Coverage Pointers - Volume XIV, No. 8

Dear Coverage Pointers Subscribers:

You got a situation?  We love situations.

Thanks for all the well wishes we received on my daughter’s wedding.  I received dozens of congratulatory notes, with many sharing the experiences of their own offspring’s weddings. 

It was a joyous occasion.  For anyone who had the responsibility of making a welcoming toast at a son or daughter’s wedding, you know that is a certain angst in coming up with just the right message. How do you capture your child’s life and your hopes for the future in five minutes?

As regular readers know, it’s been a summer of reading great and not-so-great books.  As fate would have it, in the two days before the wedding, I happened to read nationally syndicated columnist Mitch Albom’s newest, The Time Keeper, a book I would recommend.  The publisher describes the book this way:

From the author who has inspired millions worldwide with books like Tuesdays with Morrie and The Five People You Meet in Heaven comes his most imaginative novel yet, The Time Keeper -- a compelling fable about the first man on earth to count the hours.
The man who became Father Time.
In Mitch Albom's newest work of fiction, the inventor of the world's first clock is punished for trying to measure God's greatest gift. He is banished to a cave for centuries and forced to listen to the voices of all who come after him seeking more days, more years. Eventually, with his soul nearly broken, Father Time is granted his freedom, along with a magical hourglass and a mission: a chance to redeem himself by teaching two earthly people the true meaning of time.
He returns to our world--now dominated by the hour-counting he so innocently began -- and commences a journey with two unlikely partners: one a teenage girl who is about to give up on life, the other a wealthy old businessman who wants to live forever. To save himself, he must save them both. And stop the world to do so.
Albom gave me the message to deliver that evening.  As I looked back at my daughter’s life and accomplishments and looked forward to her long and exciting journey ahead with her new husband, Shawn, I talked about Albom’s message and lesson.   It’s not about the counting or the measuring of life that is important, but the quality of the moments in which we live. 

So, for those who like to count, this is the eighth issue in our 14th year of bi-weekly publication of Coverage Pointers.  For the real counters, this is the 357th edition of Coverage Pointers.

But, for those who measure by quality and not quantity, we deliver to you another offering of what we hope is a publication that brings you knowledge, practical advice and even a little bit of entertainment.

This Issue:

There are so many good things to read in this issue, so many interesting cases.  I report on a blanket AI case where the trade contract terms were clear (but there was an attempt to rewrite them).  Audrey has a case involving priority of payment issues in the NF universe. Steve discusses an all risk case and with an assist from Elizabeth Fitzpatrick, reports on a long-litigated earth movement case.  Cassie reviews the SUM bill presently heading towards the Governor’s desk.  Jen discusses a very interesting lower court case, extending Bi-Economy (and its holding on consequential damages) to the liability arena.  Marc reports on a lower court case considering the importance of exhaustion of primary limits when excess policies wait in the wings.  Earl discusses exclusions, construction defects and football, hey, why not?

 

A Salute to Sheldon (Shelly) Hurwitz, on the Tenth Anniversary of His Passing:

We cannot let the 10th anniversary of Shelly Hurwitz’ passing slip by without honoring him.  Shelly was my mentor, friend and my daughter’s godfather.  He was a gentleman and a gentle man who loved the practice and the profession of law.  When he passed, Paul Edelman, his long-time friend and colleague, wrote an obituary that was published in a state bar journal.  If you knew Shelly, you’ll want to read it and if you didn’t, you should meet him with these words:

Sheldon Hurwitz, a well-known and respected insurance law and trial attorney, and a founder of Hurwitz & Fine, P.C., died October 11, 2002 after a lengthy illness at the age of 72.

Known as "Shelly" to family and friends, he was born in Buffalo, where he attended Bennett High School, the University at Buffalo, and the University at Buffalo School of Law, where he also later taught Insurance Law as an adjunct professor. He also received a Masters of Law Degree from George Washington University.

Retired from Hurwitz & Fine, P.C. since 1999, he stayed on as counsel and continued to work diligently as a Master Arbitrator for the American Arbitration Association. He concentrated his practice in insurance law and civil litigation, lectured and wrote extensively on those subjects, with particular emphasis on insurance coverage, defense strategy, product and toxic substances liability and risk management.

He was indefatigable in his zeal for the law. He was an extremely quick thinker who would rapidly come to a conclusion without appearing to go through the logistical steps necessary to get there. He could be tough and was always direct in his approach, frequently very animated. He was also a gentleman. Physically, Shelly was a handsome, distinguished-looking man. Tall, slender, with a great shock of salt-and-pepper hair; always meticulously dressed with a handkerchief in the breast pocket of his suit coat.

Shelly was a very active man who loved to play tennis and to ski. He and his wife, Lynda, enjoyed traveling and particularly loved Europe where he served as an officer in the JAG Corps in the late 1950s. Throughout his life and career, he was always concerned with and trying to improve world affairs.

Later in his life, he took up golf and “birding”. Every summer, he and Lynda would spend two weeks at the Chautauqua Institute where he loved the mental challenges presented by the various speakers, experts in their field. Shelly was an engaging conversationalist with a great sense of humor.

Shelly took great pride in his family and their accomplishments. He has been a wonderful dad to Andrew, an attorney in NYC; Rick, an investment entrepreneur married to Sarah; and to Cindy, a school teacher married to Jay Matthews. He adored his four grandchildren and talked about them with a huge smile on his face and obvious love.

He was very well regarded in the legal community. He was honored by the New York State Bar Association, receiving the John E. Leach Award for outstanding accomplishments in Insurance Law, and extraordinary contributions to the legal profession, and was named the 1995 “Defense Trial Lawyer of the Year” by The Defense Trial Lawyers Association of Western New York.

He was special counsel to the New York State Assembly Committee on Insurance, a past Director of the Bar Association of Erie County, and President of the Trial Lawyers Association of Western New York.

He held several State Bar Association Chairmanships including Chair of the Insurance, Negligence and Compensation Law (now called the Torts, Insurance and Compensation Law) Section and Chair of the State Bar Insurance Programs Committee. He served on the Executive Committee of the International Association of Defense Counsel and chaired its Continuing Legal Education Board. He was also past Chair of the Environmental Law Committee of the Defense Research Institute.

A Master Arbitrator of the New York State No-Fault Insurance Program since 1977, Hurwitz completed the Advanced Mediation Program at Hamline University Law School’s Dispute Resolution Institute, and was a founding member of the Alliance for Dispute Resolution.

He was also active in many Jewish charities and was a former president of the Foundation for Jewish Philanthropies and the Bureau of Jewish Education.

He has left many of us with his lessons, his love for life, learning and the law. We will all miss him deeply. Godspeed, Shelly.

 

From Everyone’s Favorite No Fault Coverage Counsel, Audrey Seeley:

Recently, I have received a few questions about priority of payment of claims when an insurer wants to settle same and all are in arbitration or litigation.  It was interesting to read an arbitration decision on a somewhat related issue.  In the arbitration decision, the insurer appears after receiving arbitrations or suits to have set aside the amount that could potentially satisfy the award or a judgment.  The result is that if a subsequent arbitration or suit were filed the insurer would advise that there was limited coverage under the policy due to it setting aside those amounts.  It seems as though the insurer’s concern was that it could have an award rendered or judgment filed in excess of the policy limits.  The arbitrator determined that the insurer in that case could not set aside the potential amount of a judgment and content that policy limits were diminished.

The arbitrator reasoned that in doing so it only provided a potential incentive for an insurer to deny all claims and place the amount of those claims aside due to a potential arbitration or suit thus not paying out other valid claims under the policy.  Further, the arbitrator noted that the insurer could not be required to pay claims in excess of the policy thus there would be no reason to set aside money for those denied claims in arbitration or litigation.  It appears that the insurer was trying to ensure that it was not placed in a situation where a judgment or award could be rendered against it and it is forced to pay in excess of the policy limits. 

For some insurers handling downstate claims this is a legitimate concern. 

However, I have yet to see upstate where an insurer was forced to pay in excess of the policy limits when it could demonstrate that the policy was exhausted.  Overall, insurers who are faced with multiple suits or arbitrations this issue of properly addressing the priority of payment of claims can still feel like navigating a mine field.  When in doubt contact your favorite no-fault coverage counsel (who should already be on your speed dial).

I hope to see some of you at the DRI Annual Meeting in New Orleans in two weeks!

Audrey Seeley
[email protected]

 

One Hundred Years Ago:  Arsonist Runs Wild:

Syracuse Herald
October 12, 1912

IS CLEVER
The Police Say
Pretty Italian Girl Is Charged With Setting Fire to Buildings
Tries to Jump
Defrauds Insurance Agents
Scheme Worked Often

Harrison, N.J. — Leona Elmarko accused of fourteen or more incendiary fires, attempted to jump from the third story window of Chein & Co.’s toy factory yesterday when Detective Buonocore told her he had come to arrest her. Buonocore grabbed her just in time, and although the handsome, dark-eyed Italian girl screamed and tried to twist herself loose the detective locked her up in the Hackensack Jail

The police here say that despite the fact that she is only eighteen years old, is one of the cleverest crooks they have met.  Well-linked evidence points to a regular scheme she worked time and time again, to defraud insurance companies. She, however, denies absolutely that she is guilty. She goes so far as to say she never even heard of the names she is said to have assumed or the places she has lived in.

Peiper’s Pick – Me – Up:

Finally, a banner issue of Coverage Pointers.  For those of you on the first party side of things, take a look at the Second Department’s decision in US Dredging Corp. where the Court takes time to explain what the term “all risk” actually means in insurance law.  We’d also direct you to the Second Department’s decision in Azzato which is a must cite the next time you have an “insurable interest” case.  The Court spends a considerable amount of space explaining what is, and is not, an insurable interest. 

Finally, from the first party side of things, we also note Allstate’s nice win in enforcing the tricky earth movement exclusion.  A special shout out to Beth Fitzpatrick for the excellent legal work, and for joining our cast of characters in this week’s write up. Beth’s inside info on the case is included below. 

If first party is not your thing, take a look at the Fourth Department’s decision in Kregg this week.  The Court has, again, ruled that only the narrowest of discovery demands will be considered where social media is concerned.  In sticking with the theme of Court’s providing instructions, we’d recommend that you commit the Court’s words to memory the next time you seek an authorization for Facebook.  Don’t say we didn’t tell you, AGAIN! 

That’s it for now.  Cheers.

Steve
[email protected]

 

One Hundred Years Ago:

The New York Times reported on a family steeped in public service that was saved by a hat.

ELKUS THROWN FROM AUTO
New York Lawyer Injured in Collision Near His Home

Red Bank, NJ – Abraham Elkus, of the law firm of James Schell & Elkus, with offices at 179 Broadway, New York, was injured here today when an auto in which he was riding was run into by another car owned by George H. Churchill, who has brokerage offices at 115 Broadway, New York.

Mr. Elkus was hurled from the front seat of the machine to the pavement and landed on his head.  The heavy stiff hat which he was wearing saved him from fatal injury.  He was taken home, where it was found he had suffered contusion about the body and a gash in the side of his head.

The accident was caused by Mr. Churchill’s car skidding on a wet pavement.

Editor’s Note:  A “stiff hat” saved his life and allowed for those who followed.  Who was saved by the hat?

Mr. Elkus (1867 – 1947) went  on to become the last United States Ambassador to the Ottoman Empire under Woodrow Wilson, having been appointed in 1916, and simultaneously representing the interests of the US, Great Britain, France, Italy, Russian and Belgium. Elkus' firm James, Schell & Elkus, merged with a firm headed by Joseph Proskauer  creating the firm of Elkus, Gleason & Proskauer, a predecessor of the law firm of Proskauer Rose. In 1913 and 1920, he ran for Judge of the New York Court of Appeals, but was defeated on both occasions. On November 12, 1919, Governor Alfred E. Smith had appointed him to fill the vacancy caused by the death of William H. Cuddeback. Elkus served on the court until December 31, 1920, and then accepted an appointment as one of the League of Nations Commissioners to settle the Åland Islands dispute between Finland and Sweden. 

His daughter, Kathryn Elkus White was Ambassador to Denmark under President Johnson, and Mayor of Red Bank, NJ.

Katherine’s daughter Frances was honored for outstanding service on the Board of Directors of Blue Cross of Western PA from 1971 to 1985; received the William Van Essen Award for distinguished service on behalf of the visual welfare of the public by the W. PA Optometric Society. She became interested in nonprofits while volunteering for the Pittsburgh Counsel for International Visitors (now GloblPittsburgh); from there became Executive Director of Pittsburgh's fledgling Kidney Foundation; then to Executive director of South Hills Family Hospice from 1982 to 1986 and ultimately served as Executive Director of St. Clair Hospital Foundation until retirement in 1991.

Frances’ son, David, with whom I corresponded for this story, and delightfully shared with me his family legacy, described himself:  As for me, I am married with an 11 year old boy and a 5 year old beagle named Copper. I worked for Adobe Systems for 20 years and am now semi-retired working as a photographer and a stay-at-home papa. His website contains a wonderful tribute to his mother, Frances. 

David didn’t know of the car accident and that he exists only because his great-grandfather wore the right hat a century ago.

 

One Hundred Years Ago Today – October 12, 1912:

A Century Ago:  Game 5 of the 1912 World Series in Fenway Park

The Red Sox scored two quick runs in the bottom of the third inning against Mathewson when Hooper led off with a triple, Yerkes also tripled, and Speaker reached on an error by Giants second baseman Doyle, allowing Yerkes to score. Merkle doubled and came around to score in the seventh inning to make the score 2–1, but Christy Mathewson struck out to end the rally. The last seven Giant hitters were retired in order to finish Hugh Bedient’s three-hit complete game. Boston now led the series three games to one and was one victory away from a championship.  It didn’t get that victory until the eighth game of the Series. 

Three games to one after the fifth game? An eight game series?

In the 1912 World Series, the Boston Red Sox beat the New York Giants four games to three (with one tie).

This dramatic series showcased great pitching from Giant Christy Mathewson and from Boston fireballer Smoky Joe Wood. Wood won two of his three starts and pitched in relief in the final game. In the deciding game, Boston rallied for two runs in the tenth inning thanks to two costly Giants fielding misplays.

Nearly all of the games were close. Four games in this Series were decided by one run.

A fifth ended in a tie. A sixth was decided by two runs. Game 7 was the only one with a margin greater than three runs. Two games, including the decisive Game 8, went to extra innings. In Games 1 and 3, the losing team had the tying and winning runs on base when the game ended.

This was one of only four World Series to go to eight games, and the only best-of-seven Series to do so. While the 1912 Series was extended to eight games due to a tie game being called on account of darkness, the 1903, 1919 and 1921 World Series were all best-of-nine affairs that happened to run eight games

 

A Century Ago -- A Turn of the Ankle:
                                                                             
Wellsville (New York) Daily Reporter
October 12, 1912
Page 1

The Court Declined
Magistrate Would Not Permit Woman’s Evidence

New York, October 12 -- When Mary Anderson of Brooklyn was charged in court with having assaulted Susie Lefkowitz, she asserted that the complainant had attacked her.

“I’ll show you my ankle,” she said to Magistrate McGuire.  “It’s all swollen.  That’s the way I can prove she assaulted me.”

“You will have to get other proof,” hastily said the Magistrate.  “The Court doesn’t want to see your ankle.”

 

In this Week’s Edition, Attached:

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

• Another Tower-ing Victory on “Good Faith Belief in Non-Liability”:  Can’t Have One, Without Investigation
• A Trade Contract That Does Not Require Additional Insured Status Should Not Be Altered by Extrinsic Evidence
• Good Faith Belief in Lack of Coverage May Excuse Late Reporting

 

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

• Minor Limitation in One Plane of Range-of-Motion Is Not Serious Injury
• Plaintiff Fails to Raise Triable Issue of Fact
• Issue of Fact as to Causation Precludes Plaintiff’s Cross Motion
• 50% Deficit in Straight Leg Raise Provides Objective Evidence of Lumbar Injury
• Evidence of Pre-Existing Condition Requires Plaintiff Address Causation
• Aggravation of Asymptomatic Condition Can Constitute a Serious Injury
• Trial Court Is Reversed
• Trial Court Is Affirmed
• Contemporaneous Report Important to Prove Causation

 

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

ARBITRATION

• Interesting Decision on Priority of Payment Issue – Do You Set Aside Money to Pay an Earlier Submitted Claim in Litigation That Could Exhaust Coverage?
• Three-Sentence Conclusion Where 50 Medical Reports Were Provided Was Insufficient to Deny Surgical Procedure
  Insurer Prevails on Lost Wage Claim Denial

 

LITIGATION

• Insurer Created Issue of Fact Regarding Medical Necessity Precluding Complete Summary Judgment

 

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

Property

• Even Under an “All Risk” Policy, the Insured Still Must Prove the Loss Falls Within the Terms of the Coverage Provided
• Earth Movement Exclusion Applies to Bar Coverage \Overstated Proof of Loss = Loss of Coverage; Coverage Limited to Insured’s Actual Interest in the Property

 

Potpourri

• Court, AGAIN, Strikes Down Social Media Discovery Requests as Overly Broad
• Where No Allegation of Vicarious Liability Exists, There Is No Cause of Action for Common Law Indemnity

 

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

• A10784/S7787 –SUM Legislation – Still Before the Governor – Thousands Hope for Veto

 

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

• Malicious Prosecution and the Insurer’s Duty to Defend

 

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

• New York Trial Court Dismisses Punitive Damages Claim, but Allows Consequential Damages Claim to Remain in Third-Party Context

 

MARC’S REMARKS
Marc A. Schulz
[email protected]

• Where Underlying Insurers Never Paid Full Policy Amounts Due to Settlements, and Excess Policy Unambiguous, Excess Insurer Only Pays After Underlying Insurers Pay Up to Their Policy Limits
• Lease and Insurance Policy Language Explicitly Provided for Waiver of Subrogation Right
•  “Abuse or Molestation” Endorsement Policy Only Covers Sexual Misconduct of Employee/Worker of Insured Arising From Ownership, Maintenance or Use of Auto and Does Not Cover Students
• Expert’s Failure to Address Multiple Bulging Discs and Failure to Rule Out Plaintiff’s Injuries Not Causally Related to Accident Fatal to Defendant’s Summary Judgment Motion
• Expert Reports Identifying Injuries Degenerative and Not Secondary to Accident and Finding No Limitations of Range of Motion Sufficient to Shift Burden on Summary Judgment Motion

 

EARL’S PEARLS
Earl K. Cantwell
[email protected]

IT’S LEGAL FOOTBALL SEASON FOR POLICY EXCLUSION

We close up the summer place and move back to Buffalo this Sunday.  Sniff.
See you in two weeks.
Dan

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

LinkedIn: www.linkedin.com/in/kohane

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]

10/04/12       Hermitage Mutual v. JDG Lexington Corp.
Appellate Division, First Department
Another Tower-ing Victory on “Good Faith Belief in Non-Liability”:  Can’t Have One, Without Investigation
Even if the insured had a mistaken belief, based on the lease with a commercial tenant, that it was not responsible for the area where the plaintiff fell, it has an obligation to report the possibility of a claim as soon as reasonably possible.

