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Coverage Pointers - Volume XIV, No. 12

Dear Coverage Pointers Subscribers:

You have a situation?  We love situations.

We salute the dwindling number of Pearl Harbor survivors, on this 71st anniversary of the Day of Infamy.  There are estimated to be fewer than 3000 still alive and we honor them and those who have served our nation in times of crisis.

We wish those who celebrate a joyous Chanukah.

I bring you greetings the DRI Insurance Claims Symposium in New York City.  There are over 500 here in the audience and there are great speakers presenting on interesting and timely topics.  I am always heartened to meet subscribers, so very many of them, who have come up to introduce themselves.  Thanks for your loyal support and kind words.

The Coverage Pointers App:

The reaction to the Coverage Pointers App continues to be robust, with hundreds of downloads and installations already. The  COVERAGE POINTERS APPis available in the iPhone App Store and the Android Marketplace, for free, of course. Search for it there or for iPhone or iPad users, click here.

We received a very complimentary review of our application in a recent edition of the Buffalo Law Journal.

 

Business Interruption Primer:

Steve Peiper’s column in the attached issue provides a short and practical primer on business interruption claims.  While not exhaustive, it’s surely instructive for those claims being presented as a result of Sandy’s aftermath.


Sneak Peak:

Audrey present a couple of must-read decisions in her column, Cassie reviews the New York Governor’s emergency regulatory changes, Earl writes about the duty to defend and I provide you with a very interesting case involving asbestos, with an insurer making a creative, but unsuccessful argument, that asbestos claims ought to be outside of coverage because the product’s dangers were known to those who were involved in its sale.

 

From Audrey Seeley, Vice Chair of the DRI Insurance Law Committee:

This edition is being brought to you from the DRI Insurance Law Committee's Insurance Coverage and Practice Symposium in New York.

This edition there are two MUST read cases!  The first is a rare decision from the Court of Appeals on what is not use and operation under no-fault.  Use and operation is a topic that I love because it is factually driven.  In this case it is important to understand that the standard applied is for first party no-fault benefits which is different than the standard applied to liability tort claims on use and operation.  Here the Court held that the plaintiff's injury sustained when she stepped off a bus into a hole resulting in her falling was not use and operation.  The rationale was that the bus itself was not the proximate cause of her injury or even the instrumentality causing the injury.  

The second must read decision is from County Court in Erie County which my associate, Margo Lagueras, Esq., argued.  In New York, the practice of no-fault can many times be vastly different Upstate versus Downstate.  Upstate has yet to adopt the same standard as Downstate with regard to the plaintiff’s burden on rebutting an insuring prima facie case entitlement to summary judgment on lack of medical necessity.  This decision is a start in unifying both parts of the state.

In this decision, the court held that the plaintiff failed to raise a triable issue of fact with its one page provider affidavit which summarily states that after reviewing the file maintained for the patient the provider disagrees with the insurer’s expert’s report.  This is an important decision in the no-fault practice in Buffalo as many of the insurer’s summary judgment motions on lack of medical necessity are being denied, without opinion, in Buffalo City Court.

If you have any questions regarding these two decisions please do not hesitate to email me at [email protected].

Audrey A. Seeley

One Hundred Years Ago Today, Impeachment Trial in Full Swing:

New York Times
December 7, 1912
Page 1

TRAP IN ARCHBALD CASE, IT’S CHARGED
House Managers Accuse Williams of Tricking Them
Into Relying on His Evidence Against Judge.

CRY OF LIE INSULTS SENATE

Special to The New York Times

WASHINGTON, Dec. 6. – In the impeachment proceeding against Judge Robert W. Archbald of the Commerce Court today the plans of the House managers were interrupted when it became known that G. A. Richardson, Vice President of the Erie Railroad, was in a New York hospital suffering from a stroke of paralysis.  A subpoena had been sent to Mr. Richardson as a witness of the United States, with directions for his appearance to-day.  On his failure to respond to the thrice-repeated call of the acting Sergeant at Arms of the Senate, Representative Henry D. Clayton, Chairman of the managers, demanded that an attachment be issued for Mr. Richardson’s arrest.

The order was about to be entered when, after a whispered conference with E. Livingstone Cornelius, acting Sergeant at Arms, Senator Augustus O. Bacon, President pro tempore, explained that Mr. Richardson was not in contempt as, owing to his illness, the Senate’s officer had been unable to serve the subpoena.  Mr. Clayton said if the officer charged with the service testified under oath as to the reasons for his failure to serve the subpoena, he would be content for the present to take Mr. Richardson’s deposition before the Committee on the Judiciary in lieu of his personal appearance.  The officer will make a sworn statement to the Senate at the next sitting of the Court of Impeachment.  There probably will be a fight between counsel as to the admissibility of parts of Mr. Richardson’s former testimony.

The House managers made a mild sensation in the slow-moving proceeding when they announced that the first witness for the prosecution, Edward J. Williams, had so grossly “trapped” them into relying on his evidence and in the last two days had so completely disappointed them in his statements to the Senate that they would ask to offset his testimony favorable to Judge Archbald by submitting copies of his sworn statements before the House Committee.  A.S. Worthington, chief of counsel to the defense, insisted that such evidence could not be introduced as evidence per se, but simply to assail the credibility of the witness.  The managers agreed to pick out from Mr. Williams’s sworn testimony before the committee the parts which they said contradicted his sworn testimony before the Senate. 

Robert Wodrow Archbald (10 September 1848 – 19 August 1926) was a United States federal court judge from Pennsylvania. He was the ninth federal official on whom Articles of Impeachment were served, and only the third to be convicted and removed from office.

On March 29, 1901, Archbald received a recess appointment from President William McKinley to the United States District Court for the Middle District of Pennsylvania, to a new seat created by 31 Stat. 880. He was formally nominated on December 5, 1901, and confirmed by the United States Senate, and received his commission, on December 17, 1901.

On December 12, 1910, he was nominated by President William Howard Taft to the United States Commerce Court. He was confirmed by the Senate on January 31, 1911, and received his commission the same day.

Impeachment

After an investigation, Archbald was impeached by the House on 13 Articles by a vote of 223 to 1 on July 13, 1912. Articles I, II, III and VI alleged that Archbald had entered into agreements with litigants at a substantial benefit to himself. Article IV alleged a wrongful communication with litigants. Articles V, VII, VIII, IX and X alleged that he had improperly solicited and accepted gifts from litigants. Article XI alleged he had improperly solicited and accepted gifts from attorneys. Article XII alleged he allowed corrupt practices during jury selection. Article XIII alleged a general charge of bringing the Judiciary into disrepute. The offences alleged in Articles I through XI were connected with holidays in Europe and other gifts received from coal mine workers and railroad officials.

On 16 July, the Senate began Archbald's trial. The Senate convicted him of five of the 13 articles on 13 January, 1913. The Senate then voted to disqualify him from further office by a vote of 39 to 35.

Despite the outcome, Archbald continued to declare his innocence. "I have always known that I have done no wrong and the vote of no one makes it otherwise," he said before leaving for Scranton with his family. "Judge Archbald came as near being an ideal common pleas judge as one can hope to find," one judicial colleague said upon his death. Lawyers eulogized him as a "discriminating practitioner" whose influence "made a deeper impression than any other judge in the history" of Lackawanna County.

Steve on Sandy s/k/a Peiper on Property:

Another two weeks, and we're back with more good news.  As you all probably know by now, and if you don't you should, by Executive Order Governor Cuomo made temporary, yet sweeping, changes to the Fair Claims Handling Act.  Moving forward, for Sandy related claims in certain effected Counties, carriers must  commence an investigation within 6 days of receipt of the claim. While most, if not all, carriers already have protocol which satisfies this change, other requirements may not be so easy to meet.  Particularly, we direct you to the newly established rule requiring inspections within 6 days of notice of a claim. We note that this rule seems especially onerous in light of the fact that under the normal conditions a carrier is under no time constraints to inspect the premises.  In case you missed it before, we'd invite you take a look at our November 9th Edition of CP which offered an overview of Fair Claims' deadlines and other requirements.  If you need a copy, drop me a line. I'd be happy to send it along.

That's not all of the good news we're offering this week.  As a likely harbinger of future events, just two days ago the Second Department issued a decision which will have a serious impact on the industry's ability to rely upon the provision of the policy which requires the insured to furnish the damage claimed.  Although we review in much greater detail below, essentially the Second Department found a question of fact on whether repairing damaged property prior to an inspection violated the policyholder's obligation to preserve a loss until the carrier completes its investigation.  Needless to say, this issue is only getting started.  We remind you that the Governor of NY has already advised the public that it could discard loss items, and commence repairs, so long as the loss was cataloged by photography.

Finally, in keeping with our efforts to provide information as you need it, we are pleased to offer a primer on business interruption coverage as part of our SOS installment this week.  We hope you find it as useful as our previous primers.

In closing, we remind you to not hesitate to contact Dan, Cassie, or myself with any questions - or to just bounce an idea off of us.  We, like you, have been working on these issues full time, and are happy help out. 

Steve Peiper
[email protected]

 

One Hundred Years Ago Today:

The bust of Queen Nefertete found in El-Amarna, Egypt.  We can’t help but wonder how she felt when it was lost.

It is also the 100th anniversary of the death of Charles Darwin's son, George Darwin, who said the moon lifted out of the Pacific Ocean on a high tide and began orbiting the earth

 

In this week’s edition:

 

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

  • Asbestos Usage Was “Occurrence” Despite Knowledge of Risk
  • Disclaiming under One Policy on Late Notice Doesn’t Solve Carrier’s Failure to Disclaim on Another
  • Carrier Cannot Arbitrate Legal Issues as to Applicability of Exclusion in SUM Arbitration
  • Since Insured Had Policy and Declaration Page, It Could Not Argue Justifiable Ignorance of Coverage to Excuse Late Reporting
  • Denying Insurance to One Insured Does Not Necessarily Mean Additional Insured Will Be Without Coverage
  • Because Bill of Particulars Contained Allegations that Suggested Coverage, Even Though Complaint Did Not, Insurer Had Obligation to Defend - Having Failed to Defend, Carrier Is Bound by Results
  • Breach of Contract Claims Fail Against Insurance Agent

 

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

[email protected]

  • Complaint Dismissed Against both Appealing and Non-Appealing Defendants
  • Permanent Loss of Use Claim Is Dismissed but Permanent Consequential and Significant Limitation of Use Claims Survive
  • Plaintiff Fails to Rebut Lack of Causation Argument
  • Plaintiff Raises an Issue of Fact with Respect to Causation
  • Denial Is Affirmed on Appeal
  • Disagreement Among Orthopedists Raises Triable Issue of Fact Sufficient to Defeat Summary Judgment
  • Defendants Fail to Address 90/180-Day Claim
  • Plaintiff Rebuts Defendants’ Showing of Lack of Causation
  • Plaintiff’s Submission of Evidence with Respect to One Injury Is Sufficient

 

AUDREY’S ANGLES ON NO-FAULT
Audrey A. Seeley

aas@hurwitzfine.com

  • Use and Operation Under No-Fault Requires Vehicle to Be Proximate Cause or Instrumentality Producing the Injury
  • Plaintiff’s Conclusory Chiropractor Affidavit Insufficient to Oppose Insurer’s Summary Judgment Motion
  • Follow Up Verification Request Sent Less than 30 Days after Failure to Appear for EUO Does Not Preclude Insurer from Asserting Defense
  • Claim Premature as Insurer Demonstrated Outstanding Verification

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

SOS
Steve on Sandy

  • Business Interruption – The Basics

 

Property

  • Repair of Damages Before Inspection May Not Violate the Policy’s Inspection of Damages Provision

 

Potpourri

  • Court Rules that State Had No Special Duty to Boat Riders in Lake George Disaster

 

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

  • Governor Cuomo Directs DFS to Create Insurer Report Cards, Allow Temporary Licensing of Out-of-State Public Adjusters, and Amends Regulations Governing Time to Inspect Claims
  • Insurer Report Cards
  • Amendments to Regulation 64 (11 NYCRR 216.5(a))

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal

[email protected]

  • Determination in Prior Arbitration Results in Issue Preclusion

 

KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected] 

  • Under Pennsylvania Law, to Avoid Motion to Dismiss Bad Faith Claim, an Insured Must Set Forth Facts; Conclusory Statements Not Enough

 

JON’S JOURNAL
Jonathan M. Gorski
[email protected]

  • No Coverage in the Absence of Direct Contract Between Subcontractor and Construction Manager
  • Defendant’s Doctor’s Failure to Identify Objective Test Performed was Fatal to Defendant’s Summary Judgment Motion on Serious Injury Threshold
  • Perfunctory and Conclusory Medical Report Insufficient to Raise Triable Issue of Fact Regarding Serious Injury Threshold
  • Plaintiff’s Response to EUO Request After Commencing Suit Untimely as a Matter of Law 
  • Court Defers to Judgment of Arbitrator and Confirms Intercompany Arbitration Awards Pursuant to Insurance Law §5105

                                                             

EARL’S PEARLS
Earl K. Cantwell

[email protected]

COMPLAINT ALLEGATIONS GOVERN COVERAGE ANALYSIS

Well, that’s all folks.  If you haven’t download and installed the app, don’t forget to do so.

See you right before Christmas.

Dan

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

 

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Margo M. Lagueras
[email protected]

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

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

Marc A. Schulz
Diane F. Bosse

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

Jody E. Briandi
Steven E. Peiper

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

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
 

Scott M. Duquin
Diane F. Bosse

Index to Special Columns

Kohane’s Coverage Corner
Margo’s Musings on “Serious Injury”
Audrey’s Angles on No Fault
Steve on Sandy, Peiper on Property and Potpourri

Cassie’s Capital Connection
Fijal’s Federal Focus
Keeping the Faith with Jen’s Gems
Jon’s Journal
Earl’s Pearls
Across Borders

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

12/06/12       Union Carbide Corp. v Affiliated FM Insurance Co.
Appellate Division, First Department
Asbestos Usage Was “Occurrence” Despite Knowledge of Risk
Plaintiff met its burden of establishing that the damages caused by asbestos were the result of an "occurrence" and thus that defendant's policy provided coverage.  Indeed, the record supports plaintiff's contention that, although it was aware of some risk involved in the utilization of asbestos, at all times relevant to this appeal, it believed that its asbestos products could be used safely under the right conditions.  Plaintiff also offered, as further proof of any lack of intent, evidence that it published regulatory information in trade periodicals and provided information regarding the dangers of asbestos, as well as guidance concerning its proper usage, to its clients and potential customers.

Defendants asserted that plaintiff intended the damages because it knew that asbestos would cause injuries and that claims would be filed against it.  The record, however, shows that plaintiff was merely aware that asbestos could cause injuries and that claims could be filed.  Plaintiff's "calculated risk" in manufacturing and selling its products despite its awareness of possible injuries and claims does not amount to an expectation of damage.

12/05/12       Lancer Insurance Company v. Louis Provenzano, Inc.
Appellate Division, Second Department
Disclaiming under One Policy on Late Notice Doesn’t Solve Carrier’s Failure to Disclaim on Another
Lancer commenced the instant action for a judgment declaring that it is not obligated to defend or indemnify Louis Provenzano, Inc. (“LPI”), and Jennings in an action brought by LoDuca.  Jennings, a parking garage attendant employed by LPI at a parking garage owned by LPI and it was claimed that he assaulted LoDuca at the garage under a "Garage Non-Dealer's Liability Insurance Policy" issued to LPI for the parking garage premises on the ground that the defendants failed to timely notify Lancer of the incident.  Lancer later amended its complaint to allege that, in addition to the Garage Non-Dealer's Policy, it was not obligated to provide coverage under a "Garage Dealer's Liability Insurance Policy".

Subsequently, LPI sued its broker, Yankee, to recover damages for the Yankee defendants' alleged negligence in failing to provide timely notice of the subject incident to Lancer.

LPI and the Yankee demonstrated that, although Lancer disclaimed coverage for the subject incident under the Garage Non-Dealer's Policy, it failed to disclaim coverage under the Garage Dealer's Policy, which also provided coverage for LPI's claim based on the subject incident.
Editor’s Note:  Another example of a fatal waiver of policy defenses by not timely disclaiming.

