Dear Coverage Pointers Subscribers:
There are frightening things going on in the world. My hope is that our nation’s political adversaries can remember what is really important and work together for the common good. Such a simple concept. Enough said.
Greetings. Another road trip, this time to present at a “bad faith” conference. No rest for the wicked or weary.
Hey, come visit us on LinkedIn. We founded and maintain the New York Insurance Group there.
As we pass Labor Day, we can be certain that the courts will be gearing up for the first course of September Term decisions after the long summer hiatus. So again, this is a light issue and perhaps we can expect one more in two weeks, and then the rush will begin anew.
We have some big plans for this publication; stand by.
MDA’s Wings Over Wall Street – A special message from Larry Schiffer, Partner at Patton Boggs LLP:
MDA's Wings Over Wall Street, the Gala Benefit to fund ALS research founded by my late sister-in-law and my brother who was her 24/7 caregiver for nearly 5 years, will take place on 9/27 at Gotham Hall in NYC. It is also my birthday tomorrow. Consider making a donation to Wings for my birthday (why not!). ALS killed my sister-in-law, it killed my colleague Peter Demmerle, it killed our 2012 Spirit Award nominee Robert Amaro of Etro before he could attend Wings and feel the love and support, and kills 5,000 each year. We need your help. Please contact me or visit the Wings website to help.
Raffle tickets 6 for $100 round trip for two on Quantas to Australia – only 1500 will be sold – send me your check to MDA – Wings or contact the MDA at 212-682-5272
To donate any amount, attend the Gala event ($300 per admission), or make an auction donation, go to www.wingsoverwallstreet.org or contact me directly. Thank you for your anticipated support.
Larry
Sound Electronic Taps for the Converted
I have retired my Blackberry, moved to the iPhone to join my Ipad and will be picking up the newest iPhone as soon as it is available. I am a believer. Imagine how surprised I was when I accidentally hit the home button three times and the iPhone started talking to me. I do think that Siri is two-timing me.
Hurwitz & Fine to Present Trucking Seminar – September 27th
To promote trucking safety, minimize risks and teach drivers how to properly handle accidents when they do happen, the law firm of Hurwitz & Fine, P.C. is hosting a free seminar and luncheon on “Facing Trucking Accidents Head-On: Managing Catastrophic Risk” from 12 noon-3 p.m. on Thursday, September 27th at the Saturn Club on Delaware Avenue in Buffalo. The three hour seminar, ideal for trucking company CEOs, safety officers and risk managers, will focus on the prevention and management of trucking accidents and strategies for laying the groundwork for a solid litigation defense, including regulatory compliance, log books, record keeping, vehicle maintenance, risk management, cross border issues, development of an accident response plan and working with accident forensics.
The program is being taught by Hurwitz & Fine, P.C.’s 24-Hour Emergency Response Team which is headed by Michael F. Perley and includes Harry F. Mooney, Jody E. Briandi and David R. Adams. The team is regularly called upon to promptly investigate the causes of an accident, put forensic experts on the scene to preserve and analyze evidence and lay the foundation to mount the best possible defense. Their defense arsenal includes decades worth of relationships developed with engineers, investigators and accident reconstruction experts.
Also presenting at the seminar will be accident reconstructionists David Liske and Peter Scalia of Liske Consulting Group Forensic Professionals and transportation negligence attorney Tracy L. Brooks of the Canadian law firm of McCague Borlack. Free registration is available by contacting Hurwitz & Fine, P.C. at 716-849-8900. Seating is limited to the first 100 respondents.
For more information, contact Mike Perley at [email protected] or 716-849-8900
Peiper’s Putterings and Ponderings:
At least once a Summer, I am left scrambling for something to report about. So far this summer, I've been lucky. Although courts have been slow, every week I was able to find a few interesting decisions on third-party indemnity, civil practice tips and pointers, and even the occasional first party decision. Unfortunately, this issue is the dreaded zenith of the Summer Slowdown where we are plum out of anything to write on save an interesting decision out of the Second Department. To that end, we'd encourage you to take a look at Appellate Division's review of the need to establish a "special duty" before one can trigger liability arguments against a governmental agency. Otherwise, that's it folks.
Fortunately, with the coming of October, we will likewise have our fair share of decisions in the coming weeks and months. We'll catch up with you then. In the meantime, enjoy the last vestiges of Summer and... Go Bills!
Steven E. Peiper
[email protected]
Law School For Insurance Professionals – September 28th in Western NY:
The interest in this program has been significant. The brochure and registration information is now available on the New York State Bar website. The Buffalo program is scheduled for September 28th at the Holiday Inn in Amherst. Mike Perley and I will both be involved in those presentations.
If you’re distant from Buffalo, Albany and Syracuse have the program on Friday, September 21, the New York City presentation is Wednesday October 10 and the Melville, Long Island offering is the following day, October 11.
One Hundred Years Ago: Icehouse Wilson Born
So many readers tell me how much they enjoy the baseball stories. Who am I to deny you one this week?
George Peacock “Icehouse” Wilson, born September 14, 1912, is another of those baseball footnotes who had one major league at bat in his entire career, having come in as a pinch hitter for the Tigers back on May 31, 1934, in that team’s 11-3 loss to the Browns. Wilson did not get on base. A fabulous athlete, he had been a star halfback for St. Mary’s of California and played many years in the minors. He then worked for 34 years as a teacher and coach at Berkeley High School in Berkeley, California.
After graduating from high school, Wilson enrolled at St. Mary’s and starred in both football and baseball for the "Galloping Gaels.” During the 1930s, St. Mary's football coach, Slip Madigan (later inducted into the College Football Hall of Fame), was an active and colorful promoter of the exploits of his players. One of the tactics Madigan used to promote his players was by "bolstering their reputations with nicknames that promised to titillate the fans and writers in distant cities.” The nickname was reportedly given to Wilson because of "his coolness under competitive fire.”
The most important game of the year for St. Mary's "Galloping Gaels" football team was an annual rivalry game against Fordham, played each year at the Polo Grounds in New York. In 1933, Wilson was "heralded" by some as "the best ball-lugger on the west coast." When Wilson led St. Mary's to a win over Fordham in 1933, he was described by reporters as "the best halfback ever to play at the Polo Grounds."
When he was signed by the Tigers, the local paper indicated that Wilson has the makings of a major league sensation.
That “sensation” status never quite materialized but Icehouse had a terrific life, nonetheless. And, he did something that most of us haven’t; he batted in a major league game.
Happy Birthday Icehouse.
Audrey’s Angles:
The courts continue to issue decisions regarding the sufficiency of the insurer’s evidence on summary judgment. Many of the decisions we report on are in favor of the insurer as the plaintiff does not rebut the independent medical examination or peer review report. There is a healthy summary of those decisions this edition. There are also a few decisions regarding failure to comply with IME requests for your perusal. Finally, Arbitrator Benziger has a decision on communication between the parties during the verification process that is a worthwhile read for both sides. The import of the decision is that a provider who disagrees with the scope of a verification cannot simply ignore the request and file for arbitration. Rather, there is an obligation to communicate with the insurer on the objection to the scope of the request.
In addition, don’t forget about the DRI Annual Meeting from October 24-28 in New Orleans as well as DRI’s Insurance Law Committee’s Insurance Coverage and Practice Symposium on your calendar for December 5-7 in NYC. If you would like a brochure to register for either of these conferences please feel free to email me at [email protected].