Here, the insured did not undertake any investigation of the incident or make an effort to find out if it was responsible for the area where the accident occurred. Thus, it could not have formed a good faith belief in non-liability.

Where the insured’s principals were aware of the accident and knew that there was an injury, there was an obligation to investigate and report.
Editor’s Note:  Attaboy Max.

10/03/12       Zaidi v. New York Building Contractors, Ltd.
Appellate Division, Second Department
A Trade Contract That Does Not Require Additional Insured Status Should Not Be Altered by Extrinsic Evidence
Zaidi brought an action for personal injuries sustained on a construction site while he was employed by LTC.  He sued the owner and general contractor (“GC”), and they, in turn, sued LTC.

LTC moved to dismiss the causes of action in the third-party complaint and three causes were dismissed, leaving one, a claim for breach of contract to a policy of insurance with additional insured protection naming owner and the GC as additional insureds.

A written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.

Here, LTC established that the written agreement between it and the owner and GC did not require it to procure insurance naming them as additional insureds.  The owner and GC tried to offer extrinsic evidence to vary the terms of a clear contract and the court would not allow that evidence to be considered.

09/28/12       Donald Braasch Construc.  Inc. and CNA v. State Ins. Fund
Appellate Division, Fourth Department
Good Faith Belief in Lack of Coverage May Excuse Late Reporting
Donald Braasch Construction (“DBC”) commenced a declaratory judgment action seeking a determination that the State Insurance Fund (“SIF”) is "conditionally obligated" to indemnify them in a personal injury lawsuit.  The accident occurred in March 1994 and in April 1995 the personal injury plaintiffs commenced that lawsuit against DBC.  It took two years, until May 1997, for DBC to give notice to SIF and SIF denied coverage based on untimely reporting.

CNA defended DBC and now seeks a reimbursement for 50% of defense costs.  

DBC argues that it did not notify the SIF because it had good reasons to believe the policy inapplicable: the plaintiff was not its employee and the SIF policy excluded contractual liability.

The court finds three types of excuses to justify late notice: the lack of knowledge of an accident, a good-faith and reasonable basis for a belief in nonliability and a good-faith and reasonable basis for a belief in noncoverage.

SIF argued that DBC knew of the facts implicating coverage on the date of the accident or, at the very latest, when it moved for summary judgment in 1996 on the ground that the injured plaintiff was a special employee of DBC.

The Court found a question of fact as to the reasonableness of the delay and send the matter back for trial.
Editor’s Note:  There are cases that have suggested that a “reasonable belief in non-coverage” may justify late notice, but frankly, we are unconvinced of their vitality.  See Hermitage v. JDG Lexington, the First Department case, above, for a good discussion on “good faith belief in non-liability”.

 

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

10/11/12       Phillips v. Tolnep Limo Inc.
Appellate Division, First Department
Minor Limitation in One Plane of Range-of-Motion Is Not Serious Injury
Defendants met their prima facie burden through the submission of expert medical reports finding normal range-or-motion and a radiologist’s report who opined that plaintiff’s lumbar MRI revealed only degenerative changes.  In opposition, plaintiff failed to prove serious injury under the permanent consequential and/or significant limitation of use categories as his physician measured only a minor limitation in one plane of range-of-motion.  Such a finding does not amount to a serious injury.  In addition, plaintiff’s bill or particulars and deposition testimony defeated his 90/180-day claim.  As such, the trial court correctly dismissed the complaint.

10/10/12       Wunderlich v. Bhuiyan
Appellate Division, Second Department
Plaintiff Fails to Raise Triable Issue of Fact
On appeal, the court affirmed the trial court finding that defendants met their burden by submitting competent medical evidence establishing that plaintiff’s alleged right knee injury did not constitute a serious injury and plaintiff failed to rebut and raise a triable issue of fact.

10/09/12       Pannell-Thomas v. Bath
Appellate Division, First Department
Issue of Fact as to Causation Precludes Plaintiff’s Cross Motion
Defendant met his prima facie burden that plaintiff did not sustain a permanent consequential or significant limitation of use of the lumbar spine by submitting the affirmed report of a neurologist who found no permanent neurological disabilities, full range-of-motion and negative objective test.  Defendant’s radiologist concluded, based on affirmed MRI reports, that plaintiff’s injuries were not caused by the accident but instead were degenerative.

In opposition, plaintiff raised a triable issue of fact by submitting the affirmed report of her radiologist who found disc herniations, bulging discs and root impingements.  In addition, her treating physician conducted EMG studies confirming spinal radiculopathies, and also reported quantified range-of-motion restrictions and positive objective tests.  The treating physician also opined that plaintiff’s injuries were causally related to the accident as she was asymptomatic and had an active lifestyle for years prior to the accident.

Although defendant did not challenge plaintiff’s testimony that she was unable to work for six months following the accident, he met his burden with respect to the 90/180-day claim by submitting evidence that the injuries were not causally related.  However, plaintiff’s treating physician’s affirmation stated that she was out of work for six months, after which time she returned to work against his medical advice.  He also stated that she remained partially disabled during that period.  As there were issues of fact both as to the injuries and causation, the trial court correctly denied defendant’s motion for summary judgment, as well as plaintiff’s cross motion for partial summary judgment.

10/09/12       Jackson v. Leung
Appellate Division, First Department
50% Deficit in Straight Leg Raise Provides Objective Evidence of Lumbar Injury
The trial court granted defendant Leung’s motion.  Plaintiff cross moved to reargue and the court adhered to its prior order and, in addition, granted defendant Rosillo’s motion on res judicata grounds.  On appeal, the trial court was reversed on the law.  The appellate court additionally held that the appeal was proper because, in purporting to deny plaintiff’s cross motion to reargue, the trial court addressed the merits and, in doing so, in effect granted plaintiff’s motion.  Therefore, the cross motion to reargue should have been granted and the defendants’ motions denied.

The appellate court determined that Leung did not meet his burden because his sole medical expert, a neurologist, failed to report any range-of-motion testing, review the MRI of plaintiff’s spine, or offer any opinion on causation.  In addition, the neurologist acknowledged a 50% deficit in straight leg raising, which provided objective evidence of lumbar injury.  Therefore, the burden did not shift to plaintiff.  Nevertheless, plaintiff’s treating physician found recent range-of-motion limitations in all planes and relied on objective evidence such as an EMG/NCV study and MRI report.  He also reported that there were limitations contemporaneous with the accident.  Contrary to the trial court’s holding, under Perl, plaintiff was not required to show specific contemporaneous deficits.

10/05/12       Mendola v. Doubrava
Appellate Division, Fourth Department
Evidence of Pre-Existing Condition Requires Plaintiff Address Causation
Plaintiff claimed injuries under the permanent consequential, significant limitation of use and the 90/180-day categories after the vehicle in which she was a passenger was struck.  Defendants submitted an IME of their examining neurologist who found only a pre-existing degenerative condition of the spine.  As defendants presented persuasive evidence that plaintiff’s pain and injuries were related to a pre-existing condition, the burden shifted to plaintiff to address the claimed lack of causation. 

Plaintiff failed to do so because none of her physicians related her herniated discs or protrusions at C5-6 and/or C6-7 to the accident.  In addition, plaintiff submitted the report of an examining neurologist who concluded that she had pre-existing degenerative disc disease as seen on a cervical MRI performed only three weeks after the accident.  As such, on appeal the trial court was affirmed.

10/05/12       Verkey v. Hebard
Appellate Division, Fourth Department
Aggravation of Asymptomatic Condition Can Constitute a Serious Injury
The trial court denied defendants’ motion, denied plaintiff’s cross motion on the issue of serious injury, and granted plaintiff’s cross motion on the issue of negligence.  On appeal, all motions are denied. 

On the issue of negligence, contrary to plaintiff’s assertions, the fact that defendant entered a plea of guilty to a Vehicle & Traffic Law offense does not establish negligence per se.  Although plaintiff met his initial burden by establishing that the sole proximate cause of the accident was defendant’s failure to yield the right of way, defendant raised a triable issue of fact by presenting evidence that defendant was stopped in his lane of travel at the time of the head-on collision. 

Defendants’ motion and plaintiff’s cross motion on the issue of serious injury were properly denied by the trial court.  Even though plaintiff had a pre-existing degenerative condition as revealed on a CT scan taken the day of the accident and an MRI taken a month later, he was asymptomatic until the accident.  An aggravation of an asymptomatic condition can constitute a serious injury.  Furthermore, the existence of an asymptomatic condition that predates an accident only indicates that a plaintiff may be susceptible to injury, but it is not proof that a serious injury did not occur. 

10/03/12       Chryssty v. Koskovolis
Appellate Division, Second Department
Trial Court Is Reversed
Although defendants met their prima facie burdens, plaintiff raised a triable issue of fact that she sustained serious injury to her cervical and lumbar spine under the permanent consequential and significant limitation of use categories through the submission of competent medical evidence.  Therefore, the trial court should have denied defendants’ motions.

10/03/12       Bykova v. Sisters Trans, Inc.
Appellate Division, Second Department
Trial Court Is Affirmed
Plaintiff claimed injuries to her cervical, thoracic and lumbar regions of the spine and her right shoulder, as well as a left pneumothorax requiring surgical intervention.  Defendants met their prima facie burdens that the spinal and shoulder injuries did not constitute serious injuries and that the pneumothorax was not causally related to the accident.  However, plaintiff raised triable issues of fact under the significant limitation of use category and also as to the causation of the pneumothorax.  Therefore, the trial court properly denied defendants’ motions.

10/02/12       Njie v. Thompson
Appellate Division, First Department
Contemporaneous Report Important to Prove Causation
On appeal, the trial court is reversed and defendant’s motion denied because, although defendant’s experts found normal range or motion and no abnormalities in plaintiff’s shoulder, plaintiff’s treating doctor found a tear and recent range of motion limitation.  The court, citing Perl v Meher, reiterated that a plaintiff is not required to set forth the objective tests performed contemporaneously with the accident provided a contemporaneous report establishes causation. 

 

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

ARBITRATION
10/05/12       Buffalo Neurosurgery Group v. Geico Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Interesting Decision on Priority of Payment Issue – Do You Set Aside Money to Pay an Earlier Submitted Claim in Litigation That Could Exhaust Coverage?
The Applicant sought reimbursement for medical services rendered to the assignor on June 23, 2011.  The insurer paid $3,025.95 of the bill while setting aside $303.00 to potentially pay for a previously filed arbitration.  The insurer prevailed in the previously filed arbitration and added the $303.00 back onto the policy but claimed that only $303.00 remained under the policy.  Then, the insurer claimed that a suit was filed prior to the instant arbitration for a medical service rendered in 2010 totaling $1,510.77.  Since that medical service was rendered first in time it must set aside the remainder of the policy limits for that litigation in the event an adverse decision is rendered against the insurer.

The assigned arbitrator acknowledged the “first in time first in line” rule under 11 NYCRR §65-3.15.  However, the present situation did not fit within that rule as there is no rule that an insurer must set aside money to potentially satisfy a judgment or award that could be rendered on a claim.  Instead, under 11 NYCRR §65-3.2, the insurer is required to continue paying other necessary claims as they are submitted and cannot reduce the coverage limits by all claims whether paid or denied.  To permit otherwise the assigned arbitrator determined would provide incentive to an insurer to deny claims so that resulting arbitration or litigation would preclude or stay further payment of later claims.  The assigned arbitrator determined that the policy was not exhausted as $303.00 remained and the insurer could not set aside that money for the pending suit. 

10/05/12       Wagdy Ghaly, MD PC v. The Travelers Home and Marine Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Three-Sentence Conclusion Where 50 Medical Reports Were Provided Was Insufficient to Deny Surgical Procedure
The Applicant sought reimbursement for a cervical spine operative procedure of re-exploration of the anterior cervical spine that the insurer denied by peer review on the ground of lack of medical necessity.  The procedure was performed to evaluate the presence of possible posttraumatic pseudoarthrosis due to the motor vehicle accident to a pre-existing C5/6 and C6/7 anterior fusion.

The insurer denied the treatment based upon the peer review of Dr. Harvey Seigel which the assigned arbitrator found insufficient to support the denial.  The assigned arbitrator stated that the peer review summarized the conclusion in three sentences and did not adequately discuss the operative report.  The assigned arbitrator also mentioned that there were approximately 50 medical reports submitted to the peer reviewer pre and post-accident with the treating medical providers.  The peer review did not set forth sufficient factual and medical rationale for the conclusion reached.

10/01/12       Applicant v. ACA Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Insurer Prevails on Lost Wage Claim Denial
The Applicant sought lost wages as a result of neck and upper back injuries allegedly sustained in a December 28, 2009, motor vehicle accident.  The insurer paid the Applicant lost wages until October 25, 2011, when it denied same upon an independent medical examination conducted by Dr. Marc Appel.

Dr. Appel’s report indicated that a review of the medical records revealed the Applicant’s treating providers diagnosed her with cervical and thoracic sprain/strain.  By January 5, 2011, one treating provider advised Applicant she could return to work without restriction.  Dr. Appel diagnosed the Applicant with myofascitis but opined that she was capable of working.

The Applicant was a chiropractic assistant at the time of the accident and testified that she could perform billing and report preparation but not assist patients off the examination table.

The assigned arbitrator determined that Dr. Appel’s report was persuasive albeit minimally met the insurer’s burden.  The treating providers’ disability notes, without supporting documentation, did not rebut Dr. Appel’s report and, coupled with Applicant’s testimony, did not present a picture of someone incapable of working.

LITIGATION

09/28/12       Alfa Med. Supplies a/a/o Jose Cayetano v. Utica Mut. Ins. Co.
Appellate Term, Second Department
Insurer Created Issue of Fact Regarding Medical Necessity Precluding Complete Summary Judgment
The plaintiff’s summary judgment was partially improperly granted as the insurer submitted sufficient evidence that it timely denied the medical expense claim and submitted an affirmed peer review report creating an issue of fact on medical necessity.

 

 

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

Property

10/03/12       United States Dredging Corp. v Lexington Ins. Co.
Appellate Division, Second Department
Even Under an “All Risk” Policy, the Insured Still Must Prove the Loss Falls Within the Terms of the Coverage Provided

Plaintiff commenced the instant action after its claim for recovery of a crane was denied by Lexington.  In short, plaintiff argued that the crane had become dislodged due to a wind storm, and as such fell within the grant of the policy.  In opposition, Lexington argued that the crane set upon a pier that had deteriorated due to “wear and tear.”  Accordingly, Lexington asserted the “wear and tear” and “collapse” exclusions.

At the conclusion of non-jury trial, the Court returned a verdict in favor of Lexington.  In so holding, the Court noted that plaintiff failed to properly establish how the loss occurred.  Accordingly, even under an “all risk” policy, it never met its burden of establishing coverage.  Moreover, the Court also noted that Lexington’s delay in formally disclaiming did not result in a waiver of coverage defenses where, as here, the insured was aware of the potential for coverage issues as set out in an initial reservation of rights letter.

10/03/12       Wilner v Allstate
Appellate Division, Second Department
Earth Movement Exclusion Applies to Bar Coverage

We’ve been following this one for some time.  As noted in our January 22, 2010 issue of Coverage Pointers, we observed:
01/12/10 Wilner v. Allstate Insurance Company
Appellate Division, Second Department
A. Another Crack in The Dam? – Second Department Weighs In On GBL § 349 And Extra-Contractual Damages Available Thereunder
B. Deadly Delays in Discovery – Parties Must Timely Object to Discovery Demands; Especially in Cases Seeking Extra-Contractual Damages
For years, we’ve been warning of a potential shift in the law governing extra-contractual damages in New York. And, for the most part, the law has mostly remained intact. Make no mistake, however, the threat, and ever so slow erosion of established precedent, is still underway.
Our latest example of this trend, perceived or not, involves a first party property damage claim for damages sustained to an outside retaining wall and trees. The cause of the damage was a storm which allegedly caused the collapse of a hillside adjacent to the covered parcel. Not surprisingly, plaintiffs/insureds Wilners submitted a claim under their homeowners’ coverage with Allstate. When a dispute over the coverage could not be resolved, the Wilners commenced the instant action.

The Wilners first cause of action sought recovery for breach of the insuring agreement. The second cause of action sought recovery for an alleged breach of contract when Allstate denied the Wilners request for a defense in a related criminal proceeding (Note this claim was later dismissed). Finally, the Wilners commenced a third cause of action alleging a violation of General Business Law § 349. As a result of the alleged GBL violation, the Wilners also sought punitive damages and attorneys’ fees.
Allstate promptly moved to dismiss all three causes of action, along with the request for attorneys’ fees and punitive damages. In response, the Wilners cross-moved to compel a massive document production from Allstate.

We deal first with the issues surrounding the Wilners’ motion to compel. As a result of the motion to compel, the Wilners were awarded in camera production of
“all property damage claims under [Allstate Homeowners’ Policies like the one at issue] for damages resulting from a rain and/or wind storm which occurred on or about October 7, 2005 in Nassau County….and….all claims that resulted in litigation [for property damage] from October 7, 2005 through January 7, 2007 in Nassau County.”
This resulted in the production of 375 claims files. On appeal, the Second Department stated that because objections were not interposed within 20 days, as required by the CPLR, defendant was precluded from opposing the demands. Furthermore, the Court noted that the demands were not palpably improper because they were sufficiently tailored to claims related to the storm at issue.

We further note that defendant’s request for plaintiff to reimburse it for the cost of producing this discovery was also denied. According to the Second Department, the issue of costs incurred in discovery was not raised until the appeal.

