Allstate. Simply stated, the agreement, which presumably protected plaintiff’s structure, was directly for the benefit of plaintiff. In addition, the Court also noted that a question of fact existed as to whether plaintiff detrimentally relied upon Allstate to provide monitor services as the facility per the terms of the aforementioned agreement. In noting a question of fact existed, the Court noted in particular the fact that Allstate had failed to inspect the sprinkler system for several months prior to the incident, and had failed to notify authorities on previous occasions when it discovered the system was non-operational.
Given the questions of fact as to Allstate’s direct negligence, the Court likewise concluded that Allstate’s claims for contractual indemnity over and against D’Agostino were likewise premature. Under the terms of the contract, Allstate was not entitled to receive a windfall for losses occasioned out of its own negligence.
06/12/12 Roddy v. Nederlander Producing Co. of Am. Appellate Division, First Department Disqualification of “In-House” Counsel Where Conflict in Representation Arises
Defendants Gershwin and Nederlander were represented by the same “in-house” counsel as retained by both entities’ insurance carrier. Gershwin, alone, appears to have possessed a contractual indemnity claim over and against third-party defendant Abhann. When Gershwin, though its carrier retained counsel and began to prosecute the indemnity claim against Abhann, Abhann immediately moved to disqualify counsel due to a question of fact.
Upon review by the First Department, the Court noted that a conflict initially existed between Gershwin and Nederlander in that both parties had a competing interest in minimizing its proportional share of damages. Accordingly, counsel should have been prohibited, at that stage, from continuing to represent both parties.
Moreover, when the issue was pressed by Abhann, the conflict became more pronounced. Abhann argued that it was possible (if not probable) for the carrier defending both Gershwin and Nederlander to skew the defense so that the majority of liability fell on Gershwin. This would enable the carrier to shift any exposure to Gershwin onto Abhann via the aforementioned contractual indemnity claim. In removing counsel to Gershwin, the Court noted that “doubts as to the existence of a conflict of interest must be resolved in favor of disqualification.”
However, the Court refused to completely disqualify counsel from representing any party as had been argued by Abhann. The Court noted that where, as here, Abhann could not establish counsel obtained any confidential information from Gershwin (in the course of its representation of Gershwin) that could be used in its continued to defense of Nederlander, disqualification was not warranted.
The 2012 Legislative Session is over for the year, and while it is possible, it is unlikely the Legislature will return to Albany for any further activity. The New York Public Interest Research Group published some data on this year’s session. Notably, the publication found that only 517 bills passed both the Senate and the Assembly this year. This is the smallest number of bills passed since 1995. Not surprisingly, the bills passed by and touted by the Senate as helping to reform the No-Fault law never made it out of committee in the Assembly.
In our last edition, we mentioned that there was some last minute activity on Senate Bill 3761 which sought to allow a plaintiff to directly recover against a third-party defendant. Although there was some activity which indicated the bill may pass the Senate and would likely be passed by the Assembly as well, the bill never made it to the Senate floor for a vote, and the Assembly never considered the bill either.
Despite the fact that there is usually an end of the year flurry of activity, I was only able to find one piece of legislation which passed both the Senate and the Assembly which was related to property and casualty insurance, and it is significant. This legislation changes SUM coverage from being an optional coverage the insured must choose to purchase to a coverage that is automatically provided to the insured. This bill has received final legislative approval and will be sent to the Governor for signature.
Currently, Insurance Law §3420 allows an insured the option of purchasing SUM benefits up to the limits of bodily injury liability limits they had purchased under their automobile liability policy. Now, assuming the Governor signs the bill, rather than having the option to purchase SUM coverage, SUM coverage will be automatically provided with the same limits as your bodily injury limits unless the insured rejects the coverage.
The legislation also specifically sets forth how an insured may reject the limits of SUM coverage automatically assigned to the insured. The rejection of the coverage must be memorialized by the insurer through a signed writing or other means of evidencing the rejection of coverage. If the insured rejects SUM coverage or lowers the SUM limits in written or electronic form, the rejection must be on a form provided to the insured at the time the policy is sold. The form must fully advise the insured of the nature of the coverage and must state that the coverage is equal to the bodily injury limits unless the insured specifically requests lower limits or the coverage is rejected in its entirety.
The form supplied by the insurer must be in 12 point bold type and must state:
Supplementary uninsured/underinsured motorists coverage (SUM coverage) protects against the possibility of an accident involving another motor vehicle whose owner or operator was negligent and who may have no insurance whatsoever; or even if insured, is only insured for third-party bodily injury at relatively low liability limits, in comparison to the policyholder’s own liability limits for bodily injury sustained by third-parties. By purchasing SUM coverage, the policyholder and any insured under the policy can be protected for bodily injury to themselves and receive from the policyholder’s own insurer payment for bodily injury sustained due to the negligence of the other motor vehicle’s owner or operator. SUM coverage shall be equal to bodily injury liability limits unless lower limits are requested or the coverage is rejected. A policyholder is urged to consider purchasing the maximum SUM coverage available.”
When the insured verbally rejects the mandatory SUM coverage and limits, the rejection may be received by the insurer after the sale. However, the rejection must be in writing or signed by electronic signature. Furthermore, if the rejection is made verbally, the insurer or the agent must read the language set forth above and confirm the client has heard and understood the same. The bills specifically states that the insurer or the agent should restate the above language until the insured has verbally confirmed that they fully understand.
Additionally, the insurer must notify the named insured at least annually of his or her SUM coverage options. Furthermore, receipt of the waiver does not constitute waiver of the SUM coverage unless the insured has signed a selection or rejection form.
While this is a significant change for New York, most if not the majority of states automatically provide coverage unless the insured specifically rejects the coverage. In those states, litigation is often commenced by the insured seeking SUM benefits when the SUM benefits were either alleged to have been rejected or reduced. The courts are asked to determine whether the coverage was properly rejected. Generally, the rejection of coverage will only be upheld in those instances where there has been strict compliance with the “opt out” provisions; otherwise, the courts will hold that the SUM coverage automatically available under the statute is applicable.
Although unrelated to SUM benefits, this legislation also amends the Insurance Law by adding §5109-a which allows the superintendent to prohibit an unauthorized provider of durable medical equipment from requesting payment for the equipment for a period to be determined by the superintendent if the superintendent determines after notice and hearing that the provider:
Has engaged in a pattern and practice of fraudulent, excess or unlawful billing
Has engaged in a pattern and practice of billing insurance companies for durable medical equipment it has not provided
Has engaged in a pattern and practice of billing insurance companies for durable medical equipment that was not necessary
Has committed a fraudulent insurance act as defined in §176.05 of the Penal Law
Has been convicted of a crime involving fraudulent or dishonest practices
Has refused to appear or answer any questions upon the request of the superintendent or refused to produce any relevant information concerning the providers conduct
Has violated any provision of this article or regulations thereunder.
Both provisions of the Insurance Law will be amended as stated above, 180 days after it becomes law, assuming the Governor signs it.
06/26/12 Lagestee Mulder Inc. v. Consolidated Ins. Co. Seventh Circuit Court of Appeals –Illinois law applied The Age Old Question of Whether Property Damage Is Caused by an Occurrence
Lagestee-Mulder, Inc. [“LMI”] was hired by Crown Centre LLC [“Crown”] to construct a multi-story office building [“Project”] in Frankfort, Illinois. LMI then subcontracted the supply and installation of the Project’s windows and doors to Frontrunner Glass & Metal, Inc. [Frontrunner”]. The subcontract required that Frontrunner purchase and maintain insurance that named LMI as an additional insured. Frontrunner purchased an occurrence-based CGL policy from Consolidated Insurance Company [“Consolidated”]. The policy required Consolidated to cover sums that its insureds, Frontrunner and LMI, became legally obligated to pay because of property damage caused by an occurrence. The Policy also required Consolidated to defend any suit seeking damages for covered property.
During the later stages of construction, Crown experienced water infiltration at numerous locations, as well as other construction defects. Crown filed suit in Illinois State court. LMI tendered the defense of its claim to Consolidated, but Consolidated made no coverage decision during the subsequent six months. Notwithstanding the fact the Consolidated had not made a coverage decision, LMI began settlement discussions with Crown and settled the lawsuit. Consolidated was informed of all settlement talks, but participated in none. Approximately seven months after receiving LMI’s tender, Consolidated denied coverage for Crown’s claim against LMI and rejected LMI’s tender of defense. LMI then filed suit against Consolidated in district court alleging that Consolidated breached its duty under the policy. After motions were filed the district court found in Consolidated’s favor. For the reasons stated below, the Seventh Circuit Court of Appeals [“Court”] affirmed.
Applying Illinois law, the Court noted that the rules governing application of CGL policy provisions are settled. Where the underlying suit alleges damage to the construction project itself because of a construction defect, there is no coverage. By contrast, where the complaint alleges that a construction defect damaged something other than the project, coverage exists.
The Court pointed out that CGL policies are intended to protect the insured from liability for injury or damage to the persons or property of others; they are not intended to pay the costs associated with repairing or replacing the insured’s defective work and products, which are purely economic losses. Further stating that finding coverage for the cost of replacing or repairing defective work would transform the policy into something akin to a performance bond; and that treating a CGL policy like a performance bond would be unjust to the CGL insurer, which, in contrast to the surety on a performance bond, cannot bring suit against the contractor for defective construction.
The Court analyzed Crown’s complaint and found that the complaint alleged various deficiencies in the materials LMI used during construction, shortcomings in LMI’s workmanship, and defects in the building as constructed. The underlying complaint did not clarify what explicit damages Crown sustained, nor did it specify whether anything other than the building itself was damaged.
LMI argued that the complaint’s vague use of the term “damages” must be construed broadly enough to include all types of property loss, including covered loss to property other than the structure itself, thereby bringing the complaint within the purview of the Policy and triggering Consolidated’s duty to defend. To support its position, LMI cited to two Illinois cases: Chandler v. Doherty, 207 N.E.2d 634 (Ill.Ap.t. 1963) and Sims v. Nat’l. Cas. Ins. Co., 193 N.E.2d 123 (Ill.App.Ct.1963). In analyzing these cases, the Court noted that in Chandler and Sims the underlying complaints pled specific facts that, when construed in favor of the insured, could trigger coverage; however, in this case no such facts exist. The underlying complaint describes LMI’s alleged breaches in detail, specifying deficiencies in materials, workmanship, and in the building’s construction. But nowhere did the complaint allege damage to anything other than the building. Although the complaint did allege water infiltration, it did not identify any underlying damage caused by the water.
Pointing to its prior analysis in Amerisure Ins. Co. v. Microplastics, Inc., 622 F.3d 806 (7th Cir. 2010), the Court stated that it is the actual complaint, and not a hypothetical version, that must be considered when determining whether an insurer’s duty to defend is triggered. The Court could not speculate about possible factual scenarios which were absent from the claim itself. The Court concluded that in this matter the factual allegations of the complaint cannot support LMI’s assertion that Crown alleged anything other than defective construction because the complaint is devoid of any facts that would support this construction. Because the complaint only alleged damage to the structure itself, Consolidated’s duty to defend was not triggered.
06/22/12 Tower Ins. Co. of N.Y. v. High Style Floors Inc. Supreme Court, New York County Good Faith, Objective Basis for Believing Litigation Will Not Be Commenced Required for Insured to Prove Reasonableness of Delay in Failing to Provide Timely Notice of Claim
Tower Ins. Co. moved for summary judgment declaring it has no duty to defend/ indemnify High Style Floors in its underlying slip and fall action. High Style first gave notice to Tower of the underlying action more than six months after the occurrence. Tower contends High Style’s failure to give timely notice of the occurrence eliminated the duty to defend in the underlying action. High Style claims it knew nothing about the occurrence until it was served with a supplemental summons and complaint.
In support of its motion, Tower submitted its investigator’s signed statement from High Style’s project manager who stated he received a phone call from one of his employees saying a woman crossed the caution tape to use the back door and slipped on a patch that was on the floor. The project manager arrived at the scene when “the ambulance had just left.” The depositions of High Style’s project manager and its only employee present on the premise at the time of accident suggested the injured woman suffered little, if any, harm in the incident.
The court stated “if there has been a delay in reporting an incident to the insurer, the insured has the burden to establish that a reasonably prudent person, upon learning of the accident, would have a good faith, objective basis for believing that litigation would not be commenced.” According to the court, while the High Style depositions “may illuminate the issues of liability and comparative negligence [of the underlying] accident, they offer no good faith, objective basis for believing that litigation would not be commenced.” The court stated “it is the occurrence, not the commencement of a personal injury action that triggers an insured’s obligation to provide notice according to the terms of the Policy.”
Therefore, the Court granted Tower’s motion declaring it has no duty to defend/indemnify High Style in the underlying action.
06/21/12 Lucas & Son Real Holdings, LLC v. Allstate Inc. Co. Supreme Court, Suffolk County Practice & Procedure of Sending Out/Filing Incoming Mail May Create Issue of Fact
Plaintiffs filed this action against Allstate for failure to pay property damage and lost rental income claims resulting from a fire at the insured premises and for refusing to defend & indemnify plaintiffs in the underling personal injury action. Allstate disclaimed coverage on the ground that Lucas & Son was not an insured under the Allstate policy.
