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Coverage Pointers - Volume XIV, No. 14

Dear Coverage Pointers Subscribers:

You have a situation?  We love situations. 

We’re happy to be on this side of the fiscal cliff and we’re hopeful that in the first week of the 113th Congress, some needed relief is provided for those who have suffered and continue to suffer as a result of Sandy’s wrath.

Happy New Year.  Your editor brings you greetings from Scottsdale, AZ where it is significantly warmer than most of the places where today’s callers were hailing.  We are mixing pleasure with business and surely enjoying our escape from sub-freezing temperatures back home.  We hope that the smell of Coppertone does not dissuade you from enjoying this issue of Coverage Pointers.

With the new year upon us, we announce the promotion of Jennifer Ehman to Assistant Editor, giving Margo Lagueras respite from the responsibilities she has so ably handled for three years or so.  Thank you to both Margo and Jen.  Both will continue to handle their columns, with Jen covering both bad faith and NY lower court decisions.

Presidential Biography Marathon Continues

I made a resolution, some time ago, to read US Presidential biographies in order.  For those still keeping track, we’re through Washington, Adams, Madison, Monroe, Jefferson, John Quincy Adams, Andrew Jackson, Martin Van Buren, Wm. Henry Harrison, John Tyler and James Polk.  I just downloaded a biography of Zachary Taylor, famed only for his role in Polk’s Mexican war and selecting Millard Fillmore as his VP candidate. Fillmore would become the second “accidental President” following in the footsteps of John Tyler, only a few years earlier.  The one-term Presidents following Andrew Jackson through and including James Buchanan (and preceding Lincoln) are testaments to the strength of our nation, having survived their tenures.

 

Steve’s (Seven on) Sandy:

Greetings, and welcome to 2013.   We assume that you’ve made it through company parties, family parties, friend parties, etc., and now stare bleary-eyed and exhausted into the New Year.  We start the year off with a fresh new helping of cases, and with some changes.

First off, we point you to the cases reviewed below.  The first decision addressed below, from the Third Department, walks dangerously close to opening up unrelated claims handled by independent adjusters.  We certainly caution against permitting an insured from engaging in a fishing expedition wherein they obtain access to, and review, previous claims that have utterly nothing to do with the dispute at hand.  While the decision in American Heritage is not the end of the world (Mayan or otherwise), it is, unfortunately, a trend that we will be watching as we proceed in 2013.

We also point you to the First Department’s decision in Corrado where the court addresses the scope of the often used term “in and about.”  Specifically, the court offers some guidance on when and to what extent “in and about” language can be used to trigger a tenant’s indemnity obligations. 

Finally, this issue we introduce a tweak to our previous SOS column.  Instead of Steve on Sandy, we will be changing it to Steve’s Seven on Sandy.  As you will see below and in the attached issue (and as we will effort to do in the coming weeks and months), we offer our thoughts on seven timely questions related to property claims.  This issue’s inaugural set of questions addresses ALE duties, as well as the ACV/RC conundrum.

We hope you enjoy the new format, and get some use out of it.   Let us know, by dropping us a line or giving us a call.  We love to receive feedback. 

Stephen E. Peiper
[email protected]

 

One Hundred Years Ago – State Government Fights Insurance Fraud:

New York Times
January 4, 1913

Will Sift Fire Insurance
Sulzer Expects to Ask Legislature for Amendments to the Law

Albany – Gov. Sulzer expects to send to the Legislature amendments to the insurance law to prevent incendiarism and protect fire insurance policyholders from fraudulent insurance. It has been shown that through lax inspection almost any amount of insurance may be placed on articles of little value and when perjured testimony can be procured, the companies become victims.

William B. Ellison, formerly Corporation Counsel of New York, called on Gov. Sulzer today to urge reforms he believes would check waste and prevent high rates of insurance.  Losses due to incendiary fires have a tendency to increase rates.  Mr. Ellison suggested appointing a commissioner to take testimony for the Legislature.  He volunteered to undertake the work without charge.  Gov.  Sulzer, who, many years ago was a colleague of Mr. Ellison’s in the Legislature, was glad to avail himself of his services.  He thinks the investigation will be completed in time for remedial legislation this year.

Mr. Ellison said there should be radical changes in the standard forms of insurance policies.  It was explained that policies contained clauses that militated against holders.  Premiums are paid for varying periods and companies sometimes refuse to make payment on the ground that clauses have not been obeyed.  Mr. Ellison suggested changes to place on the companies the burden of proof that policies were void, by a waiver of all conditions when the policies were issued.  He also advocated stricter inspection to prevent over-insurance.

Gov. Sulzer said tonight he would send Mr. Ellison’s report to the Legislature and he also would ask for a statement of the position of the insurance companies.
Editor’s Note:  Governor Sulzer, elected as a Tammany Hall candidate, turned against that political machine once he was elected to office. With a Tammany-controlled Legislature, Sulzer was impeached and convicted and removed from office in October 1913. Sulzer was accused of having diverted campaign contributions to purchase stocks for himself and to have lied under oath in regards to it. Sulzer, his supporters and many historians later affirmed that the impeachment charges were made under instructions from Tammany boss “Silent Charlie” Murphy, to remove him as an obstacle to Tammany Hall's influence in state politics.  Efforts to clear his name have so far been unsuccessful.

From Audrey Seeley, Leader of the No Fault Team:

Happy New Year!  We begin this year with a healthy dose of arbitration decisions focusing on the sufficiency of a peer review, proof of a lost wage claim, and some interesting decisions on what devices are reimbursable under no-fault.  The issue of sufficient peer reviews is one that we predicted would continue in 2013 and thus far that prediction has been accurate.  This is a topic ripe for training in not only obtaining a sufficient peer review but in preparing arbitration evidence submissions when the basis for the denial is a peer review.  If you are interested in this topic and would like one of our team members to contact you to discuss training please send me an email at [email protected].

Also, if you are looking for a great CLE program in 2013 on claims handling and insurance coverage please keep in mind DRI’s Insurance Law Committee is presenting the Insurance Coverage and Claims Institute from April 10-12 in Chicago.  For a brochure and to register for the program please go to www.dri.org

Audrey

 

The Coverage Pointers App:

The COVERAGE POINTERS APP is 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.

 

Feedback Wanted:  It Ain’t Broken but Should We Fix It?:

Since our premier issue in July 1999, we have included the full text of the decisions with summarize at the end of the newsletter.  That gives the reader the opportunity to read the full text of any of the hundreds of cases we review without ever leaving the newsletter.

Of course, in 1999, fewer of our subscribers spent as much time online as they do now and links to decisions were unstable and unreliable.  Now, most read the publication on line or in the App and court links to decisions are stable.

We will continue to review every NY appellate decision relating to insurance coverage as well as selected lower court decisions.  We are considering including, in full text, only the most significant decisions about which we report and then providing live links to all of the other decisions instead of including full text.  That would reduce the size of the publication dramatically without reducing the quality of our offerings.

Any problem with that?  Please let us know whether live links to decisions would work for you.  Drop me a note: [email protected]

 

Love, a Century Ago:

New York Times
January 4, 1913

Love Laughs at Shotgun

Patchogue, L.I. -- Miss Annie Forrester of West Patchogue and Edward Palmer, who was a boarder in her parents’ home, ran way together today and it is understood that they were married in New York.  Chiefly because their acquaintance had been very short, Mr. and Mrs. Forrester objected strongly when marriage was mentioned.  So the couple planned to run away.  The Forresters heard of their plans and said that if Palmer left Patchogue with Annie he would go without his clothes, which they proposed to hold. 

Palmer went to the house yesterday with Constable C.W. Coleman who convinced the Palmers that they had better give up the clothes rather than face a possible charge of larceny.  So, Palmer, with his grip in one hand left the house and Annie followed.
“Don’t you dare take my daughter,” shouted the father. “I wouldn’t think of such a thing,” said Palmer, “but I can’t help it if she follows me.”

Just then an automobile whizzed up and Palmer and Miss Forrester jumped in.  Before they could start, eyewitnesses say, Forrester ran into his house and reappeared with his shotgun.  He pursued the automobile several blocks and then went to the Patchogue railroad station, thinking to head off the elopers, but they went right to Blue Point, the next station and caught the 4:07 train for New York.

Jen Ehman’s Gems:

I hope everyone had a happy and safe New Years.  Now that the holiday season is officially over, I suppose it is time to get back to work.  With the return of Coverage Pointers in 2013, I should note that going forward I will again be reporting on both New York trial court decisions in addition to nationwide bad faith cases. 

As there was a lack of higher court bad faith cases this week, I am only reporting on two trial level court cases in New York.  The interesting one that I would suggest reviewing is Praetorian Ins. Co. v. DMHZ Corp.  This decision arises out of a large apartment fire which caused loss of life, personal injuries and property damage.  Praetorian issued a $1,000,000 policy to the owner of the apartment building.  As the policy limits were clearly insufficient to cover all the claims, Praetorian commenced an interpleader action seeking an order determining the distribution and priority of the insurance funds.  The issue addressed by the court in this decision was whether Praetorian was entitled to amounts it expended in prosecuting the interpleader action via what would essentially be a credit against the $1,000,000 policy limit.  Notably, the decision contains an interesting discussion of the difference between the federal and New York state interpleader statutes.   

Jen
[email protected]

 

One Hundred Years Ago – Gun Control as Controversial as Today:

New York Times
January 4, 1913

SULLIVAN GUN LAW
UPHELD ON APPEAL

Appellate Division Holds, 3 to 2,
That the Legislature May Forbid
Even Keeping a Pistol at Home.

TWO JUSTICES DISSENT

Regulation Deprives a Householder
of the Means of Defending
His Home, They Assert.

The Appellate Division upheld the constitutionality of the Sullivan dangerous weapon law in a decision filed yesterday.  The majority opinion of the court held that the keeping of a revolver by a householder in his home might be prohibited by the legislature as a penal offense, under the “police power” clause of the Constitution, despite the constitutional guarantee of the right to bear arms.

In a dissenting opinion, two Justices held that it was beyond the power of the Legislature to penalize the keeping of a revolver at home, and asserted that such a prohibition was against public policy, since it prevented householders from defending themselves from marauders against whom police vigilance was often ineffective and who would disregard the law as applied to carrying dangerous weapons.

By the decision of the Appellate Division, Joseph F. Darling, a lawyer of 116 Nassau Street, who brought the test case on a writ of habeas corpus against the Warden of the Tombs, was recommitted to the City Prison to stand trial.  He will appeal to the Court of Appeals.  Darling lodged against himself the complaint on which he was arrested and taken to a Magistrate’s court, where he was held for trial in Special Sessions.  He surrendered to the Warden of the Tombs, and then sued out a writ of habeas corpus, which was sustained in Special Term of the Supreme Court.  The matter came before the Appellate Division on the District Attorney’s appeal. 

The Sullivan Act, also known as the Sullivan Law, is a gun control statute in New York State.  Upon first passage, the Sullivan Act required licenses for New Yorkers to possess firearms small enough to be concealed. Possession of such firearms without a license was a misdemeanor, and carrying them was a felony.. The possession or carrying of weapons such as brass knuckles, sandbags, blackjacks, bludgeons or bombs was a felony, as was possessing or carrying a dagger, "dangerous knife" or razor "with intent to use the same unlawfully". Named for its primary legislative sponsor, state senator Timothy Sullivan,  a notoriously corrupt Tammany Hall politician, it dates to 1911, and is still in force, making it one of the older existing gun control laws in the United States.

 

Headlines for This Week’s Issue:

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

  • Household Residency Under Homeowners Policy Requires More Than Temporary or Physical Presence Without Intention to Remain
  • Claims Made and Reported Policies Mean What They Say
  • Medicare Act Pre-empts new GOL §5-335.  Medicare Advantage Organizations May Exert Subrogation Claims Against New York Personal Injury Settlements
  • In Pre-Prejudice Case, Insured Fails to Rebut Proof of Late Reporting and Loses Coverage
  • Where Notice is Given First by Insured, Carrier Is Not Obligated to Deny Coverage on Later Notice Given by Claimant.  Here, Claimant Demonstrated Reasonable Diligence in Seeking to Identify Excess Carrier

 

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

[email protected]

  • Failure to Address Causation Results in Dismissal
  • Claim of “Significant Disfigurement” Not Readily Observable, and for Which no Photographic Evidence Is Submitted, Fails
  • On Appeal, Claims under the Permanent Consequential and Significant Limitation of Use Categories Are Reinstated
  • Evidence of Limitations Resulting from Meniscal Tear Must Be Provided
  • Bill of Particulars Alleging Only Two Days Missed Work Defeats 90/180-Day Claim as a Matter of Law
  • Plaintiffs’ Motion Denied Where Expert Failed to Make Meaningful Comparison so as to Differentiate Serious Injuries from Mild or Moderate Ones
  • Defendants’ Motion Properly Granted Where Plaintiff Fails to Submit Objective Medical Evidence of Limitations Allegedly Resulting from Two Herniated Discs
  • Battle of Causation Results in a Draw

 

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

[email protected]

ARBITRATION

  • Enhanced Assistive Device Not Reimbursable under No-Fault; Note That Device Being Sought in BI/PD Claim
  • Elliptical Machine and Sleepmaster Bed Not Reimbursable Under No-Fault
  • Social Security Award Not Res Judicata on Lost Wage Claim When Treating Physician Opines Applicant Able to Work
  • Lack of Any Treatment Records and Peer Review That Discussed Records and Cited to Medical Journals Persuasive on Lack of Medical Necessity
  • Scrutiny over Cited Journal Articles Results in Non-persuasive Peer Review

LITIGATION

  • Insurer Demonstrated Breach of Policy Conditions to Appear for IMEs and EUOs
  • Hospital Held to Same Standard of Proof on Summary Judgment as Any Other Medical Provider
  • Treating Chiropractor’s Affidavit Raises Issue of Fact Regarding Lack of Medical Necessity

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

SOS - Steve On Sandy a/k/a Seven on Sandy

  • What Constitutes Proper Service of a Proof of Loss?
  • Does a Provision of a Previous Policy Impact the Coverage Offered by a Policy Renewal?
  • Does the Two Year Suit Limitation Clause Apply to Bar Disputes Over ALE?
  • Will Tendering Checks on Non-disputed Portions of a Claim Stop Interest?
  • Do I have to Include the Contractor’s Profit and Overhead in RC Calculations?
  • Do I Owe RC coverage Where the Insured Did Not Pay for the Replacement?
  •  Does Payment of ALE Preclude A Denial of Coverage at a Later Date?

 

Bonus ----- Can I be personally named in a lawsuit, can I be personally liable?

Property

  • Discovery of I/A’s Similar Hail Damage Claims Permitted Over Objection from Defendant Carrier

 

Potpourri

  • Spoliation Sanction Not Granted Where Plaintiff can Still Prove his Case with Other Evidence
  • Where Tenant had no Rights of Maintenance Over Sidewalk, “In and About” Indemnity Language did not Apply

 

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

  • The Department of Financial Services Released Its Regulatory Agenda For 2013

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal

[email protected]

  • Policy Language Controls Trigger of Coverage for Environmental Claims

 

AGENTS ERRORS & OMISSIONS:

  • Court Found Issues of Fact as to Whether a “Special Relationship” Existed

 

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

  • Insurer Entitled to Costs, Disbursements, and Attorney Fees in Bringing Interpleader Action Where Losses Greatly Exceeded Available Coverage
  • Incident Not Covered Where It Occurred on Land the Insured Was Using to Construct a Home to Sell for Profit

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

LIQUIDATED DAMAGES MAY NOT REQUIRE ACTUAL DAMAGES

Well, that’s it for now. 

Thanks for tuning in and do provide us with the feedback requested up above.

 

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
Jennifer A. Ehman
[email protected]  

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

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

Diane F. Bosse

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

Jody E. Briandi
Steven E. Peiper

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

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

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

Scott M. Duquin
Diane F. Bosse

Index to Special Columns

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

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

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

12/28/12       Schenback v. United Frontier Mutual Ins. Co.
Appellate Division, Fourth Department
Household Residency Under Homeowners Policy Requires More Than Temporary or Physical Presence Without Intention to Remain

Eric’s parents were insured by United Frontier (“United”) as would Eric, if he resided in his parents’ household.  In a direct action commenced by the injured plaintiff after securing judgment against Eric, the lower court found that he was, in fact, a resident of the household.  The Fourth Department agreed.

A resident is one who lives in the household with a certain degree of permanency and intention to remain. The standard for determining residency for purposes of insurance coverage requires something more than temporary or physical presence and requires at least some degree of permanence and intention to remain. Apparently, Eric was living, temporarily, with the injured plaintiffs but the court found that his stay in that house was only temporary.  He intended, at all times, to return to the parents' house to live.

12/27/12       Perkins Eastman Architects, P.C. v. ACE Amer. Ins. Co.
Appellate Division, First Department
Claims Made and Reported Policies Mean What They Say
ACE issued a claims made policy to Perkins.  Perkins timely advised ACE of a "[c]ircumstance that may reasonably be expected to give rise to a Claim against [it]" and of the particulars of the potential claim. "Circumstance" is defined as "an event reported during the Policy Year from which you reasonably expect a Claim may be made." In correspondence with plaintiff from 2004 to 2005, Perkins identified specific problem areas, as well as delays and coordination issues, in the course of the subject nursing home construction project, potential claimants and the claims that may be made for millions of dollars.

There was also a later "claims made and reported" policy but coverage was denied under that policy form.  One action was barred by the exclusion for claims arising from circumstances required to be, but not, disclosed in defendant's applications for insurance. The claim in that action was made during a 2005 policy period but not reported to ACE before the end of that period so it was outside of policy cover.

The "New York Amendatory" endorsement to the second ACE policy giving defendant an additional 60 days after February 16, 2006 to give notice of the claim does not avail defendant since, by its terms, it applies only if the policy terminates or is not renewed, neither of which occurred here. 

12/26/12       Trezza v. Trezza
Appellate Division, Second Department
Medicare Act Pre-empts new GOL §5-335.  Medicare Advantage Organizations May Exert Subrogation Claims Against New York Personal Injury Settlements.
In Volume 11, No. 11 of Coverage Pointers, our November 28, 2009 edition, we announced, with great fanfare, the Legislature’s adoption of General Obligations Law Section 5-335.  We urge those who have not committed our publication to memory to review that very detailed summary which contains a historical review of the enforceability of health insurance “liens” and claims for equitable and contractual subrogation rights.  This statute was adopted to alter the rules relating to the recovery of the health insurer’s claims.  We introduced that summary by noting:

General Obligations Law § 5-335 was adopted as part of this legislative change. The new law has an immediate effect on pending litigation since it prohibits a plaintiff who has settled with one or more defendants from being charged with violating a health insurer’s alleged equitable or contractual subrogation rights. The New York State Trial Lawyers Association, representing the plaintiffs’ bar, pressed hard for these amendments. According to the sponsors, the new law seeks to prevent health insurers from complicating cases and delaying settlements, and conclusively “presumes” that the settlement does not include compensation for medical expenses (except those subject to statutory liens or are Additional Personal Injury Protection under NY No Fault.