*** Obviously, this decision underscores the absolute necessity of timely interposing objections to demands. As we have seen, the scope of discovery demands in an extra-contractual case has become increasingly broad. With this in mind, at a minimum, timely objections MUST be interposed in these cases. A better practice might be to aggressively challenge the scope of the demands by seeking a protective order, immediately, upon service ***

With respect to the GBL § 349 claim, in addition to serving as a vehicle for major discovery demands, it also provided the plaintiff with a “backdoor” argument to introduce a claim for punitive damages. Note, at no point, does the plaintiff allege bad faith. The punitive damages claim was based solely upon the alleged violation of the GBL. The Second Department points out that the plaintiffs did not seek punitive damages as a result of the alleged breach of contract.

In any event, the Second Department stated that the statutory protections under Section 349 should be broadly construed where there is an allegation of deceptive or misleading business practices involving economic activity. The Court noted that GBL § 349 claims have previously been found in disputes over (1) coverage and rate materials distributed by an insurance carrier, (2) defense obligations of insurance carriers, as well as (3) claim handling procedures in insurance cases.

The standard for pleading a GBL § 349 claim requires that the claimant demonstrate “consumer-oriented misconduct” which is “deceptive and misleading to a reasonable consumer” and which “causes actual damages [the damages need not be pecuniary].”

Here, the Wilners argued that the Allstate policy required them to undertake steps to protect Allstate’s possible subrogation claims. With the statute of limitations about to expire on a potential subrogation claim, the Wilners commenced an action against the Village of Roslyn. This was apparently undertaken by the Wilners without ever asking Allstate if it intended to proceed with the subrogation arguments.

The Wilners argue that Allstate’s failure to reach a timely coverage decision forced the Wilners into prosecuting a subrogation claim on behalf of Allstate. The Wilners argue if the subrogation action was not commenced, Allstate would have disclaimed coverage for the Wilners’ failure to preserve and protect Allstate’s possible subrogation rights.
Further, the Wilners argue that the delay of Allstate was intentionally undertaken with the purpose of forcing the Wilners to incur legal fees, and as such is part of a larger consumer oriented scheme employed by Allstate to have subrogation claims prosecuted at the cost to their insureds.

Because this same condition requiring the protection of subrogation rights is found in every Allstate homeowners’ policy, the Wilners argue that Allstate’s scheme has a “broad impact on consumers at large.” As such, the Wilners maintain that this falls neatly within the scope of GBL § 349.

Importantly, Allstate moved to dismiss the GBL §349 for failure to state a cause of action. In deciding this motion, the Court is required to accept all allegations of the opposing party as true. As such, the allegations set forth by the Wilners, which for the purposes of deciding Allstate’s motion the Court must accept as true, meet all of the criteria for successfully pleading a GBL claim.

Understanding that the claim was procedurally correct, Allstate argued that the Wilners’ interpretation of their duties to protect subrogation rights was unreasonable. In response to this position, the Court noted that the reasonableness of the Wilners’ interpretation of their requirements under the policy was a question of fact that must be determined by the jury.
Having established that the Wilners had met their burden of asserting a viable claim under GBL § 349, the Second Department also commented on damages that may be recoverable. Initially, the Court noted that Section 349 explicitly provides recovery of actual damages, as well as treble damages up to $1,000.

In addition, because the Wilners alleged that Allstate intentionally withheld its coverage decision to force the Wilners to commence the subrogation action against the Village of Roslyn, these allegations, if proven correct, could form the basis for punitive damages.
Finally, the Court noted that the Trial Court has broad discretion in awarding attorneys’ fees incurred in prosecuting a violation of GBL § 349. As such, the Court refused to dismiss any claim for attorneys’ fees at this time.

*** This case, along with others we have seen in the last few years, amounts to a complete end run to avoid prosecuting a bad faith claim. As you all know, under the Court of Appeals tests in Rocanova v Equitable Life Assur. Soc. of the United States and New York Univ. v Continental Ins. Co., proving Bad Faith in a First Party Insurance context is very difficult. It requires, at a minimum, a demonstration that (1) the claim is actionable as an independent tort, (2) that the carrier’s action was egregious, (3) that it was directed at the insured and to the general public as a whole
As a way around this, Plaintiffs are now using GBL § 349 as a method to open up discovery and seek extra-contractual/punitive damages. As this case starkly points out, it is much easier to assert a claim under GBL § 349 than it is to assert a claim under the traditional Bad Faith standard.

Clearly, GBL § 349 was never intended to govern a dispute over policy terms between carrier and insured. Then, again, one could argue that it was not meant to apply to a carrier’s duty to defend where there were covered and non-covered grounds ---that is until the Third Department’s decision in Elacqua v. Phys. Reciprocal Insurers was handed down.

This case, as with the decisions in Elacqua, Bi-Economy v. Harleysville, and Panasia Estates v. Hudson Ins. Co., all underscore how plaintiffs are using creative arguments to circumvent New York’s long standing rules which limit excess/punitive exposure in First Party Coverage disputes. It is important to note that, to date, these efforts have not resulted in an award. However, with each case that avoids immediate dismissal, the chance of the standard governing punitive damages being relaxed continues to increase ***

That was the background, Elizabeth Fitzpatrick takes over with a first-hand account of how the matter was resolved.

In the continuing saga of Wilner v. Allstate, the Second Department on October 3, 2012, affirmed the trial court’s grant of summary judgment to Allstate, finding that property damage allegedly sustained by the plaintiff following a heavy rain storm was excluded by the policy exclusion for earth movement of any type, rejecting plaintiff’s contention that plaintiff’s property was damaged because a municipal drain above the retaining wall had become clogged, a peril they contended was covered by the Allstate policy.

The court held that the exclusion clearly and unambiguously applied to preclude coverage for the loss, finding that the predominant cause of the loss was excluded.  The policy included an exclusion which explicitly provided that where two or more causes of loss exist, coverage would not be available where the predominant cause of the loss was excluded.

You may recall that the Second Department’s decision on the General Business Law §349 aspect of the claim was discussed at length in the January 22, 2010 issue of Coverage Pointers.  This is the only cause of action which remains, as the court declined to grant Allstate’s pre-answer motion to dismiss the claim, which denial was upheld by the Second Department.  Leave to appeal the decision was denied by the New York Court of Appeals.  We will keep you posted on future developments.

Peiper’s Point – Again, kudos to Beth Fitzpatrick from the Lewis Johs office, the successful attorney in the matter, for a long, hard fought victory and an even better write up!

10/03/12       Azzato v Allstate Insurance Company
Appellate Division, Second Department
Overstated Proof of Loss = Loss of Coverage; Coverage Limited to Insured’s Actual Interest in the Property
Plaintiff Azzato jointly purchased certain real property with non-party Richard Pleasants. As part of the purchase, Mr. Azzato procured landlord’s package policy with Allstate.  Mr. Azzato’s wife, Tricia Williamson, was named as an insured on that policy as well.  After a fire caused significant damage, Azzato and Williamson submitted a claim for $250,000 dollars in damage to Allstate.

Allstate denied the claim by arguing that Mr. Azzato submitted fraudulent proofs of loss with respect to personal property located within the premises.  In addition, even if Mr. Azzato had not submitted false and/or misleading claims, he was only a 50% owner of the premises.  Accordingly, as the policy only provided coverage the assured’s insurable interest, Allstate’s exposure to Mr. Azzato was limited, at most, to 50% of the loss.   Along these lines, Allstate argued that because Ms. Williamson possessed no insurable interest in the premises, she was not entitled to any coverage.

In denying Allstate’s motion for summary judgment, the Trial Court noted that a question of fact existed as to whether Mr. Azzato’s proof of loss violated the “concealment and fraud” portion of the policy.  The Trial Court also ruled that a question of fact on the issue of insurable interest existed because that term was ambiguous.

With regard to the “concealment and fraud,” the Appellate Division noted that coverage is vitiated if it is clearly established that the insured “intentionally made false and fraudulent statements or intentional swore falsely.”  Intent is conclusive where, as here, it is established that the insured’s explanation “is so unreasonable or fantastic that it is inescapable that a fraud has occurred.” Here, the submission of inflated cost estimates and altered receipts established the existence of fraud.

In addition, even if fraud was not established, the Court concluded that Mr. Azzato’s claim would have been limited to the percentage of his insurable interest.  In so holding, the Appellate Division explicitly rejected the notion that the term “insurable interest” was ambiguous.  Instead, the Court noted “insurable interest” was defined within the Insurance Law, as well as scores of other cases from around the State.  As the premises were only 50% Mr. Azzato’s, the Court noted that, at a maximum, his recovery was limited to 50%.

 

Finally, the Court also noted that Ms. Williamson possessed no ownership, and therefore no insurable interest in the property.  Accordingly, Ms. Williamson had no rights to coverage for the loss of the premises.  She was, however, permitted to proceed in a claim for the loss of an antique dining room set which may have belonged to her. 

Peiper’s Point – The Court makes very clear that “insurable interest” does not require that the person seeking coverage be the owner of an item.  Rather, the test is whether the continued existence of the property would provide the insured with a pecuniary benefit – or – alternatively, whether the loss of the property would cause a pecuniary loss.

Potpourri

09/28/12       Kregg v Maldonado
Appellate Division, Fourth Department
Court, AGAIN, Strikes Down Social Media Discovery Requests as Overly Broad
Defendant, Suzuki, sought disclosure of the “entire contents” of plaintiff’s pages on MySpace and Facebook.  Plaintiff opposed the request, and filed a motion for a protective order arguing that Suzuki’s request amounted to nothing more than a fishing expedition.

On appeal, the Fourth Department noted that it would not “prune” overly broad discovery demands.  Instead, standing precedent instructs that the entirety of discovery demands be struck as overly broad.  The Court went to state that while permissible discovery under Article 31 is broad, there must be some factual predicate with respect to the relevancy of the material.  Where, as here, Suzuki’s demand was not tailored to the facts and injuries at issue in the current case, its demand were stricken as overly broad. 

Peiper’s Point – Can’t say we didn’t warn you.  As set forth in in our November 26, 2010 issue, and more particularly in Kohane’s Corner, we noted:

11/12/10 McCann v. Harleysville Insurance Company
Appellate Division, Fourth Department
Social Media Discovery: Facebook Access. Not Now. Maybe Later.
McCann commenced an automobile accident, settled the claim and then brought an action for underinsured motorist benefits against Harleysville. The insurer sought an order compelling plaintiff to disclose photographs and seeking access to the plaintiff’s Facebook account. It was claimed that access was relevant on the issue of “serious injury” under the No Fault law. The court concluded that the request was overbroad, granted a protective order, but gave leave to the insurer to file more narrowly tailored demands.

In a second appeal, with more narrow demands, the application for discovery of Facebook access was still denied. It was claimed that the insurer was seeking permission to conduct “a fishing expedition" into plaintiff's Facebook account based on the mere hope of finding relevant evidence. However, the appellate court found that at some later date, if may be appropriate to allow access to plaintiff’s Facebook account. When? Unclear. What will make the access less of acceptable at a later date? That is also unclear.

If you’re looking for MySpace/Facebook information, the demand needs to be narrow, and supported with a strong argument why the information is needed. 

09/28/12  Sniatecki v Violet Realty
Appellate Division, Fourth Department
Espinal re-visted:  Absent Three Distinct Situations, Service Contractors are Exempt from Common Law Indemnity Claims.
Plaintiff sustained injury during the course of her employment at a food stand located within the Main Place Mall in Buffalo, New York.  Plaintiff’s injury was caused due to a wet, slippery floor that was resultant from a backup of a drain at her employer’s stand.  Accordingly, plaintiff sued the Main Liberty Group, and Violet Realty, under a basic premises liability claim.

Essentially, plaintiff maintained that the defendants violated their own protocol for cleaning the drains, and were, as such, negligent as a matter of law.

Upon being named in the suit, defendants Main Place and Violet immediately commenced a third-party action against Farara and Roy’s Plumbing.  Farara, apparently, had been retained to remedy the clog.  When Farara could not open the clog, the contacted Roy’s Plumbing who, eventually, opened the drain.

Of importance in the instant matter, Farara and Roy’s both moved to dismiss the third-party claims asserted against them by the defendants.  With respect to the claims of contractual indemnification and failure to procure insurance, the Court noted that the lack of a formal contract between the parties precluded any contractual award. 

In addition, the Court also affirmed the dismissal of common law indemnity claims against Farara and Roy’s.  In so holding, the Court noted “plaintiff's accident was not attributable to [their] [Farara and Roy’s] negligent performance or nonperformance of an act solely within [their] province"

Finally, defendant’s claims for common law contribution were dismissed where, as here, there was no evidence that Farara and/or Roy’s assumed any duty of care to the plaintiff.  Recall that, in the current instance, Farara and Roy were simply service contractors.  As such, under the Court of Appeals’ long standing Espinal decision, there is no duty unless the service contractor (a) launches an instrument of harm; (b) totally displaces the owner’s duty to maintain the premises or (c) where the owner detrimentally relies upon the service contractor.  As none of those situations were in play in the instant case, it followed that the Fourth Department summarily dismissed defendant’s common law contribution claims.

09/28/12  Genesee/Wyoming YMCA v  Bovis Lend Lease LMB, Inc.
Appellate Division, Fourth Department
Where No Allegation of Vicarious Liability Exists, There Is No Cause of Action for Common Law Indemnity
In this case, the YMCA retained Bovis to assist its efforts in constructing a new pool.  Bovis’ role in the project was “to review and approve design, constructability and materials used to construct the roof and insulation systems."  The YMCA subsequently retained Whitney East to serve as the General Contractor for the job, and Thomas Associates to serve as the architect.  Although the evidence suggests that Whitney expressed concerns over the design and implementation of the project, Bovis nonetheless approved Thomas’ plans. 

Naturally, as there is a lawsuit now at issue, the project had major defects which resulted in additional costs and expenses to the YMCA.  The YMCA commenced the instant action alleging that Bovis failed to perform its obligations under the contract, and that Bovis was unjustly enriched because it was paid for its expertise in reviewing drawings and proposals, and accordingly it should have spotted the issues related to the design plans. 

After being named as a defendant by the YMCA, Bovis commenced a third-party action against Thomas for common law indemnity.  Thomas immediately moved to dismiss the action by arguing that Bovis was not entitled, as a matter of law, to an award of common law indemnity.  The Court agreed by noting that the theory of common law indemnity permits a non-negligent party to shift its tort exposure to the culpable party.  Where, as here, the allegations against Bovis were due to its own negligence and failure to honor to the terms of its own contract, the Court noted that Bovis did not face vicarious liability due to the actions or inactions of Thomas. Rather, Bovis only faced its own exposure for its own negligence, and there was no right common law indemnity accordingly. 

09/28/12  Converse v Dole Food Co., Inc.  
Appellate Division, Fourth Department
Under California Law (as in NY), Indemnity Agreements Must be Strictly Construed
Plaintiff, a truck driver for Leonard’s Express sustained injury when the truck she was operating overturned due to an improperly loaded trailer.  The trailer, which was full of bananas, was apparently loaded at the direction of Dole Fresh Fruit.  Upon being named in this suit, Dole commenced a third-party action against Leonard’s which sought contractual indemnification.

The contract, which required California law be applied, provided that Dole was entitled to indemnification from Leonard’s.  Although, as the Court noted, under California law a party may be indemnified for its own negligence, it must explicitly reference that intent in the contract.  Where there is no indication that one party is assuming the indemnity of another party’s own negligence, Courts are instructed to strictly construe the breadth of the clause at issue.

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

A10784/S7787 – PREVIOUSLY DISCUSSED SUM LEGISLATION – Thousands Hope for Veto

SUM COVERAGE WILL BE AUTOMATICALLY PROVIDED IF GOVERNOR SIGNS

The below summary was previously provided in our July 6, 2012 coverage pointers.  We want to take a moment to highlight the fact that although this Legislation passed the Assembly and the Senate, the Governor has neither signed nor vetoed this Legislation to date.  Currently organizations such as the New York Insurance Association (“NYIA”) and New Yorkers Stand Against Auto Insurance Fraud (“NYSAIF”) are working and lobbying the Governor’s office to veto the Legislation upon its delivery.  In short, the Legislation that passed the Senate and Assembly will no longer make SUM coverage optional, and it will likely result in increased premiums to the insured.   Further opposition to this bill arises out of the belief that this Legislation will merely provide an additional avenue for fraud and additional incentive for staged accidents. 

Below is our previous summary of the legislation:

Currently, Insurance Law §3420 allows an insured the option of purchasing SUM benefits up to the limits of bodily injury liability limits they had purchased under their automobile liability policy.  Now, assuming the Governor signs the bill, rather than having the option to purchase SUM coverage, SUM coverage will be automatically provided with the same limits as your bodily injury limits unless the insured rejects the coverage. 

The legislation also specifically sets forth how an insured may reject the limits of SUM coverage automatically assigned to the insured.  The rejection of the coverage must be memorialized by the insurer through a signed writing or other means of evidencing the rejection of coverage.  If the insured rejects SUM coverage or lowers the SUM limits in written or electronic form, the rejection must be on a form provided to the insured at the time the policy is sold.  The form must fully advise the insured of the nature of the coverage and must state that the coverage is equal to the bodily injury limits unless the insured specifically requests lower limits or the coverage is rejected in its entirety.

The form supplied by the insurer must be in 12 point bold type and must state:

Supplementary uninsured/underinsured motorists coverage (SUM coverage) protects against the possibility of an accident involving another motor vehicle whose owner or operator was negligent and who may have no insurance whatsoever; or even if insured, is only insured for third-party bodily injury at relatively low liability limits, in comparison to the policyholder’s own liability limits for bodily injury sustained by third-parties.  By purchasing SUM coverage, the policyholder and any insured under the policy can be protected for bodily injury to themselves and receive from the policyholder’s own insurer payment for bodily injury sustained due to the negligence of the other motor vehicle’s owner or operator.  SUM coverage shall be equal to bodily injury liability limits unless lower limits are requested or the coverage is rejected.  A policyholder is urged to consider purchasing the maximum SUM coverage available.”

When the insured verbally rejects the mandatory SUM coverage and limits, the rejection may be received by the insurer after the sale.  However, the rejection must be in writing or signed by electronic signature.  Furthermore, if the rejection is made verbally, the insurer or the agent must read the language set forth above and confirm the client has heard and understood the same.  The bills specifically states that the insurer or the agent should restate the above language until the insured has verbally confirmed that they fully understand.