Augusto Lucas was the named insured. After his death in 2003, Maria Lucas (wife) and Pablo Lucas (son) became the owners of the premise in 2005. They claimed that in fall of 2005, Pablo informed Allstate by letter, prior to the renewal period, that the premise was now owned by Lucas & Son and Plaintiffs paid the annual premium. Allstate however, claimed they never received said letter and filed a summary judgment motion.
EBTs of Allstate’s agent and administrative salesperson outlined Allstate’s regular practice and procedure in organizing and filing incoming mail. Allstate had no documentation whatsoever regarding Pablo’s letter allegedly sent in fall 2005. Further, after Allstate issued its denial letter, Allstate received a faxed, unsigned letter regarding a request to change the insured on the policy. The court held Allstate demonstrated it is not obligated to provide coverage to plaintiffs in the underlying action as they are not named insureds on the subject policy.
In opposition, Lucas & Son submitted the affidavit of Pablo’s secretary and an unsigned letter dated fall 2005, addressed to Allstate and to the attention of Allstate’s agent, on Lucas & Son letterhead, requesting a change in insured. Pablo’s secretary verified the unsigned letter and outlined her office’s practice and procedure in drafting and sending out letters. The court held “proof that an item was properly mailed gives rise to a rebuttable presumption that the item was received by the addressee.” As both parties’ submissions raised credibility issues, the court denied Allstate’s summary judgment motion.
06/22/12 Broughton v. Flaherty Supreme Court, Wyoming County Expert Affidavits Must Support Insured’s Claims of Serious Injury
Plaintiff claims as a result of a motor vehicle action she sustained “serious” injuries, complaining of pain and limitation of motion in her right shoulder, neck, mid back, and lower back. Defendants filed a summary judgment motion, contending Plaintiff suffered no serious injury. In support of their contention, Defendant submits four expert reports.
The first report found Plaintiff’s strains to her shoulder, neck, and mid back were all resolved and there was no probable causal relationship between the accident and Plaintiff’s lower back problems. Plaintiff was found not disabled. The second report was similar in that all strains were in the process of resolving, but found Plaintiff had a mild disability. The third report concluded Plaintiff had pre-existing degenerative disc disease and found no objective evidence of causally related impairment which would preclude claimant from pursuing her normal duties. The fourth report found Plaintiff exhibited normal ranges of motion in her shoulder, mid back and lower back. Regarding Plaintiffs’ neck, the fourth report observed range of motion was reduced 50% in extension, 50% in left rotation, and 30% right rotation while flexion was full. However, the fourth report concluded there was no objective medical evidence of limitation, disability, permanency or the need for future medical treatment relative to the healed sprains.
In response, Plaintiff submitted one affidavit of her chiropractor who stated Plaintiff suffered significant permanent losses of range of motion in her neck and back caused by the accident with reference to goniometer tests she performed. The court found the affidavit sufficient to demonstrate a question of fact as to whether Plaintiff sustained a serious injury to her neck and back within the categories of permanent consequential limitation of use and significant limitation of use. However, the court granted Defendant’s summary judgment motion with respect to her “significant disfigurement” and “a medically determined injury or impairment of a non-permanent nature.” Further, the court granted Defendant’s motion on the issue of whether Plaintiff sustained a qualifying injury to her right shoulder because Plaintiff failed to raise any triable issues with respect to that injury.
The recent case of National Union Fire Insurance Co. of Pittsburgh, Pa. v. Miller,2012 WL 602894 (West Virginia 2/24/2012) involved attempting to determine what constituted a “fence” in the context of an insurance policy. The issue centered on a four foot strand of woven metal wire along the property line of a state tree nursery. A child struck the wire while riding on the handlebars of a bike suffering severe facial lacerations requiring surgery. The accident occurred near a tree nursery owned and operated by the West Virginia Department of Forestry. A declaratory judgment was sought that National Union Fire Insurance had to indemnify the State for its alleged negligence.
National Union denied coverage asserting that the wire strand constituted a “fence” and the policy excluded claims arising from the ownership, maintenance, etc. of “…fences, or related or similar activities or things.” The focus of the summary judgment motion was whether this single strand of wire constituted a “fence”. Two State Foresters visited the scene and concluded that the “fence” had been erected over 30 years ago when the property was (apparently) operated as an orchard, but that the “fence” had deteriorated over time. On the motion, both parties cited dictionary definitions of a fence such as “…a barrier intended to prevent escape or intrusion or to mark a boundary.”
The trial court ruled that, if a fence functions as a barrier to keep things out or to prevent things from escaping, this wire lacked this function. The trial court also discounted the testimony of the State Foresters since they had no personal knowledge of the historical condition of the property or its past use and condition. Since by definition, the trial court believed that the wire could not constitute a fence, it ruled that National Union owed coverage for the injuries.
However, on appeal to the West Virginia Supreme Court of Appeals, this ruling was reversed and the case was remanded back to the trial court. The Appellate Court ruled that the trial court had focused excessively on precise definitions of a “fence”, particularly in light of the language in the policy about fences or “similar activities or things”. The Appellate Court also ruled that the testimony of the State Foresters was at least relevant to what they observed along the property line, such as whether there was an old fence row or “remnant of a fence” that was intact at one time. In conclusion, the Appellate Court ruled there was a material “question of fact” whether the four foot strand of woven metal wire which caused the injuries was a “fence” or a “related or similar thing.”
The lessons of this case are several:
This case certainly demonstrates the interesting linguistic and practical issues that can arise in interpreting both technical and common language in an insurance policy. It is in fact useful and sometimes necessary to resort to “dictionary definitions” and other linguistic sources to define and describe policy terms and conditions which do not have self-contained definitions such as the “fence” in this case. As such, the issue may become as much one of grammar and linguistics as of law.
However, the Appellate Court here recommended taking a broader view of such disputed policy terms focusing not only on the nature of the condition and technical or dictionary definitions, but the overall nature of the alleged “fence” as a property condition. The Appellate Court was certainly helped in this interpretation by the residual language in the exclusion relating to “similar activities or things” akin to a fence. It is also unclear from the appellate decision whether the four foot strand of woven metal wire was indeed a “remnant” from an old fence, or perhaps had been strung as a “substitute” for an old and deteriorating fence. At trial, the parties will presumably have to delve deeper into the origins of the metal wire and try to determine, for example, whether it was erected as part of an earlier fence, as a substitute for a deteriorated fence, or just to mark a boundary of the tree nursery which might also fall within the policy exclusion.
In such a close case factually and in terms of the property condition at issue, the plaintiff will surely argue that definitions and meanings of insurance policy exclusions should be narrowly interpreted in favor of coverage and against the insurer.
06/26/12 Forkwar v. Empire Fire and Marine Insurance Company Fourth Circuit Court of Appeals Independent Contractor Is Not Indemnified by Insurance Company for Failure to Establish Respondeat Superior and Coverage is Barred by “Business Use” Policy Exclusion
Empire insured an independent contractor, Hameed Madhi, who leased and drove a tractor for J&J Logistics, Inc. While on an assignment for J&J in Maryland, Madhi was involved in an accident with plaintiff Augustine Forkwar. Upon assessment of the accident, Empire determined that it was under no obligation to indemnify Madhi because the accident fell under the “business use” exception of Madhi’s commercial auto policy.
The policy does not apply to damage caused “while a covered auto is used in the business of anyone to whom the auto is leased or rented.” Forkwar filed suit for damages against Madhi and J&J, holding the latter liable under respondeat superior. J&J made an opposed mid-trial motion for judgment as a matter of law. Madhi was found negligent. After securing judgment against Madhi, Forkwar filed suit against Empire, but the court granted Empire’s motion for summary judgment. On appeal, Forkwar argued that the district court erroneously determined that Empire was not collaterally estopped by the judgment in the previous action and that the business use exception did not bar coverage from Empire because of J&J’s involvement through respondeat superior. In reviewing the summary judgment, the court looked to Maryland substantive law and found that Madhi was using the tractor “to further the commercial interest” of J&J and therefore did fall under the business exception exclusion, see Hartford Ins. Co. v. Occidental Fire & Cas. Co., 809 F.2d 235, 239 (7th Cir. 1990). Furthermore, the court found that Madhi was an individual acting in the business of J&J and not an employee, therefore failing to meet the employer-employee relationship needed for respondeat superior under Maryland law.
Submitted by: Christie Law Group, PLLC - Posted: 06/29/2012
06/21/12 Save the Peaks Coalition v. USFS
Ninth Circuit Court of Appeals Plaintiff’s Attorney Sanctioned for Bad Faith Proceedings Instituted Entirely to Harass Defendants
Snowbowl, an intervener-defendant in an action between Save the Peaks Coalition, et al. and the United States Forest Service (USFS), requested attorney’s fees and costs pursuant to 28 U.S.C. § 1927. Section 1927 allows a court to award fees and costs as a result of an attorney who, acting in bad faith, “unreasonably and vexatiously” multiplies proceedings. “Knowingly or recklessly” filing a frivolous suit is enough to show bad faith. The 9th Circuit found that conduct by plaintiff’s counsel warranted sanctions against him personally because he acted with subjective bad faith when he “unreasonably” multiplied proceedings after losing another case against USFS. The court also found that counsel’s “intent was to harass Snowbowl” and held that sanctions against counsel individually under Section 1927 were proper. Specifically, the court awarded costs to defendant equal to the costs to defend the suit both at the district and appellate levels.
Submitted by: Marc Harwell and Emma Paige of Leitner, Williams, Dooley & Napolitan PLLC.
Mound Cotton Wollan & Greengrass, New York (Kevin F. Buckley of counsel), for appellants.
Becker & D'Agostino, P.C., New York (Michael D'Agostino of counsel), for respondent.
Order, Supreme Court, New York County (Anil Singh, J.), entered February 21, 2012, which denied defendants' motion for summary judgment dismissing the complaint and directed plaintiff to appear for an examination under oath (EUO) within 90 days, unanimously affirmed, with costs.
Defendants did not establish that plaintiff's failure to comply with the coverage conditions by not sitting for an EUO and by not producing all of the documents sought by defendants, was willful noncompliance with the terms of the subject policy. The motion court properly considered the totality of the circumstances in concluding that plaintiff's conduct was not so willful as to require excusing defendants from liability (see Erie Ins. Co. v JMM Props., LLC, 66 AD3d 1282, 1285 ), particularly where, as here, there is evidence to suggest that defendants may have also breached the terms of the policy. Moreover, the record shows that defendants did not act diligently to obtain plaintiff's cooperation in a manner that was reasonably calculated to bring it about (see Utica First Ins. Co. v Arken, Inc., 18 AD3d 644 ).
Miller Eisenman & Kanuck, LLP, New York (Michael P. Eisenman of counsel), for appellants-respondents.
Havinks Rosenfeld Ritzert & Varriale, LLP, New York (Steven H. Rosenfeld of counsel), for respondents-appellants.
Order and judgment (one paper), Supreme Court, New York County (Saliann Scarpulla, J.), entered January 30, 2012, which, to the extent appealed from, denied plaintiffs' motion for summary judgment declaring that defendant Capitol Specialty Insurance, Ltd. must make $1,000,000 in primary coverage available to plaintiffs, granted defendants' cross motion for summary judgment declaring that the maximum coverage available to plaintiffs through defendant Capitol was limited to $50,000, granted plaintiffs' motion for summary judgment declaring that defendant Redland Insurance Ltd. must make the entire limits of its excess policy in the amount of $4,000,000 available to plaintiffs, and denied defendants' cross motion for summary judgment declaring that no coverage was available under the Redland excess policy, unanimously affirmed, without costs.
In this declaratory judgment action, which arose out of an underlying personal injury action in which plaintiffs alleged that they were assaulted while patrons at a Manhattan nightclub, the $50,000 sublimit applicable to assault and battery coverage in the primary policy applied to all the coverage that was available under the policy, and plaintiffs were not entitled to a disclaimer of coverage pursuant to Insurance Law § 3420(d)(2) (see Power Auth. of State of N.Y. v National Union Fire Ins. Co. of Pittsburgh, 306 AD2d 139, 140 ; cf. Reliance Ins. Co. v Daly, 67 Misc 2d 23 , mod on other grounds 38 AD2d 715 ).
Although the injured plaintiffs, strangers to the insurance policy, may only bring a direct action against the alleged tortfeasor's insurance company for a determination of coverage issues after a judgment had been secured against the tortfeasor (CPLR 3420[b]; Lang v Hanover Ins. Co., 3 NY3d 350, 354 ), the parties had the right to stipulate that plaintiffs could commence a declaratory judgment action for a determination of the scope of coverage (see 1420 Concourse Corp. v Cruz, 135 AD2d 371, 372 , appeal dismissed 73 NY2d 868 ). Although the stipulation explicitly referenced a declaratory judgment action only with respect to the primary policy, plaintiffs' complaint clearly referenced claims against both the primary and excess policies, and defendants thus waived any objection to a determination of coverage rights under both policies (see CPLR 3211[a], 3211[e]; Lance Intl., Inc. v First Natl. City Bank, 86 AD3d 479, 479 , appeal dismissed 17 NY3d 922 ). The record also establishes that plaintiffs were not aware of a dispute with respect to the excess policy at the time they entered into the stipulation.
