Coverage Pointers - Volume XIV, No. 5
Dear Coverage Pointers Subscribers:
You have a situation? We love situations. Give us a call.
Happy Labor Day.
The appellate courts are still in summer siesta, so we offer what scraps of coverage decisions were available over the previous two weeks. Coverage Pointers will not return to its normally robust state until the end of September, when the first Fall Term decisions are released.
We have a few surprises coming in the next few weeks. Here’s our first.
Introducing Keeping the Faith with Jen’s Gems
Jennifer Ehman has returned from her maternity leave. You’ll recall that Jen was reviewing lower court decisions in her Jen’s Gems column before she was unexpected detained by childbirth and motherhood. During her absence, Marc Schulz took over the responsibilities of her column, dutifully renamed Marc’s Remarks.
Having now returned to civilization, Jen is excited about her new assignment, a column covering good faith and bad faith decisions from courts around the country. Why is the column national in scope? Its simply because there aren’t enough bad faith decisions from New York appellate courts to fill a thimble.
So Jennifer will be crafting a new column, reviewing cases on good and bad faith claims handling from around the country, with commentary and comparisons to New York rules and you’ll find her first submission in this week’s issue.
It’s Nice to be Recognized:
The best kind of recognition a law firm can receive is the respect of its clients and the most telling way of measuring that respect is a phone call asking for advice or assistance. Nothing is more important to us.
However, there are all kinds of peer-review organizations rating lawyers, and about this time each year, we receive notification of what our fellow lawyers think of us. These rating organizations establish various criteria and conduct surveys, background checks and then report on their findings.
In the past two weeks, we received notice from Super Lawyers.
The Upstate New York issue of Super Lawyers (covering lawyers outside of New York City) was released on line as was the Super Lawyers Business Edition, the latter publication being a state-wide survey, including New York City. I’m proud of my partners and salute their recognition.
In the Business Edition, for the second year in a row, Hurwitz & Fine, P.C. was the only Buffalo law firm and the only midsize law firm listed as one of the five Top Law Firms in all of New York State in Business & Transactions and in Litigation (two of the five categories rated). Top Law Firms were chosen based on the number of firm attorneys who were selected to the 2012 Super Lawyers list, as well as a combination of metrics for quality including the number of years selected to the list, inclusion on a top list and average blue ribbon panel score.
In the Upstate New York edition, an unprecedented 18 of the firm's 30 attorneys were identified by other lawyers as Super Lawyers in their respective fields. Selection requires at least 10 years in practice. Only 5% of eligible lawyers statewide make the final list. This multi-phase selection process reviews attorneys across the state to determine which attorneys have attained the highest degree of peer recognition and professional achievement.
Overall, covering all lawyers in the edition and all fields of practice, Hurwitz & Fine, P.C. attorneys were overwhelmingly featured in the Top 10 lawyers overall (two of the top 10), Top 50 overall (eight of the top 50) and Top 25 Women overall (two of the top 25) for receiving the highest number and level of nominations.
Robert P. Fine Business/Corporate Top 50
Lawrence C. Franco Business/Corporate Top 50
Dan D. Kohane Insurance Coverage Top 10, Top 50
Harry F. Mooney Personal Injury Defense: Products Top 10, Top 50
Ann E. Evanko Employment & Labor Top 50, Top 25 Women
Paul J. Suozzi Personal Injury Defense: General Top 50
Roger L. Ross Real Estate
Lawrence M. Ross Health Care
Michael F. Perley Personal Injury Defense: General Top 50
Diane K. Church, Banking
Andrea Schillaci Business Litigation Top 50, Top 25 Women
Edward C. Robinson Estate Planning & Probate
Earl K. Cantwell Business Litigation
Kevin J. Zanner Business/Corporate
Jody E. Briandi Personal Injury Defense: General
David R. Adams Construction Litigation
Todd C. Bushway Personal Injury Defense: General
Diane Bosse Insurance Coverage
We thank our peers for this kind recognition.
Notes from Audreyville:
There appears to be a consistent number of decisions being reported reversing the Special Term’s denial of an insurer’s summary judgment motion based upon breach of a policy condition to appear for scheduled IMEs or EUOs. The insurers are submitting sufficient affidavits establishing that the scheduling of IMEs and EUOs was timely done as well as denials timely issued. Likewise, the insurers are submitting sufficient affidavits from the physician or chiropractor scheduled to conduct the IME or the law firm conducting the EUO that according to their practice and procedure the assignor failed to appear for the scheduled IME or EUO.
Also, we continue to see issues in arbitration with insurers attempting to deny a surgery based upon a peer review or IME. This edition we report on a case where the insurer was not able to successfully deny a cervical spine surgery upon a peer review. The assigned arbitrator sets forth in good detail the reasons why the peer reviewer’s report is not persuasive which is a recommended read.
In addition, don’t forget about the DRI Annual Meeting from October 24-28 in New Orleans. The meeting theme this year is “The 21st Century Lawyer” and the programing is top notch in all areas of law. You can register by going to www.dri.org and clicking on the Annual Meeting link.
Finally, for those who love coverage put the DRI’s Insurance Law Committee’s Insurance Coverage and Practice Symposium on your calendar for December 5-7 in NYC. This year the program will include speaker Randy Maniloff of White and Williams, LLP. Every year we await a copy of Randy’s annual summary of the Top 10 most significant national coverage decisions. This year Randy will be releasing his 12th Annual Edition at this conference. You will be the first to hear his insights and commentary and you do not want to miss it! If you would like a brochure to register for this conference please feel free to email me at [email protected].
Have a safe and happy Labor Day weekend.
Audrey A. Seeley
So, two more books off the summer reading list: The Impeachment of Abraham Lincoln was a good one. It starts by having Lincoln survive the John Wilkes Booth assassination (attempt), to then face impeachment proceedings for his conduct during the Civil War and Reconstruction. That led to Destiny of the Republic: A Tale of Madness, Medicine and the Murder of a President, a book covering the Garfield assassination and the medical malpractice that guaranteed his death. Having completed that one, I just started my third assassination book, The President and the Assassin: McKinley, Terror, and Empire at the Dawn of the American Century (that assassination took place in Buffalo). I read the Warren Commission report as a kid, so I don’t see a JFK assassination book in my near future.
Trivia Alert: Do you know the name of the individual that was a witness or near witness to all three of those shootings: Lincoln (1865), Garfield (1861) and McKinley (1901)?
Jennifer Ehman’s Gems:
I wanted to thank everyone that sent well wishes and congratulations on the birth of my daughter, Ella. She is already three months old and doing wonderfully. But, as with life, all good things must come to an end. So, after spending the last few months with her, I am back at work. With my return, I will be taking on a new task related to this newsletter. For the last two years, I have been reporting every other week on decisions from the New York trial courts addressing various coverage issues. While I was gone, Marc Schulz did a fabulous job authoring my column and, as they say, “no good deed goes unpunished.” So, Marc will be continue with those responsibilities taking over my column, and I will be directing my efforts on a new area. Keeping the Faith With Jen’s Gems will now report on decisions addressing bad faith claims.
As many of you know, whether “bad faith” can be established is a state-by-state determination, and there is no single national standard. Unlike many of the columns in this newsletter, the decisions I will report on will not just come from New York, but rather span the country. They will come from both federal and state courts and address both first-party and third-party claims. My goal is to provide a better understanding of these claims and report on trends developing in this area. I will also routinely compare the decision to New York case law.
Of note, in the first issue, I report on two cases. The first involves a decision from the Second Circuit certifying the question “does Connecticut recognize consequential damages” to the Connecticut Supreme Court. The second decision discusses proper pleading of bad faith claims.
I hope everyone enjoys this change, and I welcome any feedback.
One Hundred Years Ago Today:
Let’s lift a glass of apple cider to Robert F. Borkenstein who was born on this day, 100 years ago. An American forensic scientist, he was most recognized for his contributions to the understanding and control of alcohol impairment in traffic accidents, and who invented the Breathalyser. He collaborated with Professor R.N. Harger of the Indiana University School of Medicine in the introduction of the Drunkometer, the first instrument for accurate measurement of quantities of alcohol in the blood by breath analysis. Subsequently, he invented the Breathalyzer, an instrument that changed the approach of forensic science and police enforcement in response to drinking-and-driving problems.
First things first…we love it when our predictions come true. As reviewed below, the Court of Appeals affirmed a 2011 holding from the Appellate Division, Second Department which held, essentially, that delays in issuing a coverage position in a property damage case will not preclude a carrier from asserting an exclusion as a coverage defense. I did a little digging, and found that my note from the last issue of 2011 contained the following quip:
We close out 2011 with a bang in this issue. Take a moment to review the Second Department’s decision in Mallory v. Allstate which upholds the Court’s standing precedent that an alleged violation of the Unfair Claims Procedures Act does not result in the loss of coverage defenses for the carrier. We, of course, couldn’t agree more with the decision. Regulation 64 serves many purposes, but was not intended to serve as a de facto Insurance Law 3420(d) for first party losses.
I did a little more digging, and found that we’d been tracking this argument far longer. In 2004, Dan Kohane addressed this issue after the Second Department’s decision in DeMarinis v Tower Ins. Co. was released. That was the April 30, 2004 issue, wherein, incidentally, Dan also reviewed the Hotel Des Aristes v Gen. Accident Ins. Co. decision which ought to ring a few bells. The April 30, 2004 issue was pre-Audrey’s Angles, pre-Serious Injury, and certainly pre-Property & Potpourri.
My point, assuming I have one, is that from humble beginnings, we’d argue that Coverage Pointers has become a pretty reliable source of tracking developments in Insurance Law. If nothing else, simply by the passage of time, we’ve assembled a fairly extensive repository of insurance cases from around New York and across the country. We do it because we enjoy it, it keeps us up on breaking developments, but also because we hope and trust it is useful for those of you nice enough to browse through it every other Friday morning. If you’re ever without access to a legal search program, try us out.
Although not as much as being right, we also love to see creative lawyering. With this in mind, I’d direct you to take a moment to review the Second Department’s decision in Arrendal v Trizechahn where the Court addressed the breadth (or lack thereof) of a contractual indemnity provision. Lastly, we’d also direct you to the Romance decision which provides a five year time limit for pre-accident medical authorizations. That’s if for now.
A Century Ago:
August 31, 1912
Steals President Taft’s Prize Cow, Pauline Wayne
(Canton, Ohio) --Pauline Wayne, President’ Taft’s prize cow, was held up and robbed on the White House grounds a day or two ago by J.F. Koehler, instructor in agriculture in a high school here.
Koehler, just back from his trip to the capital, says he saw Pauline, of whom he had read, calmly ruminating on the south lawn of the White House grounds. His professional interest being dominant and no policeman in sight, he determined to see if Pauline would “back a leg and give down” for him.