Additionally, the insurer must notify the named insured at least annually of his or her SUM coverage options.  Furthermore, receipt of the waiver does not constitute waiver of the SUM coverage unless the insured has signed a selection or rejection form.

While this is a significant change for New York, most if not the majority of states automatically provide coverage unless the insured specifically rejects the coverage.  In those states, litigation is often commenced by the insured seeking SUM benefits when the SUM benefits were either alleged to have been rejected or reduced.  The courts are asked to determine whether the coverage was properly rejected.  Generally, the rejection of coverage will only be upheld in those instances where the statute was strictly complied with; otherwise, the courts will hold that the SUM coverage automatically available under the statute is applicable.

Although unrelated to SUM benefits, this legislation also amends the Insurance Law by adding §5109-a which allows the superintendent to prohibit an unauthorized provider of durable medical equipment from requesting payment for the equipment for a period to be determined by the superintendent if the superintendent determines after notice and hearing that the provider.

1. Has engaged in a pattern and practice of fraudulent, excess or unlawful billing.
2. Has engaged in a pattern and practice of billing insurance companies for durable medical equipment it has not provided
3. Has engaged in a pattern and practice of billing insurance companies for durable medical equipment that was not necessary
4. Has committed a fraudulent insurance act as defined in §176.05 of the Penal Law
5. Has been convicted of a crime involving fraudulent or dishonest practices
6. Has refused to appear or answer any questions upon the request of the superintendent or refused to produce any relevant information concerning the providers conduct
7. Has violated any provision of this article or regulations thereunder.

 

Both provisions of the Insurance Law would be amended as stated above, 180 days after it becomes law.  

 

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

09/25/12       Southern Snow Mfg. Co. v. SnoWizard Holdings 
United States District Court – Eastern District Louisiana
Malicious Prosecution and the Insurer’s Duty to Defend
The controversy in this matter involves whether the four corners of the complaint allege sufficient facts to support a malicious prosecution claim against third-party Plaintiffs SnoWizard, Inc. and Ronald Sciortino (collectively “SnoWizard”), to trigger coverage under a policy issued by Hanover Insurance Company [“Hanover”].

On July 11, 2011, this Court consolidated this case with other Consolidated Cases.  On August 27, 2011, Plaintiffs amended their complaint and added claims against SnoWizard for monopolization of the snowball industry through alleged fraudulent procurement of certain trademark and patent rights, and for fraudulent assertions based upon nonexistent trademark and patent rights.  SnoWizard put Hanover on notice of the claim and Hanover concluded that its policy provisions did not compel it to defend SnoWizard in the case.

Hanover denied under both the Coverage A and Coverage B sections of its policy.  Specific to Coverage B, Hanover argued that the Original Complaint and the Amended Complaint did not allege a cause of action for malicious prosecution.  While Plaintiffs alleged that SnoWizard “made baseless claims against [Plaintiffs]” and instigated “abusive fraudulent litigation”, in reference to one of the consolidated cases, Hanover argued that those claims were insufficient to implicate a cause of action for malicious prosecution and “trigger” coverage under the policy.  Citing to the Federal Rules of Civil Procedure and Supreme Court precedent, Hanover argued that a plaintiff must “sufficiently state a claim” and articulate specific facts that implicate the elements of the underlying claim.  Hanover argued that to trigger coverage under Coverage B for malicious prosecution, the plaintiff must allege that “the insured brought a lawsuit against another party which was terminated in that party’s favor.”  Hanover maintained that because the alleged “abusive fraudulent litigation” is still pending, a claim of malicious prosecution would be premature.  In addition, Hanover argued that the Plaintiffs’ claims for infringement are also excluded from coverage pointing to the Infringement of Copyright, Patent, Trademark or Trade Secret Exclusion because the claims were for trademark infringement, which is explicitly excluded from coverage under the policy, and not for infringement of copyright, trade dress, or slogan, which would not trigger the exclusion.

SnoWizard argued that the duty to defend is much broader than the duty to indemnify.  SnoWizard acknowledged that the civil action at issue was still pending, but stressed that the Plaintiffs’ complaint was silent as to the result of the lawsuit.  Therefore, it was SnoWizards’ contention that Plaintiffs’ silence in its complaint regarding termination of the lawsuit in its favor left open the possibility that the suit had been terminated, creating a “possibility of liability” under the policy and triggering Hanover’s duty to defend.

In determining whether coverage was triggered the court first addressed the issue of whether the Plaintiffs’ allegations sufficiently pled a cause of action for malicious prosecution.  In analyzing the pleadings the court noted that pleadings that offer “labels and conclusions” or “naked assertions devoid for further factual enhancement” do not constitute a plausible claim.  The court also noted that nowhere did Plaintiffs’ complaint allege that a suit had terminated in its favor, as required by Louisiana law for a claim of malicious prosecution.  Without this critical element, the court could not say that there was a “possibility of liability” to implicate the insurer’s duty to defend.

The court concluded that SnoWizard was asking the court to make numerous assumptions that were not obvious from the face of the complaint to find a claim for malicious prosecution.  The court noted that the inferences SnoWizard was asking the court to make exceeded the threshold of liberal construction and instead waded into “the territory of inconsistent, unsupportable, and improbable”.

Accordingly, the court granted Hanover’s motion for summary judgment holding that the insurer did not have a duty to defend SnoWizard.

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
[email protected] 

09/17/12       Mutual Assoc. Adm’r, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA
Supreme Court, Suffolk County
New York Trial Court Dismisses Punitive Damages Claim, but Allows Consequential Damages Claim to Remain in Third-Party Context
This is a New York trial court decision in which the plaintiff sought consequential and punitive damages for injuries allegedly suffered as a result of the defendant’s breach of contract.  Plaintiff was the named insured on a Multi-Employer Plan/Trustees ERISA Liability Policy issued by defendant. 

The United States Secretary of Labor commenced the underlying action against plaintiff for breach of fiduciary duties as a third-party administrator on a benefits trust.  Defendant appointed counsel to represent plaintiff in the action.  In early 2003, the Secretary of Labor proposed a settlement, which the defendant recommended should be accepted.  However, the plaintiff rejected the settlement on the grounds that the Secretary of Labor would not agree to withdraw a press release which had been distributed concerning the plaintiff’s malfeasance, and the settlement would leave open the possibility of civil penalties that would not be covered by the policy.  Due to plaintiff’s refusal to accept the settlement offer, defendant notified it that it would not pay for any additional defense costs or expenses in the action.  Thereafter, plaintiff continued to litigate the matter at its own expense. 

Eventually, plaintiff could no longer sustain the cost of its defense, which resulted in the withdrawal of its counsel and a default judgment entered against it.  While all this was going on, defendant continued to negotiate a settlement of the monetary claims.  It eventually settled the matter on terms favorable to the plaintiff, including a waiver of civil penalties.  

Thereafter, plaintiff brought this action to recover damages including loss of income, the loss of its business, and its attorneys’ fees in defending the ERISA action and in prosecuting this action.  Defendant moved for summary judgment dismissing plaintiff’s claim of breach of contract and its request for punitive and consequential damages. 

With regard to the breach of contract claim, defendant essentially argued that plaintiff had two options under the terms of the policy:  (1) consent to the offer of settlement, or (2) negotiate/defend itself without reimbursement.  In support of this argument, defendant pointed to a portion of the condition’s section, entitled Defense Costs, Charges and Expenses, which stated that:

[t]he Company shall have the right to make such investigation and negotiation, and with the written consent of the Insureds, such settlement or compromise of any claim or suit recommended by the Company, based upon a judgment or a bona fide offer of settlement, the Insureds shall thereafter negotiate or defend such claim or suit independent of the Company and on their own behalf, and in such event, the damages and expenses accruing or determined through litigation or otherwise, in excess of the amount for which settlement could have been made as so recommended by the Company, shall not be recoverable under this Policy.

The court however disagreed that these were the insureds only options.  Specifically, it found the policy ambiguous in light of another provision which provided that the insured shall have the option to “consent to a settlement acceptable to the company and the claimant, which consent shall not be unreasonably withheld.”  In the court’s view, as ambiguities are construed against the drafter, the court denied defendant’s motion holding that it had not established that plaintiff’s action in withholding consent was unreasonable.

With regard to the request for punitive damages, the court dismissed the claim holding that a public right was not involved and plaintiff did not allege any gross, wanton or willful fraud on the part of the defendant (citing the Rocanova test).

Lastly, the court considered the claim for consequential damages.  Citing the Court of Appeals decision in Bi-Economy, the court refused to dismiss this claim holding that the complaint and bill of particulars adequately set forth factual allegations which pled a cause of action that the defendant had breached the implied covenant of good faith and fair dealing, enabling the plaintiff to seek consequential damages.  Further, defendant failed to submit any evidence that the damages plaintiff sought were not contemplated at the inception of the policy. 

Notably, the court held that defendant’s request for attorneys’ fees incurred in prosecuting this action must await trial.  It noted that while an insured is barred from recovering its attorneys’ fees in an action against its insurer alleging breach of contract, there appears to be a narrow exception where an insurer breaches the implied covenant of good faith and fair deal and, in bad faith, refuses to pay a claim of its own insured. 

Take Away:  What is worth noting about this decision is the application of Bi-Economy and consequential damages in the third-party liability context.  As a refresher, in Bi-Economy, the insured owned a retail market that sustained fire damage.   It submitted a business interruption claim under its policy.  By the time the claim was resolved, Bi-Economy’s operations were completely shut down.  It then brought an action against its insurer seeking damages for the complete demise of its business.  In deciding the case, the Court concluded that the entire purpose of business interruption insurance is to place the insured “back on its feet as soon as possible.”

In turn, the Court reasoned that the insurer “knew that failure to perform would (a) undercut the very purpose of the agreement and (b) cause additional damages that the policy was purchased to protect against in the first place.”   The Court went on to note that “when an insured suffers additional damages as a result of….excessive delay or improper denial, the insurance company should stand liable for these damages.”  

The concept of consequential damages, as explained by the court in Bi-Economy, is rooted in the fact that implicit in all contracts is a covenant of good faith and fair dealing.  Thus, a party that breaches that covenant can be liable for the foreseeable damages resulting from that breach.  As Bi-Economy involved a claim for first-party benefits, and consequential damages are rooted in a contract law concept, many have interpreted this decision to relate only to first-party claims.  Here, the court applies Bi-Economy in the third-party context.  It will be interesting to see whether this decision is appealed, and if the implication of Bi-Economy is addressed. 

Also, you should note how the insured uses the idea of consequential damages to argue that he is entitled to attorneys’ fees that would otherwise be prohibited.

 

MARC’S REMARKS

Marc A. Schulz
[email protected]

09/12/12       Forest Labs., Inc. v Arch Ins. Co.
Supreme Court, New York County
Where Underlying Insurers Never Paid Full Policy Amounts Due to Settlements, and Excess Policy Unambiguous, Excess Insurer Only Pays After Underlying Insurers Pay Up to Their Policy Limits
In this action to collect under an excess insurance policy, defendant RSUI Indemnity Co. (RSUI) moves to dismiss the complaint.  Forest Labs was insured under excess policy for directors and officers, issued by RSUI with $10 million limit.  RSUI’s policy was last layer of coverage of $70 million in underlying insurance procured from seven other insurance companies.  The insurance company directly below RSUI was Old Republic, and Arch was the excess insurer below Old Republic.

Forest Labs was sued in several actions alleging securities fraud which settled for $65 million and now claims considerable unpaid extra claims and defense costs exist, adding several million over the settlement amount.  Forest Labs settled with the primary carrier and four excess carriers for their policy limits and seeks to recover the remainder allegedly due from Arch, Old Republic and RSUI.  Forest Labs contend RSUI, as last layer of excess is obligated to pay the final $10 million in defense and indemnity costs because an “attachment point” was reached when policy limits of Old Republic were satisfied.  Forest Labs did not settle with Arch and Old Republic for total amount of insurers’ coverages but negotiated settlements where each insurer paid part of the $10 million and Forest Labs “filled in the gaps” to reach the limit. 

RSUI argues that based on the fact that neither Arch nor Old Republic paid the entirety of their limits as Forest Labs “filled in the gaps” in reach said limits, Forest Labs never actually reached the limits and thus, no “attachment point” was ever reached.  As such, RSUI contends it owes nothing to RSUI.  RSUI’s had a “follow form” policy.

The court determines that RSUI’s own policy language is sufficient to bar Forest Labs’ right to coverage as it stated “it is agreed that the Insurer shall not pay any amount until all retentions and Underlying Limits of Liability have actually been paid.”  The policy further says that RSUI will pay upon the exhaustion of the underlying policies “solely as a result of actual payment of a Covered Claim pursuant to the terms and conditions of the Underlying Insurance thereunder…”  Forest Labs unsuccessfully argued that the “follow form” language only applies to questions of scope of coverage and not exhaustion of policy limits.

Thus, the court determined the language in RSUI’s policy was not ambiguous as Forest Labs contended and held RSUI pays only after the underlying insurers pay up to their policy limits, although the court noted RSUI’s policy language could have used better language.  Consequently, the court dismissed the complaint, finding RSUI’s policy was never reached and it is not liable to make up the difference between Forest Labs final costs and amounts which it settled for with the underlying insurers.      

09/27/12       Payson v 50 Sutton Place S. Owners, Inc.
Supreme Court, New York County
Lease and Insurance Policy Language Explicitly Provided for Waiver of Subrogation Rights
Payson owns a co-op and commenced this action against it and building manager to recover damages based on alleged water damage and mold contamination in her apartment.  One claim is for damages which her insurance carrier has not paid her for and the other is a claim assigned to her by her carrier. 

Defendants moved for summary judgment dismissing complaint on ground that complaint is time-barred by statute of limitations and that plaintiff waived her right to bring the assigned claim.

Plaintiff reported loss to her property insurance carrier on 9/27/06 arising from the leaks and molds.  The carrier paid plaintiff for relocation expenses and for costs incurred in restoring the apartment.  One 10/14/09 plaintiff commenced this action for items not reimbursed by her carrier.  After commencing this action, plaintiff obtained an assignment from her carrier of its subrogation claim and amended the complaint. 

The lease contained a provision stating in the event the lessee suffers loss/damage for which lessor would be liable and lessee has insurance which covers such loss and the policy contains a waiver of subrogation against lessor, then lessee releases lessor from any liability.  Plaintiff’s insurance policy with her carrier provided “…you may waive any rights of recovery from another person or organization for a covered loss in writing before the loss occurs.  Condominiums: We waive any rights of recovery against the corporation or association of property owners of the condominium where the residence is located.”

The court held based upon the language cited above, there has been an explicit waiver of the right of subrogation based on the language in the insurance policy because the policy unambiguously provides the insurance company waives any rights of recover against condominiums.  According to the court, because the policy clearly refers to the apartment that is insured as a condo and because policy explicitly provides the insurance company waives any subrogation claims it has against a condo, it was clearly the intent of the drafter of the policy that any subrogation claims/rights were being waived as against the apartment even though it is a co-opt. 

Therefore, defendants’ motion to dismiss on the grounds of a statute of limitations defense was granted solely to extent plaintiff’s claim for monetary damages are limited to those alleged to have occurred within three years of this action.  Defendants motion also granted to dismiss the assigned claim on ground that plaintiff waived right to bring this claim.  

09/28/12       Logan Bus Co., Inc. v Discover Prop. & Cas. Ins. Co
Supreme Court, Queens County
“Abuse or Molestation” Endorsement Policy Only Covers Sexual Misconduct of Employee/Worker of Insured Arising From Ownership, Maintenance or Use of Auto and Does Not Cover Students
Logan brought this declaratory judgment action declaring Discover Prop & Cas. (Discover) is obligated to defend and indemnify it in the underlying action.  Plaintiff in the underlying action was sexually assaulted by another student on a school bus and the assault was committed in full view of bus matron.  Allegations in the underlying action include, among others, negligent supervision, negligent hiring, training, and supervision of its employees. 

Discover issued a business automobile policy to NYC DOE including Logan as an additional insured.  The policy required Discover Prop. & Cas. to pay for “bodily injury” to any person arising out of “abuse or molestation” caused by an “accident” from the ownership, maintenance or use of a covered “auto.”  An “abuse or molestation” endorsement stated it must be caused by one of the insured’s “employees” or volunteer workers or arise out of the insured’s failure to properly supervise.  Discover disclaimed coverage under the policy upon the ground that the loss did not result from the ownership, maintenance, or use of a covered auto. 

Logan argued it was entitled to summary judgment because Discover can point to no exclusion in the policy to avoid coverage and that the “abuse or molestation liability” provision covers sexual assaults committed by third parties because it does not affirmatively disclaim coverage and in fact, provides coverage for sexual abuse or molestation caused by the insured’s “failure to properly supervise.”  Logan further argued the policy provides coverage for the conduct of bus passengers as abusers or molesters based upon the use of a single conjunction. 

The court determined, however, the policy explicitly provides coverage only with respect to sexual misconduct committed by the insured’s employees or volunteer workers.  According to the court, there is no basis for defining the “supervision” of a person for whom the insured was “legally responsible” as including a student because the only covered sexual misconduct is that of an employee or worker of the insured.  Further, this is apparent from the inclusion of coverage for negligence on the part of Logan not only in the supervision, but in the employment, investigation, and retention of such person for whom Logan was legally responsible. 

Therefore, the court held the allegations in the underlying action, assuming their truth, that Logan should be held liable in damages for the sexual assault of the infant plaintiff by a fellow student do not suggest any possibility of coverage owed by Discover and it is clear from the policy provision relied upon by Logan that there is no possibility Discover may be obligated to defend or indemnify it under the facts of this case.  Thus, the court denied Logan’s summary judgment motion. 

10/01/12       Hernandez v Lapham
Supreme Court, Suffolk County
Expert’s Failure to Address Multiple Bulging Discs and Failure to Rule Out Plaintiff’s Injuries Not Causally Related to Accident Fatal to Defendant’s Summary Judgment Motion
Plaintiff’s vehicle was struck in the rear and as a result, she filed suit claiming she suffered a serious injury under the “permanent loss of use” category of Insurance Law § 5102(d).  Defendant moved for summary judgment by submitting, among others, the report of Dr. Katz regarding his IME of plaintiff.