Audrey
Best Lawyers Accolades
In our most recent issue, we reported on the Super Lawyers listings. We received word on Tuesday of our firm’s recognition in Best Lawyers in America. We were delighted to learn that 11 firm attorneys now listed on the Best Lawyers in America list. Inclusion on this highly exclusive list is considered a singular honor.
Robert P. Fine
Corporate Law
Health Care Law
Mergers & Acquisitions
Tax Law
Trusts & Estates
Lawrence C. Franco
Corporate Law
Tax Law
Trusts & Estates
Dan D. Kohane
Commercial Litigation
Insurance Law
Ann E. Evanko
Corporate Law
Employment Law
Harry F. Mooney
Civil Rights Law
Commercial Litigation
Product Liability Law
Professional Malpractice
Michael F. Perley
Litigation - Municipal
Personal Injury Litigation – Defendants
Edward C. Robinson*
Elder Law
Lawrence M. Ross
Corporate Law
Health Care Law
Tax Law
Roger L. Ross
Real Estate Law
Audrey A. Seeley*
Insurance Law
Paul J. Suozzi
Personal Injury Litigation – Defendants
(*) Lawyers who are listed for the first time in Best Lawyers
Lawyers Of The Year
Of those included in the list, two were listed the highest ranked of all attorneys in their field in WNY. Congratulations to Lawyers of the Year for 2013:
Harry F. Mooney – Professional Malpractice Law- Defendants
Dan D. Kohane – Insurance Law
The firm was also noted as a Top Listed Law Firm in Buffalo New York in Insurance Law and Litigation – Municipal as well as Civil Rights and Elder Law.
One Hundred Years Ago Today:
New York Times
September 14, 1912
IT WAS MRS. SZABO, GIBSON NOW ADMITS
His Story That Dead Woman
Was Not She False, He Says After Receiving Advice.
--
CONDUCTS HIS OWN CASE
--
And Interprets Law for the Judge
--
Wife Dines with Him in Jail
--
Examination Set for Sept. 24
Middletown, NY -- MIDDLETOWN. N. Y., Sept. 13.-Before Special County Judge Herbert B. Royce of Orange County, Burton W. Gibson, the New York lawyer accused of the murder of Mrs. Rosina Menschick Szabo at Greenwood Lake on July 16, calmly conducted his own case this morning. The prisoner looked rested after his night in jail, and he spoke quietly but distinctly, discussing the legal moves as if he were the defendant’s attorney and did not himself stand charged with murder in the first degree. He consented to District Attorney Rogers's request that the examination be put over until Sept. 24. At the end of the hearing he was taken downstairs to his cell, and later in the afternoon was taken In the Fire Department automobile to the jail at Goshen where he is now locked up ….
Editor’s Note: Mrs. Szabo met her death by strangulation while in a rowboat with her lawyer, Mr. Gibson. After two hung juries, the charges against Gibson were dismissed by the court. In a May 30, 1913 New York Times Article reporting on the second trials 11-1 hung jury, the foreman, William Wilkin complained that the lone holdout refused to take part in deliberations. Wilkin hoped that the prosecution would retry Gibson and Wilkin offered to help pay for the costs of the prosecution. The holdout juror indicated that the medical proof was too complicated and believed that Szabo may have drowned.
The day after the charges were dismissed, Gibson was indicted for grand larceny for stealing from the Szabo estate and was convicted and sentenced to five to ten years, was fined $6,500 (the amount of the theft) which, with interest, was in excess of $7000. In a September 20, 1970 article, the Middletown Sunday Record noted that probably the most exciting event that ever occurred in the Middletown City Courtroom was the arraignment on Sept. 13, 1912, of Burton W. Gibson, a New York lawyer accused to murdering a wealthy client.
Headlines for This Week’s Coverage Pointers, attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Insurer for Lessor/Owner May Pursue Subrogation Claim Against Non-Driver Lessee
- Under Illinois Law, De Facto Merger Had Not Taken Place so Asset of Insurance Was Not Transferred
MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
[email protected]
- Working “Light Duty” Is Fatal to 90/180-Day Claim
AUDREY’S ANGLES ON NO-FAULT
Audrey A. Seeley
aas@hurwitzfine.com
ARBITRATION
- Outstanding Verification Renders Claim not Ripe for Adjudication – Party Cannot Engage in Inaction Because It Believes Request Is Overbroad
LITIGATION
- Insurer Entitled to Partial Summary Judgment on Failure to Appear for Scheduled IMEs – Fact Third Party Issued Scheduling Letters no Excuse to Ignore Request
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Complaint Against County Fails Where There Is no Allegation of a Special Duty
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
- SMART Act (Proposed Revisions to Medicare Secondary Payer Act)
FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
[email protected]
- National Flood Insurance Program -- Scope of Flood Insurance Policy
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]
- Sufficient Investigation of Claim Established Under Oklahoma Law
MARC’S REMARKS
Marc A. Schulz
[email protected]
- Expert’s Failure to Render Opinion as to Percentage of Limitation Based on Measured Range of Motion Results in Denial of Summary Judgment Motion
- Failure to Submit Recent Findings of Range-of-Motion Limitations and Failure to Compare Said Limitation to What Is Considered Normal Results in Dismissal of Plaintiff’s Complaint
- Failure to Raise Lack of Notice in Denial Letter Constitutes Waiver and Cannot Later Be Asserted as Affirmative Defense
EARL’S PEARLS
Earl K. Cantwell
[email protected]
- Half a Roof is Better Than None
We wish those who celebrate, the happiest of New Years and to all, we hope and pray for peace.
See you soon.
Dan
Dan D. Kohane
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202
Phone: 716.849.8942
Fax: 716.855.0874
E-Mail: [email protected]
Website: www.hurwitzfine.com
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
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]
ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]
ASSISTANT EDITOR
Margo M. Lagueras
[email protected]
INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
[email protected]
Michael F. Perley
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Marc A. Schulz
Diane F. Bosse
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
[email protected]
Jody E. Briandi
Steven E. Peiper
NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Scott M. Duquin
Diane F. Bosse
Index to Special Columns
Kohane’s Coverage Corner
Margo’s Musings on “Serious Injury”
Audrey’s Angles on No Fault
Peiper on Property and Potpourri
Cassie’s Capital Connection
Fijal’s Federal Focus
Keeping the Faith with Jen’s Gems
Marc’s Remarks
Earl’s Pearls
Across Borders
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
09/11/12 New York Insurance Department v. New York Central Mutual
Appellate Division, First Department
Insurer for Lessor/Owner May Pursue Subrogation Claim Against Non-Driver Lessee
Kitaw leased a van from Thrifty Rental Car Finance Corp. Thrifty was insured by Reliance (now the New York State Liquidation Bureau as ancillary receiver). Kitaw also had a personal auto policy with New York Central. The Liquidation Bureau on behalf of Thrifty paid off claims from the accident, the vehicle having not been driven by Kitaw but by another.
The Appellate Division found that New York Central is obligated to provide coverage for Kitaw for liability arising from the subject accident based on the plain language of her policy, which provides coverage for liability for bodily injury arising from her "use of any auto". While Kitaw, as lessee of a vehicle owned by Thrifty, was also covered, pursuant to Vehicle and Traffic Law § 370(1)(b), by the policy Reliance issued to Thrifty, the anti-subrogation rule does not prevent Reliance, as Thrifty's subrogee, from seeking to recover from Kitaw any amounts above the limits of Kitaw's coverage under the Reliance policy that Reliance has paid in settlement of the underlying personal injury actions.