12/05/12       In the Matter of Liberty Mut. Ins. Co. v Rothfeld
Appellate Division, Second Department
Carrier Cannot Arbitrate Legal Issues as to Applicability of Exclusion in SUM Arbitration
Rothfeld made a claim under a supplementary uninsured/underinsured motorist (SUM) endorsement issued to her parents by Liberty.  In an unusual maneuver, Liberty filed a petition to compel arbitration of the issue of whether Rothfeld's claim was barred by a policy exclusion.  The lower court found that the issue was not arbitrable, but had to be resolved by the court.  Contrary to Liberty Mutual's contention, the portion of this clause requiring arbitration "as to the amount of the payment that may be owing under this SUM coverage" cannot be read to cover questions of whether a claim is excluded from coverage.
Editor’s Note:  It rare that a SUM carrier makes an application to compel arbitration in the SUM context.  Generally, the opposite is true.  When a demand for arbitration of a SUM claim is made, the insurer has 20 days to move to stay arbitration and have the court rule on the legal issue.  Generally legal issues are not arbitrable in this context.

12/05/12       Albano-Plotkin v Travelers Insurance Company
Appellate Division, Second Department
Since Insured Had Policy and Declaration Page, It Could Not Argue Justifiable Ignorance of Coverage to Excuse Late Reporting
On August 14, 2008, the infant plaintiff, while riding a bicycle inside a Wal-Mart store, allegedly struck and injured the Torres.  Approximately six months later, on February 21, 2009, Torres sued the infant plaintiff and her mother.  The mother testified that after being sued, she consulted with an attorney and was surprised to learn that her homeowner's insurance policy might provide coverage for accidents occurring off the insured premises and notified her homeowner’s carrier, Travelers, the next day.

Travelers denied on the basis of late notice and the insured commenced a declaratory judgment action.  The defense to the late notice was a justifiable delay and ignorance of the scope of her homeowner’s insurance.

To establish a valid excuse due to the insured's alleged ignorance of insurance coverage, the insured has the burden of proving "a justifiable lack of knowledge of insurance coverage" and "reasonably diligent efforts to ascertain whether coverage existed" upon receiving information "which would have prompted any person of ordinary prudence to consult either an attorney or an insurance broker".

Travelers established that their insureds had received and were aware of the policy declarations page, which stated that the subject homeowner's policy provided "personal liability" coverage for "bodily injury" and "medical payments to others," without expressly limiting that coverage to occurrences at the subject home.  Thus, the plaintiffs failed to eliminate a triable issue as to whether their ignorance of coverage was justifiable.  Judgment for Travelers.

12/04/12       Robert Pitt Realty, LLC v 19-27 Orchard Street, LLC
Appellate Division, First Department
Denying Insurance to One Insured Does Not Necessarily Mean Additional Insured Will Be Without Coverage
The underlying claim involved a June 2004 accident where Velez was hurt.  He was working for Avante.  Robert Pitt was the property owner, 24 & 27 was the GC and it hired Avante.

The battle appears to over the "Separation of Insureds Condition" contained within the Essex policy.  If there is no coverage for the named insured, can there be coverage for an additional insured?  The court finds that whether Robert Pitt, the purported additional insured, is entitled to coverage generally turns on whether the named insured, 24 & 27 is entitled to coverage.

Essex established that the notice of the accident provided by 24 & 27, approximately three months after the accident in question, was untimely as a matter of law.  Since Essex timely disclaimed coverage to 24 & 27 on this basis, it properly denied coverage to 24 & 27.

The court held the separation of insured provision coupled with endorsement providing that no coverage was available to the additional insured where there was no coverage available to the named insured.  The insurer had disclaimed to its insured based upon late notice, the location of the accident and an exclusion precluding coverage for bodily injury or property damage arising out of acts or omissions of the named insured or its employees other than general supervision. 

The disclaimer to the additional insured failed to cite late notice and cited only the provision negating coverage for an additional insured where no coverage was available to the named insure.  The court declined to impose the named insured’s untimely notice on the additional insured on the basis that the insurer failed to include this ground in their disclaimer and thus, it was waived.  However, the court found questions of fact as to whether the exclusion for bodily injury arising from acts other than those constituting general supervision would applying, concluding that if it did, no coverage would be available to the additional insured.  The court was not swayed by the insured’s argument that since the policy conditioned coverage for the additional insured on liability resulting from the negligence of the named insured, and yet excluded coverage where the named insured was negligent other than in their general supervision, the coverage was, in effect, illusory.

12/04/12       Sumner Builders Corp. v Rutgers Casualty Ins. Co.
Appellate Division, First Department
Because Bill of Particulars Contained Allegations that Suggested Coverage, Even Though Complaint Did Not, Insurer Had Obligation to Defend - Having Failed to Defend, Carrier Is Bound by Results
Sumner and P & C are not entitled to coverage under the policy that defendant issued to plaintiff Premier Drywall, Inc. because they are not named as additional insureds on the policy.  There is no information about any additional insureds either on the Schedule on which organizations included as insureds were to be shown or on the Declarations on which information required to complete the endorsement was to be shown if the Schedule was blank.  Nor, contrary to Sumner and P & C's claim, did defendant's disclaimer admit that they were additional insureds.  However, in any event, it is "[t]he four corners of an insurance agreement [that] govern who is covered".

Because Sumner and P & C are not additional insureds, defendant was not required to disclaim as to them.

Premier Drywall, Inc. failed to comply with the policy because it did not provide notification as soon as practicable of the underlying occurrence.  However, before the timeliness of Premier's notice to defendant is considered, the timeliness of defendant's disclaimer must be considered.

Contrary to defendant's contention, the May 22, 2007 letter triggered its obligation to disclaim.  Although the letter gave the wrong surname for the accident victim, it indicated the date, location, and circumstances of the accident.

Defendant issued its disclaimer on October 31, 2007.  It was not entitled to disclaim on the ground of late notice simply because the accident occurred on April 9, 2007, and plaintiffs did not notify it until May 22, 2007, as the carrier needed to know when plaintiffs first learned of the accident.  In addition, defendant needed more information about the accident victim's status to determine whether the policy's employee exclusion applied.  However, plaintiffs did not respond to defendant's June 6, 2007 requests for additional information. Therefore, triable issues of fact exist regarding the timeliness of defendant's disclaimer.

While the complaint in the underlying personal injury action alleged that the accident victim was injured during the course of his employment, the Bill of Particulars suggested otherwise, that he was not, so the insurer had an obligation to defend based on those claims.

Having wrongfully refused to defend Premier in the underlying action, defendant is bound by the finding in that action that the accident victim was neither an employee nor a contractor at the time of the accident.
Editor’s Note:  Dangerous case for carriers.  Insurer was stuck indemnifying because the bill of particulars contained broader allegations than the complaint.

11/28/12       Femia v Graphic Arts Mutual Insurance Co.
Appellate Division, First Department
Breach of Contract Claims Fail Against Insurance Agent
Insurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so"  In order for a broker to be held liable under theories of breach of contract or negligence for failing to procure insurance, a plaintiff must demonstrate that the broker failed to discharge the duties imposed by the agreement to obtain insurance, either by proof that it breached the agreement or because it failed to exercise due care in the transaction.

Here, the broker established that it obtained the specific coverage requested by the policyholder so the claims of breach of contract are dismissed.  There was no evidence of a special relationship between the agent that would give rise to a continuing duty to advise the plaintiff to obtain additional coverage/

The claim by the insurance company that issued the policy against the agent is likewise dismissed.  The insurer failed to establish proof that the agent violated its duty to report truthfully with respect to information requested on the application for insurance.

 

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

[email protected]

12/06/12       Lall v Ali
Appellate Division, First Department
Complaint Dismissed Against both Appealing and Non-Appealing Defendants
Defendants Ali and Hassan appealed while defendant Kalemba did not.  The Appellate Court reversed the trial court, determining that defendants’ radiologist’s report showed that the lumbar injuries were degenerative and not related to the accident.  Plaintiff’s radiologist’s and physician’s reports, even if they had been in admissible form, did not raise an issue of fact as the radiologist did not address causation and the physician’s report was too general.  Because plaintiff did not meet her burden against the appealing defendants, she also could not against the non-appealing defendant warranting dismissal as to all.

12/06/12       Melo v Grullon
Appellate Division, First Department
Permanent Loss of Use Claim Is Dismissed but Permanent Consequential and Significant Limitation of Use Claims Survive
In opposition to defendant’s motion, plaintiff submitted an MRI report showing a disc herniation at L4-5; a physician’s report opining that a subsequent lumbar MRI revealed an acute compression fracture of the endplate at L-3 and herniations at L4-5 and other levels; a chiropractor’s affidavit reporting contemporaneous range-of-motion limitations; and affirmations by three physicians who found continuing lumbar limitations and concluded the limitations were causally related to the subject accident.  However, the evidence did not support plaintiff’s claim under the permanent loss of use category warranting modification of the trial court’s decision to dismiss that claim but to reinstate plaintiff’s claims under the permanent consequential and/or significant limitation of use categories.

12/05/12       Oku v MTA Bus Co.
Appellate Division, Second Department
Plaintiff Fails to Rebut Lack of Causation Argument
On appeal, the grant of summary judgment to the defendant is affirmed where defendant submitted competent medical evidence showing that plaintiff’s injuries were not causally related to the submit accident and that plaintiff did not sustain an injury under the 90/180-day category.  Because plaintiff failed to raise a triable issue of fact, defendant’s motion was properly granted.

12/05/12       Walsh v Cascone
Appellate Division, Second Department
Plaintiff Raises an Issue of Fact with Respect to Causation
Although defendant met her prima facie burden establishing that plaintiff’s injuries were not cause by the subject accident, in opposition plaintiff raised a triable issue of fact regarding the injuries to his right shoulder.  Therefore, defendant’s motion was properly denied.

12/05/12       Zaman v Shest Hacking Corp.
Appellate Division, Second Department
Denial Is Affirmed on Appeal
Defendants established that plaintiff did not sustain serious injuries to his cervical or lumbar spine but plaintiff submitted competent medical evidence to rebut defendants’ showing warranting denial of their motion for summary judgment.

12/04/12       Prescod v O’Brien
Appellate Division, First Department
Disagreement Among Orthopedists Raises Triable Issue of Fact Sufficient to Defeat Summary Judgment
Plaintiff claimed injuries to his cervical spine and left knee as a result of the subject accident.  In support of her motion, defendant submitted the affirmed report of a radiologist who opined that the cervical MRI revealed no herniations, bulges or other changes causally related to the accident.  Defendant also submitted the affirmation of an orthopedist stating that had plaintiff sustained the alleged injuries, he would have had to seek immediate treatment for the pain and not wait five days.  In opposition, plaintiff failed to submit any admissible evidence.  As such, on appeal the trial court’s order was modified to dismiss plaintiff’s claim as to the cervical spine.

With regard to plaintiff’s claim of serious injury to the left knee, defendant submitted a radiologist’s report stating that the MRI of the knee was unremarkable and showed no traumatic injury.  In addition, defendant submitted affirmations from two orthopedists stating that the knee injury was not causally related to the accident.  However, while plaintiff did not submit any objective evidence supporting his claim of a meniscal tear, he raised an issue of fact through the submission of his orthopedist’s affirmation which stated that plaintiff had range-of-motion limitations caused by the accident and due to patella crepitation and chrondromalacia.  Summary judgment was, therefore, properly denied with respect to the left knee injury.

11/28/12       Lopez v Kelleher
Appellate Division, Second Department
Defendants Fail to Address 90/180-Day Claim
In a decision with no details, the trial court’s decision denying defendants’ motion is affirmed on appeal where defendants’ failed to adequately address plaintiff’s 90/180-day claim clearly set forth in her bill of particulars.  As defendants failed to meet their burden on summary judgment, the motion was properly denied.

11/28/12       Osario-Salcedo v Mazarova
Appellate Division, Second Department
Plaintiff Rebuts Defendants’ Showing of Lack of Causation
In another decision without details, the trial court is affirmed because, although defendants submitted evidence to show that plaintiff’s alleged injuries were not caused by the accident, plaintiff submitted sufficient evidence to rebut defendants’ showing and raise a triable issue of fact.  As such, the trial court properly denied defendants’ motion.

11/28/12       Sheuly v Fry
Appellate Division, Second Department
Plaintiff’s Submission of Evidence with Respect to One Injury Is Sufficient
Defendants met their burden by submitting medical evidence showing that plaintiff did not sustain a serious injury to her cervical and lumbar spine, right knee and leg, hips or under the 90/180-day category.  However, in opposition, plaintiff raised a triable issue of fact with respect to her lumbar spine.  Therefore, on appeal, the trial court is reversed and defendants’ motion denied.

 

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

11/11/12       Cividanes v City of New York
Court of Appeals
Use and Operation Under No-Fault Requires Vehicle to Be Proximate Cause or Instrumentality Producing the Injury
This is a rare decision from the Court of Appeals on the use and operation standard under no-fault.  Most use and operation questions require a careful review of the facts surrounding how the accident occurred.  In this case, the plaintiff, a bus passenger, injured her ankle exiting the bus when she “stepped off the last step into a hold and fell.”  The insurer denied the no-fault claim on the ground that plaintiff’s injuries did not arise out of the use and operation of the bus.  The Court agreed and held that the bus was neither the proximate cause nor the instrumentality producing the plaintiff’s injury.  The Court, citing the Walton case, noted that the no-fault law was written to draw the line between a motor vehicle accident and other torts.  Further, the Court stated that while this case is factually similar to the Manuel case, wherein the serious injury threshold or no-fault insurance law’s restrictions on tort liability were applicable, it should not be followed.

11/26/12       Titan Medical LLC a/a/o Saleh Hassan v State Farm Gen. Ins.
                    Co.
County Court, Erie County
Plaintiff’s Conclusory Chiropractor Affidavit Insufficient to Oppose Insurer’s Summary Judgment Motion
Our Own Margo Lagueras, Esq. Argued This Case Which Is the First Decision We Are Aware of Emanating from the County Court on this Issue
The insurer’s summary judgment motion on lack of medical necessity was denied in Buffalo City Court and on appeal the sole issue was whether Plaintiff’s chiropractor’s affidavit was sufficient to oppose the insurer’s summary judgment motion.  The Court held that the affidavit was insufficient and granted the insurer’s summary judgment motion.

The Court held that the one page affidavit plaintiff submitted failed to either explain or substantiate with objective medical evidence the chiropractor’s conclusion.  It is noted that the chiropractor’s conclusion was merely that he “disagreed” with the insurer’s expert’s conclusions.  Further, the chiropractor’s bare assertion that the he reviewed his office’s file with regard to the patient was vague and alone insufficient to base any medical conclusion that carried any probative value.

11/26/12       Arco Med. NY, PC v Lancer Ins. Co.
Appellate Term, Second Department
Follow Up Verification Request Sent Less than 30 Days after Failure to Appear for EUO Does Not Preclude Insurer from Asserting Defense
The plaintiff’s cross-motion for summary judgment should have been denied.  The insurer, in opposing the plaintiff’s cross-motion, established that the policy condition requiring attendance at an EUO was violated.  The insurer established that it timely issued EUO scheduling letters and that the individuals noticed for the EUO failed to appear.  The fact that the insurer sent the follow up request for a second EUO in less than 30 days after the initial request did not result in the insurer being precluding from asserting the policy defense.  The court held that so long as the follow up request was sent within 10 days from the failure to appear for the first scheduled EUO, the defense was not waived.

11/26/12       Oriental World Acupunture, PC a/a/o Elizabeth Gutierrez v
                    American Transit Ins. Co.
Appellate Term, Second Department
Claim Premature as Insurer Demonstrated Outstanding Verification
The insurer’s summary judgment motion should have been granted as it established that it issued timely verification requests and follow up verification requests which were outstanding.  The plaintiff failed to demonstrate that it provided the requested verification prior to commencing the action.  Thus, the claim was premature and the insurer’s timeframe to pay or deny the claim had not begun to run.

 

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

SOS
Steve on Sandy

On Monday afternoon, I spoke with a colleague who maintains his business address in Lower Manhattan.  Although I dialed the same number that I usually dial, I was informed that his new address was several blocks to the north of where he had previously hung his shingle.  While the new location is just a temporary fix, it is worth noting that on Tuesday morning he was finally making his way back to his office to inspect the damage, inspect what was salvageable, and ultimately make a decision as how to proceed for the next several months. 
Sandy made landfall off of the coast of New Jersey on October 29, 2012.  Yet, on December 3, 2012, at least one practitioner had not even made it back to his building.  Similarly stories exist throughout metro-New York and Northern New Jersey.  More than law firms, however, the Sandy knocked out access to shops and business from all facets of the economy. 
Naturally, most of the focus has been the physical damage to, or in many cases loss of, property, in the coming weeks we would wholly expect business interruption claims to amplify.  With this in mind, we focus this week’s SOS on issues very likely to be seen as claims professionals wade through the coming avalanche of Business Interruption/Extra Expense Claims. 

Business Interruption – The Basics

Under New York law, courts have traditional read the business interruption grant of coverage narrowly.  To that end, in order to establish a viable business interruption claim, one must establish each of the following criteria. 