Although Dr. Katz stated plaintiff’s MRI reports of cervical and lumbar spine and right shoulder indicate degenerative changes, the court determined he failed to set forth the basis for this conclusory opinion.  Further, Dr. Katz also failed to address multiple bulging discs found in plaintiff’s cervical, lumbar and thoracic spine, and did not rule out that they are not causally related to the accident.  The court also found an issue of fact regarding normal range of motion values as Dr. Katz used different values than those found in plaintiff’s expert report.  Dr. Katz acknowledged plaintiff has cervical and thoracolumbrosacral radiculopathy but failed to rule out plaintiff’s radicular claims as he failed to submit an independent neurological evaluation.  Finally, Dr. Katz did not address the results of the electrodiagnostic studies referenced in his report.

Moreover, Defendants examining physician failed to comment on plaintiff’s 90/180 claim because he did not examine plaintiff within the statutory period.  As Defendant was the moving party, the court denied their summary judgment motion because Defendants failed to establish prima facie that plaintiff did not suffer a serious injury.

10/01/12       Bonneannee v Bernard
Supreme Court, Queens County
Expert Reports Identifying Injuries Degenerative and Not Secondary to Accident and Finding No Limitations of Range of Motion Sufficient to Shift Burden on Summary Judgment Motion
Plaintiff was involved in a three-car accident and allegedly sustained disc herniations of the cervical spine at C3-4, C4-5, C5-6, and C6-7, as well as tear of labrum of the right shoulder.  Plaintiff contends he sustained a serious injury.  Defendants moved for summary judgment by submitting, among others, affirmed medical reports of neuroradiologist, neurologist, and an orthopedist.

The neuroradiologist noted herniate discs at C3-4, C5-6, and C6-7 but stated changes were hypertrophic, indicating his findings are chronic and degenerative and not secondary to the accident.  An MRI of plaintiff’s right shoulder stated rotator cuff intact and normal.  The neurologist examined plaintiff, found no limitations of range of motion of plaintiff’s cervical spine, and diagnosed him as “status post cervical sprain resolved.”  Further, the neurologist noted no evidence of neurological disability and no permanent injury.  Lastly, the orthopedist also found no limitation of range of motion of the right shoulder and noted he may preform activities of daily living without restriction.

Plaintiff’s EBT revealed he only missed one month of work after the accident.  Plaintiff’s counsel did not opposed defendant’s motion on the merits.  The court held defendants’ motion raised an issue as to whether plaintiff sustained a serious injury.  Therefore, the burden shifted to plaintiff to establish the existence of an issue of fact as to whether he suffered a serious injury.  As plaintiff failed to do so, the court granted defendants motion and dismissed plaintiff’s complaint.

EARL’S PEARLS
Earl K. Cantwell
[email protected]

IT’S LEGAL FOOTBALL SEASON FOR POLICY EXCLUSION

A serious crane collapse case in New York City was the setting for a series of policy exclusion decisions which became a legal football passed from court to court to court and back.  Admiral Insurance Co. v. Joy Contractors, Inc., 2012 W.L. 2092863 (Court of Appeals, June 1, 2012).  The crane collapse accident killed seven people during construction of a condominium building in New York City.  The contractor had excess insurance coverage with Admiral Insurance, and after receiving notice of the accident, Admiral sent a reservation of rights letter to the insured and several companies that claimed to be additional insureds.  The essential basis of the coverage denial was that the accident took place during “residential construction activities” which were excluded by the policy.  Admiral then sued the contractor, and others claiming to be additional insureds, seeking a declaration of no coverage. 

The trial court denied the insurance company’s Motion for Summary Judgment on the basis that there was “conflicting evidence” whether the building under construction was strictly residential or would (could?) contain mixed uses. 

The football was then passed to the Appellate Division, 1st Dept., which held that the residential construction provision did not apply to the claims.  The Appellate Division then passed the football by certifying the question to the Court of Appeals, in effect asking if rejecting the residential construction exclusion was in error.  The Court of Appeals received the punt and rather than making a fair catch returned the ball and issued a decision which ultimately ran the ball back to the trial court’s side of the field. 

The Court of Appeals said that, based on the exclusion language, there appeared to be coverage for construction of a residential building that may have commercial or retail components (a “mixed use” development).  The Court of Appeals, in reviewing the record, concluded that there were issues of fact whether the building was to be strictly residential or of such a mixed use, and the Appellate Division was in error in ruling out the possibility of applying the policy exclusion as a matter of law.  Whether the policy exclusion applied in this case was not so much a question of law or language interpretation, but one of facts.

Therefore, the case went into overtime and back to the Trial Court presumably for a trial or other proceedings to determine whether the building was “strictly residential” or would be subject to mixed use development which might exclude the “residential construction” exclusion.  Further litigation, appeals, and reports on SportsCenter will certainly ensue from this litigation.

 

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

10/03/2012   Slominski v. Citizens Property Insurance Corp.
District Court of Appeal for the State of Florida, Fourth District
Appellate Court Affirms Summary Judgment for Insurer After Inconsistent Statements from Insured’s Witnesses
Appellant homeowners, Edward and Joyce Slominski, challenged the trial court’s summary judgment entered in favor of appellee, Citizens Property Insurance Corporation, on their claim for hurricane damage from Hurricane Wilma.  At the time of Hurricane Wilma, the Slominskis had an insurance policy with Citizens.  Following the storm, they made minimal repairs to their home, costing well under their policy’s deductible.  Three and a half years later, the Slominskis filed a claim with Citizens for wind and water damage resulting from Hurricane Wilma.  Citizens made a final determination that the damage could not be attributed to Hurricane Wilma due to the amount of time that transpired between the purported date of loss and the date the damage was reported. The Slominskis then filed suit.

After discovery was conducted, Citizens filed a motion for summary judgment.  In opposition to the motion the Slominskis filed the depositions and affidavits of their contractor and the engineer who inspected their home.  The deposition testimony of the contractor and engineer did not indicate that Hurricane Wilma was the definite cause of the damage, while their affidavits stated that Hurricane Wilma was the cause.  The trial court granted Citizens’ motion for summary judgment.

The appellate court affirmed.  The appellate court stated that in delayed notice cases the prejudice to an insurer is presumed, but if the insured can demonstrate that the insurer was not prejudiced by the late notice, then the insurer will not be relieved of liability merely by a showing that notice was not given as soon as possible.  The Slominskis were unable to demonstrate a lack of prejudice because the statements provided by the contractor and engineer were inconsistent.  The court stated that, “the subsequent affidavits’ statements were inconsistent with the prior deposition testimony, and therefore, the Slominskis were not entitled to rely upon them in opposition to summary judgment.  Absent the statements contained in the affidavits, the Slominskis were unable to offer any evidence confirming that Hurricane Wilma caused the damage to their home, and that Citizens would not be prejudiced as a result of the delayed notice.
Submitted by: Gregory L. Cochran and Timothy M. Hayes of McKenna Storer 

 

REPORTED DECISIONS

Donald Braasch Construction, Inc. v. State Insurance Fund

Appeal from an order of the Supreme Court, Erie County (Diane Y. Devlin, J.), entered July 29, 2011. The order denied plaintiffs' motion for summary judgment.

Carroll Mcnulty & Kull, LLC, New York City (Kristin V. Gallagher of Counsel), for Plaintiffs-Appellants.
Harris Beach PLLC, Buffalo (Richard T. Sullivan of Counsel), for Defendant-Respondent.

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

Memorandum: Plaintiffs commenced this action seeking a judgment declaring, inter alia, that defendant is "conditionally obligated" to indemnify them in the underlying personal injury lawsuit (see e.g. Puckett v County of Erie [appeal No. 3], 262 AD2d 966; Puckett v County of Erie [appeal No. 2], 244 AD2d 865). The accident that is the subject of the underlying lawsuit occurred in March 1994 and, in April 1995, the personal injury plaintiffs commenced that lawsuit against, inter alia, plaintiff Donald Braasch Construction, Inc. (DBC). It is undisputed that DBC did not notify defendant of the accident or the personal injury lawsuit until May 1997, at which time defendant disclaimed coverage on the ground that the notice was untimely. Plaintiffs moved for summary judgment seeking a declaration that defendant must reimburse plaintiffs for one half of the settlement amount and one half of their defense costs in the underlying lawsuit. Supreme Court denied the motion, concluding that "questions of fact exist, particularly with respect to whether the delay was reasonable." Plaintiffs appeal from the order denying their motion and, notwithstanding the fact that defendant did not move or cross-move for affirmative relief and also did not cross-appeal from the order, defendant contends that we should dismiss plaintiffs' complaint in its entirety. Although we recognize that defendant is entitled to seek such relief on this appeal by plaintiff (see Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106, 110-111), we now affirm.

"Notice provisions in insurance policies afford the insurer an opportunity to protect itself . . ., and the giving of the required notice is a condition to the insurer's liability . . . Absent a valid excuse, a failure to satisfy the notice requirement vitiates the policy" (Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 440). " The burden of justifying the delay by establishing a reasonable excuse is upon the insured' " (Philadelphia Indem. Ins. Co. v Genesee Val. Improvement Corp., 41 AD3d 44, 46), and such excuses include the lack of knowledge of an accident (see Security Mut. Ins. Co. of N.Y., 31 NY2d at 441); a good-faith and reasonable basis for a belief in nonliability (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742, 743; Security Mut. Ins. Co. of N.Y., 31 NY2d at 441; Philadelphia Indem. Ins. Co., 41 AD3d at 46); and a good-faith and reasonable basis for a belief in noncoverage (see Strand v Pioneer Ins. Co., 270 AD2d 600, 600-601; Seemann v Sterling Ins. Co., 267 AD2d 677, 678; Reynolds Metal Co. v Aetna Cas. & Sur. Co., 259 AD2d 195, 200-201; see generally Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 21).

The issue on this appeal is whether DBC had a good-faith and reasonable belief that its Workers' Compensation and Employers' Liability Policy with defendant did not cover the accident and resultant litigation. DBC submitted evidence that the injured plaintiff was not DBC's employee, rendering defendant's policy inapplicable, and that the claims for contractual indemnification were excluded from coverage under defendant's policy. Additionally, DBC submitted evidence that the first claim against DBC that would arguably be covered under its policy was made in April 1997. Defendant, however, submitted evidence that DBC knew of the facts implicating coverage on the date of the accident or, at the very latest, when it moved for summary judgment in 1996 on the ground that the injured plaintiff was a special employee of DBC. "Of course, there is no inflexible test of reasonableness. As with most questions whose answers are heavily dependent on the factual contexts in which they arise, rules of general application are hard to come by" (Mighty Midgets, 47 NY2d at 19-20). We thus conclude that there are triable issues of fact whether DBC's belief in noncoverage was reasonable (see Reynolds Metal Co., 259 AD2d at 201; Seemann v Sterling Ins. Co., 234 AD2d 672, 673).

Zaidi v. New York Building Contractors, Ltd

Fabiani Cohen & Hall, LLP, New York, N.Y. (Thomas J. Hall and P. Michelle Kucsma of counsel), for third-party defendant-appellant.
Hankin & Mazel, PLLC, New York, N.Y. (Mark L. Hankin and Noe Solorzano of counsel), for defendants third-party plaintiffs-respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, the third-party defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Queens County (Satterfield, J.), dated October 25, 2010, as, upon reargument, adhered to so much of its original determination in an order of the same court dated April 16, 2007, as denied that branch of its motion which was for summary judgment dismissing the fourth cause of action in the third-party complaint.
ORDERED that the order dated October 25, 2010, is reversed insofar as appealed from, on the law, with costs, and, upon reargument, so much of the determination in the order dated April 16, 2007, as denied that branch of the motion of the third-party defendant which was for summary judgment dismissing the fourth cause of action in the third-party complaint is vacated, and that branch of the motion is granted.

The plaintiff commenced this action against the defendants to recover damages for personal injuries sustained on a construction site while he was employed by the third-party defendant LTC Electric, Inc. (hereinafter LTC). The defendants third-party plaintiffs, New York Building Contractors, Ltd., and Valenza Contractors, Inc., the owner of the premises and the general contractor for the construction project, respectively, commenced a third-party action against LTC, asserting four causes of action.

 

LTC moved for summary judgment dismissing the third-party complaint. In an order dated April 16, 2007, the Supreme Court granted those branches of the motion which were for summary judgment dismissing the first, second, and third causes of action. However, the court denied that branch of LTC's motion which was for summary judgment dismissing the fourth cause of action, which alleged breach of contract. The court determined that there was an issue of fact as to whether LTC breached an agreement to procure insurance naming the third-party plaintiffs as additional insureds.

LTC subsequently moved for leave to reargue that branch of its motion which was for summary judgment dismissing the fourth cause of action in the third-party complaint. Upon reargument, the Supreme Court adhered to its original determination with respect to that branch of the motion.

"The fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent" (Greenfield v Philles Records, 98 NY2d 562, 569). "Thus, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms" (id. at 579).

"Extrinsic evidence of the parties' intentions may be considered only if the agreement is ambiguous or incomplete" (Knight v Barteau, 65 AD3d 671, 672; see Henrich v Phazar Antenna Corp., 33 AD3d 864, 867). However, courts may not add terms to a contract and thereby make a new contract for the parties under the guise of interpreting the writing (see Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d 470, 475; Henrich v Phazar Antenna Corp., 33 AD3d at 867). Therefore, a court "will not imply a term where the circumstances surrounding the formation of the contract indicate that the parties, when the contract was made, must have foreseen the contingency at issue and the agreement can be enforced according to its terms" (Reiss v Financial Performance Corp., 97 NY2d 195, 199; see Henrich v Phazar Antenna Corp., 33 AD3d at 867). "Where a valid contract is incomplete, extrinsic evidence is admissible to complete the writing if it is apparent from an inspection of the writing that all the particulars of the agreement are not present, and that evidence does not vary or contradict the writing" (Matthius v Platinum Estates, Inc., 74 AD3d 908, 909; see Thomas v Scutt, 127 NY 133, 138; Valente v Allen Shuman & Irwin Richt, D.P.M., P.C., 137 AD2d 678, 679).

Here, LTC established that its failure to procure insurance naming the third-party plaintiffs as additional insureds did not constitute a breach of contract. LTC submitted, inter alia, the written agreement between it and the third-party plaintiffs, which did not require it to procure insurance naming the third-party plaintiffs as additional insureds. Accordingly, LTC established, prima facie, its entitlement to summary judgment dismissing the fourth cause of action, which alleged breach of contract (see Flynn v Toys "R" Us, Inc., 31 AD3d 603, 604).

In opposition, the third-party plaintiffs failed to raise a triable issue of fact. Contrary to the contention of the third-party plaintiffs, the written agreement between them and LTC was complete and enforceable according to its terms (see Reiss v Financial Performance Corp., 97 NY2d at 199; Thomas v Scutt, 127 NY at 138). Accordingly, the extrinsic evidence offered by the third-party plaintiffs in opposition to LTC's motion should not have been considered and, upon reargument, the Supreme Court should have granted that branch of LTC's motion which was for summary judgment dismissing the fourth cause of action in the third-party complaint (see Cohn v Titan Drilling Corp., 79 AD3d 925, 926; Harris v Hallberg, 36 AD3d 857, 859).

Hermitage Insurance Company v. JDG Lexington Corp

Max W. Gershweir, New York, for appellant.
Warren L. Cohen, Tuckahoe, for JDG Lexington Corp., respondent.
Friedman, Hirschen & Miller, LLP, Albany (Carolyn B. George of counsel), for Barbara Post and Alfred Sniffen, respondents.

Order, Supreme Court, New York County (Manuel J. Mendez, J.), entered December 6, 2011, which denied plaintiff Hermitage Insurance Company's motion for summary judgment declaring that it had no duty to defend and indemnify defendant JDG Lexington Corp. in an underlying personal injury action, unanimously reversed, on the law, without costs, the motion granted, and it is declared that plaintiff has no such duty.

Notwithstanding the fact that the insured may have mistakenly believed, based on the lease of its commercial tenant, that it was not responsible for the area where the plaintiff in the underlying action fell, the insured had a duty to report the possibility of a claim as soon as practicable (see Paramount Ins. Co. v Rosedale Gardens, 293 AD2d 235, 239-240 [1st Dept 2002]).

Moreover, it is undisputed that the insured did not undertake any investigation of the incident, or make inquiry regarding its alleged belief that it was not responsible for the area where the accident occurred. Thus, it could not have formed a reasonable belief of non-liability (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742, 743-744 [2005]; Tower Ins. Co. of N.Y. v Jaison John Realty Corp., 60 AD3d 418, 418-419 [1st Dept 2009]).

A party may not seek to avoid the consequences of its failure to give notice within a reasonable period of time by asserting that it had a reasonable, good faith belief that the accident would not result in liability where, as here, the insured's principals were aware of the accident, it involved a tenant who slipped and fell on the insured's premises and the tenant had to be transported by ambulance (see Tower Ins. Co. of N.Y. v Lin Hsin Long Co., 50 AD3d 305, 307-308 [1st Dept 2008]).

Similarly, because the injured party failed to give any notice to plaintiff, she must rely on the sufficiency of the notice provided by the insured which, as discussed above, was untimely (Lin Sing Long, 50 AD3d at 308-309).

We have considered the parties' remaining arguments and find them unavailing.

Njie v. Thompson

Ginsberg & Wolf, P.C., New York (Martin Wolf of counsel), for appellant.
Cheven, Keely & Hatzis, New York (William B. Stock of counsel), for respondent.

Order, Supreme Court, New York County (George J. Silver, J.), entered August 26, 2011, which granted defendant's motion for summary judgment dismissing plaintiff's complaint, based on the failure to establish a serious injury within the meaning of Insurance Law § 5102[d], unanimously reversed, on the law, without costs, and the motion denied.

Defendant made a prima facie showing of entitlement to summary judgment as to plaintiff's claims of "significant limitation of use" of his right shoulder (Insurance Law § 5102[d]; see Spencer v Golden Eagle, Inc., 82 AD3d 589, 590 [1st Dept 2011]). Defendant submitted an expert medical report finding normal ranges of motion, as well as the report of a radiologist who opined that the MRI of plaintiff's shoulder revealed no abnormalities.