Editor’s Note: An odd decision. Surely, Reliance (the Liquidation Bureau) would be entitled to pursue a subrogation claim against the driver of the vehicle so long (or to the extent) that the driver was not an insured under its policy. We’re not quite sure about a subrogation claim against Kitaw, the non-driver, lessee. We sent counsel for the successful party an e-mail asking for clarification but, so far, so response.
09/11/12 International Flavors et al v. National Union Fire Insurance
Appellate Division, First Department
Under Illinois Law, De Facto Merger Had Not Taken Place so Asset of Insurance Was Not Transferred
If companies merge, legally or de facto, the insurance policies may transfer to the acquiring corporation and the policy may well cover pre-merger liabilities. In this case, under Illinois law, there was insufficient proof of a merger to convince the court that it had occurred. Accordingly, the insurance asset from the former corporation was not transferred to the successor.
Editor’s Note: For a recent discussion of a case involving a merger of two companies and the impact of a non-assignment clause, see the Greenhomes case discussed in our February 3, 2010 edition.
MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
[email protected]
09/04/12 Pakeman v. Karekezia
Appellate Division, First Department
Working “Light Duty” Is Fatal to 90/180-Day Claim
Defendants moved for summary judgment alleging that plaintiff who was 32-years old and obese, did not sustain serious injury to the cervical, thoracic and lumbar spine and right and left knee under the permanent consequential and/or significant limitation of use categories, and additionally, that he did not sustain injury under the 90/180-day category. In support, defendants submitted reports from a neurologist finding normal range of motion, and from a radiologist who opined that the conditions revealed in MRIs were degenerative.
In opposition, plaintiff raised a triable issue of fact through the submission of reports from his orthopedic surgeon, who performed arthroscopic surgery on the left knee, and found that even after surgery, permanent, related conditions persisted which did not arise until after the accident. As this evidence raised a triable issue with respect to the knee, it was not necessary for the court to address plaintiff’s proof with respect to the other injuries and the complaint was reinstated as to the permanent consequential and/or significant limitation of use categories.
However, the dismissal of plaintiff’s 90/180-day claim was affirmed as plaintiff testified at his deposition that he did not miss any work as his duties were modified and working “light duty” defeats a 90/180-day claim.
AUDREY’S ANGLES ON NO-FAULT
Audrey A. Seeley
aas@hurwitzfine.com
ARBITRATION
9/10/12 Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Outstanding Verification Renders Claim not Ripe for Adjudication – Party Cannot Engage in Inaction Because It Believes Request Is Overbroad
An issue presented in this arbitration was whether the Applicant complied or responded to the insurer’s verification requests. The Applicant sought reimbursement for an interferential muscle stimulator and LSO brace dispensed to the assignor for injuries allegedly sustained in a June 17, 2011, motor vehicle accident. The insurer requested verification for some of the bills at issue in the arbitration and claimed that the arbitration was premature.
The Applicant alleged that the verification request contained boilerplate language and was overly burdensome. The verification request sought 16 items from Applicant and also a demand for an EUO. The assigned arbitrator determined, as a finding of fact, that the verification request sought some information necessary to the process, and other information that was overly burdensome. Specifically, the request for account payable ledgers, correspondence, and copies of all equipment instructions may not be necessary to assist in prompt resolution of the claims.
Yet, the Applicant did nothing to respond to the verification request. The assigned arbitrator further determined that a party cannot simply ignore a verification request, even if part of it is irrelevant or overly burdensome. Rather, the parties are governed by good faith, common sense and communication, not inaction. Thus, when a party deems verification requests defective or unreasonable, it should convey that information to the other party and state the basis for non-compliance. Here, the Applicant did not respond to the outstanding verification and therefore, the claim was not ripe for determination.
LITIGATION
This issue there were a number of cases where the Court held that the insurer’s motion or cross-motion for summary judgment should have been granted on the basis of lack of medical necessity. This was because the insurers established issuance of timely denials and annexed the affirmed independent medical examinations or peer review reports, and the plaintiffs failed to rebut. The following are the citations to those reported cases:
08/31/12 Five S & A Rehab PT, PC a/a/o Ormella Thakoordial v. Praetorian Ins. Co.
Appellate Term, Second Department
08/31/12 Dr. Todd Goldman, DC, PC v. Kemper Cas. Ins. Co.
Appellate Term, Second Department
08/31/12 Five Boro Psychological Services, PC a/a/o Marc Louis v. GEICO Gen. Ins. Co.
Appellate Term, Second Department
08/31/12 Axis Chiro., PLLC v. GEICO Gen. Ins. Co.
Appellate Term, Second Department
08/31/12 Atlantic Radiology Imaging, PC v. NY Cent. Mut. Fire Ins. Co.
Appellate Term, Second Department
Insurer Entitled to Summary Judgment on Failure to Appear for Scheduled IMEs
The insurer’s summary judgment motion should have been granted as the insurer established that the assignor violated a policy condition to attend scheduled IMEs. The insurer established that the IME scheduling letters were timely issued in accordance with the company’s standard office practices and procedure. Further, the insurer submitted affirmations from the healthcare professionals that were to perform the IMEs regarding the assignor’s failure to attend the scheduled IMEs. Likewise, the insurer established that the denial of claim was timely issued.
08/31/12 W.H.O. Acupuncture, PC v. Travelers Home & Mar. Ins. Co.
Appellate Term, Second Department
Insurer Entitled to Partial Summary Judgment on Failure to Appear for Scheduled IMEs – Fact Third Party Issued Scheduling Letters no Excuse to Ignore Request
The insurer’s summary judgment motion should have been partially granted as the insurer established that the assignor violated a policy condition to attend scheduled IMEs. The insurer established that the IME scheduling letters were timely issued in accordance with the third-party company’s standard office practices and procedure. The court rejected the plaintiff’s contention that the assignor was not obligated to honor the IME notice since it came from a third-party company because the IME scheduling letter clearly apprised the assignor that they were being sent on behalf of the insurer.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
09/12/12 Rozell v Milby
Appellate Division, Second Department
Complaint Against County Fails Where There Is no Allegation of a Special Duty
Decedent’s Estate commenced the instant action against, among others, the County of Dutchess. The matter arose as a result of a one car accident that occurred on the Salt Point Turnpike. Prior to the incident involving decedent, it was learned that an earlier one car accident had occurred at the exact location two hours earlier. The Estate alleged that the County of Dutchess was responsible as a result of its negligent design, construction, maintenance and/or repair of the roadway and because it failed to adequately warn motorists of the hazardous condition by not deploying signs, flairs, or emergency personnel to the location.
The County moved to dismiss on the basis that it had no duty to warn anyone, and that it did not own, control or maintain the roadway. Rather, the road was owned by New York State, and thus fell under the New York State Department of Transportation’s jurisdiction (not the County). With regard to the negligent maintenance/design claim, the Court denied the County’s motion. While it was established that the County had no ownership, maintenance or control responsibilities, the County appears to have failed to address whether it designed or constructed the roadway. As all allegations are assumed true for purposes of a motion to dismiss, the County’s decision to not address these issues was fatal to its application.