Finally, while the primary policy afforded coverage for assault and battery and related negligence claims up to a sublimit of $50,000, the excess policy, which provided coverage in "like manner" to the primary policy, was silent as to this sublimit and therefore ambiguous. Defendants' representative testified that there was no endorsement applicable to the excess policy that excluded or limited the available coverage for bodily injury resulting from an assault and battery, and his subsequent contradictory affidavit was insufficient to resolve any ambiguity in favor of the insurer (see Garber v Stevens, 94 AD3d 426, 426 ; Kenavan v Empire Blue Cross & Blue Shield, 248 AD2d 42, 47 ).
Even if the excess policy was not ambiguous, plaintiffs have demonstrated "detrimental reliance, a necessary element of equitable estoppel" (Fisk Bldg. Assoc. LLC v Shimazaki II, Inc., 76 AD3d 468, 469 ). Had plaintiffs learned that defendants took a position of no coverage with respect to the excess policy on a timely basis, they would have had the option of trying to settle their claims within the $50,000 sublimit, instead of learning that the sublimit had substantially eroded by the time they appeared for trial.
Martin, Fallon & Mullé, Huntington, N.Y. (Richard C. Mullé of counsel), for appellant.
Steven C. Pepperman, New York, N.Y., for respondent.
DECISION & ORDER
In an action pursuant to Insurance Law § 3420 to recover the amount of an unsatisfied judgment against the defendant's insured, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Partnow, J.), dated September 27, 2011, as denied its motion for summary judgment dismissing the complaint and granted that branch of the plaintiff's cross motion which was for summary judgment on the issue of liability.
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, the defendant's motion for summary judgment dismissing the complaint is granted, and that branch of the plaintiff's cross motion which was for summary judgment on the issue of liability is denied.
On September 6, 2003, a vehicle operated by the plaintiff was involved in an accident with a vehicle owned by the defendant's insured. By filing a summons and complaint dated November 11, 2003, the plaintiff commenced an action against the defendant's insured to recover damages for personal injuries. The defendant's insured defaulted in appearing or answering the complaint, and after an inquest on the issue of damages, a judgment was entered on August 17, 2006, in favor of the plaintiff and against the defendant's insured in the total sum of $184,563. The plaintiff's attorney enclosed a copy of the judgment along with correspondence that it sent to the defendant dated December 12, 2006. In correspondence dated January 5, 2007, the defendant notified its insured and the plaintiff that the December 12, 2006, correspondence was the first notice that it had received that an action had been commenced against its insured, and that it would disclaim coverage based on its failure to receive timely notice of the commencement of the action, as was required by the subject insurance policy.
The plaintiff then commenced this action pursuant to Insurance Law § 3420 to recover the amount of the unsatisfied judgment against the defendant's insured.
In an action to recover damages for personal injuries, and a third-party action, inter alia, for a judgment declaring that the third-party defendant Utica First Insurance Co. is obligated to defend and indemnify the defendant third-party plaintiff, Bernard Janowitz Construction Corporation, in the main action, the third-party defendant Utica First Insurance Co. appeals from so much of an order of the Supreme Court, Queens County (Hart, J.), dated May 10, 2011, as, upon renewal, in effect, adhered to a determination in an order dated May 4, 2010, denying its motion for summary judgment on the third-party complaint insofar as asserted against it.
ORDERED that the order dated May 10, 2011, is reversed insofar as appealed from, on the law, with costs, upon renewal, the order dated May 4, 2010, is vacated, the motion of the third-party defendant Utica First Insurance Co. for summary judgment on the third-party complaint insofar as asserted against it is granted, and the matter is remitted to the Supreme Court, Queens County, for the entry of an appropriate judgment, inter alia, declaring that the third-party defendant Utica First Insurance Co. is not obligated to defend and indemnify the defendant third-party plaintiff, Bernard Janowitz Construction Corporation, in the main action.
The defendant Bernard Janowitz Construction Corporation (hereinafter Janowitz) was hired as the general contractor for a construction project of 100 housing units known as "Harbor View" in Port Washington. Janowitz subcontracted with the third-party defendant Allright Construction (hereinafter Allright) to install metal trimming on the roofs of the houses. Allright obtained an insurance policy from the third-party defendant Utica First Insurance Co. (hereinafter Utica). The policy excluded coverage for lawsuits arising out of injuries to employees of any insured who were injured in the course of their employment. The plaintiff was employed by Allright. He was injured while working on the Harbor View project on January 11, 2005. He thereafter commenced the instant action against Janowitz to recover damages for his injuries.
Janowitz commenced a third-party action against Allright and Utica, inter alia, for a judgment declaring that Utica was required to defend and indemnify Janowitz in the main action. Utica then moved for summary judgment on the third-party complaint insofar as asserted against it. In an order dated May 4, 2010, the Supreme Court denied the motion on the ground that Utica failed to annex any pleadings to the motion. Utica moved for leave to renew, submitting the pleadings and the policy at issue with its motion for summary judgment, and argued that Janowitz was not covered under the policy. In opposition, Janowitz submitted a certificate of liability insurance, which listed Janowitz as an additional insured under the policy. In an order dated May 10, 2011, the Supreme Court granted the motion for leave to renew and, upon renewal, in effect, adhered to its original determination denying Utica's motion for summary judgment on the third-party complaint. Utica appeals, and we reverse the order dated May 10, 2011, insofar as appealed from.
An exclusion from coverage "must be specific and clear in order to be enforced" (Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311), and an ambiguity in an exclusionary clause must be construed most strongly against the insurer (see Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390, 398; Thomas J. Lipton, Inc. v Liberty Mut. Ins. Co., 34 NY2d 356, 361). An unambiguous policy provision, however, must be accorded its plain and ordinary meaning (see Sanabria v American Home Assur. Co., 68 NY2d 866), and the court may not disregard the plain meaning of the policy's language in order to find an ambiguity where none exists (see Acorn Ponds v Hartford Ins. Co., 105 AD2d 723, 724).
Here, the plain meaning of the exclusion is to relieve Utica of liability "when an insured or additional insured was sued or contribution was requested for damages arising out of bodily injury to an employee sustained in the course of employment" (Bassuk Bros. v Utica First Ins. Co., 1 AD3d 470, 471). Utica established, prima facie, its entitlement to judgment as a matter of law by showing that the exclusion barred coverage in this case, and Janowitz failed to raise a triable issue of fact in opposition (see generally Stukas v Streiter, 83 AD3d 18, 24). Although the certificate of insurance submitted by Janowitz raised a triable issue of fact as to whether Janowitz was an additional insured under the policy, that issue of fact is irrelevant in light of the exclusion.
Janowitz's remaining contentions are without merit.
Therefore, the Supreme Court, upon renewal, should have granted Utica's motion for summary judgment on the third-party complaint insofar as asserted against it.
Since this is, in part, a declaratory judgment action, the matter must be remitted to the Supreme Court, Queens County, for the entry of an appropriate judgment, inter alia, declaring that Utica is not obligated to defend or indemnify Janowitz in the main action (see Lanza v Wagner, 11 NY2d 317, appeal dismissed 371 US 74, cert denied 371 US 901).
Drinker Biddle & Reath LLP, New York (James M. Altieri of counsel) and William T. Corbett, Jr., Florham Park, NJ, of the bars of the States of New Jersey and Connecticut, admitted pro hac vice, for appellants.
Littleton Joyce Ughetta Park & Kelly LLP, Purchase (Robert L. Joyce of counsel), for respondents.
Order, Supreme Court, New York County (Jeffrey K. Oing, J.), entered November 9, 2011, which denied defendants' cross motion for summary judgment, and granted plaintiffs' motion for partial summary judgment to declare that Travelers owed a duty to defend plaintiffs Kerry, Inc. and Mastertaste, Inc. (collectively, Kerry) in connection with the underlying personal injury actions claiming damages as a result of exposure to diacetyl, unanimously affirmed, with costs.
St. Louis Flavors Corp. formerly operated a flavorings business, in which, among other things, it manufactured diacetyl and diacetyl- containing products used in artificial butter flavoring. Kerry purchased virtually all of St. Louis's assets under an Asset Purchase Agreement dated December 4, 2002 (the APA). In several underlying actions, the plaintiffs allege personal injuries arising from exposure to St. Louis's products, and allege tortious conduct by Kerry on a de facto merger or continuation theory.
The APA states that pre-merger product liability claims remain excluded liabilities, and the APA also contains a "no-transfer" clause; however, under New York law, "[t]he enforceability of a no-transfer clause in an insurance contract is limited" (Globecon Group, LLC v Hartford Fire Ins. Co., 434 F3d 165, 170 [2d Cir 2006] [applying New York law]). New York generally follows the majority rule that a no-transfer provision in an insurance contract is "valid with respect to transfers that were made prior to, but not after, the insured-against loss" (id.; see also Kittner v Eastern Mutual Ins. Co., 80 AD3d 843, 846, n 3 , lv dismissed 16 NY3d 890 ). As noted by the motion court, this principle is based on a judgment that while "insurers have a legitimate interest in protecting themselves against additional liabilities [that they] did not contract to cover, once the insured against loss has occurred, there is no issue of an insurer having to insure against additional risk" and, "in that circumstance, the only question is who the insurer will pay for the loss" (Viking Pump, Inc. v Century Indem. Co., 2 A3d 76, 103 [Del Ch 2009] [applying New York law]).
The Travelers policies were not listed in the APA's exclusive list of "Excluded Assets," and therefore fall within the APA's broadly inclusive "Purchased Assets." Even if the APA did not expressly transfer the Travelers Policies to Kerry, the benefits or coverage under those policies transferred, as a matter of law, to Kerry as the alleged successor to St. Louis's pre-acquisition liabilities. The lack of Travelers' consent to a transfer of benefits to Kerry (either expressly or by operation of law) is unimportant, as all of the underlying plaintiffs' product sale and exposure allegations show that the potential liabilities in question arose before the transfer, and as such, Travelers cannot claim that its risk increased.
Travelers' contention - that since the plaintiffs in the underlying action did not sue until after the sale, no "chose in action" existed at the time that could have been assigned by St. Louis to Kerry - is unavailing (see id. at 103, 105), as is its assertion that, balancing St. Louis and Kerry's relative pre-acquisition sizes, Kerry's larger size necessarily translates to a greater potential risk. It is the "nature of the risk, rather than the particular characteristics of the defendant" that will have the greater effect on defense costs (Northern Ins. Co. of N.Y. v Allied Mut. Ins. Co., 955 F2d 1353, 1358 [9th Cir 1992], cert denied 505 US 1221 ), and in the final analysis, Kerry is only seeking a defense from Travelers to the extent of the risk that Travelers contracted to undertake — those claims that potentially implicate St. Louis's products.
Appeal from an order of the Supreme Court, Erie County (Russell P. Buscaglia, A.J.), entered July 29, 2011 in a breach of contract action. The order, insofar as appealed from, granted plaintiff's motion to dismiss defendant's first through fifth affirmative defenses and denied defendant's cross motion for summary judgment dismissing the amended complaint.
Hurwitz & Fine, P.C., Buffalo (Dan D. Kohane of Counsel), for Defendant-Appellant.
Brian P. Fitzgerald, P.C., Buffalo (Brian P. Fitzgerald of Counsel), for Plaintiff-Respondent.
It is hereby ORDERED that the order insofar as appealed from is unanimously reversed on the law without costs, plaintiff's motion is denied, defendant's cross motion is granted and the amended complaint is dismissed.
Memorandum: Plaintiff commenced this breach of contract action seeking supplementary underinsured motorist (SUM) coverage under an automobile insurance policy issued by defendant. Plaintiff was a passenger in a Ford Windstar van driven by her husband that collided with a pickup truck that had failed to yield the right-of-way at an intersection. Upon impact, plaintiff's car seat detached from the floor of the minivan and plaintiff became airborne as the vehicle spun out of control. She allegedly sustained severe and permanent injuries as a result of the accident. The driver of the pickup truck (motorist tortfeasor) had liability coverage of $100,000. The minivan in which plaintiff was riding was insured by defendant pursuant to a policy with plaintiff and her husband, with SUM coverage of $500,000. Plaintiff timely placed defendant on notice of her potential SUM claim, and commenced the underlying personal injury action against, inter alia, the motorist tortfeasor, sounding in negligence, and against Ford Motor Company (Ford), sounding in strict products liability. Following mediation, the motorist tortfeasor's insurer offered to settle for the policy limits of $100,000, and Ford, which was self-insured, offered to settle for $475,000.