  • Loss must be caused by an actual interruption of operations during the Policy Period;
  • Actual interruption must be caused by direct physical loss or damage;
  • The direct physical loss must be caused by a Covered Cause of Loss;
  • The direct physical loss must occur at the Insured Property.

 

(Philadelphia Parking Auth. v Fed. Ins. Co., 385 F. Supp.2d 280 [SD NY 2005]).

Loss must be caused by an actual interruption of operations during the Policy Period
Generally speaking, this will require a total cessation of business.  Where a business remains open, or works remotely, coverage will not likely be triggered.  As recently as 2006, the Southern District of New York refused to grant BI coverage where the insured’s office was destroyed by a flood, but at least two employees were able to continue their normal job duties (Madison Maidens, Inc. v American Mfrs. Mut. Ins. Co., 2006 WL 1650689 [SD NY 2006]).

No coverage for BI after tenants were permitted to return to apartment buildings owned by the insured in Lower Manhattan after 9/11(Broad Street, LLC v Gulf Ins. Co., 37 AD3d 126 [1st Dept 2006]).

Actual interruption must be caused by direct physical loss or damage
It is anticipated that creative insured’s will argue that the closure of business in and around the metro-New York area resulted in an interruption of their business.  This theory, though novel, has generally been rejected by New York courts.  For instance, consider the Southern District’s ruling in the Philadelphia Airport case.  In that case, the airport sought business interruption coverage due to the complete halt in air travel in days after 9/11.  However, because the Airport Parking Lot at Philadelphia International Airport did not sustain physical damage in 9/11 Terrorist Attacks, the Southern District of NY ruled that there was no basis for a BI claim to recover revenue lost from a downturn in flyers.  (Philadelphia Parking Auth. v Fed. Ins. Co., 385 F. Supp.2d 280 [SD NY 2005]).

The direct physical loss must occur at the Insured Property
The insured structure must have sustained property damage.  It is not enough that buildings in the general vicinity were damaged or destroyed.  Consider the First Department’s decision in 2002 which held that a collapsed building which is adjacent to the insured location does not constitute physical damage (Roundabout Theatre Co., Inc. v Continental Cas. Co., 302 AD2d 1 [1st Dept 2002]; Philadelphia Parking Auth. v Fed. Ins. Co., 385 F. Supp.2d 280 [SD NY 2005]).

However, limited authority provides that where loss at part of the building renders the insured location inoperable, coverage may attach.  This is the case even though the insured location sustained no damage (Datatab, Inc. St. Paul Fire and Marine Ins. Co., 347 F. Supp. 36 [SD NY 1972]). 

Period of Restoration

  • To enable insureds to continue to receive lost profits until the insured location can be rebuilt or refurbished, or a suitable alternative location can be secured  (Duane Read, Inc. v St. Paul Fire and Marine Ins. Co., 411 F.3d 384 [2nd Cir 2005]). 
    • An insured cannot be forced to move to non-suitable locations without being permitted time to make necessary alterations and updates to the new location (Id.). 

 

  • The Period of Restoration should be tied to remedies within the control of the insured e.g., finding suitable alternatives and/or commissioning repairs (Lava Trading, Inc. v Hartford Fire Ins. Co., 365 F.Supp.2d 434 [SD NY 2005]).

Civil Authority

  • Does not require physical damage at the insured premises
  • Must be caused by a Covered Cause of Loss (usually Risk of Direct Physical Harm)
  • Government action MUST PROHIBIT ACCESS to the insured location
  • Must be a causal link between Civil Authority action and the loss of income claim

(Syufy Enters. v Home Ins. Co., 1995 US Dist LEXIS 3771 [ND CA 1995]).

Although all flights were grounded after 9/11, Civil Authority coverage did not apply because the Order did not preclude access to the insured’s parking garage.  Similar decisions also precluded coverage for airport shops, and hotel vacancies.  (Philadelphia Parking Auth. v Federal Ins. Co., 385 F.Supp.2d 280 [SD NY 2005])  City-ordered curfew did not preclude access to the insured’s business (Syufy Enters. v Home Ins. Co., 1995 US Dist LEXIS 3771 [ND CA 1995]).

Property

12/05/12       Farokhpour v Allstate Insurance Company
Appellate Division, First Department
Repair of Damages Before Inspection May Not Violate the Policy’s Inspection of Damages Provision
On January, 22, 2009, plaintiff sustained significant damage to his home after a water pipe burst in the second floor bathroom.  The burst pipe destroyed ceiling the premises dining room, ruined most of the drywall in the house, and left three feet of standing water in the residence’s finished basement. 

Plaintiff immediately notified Allstate of the claim.  At that time, Allstate advised plaintiff to mitigate his damages.  However, plaintiff was also advised to not make any repairs to the premises until Allstate could inspect the property.  That inspection was not able to be scheduled by Allstate until February 6, 2009 which was two weeks after the loss.  By the time the inspection took place, plaintiff had already arranged for most of the repairs to be completed. 

Allstate disclaimed coverage on March 26, 2009 on the basis that plaintiff had breached his duty under the policy to “show us damaged property” as often as is reasonably required. 

Thereafter, on April 13, 2009, Allstate sent a second correspondence to plaintiff indicating that its investigation was ongoing. 

Allstate eventually moved for summary judgment due to breach of the aforementioned policy condition.  In support of its motion, Allstate noted that by the time the inspector arrived at the scene most of the repairs had been completed.  At that time, it was impossible for Allstate to adjust the claim because there was no way determine how or where the loss had occurred.  In opposition, plaintiff noted that he had taken 145 photographs of the damage, and preserved the portion of the pipe that burst. 

In addition, plaintiff argued that the April 13, 2009 reservation of rights letter did not reference what, if anything, Allstate was denying.  In reliance upon that letter, plaintiff incurred $92,000 in repairs to the premises.  Allstate, however, maintains that the April 13, 2009 letter only referred to contents claims that were still at issue.  As for the physical damage to the residence, Allstate maintains that its March 26, 2009 denial letter should be controlling.

In finding a question of fact, the Second Department ruled that plaintiff’s attempts to preserve evidence (via the pipe and photographs) raised a triable issue of fact as to whether the contractual obligation to “show” the damage was breached.  In addition, the Court also ruled that Allstate’s failure to specifically delineate which portions of the claim remained at issue raised a triable issue of fact as to whether it should be precluded from denying coverage on any portion of this claim.

Peiper’s Point – Regulation 216 requires that a party take a position within 15 days of completing its investigation.  We note, however, that the Court of Appeals has recently ruled that a violation of Regulation 216 will not result in the carrier being precluded from relying upon any term or condition in the policy.  Notice the Court in the instant case does not discuss common law waiver.  Rather, it focuses on common law estoppel as the mechanism by which Allstate may lose its right to assert certain coverage defenses.  Estoppel, of course, requires that the claimant establish prejudice as a result of the carrier’s acts.     

Potpourri

11/29/12       Metz v State of New York
Court of Appeals
Court Rules that State Had No Special Duty to Boat Riders in Lake George Disaster
You may recall this incident from a few years ago.  The instant lawsuit arises out of the 2005 capsize of the Ethan Allen pleasure craft that was being operated on Lake George in Upstate New York.  Upon the conclusion of the investigation, it was determined that the vessel was well over the appropriate amount of weight and that caused, or at the very least contributed to, the incident.

At the time the boat sank, 47 passengers and the captain were on board.  Importantly, per the Navigation Law, State inspectors had recently rated the vessel for a maximum person capacity of 48 people.  Upon further investigation, it was revealed that the State had, in essence, been rubberstamping the Ethan Allen’s yearly inspection for several years.  Throughout that time, the State investigators failed to recognize that the Ethan Allen’s original canvass roof had been replaced with a much heavier wooden roof.  That extra weight should have resulted in the vessel being rated at a much lower maximum capacity.

The instant action alleges that the State’s negligence caused, or contributed to, decedent’s drowning.  The State opposed on the basis of sovereign immunity, and moved to dismiss the action.  The trial court found that an issue of fact existed as to the nature of the inspections (ie, whether they were ministerial or discretionary acts), and likewise found questions of fact as to whether the State inspections were proprietary or governmental in nature.

On appeal, the Third Department noted that the inspections were a government function.  Accordingly, the Court dismissed the State’s sovereign immunity defense.  Thereafter, the Appellate Division submitted a certified question to the Court of Appeals for review of its decision to dismiss the State’s defense. 

The Court of Appeals began its analysis by noting any bodily injury lawsuit against the State must establish the existence of special duty that is owed by the State to the claimant.  The duty can be established by showing the municipality violated a statutory duty; showing the municipality voluntarily assumed  a duty that the claimant relied upon; or, municipality assumed direction and control in the face of a safety violation.

In the instant case, the Court noted that the Navigation Law did not create a special statutory duty which was owed by the State to the particular passengers impacted by the tragedy.  The duty, to become actionable, must be narrowly assumed.  Here, however, the requirements of the Navigation Law applied to the “general public similarly situated.”

In addition, the Court noted that the Navigation Law provides no rights of tort liability.  Rather, the enforcement mechanisms are premised upon civil fines and criminal penalties.  Accordingly, given the Legislature’s silence on tort liability, it was inferred by the Court that the Navigation Law deliberately chose not to carve out a private cause of action against the State.

 

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

November 29, 2012 Press Releases From Governor Cuomo
Governor Cuomo Directs DFS to Create Insurer Report Cards, Allow Temporary Licensing of Out-of-State Public Adjusters, and Amends Regulations Governing Time to Inspect Claims
On November 29, 2012, the Governor issued a press release regarding changes to regulations directly impacting property/casualty insurers in New York.  As many of you are aware, the Governor met with top insurance executives last week and announced a series of measures “to expedite the payment of claims for New Yorkers affected by Hurricane Sandy” and an online report card system to “hold insurance companies accountable.” 

The Press Release informs consumers that, at the Governor’s direction, DFS issued a new regulation which will cut in half the amount of time insurers have to send adjusters to inspect claims in an effort to help consumers receive their payments sooner.  The Governor also signed an executive order allowing temporary licenses to be issued to “qualified out-of-state public adjusters” which will also help insureds receive their payments more quickly.

In support of these measures, Governor Cuomo stated “There simply is no substitute for speed when it comes to insurance payouts after a storm.  We must do everything possible to make sure we hold insurance companies accountable to their customers.  Today’s actions do just that.” 

In addition to the above, the moratorium issued shortly after the storm barring insurers from cancelling or terminating homeowners’ and small business owners’ policies in storm areas has been extended for an additional 21 days (December 15th).

Insurer Report Cards

As directed by Governor Cuomo, DFS has launched an online report card system.  The system and the report cards can be found at www.NYInsure.ny.gov.  The website contains a link to the report cards, frequently asked insurance questions, the ability to file a complaint and links to other resources that should aid an insured in recovery from the storm.

The report cards are not for every property and casualty insurer in the affected areas.  Per the website, the information is current as of November 30, 2012, and it covers the insurers who make up the majority of the insurance market in areas affected by Storm Sandy, including consumer policies (homeowners’ and auto insurance) and business policies (business interruption insurance). 

The report card for each insurer lists:

  • the number of claims received;
  • the number of those claims closed with payment;
  • the number of those claims closed without payment;
  • the average time in days:
    • from date of claim report to date of inspection
    • from date of inspection to date of estimate
    • from date of estimate to date of claim payment
  • Total number of adjusters in field on losses related to the storm
  • Number of complaints
  • Number of complaints as a percentage of the number of claims

A few observations from reviewing the report cards:

  • The highest average time from date of claim to date of inspection was 16.03 which was accompanied with an asterisk stating “These estimates encompass a wide array of claims and vary based on the complexity of the loss and damage severity.”
    • The next highest average without the asterisk was 11.70
    • The lowest average was 3 which primarily consisted of companies with claim volume on the smaller end of the scale
    • The average time from date of claim to date of inspection for all of the companies reported on was 7.78 days.
  • The highest average time from inspection to date of estimate was 20 days (smaller claim volume)
    • The lowest average was 1 day (generally higher claim volume)
    • The average time from date of inspection to date of estimate for all of the companies reported on was 4.72 days
  • The highest average time from date of estimate to date of payment was 10 days (smaller claim volume)
    • The lowest average was 1.5 days
    • The average time from date of estimate to date of payment was 4.21
  • The highest complaint average per the number of claims was 3.33% and there were multiple companies with no complaints.
    • The average percentage of complaints for the carriers was .43%

 

Amendments to Regulation 64 (11 NYCRR 216.5(a))

As directed by Governor Cuomo, DFS has made some changes to Regulation 64 regarding the inspection of claims.

216.5(a)(1) requires every insurer to commence an investigation of any claim filed by a claimant within 15 business days of receiving notice of claim.  An insurer must furnish to every claimant, a list of all items, statements and forms the insurer reasonably believes will be required within this 15 business day period.  (This provision was not substantively modified.  The 15 business day time frame remains the same and rather than stating the insurer must commence investigation it previously stated that the insurer was required to have procedures regarding the commencement of investigation within 15 business days.)

Added to the regulation is 216.5(a)(2) which applies to any claims for loss to real or personal property or claims for injury to persons or property occurring from October 26, 2012 through November 15, 2012 in the counties of Bronx, Kings, Nassau, New York, Orange, Queens, Richmond, Rockland, Suffolk or Westchester. (Note: this is not limited to only those claims arising out of Sandy). 

This section requires every insurer to commence an investigation of any claim within 6 business days of receiving notice of claim.  If the claim was filed between October 26, 2012 and November 29, 2012, the insurers 6 days begins November 30, 2012 or 15 business days after receiving notice of claim, whichever is sooner.  If the insurer wishes its investigation to include an inspection of the property, the inspection must also occur within the 6 days.  This is a significant change as section 1 above does not require inspection to occur within a specified time period.

Similar to section 1 above, the insurer must furnish all items, statements and forms reasonably believed to be required of the claimant within 6 business days of receiving notice of these claims.

Additionally, a claim filed with an agent of an insurer is deemed to have been filed with the insurer unless, consistent with law or contract, the agent notifies the person filing the claim that the agent is not authorized to receive notices of claim.

Lastly, the regulation adds a provision which allows a claimant to begin immediate repairs to heating systems, hot water systems, necessary electrical connections, exterior windows and doors and for minor permanent repairs to exterior walls to allow the property to retain heat when it is necessary to protect health or safety.  Additionally, any policy requirement the insured exhibit the remains of the property can be satisfied if the insured submits proof of loss documentation of the damaged or destroyed property, including photos or video recordings of the property and inventories and receipts for any repairs.  This does NOT apply to claims under flood policies issued under the national flood insurance program. 

 

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

11/27/12       Manganella v Evanston Insurance Company
First Circuit Court of Appeals -  Massachusetts
Determination in Prior Arbitration Results in Issue Preclusion
Luciano Manganella was the President and sole shareholder of Jasmine Company, Inc. [“Jasmine”].  In July 2005, Manganella sold Jasmine to Lerner New York Inc. [“Lerner”] for $30 million and a Stock Purchase Agreement [“SPA”] was signed.  Jasmine and Lerner also entered into an employment agreement under which Manganella would remain Jasmine’s president for three years. Under the SPA, $7 million of the purchase price was placed in escrow, “as security . . . in the event of a “Major Employment Breach” by Manganella.  A “Major Employment Breach” is a breach of the employment agreement that arises from, among other things, a refusal to comply with any significant policy of Lerner’s.

In 1998, an employee of Jasmine accused Manganella of sexual harassment.  In May 2006, after the sale there were further allegations of harassment against Manganella which prompted Jasmine to hire an outside investigator, which interviewed several employees.  One of the employees was Donna Burgess who recounted inappropriate comments that Manganella made to her in the past.  In June 2006, Manganella was fired.

Next, Lerner invoked the SPA’s arbitration clause, contending that Manganella had forfeited the escrowed funds by committing a “Major Employment Breach”.  After ten days of hearings the arbitration panel issued its ruling finding that Manganella had sexually propositioned several women employees and inappropriately touched and propositioned one of these employees, in “willful violation of Lerner’s Corporate Code of Conduct”.  The panel also found that Lerner failed to give Manganella notice of an opportunity to remedy these violations, as required by the SPA, and awarded Manganella the escrowed funds, along with interest and attorneys’ fees.

One month after the arbitration, Donna Burgess, a human resources manager for Jasmine from 1997-2006 filed a charge of discrimination against Manganella, Lerner and Jasmine with the Massachusetts Commission Against Discrimination (“MCAD”). 

Ten days later Manganella notified Evanston of her claims and requested coverage under the policy.  Evanston denied coverage on the ground that it was “apparent” that the harassment alleged in the MCAD charge did not happen in its entirety subsequent to the April 28, 1999 Retroactive Date, as required for coverage.