With respect to the failure to warn claim, the Court granted the County’s motion to dismiss. In so holding, the Court noted that the crux of the Estate’s claim was that the County failed to adequately perform a government function. Under such circumstances, the Court noted that plaintiff was required to plead a special duty was owed by the County. Where no such special duty was alleged, and there was no dispute over whether a special duty existed, the County’s motion to dismiss was granted.
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
SMART Act (Proposed Revisions to Medicare Secondary Payer Act)
Proposed changes to the MSPA passes the Energy and Commerce Subcommittee on Health
As a result Section 111 of the Medicare Secondary Payer Act (“MSPA”), liability insurance companies and others are now required to report liability settlements involving Medicare beneficiaries to CMS. Providing this information to CMS has led to increased scrutiny of those settlements due to concerns about properly taking into consideration Medicare’s rights to some (or all) of the settlement amount. Part of that concern is ensuring that any conditional payments made by Medicare are reimbursed to Medicare even though Medicare will not/cannot provide a conditional payment amount prior to settlement. As you know, this causes numerous and sometimes substantial delays in the settlement of a case involving a Medicare beneficiary.
The SMART Act:
- Requires Medicare to provide the conditional payment amount due within 65 days of a request along with an appeal right if it is believed Medicare was incorrect.
- Will set a threshold limit below which the MSP will not apply because the cost of recovery exceeds the amount that will be recovered.
- Would apply the Section 111 $1,000 per day per claim penalties when a claim was improperly or not reported would be amended to be an up to a $1000 per day per claim penalty.
- Would also direct the Department of Health and Human Services (HHS) to establish safe harbors that will provide companies with protection for good faith compliance efforts.
- Would direct Medicare to identify an alternative method of identifying individuals (such as the last four digits of an SSN) for the purpose of MSP reporting.
- Will clarify that the three-year MSP statute of limitations (measured from the date of reporting) covers all MSP claims.
This week the SMART Act was passed by the Energy and Commerce Subcommittee on Health in the House. The problems with Medicare recovery and the Section 111 reporting requirements were the subject of extensive hearings before the Energy and Commerce Subcommittee on Health last summer and were a driving force in aiding in the passage of this Legislation through the Subcommittee per the Acts sponsor, Congressman Tim Murphy. The SMART Act will now go to the full Committee for voting.
FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
[email protected]
09/04/12 McGair v. American Bankers Ins. Co. of Florida
First Circuit Court of Appeals – National Flood Insurance Program
Scope of Flood Insurance Policy
In July 2006, plaintiffs purchased a flood insurance policy from American Bankers Insurance Company of Florida [“American”]. The policy was issued pursuant to a federal program under which private insurers issue and administer standardized flood insurance policies and all claims are paid by the government.
After a 2010 flood damaged their home in Warwick, Rhode Island, including the contents of their basement, the plaintiffs filed a claim. American then disallowed much of the amount claimed, asserting that the contents of the McGairs’ basement were not covered by their policy. Thereafter, the McGairs brought suit in federal court, arguing that the Declarations Page of their policy created an ambiguity as to the scope of coverage and that, under federal common law and general insurance law principles, this ambiguity should be resolved in their favor. The district court disagreed and for the following reasons the First Circuit Court of Appeals [“Court”] affirmed.
The McGairs’ flood insurance policy was written pursuant to the National Flood Insurance Program [“NFIP”], a federal program created by the National Flood Insurance Act of 1968 [“NFIA”], 42 U.S.C. §§ 4001-4129. The NFIP is administered by the Federal Emergency Management Agency [“FEMA”], which is responsible for paying claims that exceed the revenue generated by premiums paid under policies issued pursuant to the program.
In 1983, FEMA created a Write-Your-Own Program [“WYOP”], permitting private insurance companies to issue policies as part of the NFIP. As part of the Write-Your-Own program, FEMA promulgated regulations prescribing the terms of the Standard Flood Insurance Policy [“SFIP”] to be used by WYO companies. FEMA provides a standard text for all NFIP policies and forbids WYOP companies from making changes; FEMA”s interpretations of the policy bind all WYOP participants; FEMA decides what rates may be charged; and, all premiums are remitted on to FEMA; if WYOP companies pay out a claim they get reimbursed by FEMA.
There were two limitations on coverage provided by the SFIP which were relevant. Article III(A)(8) of the SFIP states that coverage located in the basement of a dwelling is limited, and it identifies seventeen categories of fixtures covered under the policy. Article III(B)(3) similarly limits coverage for personal property in a basement and identifies only three covered categories of personal property (all major appliances).
The policy purchased by plaintiffs was a Preferred Risk Policy incorporating the SFIP. The policy provides that “flood insurance is provided under the terms of the National Flood Insurance Act of 1968…” Further providing that the policy “cannot be changed can nor any of its provisions be waived without the express written consent of the Federal Insurance Administrator.
In addition, the McGairs’ policy also included a Declarations Page including a Rating Information section which indicated that the McGairs have a finished basement and states that the contents of their home are located in the “basement and above”.
The primary disagreement between the parties concerned the scope of the policy’s coverage of the contents of the McGairs’ basement. The McGairs argued that based on the Declarations Page, the entire contents of their basement were covered by their policy without limitation. American Bankers disagreed relying on the limitations contained in the SFIP which disallowed the majority of the McGairs’ claim.
The Court held that there could be no ambiguity between the SFIP and the McGairs’ Declarations Page because the terms of the SFIP control. The regulations governing the SFIP provide that “no provision of the SFIP shall be altered, varied, or waived other than by the express written consent of the Federal Insurance Administrator. Therefore, as a matter of law, any discrepancy between the SFIP and an accompanying Declarations Page must be resolved in favor of the SFIP, unless the Federal Insurance Administrator has given express written consent for the alterations to the policy. No showing was made by the McGairs that such consent was ever given. The Court also determined that if it were acknowledged that the Declarations Page creates some ambiguity as to the scope of coverage, general insurance law principles applicable to the interpretation of ambiguities must give way in light of the prescription by federal regulation of the terms of the SFIP. Because American had no authority to alter the terms of the SFIP through the Declarations Page, there is no need to resolve any supposed inconsistency between the SFIP and Declarations Page. The terms of the SFIP control.
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]
09/05/12 Bannister v. State Farm Mutual Auto. Ins. Co.
United States Court of Appeals, Tenth Circuit
Sufficient Investigation of Claim Established Under Oklahoma Law
Plaintiff was operating his motorcycle on an interstate highway. The driver of the car in front of plaintiff was cut off by another car, causing the car in front of the plaintiff to brake suddenly. Plaintiff, to avoid hitting the car in front of him, deliberately fell off his motorcycle and sustained injuries when he collided with the highway barrier at a high rate of speed. Plaintiff’s wife notified State Farm of the accident soon after the occurrence and claimed entitlement to uninsured motorist benefits. State Farm investigated the claim by meeting with plaintiff and examining his motorcycle. It also obtained a copy of the policy report. Ultimately, State Farm disclaimed coverage after determining that plaintiff was operating his motorcycle under the influence of alcohol and following the motorist in front of him too closely. Plaintiff, in turn, filed a bad faith claim against State Farm.