Rawlings, on behalf of Oxford, contacted the plaintiff's attorney to assert a claim for reimbursement for amounts Oxford had paid for the plaintiff's accident-related medical care. As of June 29, 2010, Rawlings claimed that Oxford was entitled to reimbursement of $37,787.64.

This was an auto accident case.  While the appellate decision indicates that the settlement was for $75,000, consisting, in effect, of the $25,000 personal injury protection insurance policy limit of the policy covering the vehicle in which she was a passenger, and the $50,000 policy limit of the policy covering the second vehicle, that of course, could not be the case (because PIP minimum limits are $50,000).  The lower court decision reflects that the $75,000 was comprised of $50,000 in liability limits from the “other car” and $25,000 in liability limits from the car in which the injured plaintiff was a passenger.

The $37,000+ is Oxford payments that would have been the amount in excess of the injured plaintiff’s no fault limits.

The issue which the court was called upon to determine was whether General Obligations Law § 5-335 can bar a private insurer that provides health benefits through a Medicare Advantage plan from seeking reimbursement for the expenses incurred in affording accident-related medical care to an enrollee who settles a personal injury action.

The court concluded that the state statute, as applied to Medicare Advantage organizations, is preempted by federal law because it restricts the contractual reimbursement rights to which those organizations are entitled pursuant to the provisions of the Medicare Act.

General Obligations Law § 5-335, provides, in pertinent part,

"When a plaintiff settles with one or more defendants in an action for personal injuries,…it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider, except for those payments as to which there is a statutory right of reimbursement. …

Except where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider.

That section would seem, by its terms, to preclude any health insurer from asserting subrogation rights against a personal injury settlement unless there was statutory right of reimbursement. 

The Medicare Secondary Payer Act does not specifically provide a statutory right of reimbursement but permits those who pay such benefits from including in their contract, optionally, a right for reimbursement.  That is what Oxford did here, included a provision in its contract requiring reimbursement.

After a long and interesting analysis, the Second Department held, unanimously, that the Medicare statute, by allowing insurers to include such provisions in their policies, have preempted the field.  This state statute would preclude an insurer from enforcing a right that the federal government permitted the insurer to exercise.  Accordingly, the court found that Oxford could enforce its subrogation rights against the proceeds of the settlement.

What the court did not consider directly is whether any part of the $75,000 received in settlement was actually payment for medical expenses (or whether it was all for pain and suffering).  We wonder whether that decision is the next one to be considered by the trial court.

12/26/12       Spartacus School of Sports, Inc. v. Nationwide Mut. Ins. Co.
Appellate Division, Second Department
In Pre-Prejudice Case, Insured Fails to Rebut Proof of Late Reporting and Loses Coverage
Spartacus School of Sports (“Spartacus”) was insured under CGL policies issued by Nationwide. The policies required that Spartacus notify Nationwide of certain defined events "as soon as practicable." Spartacus was sued in three actions and sought coverage under the policies. Nationwide disclaimed coverage with respect to each action, in part on the ground that Spartacus had not complied with the policies' notice provisions.

Nationwide submitted evidence demonstrating that Spartacus failed to comply with the policies' requirements that it provide Nationwide with notice of the occurrences at issue in each of the underlying actions, and of the actions themselves, as soon as practicable, thus vitiating coverage.  Spartacus offered nothing in return to rebut the breach.

This was a win for Nationwide in a “pre-prejudice” case.
Editor’s Note:  We are still waiting for the first reported post-prejudice decision from any NY court.

12/26/12       Golebiewski v. National Union Fire Ins. Co., et al.
Appellate Division, Second Department
Where Notice is Given First by Insured, Carrier Is Not Obligated to Deny Coverage on Later Notice Given by Claimant.  Here, Claimant Demonstrated Reasonable Diligence in Seeking to Identify Excess Carrier
The accident occurred on April 1, 2000 at a building owned by SBP.  The plaintiff, Golebiewski, fell from a height at a construction site and sued the owner, SBP, and others. Summary judgment was awarded against SBP in the amount of $8.5 million and the parties stipulated to reducing the award to $6.1 million.  Plaintiff was paid $2 million and thus there was an unpaid balance of $4.1 million.
Having judgment against the insured, the plaintiff, now a judgment creditor, brought a direction action against National Union under Insurance Law § 3420(a)(2).  SBP was covered under a certain excess or umbrella insurance policy issued by National Union. National Union raised coverage defenses, alleging that the plaintiffs did not provide it with timely notice of this claim.

The plaintiff, as injured party, must demonstrate that he or she acted reasonably "diligently in attempting to ascertain the identity of the insurer [for the tortfeasor], and thereafter expeditiously notified the insurer" of the claim.

The plaintiffs argued that National Union cannot raise the defense of the injured party’s late notice because it didn’t rely on that ground in its disclaimer letter. However, it did not need to disclaim on that ground because the injured party did not give notice until after the insured, itself, gave notice. Under these circumstances, National Union was not required to specifically disclaim coverage based on the allegedly untimely notice by the plaintiffs.

However, the evidence demonstrated that the notice provided by the plaintiffs to National Union was timely.  A preliminary conference order required SBP to disclose, by a certain date, the existence of both primary and excess insurance policies that were in existence at the time of this accident, and which provided coverage for this occurrence pursuant to CPLR 3101(f). In response to that order, counsel for SBP disclosed only the existence of a primary insurance policy. Counsel for SBP did not supplement that response to include information regarding the excess policy at issue, the National Union policy, despite counsel's continuing obligation to supplement discovery responses (see CPLR 3101[h]).

Just prior to the trial on the issue of damages in the underlying action, counsel for SBP notified its excess carrier, National Union, of this claim and of the underlying action, and thereafter sent notice of the existence of the underlying policy to the plaintiffs. The plaintiffs notified National Union of the claim and underlying action on the same day that they learned of the existence of the excess policy.  Under these circumstances, the plaintiff was reasonably diligent in ascertaining the identity of the excess carrier and in providing notice to that carrier of this claim and of the underlying action.

Editor’s Note:  Frankly, I think that National Union had the better argument here.  If notice is given by the claimant, the carrier should deny based on that notice, whenever received.  It is the safer practice.  Secondly, the only attempts to identify excess coverage in this case, reflected in the decision, were those in the discovery process.  Were there any earlier inquiries? If the claimant waited until discovery to first seek information about excess policies, this writer sees no evidence of due diligence.

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

[email protected]

12/28/12       Monaco v Steiner
Appellate Division, Fourth Department
Failure to Address Causation Results in Dismissal
Plaintiff alleged injuries to her neck and back under the permanent loss of use, permanent consequential and/or significant limitation of use, and 90/180-day categories.  Although she arguably raised a triable issue of fact with respect to the permanent consequential and/or significant limitation of use categories, given that her medical expert failed to establish that her injuries were causally related to the accident and not to preexisting injuries, defendants’ motion was properly granted.

12/28/12       Smyth v McDonald
Appellate Division, Fourth Department
Claim of “Significant Disfigurement” Not Readily Observable, and for Which no Photographic Evidence Is Submitted, Fails
Plaintiff claimed a significant disfigurement resulting from an alleged injury to her scapula but submitted no photographs for the record.  As the injury was not readily observable and plaintiff presented no evidence that “a reasonable person viewing the plaintiff’s [scapula] in its altered state would regard the condition as unattractive, objectionable or as the subject of pity or scorn,” the claim failed.  In addition, plaintiff’s assertions that further treatment would have been merely palliative and her benefits were denied did not explain the gap in treatment because there was no evidence in the record to support those assertions.  Similarly, plaintiff’s 90/180-day claim failed because there was no objective medical evidence in the record in support and the affidavit of her treating physician was too remote to be probative with respect to causation as he first treated plaintiff three years after the accident.

12/28/12       Wilson v Colosimo
Appellate Division, Fourth Department
On Appeal, Claims under the Permanent Consequential and Significant Limitation of Use Categories Are Reinstated
Plaintiff was rear-ended while driving a recycling truck.  According to his bill of particulars, he allegedly sustained injuries under the permanent consequential and significant limitation of use categories, as well as under the 90/180-day category.  Defendants submitted evidence that there was no sign of injury to the cervical, thoracic or lumbar spine, marked exaggeration of the response to testing in the upper and lower extremities, and no objective findings with respect to the alleged injuries to the neck, shoulders, lumbar spine, knees, hips, ankles or feet.  Instead, defendants’ experts found plaintiff’s complaints were due to degenerative changes and preexisting injuries. 

In opposition, plaintiff submitted affidavits and attached reports of his treating chiropractor and a physician specializing in occupational medicine that contained the necessary objective medical findings to raise an issue of fact.  However, plaintiff’s claim under the 90/180-day category failed as he did not submit anything in opposition to defendants’ evidence.  In addition, although plaintiff was not required to establish a serious injury to support his claim for economic loss in excess of basic economic loss, he failed to submit any evidence in admissible form to support the claim.  While he did not have to wait until the full payout of the basic no-fault policy before making a claim for losses that exceed the basic economic loss threshold, he did have to show that his total economic losses did, in fact, exceed basic economic loss.

12/27/12       Valdez v Benjamin
Appellate Division, First Department
Evidence of Limitations Resulting from Meniscal Tear Must Be Provided
Defendants’ neurologist reported full range of motion, negative test results and resolved injuries, while their radiologist found an absence of tears, trauma or other causally related injuries to plaintiff’s right knee.  With regard to the claimed cervical and lumbar injuries, he found no evidence of trauma and concluded that they were preexisting degenerative conditions.

In opposition, plaintiff submitted the report of his treating physician which did not provide any evidence of range of motion limitations or qualitative assessment of the right knee.  Plaintiff’s radiologist reported a meniscal tear but no evidence was provided as to the limitations resulting from that tear.  With respect to the cervical and lumbar injuries, plaintiff similarly failed to raise an issue of fact as his radiologist did not opine as to causation and his physician’s opinion was conclusory.  In addition, plaintiff failed to explain the gap in treatment from approximately six months to a year following the 2008 accident until 2011, and his deposition testimony where he admitted returning to work two days after the accident established, as a matter of law, that he did not sustain an injury under the 90/180-day category.  As such, the trial court was affirmed and plaintiff’s complaint dismissed.

12/27/12       Haniff v Khan
Appellate Division, First Department
Bill of Particulars Alleging Only Two Days Missed Work Defeats 90/180-Day Claim as a Matter of Law
Plaintiff was rear-ended by defendants’ taxi and claimed injuries under the permanent consequential and/or significant limitation of use and 90/180-day categories to his back and left shoulder.  In support of their motion, defendants submitted the affirmed report of their orthopedist that examined plaintiff a year after the accident and found full range of motion, negative clinical tests and resolved strains.  Defendants also submitted plaintiff’s bill of particulars wherein he admitted only missing two days of work, a fact confirmed by his deposition testimony. 

In opposition, plaintiff failed to raise an issue of fact as he did not submit any evidence of recent range of motion limitations and his own expert reported that the lumbar spine was asymptomatic.  Plaintiff’s orthopedist found only minor limitations in the left shoulder which were insufficient to meet the significant or consequential standard.  Moreover, plaintiff’s orthopedist reported that plaintiff stopped treating after two months and that, at that time, exhibited only mild limitations.  On appeal, the trial court was unanimously reversed, on the law.

12/21/12       Pugh v Tantillo
Appellate Division, Fourth Department
Plaintiffs’ Motion Denied Where Expert Failed to Make Meaningful Comparison so as to Differentiate Serious Injuries from Mild or Moderate Ones
Plaintiff was allegedly injured when his vehicle was rear-ended by the defendant.  The trial court denied defendants’ motion finding that defendants’ own submissions raised issues of fact with respect to the permanent consequential and/or significant limitation of use categories.  The trial court also denied plaintiffs’ cross-motion because, although plaintiff’s treating physician noted two herniated discs in the cervical spine, and provided range-of-motion measurements, he failed to provide an assessment comparing the limitations with the norm.  As he did not make a meaningful comparison so as to differentiate serious injuries from mild or moderate ones, his affirmation was insufficient to raise a triable issue of fact under those two categories.  On appeal, the court noted that the parties abandoned any contentions with respect to the 90/180-day category and otherwise affirmed.

12/21/12       Carfi v Forget
Appellate Division, Fourth Department
Defendants’ Motion Properly Granted Where Plaintiff Fails to Submit Objective Medical Evidence of Limitations Allegedly Resulting from Two Herniated Discs
The court reiterated that, when injury under the permanent consequential category is alleged, “consequential” (i.e. important) “relates to medical significance and involves a comparative determination of the degree or qualitative nature of an injury based on the normal function, purpose and use of the body part” (Duffel v Green, 84 NY2d 795 [1995]).

Here, the trial court correctly granted defendants’ motion.  Defendants submitted the affirmed report of their orthopedic surgeon who examined plaintiff and opined, within a reasonable degree of medical certainty, that plaintiff did not sustain a causally related injury of any significance.  Even though plaintiff was diagnosed with a herniated disc three years after the accident, defendants’ expert concluded that it was consistent with degenerative disc disease and not the accident.  He also concluded that plaintiff was not disabled and that he did not exhibit any signs of spasm or motor or sensory deficits.  In addition, plaintiff’s ranges-of-motion were all within normal limits, and, according to his deposition testimony, he missed only one day of work and did not consult with any medical provider for pain and stiffness in his neck until two and a half years after the accident.

In opposition, plaintiff submitted an affirmation from his treating neurosurgeon who reviewed pre- and post-accident imaging studies, and concluded that plaintiff sustain two disc herniations as a result of the accident.  However, no objective medical proof was submitted regarding restrictions resulting from those herniations.  Therefore, the mere existence of herniations is insufficient to establish serious injury.  Plaintiff also submitted a letter affirmation from an orthopedic surgeon in opposition to defendants’ motion stating that plaintiff exhibited certain limitations. Again, the orthopedic surgeon did not quantify or qualify those limitations.  The court found that, although both surgeons opined that plaintiff suffered a permanent consequential loss of use of the cervical spine, those conclusory opinions were insufficient to raise a triable issue of fact.  Similarly, plaintiff’s affidavit describing his physical limitations was insufficient to establish a permanent consequential limitation of use because his experts did not address or quantify any limitations in plaintiff’s activities.

12/21/12       Hawkins v Bryant
Appellate Division, Fourth Department
Battle of Causation Results in a Draw
The trial court had denied defendant’s motion and granted plaintiff’s cross motion on the issues of serious injury and negligence.  As regards the issue of negligence, on appeal the court affirmed the trial court finding that plaintiff established that defendant’s failure to yield the right of way at an intersection was the sole proximate cause of the accident.

With respect to the question of serious injury however, the court determined that the trial court erred in granting that part of plaintiff’s cross motion.  Defendant met her burden showing that plaintiff’s alleged injuries were related to preexisting conditions.  The burden then shifted to plaintiff to address the alleged lack of causation and the affidavit of his chiropractor failed to address the issue.  Nevertheless, plaintiff’s treating orthopedic surgeon, who reviewed MRIs and X-rays, did opine that the accident was the cause of the spinal conditions as it aggravated plaintiff’s spinal stenosis and caused the disc herniations to worsen.  As such, neither party could prevail on summary judgment on the issue of causation.

 

AUDREY’S ANGLES ON NO-FAULT
Audrey A. Seeley
aas@hurwitzfine.com
ARBITRATION
12/27/12       Applicant v. Main Street America Group
Arbitrator Mary Anne Theiss, Onondaga County
Enhanced Assistive Device Not Reimbursable under No-Fault; Note That Device Being Sought in BI/PD Claim

The Applicant was involved in a May 20, 2010, accident while riding on an assistive device operated by the Applicant using his arms to pedal.  The Applicant at the time of the accident was a paraplegic from a previous injury.  On November 20, 2012, Dr. Farrell deemed medically necessary the Applicant’s request for an enhanced version of his assistive device in order to help the Applicant recover from his severely fracture scapula and rotator cuff injury.

The assigned arbitrator agreed with Dr. Farrell’s rationale but determined that there were other less expensive methods of recovery, such as physical therapy.  Further, the Applicant was also seeking reimbursement for this enhanced device through his personal injury/property damage claim.  The assigned arbitrator determined that despite her wanting to allow reimbursement for this device she did not fell that it was covered under the no-fault law.  Accordingly the claim was denied.

12/27/12       Applicant v. Allstate Ins. Co.
Arbitrator Mary Anne Theiss, Onondaga County
Elliptical Machine and Sleepmaster Bed Not Reimbursable Under No-Fault

The Applicant sought preapproval for an elliptical machine at $4,750.92 and Sleepmaster bed at $5,274.65 as a result of injuries sustained in a July 26, 2010, accident.  The Applicant’s treating physician provided letters that the devices would be helpful.  However, the Applicant admittedly had access to an elliptical machine at physical therapy.

The assigned arbitrator denied the claim and indicated that these items are not generally paid under the no-fault law.

12/21/12       Applicant v. New York Cent. Mut. Fire Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Social Security Award Not Res Judicata on Lost Wage Claim When Treating Physician Opines Applicant Able to Work

[Our own Margo Lagueras, Esq. handled this one for the insurer]
The Applicant sought lost wages from January 12, 2012 through August 31, 2013, allegedly as a result of a September 1, 2010, accident.  Initially, the assigned arbitrator declined to make any award with regard to future lost wages and limited the timeframe from January 12, 2012 until the date the AR-1 was filed, which was July 2, 2012.

The insurer denied the lost wage claim on the ground that the Applicant’s treating physician’s office did not disable her from working and indicated the Applicant could work part or full time without restriction.

The Applicant, according to the assigned arbitrator, presented conflicting documentation regarding disability.  The record revealed that on July 8, 2011, the Applicant was removed from her employment by the VA Western New York Healthcare System because of a ligamentous instability, cervical, thoracic, and lumbar herniations, concussive syndrome, post-traumatic headache, cervical and lumbar radiculitis, left shoulder tendinopathy, and blurred vision.

On November 17, 2011, Dr. Leone noted that the Applicant’s cervical and lumbar spine MRI did not demonstrate any significant abnormalities and surgery was not recommended.  Further, the Applicant had full flexion, extension, and rotation of the cervical and lumbar spine.  Her sensation, strength, and reflexes were normal.

On January 10, 2012, a physician’s assistant at DENT Neurologic noted that the Applicant was out of work since July when her position was eliminated.  The Applicant was diagnosed with post traumatic headache, migraines and ulnar entrapment neuropathy.  It was specifically noted that the Applicant's left arm complaint was due to her hand and not related to a neck injury.  The Applicant was not deemed disabled as a result of the accident and could work part or full time.