In July, 2009 Manganella filed sued against Evanston.  The district court held that Evanston should have at least investigated the MCAD charge before denying coverage; and, also concluded that the conduct described fell within the policy’s Disregard Exclusion.  The Disregard Exclusion bars coverage for claims based on “conduct . . . committed with wanton, willful, reckless or intentional disregard of any law or law that is or are the foundation for the claim.” 

The court also found that the arbitration panel’s determination that Manganella had harassed his employees (including Burgess) in willful violation of Lerner’s Code of Conduct also established that, for purposes of the Disregard Exclusion, Manganella acted  “with wanton, willful, reckless or intentional disregard of” the Massachusetts sexual harassment law underlying Burgess’ MCAD charge.   The district court thus held that the doctrine of issue preclusion barred Manganella from relitigating that question, and granted summary judgment to Evanston. For the following reasons the United States Court of Appeals for the First Circuit [“Court”], affirmed.

The Court noted that under the modern preclusion doctrine, “the central question is whether a party has had full and fair opportunity for judicial resolution of the same issue”.  Under those traditional requirements, issue preclusion may be applied to bar relitigation of an issue decided in an earlier action where:  (1) the issues raised in the two actions are the same; (2) the issue was actually litigated in the earlier action; (3) the issue was determined by a valid and binding final judgment; and (4) the determination of the issue was necessary to that judgment. 

In his appeal Manganella argued that two of these predicates are missing:  identity of the issues and necessity to the judgment. 

The Court determined that for issue preclusion to apply, the arbitrators must have decided an issue “the same as the one presented” in this case; however, the identity of the issues need not be absolute – it is enough that the issues were in substance identical. 

Manganella argued that in the process of deciding whether he violated the Code, the panel did not decide anything about the relationship between his conduct and state law.  The Court decided that the fact that the arbitrators did not expressly find that Manganella had propositioned any particular employee more than once does not mean that his conduct did not run afoul of the law.  Although there was some distinction between the standard imposed by the Code and that created by the law, the Court found that the two standards were similar enough that it was unable to discern a meaningful difference between acting in willful violation of the former (which the arbitrators found that Manganella had done) and acting with wanton disregard of the latter (which triggers the Disregard Exclusion).

Manganella then argued that the two issues are nevertheless not the same because the arbitrators did not make any findings specific to Burgess herself. The Court found that argument impossible to square with Manganella’s admission that Burgess was one of the Jasmine employees who the arbitration panel found Manganella sexually harassed.   The Court stated that it could not see how Manganella could have undertaken any of this conduct without a wanton or reckless disregard for its legality; concluding that, the lack of factual findings expressly tied to Burges herself does not place the present issue beyond the scope of the arbitrator’s decisions.

The court held that a subsequent proceeding to litigate the applicability of the Disregard Exclusion would involve substantially the same discovery, testimony, and argument as did the arbitration.

As to the issue of necessity to judgment, the court noted that although Manganella argued that the arbitrators could have just assumed the truth of the harassment allegations, he did not ask them to do so.  Rather, he vigorously litigated both the truth of those allegations and the question of whether he knew that his behavior was prohibited.  The Court had no concern that the panels’ resolution of this issue was based on something less than a full adversarial presentation and would could call into question whether the issue was “actually litigated” for preclusion purposes.  The Court pointed out that Manganella’s argument that the arbitrators’ findings as to his sexually harassing conduct were not necessary to the arbitral judgment was a misapprehension of the necessity-to-the judgment requirement.  The question was not was not whether the resolution of an issue was unnecessary to reach the same outcome; rather, the inquiry is whether the issue was necessary to the decision actually rendered. 

The Court found that the arbitrators’ determination that Manganella sexually harassed his employees in willful violation of the Code was necessary to the actual decision reached because the panel had to decide whether Lerner’s undisputed failure to comply with the SPA’s notice-and-remedy requirement was excusable. The Court pointed out that ultimately the arbitrators determined that although Manganella’s behavior was egregious and willfully violated the Code, notice was still feasible under the circumstances.  Further noting that he panel’s factual findings as to Manganella’s conduct were part and parcel of its resolution of this issue, and were therefore, “necessary intermediate findings” to which the decided to give preclusive effect.

The Court concluded that the extent of Manganella’s harassing conduct and his knowledge that it was prohibited were vigorously litigated and were essential to the panel’s judgment; and, to allow Manganella to contest these questions would contravene the twin goals of issue preclusion:  protecting litigants from the burden of relitigating settled issues; and, promoting judicial economy by preventing needless litigation.

The Court also held that because the Disregard Exclusion applied, Manganella was not entitled reimbursement of defense costs from Evanston.  Likewise, the applicability of the Disregard Exclusion was fatal to Manganella’s state law claims based on breach of contract and breach of the duty of good faith and fair dealing.

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
[email protected] 

11/02/12       Smith v State Farm Mutual Automobile Ins. Co.
United States Court of Appeals, Third Circuit
Under Pennsylvania Law, to Avoid Motion to Dismiss Bad Faith Claim, an Insured Must Set Forth Facts; Conclusory Statements Not Enough
This decision addresses the popular issue of what allegations are sufficient to establish a cause of action for bad faith.  Here, the insured was involved in a motor vehicle accident.  The tortfeasor had limited coverage.  Accordingly, the insured filed a claim for underinsured motorist benefits under its own policy. 

In considering defendant State Farm’s Rule 12(b)(6) motion to dismiss the bad faith cause of action, the court began by reciting Pennsylvania law.  In Pennsylvania, bad faith is defined in this context as “[a] frivolous or unfounded refusal to pay proceeds of a policy ... a breach of a known duty (i.e., good faith and fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith.”  Under the relevant statute, a two-part test is applied to bad faith claims, both elements of which must be supported by clear and convincing evidence: (1) whether the insurer lacked a reasonable basis for denying benefits under the insured's policy, and (2) whether the insurer knew or recklessly disregarded the lack of a reasonable basis.

In the court’s opinion, the complaint consisted of conclusory statements unsupported by facts—State Farm, e.g., “breach[ed] covenants of good faith and fair dealing,” and “engag[ed] in unfair settlement negotiations.”  There were no details describing what was unfair about the negotiations. Similarly, plaintiff simply asserted that State Farm “intentionally misrepresent[ed] coverage in the policy,” and “misrepresent[ed] facts and its evaluation of Plaintiff's claim,” without explaining what those misrepresentations may have been.

Thus, in reversing the finding of the district court, and dismissing the bad faith cause of action, the court noted that a disagreement over the amount of the settlement of the insured’s UIM claim clearly occurred; however, this is not unusual. The failure to immediately accede to a demand for the policy limit cannot, without more, amount to bad faith.
Take Away:  To plead a bad faith cause of action, an insured must set forth facts.  What happened?  When did it happen?  General statements are not sufficient. 

 

JON’S JOURNAL

Jonathan M. Gorski
[email protected]

11/26/12       CNY Builders, LLC v. Fireman’s Fund Ins. Co.
Supreme Court, New York County
No Coverage in the Absence of Direct Contract Between Subcontractor and Construction Manager
Plaintiffs, CNY Builders, LLC (“CNY”) and Al-Stone, LLC (“Al-Stone”) initiated a summary judgment action seeking a declaration that they were entitled to coverage as additional insureds pursuant to a commercial general liability policy issued by the defendant, Chicago Insurance Company (“Chicago”). 

Al-Stone was the owner of the premises, Tritel was the general contractor, CNY was the construction manager, and Regal was the subcontractor. CNY, acting as an agent for Tritel, entered into a contract with Broadway Concrete Corp. (“Broadway”) for concrete superstructure work at the premises.  This contract was then assigned to Regal.  The contract obligated the subcontractor to procure insurance to protect CNY and Al-Stone.  Chicago issued Regal a commercial general liability policy which contained an additional insured endorsement.  Additional insured was defined, in the policy, as:

Any person or organization for whom you are performing operations when you and such person or such organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.

This clause has been interpreted strictly to require a direct written contract between the primary insured and the person or organization seeking additional insured status.  The court quickly declared that Chicago owed no coverage to Al-Stone because Al-Stone and Regal were not in privity of contract. 
CNY argued that since it had signed a contract with Broadway, and Regal took over Broadway’s obligations by assignment, there was a direct agreement in place between CNY and Regal.  The court looked at the original contract between CNY and Broadway and concluded that the contract did not create a relationship between the construction manager and trade contract.  In fact, it explicitly foreclosed any contractual privity between the two parties.  CNY was acting in its capacity as an agent of the general contractor, Tritel, and therefore the only relationship created was between Tritel and Broadway. 

As an alternative argument, CNY claimed that its consent, in its individual capacity, to the assignment creating a binding contract.  The court dismissed this argument because there was nothing in the actual assignment or the trade contract article it referenced that made CNY a party to the trade contract.
As a third and final argument, CNY relied on the certificate of liability of insurance which listed CNY as an additional insured under the policy.  CNY’s argued that their inclusion on the certificate of insurance was evidence that Regal acknowledged their obligations and complied.  Unfortunately for CNY, this argument was refuted by existing case law.  The certificate was insufficient to confer additional insured status.

The court declared that Chicago was not obligated to defend or indemnify CNY or Al-Stone.    

11/20/12       Pereverez v. Collins
Supreme Court – Richmond County
Defendant’s Doctor’s Failure to Identify Objective Test Performed was Fatal to Defendant’s Summary Judgment Motion on Serious Injury Threshold
Defendant moved for summary judgment on the ground that the plaintiff did not suffer a “serious injury” in contemplation of Insurance Law §5102(d).

A defendant moving for summary judgment has the initial burden of establishing a prima facie case that the plaintiff did not sustain a “serious injury.”  If the defendant carries its burden, the plaintiff must then raise a triable issue of fact as to whether the alleged injuries constitute a “serious injury.”

Here, the defendants failed to satisfy their initial burden.  The defendant submitted the affirmation of a board certified orthopedist in support of their motion but the doctor failed to identify the objective tests used to measure the plaintiff’s range of motion in the cervical spine, lumbar spine, and right elbow. 

The court held that this failure was fatal to the defendant’s motion. 
In dicta, the court went on to state that even if the defendant had met their burden it would have been futile because the plaintiff’s experts raised an issue of fact.  The affirmation of plaintiff’s doctor demonstrated significant loss of range of motion in the cervical spine, lumbar spine, right elbow, and right knee.       

11/20/12       Orlando v. Graham
Supreme Court, Suffolk County
Perfunctory and Conclusory Medical Report Insufficient to Raise Triable Issue of Fact Regarding Serious Injury Threshold
In this action, the Defendant moved for summary judgment contending that the plaintiff’s alleged injuries failed to meet the serious injury threshold requirement of Insurance Law §5102(d). 

A defendant seeking summary judgment bears the initial burden of establishing a prima facie case that the plaintiff did not sustain a “serious injury.”  After the defendant meets this burden, the burden shifts onto the plaintiff to raise a triable issue of fact as to whether the plaintiff’s injuries meet the “serious injury” threshold. 

In establishing its prima facie case, the defendant relied upon the medical reports of its examining orthopedist and its examining plastic surgeon.  The orthopedist opined that the plaintiff’s causally related injuries to her spine, left knee, and calf were resolved.  Further, the orthopedist opined that the plaintiff showed no signs of permanency, disablement, and was capable of resuming her daily activities.  The plastic surgeon stated that the scars on the plaintiff’s face, left shoulder, chest, and left leg were no longer visible.  Although two scars remained, the plastic surgeon stated that both were well healed and minimally visible.  The defendant also made reference to the plaintiff’s deposition testimony which indicated that the plaintiff was not prevented from performing substantially all of the material acts constituting her customary daily living activities during 90 of the first 180 days following the subject accident. 

After the defendant successfully established its prima facie case, the burden shifted to the plaintiff.  The plaintiff contended that the injuries to her neck, back, and left leg fell within the “limitations of use” and “90/180”.  The plaintiff also argued that her scars constituted a “significant disfigurement.”  The plaintiff was unsuccessful in raising a triable issue of fact.  The court was unimpressed with the plaintiff’s doctors’ affidavits.  The doctor affidavits were “extremely perfunctory and conclusory in manner” and were not based upon recent examinations of the plaintiff.  The affidavits failed to provide competent medical evidence to substantiate the conclusions.  Without competent medical evidence, the plaintiff’s self-serving affidavit was insufficient. 

Accordingly, summary judgment was entered in favor of the defendant and the plaintiff’s negligence claim was barred under the No-Fault Insurance Law. 

11/19/12       Five Boro Psychological & Licensed Master Social Work                      Servs. PLLC v. GEICO Gen. Ins. Co.
Civil Court of the City of New York, Kings County
Plaintiff’s Response to EUO Request After Commencing Suit Untimely as a Matter of Law 
In this action, the Defendant, GEICO Gen. Ins. Co. (“GEICO”) moved for summary judgment dismissing the complaint on the ground that it issued timely denials of Plaintiff’s, Five Boro Psychological & Licensed Master Social Work Servs. (“Five Boro”), claims based upon the claimant’s failure to appear for two scheduled examinations under oath (EUOs).         

The plaintiff conceded that the claimant did not appear at the EUOs but argued that the EUO requests were unreasonable and that it objected to the reasonableness.  Indeed, the plaintiff did object but the objection letters were not mailed until approximately ten months after the initial request and four months after the plaintiff commenced the action. 

Appearance at an EUO is a condition precedent to an insurer’s liability under a policy.  Failure to comply with a condition precedent precludes an action against the insurer.  A plaintiff is required to respond, thereby preserving its objection to the reasonableness of the EUO request, prior to commencing suit.  Failure to preserve the objection bars the plaintiff from raising it as an excuse for non-appearance. 

The court granted summary judgment in favor of GEICO on the ground that the objection was untimely. The plaintiff’s objection letters, sent subsequent to commencement of the suit, were submitted too late and were insufficient to preserve any objection to the reasonableness of the EUO request.     

11/14/12     Amica Mut. Ins.Co. a/s/o Carla S. Omar v. Fiduciary Ins. Co.
Supreme Court, Queens County
Court Defers to Judgment of Arbitrator and Confirms Intercompany Arbitration Awards Pursuant to Insurance Law §5105
Petitioner, Amica Mutual Insurance Company a/s/o Carla S. Omar, Dave Sheppard and Shawn Hayes (“Amica”), instituted an Article 75 proceeding to confirm arbitration awards against Fiduciary Insurance Companies (“Fiduciary”).  Fiduciary cross-moved to vacate the arbitration awards. 

Insurance Law §5105 provides for intercompany loss transfer arbitration when the underlying motor vehicle accident involves “a motor vehicle weighing more than six thousand five hundred pounds unloaded or is a motor vehicle used principally for the transportation of persons or property for hire.”  Section 5105 is an attempt by the legislature, in limited situations, to shift the economic burden to the party at fault by allowing the insurer of the party not at fault to recoup first-party benefit payments.  Section 5105 was applicable here because Fiduciary’s insured in the underlying accident was operating a taxi. 

After a hearing, the arbitrator found Fiduciary’s insured to be 90% liable and entered awards accordingly.  After Fiduciary failed to make payment within 30 days, Amica sought a judgment confirming the arbitrator’s awards, pursuant to CPLR 7510.  Fiduciary opposed Amica’s petition and sought to vacate the awards on the grounds that (1) the arbitrator erroneously failed to deduct surcharges; (2) the arbitrator exceeded her authority; (3) the hearing was inherently unfair; and (4) the arbitrator erroneously relied upon the police report. 
Consistent with the overriding purposes of arbitration, an arbitrator’s decision is accorded a great amount of deference and the grounds for vacating an award are few in number and narrowly applied. 

CPLR 7511(b) provides that an application to vacate an arbitration award by a party who has participated in the arbitration may only be granted upon the grounds that the rights of that party were prejudiced by corruption, fraud, or misconduct in procuring the award, partiality of the arbitrator, the arbitrator exceeded his powers or failed to make a final and definite award, or a procedural failure that was not waived. 
* * *
An arbitration award in a mandatory arbitration proceeding will be upheld if it is supported by the evidence and is not arbitrary and capricious.  On review, an award may be found to be rational if any basis for such a conclusion is apparent to the court based upon the reading of the record.
[citations omitted]
Here, the arbitrator relied upon the evidence submitted at the hearing including proof of damages, the police report, and the MV104 report.  The court, citing Arbitration Forums’s Rules, determined that the arbitrator neither exceeded her powers nor prejudiced Fiduciary by accepting proof of damages at the hearing.  Moreover, the court found no statutory or regulatory authority to support Fiduciary’s claim that parties to a PIP loss transfer arbitration must exchange documentary evidence prior to the hearing.  Finally, the court determined, based on the relaxed rules of evidence, that the arbitrator was justified in relying on the police report.  All this added up to the court holding that there was a rational basis for the arbitrator’s determination of 90% liability on the part of Fiduciary’s insured for the accident and that the proof of damages was sufficient.  The court granted Amica’s petition to confirm the three arbitration awards.