Approaching Pauline, hat in hand, and with his best manner, he found her compliant. Then the ready hat found its use and very quickly he obtained a supply of milk, which later he found to justify the compliments that have been bestowed upon the pride of the White House stables.
Editor’s Note: According to Wiki, the source of all unverified information, Pauline Wayne was a Holstein cow which belonged to President Taft. Also known as "Miss Wayne", Pauline was not Taft's first presidential cow: she replaced the lesser-known "Mooley Wooly", who provided milk for the First Family for a year and a half. Taft and his wife, had growing children, and Taft was a notoriously large eater. Accordingly, Mooley Wooly was replaced by Pauline Wayne because the former could not produce enough milk for the Taft's growing family
From 1910 to 1913, Miss Wayne freely grazed the White House lawn. She was the last presidential cow to live at the White House and was considered as much a Taft family pet as she was livestock. When Taft left office, she was shipped to Wisconsin. The origins of the name "Pauline Wayne" are unknown.
Udderly taken by the story, I had to try to milk it for all I could. Turns out, Pauline, who had a steak in her reputation, had a beef with the alleged milker. In a story that appeared in the Sunday, September 1 issue of the Sandusky Register (Page 4), under the headline Peeved Pauline’s Pathetic Protests, Pauline the Cow denied the story:
“Is it true, Miss Wayne?"
And to each query, modest Pauline returned from her soft brown eyes a glance bespeaking reproach and indignation and a whisk of her tail which is to say in bovine, with business of hauteur:
“He did not. I wasn’t milked on the White House lawn by a strange man,” declared Pauline, tearful, when she finally consented to talk in little moos and grunts, between sobs, “because in the first place, I haven’t been on the White House lawn in more than a year but have been enjoying life of the pasture near the Army’s quartermaster’s stables.”
Baseball and Presidents -- One Hundred Years Ago Today:
Well, it is Presidential convention time, so let’s find some connection between an event that occurred 100 years ago and presidents. We may have to stretch a bit.
On August 31, 1912, Franklin Pierce Harter pitched in his first (of only 29) major league games for the Cincinnati Reds. He played sporadically for two seasons for the Reds, completing his major league career with the Indianapolis Hoosiers in 1914, a team affiliated with the upstart and short-lived Federal League. By the way, the Hoosiers moved to New Jersey after one season and became (for a single season year, until the league disbanded) the Newark Peppers, which, for trivia buffs, is the only major league team ever to call New Jersey its home.
Franklin Pierce “Chief” Harter is one of a select group of major league players whose famous namesake served as President of the United States. They include:
- George Washington Bradley
- Thomas Jefferson Dowd
- James Madison Toy
- Andrew Jackson Leonard
- Martin Van Buren Walker
- William Henry Harrison Gee
- Millard Fillmore Howell
- Franklin Pierce Harter
- Abraham Lincoln Bailey
- Ulysses Simpson Grant Stoner
- James Garfield Durham
- Chester Arthur Emerson
- Benjamin Harrison Van Dyke
- Grover Cleveland Alexander
- William McKinley Hargrave
- Woodrow Wilson Williams
- Calvin Coolidge Ermer
- Franklin D. Roosevelt Wieand
Just thought you needed to know. The last of our presidential ball players Franklin Delano Roosevelt “Ted” Wieand was born in April 1933, a month after FDR was inaugurated into office for his first term, played in six games with those same Cincinnati Reds for a total of 6.1 innings and ended up with an ERA of 9.95. Not much of a new deal. He was sent down to the Bush Leagues. However, in December 2010, Ted was inducted into his high school’s hall of fame, Lehigh High School in Slatington, PA. Despite his namesake, his nickname came from FDR’s cousin, another famous Roosevelt.
Robert Todd Lincoln was the son of Abraham and Mary Todd Lincoln, and his only son to live to adulthood.
- Lincoln was not present at his father's assassination, but was nearby and arrived at Ford's Theater shortly after his father was shot.
- At President Garfield’s invitation, Lincoln was at the Sixth Street Train Station in Washington D.C. when the President was shot by Charles Guiteau on July 2, 1881, and was an eyewitness to the event. Lincoln was serving as Garfield's Secretary of War at the time.
- At President William McKinley’s invitation, Lincoln was at the Pan-American Exposition in Buffalo where the President was shot by Leon Czolgosz on September 6, 1901, though he was not an eyewitness to the event.
Headlines for Today’s Issue, Attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
- License Plate Number Written on Sheet of Paper Provided by Unnamed Crossing Guard is Not Enough to Impose Liability on Vehicle’s Owner
MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
- Findings Based on Subjective Complaints of Pain Are Insufficient to Support 90/180-Day Claim
AUDREY’S ANGLES ON NO-FAULT
Audrey A. Seeley
- Physiatrist’s Opinion Insufficient to Deny Chiropractic Benefits
- Chiropractic Treatment Not Necessary as Applicant Did Not Demonstrate Palliative Benefit from Treatment
- Orthopedic Peer Review Insufficient to Deny Cervical Spine Surgery
- Insurer’s Summary Judgment Motion on Failure to Appear for Scheduled IMEs Should Have Been Granted
- Again, Insurer’s Summary Judgment Motion Should Have Been Partially Granted
- Plaintiff’s Doctor’s Affidavit Creates Issue of Fact Regarding Lack of Medical Necessity
- Outstanding Verification Renders Suit Premature
- Insurer Demonstrates Failure to Appear for Scheduled EUOs
- Failure to Submit Rebuttal Affidavit Leads to Insurer’s SJ Motion on Lack of Medical Necessity Being Granted
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
- Court of Appeals Rules that Passage of Time DOES NOT Preclude a Carrier From Relying Upon an Exclusion in a Disputed Property Damage Claim
- Authorizations Limited to Body Part are Further Limited to Five Year Pre-Accident
- Indemnity Clause did not Apply to Claims Asserted by Purported Indemnitor’s Own Employees
- Trizechahn Loses Again, Lack of a Duty Owed by Service Contractor Precludes Common Law Indemnity Claim
- Review of Expert Opinion Prior to Testimony Results in Waiver of Material Prepared in Anticipation of Litigation Exemption
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
- Proposed Changes to Regulations Pertaining to Issuance of Releases Are Drafted
FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
- The Cross Liability Exclusion and the Mend-The-Hold Doctrine
- Consequential Damages and Bad Faith
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
- Do Connecticut Courts Permit an Award of Consequential Damages in the Insurer/Insured Context?
- Pennsylvania Plaintiffs Must Plead a Factual Basis for their Bad Faith Claims
Marc A. Schulz
- No “Special Relationship” Existed Between Broker and Insured Where Broker Was Unable to Provide Umbrella Coverage to Insured
Earl K. Cantwell
BONA FIDE INVESTIGATION DEFEATS BAD FAITH CLAIM
We hope you have a joyous Labor Day weekend and we see you in two weeks.
As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.
If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.
You will find back issues of Coverage Pointers on the firm website listed above.
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York
Dan D. Kohane
Audrey A. Seeley
Margo M. Lagueras
INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
Michael F. Perley
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Jennifer A. Ehman
Marc A. Schulz
Diane F. Bosse
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
Jody E. Briandi
Steven E. Peiper
Audrey A. Seeley, Team Leader
Margo M. Lagueras
Jennifer A. Ehman
Jody E. Briandi, Team Leader
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
08/27/12 Beech v. Smith
Appellate Term, Second Department
License Plate Number Written on Sheet of Paper Provided by Unnamed Crossing Guard is Not Enough to Impose Liability on Vehicle’s Owner
Decis Beech sued for personal injuries allegedly sustained in a motor vehicle accident. After the action had been settled as to plaintiff Decis Beech, Janet Beech (Janet) proceeded to trial against defendant. At the liability phase of the bifurcated trial, plaintiff testified that she had been struck by a vehicle driven by a light-skinned black woman. After the car sped away, an unnamed crossing guard gave Janet a piece of paper with a license plate number. Plaintiff never learned the name of the crossing guard, nor did she learn the identity of the driver or the owner of the vehicle that had struck her.
Other than a license plate number which had been provided by a witness who did not testify, Janet offered no proof that Smith owned or operated the vehicle which had struck her Janet did not know the owner of the vehicle or the driver or the name of the crossing guard who provided the plate number. Without the testimony of the crossing guard, she could not provide that Smith’s vehicle was involved in the accident.
Editor’s Note: I know, I know, this is not a coverage opinion, but there wasn’t another case on which to report this issue so it’s the best I can do.
MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
08/28/12 Arenas v Guaman
Appellate Division, First Department
Findings Based on Subjective Complaints of Pain Are Insufficient to Support 90/180-Day Claim
On appeal, the trial court’s determination that plaintiff submitted sufficient medical evidence to rebut defendants’ prima facie showing with respect to the alleged injuries to her right shoulder and cervical and lumbar spine under the permanent consequential and/or significant limitation of use categories, is affirmed. However, defendants’ motion is granted with respect to plaintiff’s 90/180-day claim as she testified that she was confined to bed for only a month or two and only unable to perform a few of her normal activities. In addition, her treating physician’s findings that were based only on her own subjective complaints of pain were insufficient to raise a triable issue of fact.
08/27/12 Mid-Hudson Chiropractic Health Services PC v. Respondent
Arbitrator Kent L. Benziger, Erie County
Physiatrist’s Opinion Insufficient to Deny Chiropractic Benefits
The Applicant sought reimbursement for chiropractic services rendered from August 1, 2011 through August 22, 2011, allegedly arising out of injuries sustained from an April 16, 2011, motor vehicle accident. The Applicant’s assignor complained of neck, back and right wrist pain after the accident. On May 16, 2011, she underwent a cervical spine MRI which revealed disc bulges at C4/5 and C6/7. The Applicant submitted SOAP notes for the treatment dates in dispute documenting neck and low back pain with objective findings including subluxations. There were additional objective findings noted but the assigned arbitrator indicated they could not be read.
The insurer denied the chiropractic treatment upon the independent medical examination of physiatrist, Dr. Amy Weiss-Citrome. Dr. Weiss-Citrome documented positive objective findings in range of motion testing as well as some positive neurologic testing. Dr. Weiss-Citrome opined that from a physical medicine and rehabilitation standpoint further treatment was necessary. Yet, further massage therapy, acupuncture and chiropractic care was not needed.
The assigned arbitrator determined the IME report was not persuasive. This is because Dr. Weiss-Citrome found positive objective findings and injuries related to the accident which were unresolved yet without explanation chiropractic care was not necessary.