The district court made a finding of bad faith on State Farm’s part. The Tenth Circuit reversed the decision holding that State Farm relied on a legitimate reason in disputing plaintiff’s claim and conducted an adequate investigation of the claim. The Court noted that for plaintiff to have prevailed he would have to have shown that material facts were overlooked or that a more thorough investigation would have produced relevant information. Such a situation was not proven here. Notably, the court also mentioned that simply because State Farm did not hunt down an unknown witness or take a statement from the insured did not mean that it did not investigate the claim.
Marc A. Schulz
[email protected]
08/31/12 Yakobson v Schubert
Supreme Court, New York County
Expert’s Failure to Render Opinion as to Percentage of Limitation Based on Measured Range of Motion Results in Denial of Summary Judgment Motion
After a four-vehicle accident, Yakobson filed suit against Defendants alleging serious injuries under the 90/180 category of Ins. Law § 5102(d). Yakobson’s BOP alleged, among other injuries, right knee-joint effusion, C5-C6 broad based posterior disc protrusion, loss of lumbar lordosis above L5, L5 left radiculopathy, cervical sprain/strain, hip pain, and wrist pain. In his deposition, Yakobson stated he missed no time from work as a result of the accident.
Defendants filed a motion for summary judgment by submitting affirmed reports of an orthopedic surgeon and a radiologist. After using a goniometer, the orthopedic surgeon found normal range of motion in Yakobson’s cervical spine, right wrist, and right hip. The radiologist stated the MRI of Yakobson’s cervical spine showed mild bulging C5-C6 disc, appeared degenerative, but otherwise normal. The orthopedic surgeon also found normal ranges of motion for Yakobson’s lumbosacral spinal injuries. As a result, the court held Defendants met their prima facie burden through expert medical reports which found normal ranges of motion and no limitations regarding Yakobson’s alleged cervical spinal, wrist and hip injuries.
As to Yakobson’s right knee, the orthopedic surgeon found range of motion 0-130 (0-140 is normal), no tenderness, ligamentous instability, or atrophy. The radiologist’s impression of the MRI of Yakobson’s right knee was normal. Defendants cited to a case involving a 15% limitation of the cervical spine (no case involved 10%) in support of their motion demonstrating that a minor, mild or significant limitation of use should be classified as insignificant for purposes of § 5102(d). The court, however, held Defendants did not meet their burden regarding Yakobson’s right knee because the orthopedic surgeon did not render an opinion as to a percentage of limitation based on the measured range of motion. Although the Court granted Defendants motion regarding Yakobson’s serious injury under 90/180 day, the Court would not dismiss Yakobson’s Complaint because Defendants failed to meet the prima facie burden of serious injury concerning Yakobson’s right knee.
08/31/12 James v Williams
Supreme Court, Suffolk County
Failure to Submit Recent Findings of Range-of-Motion Limitations and Failure to Compare Said Limitation to What Is Considered Normal Results in Dismissal of Plaintiff’s Complaint
Following a motor vehicle accident, Plaintiff allegedly sustained serious injuries including, herniated disc at L5-S1 causing mass effect on right and left S-1 nerve roots, lumbar radiculopathy requiring multiple epidural injections at L5-S1, lumbosacral spine sprain, aggravation and/or exacerbation of spondylolisthesis L5-S1, cervical spine sprain, aggravation and/or exacerbation of degenerative changes in cervical spine, and left wrist sprain requiring wrist immobilization. Plaintiff alleged she was confined to bed for 2 days and home for 5 days.
Defendants moved for summary judgment by submitting, among other papers, affirmed reports of Defendant’s examining orthopedic surgeon and radiologist. The orthopedist found no tenderness of Plaintiff’s cervical spine, and all range of motion tests normal. Regarding Plaintiff’s left wrist, the orthopedist found no tenderness, swelling, or instability and all range-of-motion tests were normal. The orthopedist diagnosed Plaintiff with cervical strain with radiculitis, resolved; lumbosacral strain with radiculitis, resolved; and left wrist contusion, resolved. Further, the orthopedist determined Plaintiff was capable of full-time, full-duty work with no restrictions. Similarly, the radiologist reviewed an MRI and concluded there were no findings that could be attributed to the accident with a reasonable degree of medical certainty. Therefore, the Court held Defendants met their prima facie burden demonstrating, through affirmed medical reports, that Plaintiff did not sustain a serious injury under § 5102(d), thus shifting the burden to Plaintiff to raise an issue of fact.
Plaintiff submitted her own affidavit, a report from her pain management physician, and unaffirmed reports from her doctors in her treating physician’s office. Plaintiff’s pain management physician failed to quantify, on the basis of objective testing, the limitations he found in Plaintiff’s back, which he described as “range of motion shows diminished flexion, diminished extension and diminished lateral bending.” Plaintiff’s pain management physician also found “modified straight leg raise to 70 degrees” but failed to compare said limitation to what would be considered normal. The Court would not consider Plaintiff’s unaffirmed medical reports, even though they noted significant limitations in range-of-motion of Plaintiff’s lumbar spine, because the reports were dated two months after the accident. The Court held “in the absence of recent findings of range-of-motion limitations, Plaintiff failed to meet her burden.” Therefore, the Court granted Defendants’ motion and dismissed Plaintiff’s complaint.
09/05/12 Cholshung Realty Corp. v NY Marine Inc. Co. and Markel Ins. Co.
Supreme Court, New York County
Failure to Raise Lack of Notice in Denial Letter Constitutes Waiver and Cannot Later Be Asserted as Affirmative Defense
After filing a declaratory judgment action, Plaintiff moved for summary judgment against Markel Ins. Co. (“Markel”), for a declaration that Markel had a duty to defend and indemnify Plaintiff in the underlying action in which it was alleged that Plaintiff was the owner of a building leased to a restaurant where a firefighter was injured fighting a fire that allegedly originated in restaurant’s kitchen. The fire sent smoke and flames to other parts of the building. The lease did not extend to any part of building above the street-level restaurant although a rider allowed the restaurant to use some basement space. Pursuant to the lease, the restaurant procured insurance from Markel naming Plaintiff as an additional insured, and a liability policy from NY Marine & General Ins. Co. (“NYM”). When Plaintiff was served in the underlying action, its general liability carrier (“Seneca”) sought defense and indemnification from NYM alone. Instead, Markel answered, asserted it was the restaurant’s general liability carrier, and denied defense and indemnification to Plaintiff asserting that its initial investigation revealed several building code violations, some of which appeared to be the sole responsibility of the building owner.
Plaintiff thereafter commenced this action arguing it was an additional insured under the NYM and Markel policies. According to the Court, the issue was not Plaintiff’s status under the Markel policy, but rather the factual reasons that may have disqualified Plaintiff from coverage as Markel claimed Plaintiff failed to comply with the notice provisions of the policy and that the firefighter’s injury occurred outside the restaurant’s insured premise. Markel argued that the first time it received notice of the underlying action from Plaintiff was after service of Plaintiff’s summons and complaint, years after the underlying accident. In opposition, Plaintiff argued that Markel waived an objection based on late notice when it declined coverage solely because of alleged building code violations. The Court reiterated that “a ground not raised in the letter of disclaimer may not later be asserted as an affirmative defense.” Markel asserted that it did not state that the notice it received was improper because it did not receive any notice.