In opposition, plaintiff raised a triable issue of fact, since his treating physicians found a tear in his right shoulder (see Duran v Kabir, 93 AD3d 566, 567 [1st Dept 2012], Peluso v Janice Taxi Co., Inc., 77 AD3d 491, 492 [1st Dept 2010]), and recent range of motion limitations in his right shoulder (see Jacobs v Rolon, 76 AD3d 905 [1st Dept 2010]).

Since the Court of Appeals rejected "a rule that would make contemporaneous quantitative measurements a prerequisite to recovery," there was no requirement that the treating physician set forth any objective test that would have been used at that time (see Perl v Meher, 18 NY3d 208, 218 [2011]). Dr. Cortijo's report of an examination the day after plaintiff's accident established the requisite causation (id. At 217-218 ["a contemporaneous doctor's report is important to proof of causation" (emphasis omitted)]); plaintiff was not required to submit evidence of any quantified range of motion testing performed at that time (see Biascochea v Boves, 93 AD3d 548, 548-549 [1st Dept 2012]).

We note that if plaintiff prevails at trial on his serious injury claims, he will be entitled to recovery also on his non-serious injuries caused by the accident (see Linton v Nawaz, 14 NY3d 821 [2010]; Rubin v SMS Taxi Corp., 71 AD3d 548 [2010]).

Bykova v. Sisters Trans, Inc.

Maroney O'Connor, LLP, New York, N.Y. (Ross T. Herman of counsel), for appellants Sisters Trans, Inc., and Yadwinder Singh.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y. (Stacy R. Seldin of counsel), for appellants Gepet Corporation and Mahbubul Alam.
Raskin & Kremins, LLP, New York, N.Y. (Michael F. Kremins of counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the defendants Sisters Trans Inc., sued herein as Sisters Trans, Inc., and Yadwinder Singh appeal, and the defendants Gepet Corporation and Mahbubul Alam separately appeal, as limited by their respective briefs, from so much of an order of the Supreme Court, Kings County (Partnow, J.), dated June 28, 2011, as denied their separate motions for summary judgment dismissing the complaint insofar as asserted against each of them on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

ORDERED that the order is affirmed, with one bill of costs.

The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The plaintiff alleged, inter alia, that as a result of the subject accident, she sustained injuries to the cervical, thoracic, and lumbar regions of her spine and her right shoulder in addition to sustaining a left pneumothorax requiring surgical intervention. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical, thoracic, and lumbar regions of the plaintiff's spine and to the plaintiff's right shoulder did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Staff v Yshua, 59 AD3d 614; Rodriguez v Huerfano, 46 AD3d 794, 795), and that the pneumothorax was not causally related to the subject accident (see Scott v Aponte, 49 AD3d 1131, 1133-1134).

The defendants also submitted evidence establishing, prima facie, that the plaintiff did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d) (see McIntosh v O'Brien, 69 AD3d 585, 587).
However, in opposition, the plaintiff provided competent medical evidence raising triable issues of fact as to whether her alleged injuries constituted serious injuries under the significant limitation of use category of Insurance Law § 5102(d) and whether the pneumothorax was caused by the subject accident (see Perl v Meher, 18 NY3d 208, 217; Tudor v Yetman, 88 AD3d 870, 870-871; Dixon v Fuller, 79 AD3d 1094, 1094-1095). Accordingly, the Supreme Court properly denied the defendants' separate motions for summary judgment dismissing the complaint.

Chryssty v. Koskovolis

William Pager, Brooklyn, N.Y., for appellant.
Montfort, Healy, McGuire & Salley, Garden City, N.Y. (Donald S. Neumann, Jr., and Arthur R. Simuro of counsel), for respondent Louis Koskovolis.
Cuomo, LLC, New York, N.Y. (Paul Meli of counsel), for
respondent Bruce Yafa.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals, as limited by her brief, from so much of an order of the Supreme Court, Nassau County (Brown, J.), entered June 23, 2011, as granted those branches of the separate motions of the defendants Louis Koskovolis and Bruce Yafa which were for summary judgment dismissing the complaint insofar as asserted against each of them on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

ORDERED that the order is reversed insofar as appealed from, on the law, with one bill of costs, and those branches of the separate motions of the defendants Louis Koskovolis and Bruce Yafa which were for summary judgment dismissing the complaint insofar as asserted against each of them on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) are denied.

The defendants Louis Koskovolis and Bruce Yafa met their prima facie burdens of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). Koskovolis and Yafa submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Rodriguez v Huerfano, 46 AD3d 794, 795).

However, in opposition, the plaintiff submitted competent medical evidence raising a triable issue of fact as to whether the alleged injuries to the cervical and lumbar regions of her spine constituted serious injuries under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d) (see Perl v Meher, 18 NY3d 208, 215-218). Accordingly, the Supreme Court should have denied those branches of the separate motions of Koskovolis and Yafa which were for summary judgment dismissing the complaint insofar as asserted against each of them on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

Yafa's alternative contention that the Supreme Court should have granted that branch of his motion which was for summary judgment on the issue of liability (see Parochial Bus Sys. v Board of Educ. of City of N.Y., 60 NY2d 539; Volkov v Girsh, 9 AD3d 424, 425) is without merit. Yafa failed to establish, prima facie, that he was not negligent in the operation of his vehicle (cf. Volkov v Girsh, 9 AD3d at 425).

Verkey v. Hebard

Appeal and cross appeal from an order of the Supreme Court, Seneca County (Dennis F. Bender, A.J.), entered July 26, 2011 in a personal injury action. The order denied the motion of defendants for summary judgment on the issue of serious injury, denied that part of plaintiff's cross motion seeking summary judgment on the issue of serious injury and granted that part of plaintiff's cross motion seeking summary judgment on the issue of negligence.

Hagelin Kent, LLC, Liverpool (Keith D. Miller of Counsel), for Defendants-Appellants-Respondents.
William K. Mattar, P.C., Williamsville (April J. Orlowski of Counsel), for Plaintiff-Respondent-Appellant.

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by denying plaintiff's cross motion for partial summary judgment in its entirety and as modified the order is affirmed without costs.

Memorandum: Plaintiff commenced this action seeking damages for injuries he sustained when a vehicle owned by defendant Roy F. Hebard, Jr. and driven by defendant Roy W. Hebard collided with a vehicle driven by plaintiff. Defendants moved for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of the three categories of Insurance Law § 5102 (d) alleged in the complaint, as amplified by plaintiff's bill of particulars, i.e., the permanent consequential limitation of use, significant limitation of use, and 90/180-day categories of serious injury. Plaintiff cross-moved for partial summary judgment on liability, i.e., on the issues of negligence and serious injury (see generally Ruzycki v Baker, 301 AD2d 48, 51-52).

Addressing first the issue of negligence, we conclude that Supreme Court erred in granting that part of plaintiff's cross motion with respect to that issue. We therefore modify the order accordingly. Although plaintiff met his initial burden by establishing " that the sole proximate cause of the accident was [defendant driver's] failure to yield the right of way' to plaintiff" (Guadagno v Norward, 43 AD3d 1432, 1433; see Kelsey v Degan, 266 AD2d 843, 843), defendants raised a triable issue of fact by presenting evidence that the collision was head-on and that defendant driver was stopped in his lane of travel at the time of the collision (see Phillips v Bartholomew, 20 AD3d 920, 921-922; see generally S.J. Capelin Assoc. v Globe Mfg. Corp., 34 NY2d 338, 341). Contrary to plaintiff's contention, the fact that defendant driver entered a plea of guilty to a Vehicle and Traffic Law offense is only some evidence of negligence and does not establish his negligence per se (see Kelley v Kronenberg [appeal No. 2], 2 AD3d 1406, 1407; Canfield v Giles [appeal No. 1], 182 AD2d 1075, 1075).

The court properly denied both defendants' motion and that part of plaintiff's cross motion for summary judgment on the issue of serious injury. We note at the outset that plaintiff's contention that his injury constitutes a permanent loss of use under Insurance Law § 5102 (d) is not properly before us inasmuch as it is raised for the first time on appeal (see Ciesinski v Town of Aurora, 202 AD2d 984, 985).

We conclude that there are issues of fact on the record before us with respect to the categories of permanent consequential limitation of use and significant limitation of use, based on the conflicting expert opinions submitted by the parties (see Cooper v City of Rochester, 16 AD3d 1117, 1118). Notably, we reject defendants' contention that the affirmed report of their retained physician established that plaintiff's injury was related to a preexisting condition and thus that, as a matter of law, it was not causally related to the instant accident (see generally Spanos v Fanto, 63 AD3d 1665, 1666). Here, although plaintiff had a preexisting degenerative disc disease as noted on a CT scan taken on the day of the accident and an MRI taken one month later, that condition was, by all accounts, asymptomatic at the time of the accident. It is well settled that the aggravation of an asymptomatic condition can constitute a serious injury (see Austin v Rent A Ctr. E., Inc., 90 AD3d 1542, 1543; Terwilliger v Knickerbocker, 81 AD3d 1350, 1351). Moreover, the existence of an asymptomatic condition predating an accident merely indicates a plaintiff's susceptibility to injury; it does not constitute proof that a plaintiff did not sustain a serious injury in the subject accident (see Feaster v Boulabat, 77 AD3d 440, 440-441). We further conclude that both defendants and plaintiff failed to meet their initial burden on the 90/180-day category (see Hedgecock v Pedro, 93 AD3d 1143, 1143) and that, in any event, there is a triable issue of fact with respect to that category (see generally Zuckerman v City of New York, 49 NY2d 557, 562).

Mendola v. Doubrava

Appeal from an order of the Supreme Court, Erie County (Timothy J. Walker, A.J.), entered November 17, 2011 in a personal injury action. The order granted the motion of defendants for summary judgment on the issue of serious injury and dismissed the complaint.

Friedman & Ranzenhofer, P.C., Akron (Michael H. Ranzenhofer of Counsel), for Plaintiff-Appellant.
Hagelin Kent LLC, Buffalo (Victor M. Wright of Counsel), for Defendants-Respondents.


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

Memorandum: Plaintiff commenced this action seeking damages for injuries she sustained when the vehicle in which she was a passenger was struck by a vehicle owned by defendant Kathleen M. Siglin and operated by defendant Robin Doubrava. We conclude that Supreme Court properly granted defendants' motion for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d).

Defendants met their initial burden of establishing that plaintiff did not sustain a serious injury under any of the categories alleged, i.e., the permanent consequential limitation of use, significant limitation of use and 90/180-day categories, and plaintiff failed to raise a triable issue of fact in opposition (see generally Zuckerman v City of New York, 49 NY2d 557, 562).

In support of their motion, defendants submitted the affirmed report of a neurologist who examined plaintiff and her medical records at the request of defendants. Defendants' expert concluded that the only objective medical findings with respect to any alleged injury related to a preexisting degenerative condition of the spine. "[W]ith persuasive evidence that plaintiff's alleged pain and injuries were related to a preexisting condition, plaintiff had the burden to come forward with evidence addressing defendant[s'] claimed lack of causation" and, here, plaintiff failed to meet that burden (Carrasco v Mendez, 4 NY3d 566, 580; see Briody v Melecio, 91 AD3d 1328, 1329). Although plaintiff submitted the reports of three examining physicians, none of those physicians concluded that plaintiff's herniated discs or disc protrusions at C5-6 and/or C6-7 were caused by the accident. Indeed, the report of an examining neurologist submitted by plaintiff concluded that she had "pre-existing degenerative disc disease of the cervical spine (as evidenced on cervical spine MRI of 10/28/08 performed only three weeks after the motor vehicle accident)." Contrary to plaintiff's contention, there is nothing speculative or otherwise inappropriate relating to the interpretation and use of the MRI reports by defendants' expert in formulating his opinions (see Carrasco, 4 NY3d at 578-579).

Pannell-Thomas v. Bath

Law Office of Belovin & Franzblau, LLP, Bronx (David A. Karlin of counsel), for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., Brooklyn (Stacy R. Seldin of counsel), for respondent.

Order, Supreme Court, Bronx County (Sharon A.M. Aarons, J.), entered on or about October 31, 2011, which denied defendant's motion for summary judgment dismissing plaintiff's complaint alleging serious injuries under Insurance Law § 5102(d), and denied plaintiff's cross motion for partial summary judgment on the issue of threshold injury, unanimously affirmed, without costs.

Defendant established prima facie that plaintiff did not sustain a "permanent consequential" or "significant" limitation of use of the spine by submitting the affirmed report of a neurologist noting the absence of permanent neurological disabilities, full ranges of motion, and negative objective tests (see Barry v Arias, 94 AD3d 499, 499 [1st Dept 2012]). Defendant also made a prima facie showing that plaintiff's injuries were not causally related to the accident by submitting the affirmed MRI reports of a radiologist who concluded that the changes observed in the spine were degenerative (Gibbs v Reid, 94 AD3d 636, 637 [1st Dept 2010]).

In opposition, plaintiff raised a triable issue of fact as to existence of a permanent consequential or significant limitation of use of her lumbar spine. The affirmed report of her radiologist showed disc herniations, root impingements, and bulging discs, and her treating physician performed EMG studies confirming radiculopathies in the spine. The treating physician also reported quantified range-of-motion limitations and positive tests during the course of treatment (see Williams v Tatham, 92 AD3d 472, 473 [1st Dept 2012]). The treating physician's affirmation also raised a triable issue of fact as to causation, as she opined that plaintiff's injuries were causally related to the accident based on, among other things, the fact that plaintiff was asymptomatic and had an active lifestyle for several years before the accident (see Perl v Meher, 18 NY3d 208, 219 [2011]; Seck v Balla, 92 AD3d 543, 544 [1st Dept 2012]).

As to the 90/180-day claim, although defendant did not submit any evidence disproving plaintiff's testimony that she was unable to work for six months due to a medically determined injury, he met his prima facie burden by submitting evidence that plaintiff's injuries were not caused by the accident (see James v Perez, 95 AD3d 788, 789 [1st Dept 2012]). Plaintiff, however, raised an issue of fact and established prima facie existence of a 90/180-day injury by submitting her physician's affirmation stating that the injuries caused by the accident prevented plaintiff from working and performing her regular daily activities during the requisite period, that plaintiff returned to work six months after the accident against the doctor's medical advice, and that plaintiff was partially disabled during the period (see Williams, 92 AD3d at 473). Thus, defendant was properly denied summary judgment, and the issue of fact as to causation precludes granting plaintiff partial summary judgment.

Jackson v. Leung

Goidel & Siegel, LLP, New York (Andrew B. Siegel of counsel), for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., Brooklyn (Stacy R. Seldin of counsel), for Anthony S.C. Leung, respondent.
Marjorie E. Bornes, Brooklyn, for Nicolas Rosillo, respondent.

Order, Supreme Court, New York County (George J. Silver, J.), entered April 14, 2011, which granted defendant Anthony Leung's motion for summary judgment dismissing the complaint on the ground that plaintiff did not suffer a serious injury within the meaning of Insurance Law § 5102(d), and order, same court and Justice, entered August 29, 2011, which, upon plaintiff's cross motion to reargue Leung's motion, adhered to its prior order, and granted defendant Nicolas Rosillo's motion for summary judgment on res judicata grounds, unanimously reversed, on the law, without costs, the cross motion granted, and the motions denied.

Defendant Leung failed to meet his prima facie burden of showing that plaintiff did not suffer a serious injury to his lumbar spine since his sole medical expert, a neurologist, did not report the results of any range of motion testing, review the MRI film of plaintiff's spine, or offer any alternative opinion as to causation (see Perl v Meher, 18 NY3d 208 [2011]; Toure v Avis Rent A Car Sys, Inc., 98 NY2d 345, 350, 353 [2002]; McCree v Sam Trans Corp., 82 AD3d 601 [1st Dept 2011]). Moreover, defendant's neurologist acknowledged a 50% deficit in straight leg raising, which provides objective evidence of lumbar injury (see Brown v Achy, 9 AD3d 30, 32 [1st Dept 2004]), and did not adequately explain that finding (see Feaster v Boulabat, 77 AD3d 440 [1st Dept 2010]). Thus, the burden did not shift to plaintiff, who, in any event, raised an issue of fact with respect thereto by submitting the affirmation of his treating physician, who found recent limitations of range of motion in all planes, and relied on objective evidence, including an EMG/NCS study and MRI report (see Colon v Bernabe, 65 AD3d 969, 970 [1st Dept 2009]; Brown v Achy, 9 AD3d at 31-32).

Furthermore, contrary to the Supreme Court's holding, it was not necessary for plaintiff to proffer evidence of range of motion deficits contemporaneous with the accident, and, in any event, the physician reported that such limitations existed then (see Perl v Meher, 18 NY3d at 217-218; Paulino v Rodriguez, 91 AD3d 559, 559-560 [1st Dept 2012]). Defendant Leung did not raise a gap in treatment argument in his motion papers (Tadesse v Degnich, 81 AD3d 570 [1st Dept 2011]), and, in any event, plaintiff's treating physician proffered an explanation sufficient to raise an issue of fact (see Pommells v Perez, 4 NY3d 566, 577 [2005]; Jean-Louis v Gueye, 94 AD3d 504, 505 [1st Dept 2012]).

The order purporting to deny plaintiff's cross motion to reargue addressed the merits and, in so doing, in effect, granted plaintiff's motion and, therefore, the appeal taken therefrom is properly before this Court (see 21st Century Diamond, LLC v Allfield Trading, LLC, 88 AD3d 558, 559 n 1 [1st Dept 2011]; Matter of State Farm Mut. Auto. Ins. Co. v King, 304 AD2d 390 [1st Dept 2003]). For the foregoing reasons, the cross motion to reargue should have been granted and, upon doing so, the order granting defendant Leung's motion denied, and defendant Rosillo's motion denied.

Wunderlich v. Bhuiyan

Schlemmer & Maniatis, LLP, New York, N.Y. (Paul M. Schlemmer of counsel), for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y. (Stacy R. Seldin of counsel), for respondent Washim U. Bhuiyan.
Adams, Hanson, Rego, Carlin, Hughes, Kaplan & Fishbein, Lake Success, N.Y. (Judy Goodstein of counsel), for respondents Georgios A. Alexiou amd Despina Efremidis.


DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Butler, J.), entered April 8, 2011, which granted the motion of the defendant Washim U. Bhuiyan, and the separate motion of the defendants Georgios A. Alexiou and Despina Efremidis, for summary judgment dismissing the complaint insofar as asserted against each of them on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

ORDERED that the order is affirmed, with one bill of costs to the respondents appearing separately and filing separate briefs.