On May 4, 2012, the physician’s assistant’s re-evaluation noted that the Applicant experienced episodes of altered consciousness with diaphoresis tremulousness and trouble speaking.

There were then unsigned disability notes from the treating neurologist disabling the Applicant 100% on a temporary total basis.  The assigned arbitrator noted that he did not afford much weight to the unsigned disability notes since there was no evidence that the neurologist examined the Applicant.  Rather, the physician’s assistant opined that the Applicant was not disabled and Dr. Leone similarly found no significant abnormalities from the accident.  Further, the documented episodes of altered consciousness were 18 months post-accident and there was nothing to indicate that they were causally related to the accident.  Importantly, the assigned arbitrator determined that the Social Security award was not res judicata as to the lost wage claim in light of the treating physician’s office determining the Applicant could work.  Thus, the Applicant’s claim was denied.

12/21/12       Buffalo Diagnostic Imaging v. A. Cent. Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Lack of Any Treatment Records and Peer Review That Discussed Records and Cited to Medical Journals Persuasive on Lack of Medical Necessity

The Applicant sought reimbursement for an October 3, 2011, cervical and lumbar MRIs conducted on the assignor allegedly as a result of a June 28, 2011, accident.  The MRI was prescribed by Daniel Cox, DC and the assigned arbitrator noted that no party submitted treatment records from any of the treating providers or the prescribing chiropractor.

The insurer denied the MRI studies upon the peer review of Gary Kostek, DC.  Mr. Kostek discussed Mr. Cox’s medical records and that there was an absence of noted neurological deficits.  He also cited to various medical journals for the proposition that the MRIs were not medically necessary.

The assigned arbitrator found the peer review persuasive primarily because the Applicant did not submit any treatment records and denied the claim.

12/21/12       RS Medical v. GEICO Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Scrutiny over Cited Journal Articles Results in Non-persuasive Peer Review

The Applicant sought reimbursement of an LSO brace prescribed by Zenith Medical allegedly as a result of an April 7, 2010, accident.  The insurer denied the claim upon the peer review of Dr. Tatiana Sharahy.  While Dr. Sharahy cited to medical journals to support her opinion the assigned arbitrator determined that they did not directly support her contention on lack of medical necessity.  Specifically, the reference to the New England Journal of Medicine was determined to be taken out of context.  Also, the reliance upon the AHCPR Guidelines was not supported by adequate evidence that would find it inconsistent with generally accepted practices to prescribe the LSO brace.  Therefore, the denial was not upheld.

LITIGATION

12/24/12       Seacoast Med., PC a/a/o Tabari Salmon v. Praetorian Ins. Co.
Appellate Term, First Department
Insurer Demonstrated Breach of Policy Conditions to Appear for IMEs and EUOs

The insurer’s motion for summary judgment should have been granted as it demonstrated the assignor’s failure to appear for scheduled IMEs and EUOs in violation of conditions precedent to coverage under the policy.  The plaintiff did not specifically deny the assignor’s nonappearance or raise any issue as to mailing or the reasonableness of the notices.

12/18/12       NYU Hosp. for Joint Diseases a/a/o Michael Samilo v. State Farm Mut. Auto. Ins. Co.
Appellate Term, Second Department
Hospital Held to Same Standard of Proof on Summary Judgment as Any Other Medical Provider

The plaintiff, hospital, did not demonstrate entitlement to summary judgment as it did not establish through admissible evidence that it provided health services and the amount of those services.  The plaintiff submitted an NF-5, UB-04, and DRG Master Output Report in support of its motion.  The court held that the documents were not admissible as the plaintiff was required under CPLR 4518(a) to demonstrate that the documents were proof of the acts, transactions, occurrences and/or events recorded therein.

The court rejected plaintiff’s argument that because it is a hospital it is not held to the same standard as other medical providers due to the fact that the hospital is required to use an NF-4 or NF-5 instead of an NF-3.  The court held that all three forms are prescribed under the no-fault regulations and one is not more reliable than the others.  Rather, what form was used to submit a claim was irrelevant to the issue of whether the provider demonstrated that it is entitled to recover benefits.

The court recognized that CPLR 4518(b) permits hospital records to be used as prima facie proof of the facts contained in the records.  Yet, it does not apply to any action commenced by the hospital to recover payment for services rendered.  Further, even if the records could be used the documents must contain the proper certification as required by the CPLR, which these documents did not.

12/13/12       Bay Plaza Chiropractic, PC a/a/o Simone Henderickson v. Praetorian Ins. Co.
Appellate Term, First Department
Treating Chiropractor’s Affidavit Raises Issue of Fact Regarding Lack of Medical Necessity

An issue of fact existed on whether the medical services lacked medical necessity. While the insurer submitted a sufficient sworn peer review demonstrating lack of medical necessity, the plaintiff submitted an affidavit from the treating chiropractic which was sufficient to raise an issue of fact precluding summary judgment.

 

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

SOS - Steve On Sandy a/k/a Seven on Sandy

Editor’s Note:  Your mileage may vary.  It should go without saying, but we’ll say it anyway, that an insurance policy is a contract and contract terms may vary from policy to policy and company to company.  These questions and answers state general principles that often apply but the provisions of the policy or endorsements guiding and governing a particular insured-insurer relationship may alter the outcome when considering a particular claim or loss.

  • What Constitutes Proper Service of a Proof of Loss?

 

Under New York law, an insured has exactly 60 days to proffer completed Proofs of Loss after the same are served by the carrier.  Failure to return the Proofs of Loss, in a completed state, will result in the loss of coverage.  However, in order for a carrier to rely upon the 60 day rule, it follows that service must be properly effectuated.  Service, insofar as Proofs of Loss are concerned, must be personally delivered to the insured.  Service upon the insured’s attorney may not be deemed sufficient (Adamowicz v North Country Ins. Co., 70 AD3d 47, 889 NYS2d 733 [3d Dept., 2009]).

Consider the case of Adamowicz v North Country Ins. Co. from the Third Department.  In that case, North Country sent the Demand for Proofs of Loss to the insured’s counsel.  Where the Demand was never actually tendered to the insured (apparently the attorney never delivered it), the Court held that North Country could not deny coverage for the insured’s failure to timely tender the executed Proofs. 

  • Does a Provision of a Previous Policy Impact the Coverage Offered by a Policy Renewal?

 

If you haven’t heard this argument; rest assured, you will.  “My old policy provided coverage for that.  I didn’t know you [the carrier] switched it, and I should be entitled to what I thought I still had.” 

In answering this question, we direct you to Bardi v Farmers Fire Insurance wherein the insured argued that his previous policy terms provided unlimited RC coverage. While that may have been the case, the Third Department relied upon the well settled precept that an insured is deemed to know what their policy says.  To that end, the Court noted where the intent of the policy is unmistakable “[i]f the insured obtained or held a mistaken view or belief concerning the agreements of the policy, the fault or negligence of [the insured] was the cause.”

Absent ambiguity, an insurer must be able to rely upon the terms of the contract as written! (see Bardi v Farmers Fire Ins. Co., 260 AD3d 783, 687 NYS2d 768 [3d Dept., 1999])

  • Does the Two Year Suit Limitation Clause Apply to Bar Disputes Over ALE?

 

New York courts have a long and consistent history of upholding the Two Year Suit Limitation Clause.  (Blanar v State Farm Ins. Cos., 34 AD3d 1333, 1334, 824 NYS2d 702, 703).  Where the insurance policy limits the time limit for an insured to commence an action, all such actions commenced beyond that time limit are untimely (see Blitman Const. Corp., 66 NY2d at 822, 498 NYS2d at 350; see also Gilbert Frank Corp. v Fed. Ins. Co., 70 NY2d 966, 967, 525 NYS2d 793, 795 [1988]; The Beekman Regent Condominium Assoc. v Greater New York Mut. Ins. Co., 2007 NY Slip. Op. 8363, 845 NYS2d 38 [1st Dept., 2007]; Blanar, 34 AD3d at 1334, 824 NYS2d at 703 [4th Dept., 2006]).

In its decisions in Blitman and Gilbert Frank Corp., the Court of Appeals ruled that a 12-month time limit to commence legal action against the insured was enforceable (Blitman Const. Corp., 66 NY2d at 822, 498 NYS2d at 350; Gilbert Frank Corp., 70 NY2d at 967, 525 NYS2d at 795).  Moreover, recently the First Department upheld the application of a policy’s two-year limitation on the commencement of legal action (see The Beekman Regent Condominium Assoc., 2007 Slip. Op. 8363, 845 NYS2d at 38.).  Finally, in Blanar, the Fourth Department upheld a policy’s two-year limitation on the commencement of legal actions (Blanar, 34 AD3d at 1334, 824 NYS2d at 703 [4th Dept., 2006]).

Simply stated, if the suit is commenced within two years from the loss, it is very likely time barred. That said, a recent decision from the Appellate Term provides some cause for caution (Villa v Sterling Ins. Co., 28 Misc.3d 90, 907 NYS2d 770 [App. Term, 2010]).  In Villa, the court noted that the time limitation should be construed from the date of the breach (despite the plain language of the agreement).  Where the dispute over ALE payments did not occur until months after the loss, the court ruled that the breach (and not the loss) governed the applicability of the suit limitation clause. 

  • Does the Two Year Suit Limitation Clause Apply to Bar Disputes Over ALE?

 

Perhaps.  In the Bardi case discussed above, the carrier agreed to pay the policy limits for damages to the structure, and for personal property.  The insured, however, argued that he should be entitled to unlimited RC coverage.  As such, he refused to cash the settlement drafts that Farmers issued.

In holding that the drafts would have precluded interest from running on that part of the payment, the Court noted that the checks that were issued did not constitute a binding Release of disputed claims.  On the contrary, for a settlement draft to serve as a waiver of additional claims, it must clearly inform the insured that accepting the payment will result in the resolution of all disputed claims.  Here, on the other hand, Farmers expressly stated that cashing the checks would not result in a loss of the right to press the coverage dispute.  

Under those circumstances, the carrier possesses a fairly strong argument that no interest should accrued on tendered payments. (see Bardi v Farmers Fire Ins. Co., 260 AD3d 783 [3d Dept., 1999])

  • Do I have to Include the Contractor’s Profit and Overhead in RC Calculations?

 

Yes.  It is generally accepted that ACV is calculated by taking the depreciation from the determined Replacement Cost.  Naturally, where the Replacement Cost is lower, it follows that the ACV will be lower as well.  In the case of Mazzocki, the insurer was refusing to include the general contractor’s estimates of profit and overhead into its RC calculations  (Mazzocki v State Farm Fire & Cas., 1 AD3d 9 [3d Dept., 2003].  The result of which lowered the RC calculation, and in turn, lowered the ACV calculations. 

The Third Department disagreed, and ruled, unequivocally, that all possible costs related to the replacement of the insured loss must be included in RC calculations. This is the case even though it includes the “hypothetical calculations of materials, labor and contractor services”

  • Do I Owe RC Coverage Where the Insured Did Not Pay for the Replacement?

 

No.  The general rule in New York is that a party is only entitled to recover for losses that they have actually sustained.  As noted by the Third Department “[t]he purpose of an action on a…insurance policy is to attempt to put the insured in as good a position as he would have been had no [loss] occurred, by awarding him the actual cash value of the property lost or damaged”(Harrington v Amica Mut. Ins. Co., 223 AD2d 222 [3d Dept, 1996]).  The Court went on to note that “[c]ertainly, considering the purpose of [the replacement cost provisions], it is reasonable to deny recovery for replacement costs where the insured is not going to replace the property as he would then make a profit out of his loss”  (Id.). 

In Harrington, the insured received ACV value for a loss.  At approximately the same time, the insured then entered into an agreement with a third-party to sell the premises “as is.”  The purchasing party then completed the repairs to the property.  At that point, the insured tried to obtain the benefits of RC where the loss was actually absorbed by the third-party purchaser.  Although the policy provided for RC coverage when the damage was replaced, the insured was not entitled payment unless he could establish that he had incurred a financial loss.

  • Does payment of ALE Preclude a Denial of Coverage Obligations at a Later Date?

 

Probably not.  We’ve looked high and low, and haven’t been able to find a decision in New York law on this one.  However, a decision from North Carolina’s Court of Appeals is instructive (Hannah v Nationwide Mut. Fire Ins. Co., 190 NC App 626, 660 SE2d 600 [NC Ct. of Apps., 2008]).  In that case, Nationwide issued ALE payments to a party that it reasonably believed was insured under the terms of the policy at issue.  At the conclusion of the investigation, it was revealed, however, that the party seeking ALE coverage was not a “resident” of the insured’s “household.”  Accordingly, he did not qualify as an insured under the policy. 

When Nationwide sought to deny coverage, the purported insured argued that the decision to pay ALE resulted in the carrier being estopped from disclaiming.  The North Carolina court ruled, however, that the concept of waiver/estoppel was not applicable to “broaden the coverage of a policy so as to protect the insured against risks not included therein or expressly excluded therefrom.” 

We note that New York has traditionally adopted a similar view of estoppel/waiver (see, gen., Albert J. Schiff & Associates v Flack, 51 N.Y.2d 692435 N.Y.S.2d 972 [1980]).  As such, we would expect that a New York court would rule in similar fashion.

Bonus ----- Can I be personally named in a lawsuit, can I be personally liable?

Thankfully, NO!!!!

As noted by the Third Department “[a]s agents of a disclosed principal whose actions were undertaken at the direction of the insurer, the adjusters cannot be held personally responsible to plaintiffs. (see Bardi v Farmers Fire Ins. Co., 260 AD3d 783 [3d Dept., 1999])

Property

12/27/12       American Heritage Realty, LLC v Strathmore Ins. Co.
Appellate Division, Third Department
Discovery of I/A’s Similar Hail Damage Claims Permitted Over Objection from Defendant Carrier
Plaintiff was the owner of five different apartment complexes which were all insured by Strathmore.  When each of the premises sustained damages due to a widespread hail storm, claims were subsequently submitted to Strathmore.  After an investigation in which it retained the services of an independent adjuster, Strathmore denied plaintiff’s claims for coverage. 

Plaintiff commenced the instant action as a challenge to Strathmore’s coverage positions.  As part of discovery in that matter, plaintiff took the deposition of the independent adjuster who was retained by Strathmore to investigate the claims.  When his deposition testimony allegedly contradicted conclusions he had previously reached in his reports, plaintiff served a subpoena duces tecum on him.  In short, plaintiff sought production of the adjuster’s files from approximately 40 hail damage claims that he handled over the previous two years. 

Upon receipt of the subpoena, Strathmore immediately moved to quash the subpoena.  Plaintiffs, in turn, moved to compel compliance.  Therein, plaintiff’s argued that Strathmore had no standing to quash the subpoena of a non-party, and that the discovery sought was material and necessary to the prosecution of the case. 

The Third Department ruled that Strathmore had standing to move to quash because it had a “direct interest in the controversy” and could be aggrieved by the production of the documents requested.  However, the Court also ruled that plaintiff s had met their burden of establishing the items requested were material and necessary to the prosecution of the case.  In addition, the Court noted that plaintiff also established, as it needed to do, that the items were not obtainable from some other party.

With regard to the claim at hand, the Court noted that the independent adjuster’s actions in 40 unrelated cases were relevant to addressing his credibility as a witness.  More troubling, the Court also noted that his actions were also relevant in evaluating Strathmore’s coverage position. 

Peiper’s Point – Although dicta, we are troubled by the Court’s reference that an independent investigator’s actions may be useful in assessing a carrier’s coverage position.  How, why, or what an independent investigator handled a similar, but unrelated claim, should be irrelevant.  Indeed, should not all cases (from carrier and insured, alike) be handled on a “claim by claim” basis?

Potpourri

12/20/12       Palomo v 175 St. Realty Corp.
Appellate Division, First Department
Spoliation Sanction Not Granted Where Plaintiff can Still Prove his Case with Other Evidence
Plaintiff commenced the instant claim asserting personal injuries after a landing in a stairwell and collapsed.  Defendant moved for summary judgment on the basis that it did not have notice (actual or constructive) of the allegedly defective condition.  In response, plaintiff argued that cracking in the marble landing had been visible for weeks prior to the incident.  Thus, a question of fact existed as to notice and the motion was denied accordingly. 

Of particular interest in this case, however, was the spoliation argument raised by plaintiff.  In short, because defendant had destroyed the marble in question presumably during the course of the litigation, plaintiff sought to have the defendant’s Answer stricken.   Where, as here, the plaintiff was not deprived of an opportunity to prove his case, notwithstanding the discarded materials, the court was unwilling to grant such draconian relief.

12/27/12       Corrado v 80 Broad, LLC
Appellate Division, First Department
Where Tenant had no Rights of Maintenance Over Sidewalk, “In and About” Indemnity Language did not Apply
Plaintiff sustained injury when she tripped and fell due a defect in a public sidewalk directly in front of defendant’s building.  More particularly, plaintiff fell directly in front of a bank that leased space from defendant.  Upon receipt of the instant action, 80 Broad sought contractual indemnification from its tenant, the bank.

The terms of the lease provided that the bank would indemnify 80 Broad for any losses in or about the premises.  However, the lease also provided that 80 Broad would retain control and responsibility over the sidewalk.  The bank’s responsibility was limited to a “three foot control zone” outside of the building.

In refusing to permit 80 Broad to seek indemnity in this case, the Court noted that under some circumstances “in and about” language may include the public sidewalk.  Here, however, when viewed as part of the lease as a whole, it is clear that the public sidewalk was not intended to be an area that was part of the “demised premises

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

The Department of Financial Services Released Its Regulatory Agenda For 2013
This document sets forth 27 proposed amendments and additional to the Insurance regulations.  I have included the limited information provided for those that are most relevant to property and casualty insurers.

  • DFS plans to adopt a new part to the Insurance regulations in an effort to address certain business practices in the title insurance industry and the supervision of title insurers authorized to write title insurance in this state.
  • DFS plans to adopt a new part to the Insurance regulations implementing the Superintendent’s authority to require insurers to submit filings by electronic means.
  • DFS plans to update out of date references to the Superintendent of Insurance to the Superintendent of DFS.
  • DFS plans to amend 11 NYCRR 71 to permit the inclusion of non-duty-to-defend provisions in directors and officers liability insurance policies in certain circumstances.
  • DFS plans to adopt a new provision, 11 NYCRR 244 providing guidance against the disclosure of confidential information pertaining to domestic violence victims and endangered individuals.
  • DFS plans to adopt a provision establishing standards and procedures for the investigation and suspension or removal of a health service provider’s authorization.
  • DFS plans to adopt a new provision providing rules and guidelines to ensure full disclosure of all relevant information in advertisements that describe or solicit the purchase of property/casualty insurance coverage which are published, issued or distributed through various advertising media.
  • DFS plans to amend 11 NYCRR 86.6 to establish a requirement that any amendment to a fraud prevention plan that the Criminal Investigation Unit had previously approved must be submitted to the unit within 30 days of its implementation.