In the meantime, plaintiff commenced the instant action, which the parties had agreed to hold in abeyance pending settlement discussions in the underlying action. Upon learning of plaintiff's potential settlement with the motorist tortfeasor and Ford, defendant wrote to plaintiff and her attorney "to remind" plaintiff that, pursuant to the release or advance and subrogation protection conditions of the SUM endorsement, settlement of plaintiff's claims against the motorist tortfeasor and Ford without defendant's consent would vitiate plaintiff's right to SUM ]coverage. Shortly thereafter, plaintiff formally notified defendant of the settlement offers and stated that she intended to accept the offers unless defendant advanced the full amount of the settlement offers, i.e., $575,000, within 30 days. Defendant responded that, pursuant to the release or advance condition of the SUM endorsement, it was obligated to advance only the $100,000 limit of the motorist tortfeasor's policy and that, pursuant to the release or advance and subrogation conditions of that endorsement, plaintiff could not thereafter settle her action against the motorist tortfeasor. Defendant further responded that those conditions further prohibited plaintiff from settling her action against Ford without defendant's consent, which it refused to provide. After its initial response to plaintiff, defendant repeatedly offered to advance the $100,000 limit of the motorist tortfeasor's policy, but plaintiff rejected those offers and proceeded to settle her underlying action against the motorist tortfeasor and Ford for $100,000 and $475,000, respectively, issuing general releases to both parties.
Plaintiff then pursued this action seeking, inter alia, $400,000 in SUM coverage from defendant, and she thereafter moved to dismiss defendant's affirmative defenses of failure to satisfy the release or advance and subrogation provisions of the SUM endorsement. Defendant cross-moved for summary judgment dismissing the amended complaint. We agree with defendant that Supreme Court erred in denying its cross motion.
Exclusion 1 of the SUM endorsement provides that, except as provided by Condition 10, "if [an] insured . . . without [defendant's] written consent, settles any lawsuit against any person or organization that may be legally liable for such injury," coverage is excluded. Condition 10, the standard "release or advance" condition, provides that "[i]n accidents involving the insured and one or more negligent parties, if such insured settles with any such party for the available limit of the motor vehicle bodily injury liability coverage of such party, release may be executed with such party after thirty calendar days actual written notice to [defendant], unless within this time period [defendant] agree[s] to advance such settlement amounts to the insured in return for the cooperation of the insured in [defendant's] lawsuit on behalf of the insured . . . An insured shall not otherwise settle with any negligent party, without [defendant's] written consent, such that [defendant's] rights would be impaired."
Finally, Condition 13, the standard subrogation provision of the policy, provides that, where defendant makes a payment under the SUM endorsement, it has "the right to recover the amount of this payment from any person legally responsible for the bodily injury or loss of the person to whom, or for whose benefit, such payment was made to the extent of the payment." It further provides that "[t]he insured . . . must do whatever is necessary to transfer this right of recovery to [defendant]. Except as permitted by Condition 10, such person shall do nothing to prejudice this right."
Here, we conclude that plaintiff violated Conditions 10 and 13 by settling with the motorist tortfeasor without defendant's consent. Pursuant to Condition 10, defendant was obligated either to consent to the settlement with the motorist tortfeasor or to advance the $100,000 settlement funds offered by that tortfeasor's insurer. That release or advance condition, however, applies only to settlements "for the available limit of the motor vehicle bodily injury liability coverage of such party," and therefore does not apply to the settlement offer by Ford, which was not based upon a motor vehicle bodily injury policy. Thus, defendant satisfied its obligation to plaintiff under Condition 10 by offering to advance the $100,000 offered by the motorist tortfeasor (see generally Matter of Central Mut. Ins. Co. [Bemiss], 12 NY3d 648, 654-655) and was not obligated to advance the $475,000 offered by Ford, as plaintiff had demanded.
We further conclude that plaintiff violated Conditions 10 and 13 by settling with Ford without defendant's written consent. Condition 10 provides that plaintiff "shall not otherwise settle with any negligent party, without [defendant's] written consent" (emphasis added). Similarly, Condition 13 gives the SUM carrier the subrogation right to recover a SUM payment from "any person legally responsible for the bodily injury or loss" (emphasis added). Thus, although defendant was not obligated to advance the settlement offer made by Ford, Ford was nevertheless "legally responsible" for plaintiff's injuries, and defendant therefore had subrogation rights against Ford to the extent that its SUM payments represented payment for injuries for which Ford was legally responsible.
We reject plaintiff's contention that the last sentence of Condition 10, which provides that the insured "shall not otherwise settle with any negligent party, without [defendant's] written consent," applies only to motorist tortfeasors, not to settlement with non-motorists such as Ford. The provision on its face plainly refers to settlements with "any negligent party," and does not refer merely to motorist tortfeasors. We thus reject plaintiff's "strained, unnatural and unreasonable" interpretation of that policy condition (Progressive Northeastern Ins. Co. v State Farm Ins. Cos., 81 AD3d 1376, 1378, appeal dismissed 16 NY3d 891, lv dismissed 17 NY3d 849; see Central Mut. Ins. Co., 12 NY3d at 658-659). Plaintiff's interpretation would require the replacement of the word "motorist" for "party" in the last sentence of Condition 10, such that the phrase would read "negligent motorist" rather than "negligent party." Had the sentence been intended to read in the manner suggested by plaintiff, it would have been easy enough to phrase it that way.
We thus conclude that, by settling with Ford and the motorist tortfeasor in violation of Conditions 10 and 13, plaintiff prejudiced defendant's subrogation rights and thereby vitiated her right to SUM coverage (see Weinberg v Transamerica Ins. Co., 62 NY2d 379, 381-382). In view of our determination, we need not address the parties' remaining contentions.
David v. Caceres
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiffs appeal from an order of the Supreme Court, Nassau County (Lally, J.), dated June 17, 2011, which granted the defendant's motion for summary judgment dismissing the complaint insofar as asserted by the plaintiff Jose R. David, on the ground that that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the appeal by the plaintiffs Marcos Zelaya and Edy R. David is dismissed, as those plaintiffs are not aggrieved by the order appealed from (see CPLR 5511); and it is further,
ORDERED that the order is reversed, on the law, and the defendant's motion for summary judgment dismissing the complaint insofar as asserted by the plaintiff Jose R. David is denied; and it is further,
ORDERED that one bill of costs is awarded to the plaintiff Jose R. David.
The defendant met her prima facie burden of showing that the plaintiff Jose R. David (hereinafter the injured plaintiff) did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The injured plaintiff alleged, inter alia, that as a result of the subject accident, the cervical and lumbar regions of his spine sustained certain injuries. The defendant submitted competent medical evidence establishing, prima facie, that the alleged injuries to those regions did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Rodriguez v Huerfano, 46 AD3d 794, 795), and, in any event, were not caused by the subject accident (see Jilani v Palmer, 83 AD3d 786, 787).
In opposition, the injured plaintiff submitted competent medical evidence raising a triable issue of fact as to whether the alleged injuries to the cervical and lumbar regions of his spine constituted serious injuries under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d) (see Perl v Meher, 18 NY3d 208, 215-218). Furthermore, the injured plaintiff, who, contrary to the Supreme Court's determination, provided a reasonable explanation for a cessation of his medical treatment (see Pommells v Perez, 4 NY3d 566, 574), also submitted competent medical evidence raising a triable issue of fact as to whether the alleged injuries to the cervical and lumbar regions of his spine were caused by the subject accident (see Park v Shaikh, 82 AD3d 1066, 1067; Compass v GAE Transp., Inc., 79 AD3d 1091, 1092).
Accordingly, the Supreme Court should have denied the defendant's motion for summary judgment dismissing the complaint insofar as asserted by the injured plaintiff.
Fiore v. Reimer
Rovegno & Taylor, P.C., Great Neck, N.Y. (Robert B. Taylor of
counsel), for appellant.
Kevin M. McGowen, Garden City, N.Y. (Lorraine M. Korth of
counsel), for respondent William Reimer.
Russo, Apoznanski & Tambasco, Westbury, N.Y. (Susan J.
Mitola of counsel), for respondents Elaine White and Robert
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Nassau County (Galasso, J.), dated June 10, 2011, which granted the motion of the defendant William Reimer, and the separate motion of the defendants Elaine White and Robert White, for summary judgment dismissing the complaint insofar as asserted against them on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is affirmed, with one bill of costs to the respondents appearing separately and filing separate briefs.
In support of their respective motions for summary judgment dismissing the complaint insofar as asserted against them, the defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The plaintiff alleged, inter alia, that as a result of the subject accident, her left knee sustained certain injuries. The defendants submitted evidence establishing, prima facie, that the alleged injuries to the knee did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Staff v Yshua, 59 AD3d 614). In opposition, the plaintiff failed to raise a triable issue of fact. Accordingly, the Supreme Court properly granted the defendants' respective motions for summary judgment dismissing the complaint insofar as asserted against them.
Hayes v. Vasilios
Harold Solomon, Rockville Centre, N.Y., for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Stacy R. Seldin of counsel), for respondents.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals, as limited by her brief, from so much of an order of the Supreme Court, Queens County (Taylor, J.), dated August 10, 2011, as, upon renewal, in effect, vacated its prior order dated May 19, 2011, which denied the defendants' motion for summary judgment dismissing the complaint on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident, and thereupon granted the defendants' motion.
ORDERED that the order is affirmed insofar as appealed from, with costs.
We agree with the Supreme Court's determination, upon renewal, that the defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956—957), albeit for different reasons. The plaintiff alleged that she suffered, inter alia, injuries to the cervical, thoracic, and lumbar regions of her spine as a result of the accident. Contrary to the plaintiff's contention, and the Supreme Court's finding, the report from the defendants' examining neurologist, Dr. Maria DeJesus, was sufficient to satisfy the defendants' prima facie burden as to the alleged injuries to the regions, even though Dr. DeJesus did not review the plaintiff's medical records, since she performed objective tests showing full range-of-motion in the regions of the plaintiff's spine (see e.g. DeJesus v Paulino, 61 AD3d 605, 607; see also Staff v Yshua, 59 AD3d 614; Rodriguez v Huerfano, 46 AD3d 794, 795).
In opposition, the plaintiff failed to raise a triable issue of fact. The plaintiff relied on the medical report of her treating radiologist, Dr. Linda Harkavy, based on an examination. This report, while in admissible form, merely revealed the existence of a disc bulge at L3-4, and a "tiny . . . disc protrusion" at L4-L5. The mere existence of a bulging disc, in the absence of objective evidence as to the extent of the alleged physical limitations resulting from that injury and their duration, is not evidence of serious injury (see Scheker v Brown, 91 AD3d 751, 752).
Accordingly, upon renewal, the Supreme Court properly, in effect, vacated its prior order dated May 19, 2011, denying the defendants' motion for summary judgment dismissing the complaint, and thereupon properly granted the motion.
Jie Li v. Triboro Coach Corporation
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiffs appeal from a judgment of the Supreme Court, Queens County (Orlikoff-Flug, J.), entered March 29, 2010, which, upon a jury verdict finding that the plaintiff Jie Li did not sustain a serious injury within the meaning of Insurance Law § 5102(d), is in favor of the defendants and against them dismissing the complaint.
ORDERED that the judgment is affirmed, with one bill of costs to the respondents appearing separately and filing separate briefs.
Contrary to the plaintiffs' contentions on appeal, the jury's finding that the plaintiff Jie Li did not sustain a serious injury under the fracture or the 90/180-day category of Insurance Law § 5102(d) as a result of the subject accident was not contrary to the weight of the evidence (see Lolik v Big V Supermarkets, 86 NY2d 744; Nicastro v Park, 113 AD2d 129).
The plaintiffs' remaining contentions are without merit.
Oliver v. New York City Transit Authority
Dinkes & Schwitzer, P.C. (Pollack, Pollack, Isaac & De
Cicco, New York, N.Y. [Brian J. Isaac, Michael H. Zhu, and Jillian
Rosen], of counsel), for appellant.
Smith Mazure Director Wilkins Young & Yagerman, P.C.,
New York, N.Y. (Marcia K. Raicus
of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from a judgment of the Supreme Court, Kings County (Martin, J.), entered April 27, 2010, which, upon a jury verdict on the issue of liability finding the defendant 50% at fault in the happening of the accident, upon a jury verdict on the issue of damages finding that the plaintiff did not sustain a serious injury under the permanent loss of use, permanent consequential limitation of use, and significant limitation of use categories of serious injury within the meaning of Insurance Law § 5102(d), and upon the denial of the plaintiff's motion pursuant to CPLR 4404 to set aside the verdict on the issue of damages and for a new trial on that issue, is in favor of the defendant and against her, dismissing the complaint.
ORDERED that the judgment is reversed, on the law, with costs, the plaintiff's motion pursuant to CPLR 4404 to set aside the verdict on the issue of damages and for a new trial on that issue is granted, and the matter is remitted to the Supreme Court, Kings County, for a new trial on the issue of damages.