Further, the assigned arbitrator found merit to Applicant’s argument that the physiatrist’s opinion could not cut off benefits for treatment in another specialty. Applicant relied upon Elmont Open MRI & Diagnostic Radiology PC v. State Farm Ins. Co., 26 Misc3d 2111a (2010), for the proposition that chiropractic care is distinct from the practice of medicine and a physician’s standard is not controlling upon a chiropractor in his or her profession. The assigned arbitrator indicated that in the past he has held that in certain limited circumstances a negative examination by a specialist in one field can terminate benefits for treatment outside that specialty. However, the example provided was where the examining specialist made no positive findings and the injured person acknowledged resolution of complaints. Here, there was no such similarity in Dr. Weiss-Citrome’s report and the assigned arbitrator determined that it could not be used to deny chiropractic benefits.
08/27/12 Dudzik Chiropractic PC v. Respondent
Arbitrator Kent L. Benziger, Erie County
Chiropractic Treatment Not Necessary as Applicant Did Not Demonstrate Palliative Benefit from Treatment
The Applicant sought reimbursement for chiropractic treatment rendered from November 7, 2010 through July 7, 2011, allegedly arising out of injuries sustained from an October 31, 2009, motor vehicle accident. In support of its case, the Applicant submitted SOAP notes and re-evaluation notes. The November 22, 2010, SOAP note documented pain on palpation, subluxations, muscle spasm, edema, and trigger points. However, the note did not indicate the specific areas of those findings. Subsequent notes revealed unchanged diagnosis and apparently relatively unchanged findings.
The insurer denied chiropractic benefits upon the independent chiropractic examination conducted by Michael Cardamone, DC. The Applicant’s assignor complained of neck pain with severe headaches, right shoulder pain, and low back pain. The examination revealed numerous positive objective findings in the neck, low back, and shoulder. As a result, Mr. Cardamone recommended additional chiropractic care for another eight weeks.
Mr. Cardamone re-evaluated Applicant’s assignor on October 6, 2010. He advised that his neck pain was “not too bad” however his low back pain was still at 5-7/10 on the pain scale. The Applicant’s assignor had positive testing for left sided neck pain and local back pain. The lumbar spine range of motion was normal except for lumbar flexion while the cervical spine range of motion was decreased in all planes. Mr. Cardamone’s review of the cervical spine MRI revealed a C4/5 bulge and C5/6 herniation. He opined that the Applicant’s assignor had an 11 month course of chiropractic care and it would not improve his condition thus no further treatment was necessary.
The assigned arbitrator indicated that essentially Mr. Cardamone’s opinion is that the Applicant’s assignor reached an “end point” in chiropractic care. The Applicant argued that under Hobby v. CNA this is not a valid basis to deny chiropractic care. The assigned arbitrator indicated that more recent decisions have held that treatment is no longer necessary where it does not improve or otherwise benefit the claimant. Treatment that is not providing a palliative or curative benefit is not necessary treatment. The word palliative is defined here as treatment that lessens the pain and suffering severity and improves the quality of life without necessarily affecting a cure. The assigned arbitrator has previously held that treatment which provides palliative benefits is a finding of fact. The treatment records or credible testimony must document objectively quantifiable evidence of treatment providing relief for a significant period of time that enables the patient to work or perform his daily activities in order for the treatment to be medically necessary.
Here, the assigned arbitrator determined that the treatment was not medically necessary. The SOAP notes submitted did not document any real curative benefits or substantial relief that qualifies as palliative. The checklist form used demonstrated the same objective findings and unchanged diagnosis. Further, “a checked notation on a pre-printed form that a patient is making progress is insufficient.” The assigned arbitrator concluded that the Applicant would have been better served with a more thorough re-examination report.
08/22/12 Cameron B. Huckell, MD v. Respondent
Arbitrator Kent L. Benziger, Erie County
Orthopedic Peer Review Insufficient to Deny Cervical Spine Surgery
The Applicant sought reimbursement for a cervical spine surgery performed upon the assignor allegedly arising out of injuries sustained in a May 20, 2010, motor vehicle accident. The Applicant’s assignor treated after this accident at Erie County Medical Center (“ECMC”) with complaints of headaches, neck, back pain, and abdomen pain. A cervical spine CT scan revealed degenerative changes including degenerative disc disease, spondylosis, osteophytes, and unspecified disc bulges.
Dr. Huckell began treating the injured party for complaints of neck pain radiating into the bilateral posteriorly shoulder region as well as numbness and paresthsia to the right and left small fingers. The injured party also complained of low back pain with generalized numbness and paresthesia through the legs from below the knees. A cervical spine MRI revealed spondylosis from C3/4 to C6/7 with multi-level protrusions. A lumbar spine MRI revealed bulging discs and a L3/4 herniation. Dr. Huckell recommended his patient undergo a posterior C3-C7 laminoplasty procedure, which was performed on January 10, 2011.
The insurer denied this surgery upon the peer review of Dr. Thomas Nipper. Dr. Nipper indicated in reviewing the records there were no sensory or motor deficits and no paresthesia in the upper extremities. The CT scan showed no acute abnormalities. He also noted that intervertebral discs become less spongy and lose water content with age and these findings are generally called spondylosis or stenosis after age 50. Also, the MRI studies revealed degenerative changes. Cervical stenosis can cause radiculopathy and there was no causally related medical necessity for the surgery.
The assigned arbitrator did not find the peer review persuasive. Initially the Applicant’s assignor had no history of these problems prior to the motor vehicle accident and Dr. Huckell’s records did reveal positive neurologic findings. Dr. Huckell’s opinion was that the accident was the activating and exacerbating cause of the pre-existing cervical spine condition warranting surgery. Also, after the surgery the assignor had improvement which was not adequately discussed in the peer review.
08/24/12 Neomy Med., P.C. a/a/o Lionel Merilien v. New York Cent. Mut. Fire Ins. Co.
Appellate Term, Second Department
Insurer’s Summary Judgment Motion on Failure to Appear for Scheduled IMEs Should Have Been Granted
The insurer’s summary judgment motion should have been granted as it submitted a sufficient affidavit from the third party IME scheduling company that established the IME notices were timely and properly mailed. Also, the insurer submitted a sufficient affidavit from the chiropractor/acupuncturist scheduled to conduct the IME that the assignor failed to appear for same. The plaintiff’s affirmation from counsel alone was insufficient to raise a triable issue of fact precluding summary judgment.
08/24/12 North Bronx Med. Health Care a/a/o Elesia Fullerton v. NY Cent. Mut. Ins. Co.
Appellate Term, Second Department
Again, Insurer’s Summary Judgment Motion Should Have Been Partially Granted
The insurer’s summary judgment motion should have been partially granted on the basis of lack of medical necessity. The insurer submitted an affirmed IME report and affirmed peer review report which set forth sufficient medical rationale and factual basis for each doctor’s opinion of lack of medical necessity. The plaintiff did not submit any physician affidavit that meaningfully referred to, let alone rebutted, the conclusions set forth in the IME and peer review report.
08/23/12 Neomy Med., P.C. a/a/o Alesya Draganchyuk v. GEICO Ins. Co.
Appellate Term, Second Department
Plaintiff’s Doctor’s Affidavit Creates Issue of Fact Regarding Lack of Medical Necessity
The insurer’s summary judgment motion was properly denied as an issue of fact existed regarding lack of medical necessity. The insurer’s peer review was rebutted by the plaintiff’s doctor’s affidavit which demonstrated an issue of fact as to medical necessity.
08/23/12 Quality Health Products a/a/o Beth McCullough v. Country-Wide Ins. Co.
Appellate Term, Second Department
Outstanding Verification Renders Suit Premature
The insurer was entitled to summary judgment as it demonstrated outstanding verification rendering the suit premature. The insurer’s litigation supervisor’s submission established timely mailing of the initial and follow up verification requests to the plaintiff, which requests remained outstanding. The plaintiff did not demonstrate that verification was provided to the insurer prior to commencing the instant action.
08/7/12 Quality Psychological Services, P.C. a/a/o Daniel Robinson v. Interboro Mut. Indem. Ins. Co.
Appellate Term, Second Department
Insurer Demonstrates Failure to Appear for Scheduled EUOs
The insurer’s summary judgment motion should have been granted as the plaintiff’s assignor breached a condition of the policy to appear for scheduled EUOs. The insurer established through sufficient affidavits from the company that the EUO scheduling letters and denial were timely mailed. Also, the affidavit from the “managing no-fault attorney” of the law firm retained to conduct the EUO was sufficient to establish the procedure and practice in appearances at EUOs which demonstrated the assignor failed to appear.
08/7/12 Brownsville Advance Med., P.C. a/a/o Rhonda Francis Munro v. Kemper Independence Ins. Co.
Appellate Term, Second Department
Failure to Submit Rebuttal Affidavit Leads to Insurer’s SJ Motion on Lack of Medical Necessity Being Granted
The insurer’s summary judgment motion on lack of medical necessity should have been granted as it established through a sufficient IME report lack of medical necessity. The plaintiff failed to submit any affidavit or affirmation from a medical professional to rebut the IME physician’s conclusions. Thus, no issue of fact precluded summary judgment in the insurer’s favor.
08/28/12 Mallory v Allstate Insurance Company
Court of Appeals
Court of Appeals Rules that Passage of Time DOES NOT Preclude a Carrier From Relying Upon an Exclusion in a Disputed Property Damage Claim
In a brief decision, the Court of Appeals reaffirmed what we, your loyal servants of Coverage Pointers, have been saying for years…a violation of the Unfair Claims Settlement will not result in the waiver of otherwise applicable exclusions. In other words, a violation of the timelines set up by Regulation 216 will not operate to preclude coverage defenses akin to Insurance Law 3420(d)(2)’s application in bodily injury claims.
What we said way back when…
12/06/11 Mallory v Allstate Insurance Company
Appellate Division, Second Department
Possible Violations of Fair Claims Act DOES NOT Result in the Waiver of Policy Defenses
Plaintiff commenced this action to recover under a fire insurance policy issued by Allstate. In its Answer, Allstate asserted several exclusions as affirmative defenses. Plaintiff responded by moving to strike all policy defenses on the basis that Allstate’s failure to comply with 11 NYCRR 216.6(c) (“Unfair Claims Settlement” Act) operated as a waiver of all policy defenses. For those unfamiliar with the section at issue, Section 216.6(c) requires a first party insurer to respond with 15 days of receipt of proof loss whether the coverage is accepted, denied or more investigation is needed.
In affirming the trial court, the Second Department noted its previous precedent in De Marinis v. Tower, which unequivocally held that a violation of the time requirements imposed under the Unfair Claims Settlement Act did not constitute a waiver (akin to Insurance Law § 3420[d]) of policy exclusions.