 

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

12/19/12       Olin Corporation v. America Home Assurance Company.
Second Circuit Court of Appeals – New York
Policy Language Controls Trigger of Coverage for Environmental Claims
This appeal arises out of contamination at Olin’s manufacturing site in Morgan Hill California, between 1957 and 1987.   At issue is whether the $30.3 million attachment point for American Home’s excess policies for the years 1966-69 and 1969-1972 could be reached by the alleged property damage at Morgan Hill.  The district court granted summary judgment to American Home, which issued two excess policies during this period, on the ground that the attachment point for these excess policies could not be met.  For the following reasons, the United States Court of Appeals for the Second Circuit [“Court”] vacated the district court’s judgment and remanded the case to the district court for further proceedings.

Olin had an insurance program consisting of general commercial liability insurance and layered excess policies.  Two excess policies provided by American Home are at issue here.  The first of these covers the period of January 1, 1966 to January 1, 1969.  The second covers the period to January 1, 1969 to January 1, 1972.  Each policy covered ten percent of up to $10 million in damages in excess of $30.3 million for the three year policy period.  American Home would have no coverage obligation unless the damages attributable to one of the policies exceeded the $30.3 million attachment point.  Each policy also follows form to lower-level excess policies.

The 1969-72 American Home policy follows form to a policy issued by Underwriters at Lloyd’s [“Lloyd’s].  Of particular significance is Condition C in the Lloyd’s policy – “Prior Insurance and Non-Accumulation of Liability.”  The provision states:

It is agreed that if any loss covered hereunder is also covered in whole or in part under any other excess policy issued to the Assured prior to the inception date hereof, the limit of liability hereon  . . . shall be reduced by any amounts due to the Assured on account of such loss under such prior insurance.

Subject to the foregoing paragraph and to all the other terms and conditions of this Policy, in the event that personal injury or property damage arising out of an occurrence covered hereunder is continuing at the time of termination of this Policy, Underwriters will continue to protect the Assured for Liability in respect of such personal injury or property damage without payment of additional premium.

The 1966-69 American Home policy follows form to a policy issued by the Home Insurance Company, which mostly follows form to a policy issued by Lloyd’s. That policy was identical to the policy underlying the 1969-72 American Home in nearly all relevant respects.  The difference between the two American Home policies is that the Home Insurance Company policy underlying the 1966-69 American Home policy specifies that it only provides coverage for “accidents or occurrences . . . taking place during the period of the Policy.”  No such language applies to the 1969-72 American Home policy.

On appeal, American Home relied on two prior Olin decision, I and IIOlin I provide for pro rata allocation of damage in cases of progressive environmental injury. Under this approach, the total $102 million in damages from the cleanup of the Morgan Hill site should be equally divided among the years in which property damage occurred.   Under Olin II it was determined that property damage occurred from the time when contamination began until the time when the underground plume of perchlorate reached its maximum extent.  Therefore, assuming that contamination began in 1957 and the plume reached equilibrium in 1987, property damage occurred in 31 years.  Pursuant to Olin I and Olin II, the total damage of $102 million should be divided by 31, yielding a per-year damage figure of $3.3 million.  Since each American Home policy had a coverage period of three years, the total property damage attributable to each policy from the perchlorate spill amounted to $9.9 million – as a result neither policy’s attachment point of $30.3 million could be reached.

Olin did not dispute this basic analysis but argued that American Home had ignored the effect of Condition C on the policies.  In Olin’s view, the second paragraph of Condition C requires American Home to indemnify Olin not only for damage occurring during the policy periods by also for any damage in subsequent years. Using the pro rata approach of Olin I, $72.6 million in damage should be assigned to the 1966-1969 policy, and $62.7 million should be assigned to the 1969-72 policy.  Since these amounts far exceed the $30.3 million attachment point, each policy would be reached.

In rendering its decision the Court examined in prior decisions in Olin I and Olin II along with Condition C in the Lloyd’s policies. By virtue of the plain language of paragraph 2 of Condition C the Court saw three requirements for the application of the continuing coverage provision:  (1) there must be “personal injury” or “property damage”; (2) the personal injury or property damage must arise out of an occurrence covered by the policy; and, (3) the personal injury or property damage must be “continuing at the time of termination” of the policy.  The Court concluded that all three conditions were met.

In their briefs American Home and amicus OneBeacon argued, however, that the post-policy damage was “new” damage rather than “continuing” damage.  The Court disagreed, the Court held that American Home agreed to indemnify Olin not only for damage taking place during the policy period but also continuing after the termination of the policy.  The Court interpreted the provision as adding additional years of exposure, using the same pro rata allocation method for determining the amount of damage attributed to each year. The Court determined that allocating damages over a lengthy period typically results in attachment points for certain excess policies not being reached.  Giving effect to the plain language of Condition C thus allows insureds to look to excess policies for some indemnification when those policies include Condition C.

The Court also addressed the issue of how paragraph 1 of Condition C applies to the two American Home policies. American Home argued that this provision prevented it from having any responsibility under either policy, because the damage caused by the perchlorate spill is covered “in whole or in part” by Olin’s other polies.  Olin argued that American Home misread the prior insurance provision, which applies only to policies that are provided by the same insurer; and at the same level of coverage. Olin conceded that the paragraph 1 of Condition C did not apply to the 1969-72 American Home policy, because the 1966-69 policy meets these two conditions.

The Court agreed with Olin and concluded that paragraph 1 of Condition C reduces American Home’s liability only to the extent that a prior insurance policy at the same level of coverage, here $30.3 million, indemnifies for a loss that is also covered by an American Home policy.  The Court determined that this accords with Condition C’s apparent purpose of sweeping a continuing loss into the earliest triggered policy, with that policy then fully indemnifying the insured for that loss.  The result is that only one of the American Home policies indemnified Olin.

The Court concluded that the district court’s basis for granting summary judgment was in error.  Condition C obligates American Home to indemnify Olin not only for property damage occurring during the policy period, but also for property damage arising from covered occurrences that continues after the policy period.

AGENTS ERRORS & OMISSIONS:
Although my primary focus is on coverage cases reported in the Federal Circuit Courts, my experience in litigating Agents Errors & Omissions cases is the reason I am reporting on the following case which was an appeal from the Supreme Court, State of New York, to the Appellate Division, Fourth Judicial Department.

12/28/12       QP, Inc. v. Flanders Group, Inc.
Appellate Division, Fourth Judicial Department
Court Found Issues of Fact as to Whether a “Special Relationship” Existed
The plaintiff QP, Inc. [“QP”] was in the business of manufacturing machine parts.  The defendant Flanders Group, Inc. [“Flanders”] was an insurance agency.  Flanders had an ongoing business relationship with QP and relevant to this matter Flanders procured an insurance policy from Great Northern Insurance Company, part of the Chubb Group of Insurance Companies [“Chubb”]. Flanders had an agency agreement with Chubb.

In 2000 QP purchased a machine specifically to manufacture products for one of its customers.  Soon thereafter, QP began experiencing problems with the machine’s operation.  The problems began to adversely affect QP’s relationship with its customer.

In August 2001, during a meeting between QP and Flanders to review QP’s insurance needs an employee of QP came into the meeting to advise that the machine had again broken down.  At that point the parties began discussing available insurance options. This led to a meeting with Chubb less than a week later regarding production problems.  Chubb then hired a technical consultant to prepare a loss analysis report and on May 14, 2003 Chubb issued a disclaimer advising QP that any losses suffered by QP as a result of the subject machine were not covered under the Chubb policy.

There was no information in the opinion regarding the scope of relationship between QP and Flanders, nor was there any details regarding the notice provided to Chubb regarding the purportedly defective machine or the damages that QP was experiencing as a result of the machine.

QP commenced this action alleging that defendant breached a contract pursuant to which defendant became plaintiff’s insurance agent, procured insurance for plaintiff and generally assisted and advised plaintiff in regard to insurance matters.  Flanders moved for summary judgment dismissing the complaint on the ground that it had fulfilled all of its obligations to plaintiff as required by law. The lower court denied Flanders motion for summary judgment and in a brief decision the Fourth Department affirmed.

In rendering its decision the Fourth Department cited to the Court of Appeals case, Murphy v. Kuhn, (90 NY2d 266), noting that in Murphy the court recognized that there were “exceptional and particularized situations that may arise in which insurance agents, through their conduct or by express of implied contract with customers and clients, may assume or acquire duties in additional to those fixed at common law.”  The court noted that a determination of whether those duties arise is governed by the existence of a “special relationship” between the insured and the insurance agent.  Without defining those issues which the court believed raised a question of fact as to whether a special relationship existed the court held that QP raised triable issues of fact and affirmed the lower court’s order.

In a concurring opinion one of the Justice’s wrote to express his view that the viability of QP’s breach of contract claim was not dependent on the existence of a “special relationship” between the parties. In his concurring opinion, the judge wrote that while he agreed that a special relationship is required when a dissatisfied client of an insurance agent advances tort-based theories against the agent beyond the common-law duty, in this case plaintiff had not advanced any tort based causes of action.

In a dissenting opinion, one of the Justice’s voted to reverse, disagreeing with the majority that there were issues of fact with respect to whether this case presented one of those exceptional and particularized situations in which insurance agents, through their conduct or by express or implied contract with customers and clients, assumed or acquired duties in addition to those fixed at common law.”

The dissenting Justice pointed out that in this case QP did not allege that Flanders failed to procure insurance coverage that it requested, that defendant did not properly advise plaintiff as to available coverages, or that defendants failed to provide timely notice of an occurrence or loss to QP’s insurer.  Instead, plaintiff alleges that defendant breached heretofore unheard of duties of an insurance agent or broker by, inter alia, preparing a standard notice of loss form and forwarding it to Chubb, allegedly without plaintiff’s knowledge or consent; and by failing to advise plaintiff that the “clock was ticking” on the two-year suit limitations period in the Chubb policy.  The dissenting Justice noted that such duties do not exist as a matter of law and the causes of action alleging such duties were therefore, devoid of merit. Stating further that such duties do not exist even if there was a special relationship between QP and Flanders.

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
[email protected] 

12/21/12       Praetorian Ins. Co. v. DMHZ Corp.
Supreme Court, New York County
Insurer Entitled to Costs, Disbursements, and Attorney Fees in Bringing Interpleader Action Where Losses Greatly Exceeded Available Coverage
This decision arises out of a fire at an apartment building owned by DMHZ.  The fire resulted in multiple deaths, personal injuries and property damage.  At the time of the loss, DMHZ only had a one million dollar insurance policy in place issued by plaintiff.  Understanding that the losses greatly exceeded the amount of coverage available, plaintiff brought an interpleader action seeking an order determining the distribution and priority of the insurance funds available under the policy. 

The issue here is whether plaintiff was entitled to costs, disbursements and attorneys’ fees for bringing the interpleader.  The trial court held that it was entitled to them.  DMHZ then moved to reargue asserting that the court overlooked relevant federal court case law when it made the award in favor of plaintiffs.

Initially, the court agreed that the prior decision failed to address the federal case law (which has disallowed litigation expenses in some cases based on the rationale that they are part of an insurance company’s ordinary costs of doing business); thus, it granted DMHZ’s motion to reargue.  However, after reargument, the court reached the same decision.  It held that our state interpleader statute, CPLR 1006(f), unlike the federal court statute, not only permits a court to award attorney fees and costs in an interpleader action, but provides that the court “shall” impose fees and costs “as may be just.”

It then reasoned that on two prior occasions justices assigned to the case approved of plaintiff’s decision to bring the interpleader in order to distribute the limited funds available in an equitable manner and protect against likely bad-faith claims by claimants if plaintiff were to pay claims on the first-in-time, first-in-right basis. 

While DMHZ argued that plaintiff only brought this action out of its own self-interest, the court still held that plaintiff ought not be penalized for having taken the more prudent and diligent course rather than waiting for a dispute to arise.  It then noted that “it was DMHZ’s failure to procure sufficient insurance to cover the incident at issue that lead [plaintiff] to commence the interpleader.”  Thus, the court agreed that plaintiff was entitled to litigation expenses. 

The other issue addressed by the court was plaintiff’s cross-motion for recovery of the approximately $58,000 in fees.  DMHZ challenged this amount as being unreasonable.  The court granted an additional 30 days for the parties to settle the issue themselves, and if unable, the court instructed that the matter would be referred to a Special Referee. 

Take Away:  This decision demonstrates that interpleader actions can be very helpful when an insurer is dealing with a large loss, numerous claimants and limited coverage.  It also raises the point that when an insurer actually decides to commence the action it may be more beneficial to do so in state court as opposed to federal court since the insurer may be more likely to receive a credit for its litigation expenses in that venue.

12/14/12       Goldberg v. Encompass Ins. Co. of America
Supreme Court, Albany County
Incident Not Covered Where It Occurred on Land the Insured Was Using to Construct a Home to Sell for Profit
The underlying plaintiff was injured while working on a construction site owned by Goldberg.  Encompass issued an insurance policy to Goldberg that covered personal injury claims at his residence or on land owned by Goldberg on which a one or two family dwelling is being built as a residence for Goldberg.

When Encompass eventually received notice of this claim, it denied coverage based on untimely notice and because the injury did not occurred at an “insured location.”  This declaratory judgment action was then commenced and Encompass moved for summary judgment.

With respect to late notice, the court found that Encompass met its initial burden of proving that Goldberg’s notice was late as a matter of law; however, Goldberg raised a triable issue of fact as to his good faith belief in nonliability.  Goldberg asserted that he and his business partner were constructing a home for its resale.  Goldberg supplied the land and capital while his partner acted as the general contractor.  Since Goldberg was in the retail furniture business, he lacked any knowledge of the labor law. 

Nevertheless, while the court agreed that Goldberg had raised a triable issue of fact with regard to late notice, it still ruled in favor of Encompass finding that by the plain language of the policy coverage was limited to Goldberg’s residence or the land were Goldberg intended to build his residence.  As the site where the incident occurred was a business venture, the incident was not covered under the policy.   

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

LIQUIDATED DAMAGES MAY NOT REQUIRE ACTUAL DAMAGES

Liquidated damages are often established because actual damages will supposedly be too difficult to calculate.  But is a liquidated damages clause enforceable even if no real damages occur?  This issue was addressed in the recent case of Hovas Construction, Inc. v. Board of Trustees of Western Line Consolidated School District, 2012 Miss. App. LEXIS 556 (September 4, 2012).  The school district charged the contractor $500.00/ day in liquidated damages on a school project that finished 39 days late.   The trial court enforced the $19,500.00 payment, but the contractor appealed because the school district could not show any real damages.  The Mississippi Appellate Court rejected that argument and enforced the liquidated damages clause even if actual damages failed to materialize.

The contractor argued that, although completed 39 days late, the school building was done almost a month before the start of the school year, and the school district could not point to any loss of use, added expense, or other real damage.  The appellate court disagreed noting that potential damage was not readily ascertainable because the building was not to be used for commercial purposes, and the loss potentially involved less measurable damages such as “disruption” of the school environment, planning, assignment of personnel, etc.  The court did not find the amount of $500/day an unreasonable amount of damages when viewed prospectively.

A dissenting opinion argued that allowing recovery of liquidated damages without showing any actual damages transformed the liquidated damages clause into an unlawful penalty.  Furthermore, if liquidated damages must bear some reasonable proportion to the loss actually incurred, if no loss is actually incurred does that not suggest the liquidated damages provision is unenforceable?  Indeed, some states do seem to apply a requirement that a liquidated damages clause bear some reasonable relationship to actual damages incurred.

The majority opinion, however, disagreed with that reasoning arguing that is a “back-end retrospective analysis” as opposed to a “front-end” approach.  Whether the sum is a penalty or valid liquidated damages provision must be decided as of the time of the making of the contract, not after a breach.  Where damages are both uncertain and difficult to predict, courts generally construe a contract provision as one for liquidated damages, and not a penalty.

This case applies a rather pure “liquidated damages” analysis in the sense that the only valid test of the clause is whether actual damages are difficult to ascertain as of the date the contract is formed, regardless of the amount and type of damages that ultimately may ensue from a breach.  Other jurisdictions do take a more “retrospective” approach and assess a liquidated damages clause in light of the relationship of the liquidated damages to any actual damages.  If liquidated damages should not be disproportionate to actual damages, this represents a retrospective view, or at least a view that tempers the liquidated damages clause with the later reality of actual damages resulting from a breach.

 

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

07/12/12       Citizens Property Insurance v. Cook
Florida District Court of Appeal
Each Drink By Drunk Driver Not An “Occurrence”
With thanks to our friend DaveThompson from the Florida Association of Insurance Agents (FAIA), we note this interesting decision.  The lower court had held that each drink by under-aged drivers constituted a separate “occurrence” in a suit against the homeowners for allowing the intoxication to occur.

The appellate court disagreed, holding that the subsequent car crash, where the injuries took place, was the “occurrence”.  There cannot be an occurrence without injury.  The court distinguished this case from one involving three shotgun blasts for in a shooting situation, each shot causes immediate injury.

 

REPORTED DECISIONS

Hawkins v Bryant


Appeal from an order of the Supreme Court, Erie County (Donna M. Siwek, J.), entered August 11, 2011 in a personal injury action. The order denied defendant's motion for summary judgment and granted plaintiff's cross motion for summary judgment.

Barth Sullivan Behr, Buffalo (Andrew J. Kowalewski of Counsel), for Defendant-Appellant.
Lipsitz Green Scime Cambria LLP, Buffalo (John A. Collins of Counsel), for Plaintiff-Respondent.

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by denying that part of the cross motion on the issue of serious injury and granting the motion in part and dismissing the complaint, as amplified by the bill of particulars, with respect to the 90/180-day category of serious injury within the meaning of Insurance Law § 5102 (d) and as modified the order is affirmed without costs.

Memorandum: Plaintiff commenced this action seeking damages for injuries he allegedly sustained in a motor vehicle accident when the vehicle he was driving was struck by a vehicle owned and operated by defendant. Defendant thereafter moved for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury in the accident within the meaning of Insurance Law § 5102 (d). Supreme Court denied defendant's motion and granted plaintiff's cross motion for summary judgment on the issues of serious injury and negligence. We note at the outset that, as plaintiff notes in his brief, he did not oppose defendant's motion with respect to the 90/180-day category of serious injury. We therefore modify the order by denying the cross motion with respect to that category of serious injury and by granting the motion to that extent.