The defendants met their prima facie burdens of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the plaintiff's right knee did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Staff v Yshua, 59 AD3d 614), including evidence establishing, prima facie, that the plaintiff did not sustain a serious injury under the 90/180 day category of Insurance Law § 5102(d) (see Bamundo v Fiero, 88 AD3d 831).

In opposition, the plaintiff failed to raise a triable issue of fact (see Il Chung Lim v Chrabaszcz, 95 AD3d 950, 951; McLoud v Reyes, 82 AD3d 848, 849). Accordingly, the Supreme Court properly granted the defendants' separate motions for summary judgment.

Phillips v. Tolnep Limo Inc.

Mitchell Dranow, Sea Cliff, for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., Brooklyn (Stacy R. Seldin of coun
ssel), for respondents.

Order, Supreme Court, Bronx County (Mark Friedlander, J.), entered on or about May 18, 2011, which, insofar as appealed from, granted defendants' motion for summary judgment dismissing plaintiff Dean Phillips' complaint based on the failure to establish a serious injury within the meaning of Insurance Law § 5102(d), unanimously affirmed, without costs.

Defendants made a prima facie showing of entitlement to judgment as a matter of law as to plaintiff's claims of "permanent consequential" and "significant limitation of use" of his lumbar spine (Insurance Law § 5102[d]). Defendants submitted expert medical reports finding normal ranges of motion, as well as the report of a radiologist who opined that changes shown in an MRI of plaintiff were degenerative.

In opposition, plaintiff failed to raise a triable issue of fact as to his lumbar spine injuries. His physician's measurement of a minor limitation in one plane of range of motion was deficient in raising a triable of fact as to whether plaintiff sustained a serious injury (see Canelo v Genolg Tr., Inc., 82 AD3d 584 [1st Dept 2011]; see also Lattan v Gretz Tr. Inc., 55 AD3d 449 [1st Dept 2008]). Such finding does not amount to a serious, or important, limitation of the use within the meaning of Insurance Law § 5102(d) (see Sone v Quamar, 68 AD3d 566 [1st Dept 2009]).

Plaintiff's bill of particulars and deposition testimony refuted his 90/180-day claim, since he alleged that he was confined to home and bed for one week, after which time he returned to work (see Byong Yol Yi v Canela, 70 AD3d 584 [1st Dept 201]).

United States Dredging Corporation v Lexington Insurance Company

Kelly & Hazen, New York, N.Y. (James Hazen and William Roth
of counsel), for appellant.
Clausen Miller, P.C., New York, N.Y. (Edward M. Kay,
Courtney E. Murphy, Don R. Sampen, and
Mark J. Sobczak of counsel), for
respondent.


DECISION & ORDER

In an action to recover damages for breach of an insurance contract, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (McCarty III, J.), dated October 6, 2010, as, after a nonjury trial, in effect, upon reargument, granted the defendant's motion, in effect, inter alia, pursuant to CPLR 4404, for judgment as a matter of law dismissing the complaint.

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

The plaintiff sought to recover insurance proceeds from its insurer, the defendant, based on an incident wherein the plaintiff's pier, along with a large crane situated on top of it, collapsed into the Erie Basin near Red Hook, Brooklyn. The defendant disclaimed coverage and the plaintiff commenced this action to recover the proceeds. After a nonjury trial, the Supreme Court determined, inter alia, that the plaintiff failed to present sufficient prima facie proof that the damage to the pier and the crane was caused by wind, which would have been covered by the policy, and that the plaintiff failed to prove that it suffered prejudice as a result of any delay, false promises, or misleading behavior by the defendant in disclaiming coverage.

An "all-risk" policy allows recovery " for all losses not resulting from misconduct or fraud unless there is a specific policy provision excluding coverage of the loss in express terms'" (Roundabout Theatre Co. v Continental Cas. Co., 302 AD2d 1, 6, quoting M.H. Lipiner & Son, Inc. v Hanover Ins. Co., 869 F2d 685, 687). However, despite the "all risk" coverage, "[a]n insured seeking to recover for a loss under an insurance policy has the burden of proving that a loss occurred and also that the loss was a covered event within the terms of the policy" (Vasile v Hartford Acc. & Indem. Co., 213 AD2d 541, 541; see Morgan Stanley Group Inc. v New England Ins. Co., 225 F3d 270, 276). Labeling the policy as "all-risk" does not relieve the insured of its initial burden of demonstrating a covered loss under the terms of the policy (see Roundabout Theatre Co. v Continental Cas. Co., 302 AD2d at 6).

Here, the plaintiff failed to establish at trial that the loss of the crane and pier were covered under the terms of the policy. While the plaintiff had theorized that a windstorm caused the crane to move and shift, thereby undermining the structural integrity of the pier and, ultimately, resulting in its collapse, the evidence presented by the plaintiff demonstrated that the pier had been structurally compromised by years of wear and tear, and exhibited extreme levels of deterioration prior to the accident. Since wear and tear, deterioration and collapse, with some exceptions not applicable here, were explicitly excluded from coverage under the policy, the plaintiff's evidence did not establish coverage under the policy for the loss.

To the extent the plaintiff contends that the Supreme Court improperly limited the plaintiff's expert's testimony that wind was the cause of the incident, effectively precluding it from establishing coverage under the policy, the plaintiff's contention is without merit. The Supreme Court properly sustained the defendant's objections to the line of questioning in which the plaintiff sought to elicit its expert's conclusion that wind was the cause of the incident due to the plaintiff's failure to establish a proper foundation as to the basis for the expert's opinion (see Duran v Nassau County, 267 AD2d 346, 347).

Contrary to the plaintiff's contention, the Supreme Court did not err in finding that it failed to prove that it was prejudiced by the timing of the defendant's disclaimer, as the evidence adduced at trial established that the defendant clearly reserved its rights to disclaim coverage and, throughout the defendant's investigation of the loss, the plaintiff was aware that coverage was in question (see General Acc. Ins. Co. v 35 Jackson Ave. Corp., 258 AD2d 616, 618; Smith Jean, Inc. v Royal Globe Ins. Cos., 139 AD2d 503, 505).

The plaintiff's remaining contentions are without merit.

 Azzato v Allstate Insurance Company

Feldman, Rudy, Kirby & Farquharson, P.C., Jericho, N.Y. (Bruce
N. Farquharson of counsel), for appellant.
Philip L. Curcio, Smithtown, N.Y., for respondents.


DECISION & ORDER

In an action to recover benefits under an insurance policy, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Suffolk County (Mayer, J.), dated September 6, 2011, as, upon reargument, in effect, vacated an order of the same court dated June 7, 2010, granting that branch of its motion which was for summary judgment dismissing the complaint, and thereupon denied that branch of the motion and the alternative branch of its motion which was, in effect, for partial summary judgment limiting the potential recovery of damages by the plaintiff Raymond Azzato.

ORDERED that the order dated September 6, 2011, is modified, on the law, (1) by deleting the provision thereof, upon reargument, in effect, vacating the determination in the order dated June 7, 2010, granting that branch of the defendant's motion which was for summary judgment dismissing the complaint insofar as asserted by the plaintiff Raymond Azzato, and thereupon denying that branch of the motion and the alternative branch of its motion which was, in effect, for partial summary judgment limiting the potential recovery of damages by the plaintiff Raymond Azzato, and substituting therefor a provision, upon reargument, adhering to the determination in the order dated June 7, 2010, granting that branch of the motion, and (2) by deleting the provision thereof, upon reargument, in effect, vacating the determination in the order dated June 7, 2010, granting that branch of the defendant's motion which was for summary judgment dismissing so much of the complaint insofar as asserted by the plaintiff Tricia Williamson as sought to recover damages under the provisions of the insurance policy for injury to a dwelling, and substituting therefor a provision, upon reargument, adhering to the determination in the order dated June 7, 2010, granting that branch of the motion; as so modified, the order dated September 6, 2011, is affirmed insofar as appealed from, without costs or disbursements.

The plaintiff Raymond Azzato and a nonparty, Richard Pleasants, purchased certain real property located in East Islip (hereinafter the subject property), which was improved with a residence (hereinafter the subject dwelling). Azzato and his wife, the plaintiff Tricia Williamson, secured from the defendant insurance carrier a landlord's package insurance policy (hereinafter the policy) covering the subject dwelling and, inter alia, certain personal property located in the subject dwelling. The policy did not name Pleasants as a co-insured. The policy stated that Azzato and Williamson were insured only to the extent that they possessed an insurable interest in the property.

The plaintiffs commenced this action to recover benefits under the policy after a fire occurred on the subject property. The plaintiffs sought to recover the sum of $250,000, alleging that the defendant improperly denied their claim.

The defendant moved, inter alia, for summary judgment dismissing the complaint. The defendant contended that it had properly denied the claim since Azzato had submitted fraudulent evidence purporting to establish the cost of certain appliances which were allegedly located in the subject dwelling at the time of the fire. The defendant contended that Azzato's fraud vitiated coverage, since his actions breached the concealment and fraud provision of the policy. The defendant argued, in the alternative, that Azzato's insurable interest was limited to 50% of the value of the subject dwelling, as he was only a 50% owner of that dwelling. The defendant also contended that it was entitled to summary judgment dismissing the complaint insofar as asserted by Williamson since she was not named on the deed to the subject property and, therefore, did not have any insurable interest.

In an order dated June 7, 2010, the Supreme Court, treating the motion as unopposed, granted that branch of the defendant's motion which was for summary judgment dismissing the complaint. Thereafter, the parties stipulated that the defendant's motion had been timely opposed by the plaintiffs, and the plaintiffs moved for leave to reargue their opposition to the defendant's motion. In the order appealed from, the Supreme Court granted reargument, in effect, vacated its prior order, and thereupon denied the defendant's motion in its entirety. The court, in effect, concluded that there were triable issues of fact as to whether Azzato breached the concealment and fraud provision of the insurance policy and whether any fraud perpetrated by Azzato could be imputed to Williams. In addition, the court determined, in effect, that there was a triable issue of fact as to whether the policy limited recovery to the extent of the plaintiffs' insurable interests, since the relevant policy provision was ambiguous. The defendant appeals, and we modify.

The concealment and fraud provision of the policy provided, inter alia, that the defendant "does not cover you or any other person insured under this policy who has concealed or misrepresented any material fact or circumstance, before or after a loss." The defendant contends that Azzato breached this provision when he submitted a store receipt purporting to demonstrate the cost of the appliances allegedly damaged in the fire.

A concealment and fraud provision of an insurance policy "makes clear that the general rule of insurance law requiring good faith and fair dealing applies to fraudulent statements and false swearing made by an assured after a loss" (Domagalski v Springfield Fire & Mar. Ins. Co., 218 App Div 187, 189). "This provision is breached if an insured tenders a fraudulent proof of loss as the basis for a recovery under the policy" (Saks & Co. v Continental Ins. Co., 23 NY2d 161, 165; see Kantor Silk Mills, Inc. v Century Ins. Co., Ltd., 253 NY 584).

"Courts have been assiduous to prevent the use of the clause to bar a recovery where the alleged fraud or false swearing was not intentional, or the false statements were matters of opinion honestly, although mistakenly, held by the assured" (Domagalski v Springfield Fire & Mar. Ins. Co., 218 App Div at 189; see 70A NY Jur 2d, Insurance § 2017). "On the other hand, [courts] have not hesitated to hold that a recovery would not be permitted if it clearly appeared that the assured had intentionally made false and fraudulent statements or intentionally sworn falsely" (Domagalski v Springfield Fire & Mar. Ins. Co., 218 App Div at 189; see 70A NY Jur 2d, Insurance § 2022 [2011]).

Thus, a key issue in determining whether a concealment and fraud provision of an insurance policy has been breached is whether the inaccurate proof of loss was created or submitted with "a willful intent to defraud or to misrepresent the material facts" (St. Irene Chrisovalantou Greek Orthodox Monastery v Cigna Ins. Co., 226 AD2d 624, 624; see Christophersen v Allstate Ins. Co., 34 AD3d 515, 516). One manner in which fraudulent intent may be established is through proof that the claimed value of the loss was grossly disproportionate to the actual value of the loss (see Saks & Co. v Continental Ins. Co., 23 NY2d at 165; see also 70A NY Jur 2d, Insurance § 2022 [2011]). Such an inference of fraudulent intent raised by proof that the insured's claimed losses were grossly overvalued "becomes conclusive where it is shown that the difference between the amounts claimed in the proof of loss and those actually proved to have been destroyed are grossly disparate and the explanation tendered is so unreasonable or fantastic that it is inescapable that fraud has occurred" (Saks & Co. v Continental Ins. Co., 23 NY2d at 165-166; see Pipo Bar & Rest., Inc. v Certain Underwriters at Lloyd's at London, 15 AD3d 556, 556-557).

Here, the defendant established its prima facie entitlement to judgment as a matter of law dismissing the complaint insofar as asserted by Azzato by demonstrating that Azzato breached the concealment and fraud provision of the policy when he submitted proof, in support of his claim, purporting to establish the cost of the appliances allegedly located in the subject dwelling at the time of the fire. The defendant established that the price values submitted by Azzato were significantly inflated from the actual price that he paid (see Pogo Holding Corp. v New York Prop. Ins. Underwriting Assn., 97 AD2d 503, 505, affd 62 NY2d 969; Domagalski v Springfield Fire & Mar. Ins. Co., 218 App Div at 189).

In opposition, the plaintiffs failed to raise a triable issue of fact with respect to Azzato's breach of the concealment and fraud provision of the policy (see Pipo Bar & Rest., Inc. v Certain Underwriters at Lloyd's at London, 15 AD3d at 556-557). The plaintiffs' contention that the proof Azzato submitted was only intended to be a post-loss estimate of the replacement value of the appliances is belied by the fact that the proof he submitted was made to look like an actual receipt provided to him by the store on the date that he originally purchased the appliances (cf. Saks & Co. v Continental Ins. Co., 23 NY2d at 165-166). Thus, the form, in addition to the content, of Azzato's submitted proof of loss evinced his intent to deceive the defendant. Accordingly, the Supreme Court should have, upon reargument, adhered to its original determination granting that branch of the defendant's motion which was for summary judgment dismissing the complaint insofar as asserted by Azzato.

However, the independent wrongdoing of Azzato does not automatically vitiate any rights that Williamson may have under the terms of the policy. As indicated, the concealment and fraud provision of the policy only barred recovery from a named insured "who has concealed or misrepresented any material fact or circumstances." Accordingly, this clause only serves to vitiate the coverage of a named insured who has actually engaged in misrepresentation (see Krupp v Aetna Life & Cas. Co., 103 AD2d 252, 261; cf. Lane v Security Mut. Ins. Co., 96 NY2d 1, 5).

Here, the defendant failed to tender any evidence demonstrating that Williamson participated in, or had knowledge of, Azzato's fraudulent actions, or that she otherwise made any material misrepresentations to the defendant (see Lane v Security Mut. Ins. Co., 96 NY2d at 5; Reed v Federal Ins. Co., 71 NY2d 581, 588; Krupp v Aetna Life & Cas. Co., 103 AD2d at 261). Accordingly, as the plaintiffs correctly contend, the defendant failed to demonstrate that Williamson breached the concealment and fraud provision of the policy.

Nevetheless, the defendant moved for summary judgment dismissing the complaint insofar as asserted by Williamson on the alternative ground that she did not have an insurable interest in the damaged property. The defendant contends that the Supreme Court erred when it, in effect, concluded that the insurable interest clause of the policy was ambiguous and that resolution of the issue required consideration of extrinsic evidence.

"Extrinsic evidence will be considered only if the contract is deemed ambiguous" (Maser Consulting, P.A. v Viola Park Realty, LLC, 91 AD3d 836, 837). "Whether an agreement is ambiguous is a question of law for the courts" (Riverside S. Planning Corp. v CRP/Extell Riverside, L.P., 13 NY3d 398, 404 [internal quotation marks omitted]). "A contract is unambiguous if the language it uses has a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion" (Greenfield v Philles Records, 98 NY2d 562, 569, quoting Breed v Insurance Co. of N. Am., 46 NY2d 351, 355). "Thus, if the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity" (Greenfield v Philles Records, 98 NY2d at 569-570).

Here, the insurable interest clause stated that, "[i]n the event of a covered loss, [the defendant] will not pay for more than an insured person's insurable interest in the property." The term "insurable interest" has been defined by statute (Insurance Law § 3401 [internal quotation marks omitted]). Not only is the term "insurable interest" defined in the Insurance Law, it has long been utilized by courts to describe a particular legal concept (see e.g. Scarola v Insurance Co. of N. Am., 31 NY2d 411, 412-413; National Filtering Oil Co. v Citizen's Ins. Co. of Mo., 106 NY 535, 541; Herkimer v Rice, 27 NY 163, 168-169). Contrary to the plaintiffs' contention, the insurable interest provision of the policy was not ambiguous.

The defendant further contends that, since Williamson does not have an insurable interest in any of the property covered by the policy, the insurable interest clause provides a ground for dismissing the complaint insofar as asserted by her. The plaintiffs assert that Williamson held an insurable interest in property covered by the policy.

"It has long been the rule that, in order to prevent fraud and crime and to prohibit wagering contracts on property in which the insured possesses no interest, the lack of an insurable interest in the property insured renders the property insurance void and unenforceable" (Etterle v Excelsior Ins. Co. of N.Y., 74 AD2d 436, 438; see Scarola v Insurance Co. of N. Am., 31 NY2d at 413). Thus, "[t]he law of this State requires that the named insured have an insurable interest in the subject matter of the policy of insurance" (Citizens Sav. & Loan Assn. of N.Y. v Proprietors Ins. Co., 78 AD2d 377, 379; see Insurance Law § 3401).

In this case the insurable interest provision of the policy stated that "[i]n the event of a covered loss, [the defendant] [would] not pay for more than an insured person's insurable interest in the property covered." Thus, the insurable interest provision of the policy plainly limits the insured's recovery to the extent of that person's insurable interest.

Under the Insurance Law, the term " insurable interest'" is defined to include "any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage" (Insurance Law § 3401). "Generally, a party possesses an insurable interest in the subject matter which is insured where he has such a relation or connection with, or concern in, such subject matter that he will derive pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against" (National Superlease v Reliance Ins. Co. of N.Y., 123 AD2d 608, 608).