08/29/12 Romance v Zavala
Appellate Division, Second Department
Authorizations Limited to Body Part are Further Limited to Five Year Pre-Accident
Plaintiff commenced this action seeking to recover for alleged injuries he sustained to his lower back. In addition, plaintiff’s Bill of Particulars also identified difficulty urinating as another claimed injury. As part of discovery, defendant requested unlimited authorizations related to a polycystic kidney condition plaintiff had been treating prior to the accident. In addition, defendant sought records pertaining to plaintiff’s previous illnesses, health insurance records, employment records and the files of attorneys that had previously represented plaintiff in Medical Board hearings. Finally, defendant requested an authorization for “the complete file” of plaintiff’s automobile insurer.
When the items were not provided, defendant moved to compel. This decision was the Second Department’s appellate review of that motion. Initially, with respect to the request for an authorization related to treatment for the kidney ailment, the Court noted that it was sufficiently related to an injury claim in the instant lawsuit (ie., the difficulty urinating). However, the Court noted that while plaintiff’s claim had waived the privilege over those particular medical records it also limited the time of the authorization. To that end, the Court noted that defendant was only entitled to recover medical records from five (5) years prior to the injuries being claimed through the present date.
With regard to the additional authorizations sought by defendant, the Second Department noted that a litigant is “not entitled to uncontrolled and unfettered disclosure.” In this vein, the Court noted that the requests for medical conditions unrelated to the claimed injuries were overly broad. Moreover, the Court likewise denied defendant’s request for previous employment and insurance files.
08/29/12 Arrendal v Trizechahn
Appellate Division, Second Department
Indemnity Clause did not Apply to Claims Asserted by Purported Indemnitor’s Own Employees
Plaintiff was employed by Daisy’s Subway. Daisy’s Subway sub-leased the space from Subway Real Estate. Subway Real Estate originally leased the premises from Trizechahn who owned the building. During the course of his employment with Daisy’s Subway, plaintiff tripped over a metal bar and fell into a trash compactor. As a result of the incident, plaintiff commenced the instant claim against Trizechahn. Trizechahn answered by asserting as an affirmative defense that plaintiff’s injuries were caused by his own comparative negligence, and were not the fault of Trizechahn.
Thereafter, Trizechahn commenced a third-party action against Subway Real Estate wherein it sought contractual indemnification against Subway Real Estate. The clause relied upon by Trizechahn provided a right of indemnification for losses “caused by the ‘negligence’ of an agent or licensee of Subway Real Estate.” Trizechahn argued that as the loss was caused by the negligence of Subway Real Estate’s licensee, Daisy’s Subway, the indemnity clause had been triggered.
Unfortunately for Trizechahn, the Appellate Division disagreed. Essentially, the court ruled that the term “negligence” did not mean the comparative negligence of an employee of Daisy’s Subway. Rather, the clause was only interpreted to provide indemnity protection to Trizechahn where the negligence of an agent or licensee caused injury to a third-party. Any recovery awarded to plaintiff would be reduced by his comparative fault. Thus, the Court reasoned that it was an unreasonable interpretation of the clause to apply it to limit the recovery of the plaintiff, but then apply in on the back end again to pass through whatever liability was unrelated to the plaintiff to his employer.
08/29/12 Arrendal v Trizechahn
Appellate Division, Second Department
Trizechahn Loses Again, Lack of a Duty Owed by Service Contractor Precludes Common Law Indemnity Claim
Plaintiff was injured when he fell into a dumpster located at, or nearby, the loading dock of the building owned by Trizechahn. Trizechahn asserted cross-claims for common law and contractual indemnity against Summit Security Services. Prior to the accident, Summit had contracted with Trizechahn to provide security at the building. This included the area around the building’s loading docks.
Summit opposed both claims, and moved for summary judgment accordingly. In support of its motion, Summit argued that it’s only obligation was to provide security. It had no duty, under contract or at common law, to monitor access to the building’s dumpster. Where, as here, Summit’s duties were totally unrelated to trash collection, it followed Trizechahn had no basis for a common law indemnity claim.
In addition, Trizechahn’s claims for contractual indemnity were likewise dismissed where Summit established that it possessed no contractual obligations relative to trash collection. In affirming the dismissal, the Second Department noted that there was no evidence that Summit breached any duty created under the “security personnel service” contract.
08/21/12 Beach v Touradji Capital Mgt., LP
Appellate Division, First Department
Review of Expert Opinion Prior to Testimony Results in Waiver of Material Prepared in Anticipation of Litigation Exemption
After plaintiffs Beach and Vollero left the employ of Touradji, both men commenced the instant action which sought recovery of approximately $50,000,000 in unpaid compensation. In response, Touradji counter-claimed against Mssrs. Beach and Vollero alleging that the two had stolen proprietary information which they used to assist the formation of their new company.
As part of discovery exchange, Touradji served a Notice to Produce upon the plaintiffs which sought production of Vollero’s personal laptop. At a later deposition, Mr. Vollero testified that any materials related to Touradji would have been stored on his personal computer or an IBM ThinkPad. At that point, Touradji requested production of the computers for forensic analysis, or, in the alternative, Touradji requested that a forensic analysis be conducted by a third-party.
Mr. Vollero, resisted both efforts, and instead hired his own forensic analyst to search the computers for the missing and/or deleted information that had been requested by Touradji. The forensic expert, it turns out, located hundreds of files that had been previously deleted. All of this information was recaptured and provided to Touradji as party of discovery exchange.
Upon review of that information, Touradji again requested unfettered access to the computers so that it could conduct a second analysis. This request was denied, but the Court ruled that Touradji was entitled to a deposition of the forensic computer expert that Mr. Vollero had retained.
At that deposition, it was learned that the forensic expert had prepared a report as part of his findings. Moreover, the expert testified that he had reviewed the report in the course of his preparation for the deposition.
In light of this revelation, Touradji now moved for production of the expert’s report to Mr. Vollero. Vollero opposed the request on the basis of the attorney-client privilege and/or the attorney work product doctrine. In response, Touradji argued that because the expert had reviewed the report in preparation for his deposition it had become discoverable.
The Court noted that the expert’s review of the report waived all privilege associated with the doctrine of material prepared in anticipation of litigation. However, the Court also noted that the expert’s actions did not result in a waiver of any items that fell within the attorney work product doctrine (ie., impressions, directions, etc. of counsel). Accordingly, the Court ruled that the entire report should be provided for an in camera inspection. All items falling within the attorney work product doctrine would be redacted, but all other items related to the expert’s work would be subject to production.
Proposed Changes To 11 NYCRR 216.6(g) (Unfair Claims Settlement Practices)
Proposed Changes to Regulations Pertaining to Issuance of Releases Are Drafted
The Department of Financial Services has drafted proposed changes to the Unfair Claims Settlement Practices section 216.6(g) which pertains to the issuance of releases. Subdivisions 1 and 2 have only minor changes proposed where the Department seeks to elaborate with regard to the type of payment made. Previously, the regulation only referred to checks issued in payment of claims. The proposed regulation would include “draft, other payment medium or device, or use of an electronic transfer.” This section would also define release as:
A written document whereby a person or entity relinquishes rights and discharges an insured and/or insurer from obligations in exchange for settlement of claim.
Subdivision 2 of this section would also include additional restrictions to the release. Previously, this provision only disallowed releases that are broader than the scope of settlement. In the proposed regulation, insurers may not execute a release that:
(b) unreasonably restricts the ability of the releaser to:
(1) discuss the terms and conditions of the settlement provided, however, that the insurer shall not in any case prohibit the releaser from discussing the terms and conditions of the settlement with:
(i) the releasor’s attorney, accountant, or financial advisor or planner;
(ii) any of the releasor’s family members;
(iii) any court of law; or
(iv) any local, state or federal agency; and
(2) make statements about the insurer, provided, however, that nothing herein shall prevent an insurer from requiring the execution of a release that prohibits the releaser from making false statements about the insurer.
In other words, this proposed change would limit the extent an insurer may require the insured to keep the settlement confidential.
In addition to the above proposed changes, the proposed regulation adds additional regulations with regard to releases issued as part of a settlement under a fire, miscellaneous property, water, burglary or theft, glass, boiler and machinery, elevator, animal, collision, personal injury liability, property damage liability, fidelity and surety, motor vehicle and aircraft property damage and marine and inland marine insurance policies. Under the proposed regulations, an insurer may not require a release for any claim under any of the above enumerated policies unless the release sets forth:
- Where the claim arises under a liability policy – whether the claim is for property damage or bodily injury
- Nature of the occurrence from which claim arises
- Date and location of occurrence
- Total amount of actual damages (except where claim is under a liability policy)
- Claims under a motor vehicle liability policy must include the dollar or percentage reduction in damages as a result of an agreement because of comparative negligence
Additionally, the insurer must use separate releases for the property damage and bodily injury claims if the claim involves both types of claims under a liability policy. Furthermore a bodily injury release must state, in bolded capital letters, that the release is only for bodily injury claims and, similarly, the property damage release must state, in bolded capital letters, that the release is only for property damage claims.
Furthermore, if an insurer requires a release for motor vehicle property damage claims, the insurer must use the newly prescribed model “Release of Motor Vehicle Property Damage Liability Claim Only” form found in section 216.12 of this section. (If you would like a copy of the form, please let me know, and I will be happy to provide you a copy.)
For some of the above proposed provisions, there is an exemption where the claimant is a large commercial claimant as long as the claimant agrees, in writing, that the insurer is not subject to the relevant provisions.
08/17/12 Amerisure Ins. Co. v. National Surety Corp.
Seventh Circuit Court of Appeals –Indiana law applied
The Cross Liability Exclusion and the Mend-The-Hold Doctrine
In November 2005, Mark Swanson Associates, Inc. hired Indiana Steel Fabricating [“ISF”] to complete steel fabrication work for a construction project in Indiana. In October 2006, ISF hired Central Steel Erectors [“Central”] to perform the necessary steel erection work. ISF and Central signed a subcontract in which Central explicitly agreed to procure adequate insurance and to “defend, indemnify and hold harmless [ISF], from and against all claims, actions, judgment, damages, losses and expenses”, related to the agreement.
Central purchased two insurance policies from Scottsdale Insurance Company [“Scottsdale”]. The first was a $1 million commercial general liability policy, and the second was a $2 million umbrella policy. ISF also carried general liability and umbrella coverage – a $1 million commercial general liability policy purchased from Amerisure Insurance Company [“Amerisure”] and $7 million in umbrella coverage from National Surety Corporation [“National”].
In November 2006, an employee of Central, Brian Colip, was seriously injured at work when he fell 30 feet through a hole in the roof of a building. Colip then filed a suit against ISF arguing that ISF owned him a non-delegable duty of care and was therefore vicariously liable for his injuries. Colip eventually settled that suit for $2.9 million, and three insurance companies paid the settlement amount according to the terms of a funding agreement.