We conclude that the court erred in granting those parts of plaintiff's cross motion for summary judgment with respect to the two remaining categories of serious injury alleged by plaintiff, i.e., permanent consequential limitation of use and significant limitation of use, but properly denied those parts of defendant's motion with respect thereto. We therefore further modify the order accordingly. Defendant is correct that she met her initial burden by submitting medical records and reports constituting "persuasive evidence that plaintiff's alleged pain and injuries were related to . . . preexisting condition[s]" (Carrasco v Mendez, 4 NY3d 566, 580; see Spanos v Fanto, 63 AD3d 1665, 1666). As a result, plaintiff had the burden of coming forward with evidence addressing defendant's claimed lack of causation (see Carrasco, 4 NY3d at 580; Briody v Melecio, 91 AD3d 1328, 1329). We agree with defendant that the affidavit of plaintiff's treating chiropractor submitted by plaintiff fails to address the issue of causation and thus was insufficient to raise a triable issue of fact on causation (see Smith v Besanceney, 61 AD3d 1336, 1337-1338; Caldwell v Grant [appeal No. 2], 31 AD3d 1154, 1155). However, plaintiff's treating orthopedic surgeon, who reviewed the results of plaintiff's X rays and MRI scans, opined that the accident was the "competent and producing cause of [plaintiff's] spinal conditions by means of activation aggravation of his lumbar stenosis and degenerative spondylosis and causing worsening of the disc herniations in the lumbar spine." Thus, plaintiff raised a triable issue of fact with respect to causation (see Seck v Balla, 92 AD3d 543, 544). We further conclude that plaintiff's submissions contain the requisite objective medical findings sufficient to raise issues of fact whether plaintiff sustained a serious injury under both categories of serious injury alleged by him (see generally Toure v Avis Rent A Car Sys., 98 NY2d 345, 350; Roll v Gavitt, 77 AD3d 1412, 1413).

We further conclude that the court properly granted that part of plaintiff's cross motion for summary judgment on the issue of negligence. Plaintiff met his initial burden by establishing as a matter of law "that the sole proximate cause of the accident was defendant's failure to yield the right of way" to plaintiff and defendant failed to raise a triable issue of fact (Kelsey v Degan, 266 AD2d 843, 843; see Guadagno v Norward, 43 AD3d 1432, 1433; see also Fratangelo v Benson, 294 AD2d 880, 881). There is no evidence that plaintiff could have done anything to avoid the collision (see Driscoll v Casey, 299 AD2d 885, 885; Bolta v Lohan, 242 AD2d 356, 356) and we note that, in approaching the intersection, plaintiff was entitled to anticipate that defendant "would comply with the Vehicle and Traffic Law and yield the right-of-way" (Colaruotolo v Crowley, 290 AD2d 863, 864).

Carfi v Forget


Appeal from an order of the Supreme Court, Onondaga County (James P. Murphy, J.), entered August 1, 2011 in a personal injury action. The order granted the motion of defendants for summary judgment and dismissed the complaint.

Lynch Schwab, PLLC, Syracuse (Andrew J. Schwab of Counsel), for Plaintiff-Appellant.
Law Offices of Karen L. Lawrence, Dewitt (Barney F. Bilello of Counsel), for Defendants-Respondents.

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

Memorandum: Plaintiff commenced this action seeking damages for injuries he sustained when the vehicle in which he was a passenger was struck by a vehicle owned by defendant Dawn M. Forget and operated by defendant David C. Forget. We conclude that Supreme Court properly granted defendants' motion for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d). We note at the outset that, although plaintiff alleged that he sustained several categories of serious injury in his bill of particulars, his appellate brief alleges only that he sustained a permanent consequential limitation of use of his cervical spine. Plaintiff therefore has abandoned his contentions with respect to the remaining categories of serious injury (see Beaton v Jones, 50 AD3d 1500, 1501).

Defendants met their initial burden on the motion of establishing that plaintiff did not sustain a serious injury under the permanent consequential limitation of use category, and plaintiff failed to raise a triable issue of fact to defeat the motion (see Lux v Jakson, 52 AD3d 1253, 1254; McConnell v Freeman, 52 AD3d 1190, 1191, lv denied 55 AD3d 1420). In support of their motion, defendants submitted the affirmed report of the orthopedic surgeon who examined plaintiff on defendants' behalf. After examining plaintiff and reviewing his medical records, the orthopedic surgeon concluded within a reasonable degree of medical certainty that there was no objective evidence that plaintiff sustained a "causally related injury of any significance." He concluded instead that plaintiff likely sustained a cervical strain as a result of the accident. Although plaintiff was diagnosed with a herniated disc three years after the accident, the orthopedic surgeon concluded that such injury was unrelated to the accident and was consistent with degenerative disc disease. Moreover, the orthopedic surgeon concluded that plaintiff was not impaired or disabled by that condition. He noted that plaintiff exhibited no palpable spasm, motor deficits, or objective sensory deficits and that plaintiff's cervical spine flexion, extension, lateral deviation, and right-sided rotation were all within normal limits. Only plaintiff's left-sided rotation was "mildly decreased," i.e., 55 degrees compared with normal rotation of 60 to 90 degrees. Defendants also submitted excerpts from plaintiff's deposition, in which plaintiff testified that he missed only one day of work after the accident and that he did not see his primary care physician or any other doctors for pain or stiffness in his neck for approximately two and a half years after the accident.

In opposition to defendants' motion, plaintiff submitted, inter alia, the affirmation of his treating neurosurgeon, who reviewed plaintiff's pre- and post-accident imaging studies and concluded that plaintiff sustained two herniated discs as a result of the accident. Plaintiff also submitted MRI and X ray reports reflecting the existence of two herniated discs in his cervical spine. Even assuming, arguendo, that plaintiff raised a triable issue of fact as to the causation of the herniated discs, we conclude that the court properly granted defendants' motion because plaintiff failed to submit objective medical evidence establishing plaintiff's limitations or restrictions of use resulting from those injuries (see Accurso v Kloc, 77 AD3d 1295, 1297). It is well settled that "[p]roof of a herniated disc, without additional objective medical evidence establishing that the accident resulted in significant physical limitations, is not alone sufficient to establish a serious injury" (Pommells v Perez, 4 NY3d 566, 574; see Toure v Avis Rent A Car Sys., 98 NY2d 345, 353 n 4; Caldwell v Grant [appeal No. 2], 31 AD3d 1154, 1155-1156). "Whether a limitation of use or function is . . . consequential' (i.e., important . . . ) relates to medical significance and involves a comparative determination of the degree or qualitative nature of an injury based on the normal function, purpose and use of the body part" (Dufel v Green, 84 NY2d 795, 798; see Accurso, 77 AD3d at 1296).

Here, plaintiff also submitted the letter affirmation from a nontreating orthopedic surgeon in opposition to defendants' motion, which states that upon physical examination plaintiff exhibited normal flexion, "mild" restrictions in left rotation, "moderate" restrictions in extension, left lateral bending and right-rotation, and "marked" restrictions in right lateral bending. That orthopedic surgeon did not, however, quantify plaintiff's range of motion restrictions or provide a qualitative assessment "compar[ing] the plaintiff's limitations to the normal function, purpose and use of [the cervical spine]" (Toure, 98 NY2d at 350; see Dann v Yeh, 55 AD3d 1439, 1440; Caldwell, 31 AD3d at 1156). Although the affirmation of plaintiff's treating neurosurgeon referenced range of motion losses "documented by [him]self and various physicians," he likewise failed to provide a quantitative or qualitative assessment thereof (see Toure, 98 NY2d at 350; Caldwell, 31 AD3d at 1156). Moreover, although both surgeons opined that plaintiff sustained a "permanent consequential loss" of function or use of his cervical spine as a result of the accident, those conclusory assertions are insufficient to raise a triable issue of fact (see Anderson v Capital Dist. Transp. Auth., 74 AD3d 1616, 1617, lv denied 15 NY3d 709; Barry v Future Cab Corp., 71 AD3d 710, 711; Burridge v Gaines, 294 AD2d 892, 893).

Finally, we conclude that plaintiff's submission of an affidavit in which he described his physical limitations—i.e., that he cannot turn his head "normally,"operate a lawnmower, or "shovel[ ] [his] driveway"; that he has to be "careful" with his activities to prevent the onset of pain; and that prolonged standing triggers headaches and increased neck pain—is insufficient to establish a permanent consequential limitation of use inasmuch as plaintiff's experts "did not address or quantify any limitations in the activities of plaintiff resulting from [his] injuries" (Accurso, 77 AD3d at 1297).

Pugh v Tantillo


Appeal and cross appeal from an order of the Supreme Court, Onondaga County (Brian F. DeJoseph, J.), entered January 19, 2012. The order denied the motion of defendants for summary judgment, and denied in part the cross motion of plaintiffs for partial summary judgment.

Alexander & Catalano, LLC, Syracuse (James L. Alexander of Counsel), for Plaintiffs-Appellants-Respondents.
Law Office of Keith D. Miller, Liverpool (Keith D. Miller of Counsel), for Defendants-Respondents-Appellants.

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

Memorandum: Plaintiffs commenced this action seeking damages for injuries sustained by Maurice M. Pugh (plaintiff) when the vehicle he was driving was rear-ended by a vehicle driven by defendant David J. Tantillo and owned by defendant Ciro P. Tantillo. Defendants moved for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d), and plaintiffs cross-moved for partial summary judgment on the issues of liability and serious injury. Plaintiffs appeal and defendants cross-appeal from an order that denied defendants' motion and granted only that part of plaintiffs' cross motion seeking summary judgment on the issue of negligence. We affirm. We note at the outset that defendants do not contend that Supreme Court erred in granting that part of plaintiffs' cross motion on the issue of negligence, and we further note that the parties have abandoned any contentions with respect to the 90/180-day category of serious injury set forth in plaintiffs' bill of particulars (see Ciesinski v Town of Aurora, 202 AD2d 984, 984).

We conclude that the court properly denied defendants' motion for summary judgment with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury. "[D]efendants' own submissions raise triable issues of fact whether plaintiff sustained a qualifying injury under" those two categories (Feggins v Fagard, 52 AD3d 1221, 1223; see Strong v ADF Constr. Corp., 41 AD3d 1209, 1210).

We further conclude that the court properly denied plaintiffs' cross motion for summary judgment on the issues whether plaintiff sustained a qualifying injury under those two categories of serious injury (see Monette v Trummer [appeal No. 2], 96 AD3d 1547, 1548-1549). Plaintiffs submitted the affirmation of plaintiff's treating physician who stated that plaintiff had two herniated discs in his cervical spine that required surgical treatment, but "[p]roof of a herniated disc, without additional objective medical evidence establishing that the accident resulted in significant physical limitations, is not alone sufficient to establish a serious injury" (Pommells v Perez, 4 NY3d 566, 574). Although plaintiff's treating physician provided measurements of the range of motion of plaintiff's cervical spine, he did not provide an assessment that " compares the plaintiff's limitations to the normal function, purpose and use of the affected body organ, member, function or system' " (Leahey v Fitzgerald, 1 AD3d 924, 925-926, quoting Toure v Avis Rent A Car Sys., 98 NY2d 345, 350). "Inasmuch as plaintiff[s'] expert made no meaningful comparison so as to differentiate serious injuries from mild or moderate ones, his [affirmation] was thus insufficient to establish a significant limitation of use' " or a permanent consequential limitation of use (Monette, 96 AD3d at 1549).

Golebiewski v. National Union Fire Ins. Co., et al


Sedgwick LLP, New York, N.Y. (Andrew Houghton, Jessika
Moon, and Dirk C. Haarhoff of counsel), for appellant-respondent.
Edward B. Safran, New York, N.Y., for respondents-appellants.

DECISION & ORDER

In an action pursuant to Insurance Law § 3420(a)(2) to recover the amount of an unsatisfied judgment against the defendant's insured, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Kramer, J.), dated June 29, 2011, as denied its cross motion for summary judgment dismissing the complaint, and the plaintiffs cross-appeal from so much of the same order as denied their motion for summary judgment declaring that the defendant is bound, under a certain policy of excess or umbrella insurance, to pay the unpaid portion of a judgment entered October 22, 2003, in favor of the plaintiffs and against the defendant's insured, Shaya B. Pacific, LLC, as reduced by a stipulation dated August 3, 2003, representing the principal sum of $4,122,000, plus interest from February 20, 2003.

ORDERED that the order is affirmed insofar as appealed from; and it is further,

ORDERED that the order is reversed insofar as cross-appealed from, on the law, the plaintiffs' motion for summary judgment declaring that the defendant is bound, under a certain policy of excess or umbrella insurance, to pay the unpaid portion of the judgment entered October 22, 2003, as reduced by the stipulation dated August 3, 2003, in the principal sum of $4,122,000, plus interest from February 20, 2003, is granted, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that the defendant is bound, under the subject policy of insurance, to pay the unpaid portion of the judgment entered October 22, 2003, in favor of the plaintiffs and against the defendant's insured, Shaya B. Pacific, LLC, as reduced by stipulation dated August 3, 2003, in the principal sum of $4,122,000, plus interest from February 20, 2003; and it is further,

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

This action arises from an accident that occurred on April 1, 2000, at a building owned by Shaya B. Pacific, LLC (hereinafter SBP). The injured plaintiff, Kazimierz Golebiewski, fell from a height while performing construction work at that building. Golebiewski, and his spouse (hereinafter together the plaintiffs) suing derivatively, then commenced an underlying personal injury action against SBP, among others. In that action, the Supreme Court awarded the plaintiffs summary judgment on the issue of liability. After a trial on the issue of damages, the jury awarded [*2]the plaintiffs damages in the principal sum of $8,522,613, and the Supreme Court entered judgment on that verdict. The parties subsequently stipulated to reduce the damages award to $6,122,000, plus interest from February 20, 2003. The plaintiffs have since recovered the sum of $2,000,000 of the principal award of $6,122,000, leaving an unpaid principal balance of $4,122,000.

In this action, commenced pursuant to Insurance Law § 3420(a)(2), the plaintiffs seek to recover the unpaid portion of that judgment in the principal sum of $4,122,000, plus interest, from the defendant National Union Fire Insurance Company of Pittsburgh, P.A. (hereinafter National Union). It is undisputed that at the time of the accident, the building owner, SBP, was covered under a certain excess or umbrella insurance policy issued by National Union. National Union contends, however, that it may not be held liable under Insurance Law § 3420(a)(2), as the plaintiffs did not provide it with timely notice of this claim.
Insurance Law § 3420(a)(2) provides that if certain conditions are met, an injured party may commence an action to recover an unsatisfied judgment from the insurance carrier for a tortfeasor that becomes a judgment debtor. To recover an unsatisfied judgment pursuant to Insurance Law § 3420(a)(2), the plaintiff must show, inter alia, that he or she acted reasonably "diligently in attempting to ascertain the identity of the insurer [for the tortfeasor], and thereafter expeditiously notified the insurer" of the claim (Steinberg v Hermitage Ins. Co., 26 AD3d 426, 428; see Tower Ins. Co. of N.Y. v Lin Hsin Long Co., 50 AD3d 305, 308).

Here, contrary to the plaintiffs' contention, National Union is not estopped from raising the defense of untimely notice. Although the plaintiffs contend that National Union may not now argue that the notice provided by the plaintiffs was untimely, as it did not disclaim coverage on that basis, it is undisputed that, prior to the plaintiffs' delivery of notice to National Union, SBP, the tortfeasor itself, provided National Union with notice of this claim and of the commencement of the underlying action. Under these circumstances, National Union was not required to specifically disclaim coverage based on the allegedly untimely notice by the plaintiffs (see Steinberg v Hermitage Ins. Co., 26 AD3d at 428; Rochester v Quincy Mut. Fire Ins. Co., 10 AD3d 417, 418; Ringel v Blue Ridge Ins. Co., 293 AD2d 460, 462; Massachusetts Bay Ins. Co. v Flood, 128 AD2d 683, 683-684). Consequently, National Union is not estopped from now raising the defense of untimely notice (see Appel v Allstate Ins. Co., 20 AD3d 367; Rochester v Quincy Mut. Fire Ins. Co., 10 AD3d at 418).

However, the evidence showed, as a matter of law, that the notice provided by the plaintiffs to National Union was timely, under the circumstances of this case. In particular, during the discovery phase of the underlying action, a preliminary conference order required SBP to disclose, by a certain date, the existence of both primary and excess insurance policies that were in existence at the time of this accident, and which provided coverage for this occurrence pursuant to CPLR 3101(f). In response to that order, counsel for SBP disclosed only the existence of a primary insurance policy. Counsel for SBP did not supplement that response to include information regarding the excess policy at issue, the National Union policy, despite counsel's continuing obligation to supplement discovery responses (see CPLR 3101[h]). Just prior to the trial on the issue of damages in the underlying action, counsel for SBP notified its excess carrier, National Union, of this claim and of the underlying action, and thereafter sent notice of the existence of the underlying policy to the plaintiffs. The plaintiffs notified National Union of the claim and underlying action on the same day that they learned of the existence of the excess policy.

Under these circumstances, the plaintiffs showed, prima facie, that they were reasonably diligent in ascertaining the identity of the excess carrier and in providing notice to that carrier of this claim and of the underlying action, and National Union failed to raise a triable issue of fact in opposition to that prima facie showing (see Cicero v Great Am. Ins. Co., 53 AD3d 460; see also Malik v Charter Oak Fire Ins. Co., 60 AD3d 1013, 1015-1016; Chunn v New York City Hous. Auth., 55 AD3d 437, 438; Allstate Ins. Co. v Marcone, 29 AD3d 715; State of New York v Zurich Ins. Co., 199 AD2d 916, 917). Further, in opposition to the plaintiffs' motion, National Union asserted no other defense to this action, apart from untimely notice. For the same reasons, National Union failed to establish, prima facie, that it was entitled to judgment as a matter of law (see Cicero v Great Am. Ins. Co., 53 AD3d 460).

Accordingly, the Supreme Court properly denied National Union's cross motion for summary judgment dismissing the complaint, but should have granted the plaintiffs' motion for summary judgment declaring that National Union is liable for the unsatisfied portion of the underlying judgment, plus interest from February 20, 2003 (see Insurance Law § 3420[a][2]).

Since this is a declaratory judgment action, the matter must be remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that National Union is bound, under the subject policy of insurance, to pay the unpaid portion of a judgment dated October 22, 2003, as reduced by stipulation dated August 3, 2003, in the principal sum of $4,122,000, plus interest from February 20, 2003 (see Lanza v Wagner, 11 NY2d 317, 317-334, appeal dismissed 371 US 74, cert denied 371 US 901).

Spartacus School of Sports, Inc. v. Nationwide Mut. Insurance Co.


Milber Makris Plousadis & Seiden, LLP, Woodbury, N.Y. (Lorin
A. Donnelly, Sarah M. Ziolkowski, and David Zegarelli of counsel),
for appellant.