On September 11, 2000, the plaintiff was a passenger on a bus owned by the defendant, New York City Transit Authority. She allegedly was injured when the bus stopped and caused her to fall backwards. The plaintiff had a history of rheumatoid arthritis and had undergone two knee replacements and one hip replacement prior to the accident. Following the accident, the plaintiff immediately sought medical treatment and, on September 25, 2000, a fracture of the pelvis and dislocation in the plaintiff's hip was discovered. Over the next few years, she underwent hip replacement revisions, and surgeries on her lumbar spine. The plaintiff commenced this action against the defendant alleging that, as a result of the accident, she sustained serious injuries within the meaning of Insurance Law § 5102(d).
Following a bifurcated jury trial, the defendant was found to be 50% at fault in the happening of the accident and the jury determined that the accident was a substantial factor in causing injuries to the plaintiff, but that the plaintiff did not sustain a serious injury within the significant limitation of use of a body function or system, a permanent consequential limitation of use of a body organ or member, or a permanent loss of use of a body organ, member, function, or system categories of serious injury. The plaintiff moved pursuant to CPLR 4404 to set aside the verdict on the issue of damages, arguing, inter alia, that the court erred in failing to submit the serious injury category of fracture to the jury in its charge and on the verdict sheet.
We agree with the plaintiff that the jury charge and verdict sheet were improper. The plaintiff was required to show at trial that the alleged injuries were serious within the meaning of Insurance Law § 5102(d) and that the injuries were proximately caused by the accident (see Pommells v Perez, 4 NY3d 566, 574-575; Siew Hwee Lim v Dan Dan Tr., Inc., 84 AD3d 1213; Carter v Full Serv., Inc., 29 AD3d 342). The plaintiff presented evidence showing that in addition to other injuries, she sustained a fracture of her pelvis. Her expert opined that the fracture was caused by the accident. The defendant presented an expert who agreed that there was a fracture but opined that it was caused by medical personnel in an attempt to fix the dislocation of the plaintiff's hip. The court erred in failing to submit to the jury the question of whether the plaintiff suffered a serious injury under the "fracture" category of Insurance Law § 5102(d), and whether the plaintiff's fracture was caused by the accident. Under these circumstances, the plaintiff is entitled to a new trial on the issues of damages (see Bassett v Romano, 126 AD2d 693). At this new trial, the plaintiff may seek to establish that she suffered a serious injury under all available categories of Insurance Law § 5102(d), provided they are supported by a reasonable view of the evidence presented.
The plaintiff's remaining contentions are without merit.
Stepnoski v. Brito
Kim, Patterson & Sciarrino, LLP, Bayside, N.Y. (Stephen E.
Kwan of counsel), for appellants.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendants appeal from an order of the Supreme Court, Queens County (Grays, J.), dated June 29, 2011, which denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is affirmed, without costs or disbursements.
We affirm the order denying the defendants' motion for summary judgment dismissing the complaint, but do so on a ground different from that relied upon by the Supreme Court.
The defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The defendants failed to adequately address the plaintiff's claim that he sustained a medically-determined injury or impairment of a nonpermanent nature which prevented him from performing substantially all of the material acts which constituted his ususal and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident (see Aujour v Singh, 90 AD3d 686, 686-687; Bangar v Man Sing Wong, 89 AD3d 1048, 1049).
Accordingly, the defendants' motion for summary judgment dismissing the complaint was properly denied, without regard to the sufficiency of the papers submitted by the plaintiff in opposition (see Aujour v Singh, 90 AD3d at 687; Bangar v Man Sing Wong, 89 AD3d at 1049).
Womack v. Wilhelm
Calendar Date: April 23, 2012
Before: Mercure, J.P., Rose, Stein, Garry and Egan Jr., JJ.
The Delorenzo Law Firm, L.L.P., Schenectady (Cory Ross Dalmata of counsel), for appellant.
Thuillez, Ford, Gold, Butler & Young, L.L.P., Albany (Daisy Ford Paglia of counsel), for respondents.
MEMORANDUM AND ORDER
Appeal from an order of the Supreme Court (Kramer, J.), entered March 25, 2011 in Schenectady County, which granted defendants' motion for summary judgment dismissing the complaint.
Plaintiff commenced this action, alleging that, as a result of a motor vehicle accident on October 5, 2007, she suffered a serious injury to her cervical, thoracic and lumbar spine under the significant limitation of use and 90/180-day categories of Insurance Law § 5102 (d)[FN1] . In her bill of particulars, plaintiff alleged that her injuries included bulging discs and disc protrusions, as well as numbness and swelling of her hands and sprains of her neck, back and left wrist. She further alleged that her symptoms worsened after she was involved in a second, unrelated motor vehicle accident in October 2009. Following joinder of issue and discovery, defendants moved for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury. Supreme Court granted defendants' motion in its entirety. On plaintiff's appeal, we affirm.
As the proponent of the summary judgment motion, defendants had the threshold burden to establish, by competent medical evidence, that plaintiff did not suffer a serious injury causally related to the 2007 accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 352 ; Peterson v Cellery, 93 AD3d 911, 912 ). To that end, defendants submitted plaintiff's deposition testimony and the affirmed report of Joseph Elfenbein, an orthopedic surgeon who reviewed plaintiff's medical records and performed an independent medical examination of plaintiff in April 2010. Defendants also submitted various unsworn records of plaintiff's treating and consulting physicians and her emergency room records, all of which are "documents upon which defendant[s] may properly rely to make [a] prima facie showing of entitlement to judgment as a matter of law" (Tuna v Babendererde, 32 AD3d 574, 575 ; see McElroy v Sivasubramaniam, 305 AD2d 944, 945 ; Seymour v Roe, 301 AD2d 991, 991-992 ).
Defendants' proof established that, six days after the 2007 accident, plaintiff sought medical care at an emergency room complaining of pain in her wrist, neck and lower back. An X ray of plaintiff's wrist revealed no fracture, and she was diagnosed with a neck and back strain and a sprained wrist, prescribed Flexeril and Motrin, and released with the instruction that she follow up with her doctor. Based upon his review of plaintiff's medical records and his physical examination of plaintiff — which indicated a full range of motion of her cervical and lumbar spine — Elfenbein concluded that, while plaintiff may have suffered strains of the cervical and lumbar spine and a sprained wrist, they were resolved and there was no objective medical evidence demonstrating that plaintiff's injuries caused a significant limitation of the use of her spine or of any orthopedic disability. Thus, defendants submitted sufficient evidence to satisfy their initial burden under the significant limitation category (see Peterson v Cellery, 93 AD3d at 913; Howard v Espinosa, 70 AD3d 1091, 1092 ; Tuna v Babendererde, 32 AD3d at 575-576).
Defendants' submissions also satisfied their initial burden of demonstrating that plaintiff was not "prevent[ed] . . . from performing substantially all of the material acts which constitute [her] usual and customary daily activities" for at least 90 of the 180 days immediately following the 2007 accident (Insurance Law § 5102 [d]; see Crawford-Reese v Woodard, 95 AD3d 1418, 1419 ). In her deposition, plaintiff testified that sitting for long periods of time exacerbated the pain in her lower back, causing numbness and tingling, and that she experienced pain and discomfort while engaging in certain activities at work as a home health aide between February and August 2008. She testified that her injuries limited her daily activities for a couple of months, but did not allege that she was unable to perform her work duties — such as vacuuming, sweeping, cleaning or assisting clients with getting dressed — at any point in time.
Accordingly, the burden shifted to plaintiff to raise a triable issue of fact as to both the significant limitation and 90/180-day categories (see Toure v Avis Rent A Car Sys., 98 NY2d at 353; Krivit v Pitula, 79 AD3d 1432, 1433 ). To establish a claim under the significant limitation category of serious injury, "the medical evidence submitted by plaintiff must contain objective, quantitative evidence with respect to diminished range of motion or a qualitative assessment comparing plaintiff's present limitations to the normal function, purpose and use of the affected body organ, member, function or system" (John v Engel, 2 AD3d 1027, 1029 ; see Toure v Avis Rent A Car Sys., 98 NY2d at 353; Peterson v Cellery, 93 AD3d at 913).
Here, plaintiff failed to submit an affidavit of a medical expert, instead relying on, among other things, her own affidavit, results from a December 2008 MRI and an unsworn report by her treating physician, Alan Bloomberg, from January 2009 [FN2] . Cumulatively, plaintiff's submissions documented mild spinal narrowing and "[m]ild disc degenerative change" in her cervical spine, including bulging discs, as well as a diminished range of motion in her cervical spine. Absent from the documents relied upon by plaintiff was any competent medical evidence based on objective medical tests that causally related plaintiff's alleged limitations to the October 2007 accident (see John v Engel, 2 AD3d at 1029). Furthermore, while the reports on which plaintiff relied document a diminished range of motion, they "provided no qualitative or quantitative assessment of this limitation [to] support a conclusion that it was . . . significant" (Felton v Kelly, 44 AD3d 1217, 1219 ; see Howard v Espinosa, 70 AD3d at 1093), as opposed to mild, minor or slight (see Pugh v DeSantis, 37 AD3d 1026, 1029 ). In addition, the unsworn report of a June 2010 reevaluation by Bloomberg proffered by plaintiff is of no probative value, as it was not submitted or relied upon in support of defendants' motion (see Caulkins v Vicinanzo, 71 AD3d at 1226). In any event, such report does not raise a material issue of fact with respect to plaintiff's claim of serious injury as it relates to the 2007 accident insofar as it only reflects data subsequent to the 2009 accident which, by plaintiff's own testimony, exacerbated her alleged symptoms.
With respect to her claim under the 90/180-day category, plaintiff failed to submit any "objective evidence linking the alleged curtailment of her activities following the accident to an injury sustained in the accident" (Clark v Basco, 83 AD3d 1136, 1139-1140 ). Notably, none of plaintiff's medical records from within the initial 180-day period following the accident referenced any limitations on her usual daily activities (see Henry v Sorge, 90 AD3d 1355, 1357 ; Dongelewic v Marcus, 6 AD3d 943, 945 ). Thus, even viewing the evidence in the light most favorable to plaintiff, she failed to raise a triable issue of fact concerning whether she sustained a serious injury within the meaning of Insurance Law § 5102 (d) as a result of the 2007 accident, and Supreme Court properly granted defendants' motion for summary judgment dismissing the complaint (see Mahar v Bartnick, 91 AD3d 1163, 1165-1166 ).
Mercure, J.P., Rose, Garry and Egan Jr., JJ., concur.
Footnote 2: While, ordinarily, uncertified medical records and unsworn reports "'are of no probative value' in opposing a summary judgment motion," because defendants offered plaintiff's uncertified medical records in support of their motion for summary judgment, and to the extent that Elfenbein relied on such records in his affirmed report, plaintiff is also entitled to rely on them (Caulkins v Vicinanzo, 71 AD3d 1224, 1226 , quoting Parmisani v Grasso, 218 AD2d 870, 872 ; see Pietrocola v Battibulli, 238 AD2d 864, 866 n ).
Barr Post & Associates, PLLC, Spring Valley, N.Y. (Harvey S. Barr of counsel), for appellant.
DECISION & ORDER
In an action, inter alia, to recover damages for breach of contract, the plaintiff appeals from an order and judgment (one paper) of the Supreme Court, Rockland County (Weiner, J.), dated April 11, 2011, which granted the separate motions of the defendants Nikko Construction Corp. and SDM Construction II, LLC, pursuant to CPLR 3211(a)(1) to dismiss the complaint insofar as asserted against each of them, and dismissed the complaint in its entirety.
ORDERED that the order and judgment is reversed, on the law, with costs, the separate motions of the defendants Nikko Construction Corp. and SDM Construction II, LLC, pursuant to CPLR 3211(a)(1) to dismiss the complaint insofar as asserted against each of them are denied, and the complaint is reinstated as against all of the defendants.
The Supreme Court granted the separate motions of the defendants Nikko Construction Corp. (hereinafter Nikko) and SDM Construction II, LLC (hereinafter SDM), pursuant to CPLR 3211(a)(1) to dismiss the complaint insofar as asserted against each of them on the ground that the plaintiff failed to comply with provisions in its construction contract with Nikko, which required that claims arising out of the contract be submitted first to mediation and then, if mediation proved unsuccessful, to arbitration, and dismissed the complaint in its entirety. However, an agreement to submit a dispute to mediation and arbitration is not a defense to an action, and, thus, may not be the basis for a motion to dismiss a complaint based on documentary evidence (see Allied Bldg. Inspectors Intl. Union of Operating Engrs., Local Union No. 211, AFL-CIO v Office of Labor Relations of City of N.Y., 45 NY2d 735, 738; Carbon Capital Mgt., LLC v American Express Co., 88 AD3d 933, 940; Curran v Estate of Curran, 87 AD3d 607; Nachman v Jenelo Corp., 25 AD3d 593). Moreover, SDM and the defendants Tri Equities Construction Corp., and EFCO Corporation were not parties to the plaintiff's contract with Nikko, and, thus, there is no agreement between the plaintiff and these parties to submit any disputes arising under the Nikko contract to mediation and arbitration (see TNS Holdings v MKI Sec. Corp., 92 NY2d 335).