The agreement provided that Scottsdale would pay $1 million out of the Scottsdale CGL policy and $950,000 out of the Scottsdale umbrella policy, while Amerisure would pay the remaining $950,000. Initially, National had no obligation to contribute. The agreement specifically reserved the rights of the parties to seek reimbursement or contribution from each other.
Amerisure later filed suit against Scottsdale and Central in the United States District Court for the Southern District of Indiana. Scottsdale then filed counter- and cross-claims against Amerisure and National.
This district court dismissed Central from the litigation and granted summary judgment in favor of Scottsdale, ruling that it had no obligation to pay under its umbrella policy. The court awarded Scottsdale $50,000 from Amerisure, exhausting Amerisure’s $1million policy, and the remaining $900,000 from National. Amerisure and National appealed to the United States Court of Appeals for the Seventh Circuit [“Court”]. For the following reasons the Court affirmed the district court’s decision.
The primary issue on appeal relates to Scottsdale’s obligation to contribute to Colip’s settlement under the Scottsdale umbrella policy. Scottsdale argued that the umbrella policy contains an explicit exclusion – the “Cross Liability Exclusion” - that exempts it from paying; Amerisure and National counter that Scottsdale is estopped from relying on that provision, and in any event it does not apply here.
The Cross-Liability Exclusion in the Scottsdale umbrella policy provides that, “this insurances does not apply to “bodily injury,” “property damage” or personal or advertising injury” arising out of a claim or suit brought by an insured against another insured.
All parties agreed that Colip suffered “bodily injury”, and that ISF and Colip are both insured under the policy; however, Amerisure and National argue that Colip’s injury did not “arise out of a claim or suit”. They argue that Colip’s injury arose out of a workplace accident, but the liability for that injury arose out of Colip’s lawsuit, and, as such, the Exclusion does not apply to Colip’s case. The insurers argued that because this litigation is between insurance companies, the Scottsdale policy must be construed from a “neutral stance”. See, Indiana Lumbermens Mut. Ins. Co. v. Statesman Ins. Co., 260 Ind. 32 (1973).
The Court did not find this to be a sensible reading of the policy stating that it was a strained effort to avoid the natural meaning of the words while at the same time preserving just enough to avoid making the provision illusory. To analyze this issue, the Court reviewed the Indiana Lumbermen’s decision cited by Amerisure and Scottsdale and determined that what the Indiana Supreme Court actually required in this type of contract litigation is to “seek out the general intent of the contract from a neutral stance.”
The Court determined that the straightforward way to read the policy exclusion is as one that applies to lawsuits between two parties covered by the same insurance – or as the policy states – “a claim or suit brought by any insured against another insured”. The Court found this to make sense because without the Exclusion, parties under the same policy would have no disincentive to sue one another, since only the insurance company would ultimately bear the cost of the judgment. The Court was satisfied that the Exclusion’s language, including its title, clarifies that it applies to instances of cross-liability and reflects the intent of Scottsdale and Central not to purchase insurance that would cover personal injury lawsuits between insured parties under the umbrella policy.
Another issue the Court addressed was whether Scottsdale waited too long to assert its rights under the Exclusion. Amerisure and National argued that Scottsdale did not bring up the Exclusion until too late in the game, and that this late assertion constitutes an unfair attempt by Scottsdale to “mend its hold”. The mend-the-hold doctrine prevents a defendant in contract litigation from changing its defenses in midstream without any reason for doing so.
The Court found this argument to be unavailing. First, the Court determined that it was not at all clear that the Indiana courts have any intention of applying the doctrine. Second, even if the doctrine did apply it would not be applicable to this case. The Court pointed out that Scottsdale not only specifically stated its position that the Scottsdale umbrella coverage was subordinate to the Amerisure policy, but it also explicitly reserved Scottsdale’s “right to assert defenses regarding any of the other terms, conditions, or exclusions of this policy.” Accordingly, the Court concluded that the parties had ample notice of Scottsdale’s intent to “assert all defense to coverage available to it under the policy.”
08/27/12 Ryan v. National Union Fire Ins. Co. of Pittsburgh
Second Circuit Court of Appeals – Connecticut law applied
Consequential Damages and Bad Faith
For analysis of this case, reference the new column written by Jennifer Ehman which specifically addresses ‘bad faith’ cases
Jennifer A. Ehman
08/27/12 Ryan v. National Union Fire Ins. Co. of Pittsburgh
United States Court of Appeals, Second Circuit
Do Connecticut Courts Permit an Award of Consequential Damages in the Insurer/Insured Context?
In this decision, plaintiffs were employees of a securities broker-dealer. A client filed a securities arbitration claim before the National Association of Securities Dealers. He alleged that plaintiffs “churned” his account by trading excessively for the sole purpose of generating commissions and fraudulently and negligently managed his account. Plaintiffs submitted the claim to defendant under their Securities Broker/Dealer Professional Liability Insurance Policy.
Although defendant initially provided a defense, after several months of investigation, it withdrew the defense due to three policy exclusions. The matter then continued on with plaintiffs paying for their own defense. Eventually, the matter went before an arbitration panel where plaintiffs were found jointly and several liable for over a million dollars in damages. With the award outstanding, plaintiffs brought this lawsuit against defendant. Before the arbitration award was confirmed, defendant stepped in and negotiated a settlement. With the settlement, defendant also agreed to pay plaintiffs’ defense costs.
As a result, the issue of this appeal is not whether plaintiffs were entitled to defense and indemnification for the arbitration, but rather whether they could recover consequential damages for injury to their reputations. The court began by considering the case law in Connecticut regarding consequential damages. After doing so, the court concluded that Connecticut law was silent on the availability of these types of damages in duty to defend cases. The court went on to reason that even if consequential damages were available, it was unclear whether the law would permit plaintiffs to recover reputational damages for breach of a duty to defend. The court noted that appellate courts in Connecticut had never even addressed whether such reputational damages were available in any breach of contract action. It further noted citing a Fourth Circuit case, among others, that reputational damages arising from a breach of contract are typically not compensable as they are too speculative and cannot reasonably be presumed to be contemplated by the parties when they formed the contract. Accordingly, the court certified these two questions to the Supreme Court of Connecticut.
Take Away: New York courts, unlike Connecticut courts, have spoken on the issue of consequential damages. The leading case on these damages is the 2008 Court of Appeals decision, Bi-Economy Market, Inc. v. Harleysville Insurance Company of New York. That decision dealt with a food market that sustained fire damage. In the course of resolving the insurance claim, the market went under. The Court of Appeals held that in addition to general damages, a party may also be entitled to special, compensatory damages. To recover compensatory damages, an insured must establish that the possibility of the loss would arise from a breach, was foreseen, or should have been foreseen, at the time the policy was issued.
Further, with regard to the concept of what types of damages could be recoverable, the Court of Appeals, as does the Second Circuit above, held that proof of consequential damages cannot be speculative or conjectural. With that said, reputational damages are a classic type of damage in third-party claims and, assuming the insured has some proof, they arguably could be recoverable in New York.
08/20/12 Palmisano v. State Farm Fire and Casualty Co.
United States District Court, Western District of Pennsylvania
Pennsylvania Plaintiffs Must Plead a Factual Basis for their Bad Faith Claims
This decision results from defendant’s motion to dismiss plaintiffs’ bad faith claims, among others. Plaintiffs owned a two-story home in Pittsburgh, Pennsylvania. In October 2010, they discovered damage to their home including, buckling and cracking of the floor in the kitchen and numerous cracks to the walls. They hired a contractor to inspect the home and determine the cause of the problems. During the inspection, it was discovered that a main sewer pipe had separated, spilling water which pooled in large quantities in the back of the house. The water caused the foundation of the home to fail.
Plaintiffs submitted a claim to defendant for coverage. Defendant retained a structural engineer to inspect the home. Ultimately, the engineer determined the damage to the home was the result of long-term wear and movement of the south wall beneath the garage infused by hydrostatic and soil pressures in conjunction with long-term differential movement of the foundation support walls. Based on this report, defendant disclaimed coverage citing a relevant earth movement exclusion and water damage exclusion.
In response, plaintiffs brought his action. In the complaint, plaintiffs alleged bad faith. The court examined the sufficiency of this claim on the motion to dismiss. The court began by noting that only a complaint that states a plausible claim for relief survives a motion to dismiss. In the bad faith context, courts require more than conclusory and bare-bones allegations that an insurance company acted in bad faith by listing a number of generalized accusations without sufficient factual support. Rather, they require facts which “describe who, what, where, when and how the alleged bad faith occurred.” Here, plaintiffs’ claim failed as they made broad generalizations that defendant acted in bad faith (i.e., defendant failed to fairly and properly investigate the claim) and, in turn, the claim was dismissed.
Take Away: This decision reinforces the importance of plaintiffs pleading a factual basis for their bad faith claims. Plaintiffs at times will throw in an allegation of bad faith in order to “get the carriers attention.” These claims often lack a factual basis (mostly because none exists). When such a situation occurs, an immediate motion to dismiss may be the best course of action. Get the bad faith claims dismissed prior to the start of discovery.
Marc A. Schulz
08/16/12 Lehneis v Neil
Supreme Court, Suffolk County
No “Special Relationship” Existed Between Broker and Insured Where Broker Was Unable to Provide Umbrella Coverage to Insured
Plaintiff’s wife was involved in an auto accident, was named as a defendant in an underlying action, and settled for an amount well in excess of plaintiff’s auto insurance coverage. Plaintiff in this action seeks to recover the amount which he personally paid in the settlement, and filed an action sounding in negligence and breach of contract for defendant’s alleged failure to procure umbrella insurance coverage.
Defendant CFP and Insurance Co. moved for summary judgment on grounds that they fulfilled their duties to plaintiff and that plaintiff did not rely on CFP to obtain umbrella insurance. Defendant CFP testified she did not handle auto insurance, she did not have access to surplus or excess carriers, and as she did not handle auto insurance, she would tell client to contact their auto insurance carrier regarding any requests for umbrella coverage.
In opposition, plaintiff submitted his deposition transcript which revealed that on every occasion defendant advised him that she was not able to obtain umbrella coverage, he would attempt to obtain such coverage on his own and that he relied on a number of brokers to meet his insurance needs. Thus, the court held such testimony establishes defendant CFP performed her common law duty as an insurance broker and no special relationship existed between plaintiff and defendant. Consequently, the court granted defendants motion for summary judgment.
BONA FIDE INVESTIGATION DEFEATS BAD FAITH CLAIM
A federal district court recently ruled that an insurance company did not act in “bad faith” in conducting a lengthy investigation of a fire loss claim based on certain “red flags” indicating a possibly fraudulent claim. Fabrikant v. State Farm Fire & Casualty Co. 2012 WL 1677293 (M.D. Pennsylvania 5/14/12). The District Court generally held that the possibility of a fraudulent arson claim supported the need for such an in-depth investigation.