The Court noted that Markel dismissed Seneca’s letter describing an unknown injury to a firefighter which occurred while fighting a fire that originated in the kitchen area of the subject restaurant. It is well settled that an insurer’s duty to defend is broader than its duty to indemnify and that the duty to defend arises whenever the allegations in the complaint fall within the risk covered by the policy. The alleged negligence in the underlying action caused harm beyond the restaurant’s premise and, as the restaurant’s insurer, Markel had an obligation to defend Plaintiff, the additional insured. The Court determined that “the physical boundaries of the restaurant are not legal boundaries of Markel’s policy” because just as the fire could not be limited only to premises insured by Markel, the possible liability arising from the peril also could not be so divided. The Court held that as there was credible evidence the fire arose out of the ownership, maintenance or use of the restaurant premises, Markel had a duty to defend Plaintiff in the underlying action.
EARL’S PEARLS
Earl K. Cantwell
[email protected]
HALF A ROOF IS BETTER THAN NONE
At times, language in insurance policies needs to be evaluated and dissected, but many times it is a complicated fact pattern that causes coverage analysis and issues. The recent case of Davis v. American States Insurance Co., 2012 WL 2004866 [Dist Ct Wash, June 5, 2012] applied a policy definition of “collapse” to a roof that was only partially collapsed.
The commercial building was located in Tacoma, Washington, owned by the Davis’, and insured by American States. A rainstorm caused part of the building roof to cave in. The insured’s engineer opined that the entire roof needed to be replaced because of damage to the trusses. However, American States’ engineer concluded that the trusses had been damaged, at least in part, by long term wear and tear. American States agreed to pay only for damage to the collapsed part of the roof and would not pay for damage to the trusses in the non-collapsed section. The Federal Court held that this coverage denial was reasonable based upon the policy definition of “collapse”.
The insureds sued American States for breach of contract, bad faith, and violation of Washington consumer and insurance protection laws. American States filed a motion for summary judgment which the Court granted. The Court ruled that the policy language unambiguously excluded coverage for the intact portion of the roof.
The policy defined collapse as an “abrupt falling down or caving in of a building or any part of a building”, and further specified that that part of a building in danger of falling down was not considered collapsed. The Court ruled that the non-collapsed portion of the roof did not abruptly fall down or cave in. Rather, it was in place and therefore excluded even if plaintiffs alleged there was “danger” of its falling down.
In a related part of the decision, the Court found that American States’ decision to follow its engineer’s findings and not those of the insured’s engineer did not constitute “bad faith”. Among other reasons, the recommendation of the plaintiffs’ engineer that roof trusses had to be replaced did not mean or help prove that they were covered as a “collapse” under the policy language.
The Court also held that American States had not improperly diminished payment for covered repairs based upon bids and estimates received, and did not violate any State of Washington consumer protection and insurance regulatory statutes.
The lesson from this case is that, while policy language may be clear and unambiguous, the partial or incomplete nature of a loss may result in conflict since part of a loss may be covered under the policy language, but other parts of the loss, certain damages, or some types of loss events may not be covered or excluded.
ACROSS BORDERS
Courtesy of the FDCC Website
www.thefederation.org
09/11/12 Garcia v. City of Bridgeport
Connecticut Supreme Court
Municipal Self-Insurers’ UM Coverage Limited to Statutory Minimum
The City of Bridgeport is a self-insured municipality. Garcia was an employee of Bridgeport who was operating a City vehicle when he was impacted by an uninsured motorist. The statutory minimum limits in Connecticut for UM coverage are $20,000 per person/$40,000 per occurrence. Since the City of Bridgeport was self-insured, Garcia argued the statutory minimum limits did not apply and the UM coverage was unlimited. The Supreme Court of Connecticut disagreed and held the UM coverage limits for a Connecticut municipality which is self-insured are limited to the statutory minimum.
Submitted by: Peter S. Doody (Higgs, Fletcher & Mack)
09/07/12Friedberg v. Chubb & Son, Inc
Eighth Circuit Court of Appeals
When It Rains, It Pours: Eighth Circuit Upholds District Court’s Interpretation of Insurance Policy’s Faulty-Construction Exclusion In Favor of Insurer
The Friedbergs owned a home which was insured under Chubb’s “Masterpiece” policy. The Friedbergs noticed a hole in a vertical pillar supporting their home’s light bridge and sought to have it repaired. The repairman responded to the call, but suspecting widespread damage to the home and recommended an inspection. A forensic investigation revealed extensive water damage. The Friedbergs notified Chubb of the loss. Chubb sent an expert to inspect the home. The expert concluded that defective construction enabled water to enter the walls and beam system and that the damage had accumulated over several years. Based on policy exclusions, Chubb rejected the Friedbergs’ claim. The Friedbergs sued Chubb for declaratory relief. The district court granted summary judgment in favor of Chubb, ruling that even under Friedbergs’ theory that the water entered through the roof, the water damage was a loss caused by faulty construction and was therefore excluded under the policy. On appeal, the Friedbergs challenged the district court’s interpretation of the policy’s faulty-construction exclusion. The Court determined that the faulty construction of the home was the efficient and proximate cause of their loss and the Friedbergs’ interpretation was an unnatural reading of the language. Thus, the Court affirmed the decision of the district court.
Submitted by: Amy L. Vanderveen and Mark J. Gesk of Wayman, Irvin & McAuley, LLC
09/04/12 McGair v. American Bankers Insurance Company of Florida
United States Court of Appeals for the First Circuit
First Circuit Holds That Homeowners Cannot Recover Damages for the Contents Contained in the Basement of Their Dwelling
This appeal arose from a dispute over the scope of a flood insurance policy. In July 2006, Mary Jane and Joseph McGair (the “McGairs”) purchased a flood insurance policy from Appellee, American Bankers Insurance Company of Florida (“American Bankers”). The policy was issued pursuant to the National Flood Insurance Program (“NFIP”), a federal program under which private insurers issue standardized flood insurance policies. After a flood damaged their home, the McGairs sought compensation. American Bankers disallowed much of the amount claimed, asserting that the contents of the basement were not covered. The McGairs brought suit in federal court arguing that the Declarations Page of their policy created an ambiguity as to the scope of coverage and that the ambiguity should be resolved in their favor. The district court entered summary judgment in favor of American Bankers, explaining that the regulations governing the NFIP provide that the parties cannot alter the terms of the SFIP and the McGairs were charged with knowledge of that prohibition.
On appeal, the Court noted that by regulation, the Standard Flood Insurance Policy (“SFIP”) and required endorsements must be used in the Flood Insurance Program, and no provision can be altered without the express written consent of the Federal Insurance Administrator. The McGairs’ policy incorporated the SFIP, which includes provisions limiting coverage for the contents of the basement of an insured dwelling. The McGairs refused to accept the settlement payment issued by the adjuster, as they insisted that the contents of their basements were covered without limitation because the contents were listed on their Declarations Page.
The Court noted that the McGair’s policy was an SFIP and therefore included the limitations on coverage. The Court held that there was no ambiguity in their policy because the terms of the SFIP controlled and that general insurance law principles applicable to the interpretation of ambiguities must give way in light of the prescription by federal regulation of the terms of the SFIP. Lastly, the Court held that the McGairs could not escape the rules requiring strict construction of the SFIP, as they did not allege that American Bankers acted outside the scope of its obligations under the NFIP.
Submitted by: Amy L. Vanderveen and Mark J. Gesk of Wayman, Irvin & McAuley, LLC
REPORTED DECISIONS
NYS Superintendent of Insurance v. New York Central Mutual
Eisenberg & Kirsch, Liberty (Robert M. Lefland of counsel), for appellant.