DILLON, J.P., ENG, AUSTIN and SGROI, JJ., concur. All American Moving and Storage, Inc. v W. Reilly Andrews
Armienti DeBellis Guglielmo & Rhoden LLP, New York (Vanessa M. Corchia of counsel), for appellant.
Salamon, Gruber, Blaymore & Strenger, P.C., Roslyn Heights (Sanford Strenger of counsel), for Ackerman respondents.
Torino & Bernstein, P.C., Mineola (Charles R. Strugatz of counsel), forD'Agostino Supermarkets, Inc., respondent.
Lester Schwab Katz & Dwyer LLP, New York (Steven B. Prystowsky of counsel), for Metropolitan Security Storage, Ltd., respondent.
Speyer & Perlberg, LLP, Melville (Marie E. Garelle of counsel), for New York Marine & General Insurance Company, respondent.
Order, Supreme Court, Bronx County (Dominic R. Massaro, J.), entered June 17, 2010, which, insofar as appealed from as limited by the briefs, denied defendant Allstate Sprinkler Corp.'s motion for summary judgment dismissing the claims and cross claims asserted against it in action No. 3 and for conditional summary judgment on its cross claim for contractual indemnification against defendant D'Agostino Supermarkets, Inc., in action No. 3, unanimously affirmed, without costs.
In this action to recover damages arising out of a warehouse fire, Allstate failed to establish as a matter of law that it did not owe the non-contracting respondents a duty of care or breach any duty owed. The record shows that Allstate owed plaintiffs - owners of the property - a duty of care, as plaintiffs were third-party beneficiaries to the sprinkler inspection services contract between Allstate and defendant-tenant D'Agostino. Indeed, D'Agostino entered into the contract to fulfill its duty to maintain the sprinklers pursuant to its lease with plaintiffs, who were required by law to have the sprinkler systems inspected at least once a month by a person holding a certificate of fitness (see former Administrative Code of the City of New York, § 27-4265). Thus, D'Agostino clearly intended to benefit plaintiffs by engaging Allstate to inspect the sprinklers (see MK W. St. Co. v Meridien Hotels, 184 AD2d 312, 313  ["the intention which controls in determining whether a stranger to a contract qualifies as an intended third-party beneficiary is that of the promisee"], and the benefit to plaintiffs was "sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate [the non-contracting parties] if the benefit is lost" (Burns Jackson Miller Summit & Spitzer v Lindner, 59 NY2d 314, 336 ).
Furthermore, while "a contractual obligation, standing alone, will generally not give rise to tort liability in favor of a third party" (Espinal v Melville Snow Contrs., 98 NY2d 136, 138 ), there are three exceptions to this general rule pursuant to which a party may be said to have assumed a duty of care to third parties (id. at 140). One of those exceptions is where the third party has detrimentally relied on the continued performance of the contracting party's duties (id.). Given Allstate's admitted failure to inspect the sprinkler system for months before the fire, despite its contractual obligation to perform monthly inspections, and evidence of its failure to report to the owner and the Fire Department that it had found the sprinkler system shut off on several inspections, we agree with the motion court that issues of fact exist as to whether plaintiffs and defendant-subtenant Metropolitan detrimentally relied on Allstate's continued performance of its contractual duties.
However, we find that the other two Espinal exceptions do not apply. Any failure by Allstate to inspect the sprinklers did not launch a force or instrument of harm (see Church v Callanan Indust., 99 NY2d 104, 112  [incomplete performance of contractual duty to install guiderail did nothing more than neglect to make highway safer, as opposed to making it less safe]; see also H.R. Moch Co. v Rensselaer Water Co., 247 NY 160, 168  ["[t]he query always is whether the putative wrongdoer has advanced to such a point as to have launched a force or instrument of harm, or has stopped where inaction is at most a refusal to become an instrument for good"]; compare Powell v HIS Contrs., Inc., 75 AD3d 463  [where evidence indicated contractor had negligently installed a new sidewalk, issue of fact as to whether it created unreasonable risk of harm or increased that risk], with Ocampo v Abetta Boiler & Welding Serv., Inc., 33 AD3d 332  [where evidence presented that contractor negligently repaired machine that was put back into operation, issue of fact existed as to whether contractor launched a force or instrument of harm]). Nor was the sprinkler inspection contract the type of comprehensive and exclusive service agreement found by the Court of Appeals in Palka v Servicemaster Mgt. Servs. Corp. (83 NY 2d 579, 588 ) that would create a duty of care to noncontracting third parties (see Fairclough v All Serv. Equip. Corp., 50 AD3d 576, 578 ; Gamarra v Top Banana, LLC, 50 AD3d 425 ).
Regarding the matter of Allstate's alleged negligence, issues of fact include whether Allstate was able to gain access to the premises to inspect the sprinkler system; whether it breached its duty to inspect the system and whether any breach of Allstate's regulatory and contractual duties (including any failure to report to the owners, D'Agostino, and/or the Fire Department that the sprinkler valve was found to be shut off on several inspections) was a proximate cause of the damage.
Given that triable issues of fact exist as to Allstate's negligence, it is not entitled to summary judgment on its cross claim for contractual indemnification from D'Agostino (see Vukovich v 1345 Fee, LLC, 61 AD3d 533, 534 ).
Michael S. Lamonsoff (Sacks and Sacks, LLP, New York, N.Y. [Scott N. Singer], of counsel), for appellant-respondent.
Hannum Feretic Prendergast & Merlino, LLC, New York, N.Y. (Matthew J. Zizzamia of counsel), for third-party defendant-respondent-appellant.
Traub Lieberman Straus & Shrewsberry, LLP, Hawthorne, N.Y. (Lisa M. Rolle of counsel), for defendants-respondents.
McGaw, Alventosa & Zajac, Jericho, N.Y. (Ross P. Masler of counsel), for defendant third-party plaintiff-respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals, as limited by his brief, from so much of an order of the Supreme Court, Queens County (McDonald, J.), entered May 24, 2011, as granted those branches of the motion of the defendants Thatch, Ripley & Co., LLC, and Macklowe Properties, Inc., which were for summary judgment dismissing the causes of action alleging common-law negligence and violations of Labor Law §§ 200 and 240(1) insofar as asserted against them, and denied that branch of his cross motion which was for summary judgment on the issue of liability on the cause of action alleging a violation of Labor Law § 240(1) insofar as asserted against those defendants, and the third-party defendant cross-appeals, as limited by its brief, from so much of the same order as granted those branches of the motion of the defendants Thatch, Ripley & Co., LLC, and Macklowe Properties, Inc., which were for summary judgment dismissing the causes of action alleging common-law negligence and violation of Labor Law § 200 insofar as asserted against those defendants and on the cross claim of those defendants for contractual indemnification against it, denied that branch of the motion of those defendants, joined in by the third-party defendant, which was for summary judgment dismissing the cause of action alleging a violation of Labor Law § 241(6) insofar as asserted against those defendants, and granted that branch of the plaintiff's cross motion which was for leave to amend the bill of particulars to allege violations of 12 NYCRR 23-4.2.
ORDERED that the cross appeal from so much of the order as granted those branches of the motion of the defendants Thatch, Ripley & Co., LLC, and Macklowe Properties, Inc., which were for summary judgment dismissing the causes of action alleging common-law negligence and violations of Labor Law § 200 insofar as asserted against them is dismissed, without costs or disbursements, as the third-party defendant-respondent-appellant is not aggrieved by that portion of the order cross-appealed from (see CPLR 5511); and it is further,
ORDERED that the order is modified, on the law, by deleting the provisions thereof granting those branches of the motion of the defendants Thatch, Ripley & Co., LLC, and Macklowe Properties, Inc., which were for summary judgment dismissing the causes of action alleging common-law negligence and violations of Labor Law §§ 200 and 240(1) insofar as asserted against them and on their cross claim for contractual indemnification against the third-party defendant, and substituting therefor a provision denying those branches of the motion; as so modified, the order is affirmed insofar as appealed from and insofar as reviewed on the cross appeal, without costs or disbursements.
The plaintiff, an employee of the third-party defendant, Sorbara Construction Corporation (hereinafter Sorbara), allegedly was injured when he fell while he was working on a project to construct a new condominium building. According to the plaintiff, on the date of the accident, a trench approximately 10 feet wide and 8 feet deep surrounded the work site. As the plaintiff recounted it, three or four planks, which the plaintiff estimated to be 10 feet long, were placed across the trench at a "slight decline," and served as the only way into and out of the site. The plaintiff alleged that he was instructed by his foreman to bring some lumber onto the site. As he was walking across the planks, carrying lumber on his shoulders, the planks "opened up," causing him to fall into the trench.
The plaintiff commenced this action to recover damages against the owner of the site, the defendant Thatch, Ripley & Co., LLC (hereinafter Thatch), the property manager, the defendant Macklowe Properties, Inc. (hereinafter Macklowe), and the construction manager, the defendant third-party plaintiff Gotham Greenwich Construction Company, LLC (hereinafter Gotham). Gotham impleaded Sorbara, and Thatch and Macklowe (hereinafter together the Thatch defendants) asserted cross claims against Sorbara seeking, among other things, contractual indemnification.
In an order entered May 24, 2011, the Supreme Court, inter alia, granted those branches of the Thatch defendants' motion which were for summary judgment dismissing the causes of action alleging common-law negligence and violations of Labor Law §§ 200 and 240(1) insofar as asserted against them and on their cross claim for contractual indemnification against Sorbara, denied that branch of the plaintiff's cross motion which was for summary judgment on the issue of liability on the cause of action alleging a violation of Labor Law § 240(1), and granted that branch of the plaintiff's cross motion which was for leave to amend his bill of particulars to allege violations of 12 NYCRR 23-4.2. The plaintiff appeals, and Sorbara cross-appeals, from stated portions of the order. We modify.
The Supreme Court should have denied that branch of the Thatch defendants' motion which was for summary judgment dismissing the Labor Law § 240(1) cause of action insofar as asserted against them. Liability under Labor Law § 240(1) depends on whether the injured worker's "task creates an elevation-related risk of the kind that the safety devices listed in section 240(1) protect against" (Broggy v Rockefeller Group, Inc., 8 NY3d 675, 681). The kind of accident triggering Labor Law § 240(1) coverage is one that will sustain the allegation that an adequate " scaffold, hoist, stay, ladder or other protective device'" would have " shield[ed] the injured worker from harm directly flowing from the application of the force of gravity to an object or person'" (Runner v New York Stock Exch., Inc., 13 NY3d 599, 604 [emphasis removed], quoting Ross v Curtis-Palmer Hydro-Elec. Co., 81 NY2d 494, 501; see Salazar v. Novalex Contr. Corp., 18 NY3d 134, 139). "[T]he single decisive question [in determining whether Labor Law § 240(1) is applicable] is whether plaintiff's injuries were the direct consequence of a failure to provide adequate protection against a risk arising from a physically significant elevation differential" (Runner v New York Stock Exch. Inc., 13 NY3d at 603; see La Veglia v St. Francis Hosp., 78 AD3d 1123, 1127). Here, the plaintiff allegedly was injured while engaged in a task that entailed an elevation-related risk. Furthermore, contrary to the Thatch defendants' contention, the planks from which the plaintiff allegedly fell were being utilized in the performance of his work and were, under the circumstances, the functional equivalent of a scaffold meant to prevent the plaintiff from falling into the eight-foot-deep trench (see McCay v J.A. Jones-GMO, LLC, 74 AD3d 615; De Jara v 44-14 Newtown Rd. Apt. Corp., 307 AD2d 948, 950; Missico v Tops Mkts., 305 AD2d 1052; see also Ervin v Consolidated Edison of N.Y., 93 AD3d 485; Auriemma v Biltmore Theatre, LLC, 82 AD3d 1, 8-9). Therefore, the Thatch defendants failed to establish, prima facie, that the plaintiff's alleged injuries were not the direct consequence of a failure to provide adequate protection against a risk arising from a physically significant elevation differential.
However, the plaintiff is not entitled to summary judgment on the issue of liability on the cause of action alleging a violation of Labor Law § 240(1). In opposition to the plaintiff's prima facie showing of entitlement to judgment as a matter of law, the defendants raised a triable issue of fact as to whether the trench described by the plaintiff and his coworker actually existed, and whether an accident occurred in the manner alleged by the plaintiff (see e.g. Kamolov v BIA Group, LLC, 79 AD3d 1101).