A house fire occurred in November 2009. A fire marshal determined that the fire was accidental, and was caused by an electric space heater. State Farm referred the claim to SIU based on some possible “red flags” of arson including flammable remnants, claimant’s financial problems, and the fact that no one was in the house at the time of the fire.
State Farm did not complete its investigation within the one year period in the policy for the claimant to file suit on the loss. State Farm claimed the delay was caused by the policyholder’s failure to provide requested documents. The insured countered that State Farm’s position was unreasonable since the fire marshal had determined an accidental loss.
Eventually, State Farm covered the property damage but reserved rights on the personal property claim pending receipt of further documentation. The insured then sued for breach of contract, bad faith, and unfair trade practices in state court. State Farm removed the case to the United States District Court due to diversity jurisdiction. State Farm then moved for summary judgment which was granted.
In the first important part of the ruling, the court said that referral of the claim to State Farm’s SIU unit was reasonable based upon certain information indicating that the fire might not be an accident. The court also noted some delay on the claimant’s part in forwarding requested documents to State Farm.
Secondly, the court found that State Farm did not act in bad faith based on the “red flags” that triggered the in-depth investigation. Even though State Farm eventually paid the claim, that fact did not demonstrate bad faith because further investigation was warranted.
The court then ruled that State Farm had not acted in a “deceptive” or unfair manner in violation of Pennsylvania unfair trade practice law, etc.
The lesson of this case is that, if there are bona fide questions concerning the validity or scope of a claim prompting further investigation, that is not “bad faith” even if all or most of the claim may ultimately be approved and paid. Thus, in defending bad faith claims, it is important for insurance companies to be able to explain and defend the processes that went into investigating and adjusting the loss.
08/22/12 Remodeling Dimensions, Inc. v. Integrity Mut. Ins. Co.
Minnesota Supreme Court
Insurer Who Accepts Defense of Arbitration Under Reservation of Rights Has Duty to Advise of Insured's Interest in Written Explanation of Award
Minnesota Supreme Court
Integrity Mutual Insurance Company accepted the defense of Remodeling Dimensions, Inc. with respect to an arbitration alleging both covered and noncovered claims. Integrity appointed defense counsel pursuant to a reservation of rights. Defense counsel failed to timely request a written explanation for an award and absent such explanation Integrity denied coverage. The Minnesota Supreme Court "conclude[d] that when an insurer notifies its insured that it accepts the defense of an arbitration claim under a reservation of rights that includes covered and noncovered claims, the insurer not only has a duty to defend the claim, but also to disclose to its insured the insured's interest in obtaining a written explanation of the award that identifies the claims or theories of recovery actually proved and the portions of the award attributable to each." If an insurer fails to disclose the burden of proving allocation of the award between covered and noncovered claims shifts from the insured to the insurer.
Submitted by: Carlos Del Carpio of Meckler Bulger Tilson Marick & Pearson LLP
08/20/12 Atkins v. Suburban Mobility Auth. For Regional Transportation
Michigan Supreme Court
Application for No-fault Benefits Does Not Constitute Notice of Intent to Pursue Tort Claim
Atkins alleges she was injured while riding on a Suburban Mobility Authority for Regional Transportation (SMART) bus when it was involved in an accident. She filed an application for no-fault benefits within ten days but notified SMART of a tort claim seven months after the accident. The Michigan Supreme Court held that notice of a tort claim seven months after the accident did not meet the 60-day notice requirement of Michigan's Metropolitan Transportation Authorities Act.
Further, the plaintiff's application for no-fault benefits does not satisfy the notice requirement.
Submitted by: Carlos Del Carpio of Meckler Bulger Tilson Marick & Pearson LLP
Baker, McEvoy, Morrissey & Moskovits, P.C., New York (Stacy R. Seldin of counsel), for appellants.
Ephrem J. Wertenteil, New York, for respondent.
Order, Supreme Court, Bronx County (Stanley Green, J.), entered June 16, 2011, which denied defendants' motion for summary judgment dismissing the complaint alleging a serious injury within the meaning of Insurance Law § 5102(d), unanimously modified, on the law, to grant the motion as to plaintiff's 90/180-day claim, and otherwise affirmed, without costs.
Assuming that, with respect to plaintiff's claims of significant limitation or permanent consequential limitation of use of her right shoulder and cervical and lumbar spine, defendants made a prima facie showing of entitlement to judgment as a matter of law in support of their motion, plaintiff submitted sufficient medical evidence to raise triable issues of fact as to the severity of her injuries and as to the injuries' causal connection with the accident.
Defendants met their burden as to the 90/180-day claim by relying on plaintiff's testimony that she was confined to bed for only "a month or two" and was unable to perform only a few activities (see Williams v Baldor Specialty Foods, Inc., 70 AD3d 522, 522-523 ; see also Insurance Law § 5102[d]). Her physician's findings with respect to her restrictions do not raise a triable issue of fact, since they are based on plaintiff's subjective complaints of pain (see Browne v Covington, 82 AD3d 406, 407 ; see also Below v Randall, 240 AD2d 939, 940 ).
Appeal from a judgment of the Civil Court of the City of New York, Kings County (Reginald A. Boddie, J.), entered November 8, 2010. The judgment, upon a jury verdict, awarded plaintiff Janet Beech the principal sum of $150,000.
ORDERED that the judgment is reversed, without costs, and the matter is remitted to the Civil Court for the entry of a judgment dismissing so much of the complaint as was asserted by plaintiff Janet Beech.
Plaintiffs Decis Beech and Janet Beech commenced this action to recover for personal injuries allegedly sustained in a motor vehicle accident. After the action had been settled as to plaintiff Decis Beech, plaintiff Janet Beech (plaintiff) proceeded to trial against defendant. At the liability phase of the bifurcated trial, plaintiff testified that she had been struck by a vehicle driven by a light-skinned black woman. After the vehicle sped away, a crossing guard approached plaintiff and showed her a piece of paper with a number on it. Plaintiff never learned the name of the crossing guard, nor did she learn the identity of the driver or the owner of the vehicle that had struck her.
At the close of the liability phase, defense counsel moved for a directed verdict based on plaintiff's failure to establish that defendant Erin Smith was the owner and operator of the vehicle involved in the accident. The court denied the motion, and defendant appeals. We now reverse.
Other than a license plate number which had been provided by a witness who did not testify, plaintiff offered no proof that defendant owned or operated the vehicle which had struck her (see Johnson v Kernizant, 2003 NY Slip Op 50919[U] [App Term, 2d & 11th Jud Dists 2003]). Plaintiff admitted that she was unaware of the identity of the owner of the vehicle or its driver. Moreover, she was unaware of the identity of the crossing guard, who was the only other witness to the accident, who had provided a license plate number. Without any testimony from the crossing guard, plaintiff could not establish that defendant's vehicle had been involved in the accident. Indeed, defendant never appeared at a deposition nor did she testify at trial. Since plaintiff, as the sole trial witness, was unable to identify defendant as the vehicle's owner or driver, the evidence was legally insufficient to support the jury's verdict.[FN1]
We note that the evidence was also insufficient to support the jury's verdict on damages. In order to establish a serious injury under the "90/180 day" category, plaintiff was required to demonstrate that she "[had] been curtailed from performing . . . [her] usual activities to a great extent" during 90 of the 180 days immediately following the accident in question (Licari v Elliott, 57 NY2d 230, 236 ; see Insurance Law § 5102 [d]). Plaintiff failed to sustain this burden, as she offered no evidence to show that her injuries had curtailed her from performing her usual and customary activities to a great extent for the requisite period (see Lanzarone v Goldman, 80 AD3d 667 ; Nesci v Romanelli, 74 AD3d 765 ; Hamilton v Rouse, 46 AD3d 514 ; Rodriguez v Virga, 24 AD3d 650 ; Berman v General Elec. Cap Auto, 300 AD2d 522 ).
Accordingly, the judgment is reversed and the matter is remitted to the Civil Court for the entry of a judgment dismissing so much of the complaint as was asserted by plaintiff Janet Beech.
Lester Schwab Katz & Dwyer, LLP, New York, N.Y. (Lawrence
A. Steckman of counsel), for appellants.
Sullivan Papain Block McGrath & Cannavo P.C., New York,
N.Y. (Stephen C. Glasser of counsel),
DECISION & ORDER
In an action to recover damages for personal injuries, etc., the defendants appeal, as limited by their brief, from so much of an order of the Supreme Court, Kings County (Vaughan, J.), dated July 13, 2011, as denied that branch of their motion which was to compel the plaintiffs to provide authorizations for the release of certain records.
ORDERED that the order is modified, on the facts and in the exercise of discretion, by deleting the provision thereof denying that branch of the defendants' motion which was to compel the plaintiffs to provide authorizations for the release of the medical records of the plaintiff Jason Romance relating to treatment received, if any, for polycystic kidney disease and substituting therefor a provision granting that branch of the motion to the extent of directing the plaintiffs to provide authorizations for the release of the medical records of the plaintiff Jason Romance relating to treatment received, if any, for polycystic kidney disease from February 2005 to the present; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.
"It is well settled that a party must provide duly executed and acknowledged written authorizations for the release of pertinent medical records under the liberal discovery provisions of the CPLR when that party has waived the physician-patient privilege by affirmatively putting his or her physical or mental condition in issue" (Cynthia B. v New Rochelle Hosp. Med. Ctr., 60 NY2d 452, 456-457 [citation omitted]; see CPLR 3121[a]; O'Rourke v Chew, 84 AD3d 1193, 1194). Here, in their bill of particulars, the plaintiffs alleged, inter alia, that, as a result of the subject accident, the injured plaintiff, Jason Romance, sustained injury to his lower back and experienced difficulty urinating. Therefore, the injured plaintiff waived the physician-patient privilege with respect to his relevant prior medical history concerning those physical conditions, which he affirmatively placed in controversy (see Koump v Smith, 25 NY2d 287, 294; Sadicario v Stylebuilt Accessories, 250 AD2d 830, 831; Josephs v Oliver, 48 AD2d 688, 688). In light of these allegations, the medical records concerning any treatment for the injured plaintiff's polycystic kidney disease were sufficiently related to those conditions so as to be covered by the waiver (see Josephs v Oliver, 48 AD2d at 688). However, the defendants' request, set forth in their notice to produce, that the authorization to obtain these records be unrestricted as to date was not reasonable (see e.g. Smukler v 12 Lofts Realty, 167 AD2d 119, 120). Therefore, this authorization should be limited so as to authorize the release of the records relating to such treatment, if any, which occurred during the five-year period prior to the commencement of this action and up to the present time. Accordingly, the Supreme Court should have granted that branch of the defendants' motion which was to compel the plaintiffs to provide authorizations for the release of the injured plaintiff's medical records relating to treatment received, if any, for polycystic kidney disease to the extent of directing the plaintiffs to provide authorizations for the release of the medical records of the injured plaintiff relating to treatment received, if any, for polycystic kidney disease from February 2005 to the present.