DECISION & ORDER

In an action, inter alia, for a judgment declaring that the defendant is obligated to defend and indemnify the plaintiff in three underlying actions entitled Salas v Spartacus School of Sports, Inc., Obolensky v Reasen, and Furman v Spartacus School of Sports, Inc., all commenced in the Supreme Court, Kings County, under Index Nos. 30130/08, 23146/08, and 12341/08, respectively, the defendant appeals from an order of the Supreme Court, Kings County (Lewis, J.), dated October 28, 2011, which denied its motion for summary judgment, in effect, declaring that it is not obligated to defend or indemnify the plaintiff in the underlying actions.

ORDERED that the order is reversed, on the law, with costs, the defendant's motion is granted, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that the defendant is not obligated to defend or indemnify the plaintiff in the underlying actions.

The plaintiff, Spartacus School of Sports, Inc. (hereinafter Spartacus), was insured under commercial general liability insurance policies (hereinafter the policies) issued by the defendant, Nationwide Mutual Insurance Company (hereinafter Nationwide). The policies required that Spartacus notify Nationwide of certain defined events "as soon as practicable." After being named as a defendant in three actions, entitled Salas v Spartacus School of Sports, Inc., Obolensky v Reasen, and Furman v Spartacus School of Sports, Inc., all commenced in the Supreme Court, Kings County, Spartacus sought coverage under the policies. Nationwide disclaimed coverage with respect to each action, in part on the ground that Spartacus had not complied with the policies' notice provisions. Spartacus then commenced this action seeking, among other things, a judgment declaring that Nationwide is obligated to defend and indemnify it in each underlying action. Nationwide interposed counterclaims seeking a judgment declaring that it is not obligated to defend or indemnify Spartacus in the underlying actions. Nationwide eventually moved for summary judgment, in effect, declaring that it is not obligated to defend or indemnify the plaintiff in the underlying actions. The Supreme Court denied the motion, and Nationwide appeals.

Nationwide established its prima facie entitlement to judgment as a matter of law declaring that it is not obligated to defend or indemnify Spartacus in the underlying actions. In support of its motion, Nationwide submitted evidence demonstrating that Spartacus failed to comply [*2]with the policies' requirements that it provide Nationwide with notice of the occurrences at issue in each of the underlying actions, and of the actions themselves, as soon as practicable, thus vitiating coverage (see Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 337; AH Prop., LLC v New Hampshire Ins. Co., 95 AD3d 1243, 1244; SP & S Assoc., LLC v Insurance Co. of Greater N.Y., 80 AD3d 529, 529). In opposition, Spartacus failed to raise a triable issue of fact (see AH Prop., LLC v New Hampshire Ins. Co., 95 AD3d at 1244; SP & S Assoc., LLC v Insurance Co. of Greater N.Y., 80 AD3d at 529). Accordingly, the Supreme Court should have granted Nationwide's motion.

In light of our determination, we need not reach Nationwide's remaining contention.

Since this is a declaratory judgment action, the matter must be remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that Nationwide is not obligated to defend or indemnify Spartacus in the underlying actions (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

Liberty Ins. Underwriters, Inc. v. Perkins Eastman Architects, P.C.,



Perkins Eastman Architects, P.C., Third-Party Plaintiff-Appellant,

v

ACE American Insurance Company, Third-Party Defendant-Respondent.

Kissel Hirsch & Wilmer LLP, Tarrytown (Frederick J. Wilmer
of counsel), for Liberty Insurance Underwriters, Inc., appellant.
Clifton Budd & DeMaria, LLP, New York (Robert J. Tracy of
counsel), for Perkins Eastman Architects, P.C.,
respondent/appellant .
Kramer Levin Naftalis & Frankel LLP, New York (Philip S.
Kaufman of counsel), for Ace American Insurance Company,
respondent.

Judgment, Supreme Court, New York County (Bernard J. Fried, J.), entered September 7, 2011, to the extent appealed from, declaring that plaintiff is obligated to defend and indemnify defendant in the underlying federal action, and dismissing the third-party complaint, unanimously modified, on the law, to vacate the dismissal of the third-party complaint and declare that third-party defendant is not obligated to defend or indemnify defendant in the underlying action, and otherwise affirmed, without costs.

In compliance with the "claims made" policy issued to it by plaintiff, defendant timely advised plaintiff of a "Circumstance that may reasonably be expected to give rise to a Claim against [it]" and of the particulars of the potential claim. "Circumstance" is defined as "an event reported during the Policy Year from which you reasonably expect a Claim may be made." In correspondence with plaintiff from 2004 to 2005, defendant identified specific problem areas, as well as delays and coordination issues, in the course of the subject nursing home construction project. It identified the owner, contractor, and contractor's surety as potential claimants for millions of dollars. It noted that the owner was litigious, that the contractor was looking to deflect blame, and that negotiations with the surety over honoring its performance bond were proceeding slowly. Nowhere in any of the notices and letters to plaintiff did defendant limit the potential claim to design errors.

As to third-party defendant ACE's "claims made and reported" policies, coverage for the federal action is barred by the exclusion for claims arising from circumstances required to be, but not, disclosed in defendant's applications for insurance. Moreover, the federal action was a claim first made on November 3, 2005, during the second ACE policy period (February 16, 2005-February 16, 2006), but not reported to ACE before the end of that policy period. Although plaintiff disclaimed coverage on February 20, 2006, ACE did not receive notice of the federal action until March 31, 2006.

The "New York Amendatory" endorsement to the second ACE policy giving defendant an additional 60 days after February 16, 2006 to give notice of the claim does not avail defendant since, by its terms, it applies only if the policy terminates or is not renewed, neither of which occurred here. Nor did defendant establish detrimental reliance on any communications from ACE so as to estop ACE from denying coverage.

We modify solely to declare in ACE's favor (see Lanza v Wagner, 11 NY2d 317, 334 [1962], cert denied 371 US 901 [1962]).

Valdez v Benjamin


Sim & Record, LLP, Bayside (Sang J. Sim of counsel), for appellant.
Desena & Sweeney, LLP, Hauppauge (Shawn P. O'Shaughnessy of counsel), for respondents.
Order, Supreme Court, Bronx County (Howard H. Sherman, J.), entered June 27, 2011, which granted defendants' motion for summary judgment dismissing the complaint alleging serious injuries under Insurance Law § 5102(d), unanimously affirmed, without costs.

Defendants met their burden of establishing the absence of a serious injury to plaintiff's right knee by submitting their neurologist's report finding full range of motion, negative test results, and resolved injuries, and their radiologist's report finding absence of tears, trauma, or other causally related injuries (see Fuentes v Sanchez, 91 AD3d 418 [1st Dept 2012]). In opposition, plaintiff failed to raise a triable issue of fact. His treating physician provided neither evidence of range of motion limitations nor a qualitative assessment of the knee, and his finding of permanency relied on plaintiff's subjective complaints of pain (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350 [2002]). While plaintiff's radiologist found a meniscal tear, the record contains no evidence of any limitations resulting from that tear (see Dembele v Cambisaca, 59 AD3d 352 [1st Dept 2009]).

Plaintiff's contention that defendants failed to establish the absence of serious injury to his cervical and lumbar spine because of the inconsistencies or omissions in their experts' reports is unpreserved, and we decline to consider it (see Alicea v Troy Trans, Inc., 60 AD3d 521, 521—522 [1st Dept 2009]). In any event, plaintiff failed to rebut defendants' prima facie showing of lack of causation. Defendants' radiologist concluded that the claimed injuries in both parts of the spine were preexisting degenerative conditions, and found no evidence of trauma or causally related injuries (see Graves v L & N Car Serv., 87 AD3d 878 [1st Dept 2011]). Plaintiff's radiologist did not opine as to the etiology of the injuries (id.). Plaintiff's treating physician opined as to causation, albeit conclusorily (see Biascochea v Boves, 93 AD3d 548, 548-549 [1st Dept 2012]). However, plaintiff failed to explain adequately the gap in treatment from six months or a year after the February 2008 accident through February 2011 (see Pommells v Perez, 4 NY3d 566, 574 [2005]).

Plaintiff's admission at deposition that he returned to work two days after the accident established as a matter of law that he did not suffer a 90/180—day injury (see Seck v Balla, 92 AD3d 543 [1st Dept 2012]).
Haniff v Khan


Brand Glick & Brand, P.C., Garden City (Peter M. Khrinenko of counsel), for appellants.
Burns & Harris, New York (Blake G. Goldfarb of counsel), for respondent.

Order, Supreme Court, Bronx County (Mary Ann Brigantti-Hughes, J.), entered September 19, 2011, which, to the extent appealed from, denied defendants' motion for summary judgment dismissing the complaint alleging serious injuries under Insurance Law § 5102(d), unanimously reversed, on the law, without costs, the motion granted, and the complaint dismissed. The Clerk is directed to enter judgment accordingly.

Plaintiff's car was rear-ended by a cab driven and owned by defendants on September 24, 2009, and he subsequently commenced this action alleging serious injuries to his lower back and left shoulder under the "significant limitation," "permanent consequential limitation," and 90/180-day injury categories of Insurance Law § 5102(d).

Defendants established prima facie absence of a serious injury in the lumbar spine and shoulder by submitting the affirmed report of an orthopedist who examined plaintiff in October 2010 and found full range of motion, negative clinical test results, and resolved sprains (see Castillo v Cinquina, 85 AD3d 660 [1st Dept 2011]; Christian v Waite, 61 AD3d 581, 582 [1st Dept 2009]).

Plaintiff failed to raise a triable issue of fact. He did not submit any recent evidence of limitations in his lumbar spine, and his expert reported the lumbar spine was asymptomatic. As to the shoulder, plaintiff's orthopedist found only minor limitations in range of motion which are insufficient to establish existence of a "significant" or "consequential" limitation (see Style v Joseph, 32 AD3d 212, 214 n [1st Dept 2006]; Arrowood v Lowinger, 294 AD2d 315, 316 [1st Dept 2002]; Bandoian v Bernstein, 254 AD2d 205 [1st Dept 1998]). Further, plaintiff returned to work without limitation after two days and his orthopedist noted that he stopped treatment at his office after two months, at which time he exhibited only mild limitations, which are not a serious injury (see Gaddy v Eyler, 79 NY2d 955, 956-957 [1992]).

Defendants established entitlement to dismissal of the 90/180-day injury claim by submitting plaintiff's verified bill of particulars alleging that he was confined to bed and home and was substantially disabled for only two days (see Rosa v Mejia, 95 AD3d 402, 405 [1st Dept 2012]; Onishi v N & B Taxi, Inc., 51 AD3d 594, 595 [1st Dept 2008]). Plaintiff did not submit any evidence to raise a triable issue of fact. Rather, the deposition testimony, which he submitted, confirmed that he missed two days of work.

Schenback v. United Frontier Mutual Ins. Co.


Appeal from an order of the Supreme Court, Erie County (Patrick H. NeMoyer, J.), entered January 9, 2012. The order, insofar as appealed from, granted the motion of plaintiffs for summary judgment and determined that Eric Prutsman was an insured under his parents' homeowners policy.


BARTH SULLIVAN BEHR, BUFFALO (LAURENCE D. BEHR OF COUNSEL), FOR DEFENDANT-APPELLANT.
LAW OFFICES OF RICHARD S. BINKO, BUFFALO (RICHARD S. BINKO OF COUNSEL), FOR PLAINTIFFS-RESPONDENTS.
JOHN RICHARD STREB, KENMORE, FOR INTERPLEADER DEFENDANT-RESPONDENT.


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

Memorandum: This appeal arises from an action pursuant to Insurance Law § 3420 (b) to recover from defendant-interpleader plaintiff, United Frontier Mutual Insurance Company (United), the amount of a default judgment that plaintiffs obtained against interpleader defendant, Eric Prutsman. Prutsman's parents were insured by United and, pursuant to the terms of the policy, Prutsman also would be covered if he resided in his parents' household. United appeals from an order that, inter alia, granted plaintiffs' motion for summary judgment on their complaint, determining that Prutsman is an insured under the United policy and thus that plaintiffs are entitled to recover against United pursuant to Insurance Law § 3420 (b).

"A resident is one who lives in the household with a certain degree of permanency and intention to remain" (Canfield v Peerless Ins. Co., 262 AD2d 934, 934-935, lv denied 94 NY2d 757; see Matter of State Farm Mut. Auto. Ins. Cos. v Jackson, 31 AD3d 1171, 1171-1172). "The standard for determining residency for purposes of insurance coverage requires something more than temporary or physical presence and requires at least some degree of permanence and intention to remain' " (Government Empls. Ins. Co. v Paolicelli, 303 AD2d 633, 633; see Canfield, 262 AD2d at 934-935). Here, plaintiffs met their initial burden on their motion by establishing that Prutsman's stay in their house was only temporary and that plaintiffs, Prutsman and his parents intended at all times that he return to the parents' house to live (see generally Alvarez v Prospect Hosp., 68 NY2d 320, 324). In opposition, United failed to raise a triable issue of fact (see generally Konstantinou v Phoenix Ins. Co., 74 AD3d 1850, 1851, lv denied 15 NY3d 712; Matter of Prudential Prop. & Cas. Ins. Co. [Galioto], 266 AD2d 926, 926).

 

Trezza v. Trezza

APPEAL by nonparties Oxford Health Plans and The Rawlings Company, LLC, in an action to recover damages for personal injuries, from an order of the Supreme Court (Herbert Kramer, J.), dated June 23, 2011, and entered in Kings County, which, in effect, granted the plaintiff's motion to extinguish a purported lien and/or claim for reimbursement.

Robinson & Cole LLP, New York, N.Y. (Thomas J. Donlon
and Linda L. Morkan of counsel), for nonparty-appellants.
Bruce Montague & Partners, Bayside, N.Y. (Craig I. Gardy
of counsel), for respondent.

OPINION & ORDER


DICKERSON, J.

In 2009, the Legislature enacted General Obligations Law § 5-335 to protect a plaintiff who settles an action to recover damages for personal injuries from being subject to certain subrogation or reimbursements claims by health benefit providers. The statute provides that "except where there is a statutory right of reimbursement," no party who enters into a settlement "shall be subject to a subrogation claim or claim for reimbursement by a benefit provider" with respect to those expenses "that have been or are obligated to be paid or reimbursed by said benefit provider". The issue we are called upon to determine on this appeal is whether General Obligations Law § 5-335 can bar a private insurer that provides health benefits through a Medicare Advantage plan (see 42 USC §§ 1395w-21-1395w-29) from seeking reimbursement for the expenses incurred in affording accident-related medical care to an enrollee who settles a personal injury action. For the reasons which follow, we conclude that General Obligations Law § 5-335, insofar as applied to Medicare Advantage organizations, is preempted by federal law because it restricts the contractual reimbursement rights to which those organizations are entitled pursuant to the provisions of Title XVIII of the Social Security Act, as amended, 42 USC § 1395 et seq., commonly known as the Medicare Act (see generally Heckler v Ringer, 466 US 602, 605).
Factual and Procedural Background ).

On March 20, 2005, the plaintiff was injured in an automobile accident. She was a passenger in a vehicle operated by her husband, the defendant Dana Trezza, when that vehicle collided with a second vehicle. The plaintiff allegedly sustained serious injuries as a result of the accident. The nonparty appellant Oxford Health Plans (hereinafter Oxford), the plaintiff's Medicare secondary payer organization, paid $37,787.64 in medical expenses for treatment of the plaintiff's accident-related injuries.

The plaintiff commenced this personal injury action on or about October 24, 2007, against her husband and the owners and operator of the second vehicle. Ultimately, the plaintiff received a settlement of $75,000, consisting, in effect, of the $25,000 personal injury protection insurance policy limit of the policy covering the vehicle in which she was a passenger, and the $50,000 policy limit of the policy covering the second vehicle.

By letter dated September 10, 2008, the nonparty appellant The Rawlings Company, LLC (hereinafter Rawlings), on behalf of Oxford (hereinafter together the Oxford parties) contacted the plaintiff's attorney to assert a claim for reimbursement for amounts Oxford had paid for the plaintiff's accident-related medical care. As of June 29, 2010, Rawlings claimed that Oxford was entitled to reimbursement of $37,787.64.

By order to show cause dated October 9, 2010, the plaintiff moved to extinguish Oxford's purported lien and/or claim for reimbursement. The plaintiff asserted that, pursuant to General Obligations Law § 5-335, there is no right to reimbursement or subrogation for medical insurance providers such as Oxford. General Obligations Law § 5-335 provides, in pertinent part,

"When a plaintiff settles with one or more defendants in an action for personal injuries, medical, dental, or podiatric malpractice, or wrongful death, it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider, except for those payments as to which there is a statutory right of reimbursement. By entering into any such settlement, a plaintiff shall not be deemed to have taken an action in derogation of any nonstatutory right of any benefit provider that paid or is obligated to pay those losses or expenses; nor shall a plaintiff's entry into such settlement constitute a violation of any contract between the plaintiff and such benefit provider.

"Except where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider" (General Obligations Law § 5-335[a]).

The plaintiff claimed that any contractual right to reimbursement Oxford may have had was extinguished when General Obligations Law § 5-335 went into effect on November 12, 2009.

The Oxford parties opposed the plaintiff's motion. They reiterated that Oxford had paid $37,787.64 for medical expenses incurred by the plaintiff allegedly arising out of her automobile accident. The Oxford parties asserted that Oxford had a statutory right to reimbursement under 42 USC §§ 1395y and 1395w-22, and that General Obligations Law § 5-335 expressly recognizes that statutory rights of reimbursement, such as those under the federal law governing Medicare, are not subject to extinguishment. The Oxford parties also maintained that it was unnecessary for them to seek a declaration that General Obligations Law § 5-335 is preempted by federal law, because that section provides for reimbursements where a statutory right thereto exists.

In support of their position that they had a statutory right to reimbursement, the Oxford parties relied on language in Oxford's contract with the plaintiff which stated, in pertinent part:

"Who Pays First?

"As a Member, you are always entitled to receive Covered Services through the AARP MedicareComplete plan. Medicare law, however, gives us or our designee the right to recover payments from certain third party insurance companies or from you, if you were paid by a third party. Because of this, we may ask you for information about other insurance you may have. If you have other insurance, you can help us obtain payment from the other insurer by promptly providing the requested information.

"If any no-fault or any liability insurance is available to you, benefits under that plan must be applied to the costs of health care covered by that plan. Where we have provided benefits, and a judgment or settlement is made with a no-fault or liability insurer, you must reimburse us or our designee (entity or person selected for this purpose) to the extent of your medical expenses."