The Supreme Court also should have denied that branch of the Thatch defendants' motion which was for summary judgment dismissing the causes of action alleging common-law negligence and a violation of Labor Law § 200 insofar as asserted against them. Labor Law § 200 codifies the common-law duty to maintain a safe work site (see Rizzuto v L.A. Wenger Contr. Co., 91 NY2d 343, 352). Where, as here, a plaintiff contends that an accident occurred because a dangerous condition existed on the premises where work was being undertaken, an owner moving for summary judgment dismissing causes of action alleging common-law negligence and a violation of Labor Law § 200 has the initial burden of making a prima facie showing that it neither created the dangerous condition nor had actual or constructive notice of its existence (see Rodriguez v BCRE 230 Riverdale, LLC, 91 AD3d 933, 934; Slikas v Cyclone Realty, LLC, 78 AD3d 144, 148-149; Chowdhury v Rodriguez, 57 AD3d 121, 128). To provide constructive notice, the defect must be visible and apparent and exist for a sufficient length of time prior to the accident to permit the defendant to discover and remedy it (see Gordon v American Museum of Natural History, 67 NY2d 836, 837). Here, in opposition to the Thatch defendants' prima facie showing of entitlement to judgment as a matter of law, the plaintiff raised a triable issue of fact as to whether the Thatch defendants had constructive notice of a dangerous premises condition by adducing evidence that the trench and planks from which he allegedly fell had existed for approximately six months prior to the occurrence of the accident.
The Supreme Court properly denied that branch of the Thatch defendants' motion, joined in by Sorbara, which was for summary judgment dismissing the cause of action alleging a violation of Labor Law § 241(6) insofar as asserted against the Thatch defendants, and properly granted that branch of the plaintiff's cross motion which was for leave to amend his bill of particulars to allege violations of Industrial Code provision 12 NYCRR 23-4.2. To recover under Labor Law § 241(6), a plaintiff must establish that, in connection with construction, demolition, or excavation, an owner or general contractor violated an Industrial Code provision which sets forth specific, applicable safety standards (see Ross v Curtis—Palmer Hydro—Elec. Co., 81 NY2d at 503-505; Weingarten v Windsor Owners Corp., 5 AD3d 674). "[L]eave to amend the pleadings to identify a specific, applicable Industrial Code provision may properly be granted, even after the note of issue has been filed, where the plaintiff makes a showing of merit, and the amendment involves no new factual allegations, raises no new theories of liability, and causes no prejudice to the defendant'" (D'Elia v City of New York, 81 AD3d 682, 684, quoting Galarraga v City of New York, 54 AD3d 308, 310; see Jara v New York Racing Assn., Inc., 85 AD3d 1121, 1123; Dowd v City of New York, 40 AD3d 908, 911). The defendants failed to sustain their prima facie burden of demonstrating that the Industrial Code provision governing hazardous openings (see 12 NYCRR 23-1.7[b]), which was relied on by the plaintiff in his bill of particulars, was either factually inapplicable to this case or was satisfied. Further, the Supreme Court properly granted leave to amend the bill of particulars to add the Industrial Code provision governing trench and area-type excavations (see 12 NYCRR 23-4.2[h], [i]) since the amendment will not prejudice the defendants and the proposed amendment has merit (see D'Elia v City of New York, 81 AD3d at 684).
Finally, the Supreme Court should have denied that branch of the Thatch defendants' motion which was for summary judgment on their cross claim for contractual indemnification against Sorbara. "[A] party seeking contractual indemnification must prove itself free from negligence, because to the extent its negligence contributed to the accident, it cannot be indemnified therefor" (Cava Constr. Co., Inc. v Gealtec Remodeling Corp., 58 AD3d 660, 662; see General Obligations Law § 5-322.1; Rodriguez v Tribecca 105, LLC, 93 AD3d 655; Baillargeon v Kings County Waterproofing Corp., 91 AD3d 686, 688). The Thatch defendants failed to make such a prima facie showing. Roddy v Nederlander Producing Company of America, Inc.
Mischel & Horn, P.C., New York (Scott T. Horn of counsel), for appellant/appellant.
Law Offices of Charles J. Siegel, New York (Robert S. Cypher of counsel), for respondents/respondent.
Order, Supreme Court, New York County (Louis B. York, J.), entered December 9, 2011, which denied third-party defendant Abhann Productions, Inc.'s (Abhann) motion to disqualify the Law Offices of Charles J. Siegel (the Siegel Firm) from representing defendants Nederlander Producing Company of America, Inc. (Nederlander) and The Gershwin Theatre (Gershwin), unanimously modified, on the law, to grant the motion insofar as it seeks disqualification of the Siegel Firm from the continued representation of Gershwin, and otherwise affirmed, without costs.
Supreme Court correctly noted that a potential for a conflict exists resulting from the Siegel Firm's joint representation of both Gershwin and Nederlander, as each defendant has a competing interest in minimizing its proportional share of the damages. An attorney " may not place himself in a position where a conflicting interest may, even inadvertently, affect, or give the appearance of affecting, the obligations of the professional relationship'" (Flores v Willard J. Price Assoc., LLC, 20 AD3d 343, 344 , quoting Matter of Kelly, 23 NY2d 368, 376 ), and " doubts as to the existence of a conflict of interest must be resolved in favor of disqualification'" (Justinian Capital SPC v WestLB AG, N.Y. Branch, 90 AD3d 585, 585 , quoting Rose Ocko Found. v Liebovitz, 155 AD2d 426, 428 ).
However, the court denied the motion on the ground that granting it would further delay the prosecution of the plaintiff's case. This decision would preclude Abhann, the contractual indemnitor of Gershwin in this matter, from exercising its right to properly defend the action in an effort to limit its exposure to Gershwin's proportional share of the liability. Abhann contends that the Siegel Firm, as staff counsel to CNA Insurance, the primary insurer of Gershwin and Nederlander, could seek to improperly funnel liability from Nederlander to Gershwin. In support of this position, Abhann cites, inter alia, the fact that the Siegel Firm rejected Abhann's insurer's agreement to accept the defense and indemnity of Gershwin with the explanation that Abhann was also obligated to contractually indemnify Nederlander. We find that the Siegel Firm's stance is foreclosed by this Court's recent decision in this matter (93 AD3d 495 ). Furthermore, Nederlander's contention that it, like Gershwin, also owns the premises, was waived by its denial of ownership in its answer to the complaint. This conduct by the primary insurer's house counsel, given the circumstance of these joint clients' divergent litigation strategies, sufficiently raises, as noted above, "doubts as to the existence of a conflict of interest [that] must be resolved in favor of disqualification." Denying the motion would reward the Siegel Firm's dilatory tactics at the expense of Abhann's rights.
To the extent Abhann argues that the Siegel Firm should also be disqualified from representing Nederlander on the ground that the Siegel Firm had obtained confidential information from Gershwin during its representation thus far, Abhann has failed to identify what confidential information would have been imparted to the firm so as to warrant such disqualification (see Pelligrino v Oppenheimer & Co., Inc., 49 AD3d 94, 98, 100 ). VOSS v THE NETHERLANDS INSURANCE COMPANY
Appeal from an order of the Supreme Court, Onondaga County (Deborah H. Karalunas, J.), entered January 11, 2011. The order granted the motion of defendant CH Insurance Brokerage Services, Co., Inc. for summary judgment dismissing the amended complaint against it.
Dirk J. Oudemool, Syracuse, for Plaintiffs-Appellants.
Wilson, Elser, Moskowitz, Edelman & Dicker Llp, Albany (Elizabeth Grogan of Counsel), for Defendant-Respondent.
It is hereby ORDERED that the order so appealed from is affirmed without costs.
Memorandum: Plaintiffs commenced this action alleging, inter alia, negligence and breach of contract in connection with business interruption coverage that CH Insurance Brokerage Services, Co., Inc. (defendant) obtained for plaintiffs from former defendant, Peerless Insurance Company, for which defendant The Netherlands Insurance Company was substituted by stipulation of the parties after the action was commenced. We conclude that Supreme Court properly granted defendant's motion for summary judgment dismissing the amended complaint against it, but our reasoning differs from that of the court. Contrary to the court's determination, we agree with plaintiffs that defendant failed to establish its entitlement to judgment dismissing the amended complaint on the ground that no special relationship existed between defendant and plaintiffs (see generally Murphy v Kuhn, 90 NY2d 266, 271). In support of its motion, defendant submitted the deposition testimony of Deborah Voss (plaintiff), the sole shareholder and principal of the corporate plaintiffs, stating that defendant's representative reviewed, inter alia, the types of businesses to be insured as well as sales figures, and that he thereafter presented her with a proposal for insurance coverage, which included $75,000 per incident for business interruption insurance. When plaintiff questioned whether the amount was sufficient, defendant's representative assured her that it was and that defendant would review the coverage annually and recommend adjustments as the businesses grew. Thus, we conclude that defendant's own submission supports the contention that plaintiff relied upon defendant's expertise and assurance regarding the appropriate level of insurance to protect the corporate plaintiffs in the event of a loss (cf. Hoffend & Sons, Inc. v Rose & Kiernan, Inc., 7 NY3d 152, 157-158).
As noted, however, we nevertheless conclude that the court properly granted defendant's motion. The commercial building that housed the corporate plaintiffs, as well as a corporate tenant, was damaged on three separate occasions in connection with water leaking from the roof, which caused a portion of the roof to collapse on two of those occasions. The first two incidents occurred while the limit for business interruption coverage was $75,000, and the third incident occurred after the policy was renewed and the coverage for business interruption had been reduced to $30,000. Plaintiffs alleged in their amended complaint and supplemental bill of particulars that defendant failed to provide adequate coverage and was negligent in reducing the coverage. However, the renewed policy was in effect for approximately nine months at the time of the third loss, and "[p]laintiff[s are] charged with conclusive presumptive knowledge of the terms and limits of [the policy]" (Hoffend & Sons, Inc., 19 AD3d 1056, 1057, affd on other grounds 7 NY3d 152 [internal quotation marks omitted]). Thus, the cause of action against defendant for negligence and breach of contract with respect to the reduced policy limit is defeated as a matter of law (see id. at 1057-1058). Indeed, plaintiff admitted that she knew that the policy limit had been reduced from $75,000 to $30,000 and that, although she had contacted defendant to question the reduction, she did not hear back from defendant's representative and did not again contact defendant's representatives.
We note that plaintiff testified at her deposition that plaintiffs received only $3,197 on the claim for business interruption for the first incident and $30,000 for the second incident, and that no funds were paid on the claim for business interruption for the third incident. Plaintiff testified that, if the policy limit of $75,000 had been paid in a timely manner for each of the first two incidents, the plaintiff corporations would have remained operational. We therefore conclude that, even in the event that defendant negligently failed to obtain sufficient business interruption coverage for plaintiffs, any such negligence is not a proximate cause of plaintiffs' damages as a matter of law (see generally Derdiarian v Felix Contr. Corp., 51 NY2d 308, 315, rearg denied 52 NY2d 784, 829).
All concur except Carni, J., who dissents and votes to reverse in accordance with the following Memorandum: I respectfully dissent and would deny the motion of CH Insurance Brokerage Services, Co., Inc. (defendant) for summary judgment dismissing the amended complaint against it. At the outset, I note that I concur with my colleagues that "defendant's own submission supports the contention that [Deborah Voss (plaintiff)] relied upon defendant's expertise and assurance regarding the appropriate level of insurance to protect the corporate plaintiffs in the event of a loss." Thus, I further concur with my colleagues that defendant failed to establish its entitlement to judgment dismissing the amended complaint on the ground that no special relationship existed between defendant and plaintiffs (see generally Murphy v Kuhn, 90 NY2d 266, 271). However, it is at this juncture that the majority and I part ways.
Given my agreement with the majority that plaintiffs' assertion of a "special relationship" with defendant remains viable, it thus follows that plaintiffs may be found to have relied upon defendant's expertise and assurance regarding the appropriate level of insurance to protect the corporate plaintiffs in the event of a loss. It is therefore incongruous to conclude, simultaneously, as does the majority, that the cause of action against defendant for negligence and breach of contract is defeated as a matter of law because the renewed policy was in effect for approximately nine months at the time of the third loss, and "[p]laintiff[s are] charged with conclusive presumptive knowledge of the terms and limits of [the policy]" (Hoffend & Sons, Inc. v Rose & Kiernan, Inc., 19 AD3d 1056, 1057, affd on other grounds 7 NY3d 152 [internal quotation marks omitted]). Rather, if plaintiffs in fact relied upon defendant's expertise and assurance regarding the appropriate level of insurance coverage, "it is no answer for the broker to argue, as an insurer might, that the insured has an obligation to read the policy" (Baseball Off. of Commr. v Marsh & McLennan, 295 AD2d 73, 82; see Hersch v DeWitt Stern Group, Inc., 43 AD3d 644, 645). Indeed, the doctrine that an insured is presumed to know the terms and limits of the policy has its genesis in actions against insurers - not agents with whom a special relationship with the insured has been alleged or established (see Metzger v Aetna Ins. Co., 227 NY 411, 414-417).
I also respectfully disagree with the majority's conclusion concerning the dispositive effect of the testimony of plaintiff that, if the $75,000 policy limits had been paid in a timely manner after the first two incidents, the plaintiff corporations would have remained operational. The policy at issue provided "BUSINESS INCOME (AND EXTRA EXPENSE) COVERAGE." Under the policy, the insured's "Business Income loss" is determined by the net income of the business before the direct physical loss or damage occurred. The policy covers business income loss sustained due to the necessary suspension of "operations" during the "period of restoration" caused by the physical loss to the business property.