However, since a party does not waive the physician-patient privilege with respect to unrelated illnesses or injuries (see McFarlane v County of Suffolk, 60 AD3d 918, 918; Gill v Mancino, 8 AD3d 340, 341; Carboni v New York Med. Coll., 290 AD2d 473, 473), the defendants were not entitled to any of the other authorizations for the release of the injured plaintiff's medical records requested in their notice to produce, which sought disclosure of medical records pertaining to illnesses and injuries unrelated to the subject accident. Furthermore, CPLR 3101(a) requires, in pertinent part, "full disclosure of all matter material and necessary in the prosecution or defense of an action." " [T]he principle of "full disclosure" does not give a party the right to uncontrolled and unfettered disclosure'" (Buxbaum v Castro, 82 AD3d 925, 925, quoting Gilman & Ciocia, Inc. v Walsh, 45 AD3d 531, 531). Accordingly, the Supreme Court providently exercised its discretion in denying that branch of the defendants' motion which was to compel the plaintiffs to provide authorizations for the release of the injured plaintiff's medical records pertaining to illnesses and injuries unrelated to the subject accident, and authorizations for the release of other records, such as the injured plaintiff's health insurance records, the injured plaintiff's complete employment file with the New York City Fire Department, the file of "any attorney" who represented the injured plaintiff before the Medical Board of the Fire Department of New York, and the complete file of the injured plaintiff's auto insurer (see Buxbaum v Castro, 82 AD3d at 925; Peluso v Red Rose Rest., Inc., 78 AD3d 802, 803).
DILLON, J.P., BALKIN, BELEN and AUSTIN, JJ., concur.
Arrendal v Trizechahn Corporation, et al.
Lawrence, Worden, Rainis & Bard, P.C., Melville, N.Y. (Roger
B. Lawrence of counsel), for appellant Trizechahn Corporation.
Gallo Vitucci Klar, New York, N.Y. (Kimberly A. Ricciardi of
counsel), for appellant American
Building Maintenance, Inc.
Hoey, King, Toker & Epstein (Mischel & Horn, P.C., New
York, N.Y. [Scott T. Horn and Naomi
M. Taub], of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendant Trizechahn Corporation appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Kramer, J.), dated October 8, 2010, as granted those branches of the motion of the defendant Summit Security Services which were for summary judgment dismissing the complaint insofar as asserted against that defendant and for summary judgment dismissing its cross claims for common-law and contractual indemnification against that defendant, and the defendant American Building Maintenance, Inc., separately appeals, as limited by its brief, from so much of the same order as granted that branch of the motion of the defendant Summit Security Services which was for summary judgment dismissing the complaint insofar as asserted against that defendant.
ORDERED that the appeal by Trizechahn Corporation and the separate appeal by the defendant American Building Maintenance, Inc., from so much of the order as granted that branch of the motion of the defendant Summit Security Services which was for summary judgment dismissing the complaint insofar as asserted against it are dismissed, as the appellants are not aggrieved by that portion of the order (see CPLR 5511; Mixon v TBV, Inc., 76 AD3d 144, 152); and it is further,
ORDERED that the order is affirmed insofar as reviewed; and it is further,
ORDERED that one bill of costs is awarded to the defendant Summit Security Services.
Trizechahn One NY Plaza, LLC, sued herein as Trizechahn Corporation (hereinafter Trizechahn), owned a commercial building. Pursuant to a "security personnel service contract" with Trizechahn, which contained an indemnification provision, the defendant Summit Security Services (hereinafter Summit) provided certain security services at the building. One of those services was monitoring access to the building's loading dock.
In addition, pursuant to a contract with Trizechahn, the defendant American Building Maintenance, Inc., provided certain cleaning services at the building. One of those services was disposing of tenants' garbage, via a trash compactor connected to the loading dock.
On March 10, 2005, the plaintiff, who worked at a restaurant located inside of the building, attempted to use the trash compactor to dispose of garbage. As he was doing so, he tripped and fell into the compactor. He allegedly sustained certain injuries as a result of the accident.
The principle of common-law, or implied, indemnification permits a party who has been compelled to pay for the wrong of another to recover from the wrongdoer the damages the party paid to the injured party (see Bellefleur v Newark Beth Israel Med. Ctr., 66 AD3d 807, 808). If, in fact, an injury can be attributed solely to the negligent performance or nonperformance of an act solely within the province of a contractor engaged by a landowner, the contractor may be held liable to the landowner for common-law indemnification (id. at 808; see Curreri v Heritage Prop. Inv. Trust, Inc., 48 AD3d 505, 507).
Summit, which submitted evidence showing, among other things, that it had no duty to monitor access to the trash compactor or garbage disposal activities at the trash compactor, established its prima facie entitlement to judgment as a matter of law dismissing Trizechahn's cross claim against it for common-law indemnification (see Guerra v St. Catherine of Sienna, 79 AD3d 808, 809; Curreri v Heritage Prop. Inv. Trust, Inc., 48 AD3d at 507). In opposition, Trizechahn failed to raise a triable issue of fact (see Guerra v St. Catherine of Sienna, 79 AD3d at 809). Accordingly, the Supreme Court properly granted that branch of Summit's motion which was for summary judgment dismissing Trizechahn's cross claim against it for common-law indemnification.
In addition, Summit established its prima facie entitlement to judgment as a matter of law dismissing Trizechahn's cross claim against it for contractual indemnification, by establishing, prima facie, that it did not breach the security personnel service contract "by failing to perform one or more of the services for which" it was "retained" (Aberman v Retail Prop. Trust, 92 AD3d 703, 704; see Peycke v Newport Media Acquisition II, Inc., 17 AD3d 338, 339; Baratta v Home Depot USA, 303 AD2d 434, 435). In opposition, Trizechahn failed to raise a triable issue of fact (see Alvarez v Prospect Hosp., 68 NY2d 320, 324). Accordingly, the Supreme Court properly granted that branch of Summit's motion which was for summary judgment dismissing Trizechahn's cross claim against it for contractual indemnification.
Arrendal v Trizechahn Corporation
Goldberg Segalla, Mineola, N.Y. (Annmarie Giblin and Brendan
T. Fitzpatrick of counsel), for second third-party defendant/third
Zaremba Brownell & Brown PLLC, New York, N.Y. (Richard
J. Brownell and Brian C. Axt of
counsel), for third third-party defendants-
Lawrence, Worden, Rainis & Bard, P.C., Melville, N.Y.
(Roger B. Lawrence of counsel), for
defendant third-party plaintiff/second third-
DECISION & ORDER
In an action to recover damages for personal injuries, the second third-party defendant/third third-party plaintiff, Subway Real Estate Corp., appeals, as limited by its notice of appeal and brief, from so much of an order of the Supreme Court, Kings County (Kramer, J.), dated November 15, 2010, as denied that branch of its cross motion which was for summary judgment dismissing the second cause of action in the second third-party complaint, which was for contractual indemnification, and the third third-party defendants, Kashif D. Creary and Daisy's Subway, Inc., T/A Subway, separately appeal, as limited by their notice of appeal and brief, from so much of the same order as denied that branch of their motion which was for summary judgment dismissing the second cause of action in the third third-party complaint, which was for contractual indemnification.
ORDERED that the order is reversed insofar as appealed from, on the law, with one bill of costs to Subway Real Estate Corp. payable by Trizechahn One NY Plaza, LLC, and one bill of costs to Kashif D. Creary and Daisy's Subway, Inc., T/A Subway, payable by Subway Real Estate Corp., that branch of the cross motion of Subway Real Estate Corp., which was for summary judgment dismissing the second cause of action in the second third-party complaint, which was for contractual indemnification, is granted, and that branch of the motion of Kashif D. Creary and Daisy's Subway, Inc., T/A Subway, which was for summary judgment dismissing the second cause of action in the third third-party complaint, which was for contractual indemnification, is granted.
Trizechahn One NY Plaza, LLC, sued herein in the main action as Trizechahn Corporation (hereinafter Trizechahn), owned a commercial building in Manhattan. Pursuant to a lease with Trizechahn, the second third-party defendant/third third-party plaintiff, Subway Real Estate Corp. (hereinafter Subway Real Estate), leased certain premises (hereinafter the premises) within the building. Pursuant to a sublease with Subway Real Estate, the third third-party defendant Kashif D. Creary, who owned the third third-party defendant Daisy's Subway, Inc., T/A Subway (hereinafter together Daisy's Subway), subleased the premises.
On March 10, 2005, the plaintiff, who was employed by Daisy's Subway, attempted to dispose of garbage via the building's trash compactor. The trash compactor was located outside of the premises, at the building's loading dock. The plaintiff described the area in which the trash compactor was located as "dark." As he was disposing of the garbage, he tripped over what he described as a "metal bar," and fell into the trash compactor. He allegedly sustained certain injuries as a result of the accident.
The plaintiff commenced this personal injury action against Trizechahn and others. He alleged, among other things, that he was injured as a result of a dangerous or defective condition that Trizechahn either created, or had actual or constructive notice of.
In its answer, Trizechahn alleged, as an affirmative defense, that the plaintiff's injuries were caused in whole or in part by his own negligence. According to Trizechahn, the plaintiff was negligent in, among other things, attempting to use the trash compactor, and failing to see the metal bar.
After interposing its answer, Trizechahn commenced a third-party action against Subway Real Estate, seeking, inter alia, indemnification pursuant to an indemnification provision in the lease. Subway Real Estate, in turn, commenced a third-party action against Daisy's Subway, seeking, inter alia, contractual indemnification. In this regard, the sublease effectively provided, in pertinent part, that Daisy's Subway would "perform and observe all of the obligations of" Subway Real Estate "under" the lease.
The lease's indemnification provision obligated Subway Real Estate to indemnify Trizechahn for, among other things, losses caused by the "negligence" of an agent or licensee of
Subway Real Estate, which the plaintiff allegedly was. Trizechahn argues that it is entitled to be indemnified by Subway Real Estate, under this particular clause of the indemnification provision. That clause also, in effect, obligated Daisy's Subway to indemnify Subway Real Estate for losses caused by the "negligence" of an employee of Daisy's Subway, which the plaintiff undisputedly was.