Carman, Callahan & Ingham, LLP, Farmingdale (Michael F. Ingham of counsel), for respondent.
Order, Supreme Court, New York County (George J. Silver, J.), entered January 13, 2011, which granted plaintiff's motion to confirm the report and recommendation of the Special Referee, dated December 31, 2009, granted plaintiff's motion for summary judgment declaring that defendant Vanessa Kitaw is afforded liability coverage for bodily injury arising from the subject motor vehicle accident under the personal automobile policy issued to her by defendant New York Central Mutual Fire Insurance Company (New York Central), and denied New York Central's cross motion for summary judgment declaring that Kitaw is not so covered, unanimously modified, on the law, to declare that Kitaw's New York Central policy affords her coverage for liability for bodily injury arising from the subject motor vehicle accident, and otherwise affirmed, without costs.
This coverage dispute arises from a motor vehicle accident that involved a van leased by defendant Kitaw but driven by another person. It is undisputed that Reliance Insurance Company (represented herein by plaintiff, its ancillary receiver), the liability carrier of the rental company (defendant MPT, Inc. d/b/a Thrifty Rental Car Finance Corp. [Thrifty]) that leased the van to Kitaw, has settled all personal injury claims arising from the accident. The court, adopting the recommendation of a referee, correctly determined that New York Central, which issued a personal automobile liability policy to Kitaw, is obligated to provide coverage for Kitaw for liability arising from the subject accident based on the plain language of her policy, which provides coverage for liability for bodily injury arising from her "use of any auto" (see Hertz Corp. v Govt. Empls. Ins. Co., 250 AD2d 181, 186-187 [1998], lv dismissed 93 NY2d 1040 [1999]), and we modify to declare accordingly. While Kitaw, as lessee of a vehicle owned by Thrifty, was also covered, pursuant to Vehicle and Traffic Law § 370(1)(b), by the policy Reliance issued to Thrifty (see ELRAC, Inc. v Ward, 96 NY2d 58, 73-75 [2001]), the antisubrogation rule does not prevent Reliance, as Thrifty's subrogee, from seeking to recover from Kitaw any amounts above the limits of Kitaw's coverage under the Reliance policy that Reliance has paid in settlement of the underlying personal injury actions (see id. at 77-78).
We have considered New York Central's remaining argument and find it unavailing.
International Flavors et al v. National Union Fire Insurance
SNR Denton US LLP, Chicago, IL (Donna J. Vobornik of the bars of the State of Illinois and the State of Wisconsin, admitted pro hac vice, of counsel), for St. Paul Protective Insurance Company, appellant.
Vedder Price P.C., New York (John H. Eickemeyer of counsel), for American Guarantee and Liability Insurance Company, appellant.
Dickstein Shapiro LLP, New York (Nicholas J. Zoogman of counsel), for respondents.
Order and judgment (one paper), Supreme Court, New York County (Charles Ramos, J.), entered September 14, 2011, which granted plaintiffs-respondents' motion for summary judgment for a declaration that Bush Boake Allen Inc. (BBA) bears successor corporate liability in certain underlying actions and is therefore entitled to insurance coverage under a policy issued by defendant St. Paul Protective Insurance Company, and denied St. Paul's motion for summary judgment dismissing the complaint on the grounds that BBA is not entitled to such insurance coverage, and, order and judgment (one paper), same court, Justice and date, which granted plaintiffs-respondents' motion for summary judgment for a similar declaration as against defendant American Guarantee and Liability Insurance Company, and denied American Guarantee's motion for summary judgment declaring that BBA is not entitled to such insurance coverage, unanimously reversed, on the law, plaintiffs' motions denied, defendants motions granted, the declarations vacated, and it is declared that the respective defendants have no duty to defend or indemnify plaintiffs-respondents in the underlying actions.
In January 1990, plaintiff BBA purchased all the common stock in its competitor, Food Materials Corporation (FMC), an Illinois corporation engaged in the distribution, manufacture and/or sale of butter flavoring products, in exchange for $10 million in cash. FMC remained an independent and viable legal entity, retaining all of its pre-acquisition assets, obligations and]liabilities, until January 1991, when BBA dissolved it, took its assets, and continued to operate the FMC business as before, until the closure of FMC's Chicago facility in 2002.
In 2004 and 2006, plaintiffs-respondents were sued in underlying actions by plaintiffs who alleged that they sustained injuries as a result of work-related exposure to certain butter flavoring products at a microwave popcorn packaging facility in Illinois. When evidence emerged that FMC supplied butter flavoring to the facility during the time of the underlying plaintiffs' exposures, plaintiff-respondent International Flavors & Fragrances, Inc., BBA's parent company, notified the defendant insurers who had provided policies to FMC during the relevant time frame, demanding coverage.
The motion court erroneously granted plaintiffs-respondents' request for a declaration of coverage on a finding that BBA had acquired the relevant FMC liabilities and insurance policy protections based on the doctrine of de facto merger. Rather than relying on New York and other out-of-state case law that materially differs from Illinois's "rigorous" de facto merger law (see Knoll Pharm. Co. v Auto. Ins. Co., 167 F Supp 2d 1004, 1011, n 9 [ND Ill 2001]) and applying a "flexible" approach that would permit a finding of a de facto merger in the instant circumstances (see Arnold Graphics Indus., Inc. v Ind. Agent Ctr., Inc., 1985 WL 211, at *8, 1985 US Dist LEXIS 23201, *23 [SD NY 1985], affd 775 F2d 38 [2d Cir 1985]; Fitzgerald v Fahnestock & Co., 286 AD2d 573 [2001]; Sweatland v Park Corp., 181 AD2d 243, 246 [1992]), the motion court should have utilized Illinois law to analyze the facts of this case. Although the Illinois Supreme Court has not addressed the specific factual scenario presented here, Illinois courts have fashioned a limited de facto merger exception to the general common law prohibition against successor liability requiring a showing that: (1) the seller ceased its ordinary business operations and dissoved; (2) the buyer assumed the seller's liabilities and obligations necessary for uninterupted continuation of business; (3) there is a continuity of shareholders; and (4) there is a continuity of the business enterprise, including management, employees, location, general business operations, and assets (see Gray v Mundelein Coll., 296 Ill App 3d at 808). The Illinois Courts have strictly enforced the exception, applying it only when all of the factors are met (see Gray v Mundelein Coll., supra at 795, 808 [1st Dist 1998], lv denied 179 Ill 2d 582 [1998]; North Shore Gas Co. v Salomon Inc., 152 F3d 642 [7th Cir 1998], overruled on another ground), and have been "distinctly unreceptive" to expansions of successor liability (Amann v Sylvania Aero Enter., 1989 WL 152951, at *5, 1989 US Dist LEXIS 14069, *12-13 [ND Ill 1989]).
Here, the third factor, "continuity of shareholders," which requires that the seller's shareholders receive shares of the buyer's stock as payment for the seller's assets (see Mamacita, Inc. V Colborne Acquisition Co.,LLC, 2011 WL 881654, *4, 2011 US Dist LEXIS 25146, *10, [ND Ill 2011]), is absent. Thus, under Illinois law, the doctrine of de facto merger does not apply. In the absence of such a merger, there is no basis for BBA's assumption of FMC's pre-dissolution liabilities or for a finding that BBA succeeded to rights under the FMC Insurer's policies.