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

COMPLAINT ALLEGATIONS GOVERN COVERAGE ANALYSIS

A recent case emphasized the importance of the content of the underlying complaint to determine whether insurance coverage is triggered.  Lagestee-Mulder Inc. v Consolidated Insurance Co., 2012 U.S. App. Lexis 13004 [7th Circuit, June 26, 2012].  The plaintiff was the general contractor on a multi-story office building in Illinois.  The owner made claims for water infiltration and construction defects that occurred during the late stages of construction.  The insurance company denied coverage, which denial was upheld by the District Court and then affirmed on appeal.

The key question was whether the owner’s complaint alleged “property damage” covered by a CGL policy on which the contractor claimed to be an additional insured.  Generally, if the claim alleges damage to the construction project itself because of a construction defect, there may be no coverage.  However, a covered “occurrence” may be found if the complaint alleges that the construction defect damaged something other than the project/work itself. 

The complaint alleged breach of the construction contract; breach of several warranties for failure to properly construct, furnish labor and materials, furnish products free of defects, and correct defective work.  However, the complaint did not specify the damages sustained, or whether anything other than the building itself was damaged.

The plaintiff claimed that the vagueness of the alleged ”damages” should be construed to include all types of property loss, citing cases holding that courts have found a duty to defend where the facts cited in the complaint were not specific enough to exclude coverage. 

The District Court and the Circuit Court disagreed, ruling that the underlying complaint here did not plead specific facts that, even if construed in plaintiff’s favor, would trigger coverage.  The complaint allegations highlighted damage to the building itself, and even though the complaint included “water infiltration”, it did not identify the damage or location of the damage caused by the water.  The courts ruled that “mere possibility” that covered damage may have occurred does not trigger a duty to defend or indemnify.  It is the actual complaint, not some supposed interpretation that must be considered when determining whether the duty to defend was triggered, and the coverage denial was affirmed.

This case emphasizes the importance of the underlying complaint or claim notice in analyzing whether coverage exists, and whether any exclusion applies, etc.  If coverage is not triggered on the face of the claim, a coverage denial may be upheld. 

This case also emphasizes a fairly common interpretation of CGL coverage that denies using liability insurance proceeds to repair damage from construction defects, which would transform the CGL policy into a “performance bond”. 

However, given the liberal rules with respect to amending a complaint, and assuming that a finding of coverage would be beneficial to the owner as well as the general contractor, clearly the owner might simply amend its complaint to be more specific and detailed in an effort to plead into coverage.  However, since this was a new build, it may have been difficult, if not impossible, for such allegations to be crafted, since the entire new structure would arguably be part of the project and construction work.

 

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

11/20/12       Maxum Indemnity Company v Jiminez
Court of Appeals of Georgia
Coverage Under a CGL Policy Applies to Claim Against a Plumbing Subcontractor to Recover the Cost to Repair Property Damage Caused by His Faulty Workmanship in Construction Projects, Despite Insurance Company’s Attempt to Characterize Underlying Claim as Involving Only Contractual Indemnity
Jose Alfredo Jimenez and Gill Plumbing Company were hired to install pipes for a dormitory at Georgia Southern University.  A pipe burst subsequent to construction caused damage to several units in the dormitory.  The trial court found Jimenez liable for the damages.  Jimenez was insured under a CGL policy issued by Maxum Indemnity Company.  Maxum brought suit against Jimenez to determine whether the underlying claim fell within its policy.

The policy states that Maxum agrees to “pay those sums that [Jimenez] becomes legally obligated to pay as ‘damages’ because of…‘property damage’ to which [the] insurance applies.”  The policy also states that the insurance applies to property damage “cause by an ‘occurrence’.”  Property damage expected or intended from the standpoint of any insured is not covered under the policy.  The “Contractual Liability” exclusion also prohibits coverage of ‘property damage’ for which the insured is obligated to pay damages, by reason of the assumption of liability in a contract or agreement.

Maxum argued that the underlying claim did not fall within the policy’s coverage for “property damage” caused by an “occurrence.”  The Court of Appeals disagreed, stating that a subcontractor’s faulty workmanship that causes unforeseen or unexpected damage to other property constitutes an “occurrence” under a CGL policy.  Maxum then argued that the underlying claim was for contractual indemnity only and was excluded by the “Contractual Liability” exception under the policy.

The Court held that a contractor’s legal duty to exercise ordinary care not to endanger the persons or property of others may constitute both a tort arising from a contract and a breach of the contractual relationship itself.  Further, Jimenez’s obligation to pay the damages award was not based upon a contractual assumption of liability, but rather, tort liability arising from his own negligent pipe workmanship.  As such, the Court of Appeals held that the “Contractual Liability” exclusion did not apply.  The underlying claim was to recover the cost of repairing the damage to the dormitory caused by negligent workmanship and was thus covered under the CGL policy.
Submitted by: Michelle Pearson and Rick Righi, Righi Law Group

11/06/12       Bird v Best Plumbing Group, LLC
Washington State Supreme Court
WA Constitution Does Not Entitle Insurer to Have a Reasonableness of a Covenant Judgment Settlement Amount Determined by a Jury
Bird brings this action for trespass and negligence against Best who is insured by Farmers Insurance Exchange.  Best entered Bird’s property without permission and cut a pressurized sewer line which cycled and erupted causing injury to Bird and his property.  After Farmers attempted to settle the claims without success, Best consulted an outside attorney who negotiated a settlement between Bird and Best for $3.75 million stipulated judgment against Best.  It also included a covenant not to execute against Best. Bird moved for a determination that the settlement was reasonable under RCW 4.22.060.

Farmers intervened and made a motion for a jury trial that was denied.  The court held a reasonableness hearing and found the settlement to be reasonable.  Farmers appealed the denial of the request for a jury trial.  The Court of Appeals affirmed the trial court’s denial.  There is precedent that the right to a jury trial exists where a case is purely legal in nature but does not exist where a case is purely equitable.  The Supreme Court held that the statute here creates an equitable proceeding and therefore does not afford the right to a jury trial.  Additionally, the Supreme Court found that in a subsequent bad faith action there also is no constitutional right to have the previously determined amount re-decided by a jury.  The dissent notes that while determinations of reasonableness in the context of contribution have been deemed to be equitable, an action for bad faith is a legal action to which the WA Constitution unequivocally guarantees a right to trial by jury.
Submitted by: Christie Law Group, PPLC

 

REPORTED DECISIONS

Femia v. Graphic Arts Mutual Insurance Co.


Wilson Elser Moskowitz Edelman & Dicker LLP, White Plains, N.Y. (Nancy Quinn Koba and Alice Leslie Brodie of counsel), for appellant.
Weg & Myers, P.C., New York, N.Y. (Joshua L. Mallin and Rebecca A. Barrett of counsel), for plaintiff-respondent.
Faust Goetz Schenker & Blee LLP, New York, N.Y. (Christopher B. Kinzel of counsel), for defendant-respondent.

DECISION & ORDER

In an action, inter alia, to recover damages for breach of an insurance contract, the defendant Dayton & Osborne, LLC, appeals, as limited by its brief, from so much of an order of the Supreme Court, Suffolk County (Spinner, J.), dated December 30, 2010, as denied its motion for summary judgment dismissing the fourth and fifth causes of action and the cross claims of the defendant Graphic Arts Mutual Insurance Co., insofar as asserted against it.

ORDERED that the order is reversed insofar as appealed from, on the law, with one bill of costs payable by the respondents, and the motion of the defendant Dayton & Osborne, LLC, for summary judgment dismissing the fourth and fifth causes of action and the cross claims of the defendant Graphic Arts Mutual Insurance Co., insofar as asserted against it is granted.

The Supreme Court improperly declined to consider the deposition transcripts submitted by the defendant Dayton & Osborne, LLC (hereinafter Dayton), in support of its motion for summary judgment where the transcripts were certified by the reporter and their accuracy was not challenged (see Pevzner v 1397 E. 2nd, LLC, 96 AD3d 921; Boadu v City of New York, 95 AD3d 918; Zalot v Zieba, 81 AD3d 935; see also Rodriguez v Ryder Truck, Inc., 91 AD3d 935, 936; Ashif v Won Ok Lee, 57 AD3d 700).

"Generally, the law is reasonably settled on initial principles that insurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so" (Murphy v Kuhn, 90 NY2d 266, 270; see Core-Mark Intl. v Swett & Crawford Inc., 71 AD3d 1072; Reilly v Progressive Ins. Co., 288 AD2d 365; Chaim v Benedict, 216 AD2d 347; Erwig v Cook Agency, 173 AD2d 439). In order for a broker to be held liable under theories of breach of contract or negligence for failing to procure insurance, a plaintiff must demonstrate that the broker failed to discharge the duties imposed by the agreement to obtain insurance, either by proof that it breached the agreement or because it failed to exercise due care in the transaction (see Bedessee Imports, Inc. v Cook, Hall & Hyde, Inc., 45 AD3d 792; Katz v Tower Ins. Co. of N.Y., 34 AD3d 432; Mickey's Rides-N-More, Inc. v Anthony Viscuso Brokerage, Inc., 17 AD3d 328; Structural Bldg. Prods. Corp. v Business Ins. Agency, 281 AD2d 617).

Here, Dayton demonstrated its prima facie entitlement to judgment as a matter of law dismissing the fourth and fifth causes of action to recover damages for negligence and breach of contract, respectively, insofar as asserted against it by submitting evidence showing that it procured the specific insurance coverage requested by the plaintiff (see Loevner v Sullivan & Strauss Agency, Inc., 35 AD3d 392). Moreover, the record is devoid of evidence of a special relationship between Dayton and the plaintiff that would give rise to a continuing duty on Dayton's part to advise the plaintiff to obtain additional coverage (see Murphy v Kuhn, 90 NY2d at 271; Loevner v Sullivan & Strauss Agency, Inc., 35 AD3d at 394-395; W. Joseph McPhillips, Inc. v Ellis, 8 AD3d 782). In opposition, the plaintiff failed to raise a triable issue of fact. Therefore, the Supreme Court should have granted that branch of Dayton's motion which was for summary judgment dismissing the fourth and fifth causes of action insofar as asserted against it.

Further, Dayton established, prima facie, its entitlement to judgment as a matter of law dismissing the cross claims of the defendant Graphic Arts Mutual Insurance Co. (hereinafter Graphic Arts) for contractual and common-law indemnification insofar as asserted against it. In opposition to Dayton's prima facie showing, Graphic Arts failed to raise a triable issue of fact as to whether Dayton violated its duty to report truthfully with respect to information requested on the application for insurance (see Equitable Life Assur. Socy. of U.S. v Werner, 286 AD2d 632; Anne M.Payne & Joseph Wilson, New York Insurance Law § 6:43 at 254 [2011-2012 ed. West's NY Prac Series]), or whether Graphic Arts itself was without fault in causing the plaintiff's loss (see Bedessee Imports, Inc. v Cook, Hall & Hyde, Inc., 45 AD3d 792; cf. General Acc. Ins. Co. v Smith & Assoc., 184 AD2d 616, 617). Therefore, the Supreme Court should have granted that branch of Dayton's motion which was for summary judgment dismissing the cross claims of Graphic Arts insofar as asserted against it.

Sumner Builders Corporation v. Rutgers Casualty Ins. Co.


Miranda Sambursky Slone Sklarin Verveniotis, LLC, Mineola (Steven Verveniotis of counsel), for appellant-respondent.
Charbuck Calabria Jones & Materazo, P.C., Hicksville (Nicholas P. Calabria of counsel), for respondents-appellants.

Order and judgment (one paper), Supreme Court, New York County (Paul G. Feinman, J.), entered August 11, 2011, which, to the extent appealed from, denied plaintiffs' motion for summary judgment declaring that defendant is obligated to defend and indemnify plaintiffs Sumner Builders corporation and P & C Building, Inc. in the underlying personal injury action, and denied defendant's cross motion for summary judgment dismissing the complaint, unanimously modified, on the law, to grant defendant's motion to the extent of declaring that it has no obligation to defend or indemnify Sumner Builders Corporation and P & C Building, Inc., and otherwise affirmed, without costs.

Sumner and P & C are not entitled to coverage under the policy that defendant issued to plaintiff Premier Drywall, Inc. because they are not named as additional insureds on the policy (see National Abatement Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 33 AD3d 570, 571 [1st Dept 2006]; see also, e.g., Sanabria v American Home Assur. Co., 68 NY2d 866, 868 [1986]). There is no information about any additional insureds either on the Schedule on which organizations included as insureds were to be shown or on the Declarations on which information required to complete the endorsement was to be shown if the Schedule was blank. Nor, contrary to Sumner and P & C's claim, did defendant's disclaimer admit that they were additional insureds. However, in any event, it is "[t]he four corners of an insurance agreement [that] govern who is covered" (Sixty Sutton Corp. v Illinois Union Ins. Co., 34 AD3d 386, 388 [1st Dept 2006]). Because Sumner and P & C are not additional insureds, defendant was not required to disclaim as to them (see e.g. National Abatement, 33 AD3d at 571).

Defendant contends that plaintiff Premier Drywall, Inc. failed to comply with the policy because it did not provide notification as soon as practicable of the underlying occurrence. However, before the timeliness of Premier's notice to defendant is considered, the timeliness of defendant's disclaimer must be
considered (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 67 [2003]). Contrary to defendant's contention, the May 22, 2007 letter triggered its obligation to disclaim. Although the letter gave the wrong surname for the accident victim, it indicated the date, location, and circumstances of the accident (see Greenburgh Eleven Union Free School Dist. v National Union Fire Ins. Co. of Pittsburgh, PA, 304 AD2d 334, 335-336 [1st Dept 2003]). Defendant issued its disclaimer on October 31, 2007. It was not entitled to disclaim on the ground of late notice simply because the accident occurred on April 9, 2007, and plaintiffs did not notify it until May 22, 2007; defendant needed to know when plaintiffs first learned of the accident (see Ace Packing Co., Inc. v Campbell Solberg Assoc., Inc., 41 AD3d 12, 15 [1st Dept 2007]). In addition, defendant needed more information about the accident victim's status to determine whether the policy's employee exclusion applied. However, plaintiffs did not respond to defendant's June 6, 2007 requests for additional information. Therefore, triable issues of fact exist regarding the timeliness of defendant's disclaimer (see Admiral Ins. Co. v State Farm Fire & Cas. Co., 86 AD3d 486, 489-490 [1st Dept 2011]).

Defendant contends that the employee exclusion applies because the accident victim was the cabinet contractor. However, there is conflicting evidence on this point. Defendant also relies on the fact that the complaint in the underlying personal injury action alleged that the accident victim was injured during the course of his employment. However, defendant cannot ignore the facts that created a reasonable possibility of coverage that were made known to it in the accident victim's November 2008 amended bill of particulars and rely solely on the allegations in the complaint to assess its duty to defend Premier (see Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 70 [1991]).

Having wrongfully refused to defend Premier in the underlying action, defendant is bound by the finding in that action that the accident victim was neither an employee nor a contractor at the time of the accident (see Ramos v National Cas. Co., 227 AD2d 250, 250-251 [1st Dept 1996]). The case it cites, First State Ins. Co. v J & S United Amusement Corp. (67 NY2d 1044 [1984]), is distinguishable because there the insurer did not refuse to defend (id. at 1045-1046). Moreover, we make no declaration as to defendant's obligation to indemnify Premier (id. at 1046). A determination as to defendant's duty to indemnify is precluded by issues of fact as to the timeliness of defendant's disclaimer and, if the disclaimer is found to be timely, the timeliness of plaintiffs' notices of the underlying occurrence. Defendant contends that the 43-day delay between the date Sumner and P & C's president knew of the accident and the date of the May 22 letter is unreasonable as a matter of law. However, unlike the policy in the case it cites, Steadfast Ins. Co. v Sentinel Real Estate Corp. (283 AD2d 44 [1st Dept 2001]), the policy in the case at bar does not contain a 15-day deadline for giving notice. Premier contends that its notice could not have been late because it was not aware of the occurrence until defendant's disclaimer. However, there is conflicting evidence as to when Premier was aware of the occurrence.

Lopez v Kelleher


Richard T. Lau, Jericho, N.Y. (Linda Meisler 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, Suffolk County (Rebolini, J.), dated February 28, 2012, 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) as a result of the subject accident.

ORDERED that the order is affirmed, without costs or disbursements.