The term "negligence," as employed in the lease's indemnification provision, should not, as the Supreme Court essentially determined, be construed to mean the comparative negligence of an injured agent or licensee of Subway Real Estate, or the comparative negligence of an injured employee of Daisy's Subway. "Words in" a contractual indemnification provision "are to be construed to achieve the apparent purpose of the parties" (Hooper Assoc. v AGS Computers, 74 NY2d 487, 491; see Weissman v Sinorm Deli, 88 NY2d 437, 446). "The language of an indemnity provision should be construed so as to encompass only that loss and damage which reasonably appear to have been within the intent of the parties" (Niagara Frontier Transp. Auth. v Tri-Delta Constr. Corp., 107 AD2d 450, 453, affd 65 NY2d 1038). Considering that the comparative negligence of the injured agent or licensee of Subway Real Estate, allegedly the plaintiff herein, or the comparative negligence of the injured employee of Daisy's Subway, undisputedly the plaintiff herein, would actually reduce loss and damages, if any, attributable to Trizechahn (see CPLR 1411), it does not reasonably appear that the parties intended that the clause of the lease's indemnification provision dealing with an agent's, employee's or licensee's negligence would be triggered in the event of a finding of such comparative fault. Rather, it reasonably appears that the parties intended that this clause of the indemnification provision would be triggered in the event of a finding of negligence of an agent or licensee of Subway Real Estate, or negligence of an employee of Daisy's Subway, in connection with a tort committed against a third party.
Daisy's Subway and Subway Real Estate thereby demonstrated their prima facie entitlement to summary judgment dismissing the causes of action against them for contractual indemnification (see Naclerio v C.R. Klewin, Inc., 293 AD2d 588). Since, in opposition, a triable issue of fact was not raised, the Supreme Court should have granted that branch of the motion of Daisy's Subway which was for summary judgment dismissing Subway Real Estate's cause of action against it for contractual indemnification, and should have granted that branch of Subway Real Estate's cross motion which was for summary judgment dismissing Trizechahn's cause of action against it for contractual indemnification.
SKELOS, J.P., DICKERSON, LEVENTHAL and ROMAN, JJ., concur.
Mallory v Allstate Insurance Company
Submitted by Norman H. Dachs, for appellant.
Submitted by Brian R. Rudy, for respondent.
The order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative.
Plaintiff sought compensation pursuant to her homeowner's insurance for fire damage. Defendant sought to raise three affirmative defenses based on plaintiff's alleged breach of the insurance policy. Under the facts of this case, the Appellate Division correctly determined that an insurer's failure to comply with 11 NYCRR 216.6 (c) in processing a claim does not preclude that insurer from relying upon a policy exclusion to disclaim coverage.
Beach v Touradji Capital Management, LP,
Defendants/counterclaim plaintiffs Touradji Capital Management, LP and Paul Touradji and counterclaim plaintiff Deeprock Venture Partners, LP appeal from the order of the Supreme Court, New York County (Richard B. Lowe III, J.), entered September 29, 2011, which denied their motion for review of the Special Referee's ruling and to obtain discovery of forensic reports.
O'Brien LLP, New York (Sean O'Brien and Sara A.
Welch of counsel), and
Gibbons, P.C., New York
(Elizabeth Ann Fitzwater of
counsel), for appellants.
Liddle & Robinson, L.L.P., New York (David I.
Greenberger, Jeffrey L.
Liddle, James R. Hubbard and
Jennifer Rodriguez of
counsel), for respondents.
At issue in this appeal is whether reports prepared by a computer forensic analyst retained by plaintiff's counsel in connection with a discovery demand by defendants for production of plaintiff's computers are privileged. The motion court held that the reports are privileged and that the privilege was not waived when the analyst read his reports to refresh his recollection prior to testifying. We reverse, and remand the matter to the motion court for an in camera inspection to determine what portions, if any, of the reports are privileged attorney work product, as the remaining portions are discoverable pursuant to CPLR 3101(d)(2).
Plaintiffs Gentry Beach and Robert Vollero were employed as portfolio managers by defendant-counterclaim plaintiff Touradji Capital Management LP (Touradji) from 2005 through 2008. After their departure, plaintiffs commenced this action seeking more than $50 million in compensation they claimed was owed to them. Defendants filed counterclaims against plaintiffs and their new business, Vollero Beach Capital Funds, including a claim that plaintiffs had stolen its proprietary information in order to form their new venture, which directly competes with defendants.
During discovery, in response to a demand by defendants, Vollero produced a CD containing electronic files related to his work at Touradji. Defendants sought to obtain Vollero's personal laptop computers for a forensic examination, believing they contained stolen proprietary information. The Special Master denied that request, instead ordering Vollero to be deposed concerning the electronic files he had produced. At deposition, Vollero testified that he believed the files he had produced on the CD had been transferred from his personal Sony Vaio computer. He also testified that he owned an IBM Thinkpad, but did not recall putting any Touradji data on that computer. In response to this testimony, Touradji requested that it be permitted to examine both of the personal computers, or that the computers be analyzed by a third-party forensic examiner. Vollero did not comply with that request, but his counsel arranged for a forensic examination of the computers, and Touradji identified specific areas of inquiry for the examiner.
The forensic computer analyst retained by Vollero's counsel performed an examination which revealed that none of the electronic files produced by Vollero had been located on the Sony Vaio, but instead had been on the IBM Thinkpad. Additionally, the forensic analyst identified hundreds of deleted files related to Touradji on the IBM Thinkpad and restored them. He also found other files on both the Sony Vaio and the IBM Thinkpad that were responsive to Touradji's discovery demands. Those files were produced to Touradji. A subsequent application by defendants for an order compelling Vollero to turn over the two computers to their own vendor for inspection and analysis was denied; instead the Special Referee ordered a four-hour deposition of the forensic analyst.
The forensic analyst testified about the searches, software, and methods he used to examine the computers, although he could not recall all the specifics of his findings. Touradji's counsel asked the forensic analyst whether he had prepared a "written report" of his findings concerning the Vollero computers. Plaintiffs' counsel objected to the question on the grounds of privilege. The Special Referee permitted the question to be asked, as it simply called for a yes or no answer, and the forensic analyst responded, "yes." Touradji's counsel then asked the forensic analyst if he had reviewed the reports prior to his deposition and the analyst replied that he had reviewed his reports. Touradji made an application to the Referee seeking production of those reports, asserting that the reports were not privileged, and that even if they were, the privilege was waived when the forensic analyst used the reports to refresh his recollection prior to his deposition. The Referee denied the application, noting that the reports were privileged or material prepared for litigation and not subject to discovery.
In moving to review the Referee's ruling and obtain discovery of the forensic analyst's reports, Touradji argued that this Court's decision in Herrmann v General Tile & Rubber Co. (79 AD2d 955 ), held that once a witness has reviewed a document to refresh his recollection for a deposition, the adverse party is entitled to it, even if it is otherwise privileged. Plaintiffs opposed the motion, arguing that although the Herrmann case seemed to direct release of the report, Herrmann is not followed by the other Departments. The motion court held that the reports are privileged and denied the motion.
The work product of an attorney is privileged, and that privilege "extends to experts retained as consultants to assist in analyzing or preparing the case . . . (Hudson Ins. Co. v Oppenheim, 72 AD3d 489 ). However,
"that doctrine affords protection only to facts and observations disclosed by the attorney. Thus, it is the information and observations of the attorney that are conveyed to the expert which may thus be subject to trial exclusion. The work product doctrine does not operate to insulate other disclosed information from public exposure" (People v Edney, 39 NY2d 620, 625 ; see also Central Buffalo Project Corp. v Rainbow Salads, Inc., 140 AD2d 943  [the concept of attorney work product is narrowly construed and "embraces interviews, statements, memoranda, correspondence, briefs, mental impressions, and personal beliefs' that were held, prepared or conducted by the attorney"]; Zimmerman v Nassau Hospital, 76 AD2d 921, 922  [only the information and observations disclosed by the attorney and conveyed to the expert[ ] are subject to exclusion"]).
In this case, the reports were prepared at the request of plaintiff's counsel in response to defendants' demand that they be permitted to examine plaintiff's computers. Instead of permitting defendants to conduct their own examination, plaintiff's counsel retained a forensic analyst to ostensibly perform the same search that would have been conducted by defendants if they had been given access to the computers. The only portion of the analyst's reports that could be attorney work product would be impressions, directions, etc., of counsel.
The court should have conducted an in camera review to ascertain whether any portion of the reports is attorney work product (see Hudson Ins. Co. v Oppenheim, 72 AD3d 489 , supra [court conducted in camera review of the withheld documents before concluding that they were privileged]). The information in the reports as to how the search was conducted, what was found, what was deleted, when it was deleted, etc., is material prepared for litigation, and defendants have demonstrated a substantial need for the reports and are unable to obtain the information by any other means (CPLR 3101[d]); see Drizin v Sprint Corp., 3 AD3d 388, 390 ). Additionally, the conditional privilege that attaches to material prepared for litigation is waived when used by a witness to refresh a recollection prior to testimony (see Merrill Lynch Realty Commercial Servs. v Rudin Mgt. Co., 94 AD2d 617 ; compare Maisch v Millard Fillmore Hosps., 278 AD2d 838 ).
To the extent that any portion of the reports prepared by the forensic analyst is attorney work product, the privilege protects the reports notwithstanding that the analyst reviewed the reports prior to his deposition (see generally Fernekes v Catskill Regional Med. Ctr., 75 AD3d 959, 961 ; Geffers v Canisteo Cent. School Dist. No. 463201, 105 AD2d 1062 ). While Herrmann (79 AD2d 955) has been cited for the contrary result, requiring production of a report on the ground that the attorney work product privilege has been waived by the witness's review of a work product document prior to testimony (see e.g. Crawford v Lahiri, 250 AD2d 722 ), the issue in Herrmann involved a tape recording of a witness interview that had been made by an insurance company, not by or for an attorney. Thus, it was material prepared for litigation, and whatever conditional privilege attached to the tape was waived when it was used to refresh the witness's recollection prior to testimony (see Rouse v County of Greene, 115 AD2d 162 , supra, [citing Herrmann, and holding that any conditional privilege that may have attached to a diary kept of medical treatment was waived when witness used diary to refresh recollection prior to testimony]; see also Merrill Lynch Realty Commercial Servs. v Rudin Mgt. Co., 94 AD2d 617 , supra [citing Herrmann and holding that any privilege for a chronology that had been kept was waived when used to prepare for deposition]). Because an inartful reference to attorney work product in Herrmann may indicate that the ruling in Herrmann applies to a waiver of attorney work product privilege, we clarify that the attorney work product privilege is not waived when a privileged document is used to refresh the recollection of a witness prior to testimony.
Accordingly, the order of the Supreme Court, New York County (Richard B. Lowe III, J.) entered September 29, 2011 which denied the motion by defendants and counterclaim plaintiffs for review of the Special Referee's ruling and to obtain discovery of forensic reports, unanimously reversed, on the law, with costs, the order vacated, and the matter remanded for an in camera
inspection of the reports to determine what portion, if any, are subject to privilege.