Pollack, Pollack, Isaac & De Cicco, New York (Brian J. Isaac of counsel), for appellant.
Skenderis & Cornacchia P.C., Long Island City (Robert Joshua Yenchman of counsel), for respondents.
Order, Supreme Court, Bronx County (Diane A. Lebedeff, J.), entered May 11, 2011, which granted defendants' motion for summary judgment dismissing the complaint based on the failure to establish a serious injury pursuant to Insurance Law § 5102(d), unanimously modified, on the law, to deny the motion insofar as it is addressed to plaintiff's allegations that he suffered a serious injury comprising a significant limitation of use of a body organ, member, function or system or a permanent consequential limitation of use of a body function or system, and otherwise affirmed, without costs.
By submitting in support of their summary judgment motion the expert medical reports of a neurologist finding normal ranges of motion, as well as the report of a radiologist who opined that changes shown in the MRIs of the then obese 32-year-old plaintiff were degenerative, defendants made a prima facie showing of entitlement to summary judgment as to plaintiff's claims that he suffered "significant limitation of use" or "permanent consequential limitation of use" of his cervical, thoracic and lumbar spine and right and left knee as a result of a motor vehicle accident that occurred on July 30, 2009 (see Spencer v Golden Eagle, Inc., 82 AD3d 589, 590-591 [2011]; Insurance Law § 5102[d]). Plaintiff successfully opposed this aspect of the motion, however, by submitting competent expert evidence that raised triable issues of fact as to whether the accident caused a "significant limitation of use" or "permanent consequential limitation of use" of his left knee. In addition to affirmed expert reports concluding that the range of motion in the left knee was significantly limited, Dov J. Berkowitz, M.D., an orthopedic surgeon, opined in his affirmed report that, after he performed arthroscopic surgery on the knee, it continued to manifest hypertrophic synovitis and chondral erosion of the patella-femoral joint. Dr. Berkowitz further opined that the injury to the left knee was permanent and was related to the accident, a view supported by his report that the symptoms of which plaintiff complains did not arise until the accident (see Perl v Meher, 18 NY3d 208, 218-219 [2011]). Since plaintiff's evidence raised a triable issue as to whether the accident caused a serious injury to his left knee within the meaning of the statute, it is unnecessary to address whether his proof with respect to other alleged injuries would have been sufficient to withstand defendants' motion for summary judgment (see Linton v Nawaz, 14 NY3d 821 [2010]).
While we otherwise reinstate the complaint, we affirm the dismissal of plaintiff's 90/180-day claim on the ground that the claim was refuted by plaintiff's own deposition testimony, inasmuch as he testified that he did not miss any time from work, since his duties at work were "modified." Working "light duty" is fatal to a 90/180—day claim (see Williams v Perez, 92 AD3d 528, 529 [2012]; Tsamos v Diaz, 81 AD3d 546, 547 [2011]).
James M. Fedorchak, County Attorney, Poughkeepsie, N.Y. (Keith P. Byron of counsel), for appellant.
Feldman, Kleidman & Coffey, LLP, Fishkill, N.Y. (Marsha S. Weiss of counsel), for plaintiff-respondent.
Craig P. Curcio, Middletown, N.Y. (Deborah Bookwalter of counsel), for defendant-respondent.
DECISION & ORDER
In an action to recover damages for personal injuries and wrongful death, etc., the defendant County of Dutchess appeals from an order of the Supreme Court, Dutchess County (Brands, J.), dated June 2, 2011, which denied its motion pursuant to CPLR 3211(a)(7) to dismiss the complaint and all cross claims insofar as asserted against it.
ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the motion of the defendant County of Dutchess which was pursuant to CPLR 3211(a)(7) to dismiss so much of the complaint and all cross claims insofar as asserted against it as were premised upon allegations that it failed to have emergency personnel remain at the location of a prior motor vehicle accident and failed to warn motorists of icy road conditions with "flares and/or signs," and substituting therefor a provision granting that branch of the motion; as so modified, the order is affirmed, without costs or disbursements.
The plaintiff's decedent died as a result of injuries sustained in a one-car accident that took place on an ice-covered portion of the Salt Point Turnpike in Dutchess County. Another one-car accident had taken place on the same portion of the roadway approximately two hours prior to the subject accident. The plaintiff commenced this action against the County of Dutchess, among others, alleging, with respect to the County, that the County negligently designed, constructed, and maintained the subject roadway, and that the County was negligent in failing to have emergency personnel remain at the location of the prior accident and in failing to warn motorists of the icy road conditions with "flares and/or signs." The defendant Cheryl Milby asserted cross claims against the County for indemnification and contribution. The Supreme Court denied the County's motion pursuant to CPLR 3211(a)(7) to dismiss the complaint and all cross claims insofar as asserted against it. The County appeals, and we modify.
In reviewing a motion to dismiss pursuant to CPLR 3211(a)(7), " the court will accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory'" (Matter of Walton v New York State Dept. of Correctional Servs., 13 NY3d 475, 484, quoting Nonnon v City of New York, 9 NY3d 825, 827 [internal quotation marks omitted]). "Affidavits submitted by a [defendant] will almost never warrant dismissal under CPLR 3211 unless they establish conclusively that [the plaintiff] has no . . . cause of action'" (Lawrence v Graubard Miller, 11 NY3d 588, 595 [emphasis omitted], quoting Rovello v Orofino Realty Co., 40 NY2d 633, 636). "Indeed, a motion to dismiss pursuant to CPLR 3211(a)(7) must be denied unless it has been shown that a material fact as claimed by the pleader to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it'" (Sokol v Leader, 74 AD3d 1180, 1182, quoting Guggenheimer v Ginzburg, 43 NY2d 268, 275). Here, while the County submitted some evidence that the subject roadway was owned, maintained, and controlled by the State of New York, and not the County, it failed to demonstrate that no significant dispute exists with regard to these facts, or with regard to whether the County was involved in the construction or design of the roadway. Accordingly, the Supreme Court properly denied that branch of the County's motion which was pursuant to CPLR 3211(a)(7) to dismiss so much of the complaint and all cross claims insofar as asserted against it as were premised upon allegations that the County negligently designed, constructed, and maintained the subject roadway.
However, the Supreme Court should have granted that branch of the County's motion which was pursuant to CPLR 3211(a)(7) to dismiss so much of the complaint and all cross claims insofar as asserted against it as were premised upon allegations that the County failed to have emergency personnel remain at the location of the prior motor vehicle accident and failed to warn motorists of the icy road conditions with "flares and/or signs." These allegations concern the County's governmental function, and the complaint fails to allege a special duty owed to the plaintiff's decedent, as opposed to the public generally, with regard to these allegations (see Valdez v City of New York, 18 NY3d 69, 75; Balsam v Delma Eng'g Corp., 90 NY2d 966, 968; Sorrentino v Mayerson, 82 AD3d 955, 955-956). Contrary to the contentions of the plaintiff and the defendant Cheryl Milby, a plaintiff is required to allege the existence of a special duty regardless of whether the governmental action at issue is discretionary or ministerial (see Valdez v City of New York, 18 NY3d at 76-77; McLean v City of New York, 12 NY3d 194, 203; Lauer v City of New York, 95 NY2d 95, 99).BALKIN, J.P., HALL