The Oxford parties asserted that the plaintiff acknowledged that she had the obligation to reimburse Medicare since she conceded that General Obligations Law § 5-335 did not extinguish claims made pursuant to a valid statutory right of reimbursement. The Oxford Parties claimed that the plaintiff had the same obligation as to Oxford, since it was a Medicare+Choice organization, as defined at 42 USC § 1395w-28(a)(1) ("The term Medicare+Choice organization' means a public or private entity that is certified under section 1395w—26 of this title as meeting the requirements and standards of this part for such an organization"). The Oxford parties asserted that Oxford was entitled to its statutory right of reimbursement pursuant to 42 USC §§ 1395y, 1395w-22, and 1395mm(e)(4).

In reply, the plaintiff first asserted that General Obligations Law § 5-335 was not preempted by federal law. The plaintiff claimed that, while General Obligations Law § 5-335 does specifically recognize that statutory rights of reimbursement are not subject to elimination, Oxford did not have a statutory right to reimbursement. According to the plaintiff, the federal Medicare statute did not confer any affirmative statutory right to reimbursement. Rather, any such right was created by the insurance contract itself, and therefore Oxford had a contractual, not a statutory, right to reimbursement. She argued that contractual rights would be extinguished by General Obligations Law § 5-335.

Further, the plaintiff asserted that there was no evidence that her settlement included compensation for health care services she received, and, pursuant to General Obligations Law § 5-335, her settlement was conclusively presumed not to include compensation for the cost of health care services. Therefore, according to the plaintiff, her settlement did not include compensation to her for health care services from which Oxford could seek reimbursement.

The Order Appealed From

In an order dated June 23, 2011, the Supreme Court, Kings County (Kramer, J.), granted the plaintiff's motion to extinguish the purported lien and/or claim for reimbursement (Trezza v Trezza, 32 Misc 3d 1209[A], 2011 NY Slip Op 51237[U] [Sup Ct, Kings County]). Relying, in effect, on the language in 42 USC § 1395W-22(2)(4), set forth in the analysis below, the Supreme Court stated that the "Medicare Act permits, but does not require, HMO insurers to contract for subrogation rights'" (Trezza v Trezza, 32 Misc 3d 1209[A], 2011 NY Slip Op 51237[U], *2, quoting Nott v Aetna U.S. Healthcare, Inc., 303 F Supp 2d 565, 571 [ED PA]).

The Supreme Court then observed that General Obligations Law § 5-335(a) creates a conclusive presumption that settlements in personal injury actions do not include compensation for the cost of health care services except where there exists a statutory right of reimbursement (see Trezza v Trezza, 32 Misc 3d 1209[A], 2011 NY Slip Op 51237[U], *2). With the exception of the circumstance where there is a statutory right of reimbursement, "a benefit provider has no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider'" (id. at 2, quoting General Obligations Law § 5-335[a]).

The Supreme Court determined that the threshold question was whether the Medicare Act preempted General Obligations Law § 5-335 (see Trezza v Trezza, 32 Misc 3d 1209[A], 2011 NY Slip Op 51237[U], *2). The Supreme Court stated that the "central inquiry is whether Congress intended to create . . . a private cause of action when passing the Medicare Act" (id. at * 2 [internal quotation marks omitted]). The Supreme Court then observed that courts "have held that because the Medicare Act did not establish a federal scheme for the civil enforcement of HMO subrogation rights, it did not create a private cause of action" (id. at *2, citing Nott v Aetna U.S. Healthcare, Inc., 303 F Supp 2d at 570, and Care Choices HMO v Engstrom, 330 F3d 786, 789 [6th Cir]). The court concluded that the Medicare Act "does not create a statutory right of reimbursement; instead, it allows HMOs to include subrogation rights in its contracts with beneficiaries" (Trezza v Trezza, 32 Misc 3d 1209[A], 2011 NY Slip Op 51237[U], *2). Accordingly, the court determined that, "[b]ecause the Medicare Act permits, but does not mandate, HMO insurers to contract for subrogation rights' ([Nott v Aetna U.S. Healthcare, Inc., 303 F Supp 2d] at 571), subrogation in this context remains a state contract law issue" (Trezza v Trezza, 32 Misc 3d 1209[A], 2011 NY Slip Op 51237[U], *2).

The Supreme Court concluded that, because General Obligations Law § 5-335(a) creates a conclusive presumption that a settlement in a personal injury action does not include compensation for health care services, and because that section further expressly states that, "[e]xcept where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party," Oxford had no lien or subrogation claim for medical expenses against the plaintiff (see Trezza v Trezza, 32 Misc 3d 1209[A], 2011 NY Slip Op 51237[U], *3).

Analysis

General Obligations Law § 5-335 was enacted on November 12, 2009, and became effective immediately (see L 2009, ch 494, pt F, §§ 8-9). It provides, in pertinent part, that "[w]hen a plaintiff settles with one or more defendants in an action for personal injuries . . . it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider, except for those payments as to which there is a statutory right of reimbursement" (General Obligations Law § 5-335). It further provides that, "[e]xcept where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider" (id.).

As stated in a letter dated November 13, 2009, from the Office of the Mayor of the City of New York to David Paterson, then the Governor of New York State, recommending approval of the Act which included the addition of General Obligations Law § 5-335, the enactment of that section would serve to protect the parties to personal injury or wrongful death actions "from being subject, following resolution of the action, to a subrogation claim or claim for reimbursement by a health benefit provider" (Bill Jacket, L 2009, ch 494, at 19). Thus, "[p]assage of the bill would prevent concerns about post-settlement subrogation or reimbursement claims from discouraging litigants from settling personal injury claims" (id.).

The plaintiff here participated in Oxford's Medicare+Choice program, authorized under Part C of the Medicare Act (see 42 USC §§ 1395w-21—1395w-29). "In 1997, Congress enacted Part C of the Medicare Act authorizing the Centers for Medicare & Medicaid Services (CMS), an agency within [the Department of Health and Human Services], to contract with private managed health care organizations to provide individuals with the Medicare benefits they would be entitled to receive under Part A (hospital services) and Part B to (outpatient services) of the Act" (Cotton v StarCare Med. Group, Inc., 183 Cal App 4th 437, 448-449 [Ct App, 4th Dist], citing 42 USC § 1395w-21 et seq.). "Initially called the Medicare+Choice program, Part C was later renamed Medicare Advantage" (Cotton v StarCare Med. Group, Inc., 183 Cal App 4th at 449), although it appears that the names continue to be employed interchangeably.

Part C provides, inter alia:

"Organization as secondary payer

"Notwithstanding any other provision of law, a Medicare+Choice organization may (in the case of the provision of items and services to an individual under a Medicare+Choice plan under circumstances in which payment under this subchapter is made secondary pursuant to section 1395y(b)(2) of this title) charge or authorize the provider of such services to charge, in accordance with the charges allowed under a law, plan, or policy described in such section—

"(A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or
"(B) such individual to the extent that the individual has been paid under such law, plan, or policy for such services" (42 USC § 1395w-22[a][4]).

It is clear that Part C permits, but does not require, Medicare Advantage organizations to create a right of reimbursement for themselves in their insurance agreements with insureds covered under Medicare. This conclusion is reinforced by considering other provisions of the Medicare Act which provide for mandatory reimbursement in other contexts (see 42 USC § 1395y[b][2][B]). Thus, there is no statutory right to reimbursement in favor of Medicare Advantage insurers such as Oxford. Instead, Part C only furnishes statutory authorization for insurers such as Oxford to include reimbursement provisions in their agreements with enrollees.

In the absence of a statutory right of reimbursement, General Obligations Law § 5-335 would seem to apply and effectively bar Oxford from recovering any part of the funds the plaintiff received in settling her personal injury claims with the defendants as reimbursement for the cost of health care services paid for by Oxford.

However, as did the Supreme Court, we must consider any preemptive effect the Medicare Act may have on General Obligations Law § 5-335. This is an issue of first impression before this Court.

"Preemption analysis begins, as always, with reference to the well-familiar Supremacy Clause of the United States Constitution, which provides that federal laws shall be the supreme Law of the Land; and the Judges in every state shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding'" (People v First Am. Corp., 18 NY3d 173, 179, cert deniedUS, 132 S Ct 1929, quoting US Const, art VI, cl 2). "Under the doctrine of federal preemption, Congress may preempt state laws, either expressly or impliedly" (Sharabani v Simon Prop. Group, Inc., 96 AD3d 24, 28, citing Jones v Rath Packing Co., 430 US 519, 525). "Federal preemption of state laws generally can occur in three ways: where Congress has expressly preempted state law, where Congress has legislated so comprehensively that federal law occupies an entire field of regulation and leaves no room for state law, or where federal law conflicts with state law'" (Sharabani v Simon Prop. Group, Inc., 96 AD3d at 27, quoting Wachovia Bank, N.A. v Burke, 414 F3d 305, 313[2d Cir], cert denied 550 US 913; see Barnett Bank of Marion Cty. N.A. v Nelson, 517 US 25, 31). "In determining whether federal law preempts state law, the United States Supreme Court has instructed that a court's sole task is to ascertain the intent of Congress'" (People v First Am. Corp., 18 NY3d at 179, quoting California Fed. Sav. & Loan Assn. v Guerra, 479 US 272, 280).

As noted above, Congress enacted Part C of the Medicare Act in 1997. "The 1997 law contained a preemption clause barring state laws and regulations inconsistent' with the standards issued by CMS and all state standards relating to four specific areas" (Cotton v StarCare Med. Group, Inc., 183 Cal App 4th at 449, quoting 69 Fed Reg 46866, 46913[2004]).

In the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress replaced the limited preemption provision with the following comprehensive preemption provision: "The standards established under [Part C] shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to [Medicare Advantage] plans which are offered by [Medicare Advantage] organizations under [Part C]" (42 USC § 1395w-26[b][3]). This provision took effect on the date of the enactment of the Act, December 8, 2003.

According to the House of Representatives Report which accompanied the 2003 legislation, Congress intended the amendment to "clarif[y] that the [Medicare Advantage] program is a federal program operated under Federal rules" (HR Rep 391, 108th Cong, 1st Sess at 557). The report continued, "State laws, do not, and should not apply, with the exception of state licensing laws or state laws related to plan solvency. There has been some confusion in recent court cases" (id. at 557).

The term "standards," as employed in the preemption provision set forth in 42 USC § 1395w-26(b)(3), is not defined in the Medicare Act. However, "a standard' within the meaning of the preemption provision is a statutory provision or a regulation promulgated under the Act and published in the Code of Federal Regulations" (Do Sung Uhm v Humana, Inc., 620 F3d 1134, 1149 n 20 [9th Cir 2010]; see New York City Health & Hosps. Corp. v WellCare of New York, 801 F Supp 2d 126, 140 [SD NY 2011]; Medical Card Sys. v Equipo Pro Convalecencia, 587 F Supp 2d 384, 387 [D PR 2008]). Thus, the term "standards" as used in 42 USC § 1395w-26(b)(3) refers to both statutory provisions and regulations promulgated under the Act and published in the CFR.

Under 42 USC § 1395w-26(b)(1), "[t]he Secretary shall establish by regulation other standards (not described in subsection (a) of this section) for Medicare+Choice organizations and plans consistent with, and to carry out, this part [Part C]. The Secretary shall publish such regulations by June 1, 1998." This enabling provision authorized the Secretary to promulgate regulations to carry out Part C, and to publish them in the CFR.

At 42 CFR 422.108, entitled "Medicare secondary payer (MSP) procedures," regulations of the Centers for Medicare & Medicaid Services promulgated pursuant to the foregoing enabling provision describe the procedures to be employed by Medicare Advantage organizations in billing for covered Medicare services for which Medicare is not the primary payer. Under 42 CFR 422.108(f): "Consistent with § 422.402 concerning the Federal preemption of State law, the rules established under this section supersede any State laws, regulations, contract requirements, or other standards that would otherwise apply to [Medicare Advantage] plans." That subsection further states, "A State cannot take away [a Medicare Advantage] organization's right under Federal law and the MSP regulations to bill, or to authorize providers and suppliers to bill, for services for which Medicare is not the primary payer" (42 CFR 422.108[f]).

Indeed, Part C itself states that, "[n]otwithstanding any other provision of law," Medicare Advantage organizations may charge "such individual to the extent that the individual has been paid under such law, plan, or policy for such services" (42 USC § 1395w-22[a][4]).

Thus, the Medicare Act provides that Medicare Advantage organizations may create a right of reimbursement for themselves in their insurance agreements with Medicare insureds. Moreover, "[t]he standards established under [Part C] shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to [Medicare Advantage] plans which are offered by [Medicare Advantage] organizations under [Part C]" (42 USC § 1395w-26[b][3]), and "[a] State cannot take away [a Medicare Advantage] organization's right under Federal law and the MSP regulations to bill, or to authorize providers and suppliers to bill, for services for which Medicare is not the primary payer" (42 CFR 422.108[f]).

Yet General Obligations Law § 5-335 would prohibit Medicare Advantage organizations from exercising the contractual right to reimbursement in that it would constrain contractual reimbursement rights where the insured entered into a personal injury settlement. In other words, General Obligations Law § 5-335, which, insofar as at issue here, clearly does not constitute a licensing law or a law relating to plan solvency, would, in the context of such personal injury settlements, "take away [a Medicare Advantage] organization's right under Federal law and the MSP regulations to bill, or to authorize providers and suppliers to bill, for services for which Medicare is not the primary payer" in contravention of the federal regulations enabled by 42 USC § 1395w-26(b)(1) (42 CFR 422.108[f]).

Based on the express preemption provision set forth in 42 USC § 1395w-26(b)(3), as well as the regulations set forth in 42 CFR 422.108(f), we hold that General Obligations Law § 5-335, insofar as applied to Medicare Advantage organizations under Part C, is preempted by federal law since it would impermissibly constrain contractual reimbursement rights authorized under the "Organization as secondary payer" provisions of the Medicare Act (see 42 USC § 1395w-26[b][3]; 42 CFR 422.108[f]; Potts v Rawlings Co., LLC, 2012 WL 4364451, 2012 US Dist LEXIS 137802 [SD NY 2012]; see also Phillips v Kaiser Found. Health Plan, Inc., 2011 WL 3047475, *6, 2011 US Dist LEXIS 80456, *20-21 [ND Cal] ["The Medicare Act contains an expansive express preemption provision [and] prohibits states from limiting [secondary payer] rights" (citation omitted)]; cf. Do Sung Uhm v Humana, Inc., 620 F3d at 1148-1153 [in considering the preemption provision of Medicare Part D, which incorporates the express preemption provision in Part C, the Ninth Circuit concluded that the statute preempted state consumer protection claims and fraud common law claims]). Moreover, we agree with the conclusion expressed most recently in a case from the United States District Court for the Southern District of New York that this is so "[w]hether or not there is a private right of action for [Medicare Advantage] organizations" (Potts v Rawlings Co., LLC, 2012 WL 4364451, *10, 2012 US Dist LEXIS 137802, *36).

Thus, because General Obligations Law § 5-335 is expressly preempted by the Medicare Act, the Supreme Court erred in granting the plaintiff's motion to extinguish the purported lien and/or claim for reimbursement based on that section.

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

Accordingly, the order is reversed, on the law, and the plaintiff's motion to extinguish a purported lien and/or claim for reimbursement is denied.

ORDERED that the order is reversed, on the law, with costs, and the plaintiff's motion to extinguish a purported lien and/or claim for reimbursement is denied.

Wilson v Colosimo

Appeal from an order and judgment (one paper) of the Supreme Court, Monroe County (Thomas A. Stander, J.), entered September 15, 2011. The order and judgment granted the motion of defendants for summary judgment dismissing the complaint and denied the cross motion of plaintiffs for partial summary judgment.

Hogan Willig, Amherst (Eric B. Grossman of Counsel), for Plaintiffs-Appellants.
Trevett Cristo Salzer & Andolina, P.C., Rochester (Erica M. Direnzo of Counsel), for Defendants-Respondents.

It is hereby ORDERED that the order and judgment so appealed from is unanimously modified on the law by denying the motion in part and reinstating the complaint, as amplified by the bill of particulars, with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury within the meaning of Insurance Law § 5102 (d) and as modified the order and judgment is affirmed without costs.

Memorandum: Plaintiffs commenced this action seeking damages for injuries that Harold Wilson (plaintiff) allegedly sustained when the recycling truck he was driving was rear-ended by a vehicle owned by defendant R.J. Chevrolet, Inc., doing business as Bob Johnson Chevrolet, and operated by defendant Christopher Colosimo. According to plaintiffs' supplemental bill of particulars, plaintiff allegedly sustained a serious injury under the permanent consequential limitation of use, the significant limitation of use and the 90/180-day categories of serious injury. Defendants initially moved for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury pursuant to Insurance Law § 5102 (d) that was proximately caused by the accident. Plaintiffs opposed the motion and cross-moved for partial summary judgment on their claim for economic loss in excess of basic economic loss. Supreme Court granted defendants' motion and denied plaintiffs' cross motion. We note that the order does not address the dismissal of plaintiffs' claim for economic loss, which does not require a showing of serious injury (see generally Montgomery v Daniels, 38 NY2d 41, 47-48; Colvin v Slawoniewski, 15 AD3d 900, 900). In its bench decision, however, the court awarded defendants summary judgment dismissing that claim on the authority of CPLR 3212 (b). Where, as here, " there is a conflict between an order and a decision,' " the decision controls (Stivers v Brownell, 63 AD3d 1516, 1517-1518). We conclude that the court erred in granting those parts of defendants' motion with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury. We therefore modify the order accordingly.

Defendants met their initial burden on the motion by submitting an expert's affirmation establishing as a matter of law that there was "no sign of injury to the cervical, thoracic or lumbar spine, and a marked exaggeration of the response to testing in the upper and lower extremities and no objective findings concerning neck, shoulders, lumbar spine, hips, knees, ankles, and feet." Defendants' expert attributed plaintiff's complaints of pain to preexisting injuries and "multilevel degenerative changes." Furthermore, because defendants' expert concluded that the only objective medical findings of an injury to plaintiff were related to a preexisting degenerative condition of his spine, "plaintiff[s] had the burden to come forward with evidence addressing defendant[s'] claimed lack of causation" (Carrasco v Mendez, 4 NY3d 566, 580; see Mendola v Doubrava, 99 AD3d 1247, 1248; Webb v Bock, 77 AD3d 1414, 1415).

In opposition to defendants' motion, however, plaintiffs raised triable issues of fact with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury by submitting the affidavit and attached report of plaintiff's treating chiropractor as well as an affidavit and attached reports and records from a physician specializing in occupational medicine. Those documents "contain the requisite objective medical findings that raise issues of fact whether plaintiff sustained a serious injury" as a result of the instant accident (Roll v Gavitt, 77 AD3d 1412, 1413; see Terwilliger v Knickerbocker, 81 AD3d 1350, 1351; Harris v Carella, 42 AD3d 915, 916-917; cf. Caldwell v Grant [appeal No. 2], 31 AD3d 1154, 1155).