However, the policy clearly contemplates the possibility that the insured might not resume "operations" after the loss. Specifically, the policy provides, "If you do not resume operations,' or do not resume operations' as quickly as possible, we will pay based on the length of time it would have taken to resume operations' as quickly as possible." Thus, neither the policy nor the benefits paid thereunder guarantee or insure that the insured business will once again become operational, profitable or sustainable. Instead, the policy insures against losing net business income and incurring extra expenses during the period when "operations" are suspended or during a reasonable time in which to "resume operations" (see generally Buffalo El. Co. v Prussian Natl. Ins. Co., 64 App Div 182, 185-187, affd 171 NY 25). If and when the business resumes operations, the insurer's obligation to pay net income benefits terminates (see Royal Indem. Co. v Retail Brand Alliance, Inc., 33 AD3d 392, 393, lv denied 8 NY3d 813, 11 NY3d 705). However, if the business does not resume operations, the insured is entitled to business interruption coverage for the period of time it would have reasonably taken to resume operations (see Children's Place Retail Stores, Inc. v Federal Ins. Co., 37 AD3d 243), and the duration of that time period ordinarily constitutes an issue of fact (see Maple Leaf Motor Lodge v Allstate Ins. Co., 53 AD2d 1045, 1046). Thus, an insured may receive payment of policy benefits for business interruption coverage and never resume operations without violating the terms and conditions of the policy (see DiLeo v United States Fid. & Guar. Co., 109 Ill App 2d 28, 42-43, 248 NE2d 669, 676; see also National Union Fire Ins. Co. v Scandia of Hialeah, Inc., 414 So 2d 533, 535). There is no requirement in the policy that the insured must resume operations in order to recover business interruption losses (see B A Props., Inc. v Aetna Cas. & Sur. Co., 273 F Supp 2d 673, 685). Indeed, the claims analyst for the insurer testified at his deposition that business income loss payments made to an insured could be spent "on anything."
Plaintiffs' action against defendant arises from the failure to procure business interruption coverage limits in an amount consistent with the nature of the business, and its revenue, expense and net income performance history. Whether defendant was negligent in failing to do so is measured not by whether plaintiffs would have resumed operations if timely paid the full but allegedly insufficient limits after each of the first two incidents. Instead, it is measured by the amount of plaintiffs' business income losses when compared to the policy limits determined and procured by defendant. Thus, I conclude that whether plaintiffs actually resumed operations is irrelevant to the proximate cause analysis. As the movant seeking summary judgment dismissing the amended complaint, defendant had to establish that the policy limits were sufficient to cover the amount of plaintiffs' business income losses during the relevant policy periods (see generally Zuckerman v City of New York, 49 NY2d 557, 562). Defendant did not meet that burden and thus is not entitled to summary judgment.
Moreover, in my view the record is confusing and inconclusive with respect to the amount of plaintiffs' business interruption losses for each incident. However, the record does reflect that, with respect to the second incident, plaintiffs' claimed business income loss was the sum of $449,724. Obviously, the disparity between that loss and the $75,000 policy limit would provide the necessary proximate cause for an award of damages with respect to the second incident in the event that plaintiffs were successful in convincing the trier of fact that the aforementioned "special relationship"
existed and that defendant was negligent.
Bruno, Gerbino & Soriano, LLP, Melville, N.Y. (Charles W.
Benton of counsel), for respondents.
DECISION & ORDER
In an action, inter alia, to recover damages for breach of an insurance contract, the plaintiff appeals, as limited by his brief, from so much of an order of the Supreme Court, Nassau County (Mahon, J.), dated December 13, 2010, as granted those branches of the motion of the defendants Encompass Insurance Company of America and Encompass Insurance Company which were pursuant to CPLR 3211(a)(7) to dismiss the second, third, eighth, and ninth causes of action, the first cause of action to the extent it sought to recover damages for alleged violations of Insurance Law § 2601, and the claims for punitive damages insofar as asserted against them, denied those branches of his motion which were to compel the defendants Encompass Insurance Company of America and Encompass Insurance Company to comply with his first and second notices for discovery and inspection and to produce certain witnesses to be deposed, and granted that branch of the cross motion of the defendants Encompass Insurance Company of America and Encompass Insurance Company which was for a protective order pursuant to CPLR 3103(a).
ORDERED that the order is modified, on the law and the facts, (1) by deleting the provision thereof granting those branches of the motion of the defendants Encompass Insurance Company of America and Encompass Insurance Company which were pursuant to CPLR 3211(a)(7) to dismiss the third cause of action, which sought damages for an alleged violation of General Business Law § 349, the first cause of action to the extent it sought damages for alleged violations of Insurance Law § 2601, and the claims for punitive damages insofar as asserted against them, and substituting therefor a provision denying those branches of the motion, (2) by deleting the provision thereof denying that branch of the plaintiff's motion which was to compel the defendants Encompass Insurance Company of America and Encompass Insurance Company to produce the documents contained within the plaintiff's claim file which were withheld by those defendants based upon work product privilege, and substituting therefor a provision granting that branch of the motion to the extent of directing those defendants to provide the Supreme Court with a detailed privilege log, (3) by deleting the provision thereof granting the cross motion of the defendants Encompass Insurance Company of America and Encompass Insurance Company for a protective order pursuant to CPLR 3103(a), and substituting therefor a provision denying the cross motion, and (4) by adding a provision thereto denying that branch of the motion of Encompass Insurance Company of America and Encompass Insurance Company which was for summary judgment dismissing the third cause of action insofar as asserted against them; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements, and the matter is remitted to the Supreme Court, Nassau County, for an in camera review of the allegedly privileged documents in accordance herewith.
On February 10, 2006, a water pipe burst in the second floor of the plaintiff's house, causing extensive water damage. The home was covered by a homeowners' insurance policy issued by the defendants Encompass Insurance Company of America and Encompass Insurance Company (hereinafter together Encompass). Following the occurrence, the plaintiff filed an insurance claim with Encompass. However, after a year of attempting to negotiate a settlement, and after receiving what he considered inadequate offers and improper mold remediation efforts from Encompass, the plaintiff commenced this action alleging, inter alia, that Encompass breached the insurance policy in the manner in which it handled his claim, and engaged in deceptive business practices through a general policy of denying, delaying, and defending against such claims with respect to him and other similarly situated policy holders, in order to force him and other policy holders into woefully inadequate claim settlements. Encompass moved, inter alia, pursuant to CPLR 3211(a)(7) to dismiss the complaint insofar as asserted against it. The Supreme Court, inter alia, partially granted Encompass's motion. The plaintiff appeals, and we modify.
"On a motion to dismiss the complaint pursuant to CPLR 3211(a)(7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Breytman v Olinville Realty, LLC, 54 AD3d 703, 703—704; see Leon v Martinez, 84 NY2d 83, 87).
To state a cause of action under General Business Law § 349, the complaint must allege that the defendant engaged in a deceptive act or practice, that the challenged act or practice was consumer-oriented, and that the plaintiff suffered an injury as a result of the deceptive act or practice (see Stutman v Chemical Bank, 95 NY2d 24, 29; Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25). Contrary to the Supreme Court's determination, the plaintiff's third cause of action, as amplified by the affidavit and documents he submits in opposition to the motion, states a cognizable cause of action to recover damages for unfair practices under General Business Law § 349, including a general practice of inordinately delaying the settlement of insurance claims against policyholders (see Wilner v Allstate Ins. Co., 71 AD3d 155, 161; Acquista v New York Life Ins. Co., 285 AD2d 73, 82). Accordingly, the Supreme Court erred in granting that branch of Encompass's motion which was pursuant to CPLR 3211(a)(7) to dismiss the third cause of action insofar as asserted against it. In addition, contrary to Encompass's contention, a claim for punitive damages may be asserted in the context of a cause of action predicated upon an alleged violation of General Business Law § 349 (see Wilner v Allstate Ins. Co., 71 AD3d at 167).
Encompass also moved for summary judgment dismissing the third cause of action insofar as asserted against it. However, the Supreme Court did not decide that branch of Encompass's motion. In the interest of judicial economy, we hold that the branch of Encompass's motion which was for summary judgment dismissing the third cause of action insofar as asserted against it must be denied. Not only was that branch of the motion premature, having been made in the earliest phase of discovery in this action (see Elbaz v New York City Hous. Auth., 90 AD3d 986), but Encompass's attorney's affirmation and exhibits were insufficient to establish its prima facie entitlement to judgment as a matter of law with respect to that cause of action (see Alvarez v Prospect Hosp., 68 NY2d 320, 324; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853; Sellino v Kirtane, 73 AD3d 728; Lampkin v Chan, 68 AD3d 727).
The Supreme Court also erred in granting that branch of Encompass's motion which was pursuant to CPLR 3211(a)(7) to dismiss the first cause of action to the extent it sought to recover damages for violations of Insurance Law § 2601. Contrary to the Supreme Court's determination and Encompass's contention, the plaintiff did not seek to add a separate cause of action alleging violations of Insurance Law § 2601 but, rather, sought to amplify his cause of action to recover damages for breach of contract with allegations of such violations (see Bristol Harbour Assoc. v Home Ins. Co., 244 AD2d 885).
Contrary to the plaintiff's contention, the Supreme Court correctly granted that branch of Encompass's motion which was pursuant to CPLR 3211(a)(7) to dismiss the eighth and ninth causes of action insofar as asserted against it alleging intentional and negligent infliction of emotional distress, respectively. Accepting the allegations of the complaint as true, and affording the plaintiff the benefit of every favorable inference, the complained of conduct did not so transcend the bounds of decency as to be regarded as atrocious and intolerable in a civilized society (see Tartaro v Allstate Indem. Co., 56 AD3d 758; Rohrlich v Consolidated Bus Tr., Inc., 15 AD3d 561, 562).
With respect to the parties' discovery issues, CPLR 3101(a) broadly mandates "full disclosure of all matter material and necessary in the prosecution or defense of an action." This provision is liberally interpreted in favor of disclosure (see Kavanagh v Ogden Allied Maintenance Corp., 92 NY2d 952, 954; Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406; Matter of Skolinsky, 70 AD3d 845; Riverside Capital Advisors, Inc. v First Secured Capital Corp., 292 AD2d 515). However, the discovery sought must be relevant to the issues at bar, with the test employed being "usefulness and reason" (Allen v Crowell-Collier Publ. Co., 21 NY2d at 406). Regarding an entire set of discovery demands which are "palpably improper in that they are overbroad, lack specificity, or seek irrelevant or confidential information, the appropriate remedy is to vacate the entire demand rather than to prune it" (Bell v Cobble Hill Health Ctr., Inc., 22 AD3d 620, 621). "The burden of serving a proper demand is upon counsel, and it is not for the courts to correct a palpably bad one" (id. at 621 [internal quotation marks omitted]).
Here, the plaintiff's discovery demands included production of Encompass's entire claim file for the subject water damage. The plaintiff asserts that Encompass only produced part of the claim file. In response, Encompass asserts that it withheld only those parts of the claim file that were produced in anticipation of litigation and thus were protected by work product privilege (see Veras Inv. Partners, LLC v Akin Gump Strauss Hauer & Feld LLP, 52 AD3d 370). However, the party asserting the privilege that material sought through discovery was prepared exclusively in anticipation of litigation or constitutes attorney work product bears the burden of demonstrating that the material it seeks to withhold is immune from discovery (see Koump v Smith, 25 NY2d 287, 294) by identifying the particular material with respect to which the privilege is asserted and establishing with specificity that the material was prepared exclusively in anticipation of litigation (see Chakmakjian v NYRAC, Inc., 154 AD2d 644, 645; Crazytown Furniture v Brooklyn Union Gas Co., 145 AD2d 402). Here, Encompass's attorney's conclusory assertions were insufficient to satisfy this burden (see Bombard v Amica Mut. Ins. Co., 11 AD3d 647, 648; see also Agovino v Taco Bell 5083, 225 AD2d 569). Accordingly, the Supreme Court should have granted that branch of the plaintiff's motion which was to compel Encompass to produce the documents contained in the plaintiff's claim file to the extent of directing Encompass to provide the Supreme Court with a detailed privilege log (see CPLR 3122; Clark v Clark, 93 AD3d 812), and the matter must be remitted to the Supreme Court, Nassau County, for an in camera review of the allegedly privileged documents.
Although Encompass also failed to meet its burden of demonstrating that certain discovery demands involved undiscoverable trade secrets (see Hunt v Odd Job Trading, 44 AD3d 714, 716), aside from the claim file, the remaining discovery demands were nevertheless palpably improper in that they were overbroad, lacked specificity, or sought irrelevant information. Accordingly, the Supreme Court correctly denied that branch of the plaintiff's motion which was to compel Encompass to comply with these discovery demands (see Bell v Cobble Hill Health Ctr., Inc., 22 AD3d at 621).
Under the circumstances of this case, Encompass was not entitled to a protective order (see CPLR 3103).
The plaintiff's remaining contentions are without merit.
DILLON, J.P., FLORIO, LOTT and SGROI, JJ., concur