The defendants failed to meet their prima facie burden of demonstrating 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, 350; Gaddy v Eyler, 79 NY2d 955, 956-957). The defendants' motion papers failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that she sustained a medically determined injury or impairment of a nonpermanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident (cf. Tinsley v Bah, 50 AD3d 1019, 1019-1020).

Since the defendants failed to meet their prima facie burden, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).

Accordingly, the Supreme Court properly denied the defendants' motion for summary judgment dismissing the complaint.

 

Osario-Salcedo v Mazarova

Marjorie E. Bornes, Brooklyn, N.Y., for appellants.
Seligson, Rothman & Rothman, New York, N.Y. (Martin S. Rothman and Amy Morganstern of counsel), for responent.

DECISION & ORDER

In an action to recover damages for personal injuries, the defendants Nicholas Agostino and Orange Transportation Svc., Inc., appeal, as limited by their brief, from so much of an order of the Supreme Court, Kings County (Rothenberg, J.), dated November 17, 2011, as denied their motion 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) as a result of the subject accident.

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

The appellants 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; Kearney v Garrett, 92 AD3d 725, 726) by submitting evidence establishing that the plaintiff's alleged injuries were not caused by the subject accident (cf. Jilani v Palmer, 83 AD3d 786, 787).

However, in opposition, the plaintiff submitted evidence raising a triable issue of fact as to whether his alleged injuries were caused by the subject accident (see Perl v Meher, 18 NY3d 208, 218-219; Sforza v Big Guy Leasing Corp., 51 AD3d 659, 661). Accordingly, the Supreme Court properly denied the appellants' motion for summary judgment dismissing the complaint insofar as asserted against them.

Sheuly v Fry

H. Bruce Fischer, P.C., New York, N.Y., for appellant.
London Fischer, LLP, New York, N.Y. (Myra Needleman and Jennifer R. Budoff of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Hart, J.), dated November 21, 2011, which granted the motion of the defendants Jeremy Eugene Fry, The Walt Disney Company, Incantation Productions, Inc., and Cinema Vehicles Services East, LLC, 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) as a result of the subject accident.

ORDERED that the order is reversed, on the law, with costs, and the motion of the defendants Jeremy Eugene Fry, The Walt Disney Company, Incantation Productions, Inc., and Cinema Vehicles Services East, LLC, 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) is denied.

The movants 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). The movants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine, her right knee, her right leg, and her hips did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Fudol v Sullivan, 38 AD3d 593, 594), and that the plaintiff did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d) (see Richards v Tyson, 64 AD3d 760, 761).

In opposition, however, the plaintiff submitted evidence raising a triable issue of fact as to whether she sustained a serious injury to the lumbar region of her spine (see Perl v Meher, 18 NY3d 208, 218-219). Accordingly, the Supreme Court erred in granting the movants' motion.

Prescod v O'Brien


Eisenberg & Kirsch, Liberty (Robert M. Lefland of counsel), for appellant.
Robert I. Gruber, New York, for respondent.

Order, Supreme Court, Bronx County (Lucindo Suarez, J.), entered on or about December 8, 2011, which, insofar as appealed from, denied defendant's motion for summary judgment dismissing plaintiff's claims of serious injury to his cervical spine and left knee within the meaning of Insurance Law § 5102(d), unanimously modified, on the law, to grant the motion insofar as it sought to dismiss plaintiff's claim regarding his cervical spine, and otherwise affirmed, without costs.
Defendant met her prima facie burden as to plaintiff's alleged serious injuries.

With regard to the alleged cervical spine injury, defendant submitted the affirmed report of a radiologist opining that the MRI revealed no disc bulges, herniations, or changes causally related to the accident, and the affirmation of an orthopedist stating that plaintiff could not have sustained the alleged injuries as a result of the accident because if he had, he would have suffered from immediate pain, yet plaintiff did not seek treatment until five days after the accident (see Barry v Arias, 94 AD3d 499 [1st Dept 2012]; Paulino v Rodriguez, 91 AD3d 559 [1st Dept 2012]; Farrington v Go On Time Car Serv., 76 AD3d 818, 819 [1st Dept 2010]). Plaintiff failed to raise an issue of fact in opposition because he offered no admissible objective medical evidence of an injury to his cervical spine and the EMG/NVC study revealing radiculopathy is unsworn (see CPLR 2106; Barry v Arias, 94 AD3d at 499-500).

As to plaintiff's left knee injury, defendant met her prima facie burden by offering a radiologist's report stating that the MRI was unremarkable and showed no evidence of acute traumatic injury, and the affirmations of two orthopedists stating that any injuries were not caused by the accident. In opposition, plaintiff submitted no objective evidence in support of his claim of meniscal tears. However, plaintiff raised an issue of fact in opposition by proffering the affirmation of his orthopedist who opined that plaintiff exhibited patella crepitation and chondromalacia causing diminished range of motion in extension and flexion, and that these conditions, especially as to the left knee, were caused by the accident (see Pommells v Perez, 4 NY3d 566, 576-577 [2005]).
We have considered the defendant's remaining arguments and find them unavailing.

Oku v MTA Bus Co.

Mallilo & Grossman, Flushing, N.Y. (Francesco Pomara, Jr., of counsel), for appellant.
Sullivan & Brill, LLP, New York, N.Y. (Courtney Haskins of counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Weiss, J.), dated September 14, 2011, which granted the motion of the defendant MTA Bus Company for summary judgment dismissing the complaint insofar as asserted against it 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.

ORDERED that the order is affirmed, with costs.

The defendant MTA Bus Company (hereinafter the MTA) met its 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 MTA submitted competent medical evidence establishing, prima facie, that the plaintiff's injuries were not caused by the subject accident (see Jilani v Palmer, 83 AD3d 786, 787), and that the plaintiff did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d) (see Richards v Tyson, 64 AD3d 760, 761).

In opposition, the plaintiff failed to raise a triable issue of fact. Accordingly, the Supreme Court properly granted the MTA's motion for summary judgment dismissing the complaint insofar as asserted against it on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

Walsh v Cascone


DeSena & Sweeney, LLP, Hauppauge, N.Y. (Shawn P. O'Shaughnessy of counsel), for appellant.
Subin Associates, LLP, New York, N.Y. (Eric D. Subin of counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Richmond County (Fusco, J.), dated March 19, 2012, which denied her 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) as a result of the subject accident.
ORDERED that the order is affirmed, with costs.

The defendant met her prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The defendant established, prima facie, that the plaintiff's injuries were not caused by the subject accident (cf. Jilani v Palmer, 83 AD3d 786, 787).

In opposition, however, the plaintiff submitted evidence raising a triable issue of fact as to whether the alleged injury to his right shoulder was caused by the subject accident (see Perl v Meher, 18 NY3d 208, 218-219; Sforza v Big Guy Leasing Corp., 51 AD3d 659, 661). Accordingly, the Supreme Court properly denied the defendant's motion for summary judgment dismissing the complaint.

Zaman v Shest Hacking Corp.

Baker, McEvoy, Morrissey & Moskovits, P.C., Brooklyn, N.Y. (Stacy R. Seldin of counsel), for appellants.
Mark E. Weinberger, P.C., Rockville Centre, N.Y. (Marc J. Musman of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, etc., the defendants appeal, as limited by their brief, from so much an order of the Supreme Court, Kings County (Schmidt, J.), dated November 2, 2011, as denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff Syed Zaman did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

ORDERED that the order is affirmed insofar as appealed from, with costs.
The defendants met their prima facie burden of showing that the plaintiff Syed Zaman (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 defendants submitted competent medical evidence to establish, prima facie, that the injured plaintiff did not sustain serious injuries to the cervical or lumbar regions of his spine.

However, in opposition, the plaintiffs submitted evidence raising a triable issue of fact as to whether the injured plaintiff did sustain such serious injuries (see Perl v Meher, 18 NY3d 208, 218-219; Sforza v Big Guy Leasing Corp., 51 AD3d 659, 661). Accordingly, the Supreme Court properly denied the defendants' motion for summary judgment dismissing the complaint.

Farokhpour v Allstate Insurance Company


Feldman, Rudy, Kirby & Farquharson, P.C., Jericho, N.Y. (Brian R. Rudy of counsel), for appellant.
BenChaim & Associates, P.C. (Daniel Hirschel, Garden City, N.Y., of counsel), for respondent.

DECISION & ORDER

In an action, inter alia, to recover damages for breach of an insurance contract, the defendant appeals from so much of an order of the Supreme Court, Queens County (Pineda-Kirwan, J.), dated April 8, 2011, as denied its cross motion for summary judgment dismissing the complaint.

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

The defendant, Allstate Insurance Company (hereinafter Allstate), issued a homeowners insurance policy to the plaintiff insuring his home in Forest Hills. According to the plaintiff, on or about January 22, 2009, he discovered extensive water damage to the home resulting from a burst pipe in the second floor bathroom which caused the dining room ceiling to collapse, drywall in most of the house to be ruined, and water to cascade to the first floor and into the finished basement, which had two to three feet of standing water. Within a day, the plaintiff notified Allstate of the occurrence. Approximately two weeks later, on February 6, 2009, a claims adjuster for Allstate inspected the premises. By letter dated March 26, 2009, Allstate disclaimed coverage on the ground that the plaintiff had failed to comply with a policy condition requiring him to show the damaged property to Allstate. However, Allstate also sent a letter dated April 13, 2009, stating that its investigation of the claim was still continuing.

The plaintiff commenced this action, inter alia, to recover damages for breach of an insurance contract. Thereafter, the plaintiff moved for summary judgment on the complaint, and Allstate cross-moved for summary judgment dismissing the complaint. The Supreme Court, finding triable issues of fact, denied the motion and the cross motion. Allstate appeals from so much of the order as denied its cross motion.

In a section entitled "Conditions," the subject homeowners policy provides, in part:

"3. What You Must Do After a Loss
"In the event of a loss to any property that may be covered by this policy, you must:
. . .
as often as we reasonably require:
1) show us the damaged property."

In support of its cross motion for summary judgment dismissing the complaint, Allstate contended that it properly disclaimed coverage on March 26, 2009, due to the plaintiff's failure to comply with this condition in the policy. Allstate submitted, among other things, the affidavit of its claims adjuster, who averred that, upon receipt of the claim a day after the alleged loss, he instructed the plaintiff to mitigate his loss but told him not to make "actual repairs" until he could inspect the damage. He further averred that, when he visited the home two weeks later, on February 6, 2009, significant repairs had been made to the home which made it impossible for him to tell whether a loss had occurred and what had caused the alleged loss. In addition, Allstate submitted an affidavit of another representative stating that the letter dated April 13, 2009, which indicated that Allstate's investigation was continuing, actually referred to a "contents claim" which remained open, whereas the claim for damage to premises was disclaimed in the March letter. With this evidence Allstate established its prima facie entitlement to judgment as a matter of law demonstrating that it properly disclaimed coverage due to the plaintiff's failure to comply with the subject policy condition.

However, in opposition, the plaintiff submitted evidence, inter alia, that his home was rendered uninhabitable by the occurrence and required immediate repair, he took 145 photographs of the damage and preserved the broken pipe for Allstate's inspection, and he allowed access to the premises on February 6, which was a date chosen by Allstate as the first date its claims adjuster was available. With this evidence, the plaintiff raised a triable issue of fact as to whether he complied with the subject policy condition (cf. Christine's Shoes Corp. v 251 Main St. Corp., 267 AD2d 415 [whether tenant allowed the landlord reasonable access to the leasehold estate was a question to be resolved by the trier of fact]). In addition, the plaintiff submitted evidence that the letter from Allstate dated April 13, 2009, which indicated that the investigation was still continuing, failed to specify that it related to a different claim, and that the plaintiff spent more than $92,000 repairing his home. With this evidence, the plaintiff raised a triable issue of fact as to whether Allstate should be estopped from disclaiming coverage due to an unreasonable delay in disclaiming coverage which caused the plaintiff prejudice (cf. Topliffe v US Art Co., Inc., 40 AD3d 967, 969; Legum v Allstate Ins. Co., 33 AD3d 670; Scappatura v Allstate Ins. Co., 6 AD3d 692). Accordingly, the Supreme Court properly denied Allstate's cross motion.


Metz v State of New York


Andrew D. Bing, for appellant.
James E. Hacker, for respondents.
City of New York, amicus curiae.

LIPPMAN, Chief Judge:

The issue presented by this appeal is whether the State can be held liable to individuals who were injured and the personal representatives of those who lost their lives due to the tragic capsizing of a public vessel — the Ethan Allen. We conclude that because the State owes no special duty to these claimants, the claims that the State's inspectors failed to certify safe passenger capacity on the vessel must be dismissed.

The Ethan Allen was a public vessel operating as a tour boat on Lake George. In 2005, 20 passengers were killed and several others were injured when the boat capsized and sank. As a public vessel, the Ethan Allen had been subject to yearly State inspections, at which an inspector appointed by the Commissioner of the New York State Office of Parks, Recreation and Historic Preservation (OPRHP) would issue a certificate indicating, among other things, the vessel's maximum passenger capacity. At the time the vessel sank, it had been carrying 47 passengers and 1 crew member, within the 48-passenger maximum set forth in the certificate of inspection.

The State regulates the use of public vessels under the Navigation Law [FN1]. In order to operate a public vessel upon the state's waters, a certificate of inspection is required (see Navigation Law § 50). An inspector must carefully examine the vessel and its equipment and, "if satisfied that [the ship] is in all respects safe and conforms to the requirement[s of the Navigation Law], shall" execute the certificate of inspection (Navigation Law §§ 63, 13). The inspector is also required to determine the number of passengers that can be safely transported and that number — along with the number of crew members necessary to safely operate the vessel — must be set forth in the certificate of inspection (see Navigation Law §§ 13, 63).

The Ethan Allen was constructed in 1964 and its first inspections were conducted by the United States Coast Guard. The vessel's last certificate of inspection from the Coast Guard set forth a maximum passenger capacity of 48 persons and 2 required crew members, for a total capacity of 50 persons. From 1979, when ORPHP began certifying the ship, to the time of the accident in 2005, the passenger capacity was consistently certified at 48 persons. This was so, despite the fact that the Ethan Allen was modified in 1989 — replacing its canvas canopy with a canopy made of wood. Several State inspectors testified at their examinations before trial that they did not independently verify the vessel's passenger capacity by conducting a stability test, but rather relied on the number certified from the previous year. For instance, one inspector agreed that the number was "rubber stamped" based on the capacity from the prior certificate of inspection and another referred to the passenger capacity certified by the Coast Guard as "gospel."

The 48-passenger limit certified by the State inspectors was, however, much higher than the level at which the vessel could safely be operated. Notably, since this accident, the State has increased the average weight per passenger from 140 pounds — an approximation apparently adopted in the 1950s and utilized by the Coast Guard — to 174 pounds.

Claimants commenced this action against the State alleging that it had been negligent in certifying an unsafe passenger capacity, resulting from the use of outdated passenger weight criteria, and in failing to require a new stability assessment after the vessel had been significantly modified. The State answered raising several defenses, including governmental immunity.

The Court of Claims denied claimants' motion to dismiss the State's affirmative defense of immunity and denied the State's cross-motion for summary judgment. The court found insufficient evidence to allow it to determine whether the inspections were proprietary or governmental in nature. In addition, the court found issues of fact as to whether the inspections were ministerial or discretionary acts.

The Appellate Division modified by granting claimants' motion to dismiss the State's affirmative defense, dismissed the affirmative defense and, as so modified, affirmed (86 AD3d 748 [3d Dept 2011]). The Court found that the inspections were a governmental function, but concluded that the State had failed to demonstrate that its inspectors had in fact exercised any discretion in certifying the vessel's passenger capacity. The Appellate Division granted the State's motion for leave to appeal to this Court, certifying the following question for our review: "Did this Court err, as a matter of law, in modifying, on the law, the order of [the Court of Claims], by reversing so much thereof as denied claimants' motion to dismiss defendant's affirmative defense of sovereign immunity; granting said motion and dismissing the affirmative defense; and, as so modified, affirming the order?" We reverse and answer the certified question in the affirmative.

As we recently made clear in Valdez v City of New York (18 NY3d 69, 80 [2011]), claimants must first establish the existence of a special duty owed to them by the State before it becomes necessary to address whether the State can rely upon the defense of governmental immunity. In that vein, it is well settled that the State "is not liable for the negligent performance of a governmental function unless there existed 'a special duty to the injured person, in contrast to a general duty owed to the public'" (McLean v City of New York. 12 NY3d 194, 199 [2009], quoting Garrett v Holiday Inns, 58 NY2d 253, 261 [1983]).