Nevertheless, we agree with defendants that the court properly granted that part of their motion regarding the 90/180-day category of serious injury. Defendants submitted competent evidence establishing that plaintiff's activities " were not curtailed to a great extent' and that [he] therefore did not sustain a serious injury under the 90/180[-day] category of serious injury" (Schreiber v Krehbiel, 64 AD3d 1244, 1246). Plaintiffs submitted nothing in opposition to defendants' motion with respect to that category and thus failed to raise a triable issue of fact whether plaintiff "was unable to perform substantially all of the material acts that constituted [his] usual and customary daily activities during the requisite period of time" (Burke v Moran, 85 AD3d 1710, 1711; see generally Licari v Elliott, 57 NY2d 230, 236).

Finally, we conclude that the court properly denied plaintiffs' cross motion and granted defendants summary judgment pursuant to CPLR 3212 (b) on plaintiffs' claim for economic loss in excess of basic economic loss. Although a claim for economic loss does not require the plaintiff to have sustained a serious injury (see generally Montgomery, 38 NY2d at 47-48; Colvin, 15 AD3d at 900; Barnes v Kociszewski, 4 AD3d 824, 825), plaintiffs here "failed to produce any evidence in admissible form which supports such a claim" (Watford v Boolukos, 5 AD3d 475, 476; see Insurance Law §§ 5102 [a] [1] - [3]; 5104 [a]). While plaintiffs correctly contend that they need not await the full $50,000 payout for basic economic losses from their first-party no-fault policy before making a claim under Insurance Law § 5102 (a) for those additional economic losses that exceed the basic economic loss threshold, they still failed to establish that plaintiff's total economic losses here did actually "exceed basic economic loss" (Watkins v Bank of Castile, 172 AD2d 1061, 1062 [emphasis added]; see Diaz v Lopresti, 57 AD3d 832, 833).

Monaco v Steiner

Appeal from an order of the Supreme Court, Erie County (John M. Curran, J.), entered September 14, 2011 in a personal injury action. The order granted defendants' motion for summary judgment and dismissed the complaint.

William K. Mattar, P.C., Williamsville (April J. Orlowski of Counsel), for Plaintiff-Appellant.
Kenney Shelton Liptak Nowak Llp, Buffalo (Nancy A. Long of Counsel), for Defendants-Respondents.

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

Memorandum: Plaintiff commenced this action seeking damages for injuries she allegedly sustained in a motor vehicle accident. Defendants moved for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d) as a result of the accident. Supreme Court properly granted the motion. Defendants met their initial burden of establishing that plaintiff did not sustain a serious injury under any of the categories alleged, i.e., the permanent loss of use, permanent consequential limitation of use, significant limitation of use and 90/180-day categories (see generally Zuckerman v City of New York, 49 NY2d 557, 562), and plaintiff failed to raise an issue of fact with respect to the permanent loss of use and 90/180-day categories (see generally id.). Although plaintiff arguably raised an issue of fact whether she is suffering from a permanent consequential limitation of use or a significant limitation of use, the motion nevertheless was properly granted inasmuch as her medical expert failed to establish that the injuries were causally related to the accident and not to her prior neck and back complaints (see Pommells v Perez, 4 NY3d 566, 572; MacMillan v Cleveland, 82 AD3d 1388, 1388-1389; Clark v Perry, 21 AD3d 1373, 1374).

Smyth v McDonald

Appeal from an order of the Supreme Court, Erie County (Frederick J. Marshall, J.), entered October 19, 2011 in a personal injury action. The order denied defendants' motion for summary judgment.

Adams, Hanson, Rego, Carlin, Hughes, Kaplan & Fishbein, Williamsville (Bethany A. Rubin of Counsel), for Defendants-Appellants.
The Carey Firm, LLC, Grand Island (Shawn W. Carey of Counsel), for Plaintiffs-Respondents.

It is hereby ORDERED that the order so appealed from is unanimously reversed on the law without costs, the motion is granted and the complaint is dismissed.

Memorandum: Plaintiffs commenced this action seeking damages for injuries Theresa A. Smyth (plaintiff) allegedly sustained when a vehicle owned by defendants Barbara F. McDonald and Earl L. McDonald and operated by defendant Benjamin J. McDonald rear-ended her vehicle in October 2006. Supreme Court erred in denying defendants' motion for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d). With respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury allegedly sustained by plaintiff, defendants met their initial burden on the motion by submitting, inter alia, the records concerning medical treatment received by plaintiff immediately following the accident, which establish that plaintiff did not sustain a traumatic injury and that there was an unexplained gap in treatment after plaintiff's last physical therapy visit in January 2007. Plaintiff next sought treatment with her primary care physician in August 2009 and thereafter resumed physical therapy. Defendants contend that the 31-month gap in plaintiff's treatment is fatal to her claim that she sustained a serious injury within the meaning of those two categories of serious injury. We agree. We conclude that plaintiffs failed to raise a triable issue of fact to defeat the motion with respect to those two categories. Plaintiffs submitted, inter alia, the affidavit of a physician who treated plaintiff for her back condition for the first time in October 2009, but they failed to provide a reasonable explanation for the lengthy gap in treatment (see Pommells v Perez, 4 NY3d 566, 574). Thus, although the treating physician provided objective medical evidence that plaintiff was injured, the 31-month gap in treatment renders his opinion as to causation purely speculative (see Smith v Reeves, 96 AD3d 1550, 1551). Plaintiff stopped attending physical therapy in early 2007 because her primary care physician would not provide a new prescription for physical therapy and instead recommended that plaintiff engage in a pain management program. Plaintiff asserted that she chose not to engage in the pain management program because she thought that she would have to take narcotic medication, which she was not willing to do, and she hoped that her injury would heal on its own over time. That, however, is not a reasonable explanation for the 31-month gap in treatment, which fatally undermines plaintiffs' claim of serious injury with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury (see Semonian v Seidenberg, 71 AD3d 1562, 1563; Wei-San Hsu v Briscoe Protective Sys., Inc., 43 AD3d 916, 917; Colon v Kempner, 20 AD3d 372, 374; see generally Pommells, 4 NY3d at 574). Although plaintiffs assert with respect to the gap in treatment that further physical therapy would have been palliative and that plaintiff's request for no-fault benefits was denied, those assertions are not supported by the record (cf. Brown v Dunlap, 4 NY3d 566, 577; Peluso v Janice Taxi Co., Inc., 77 AD3d 491, 492).

With respect to the significant disfigurement category of serious injury alleged by plaintiffs, we further conclude that defendants met their initial burden on the motion (see generally Zuckerman v City of New York, 49 NY2d 557, 562). In addition, plaintiffs failed to raise an issue of fact whether plaintiff sustained such an injury because the alleged disfigurement of plaintiff's scapula, of which in any event there is no photograph in the record, is not readily observable to others (see Mahar v Bartnick, 91 AD3d 1163, 1166; see also Wiegand v Schunck, 294 AD2d 839, 839), and plaintiffs did not present evidence that "a reasonable person viewing the plaintiff's [scapula] in its altered state would regard the condition as unattractive, objectionable or as the subject of pity or scorn" (O'Brien v Bainbridge, 89 AD3d 1511, 1513 [internal quotation marks omitted]).

Finally, with respect to the 90/180-day category of serious injury alleged by plaintiffs, we conclude that defendants met their initial burden by submitting plaintiff's "medical records establishing that there are no objective medical findings of a medically determined injury or impairment of a nonpermanent nature which caused the alleged limitations on [her] daily activities' within 90 of the 180 days immediately following the occurrence of the injury or impairment" (Harrity v Leone, 93 AD3d 1204, 1205). Plaintiffs failed to raise an issue of fact with respect to that category. The affidavit of plaintiff's treating physician, based upon his treatment of plaintiff beginning three years after the accident, is "too remote to be probative of plaintiff's accident-related claim" and is therefore insufficient to raise an issue of fact as to the causal link between plaintiff's alleged injuries and her limitations within the 180 days following the accident (Whisenant v Farazi, 67 AD3d 535, 536; see Smith, 96 AD3d at 1552).

Corrado v 80 Broad LLC


Devitt Spellman Barrett, LLP, Smithtown (John M. Denby of
counsel), for appellant.
Gannon, Rosenfarb, Balletti & Drossman, New York (Lisa L.
Gokhulsingh of counsel), for respondent.

Order, Supreme Court, New York County (Anil C. Singh, J.), entered October 11, 2011, which to the extent appealed from as limited by the briefs, denied that portion of defendant tenant Bank's motion for summary judgment seeking dismissal of defendant landlord 80 Broad, LLC's cross claims against it and granted defendant landlord's cross motion for summary judgment on its indemnification claim, unanimously modified, on the law, to the extent of denying landlord's cross motion, and otherwise affirmed, without costs.

This is an action for personal injuries suffered by plaintiff, who is not a party to this appeal, when she tripped and fell on a defect in the public sidewalk in front of the defendant tenant bank's branch office, located in premises leased from defendant landlord's building. Pursuant to the lease, defendant landlord is responsible for maintaining the sidewalk and defendant tenant's use of the sidewalk is limited to a three foot "control zone" outside the premises for ingress, egress and deliveries where landlord retains control of the lighting, signage, presentation and design of the premises. In addition, the lease contains an indemnification provision providing that tenant is to indemnify landlord for any accident that occurs "in or about the premises."

Although the phrase "in or about," may, in appropriate circumstances, refer to a general area "expressing the idea of physical proximity" sufficient to include the sidewalk outside a demised premises (see Hogeland v Silbey Lindsay & Curr Co., 42 NY2d 153, 159 [1977]), construing the indemnification clause in this manner would improperly place the clause in direct conflict with other provisions of the lease (National Conversion Corp. v Cedar Bldg. Corp., 23 NY2d 621, 625 [1969]; HSBC Bank USA v National Equity Corp., 279 AD2d 251, 253 [1st Dept 2001]). Tenant is precluded from having any beneficial use of or responsibility for maintenance of the sidewalk and the public sidewalk was not part of the leased premises. Accordingly, the indemnification provision cannot be construed as an agreement to indemnify landlord for accidents on the public sidewalk (see e.g. Lopez v Guei Shun Shiau, 29 Misc 3d 1215(A), affd 88 AD3d 598 [1st Dept 2011]).

The tenant also seeks summary judgment against the landlord on the tenant's common-law indemnification claims to the extent the tenant is liable to plaintiff. Such relief, which the tenant requested in the alternative, is unnecessary since the order appealed from also dismissed the complaint as against the tenant.

Palomo v 175th Street Realty Corp.


Rivkin Radler LLP, Uniondale (Merril S. Biscone of counsel),
for appellants-respondents.
Barry E. Greenberg, P.C., Farmingdale (Barry E. Greenberg of
counsel), for respondent-appellant.

Order, Supreme Court, Bronx County (John A. Barone, J.), entered March 9, 2012, which denied defendants' motion for summary judgment dismissing the complaint, and denied plaintiff's cross motion for, inter alia, an order striking defendants' answer for spoliation of key evidence, directing defendants and their insurance carriers to produce their files for in camera inspection, and granting him summary judgment as to liability, unanimously modified, on the law, to grant defendants' motion to the extent it sought dismissal of the complaint as against defendants Steven Padernacht and Michael Padernacht, and otherwise affirmed, without costs.

Defendants satisfied their burden on summary judgment by presenting evidence demonstrating that they did not create the defective condition of the marble staircase landing that collapsed under plaintiff, and lacked actual or constructive notice thereof. In opposition, plaintiff presented evidence that the landing was visibly cracked for an extended period of time and wobbled when stepped on, thereby raising an issue of fact as to whether defendants had constructive notice of the defective condition for a sufficient period of time before the landing collapsed to be able to make repairs. However, to the extent that the motion sought dismissal as against the Padernacht defendants individually, it should have been granted, inasmuch as that portion of the motion was unopposed by plaintiff, and there is no evidence that the individual defendants personally participated in any malfeasance or misfeasance constituting an affirmative tortious act (see Peguero v 601 Realty Corp., 58 AD3d 556, 558-559 [1st Dept 2009]).

Defendants' claim that the affidavits of three notice witnesses should be disregarded because they were not timely disclosed is unpersuasive since one witness was a former employee of defendants, and the other two were identified by plaintiff or his mother in their deposition testimony. Thus there can be no claim of prejudice or surprise. In any event, even without considering those affidavits, plaintiff raised an issue of fact as to notice. The alleged untimely disclosure of plaintiff's expert did not render his expert's affidavit inadmissible, since any such failure was not intentional or willful, and there was no showing of prejudice to defendants (see Baulieu v Ardsley Assoc., L.P., 85 AD3d 554 [1st Dept 2011]).

The merits of the untimely cross motion for summary judgment were properly reached to the extent that it is based on the same issues raised by the motion (CPLR 3212(a); see Filannino v Triborough Bridge & Tunnel Auth., 34 AD3d 280 [1st Dept 2006], appeal dismissed 9 NY3d 862 [2007]). Plaintiff did not establish entitlement to summary judgment based on the doctrine of res ipsa loquitur, since, even assuming arguendo that exclusivity could be established, he has not shown that the inference of negligence is inescapable or that defendants failed to raise any material issue of fact in rebuttal (see Morejon v Rais Constr. Co., 7 NY3d 203, 209 [2006]; Estrategia Corp. v Lafayette Commercial Condo, 95 AD3d 732 [1st Dept 2012]).

Plaintiff's motion to have defendants' answer stricken as a sanction for spoliation, based on the building superintendent's disposal of the broken marble pieces of the stair landing, was properly denied since plaintiff has not been deprived of his ability to prove his case (see Shapiro v Boulevard Hous. Corp., 70 AD3d 474, 476 [1st Dept 2010]), and plaintiff has not sought any lesser sanction (Rodriguez v 551 Realty LLC, 35 AD3d 221, 221 [1st Dept 2006]). The court properly declined to grant plaintiff's request for in camera inspection, as plaintiff did not seek such relief until more than six months after he filed his note of issue indicating that discovery was completed.

AMERICAN HERITAGE REALTY LLC v STRATHMORE INS. COMPANY


Calendar Date: November 13, 2012
Before: Mercure, J.P., Lahtinen, Malone Jr., Stein and Garry, JJ.

Speyer & Perlberg, LLP, Melville (Dennis M.
Perlberg of counsel), for appellant.
Whiteman, Ostermann & Hanna, LLP, Albany (Jason
L. Shaw of counsel), for respondents.

MEMORANDUM AND ORDER

Mercure, J.P.

Appeal from that part of an order of the Supreme Court (Connolly, J.), entered February 22, 2012 in Albany County, which partially denied defendant's motion to quash a subpoena duces tecum issued by plaintiffs.

Plaintiffs are the owners of five apartment complexes that were insured by defendant. They allege that defendant breached the insurance policies by failing to cover losses caused by hail storms in 2008 and 2009. Plaintiffs issued a subpoena duces tecum to Robert Marks, an independent adjuster hired by defendant to facilitate the resolution of their claims, after Marks gave deposition testimony that allegedly contradicted his previous conclusion in reports to defendant that the properties sustained hail damage. The subpoena demanded, among other things, all documents concerning hail damage insurance claims adjusted by Marks for the years 2008 and 2009 — evidently about 40 additional claims. Plaintiffs subsequently agreed to limit the subpoena to documents reflecting the date and nature of hail damage claims in 2008 and 2009, the addresses where the claims arose and whether Marks recommended payment of the claims, and to redaction of the names of insureds and insurers. Defendant moved to quash the subpoena and plaintiffs cross-moved to compel compliance.

As relevant here, Supreme Court denied the motion to quash with respect to documents pertaining to other hail claims adjusted by Marks [FN1] . Defendant appeals and we now affirm.

Initially, we reject plaintiffs' argument that defendant is not aggrieved by the denial of its motion to quash. While Supreme Court's order compelled only Marks, who is a nonparty, to comply with the subpoena, defendant had a legal interest affected by the denial of the relief that it sought — under the CPLR, an adverse party has the right to move to quash a nonparty subpoena (see Patrick M. Connors, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C2304:1; C3101:23; C3120:12; see also Velez v Hunts Point Multi-Service Ctr., Inc., 29 AD3d 104, 110-112 [2006]). "Moreover, [the] ability to obtain disclosure from a nonparty may be central to the outcome of the case" (Patrick M. Connors, Supp Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3101:22, 2012 Pocket Part at 4). Inasmuch as defendant "has a direct interest in the controversy which is affected by the result [of the order] and . . . the adjudication has a binding force against [its] rights," it is aggrieved by the order and may maintain this appeal (Matter of Grace R., 12 AD3d 764, 765 [2004] [internal quotation marks and citations omitted]; see Koramblyum v Medvedovsky, 19 AD3d 651, 652 [2005]; Lawson v Lawson, 194 AD2d 389, 389 [1993]; see also Golub v Ganz, 22 AD3d 919, 920-921 [2005]).

Turning to the merits, CPLR 3101 (a) (4) provides that the parties to an action are entitled to "full disclosure of all matter material and necessary in the prosecution or defense of an action" from nonparties "upon notice stating the circumstances or reasons such disclosure is sought or required." The trial court has broad discretion in determining whether the information sought is "material and necessary," terms that encompass "'any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason'" (Andon v 302-304 Mott St. Assoc., 94 NY2d 740, 746 [2000], quoting Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406 [1968]). In addition, "something more than mere relevance or materiality must be shown to obtain disclosure from a nonparty witness" (Fraser v Park Newspapers of St. Lawrence, 257 AD2d 961, 962 [1999]); the party requesting disclosure must show that "'sufficient independent evidence is not obtainable'" (Matter of Troy Sand & Gravel Co., Inc. v Town of Nassau, 80 AD3d 199, 203 [2010], quoting O'Neill v Oakgrove Constr., 71 NY2d 521, 526 [1988]).

Plaintiffs seek the documents at issue to demonstrate whether hail damaged the roofs of other properties in proximity to their apartment complexes, whether the damage was sufficient to cause other property owners to submit insurance claims, and whether Marks recommended payment of those claims. Marks evidently adjusted approximately 40 other hail damage claims during the relevant time frame and indicated that he could retrieve those files on his computer by conducting a word search. In our view, the documents are relevant to both Marks' credibility and defendant's claim that plaintiff did not sustain a loss as a result of hail damage during the relevant policy period. Moreover, sufficient independent evidence is not obtainable. Inasmuch as "[t]he fact that the material may later be ruled inadmissible does not foreclose disclosure," Supreme Court did not abuse its broad discretion in denying the motion to quash (Robinson v Meca, 214 AD2d 246, 249 [1995]; see Matter of Niagara Mohawk Power Corp. v Town of Moreau Assessor, 8 AD3d 935, 937 [2004]).

Lahtinen, Malone Jr., Stein and Garry, JJ., concur.

ORDERED that the order is affirmed, with costs

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