Plainly, the inspections at issue here are consistent with those that we have deemed governmental functions. The vessel inspections are undertaken by the State for safety purposes and are akin to inspections conducted by a municipality when issuing certificates of occupancy or determining compliance with fire and safety codes (see Worth Distribs. v Latham, 59 NY2d 231, 237 [1983]; Garrett, 58 NY2d at 261).

We have recognized three ways in which a special relationship can be formed, resulting in a special duty — "'(1) when the municipality violates a statutory duty enacted for the benefit of a particular class of persons; (2) when it voluntarily assumes a duty that generates justifiable reliance by the person who benefits from the duty; or (3) when the municipality assumes positive direction and control in the face of a known, blatant and dangerous safety violation'" (McLean, 12 NY3d at 199 [citations omitted]). Here, claimants focus on the State's alleged violation of its duty under the Navigation Law.

"[I]n the absence of some special relationship creating a duty to exercise care for the benefit of particular individuals, liability may not be imposed on a municipality for failure to enforce a statute or regulation" (O'Connor v City of New York, 58 NY2d 184, 192 [1983]). The statutory scheme at issue here does require inspectors to issue a certificate of inspection indicating that the vessel is safe and, specifically, certifying the number of passengers the vessel can safely transport (see Navigation Law §§ 13, 63). However, these statutory obligations do not create a special duty of care owed by the State to particular passengers. Rather, this case is similar to O'Connor, where the City's inspector either failed to observe a defect in the gas piping system or failed to insist that such defect be corrected before certifying that the system satisfied the applicable building department rules and regulations. We observed that those regulations were intended to benefit the persons who were injured in the explosion that ensued after the defective gas system was activated "but in the broad sense of protecting all members of the general public similarly situated" (O'Connor, 58 NY2d at 190). There, as here, the provisions at issue — although clearly designed to protect public safety — did not create a duty to particular individuals.

Moreover, recognizing a private right of action would be incompatible with the legislative design. The Navigation Law does not provide for governmental tort liability, but instead for fines and criminal penalties to be imposed upon vessel owners and operators (see e.g. Navigation Law § 62 [negligence on the part of vessel owners/employees that results in the death of a passenger is a class E felony]; Navigation Law §§ 58, 73-b [an owner or operator who overloads the vessel beyond the designated passenger capacity will be guilty of a misdemeanor]). In addition, when the Legislature amended the Navigation Law in response to this tragedy, it imposed additional safety standards and enhanced certain penalties, but still did not provide for a private right of action (see L 2007, ch 320, as amended). Under these circumstances, we can infer that the Legislature has determined that these penalties are the best way to enforce violations of the Navigation Law and that the failure to establish a private right of action against the State was deliberate (see e.g. McLean, 12 NY3d at 200-201).

Although the law is clear, the upshot is that, regardless of any negligence on the part of the State, the victims of this disastrous wreck are essentially left without an adequate remedy. The Legislature currently has a proposal before it to require public vessels to carry marine protection and indemnity insurance (2011 NY Assembly Bill A6699). We note that such a requirement — had it existed — might have been able to provide a modicum of relief here.

In light of our determination, it is unnecessary to address the parties' remaining contentions.

Accordingly, the order of the Appellate Division should be reversed, with costs, the claims dismissed and the certified question answered in the affirmative.
* * * * * * * * * * * * * * * * *
Order reversed, with costs, the claims dismissed and the certified question answered in the affirmative. Opinion by Chief Judge Lippman. Judges Ciparick, Graffeo, Read, Smith and Pigott concur.
Decided November 29, 2012
Footnotes

Footnote 1: "'Public Vessel' shall mean and include every vessel which is propelled in whole or in part by mechanical power and is used or operated for commercial purposes on the navigable waters of the state; that is either carrying passengers, carrying freight, towing, or for any other use; for which a compensation is received" (Navigation Law § 2 [6][a]).

Albano-Plotkin v Travelers Insurance Company


Dupée & Monroe, P.C., Goshen, N.Y. (James E. Monroe of counsel), for appellants.
Hiscock & Barclay, LLP, Rochester, N.Y. (William C. Foster and Joseph A. Wilson of counsel), for respondent.

DECISION & ORDER

In an action for a judgment declaring that the defendant Travelers Insurance Company is obligated to defend and indemnify the plaintiffs in an underlying action entitled Torres v Wal-Mart, pending in the Supreme Court, Orange County, under Index No. 1299/2009, the plaintiffs appeal from an order of the Supreme Court, Orange County (Bartlett, J.), dated June 2, 2011, which granted the motion of the defendant Travelers Insurance Company, in effect, for summary judgment declaring that the defendant Travelers Insurance Company is not obligated to defend and indemnify them in the underlying action, and denied their cross motion for summary judgment declaring that the defendant Travelers Insurance Company is so obligated. Justice Lott has been substituted for former Justice Belen (see 22 NYCRR 670.1[c]).

ORDERED that the order is modified, on the law, by deleting the provision thereof granting the motion of the defendant Travelers Insurance Company, in effect, for summary judgment declaring that the defendant Travelers Insurance Company is not obligated to defend and indemnify the plaintiffs in the underlying action, and substituting therefor a provision denying that motion; as so modified, the order is affirmed, without costs or disbursements
.
On August 14, 2008, the infant plaintiff, while riding a bicycle inside a Wal-Mart store, allegedly struck and injured the defendant Ines Torres. Approximately six months later, on February 21, 2009, the infant plaintiff and his mother, the plaintiff Rita Albano-Plotkin (hereinafter the mother), were served with a summons and complaint in an action (hereinafter the underlying action) commenced by the defendants Ines and Phillip Torres (hereinafter the Torreses). According to the mother, she subsequently consulted with an attorney and was surprised to learn that her homeowner's insurance policy might provide coverage for accidents occurring off the insured premises. The next day, the plaintiffs' attorney mailed a letter to the defendant Travelers Insurance Company (hereinafter Travelers), which had issued the homeowner's policy, notifying it of the accident.

After Travelers disclaimed coverage on the ground of late notice, the plaintiffs commenced this action against Travelers and the Torreses for a judgment declaring that Travelers is obligated to defend and indemnify them in the underlying action. Travelers moved for summary judgment, in effect, declaring that it was not obligated to defend and indemnify the plaintiffs in the underlying action, and the plaintiffs cross-moved for summary judgment declaring that it was so obligated, contending that their delay in notifying Travelers was excused by their justifiable ignorance of available coverage for the off-premises accident. The Supreme Court granted Travelers' motion and denied the plaintiffs' cross motion. The plaintiffs appeal.

"[T]he providing of timely notice to an insurer is a condition precedent to recovery and, absent a valid excuse, the failure to satisfy the notice requirement vitiates the policy" (Nationwide Ins. Co. v Empire Ins. Group, 294 AD2d 546, 548 [citation omitted]; see McGovern-Barbash Assoc., LLC v Everest Natl. Ins. Co., 79 AD3d 981, 983). To establish a valid excuse due to the insured's alleged ignorance of insurance coverage, the insured has the burden of proving "a justifiable lack of knowledge of insurance coverage" and "reasonably diligent efforts to ascertain whether coverage existed" upon receiving information "which would have prompted any person of ordinary prudence to consult either an attorney or an insurance broker" (Winstead v Uniondale Union Free School Dist., 201 AD2d 721, 723; see Sitnick v Travelers Ins. Co., 82 AD3d 573, 573; Seemann v Sterling Ins. Co., 267 AD2d 677, 678; Padavan v Clemente, 43 AD2d 729, 729-730). The sufficiency of an excuse ordinarily presents a question of fact to be determined at trial (see Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 42-43; Winstead v Uniondale Union Free School Dist., 170 AD2d 500, 503), and may be decided as a matter of law "only when the facts are undisputed and not subject to conflicting inferences" (St. James Mech., Inc. v Royal & Sunalliance, 44 AD3d 1030, 1031; see Greenwich Bank v Hartford Fire Ins. Co., 250 NY 116, 131; Preferred Mut. Ins. Co. v New York Fire-Shield, Inc., 63 AD3d 1249, 1251).

Here, Travelers established its prima facie entitlement to judgment as a matter of law by demonstrating that the plaintiffs had knowledge of the accident but failed to notify it of the occurrence until approximately seven months thereafter (see McGovern-Barbash Assoc., LLC v Everest Natl. Ins. Co., 79 AD3d at 983). In opposition, the plaintiffs raised a triable issue of fact as to the existence of a reasonable excuse for the delay in notification with evidence that they were unaware that the subject homeowner's policy, in addition to providing coverage for incidents which occurred in the family home, also provided coverage for this incident which occurred in a Wal-Mart store, and that, upon receiving the summons in the underlying action, they retained counsel who notified Travelers of the claim (see Sitnick v Travelers Ins. Co., 82 AD3d at 573; Seemann v Sterling Ins. Co., 234 AD2d 672, 673). Accordingly, the Supreme Court should have denied Traveler's motion for summary judgment.

However, the Supreme Court properly denied the plaintiffs' cross motion for summary judgment. In support of the cross motion, the plaintiffs submitted evidence, inter alia, that they had received and were aware of the policy declarations page, which stated that the subject homeowner's policy provided "personal liability" coverage for "bodily injury" and "medical payments to others," without expressly limiting that coverage to occurrences at the subject home. Thus, the plaintiffs failed to eliminate a triable issue as to whether their ignorance of coverage was justifiable (see Winstead v Uniondale Union Free School Dist., 201 AD2d at 723; cf. Sitnick v Travelers Ins. Co., 82 AD3d at 573; Seemann v Sterling Ins. Co., 267 AD2d at 678). Since the plaintiffs failed to establish their prima facie entitlement to judgment as a matter of law, their cross motion for summary judgment declaring that Travelers is obligated to defend and indemnify them in the underlying action was properly denied, without regard to the sufficiency of Travelers' papers in opposition (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).

Robert Pitt Realty, LLC v 19-27 Orchard Street, LLC

Clausen Miller P.C., New York (Daniel S. Valinoti, and Mark J. Sobczak of the bar of the State of Illinois, admitted pro hac vice, of counsel), for appellants.
Lewis Johs Avallone Aviles, Islandia (Elizabeth A. Fitzpatrick of counsel), for Robert Pitt Realty, LLC and The Hartford Insurance Company, respondents.

Order, Supreme Court, Bronx County (Mark Friedlander, J.), entered on or about December 13, 2010, which, to the extent appealed from as limited by the briefs, granted plaintiffs Robert Pitt Realty, LLC and the Hartford Insurance Company's motion for summary judgment declaring that defendant Essex Insurance Company (Essex) owed a duty to defend and indemnify Robert Pitt Realty, LLC in the underlying action, and denied the cross motion by defendants Essex and Markel Group for summary judgment declaring that Essex has no duty to defend or indemnify Robert Pitt Realty, LLC (Robert Pitt), The Hartford Insurance Company, 19-27 Orchard Street, LLC (19-27) and 24 & 27 Orchard Street Corp. (24 & 27) with respect to the underlying personal injury action, unanimously modified, on the law, plaintiffs' motion for summary judgment denied, defendants' cross motion granted to the extent of declaring that Essex has no duty to defend or indemnify 19-27 or 24 & 27, and otherwise affirmed, without costs.

This declaratory judgment action arises from an underlying bodily injury action brought by Victor Velez in which it is alleged that he was injured during the course and scope of his employment with defendant Avante Building & Consulting Corp. (Avante) on June 23, 2004. Avante was purportedly hired by 24 & 27 to perform work within premises owned by Robert Pitt and leased by 24 & 27. [*2]

The "Separation of Insureds Condition" contained within the Essex policy does not negate the portion of the policy which precludes coverage to Robert Pitt, the additional insured, when no coverage is extended to 24 & 27, the named insured, on grounds of ambiguity. Rather, it "primarily highlights the named insured's separate rights and duties, as well as makes clear that the limits of the policy are to be shared by all of the insureds . . . [who] must share [the limit of coverage] equally; [and] it does not negate bargained-for exclusions, or otherwise expand, or limit coverage" (DRK, LLC v Burlington Ins. Co., 74 AD3d 693, 694 [1st Dept 2010], lv denied 16 NY3d 702 [2011]). Thus, it does not render the policy's coverage or exclusion provisions ambiguous, and therefore, Robert Pitt's entitlement to coverage must be analyzed within the reasons cited by Essex's disclaimer to 24 & 27. Stated differently, as indicated in the insurance policy, whether Robert Pitt is entitled to coverage will generally turn on whether 24 & 27 is entitled to coverage.

Preliminarily, Essex establishes that the notice of the accident provided by 24 & 27, approximately three months after the accident in question, was untimely as a matter of law. Accordingly, since Essex timely disclaimed coverage to 24 & 27 on this basis, it properly denied coverage to 24 & 27. This, however, does not preclude coverage to Robert Pitt since although additional insured Robert Pitt, the out-of-possession landlord/owner of the premises where Velez was injured, was advised of the late notice provided by its tenant, the named insured, there was no specific disclaimer from Essex to Robert Pitt on this basis. Notwithstanding the policy's preclusion of coverage to Robert Pitt when no coverage was extended to 24 & 27, as a separate insured, Robert Pitt was entitled to its own disclaimer on grounds that it failed to timely notify Essex of the accident for which it seeks coverage (Sport Rock Intl., Inc. v American Cas. Co. of Reading, Pa., 65 AD3d 12, 17 [1st Dept 2009]). Since Essex failed to provide Robert Pitt with a timely disclaimer this defense was abandoned, and it cannot deny coverage to Robert Pitt on this ground (see General Acc. Ins. Group v Cirucci, 46 NY2d 862, 864 [1979]; Greaves v Public Serv. Mut. Ins. Co., 5 NY2d 120, 124 [1959]).

Essex's denial of coverage to 24 & 27 on the ground that the incident did not occur at a covered location is unavailing and unsupported by the record. The deposition testimony and the lease clearly established that the premises at which the work in question was being performed was "the Building at 25 Robert Pitt Drive, Monsey, NY 10952." Accordingly, Essex would not have been able to deny coverage to 24 & 27 on this ground and thus cannot deny coverage to Robert Pitt on this ground either.

Based on the deposition testimony, factual issues remain as to whether, Essex has a duty to defend and indemnify 24-27 and thus Robert Pitt or whether the exclusion for "bodily injury" or "property damage" arising out of the acts or omissions of the named insured or its employees, other than general supervision of "work" performed for the named insured by the "contractor," applies. Since whether Essex is entitled to deny coverage to 24 & 27 is dispositive on the issue of coverage to Robert Pitt, based on the foregoing, the motion court erred in granting summary judgment to plaintiffs.

Insofar as 19-27 owned the adjacent lot, a premise separate and apart from the premises covered under the policy, Essex had no duty to defend or indemnify it. Thus, Essex properly denied coverage to 19-27.

In the Matter of Liberty Mut. Ins. Co. v Rothfeld


Jaffe & Asher, LLP, New York, N.Y. (Marshall T. Potashner of counsel), for appellant.
Shayne, Dachs, Corker, Sauer & Dachs, LLP, Mineola, N.Y. (Jonathan A. Dachs of counsel), for respondent.

DECISION & ORDER
In a proceeding pursuant to CPLR article 75 to compel arbitration of Debre M. Rothfeld's claim for supplementary uninsured/underinsured motorist benefits, the petitioner appeals from (1) an order of the Supreme Court, Nassau County (Diamond, J.), dated March 19, 2012, which denied its petition to compel arbitration on the issue of whether Debre M. Rothfeld's claim was barred by a policy exclusion, and (2) a judgment of the same court dated May 7, 2012, which, upon the order, directed the arbitration to proceed only as to the issues of Debre M. Rothfeld's right to recover from the uninsured/underinsured tortfeasor and the amount of her alleged damages recoverable under the supplementary uninsured/underinsured endorsement.

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

ORDERED that the judgment is affirmed; and it is further,

ORDERED that one bill of costs is awarded to Debre M. Rothfeld.

The appeal from the intermediate order dated March 19, 2012, must be dismissed because the right of direct appeal therefrom terminated with the entry of the judgment in the action (see Matter of Aho, 39 NY2d 241, 248). The issues raised on the appeal from the intermediate order are brought up for review and have been considered on the appeal from the judgment (see CPLR 5501[a][1]).
Debre M. Rothfeld made a claim under a supplementary uninsured/underinsured motorist (hereinafter SUM) endorsement issued to her parents by the petitioner, Liberty Mutual Fire Insurance Company (hereinafter Liberty Mutual). Liberty Mutual thereafter filed a petition to compel arbitration of the issue of whether Rothfeld's claim was barred by a policy exclusion. The Supreme Court determined that Liberty Mutual was not entitled to arbitrate that issue, and directed that arbitration proceed only as to the issues of Rothfeld's right to recover from the uninsured/underinsured tortfeasor and the amount of her alleged damages recoverable under the SUM endorsements.

The SUM endorsement at issue in this case provided for arbitration of disagreements as to whether the insured was "legally entitled to recover damages from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by the insured, or . . . as to the amount of the payment that may be owing under this SUM coverage." Contrary to Liberty Mutual's contention, the portion of this clause requiring arbitration "as to the amount of the payment that may be owing under this SUM coverage" cannot be read to cover questions of whether a claim is excluded from coverage. Rather, the subject arbitration clause was "particular, not general," and "made arbitrable to fact issues only," that is, whether Rothfeld was entitled to recover from the uninsured/underinsured motorist, and the amount of damages recoverable under the SUM endorsement (Matter of Rosenbaum [American Sur. Co. of N.Y.], 11 NY2d 310, 314; see Matter of Travelers Indem. Co. [Levy], 195 AD2d 35, 39-40; cf. Matter of Prudential Prop. & Cas. Ins. Co. [Hidalgo], 133 AD2d 87, 87 [involving a broad arbitration clause, which provided for arbitration of disputes as to: "whether or not a claim [under the underinsured motorist endorsement] is payable and the actual amount we'll pay" (emphasis added)]). Accordingly, the Supreme Court properly denied the petition to compel arbitration on the issue of whether Rothfeld's claim was barred by a policy exclusion and properly directed arbitration to proceed only as to the issues of Rothfeld's right to recover from the uninsured/underinsured tortfeasor and the amount of her alleged damages recoverable under the SUM endorsement.

Lancer Insurance Company v Louis Provenzano, Inc.

The Sullivan Law Group, LLP, New York, N.Y. (Dana B. Hoffman and Robert M. Sullivan of counsel), for third-party defendants-appellants-respondents.
Law Offices of Curtis, Vasile P.C., Merrick, N.Y. (Patricia M. D'Antone and Roy W. Vasile of counsel), for plaintiff-respondent-appellant.
Marcus Rosenberg & Diamond LLP, New York, N.Y. (David Rosenberg and Pamela D. Evans of counsel), for defendant third-party plaintiff-respondent-appellant.

DECISION & ORDER

In an action for a judgment declaring, inter alia, that the plaintiff is not obligated to defend or indemnify the defendant third-party plaintiff and the defendant Cyrus Jennings in an underlying action entitled LoDuca v Louis Provenzano, Inc., commenced in the Supreme Court, Kings County, under Index No. 729/08, and a related third-party action, inter alia, for a judgment declaring that the third-party defendants are obligated to indemnify the defendant third-party plaintiff in the underlying action to the extent the plaintiff is not obligated to indemnify the defendant third-party plaintiff, the third-party defendants appeal from so much of an order of the Supreme Court, Nassau County (Parga, J.), entered October 11, 2011, as denied their cross motion, in effect, for summary judgment dismissing the third-party causes of action, in effect, to recover damages for negligence and breach of contract and declaring that they are not obligated to indemnify the defendant third-party plaintiff in the underlying action or, alternatively, pursuant to CPLR 3211(a)(7) to dismiss the third-party complaint, the plaintiff cross-appeals, as limited by its brief, from so much of the same order as denied its cross motion for summary judgment declaring, among other things, that it is not obligated to defend or indemnify the defendant third-party plaintiff and the defendant Cyrus Jennings in the underlying action, and the defendant third-party plaintiff cross-appeals, as limited by its brief, from so much of the same order as denied that branch of its motion which was for summary judgment declaring that the third-party defendant Yankee Brokerage, Inc., is obligated to indemnify it in the underlying action and denied its cross motion for summary judgment declaring that the plaintiff is obligated to defend and indemnify it in the underlying action.

ORDERED that the order is modified, on the law, (1) by deleting the provision thereof denying that branch of the third-party defendants' cross motion which was, in effect, for summary judgment dismissing the third-party causes of action, in effect, to recover damages for negligence and breach of contract and declaring that they are not obligated to indemnify the defendant third-party plaintiff in the underlying action, and substituting therefor a provision granting that branch of that cross motion, and (2) by deleting the provision thereof denying the defendant third-party plaintiff's cross motion for summary judgment declaring that the plaintiff is obligated to defend and indemnify it in the underlying action, and substituting therefor a provision granting that cross motion; as so modified, the order is affirmed insofar as appealed and cross-appealed from, with one bill of costs to the third-party defendants payable by the defendant third-party plaintiff, and one bill of costs to the defendant third-party plaintiff payable by the plaintiff, and the matter is remitted to the Supreme Court, Nassau County, for the entry of a judgment, inter alia, declaring that the plaintiff is obligated to defend and indemnify the defendant third-party plaintiff in the underlying action and that the third-party defendants are not obligated to indemnify the defendant third-party plaintiff in the underlying action.

Lancer Insurance Company (hereinafter Lancer) commenced the instant action for a judgment declaring, inter alia, that it is not obligated to defend or indemnify the defendant third-party plaintiff, Louis Provenzano, Inc. (hereinafter LPI), and the defendant Cyrus Jennings in an underlying action entitled LoDuca v Louis Provenzano, Inc., commenced in the Supreme Court, Nassau County (hereinafter the underlying action). The complaint in the underlying action alleged that Jennings, a parking garage attendant employed by LPI at a parking garage owned by LPI, assaulted Salvatore LoDuca at the garage after a verbal altercation. Lancer alleged, in its complaint, that it was not obligated to provide coverage for LPI's claim with respect to the subject incident under a "Garage Non-Dealer's Liability Insurance Policy" (hereinafter the Garage Non-Dealer's Policy) issued to LPI for the parking garage premises on the ground that the defendants failed to timely notify Lancer of the subject incident. Lancer later amended its complaint to allege that, in addition to the Garage Non-Dealer's Policy, it was not obligated to provide coverage under a "Garage Dealer's Liability Insurance Policy" (hereinafter the Garage Dealer's Policy) issued to LPI for the same premises.

Subsequently, LPI commenced a third-party action against Yankee Brokerage, Inc. (hereinafter Yankee), the insurance broker which procured the subject insurance policies for LPI, and Jeff Goldstein, Yankee's president (hereinafter together the Yankee defendants). LPI asserted causes of action, in effect, to recover damages for the Yankee defendants' alleged negligence and breach of contract in failing to provide timely notice of the subject incident to Lancer on behalf of LPI, and for a judgment declaring that the Yankee defendants are obligated to indemnify LPI in the underlying action to the extent Lancer is not obligated to indemnify it.

LPI moved, inter alia, for summary judgment declaring that Yankee is obligated to indemnify it in the underlying action. The Yankee defendants cross-moved, among other things, in effect, for summary judgment dismissing the third-party causes of action, in effect, to recover damages for negligence and breach of contract and declaring that they are not obligated to indemnify LPI in the underlying action. Lancer cross-moved for summary judgment declaring, inter alia, that it is not obligated to defend or indemnify LPI and Jennings in the underlying action. LPI cross-moved for summary judgment declaring that Lancer is obligated to defend and indemnify it in the underlying action. The Supreme Court denied the motion and the cross motions.

The Supreme Court properly denied that branch of LPI's motion which was for summary judgment awarding it declaratory relief against Yankee, and Lancer's motion for summary judgment awarding it declaratory relief against LPI and Jennings. The Supreme Court erred, however, in denying that branch of the Yankee defendants' cross motion which was, in effect, for summary judgment dismissing the third-party causes of action, in effect, to recover damages for negligence and breach of contract and declaring that they are not obligated to indemnify LPI in the underlying action, and LPI's cross motion for summary judgment declaring that Lancer is obligated to defend and indemnify it in the underlying action.

LPI and the Yankee defendants demonstrated their prima facie entitlement to judgment as a matter of law by presenting evidence that, although Lancer disclaimed coverage for the subject incident under the Garage Non-Dealer's Policy, it failed to disclaim coverage under the [*3]Garage Dealer's Policy, which also provided coverage for LPI's claim based on the subject incident. " As with the construction of contracts generally, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court'" (Farm Family Cas. Ins. Co. v Brady Farms, Inc., 87 AD3d 1324, 1326, quoting Vigilant Ins. Co. v Bear Stearns Cos., Inc., 10 NY3d 170, 177). Here, LPI and the Yankee defendants demonstrated, prima facie, that the Garage Dealer's Policy clearly and unambiguously provides coverage for the subject incident.

In opposition, Lancer failed to raise a triable issue of fact. In general, whenever an insurer wishes to exclude certain coverage from its policy obligations, it must do so "in clear and unmistakable" language, and any such exclusions or exceptions from policy coverage must be specific and clear in order to be enforced (see Insurance Co. of Greater N.Y. v Clermont Armory, LLC, 84 AD3d 1168, 1170). Contrary to Lancer's contention, the Garage Dealer's Policy contains no language expressly limiting coverage under the policy to the operations of LPI's auto dealership. Therefore, the Garage Dealer's Policy does not exclude coverage for the subject incident, which occurred in the course of LPI's parking garage operations. Accordingly, in light of its failure to disclaim coverage for the subject incident under the Garage Dealer's Policy, Lancer is obligated to defend and indemnify LPI in the underlying action (see Guzman v Nationwide Mut. Fire Ins. Co., 62 AD3d 946). Since Lancer is obligated to indemnify LPI in the underlying action, the Yankee defendants are entitled to summary judgment dismissing the third-party causes of action, in effect, to recover damages for negligence and breach of contract based upon their alleged failure to provide timely notice of the subject incident to Lancer on behalf of LPI, and declaring that the Yankee defendants are not obligated to indemnify LPI in the underlying action.

Since this is, in part, a declaratory judgment action, the matter must be remitted to the Supreme Court, Nassau County, for the entry of a judgment, inter alia, declaring that Lancer is obligated to defend and indemnify LPI in the underlying action, and that the Yankee defendants are not obligated to indemnify LPI in the underlying action (see Lanza v Wagner, 11 NY2d 317, appeal dismissed 371 US 74, cert denied 371 US 901).

In light of our determination, we need not reach the parties' remaining contentions.

Union Carbide Corp. v Affiliated FM Insurance Co.


Ford Marrin Esposito Witmeyer & Gleser, LLP, New York (Catherine B. Altier of counsel), for Columbia Casualty Company and Continental Casualty Company, appellants.
Litchfield Cavo LLP, New York (Edward Fogarty, Jr., and Brian M. Reid of the bar of the State of Illinois, admitted pro hac vice, of counsel), for Argonaut Insurance Company, appellant.
Proskauer Rose LLP, Chicago, IL (Steven R. Gilford of the bar of the State of Illinois, admitted pro hac vice, of counsel), for respondent.

Order, Supreme Court, New York County (Charles E. Ramos, J.), entered January 4, 2011, which granted plaintiff's motion for partial summary judgment striking defendant Argonaut Insurance Company's defense that there should be no insurance coverage because plaintiff expected or intended the bodily injury claims that resulted from exposure to its asbestos products, and denied Argonaut's motion for summary judgment on the same issue, unanimously affirmed, with costs.

Plaintiff met its burden of establishing that the damages at issue were the result of an "occurrence" and thus that defendant's policy provided coverage (see Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 220 [2002]). Indeed, the record supports plaintiff's contention that, although it was aware of some risk involved in the utilization of asbestos, at all times relevant to this appeal, it believed that its asbestos products could be used safely under the right conditions. Plaintiff also offered, as further proof of any lack of intent, evidence that it published regulatory information in trade periodicals and provided information regarding the dangers of asbestos, as well as guidance concerning its proper usage, to its clients and potential customers (see Santoro ex rel. Santoro v Donnelly, 340 F Supp 2d 464, 486 [SD NY 2004] [New York law presumes that users will heed warnings provided with a product]). In addition, plaintiff presented evidence that, during the relevant time period, the federal government shared plaintiff's belief that asbestos could be used safely and, to that end, promulgated regulations designed to control, monitor and record asbestos usage — but, importantly, did not ban it.

Since plaintiff established coverage, the burden shifted to defendants to show that, pursuant to the policy's exclusion, plaintiff intended the damages (see Consolidated Edison, 98 NY2d at 220; Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 649 [1993]). Defendants have failed in this regard.

Defendants asserted that plaintiff intended the damages because it knew that asbestos would cause injuries and that claims would be filed against it. The record, however, shows that plaintiff was merely aware that asbestos could cause injuries and that claims could be filed. Plaintiff's "calculated risk" in manufacturing and selling its products despite its awareness of possible injuries and claims does not amount to an expectation of damage (Continental Cas., 80 NY2d at 649).

Defendants' collateral estoppel argument based on a California jury verdict also fails. The nature of the jury instructions in the California case renders it impossible to discern exactly which facts, or acts of plaintiff, played a part in the jury's decision, or upon exactly which portion of the jury instruction (i.e., malice, oppression or fraud) the jury based its punitive damages award. As such, defendants cannot show an "an identity of issue which has necessarily been decided in the prior action and is decisive of the present action" (Schwartz v Public Adm'r of County of Bronx, 24 NY2d 65, 71 [1969]).

We have considered defendants' remaining arguments and find them unavailing.

Lall v Ali


Marjorie E. Bornes, Brooklyn, for appellants.
Litman & Litman, P.C., East Williston (Jeffrey Litman of counsel), for Jean Ramsaroop Lall, respondent.
Law Offices of Karen L. Lawrence, Tarrytown (David Holmes of counsel), for Wieslaw Kalemba, respondent.

Order, Supreme Court, Bronx County (Patricia Anne Williams, J.), entered February 1, 2011, which, to the extent appealed from as limited by the briefs, denied defendants Ali and Hassan's motion for summary judgment dismissing plaintiff Jean Ramsaroop Lall's claim of serious injury of a nonpermanent nature under Insurance Law § 5102(d), unanimously reversed, on the law, without costs, and the motion granted, and, upon a search of the record, defendant Kalemba's motion for summary judgment dismissing Jean Ramsaroop Lall's complaint as against him is granted. The Clerk is directed to enter judgment in defendants' favor dismissing Jean Ramsaroop Lall's complaint.

The record demonstrates that plaintiff Jean Ramsaroop Lall did not sustain a serious injury of a nonpermanent nature (Insurance Law § 5102[d]). Defendants' radiologist opined that plaintiff's alleged lumbar spine injuries were degenerative and not related to the accident, and, in opposition, plaintiff failed to refute that evidence (see Reyes v Esquilin, 54 AD3d 615 [1st Dept 2008]). Even if the radiologist and physician's unaffirmed reports plaintiff submitted are properly considered, they are insufficient to raise an issue of fact. The radiologist did not address causation, and the physician's opinion was too general (see Winters v Cruz, 90 AD3d 412 [1st Dept 2011]).

Because plaintiff cannot meet the serious injury threshold against the appealing defendants, she cannot meet it against the nonappealing defendant (see Lopez v Simpson, 39 AD3d 420 [1st Dept 2007]).

Melo v. Grullo


Frekhtman & Associates, Brooklyn (Andrew Green of counsel), for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., Brooklyn (Stacy R. Seldin of counsel), for respondent.

Order, Supreme Court, Bronx County (Stanley Green, J.), entered August 3, 2011, which granted defendants' motion for summary judgment dismissing the complaint on the threshold issue of serious injury under Insurance Law § 5102(d), unanimously modified, on the law, to deny the motion as to the claims of serious injury resulting in "permanent consequential" or "significant" limitations and fracture, and otherwise affirmed, without costs.

Defendant established prima facie that plaintiff did not sustain a serious injury resulting in either a "permanent consequential" or a "significant" limitation of use of his lumbar spine by submitting an affirmation by a neurologist who examined plaintiff and found a full range of motion of the lumbar spine,
and diagnosed him with a resolved lumbar sprain/strain (see Baez v Boyd, 90 AD3d 524 [1st Dept 2011]).

In opposition, plaintiff raised an issue of fact by submitting an MRI report by his radiologist, who found a disc herniation at L4-5; a report by a physician who opined that a subsequent MRI of the lumbar spine revealed an acute compression fracture of the endplate at L-3 and disc herniations at L4-5 and other levels; his chiropractor's affidavit showing range of motion limitations contemporaneous with the accident; and affirmations by three physicians who found continuing limitations and opined that these limitations were permanent and that the lumbar injuries were directly caused by the accident (see Thompkins v Ortiz, 95 AD3d 418 [1st Dept 2012]). This record does not support plaintiff's contention that he suffered a permanent loss of use of his lumbar spine (see Oberly v Bangs Ambulance, 96 NY2d 295, 299 [2001]).

Defendant established prima facie that plaintiff did not sustain a 90/180-day injury by submitting plaintiff's bill of particulars and deposition testimony acknowledging that he was confined to bed and home for only a week; in opposition, plaintiff failed to raise an issue of fact (see Hospedales v "John Doe," 79 AD3d 536 [1st Dept 2010]).

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