As the plaintiffs correctly contend, "[a] legal or equitable interest in the property insured is not necessary to support an insurable interest" (Weissman v Galway Constr. Corp., 239 AD2d 410, 411; see National Filtering Oil Co. v Citizen's Ins. Co. of Mo., 106 NY at 541). Rather, "a person has an insurable interest in a property whenever he or she would profit by or gain some advantage from the property's continued existence or suffer some loss or disadvantage by its destruction" (3 Couch on Insurance 3d § 41:11; see National Filtering Oil Co. v Citizen's Ins. Co. of Mo., 106 NY at 541).

However, "[t]he interest must be of such a character that the destruction of the property will have a direct, and not a mere remote or consequential, effect upon it" (3 Couch on Insurance 3d § 41:11). "Mere possession or license to use the property is insufficient to support an insurable interest where the insured would experience no direct economic loss by its destruction" (id.; see Cassadei v Nationwide Mut. Fire Ins. Co., 21 AD3d 681).

Here, in support of that branch of its motion which was for summary judgment dismissing the complaint insofar as asserted by Williamson, the defendant submitted the deed for the subject property which transferred the subject property to Azzato and Pleasants as tenants-in-common. In addition, the defendant submitted a supplemental fire claim form submitted in support of the plaintiffs' claim, which indicated that 50% of the subject property was owned by Azzato and that the other 50% of the subject property was owned by Pleasants. Williamson's name did not appear on the deed or the supplemental fire claim form.

"An insurer undertakes a separate and distinct obligation to the various insured parties" (BMW Fin. Servs. v Hassan, 273 AD2d 428, 429), and the insurable interest of each insured is treated as separate and distinct from the other insured parties' insurable interests (see Harvey v Cherry, 76 NY 436, 443; Graziane v National Sur. Corp., 120 AD2d at 773, 775). This rule has been applied to the rights of insured spouses and one spouse's contractual right under an insurance policy will be treated as distinct from the other spouse's rights under that policy (see Graziane v National Sur. Corp., 120 AD2d 773, 775; Krupp v Aetna Life & Cas. Co., 103 AD2d at 258).

We conclude that the defendant's submissions established that Azzato's insurable interest in the subject dwelling was limited to 50% of the value of that dwelling (see Harvey v Cherry, 76 NY at 443; Graziane v National Sur. Corp., 120 AD2d at 775), and that Williamson did not have any insurable interest in the subject dwelling (see Peker v Allstate Ins. Co., 13 AD3d 596, 598; Silberman v Royal Ins. Co., 184 AD2d 562, 562). Accordingly, the defendant established their prima facie entitlement to judgment as a matter of law dismissing the complaint insofar as asserted by Williamson.

In opposition, the plaintiffs failed to raise a triable issue of fact as to whether Williamson had an insurable interest in the subject dwelling. The plaintiffs contend that Williamson contributed to the purchase of Azzato's share of the subject property, that she helped to maintain it after it was purchased, and that she furnished portions of the subject dwelling with her own personal property. The mere fact that Williamson may have helped to pay for the subject property does not establish that she has an insurable interest in that property (see Silberman v Royal Ins. Co., 184 AD2d at 562). Furthermore, the fact that she may have helped to maintain her husband's investment does not provide a basis for concluding that she had an insurable interest such that the loss of the subject dwelling would have directly affected her pecuniary interests (see Judge v Travelers Ins. Co., 262 AD2d 983, 984). In addition, the plaintiffs have not alleged that Williamson earned any income from the subject property, resided in the subject dwelling, or had any legal or equitable right to do so (cf. Redfield v Holland Purchase Ins. Co., 56 NY 354, 357; Etterle v Excelsior Ins. Co. of N.Y., 74 AD2d at 440).

Accordingly, the plaintiffs failed to raise a triable issue of fact as to whether Williamson had an insurable interest in the subject dwelling and the Supreme Court erred when it, upon reargument, denied that branch of the defendant's motion which was for summary judgment dismissing so much of the complaint insofar as asserted by Williamson as sought to recover damages under the provisions of the policy for injury to the subject dwelling. However, in light of the fact that the policy at issue covered personal property that was located in the dwelling, Williamson nevertheless raised a triable issue of fact by tendering evidence to show that she was the owner of an antique dining room set which allegedly was destroyed in the fire (cf. Cassadei v Nationwide Mut. Fire Ins. Co., 21 AD3d at 682). Accordingly, the Supreme Court properly, upon reargument, denied that branch of the defendant's motion which was for summary judgment dismissing so much of the complaint insofar as asserted by Williamson as sought to recover under the provision of the policy covering personal property.

In light of the foregoing, we need not reach the defendant's remaining contention.

Kregg v. Maldonado

Before: Scudder, P.J., Centra, Carni, Sconiers, And Martoche, JJ.
Decided: September 28, 2012

ATTORNEYS
For Plaintiff-Appellant: John A. Collins of Counsel, Lipsitz Green Scime Cambria LLP, Buffalo.
For Defendants-Respondents: Thomas S. Lane of Counsel, Webster Szanyi LLP, Buffalo.

MEMORANDUM AND ORDER 

Appeal from an order of the Supreme Court, Erie County (John L. Michalski, A.J.), entered August 5, 2011. The order, insofar as appealed from, granted that part of the motion of defendants American Suzuki Motor Corporation and Suzuki Motor Corporation of Japan seeking to compel plaintiff to disclose computer records regarding the use of social media.

It is hereby ORDERED that the order insofar as appealed from is unanimously reversed on the law without costs and that part of the motion seeking disclosure of all social media account records maintained by or on behalf of Christopher M. Williams is denied in accordance with the following Memorandum: Plaintiff, as limited by her brief, appeals from an order insofar as it granted that part of the motion of defendants Suzuki Motor Corporation of Japan and American Suzuki Motor Corporation (collectively, Suzuki defendants) to compel the disclosure of all social media account records concerning plaintiff's son (hereafter, injured party), who was involved in a motor vehicle accident while driving a motorcycle manufactured and distributed by the Suzuki defendants. After initial disclosure exchanges, the Suzuki defendants learned that family members of the injured party had established Facebook and MySpace accounts for him and had made Internet postings on his behalf in connectio n with those accounts. The Suzuki defendants moved, inter alia, to compel the disclosure of the "entire contents" of those and any other social media accounts maintained by or on behalf of the injured party. Plaintiff objected to such disclosure on the grounds of relevance and burden, contending that the demand for disclosure was a "fishing expedition." Supreme Court agreed with the Suzuki defendants thatthey were entitled to such disclosure. That was error.

Although CPLR 3101 (a) provides for "full disclosure of all matter material and necessary in the prosecution or defense of an action," it is well settled that a party need not respond to discovery demands that are overbroad (see Optic Plus Enters., Ltd. v. Bausch & Lomb Inc., 35 AD3d 1263, 1263). Where discovery demands are overbroad, " 'the appropriate remedy is to vacate the entire demand rather than to prune it' " (Board of Mgrs. of the Park Regent Condominium v. Park Regent Assoc., 78 AD3d 752, 753). In McCann v. Harleysville Ins. Co. of N.Y. (78 AD3d 1524, 1525), we addressed a similar discovery demand and concluded that the request for access to social media sites was made without "a factual predicate with respect to the relevancy of the evidence" (see Crazytown Furniture v. Brooklyn Union Gas Co., 150 AD2d 420, 421). Here, as in McMann, there is no contention that the information in the social media accounts contradicts plaintiff's claims for the diminution of the injured party's enjoyment of life (cf. Romano v. Steelcase, Inc., 30 Misc 3d 426, 427). As in McCann, the proper means by which to obtain disclosure of any relevant information contained in the social media accounts is a narrowly-tailored discovery request seeking only that social-media-based information that relates to the claimed injuries arising from the accident. Thus, we deny that part of the Suzuki defendants' motion to compel the disclosure of the entire contents of the injured party's social media accounts, without prejudice to the service of a more narrowly-tailored disclosure request.

 

Wilner v Allstate Insurance Company

Sullivan Law Group, LLP, New York, N.Y. (Robert M. Sullivan
and Sojee Kim of counsel), for appellant.
Lewis Johs Avallone Aviles, LLP, Melville, N.Y. (Elizabeth
A. Fitzpatrick of counsel), for
respondent.

DECISION & ORDER

In an action, inter alia, to recover damages for breach of an insurance contract, the plaintiff appeals from an order of the Supreme Court, Nassau County (Winslow, J.), dated March 13, 2011, which granted that branch of the defendant's motion which was, in effect, for summary judgment dismissing the first cause of action and denied her cross motion for summary judgment on the issue of liability on the first cause of action.

ORDERED that the order is affirmed, with costs.

The defendant, Allstate Insurance Company (hereinafter Allstate), issued a Deluxe Plus Homeowner's Policy (hereinafter the policy) insuring the plaintiff's residence for the period of April 19, 2005, to April 19, 2006. During the coverage period, the plaintiff's property sustained extensive damage when, during a rain storm, a mudslide caused a retaining wall on her property to collapse. The plaintiff made a claim with Allstate pursuant to the policy for the damage sustained. However, Allstate disclaimed coverage based upon language in the insurance policy which excluded losses, inter alia, due to "[e]arth movement of any type, including, but not limited to . . . landslide, subsidence, mudflow, pressure, sinkhole, erosion, or the sinking, rising, shifting, creeping, expanding, bulging, cracking, settling or contracting of the earth."

The plaintiff commenced this action against Allstate, inter alia, to recover damages for breach of the insurance contract. Allstate moved, among other things, in effect, for summary judgment dismissing the first cause of action, which alleged breach of the insurance contract, based on the policy's exclusionary language. The plaintiff cross-moved for summary judgment on the issue of liability on the first cause of action, asserting that the retaining wall was damaged because a municipal drain above the retaining wall had become clogged, a peril covered by the policy. The Supreme Court awarded Allstate summary judgment dismissing the first cause of action and denied the plaintiff's cross motion.

" [C]ourts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on the specific language of the policies'" (Sanabria v American Home Assur. Co., 68 NY2d 866, 868, quoting State of New York v Home Indem. Co., 66 NY2d 669, 671), whose unambiguous provisions " must be given their plain and ordinary meaning'" (United States Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232, quoting Government Empls. Ins. Co. v Kliger, 42 NY2d 863, 864). "[A]n exclusion from coverage must be specific and clear in order to be enforced' (Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311 [1984]), and an ambiguity in an exclusionary clause must be construed most strongly against the insurer" (Guachichulca v Laszlo N. Tauber & Assoc., LLC, 37 AD3d 760, 761; see Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390, 398; Ruge v Utica First Ins. Co., 32 AD3d 424, 426). The plain meaning of the policy's language may not be disregarded in order to find an ambiguity where none exists (see Bassuk Bros. v Utica First Ins. Co., 1 AD3d 470, 471; Garson Mgt. Co. v Travelers Indem. Co. of Ill., 300 AD2d 538, 539; Sampson v Johnston, 272 AD2d 956).

In this case, Allstate met its initial burden of establishing its entitlement to judgment as a matter of law by demonstrating that the exclusion clearly and unambiguously applies to the plaintiff's property loss (see Labate v Liberty Mut. Ins. Co., 45 AD3d 811, 812-813; Nowacki v United Servs. Auto. Assn. Prop. & Cas. Ins. Co., 186 AD2d 1038). The plain language of the exclusion was to relieve the insurer from loss or damage to covered property caused by "[e]arth movement of any type, including, but not limited to . . . landslide [and] mudflow." Here, the loss was attributable to a landslide and mudflow. Moreover, even though the movement was precipitated by excessive rain and a clogged drain, the policy expressly excluded coverage for losses occasioned by such causes as well (cf. Cali v Merrimack Mut. Fire Ins. Co., 43 AD3d 415, 416-418; Sheehan v State Farm Fire & Cas. Co., 239 AD2d 486; Kula v State Farm Fire & Cas. Co., 212 AD2d 16, 20). In opposition, the plaintiff failed to raise a triable issue of fact (see Zuckerman v City of New York, 49 NY2d 557, 562).

Accordingly, the Supreme Court properly granted that branch of Allstate's motion which was, in effect, for summary judgment dismissing the first cause of action.

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


SNIATECKI v VIOLET REALTY, INCORPORATED

Appeal and cross appeal from an order of the Supreme Court, Erie County (Timothy J. Walker, A.J.), entered September 9, 2011. The order, among other things, denied the cross motion of defendants for summary judgment dismissing plaintiff's complaint and denied the motion of third-party defendant L. Fanara's Plumbing & Heating, Inc. for summary judgment dismissing the third-party complaint against it.


BROWN & KELLY, LLP, BUFFALO (KENNETH KRAJEWSKI OF COUNSEL), FOR DEFENDANTS-APPELLANTS AND THIRD-PARTY PLAINTIFFS-APPELLANTS- RESPONDENTS.
KENNEY SHELTON LIPTAK NOWAK LLP, BUFFALO (JOSHUA M. HENRY OF COUNSEL), FOR THIRD-PARTY DEFENDANT-RESPONDENT-APPELLANT.
GOLDBERG SEGALLA LLP, BUFFALO (DENNIS GLASCOTT OF COUNSEL), FOR THIRD-PARTY DEFENDANT-RESPONDENT.
LAW OFFICE OF JOSEPH A. ABLES, JR., ORCHARD PARK (NORMAN E.S. GREENE OF COUNSEL), FOR PLAINTIFF-RESPONDENT.

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by granting the motion of third-party defendant L. Fanara's Plumbing & Heating, Inc. and dismissing the third-party complaint and all cross claims against it and by granting that part of the cross motion of defendants for summary judgment dismissing the complaint, as amplified by the bill of particulars, insofar as it alleges that defendants were negligent in failing to warn plaintiff of the dangerous condition at issue and dismissing the complaint to that extent and as modified the order is affirmed without costs.

Memorandum: Defendants-third-party plaintiffs, Violet Realty, Incorporated and Main Place Liberty Group, LLG (hereafter, defendants), appeal and third-party defendant L. Fanara's Plumbing & Heating, Inc. (Fanara's) cross-appeals from an order that, inter alia, denied Fanara's motion for summary judgment dismissing the third-party complaint and all cross claims against it, denied defendants' cross motion for summary judgment dismissing the complaint against them and granted the cross motion of third-party defendant Roy's Plumbing, Inc. (Roy's Plumbing) for summary judgment dismissing the third-party complaint and all cross claims against it. We conclude that Supreme Court properly granted the cross motion of Roy's Plumbing, but that the court erred in denying Fanara's motion and in denying that part of defendants' cross motion for summary judgment dismissing the complaint, as amplified by the bill of particulars, insofar as it alleges that defendants were negligent in failing to warn plaintiff of the dangerous condition at issue. We therefore modify the order accordingly.

Plaintiff commenced this action to recover damages for injuries she sustained when she fell on the wet kitchen floor of a food stand area located on property owned by defendants. At the time of the incident, plaintiff was working for her employer, who had leased the food stand area, including the kitchen area, from defendants. It is undisputed that the kitchen floor was wet because two floor drains in the kitchen had begun backing up the day before plaintiff's accident, causing water to pool on the kitchen floor. In her bill of particulars, plaintiff contended, among other things, that defendants were negligent in failing to maintain the premises in a safe and suitable condition; in failing to repair the plumbing to prevent the clog; in allowing access to an unsafe area; in failing to properly supervise the area of the dangerous condition; and in failing to warn plaintiff of the dangerous condition. Defendants subsequently commenced a third-party action against Fanara's, a contractor hired by defendants to repair the clogged drains, and Roy's Plumbing, a contractor hired by Fanara's after Fanara's was unable to repair the clogged drains. Ultimately, employees of Roy's Plumbing were able to resolve the problem by flushing the piping from two separate access points.

Addressing first the cross motion of defendants, we conclude that they were not entitled to summary judgment dismissing the complaint in its entirety against them. "A landowner is liable for a dangerous or defective condition on his or her property when the landowner created the condition or had actual or constructive notice of it and a reasonable time within which to remedy it' " (Anderson v Weinberg, 70 AD3d 1438, 1439; see Pommerenck v Nason, 79 AD3d 1716, 1716). Defendants failed to establish that they cleaned the pipes at any time between February 2004 and December 28, 2004, the date on which the drains became clogged. It is undisputed that, in a January 2004 proposal for flushing the pipes, defendants' head of maintenance had written a note to the employee in charge of sewer lines asking him to "Pls. arrange for the sewer to be cleaned every 6 mos." We thus conclude that there is a triable issue of fact whether defendants created the dangerous condition by negligently maintaining the pipes (see Reimold v Walden Terrace, Inc., 85 AD3d 1144, 1145-1146; cf. Chi-Ming Tang v Village of Geneseo, 303 AD2d 987, 987). We note in any event that, although it is undisputed that defendants acted promptly to remedy the condition, " [e]ven where the relevant facts are uncontested, summary judgment is rarely appropriate in negligence cases, inasmuch as the issue of whether the defendant . . . acted reasonably under the circumstances can rarely be resolved as a matter of law' " (Rubin v Reality Fashions, 229 AD2d 1026, 1027; see generally Andre v Pomeroy, 35 NY2d 361, 364).

Defendants correctly contend that the violation of their own internal policy would not constitute evidence that they were negligent if their internal policy "require[s] a standard that transcends reasonable care" (Gilson v Metropolitan Opera, 5 NY3d 574, 577; see Lesser v Manhattan & Bronx Surface Tr. Operating Auth., 157 AD2d 352, 356, order amended 176 AD2d 463, affd sub nom. Fishman v Manhattan & Bronx Surface Tr. Operating Auth., 79 NY2d 1031, rearg denied 80 NY2d 893). Inasmuch as flushing or cleaning of the pipes is "part of the service that [defendants] provide[] and for which [they are] responsible" (Haber v Cross County Hosp., 37 NY2d 888, 889), we conclude that it is for the jury to determine whether "observance of [the internal policy] fell within the orbit of what is required by reasonable care" (Danbois v New York Cent. R.R. Co., 12 NY2d 234, 240; see Juiditta v Bethlehem Steel Corp., 75 AD2d 126, 135-136).

Defendants also correctly contend that they have no duty to warn of a dangerous condition that is open and obvious (see Tagle v Jakob, 97 NY2d 165, 169; Koval v Markley, 93 AD3d 1171, 1172; Mazurek v Home Depot U.S.A., 303 AD2d 960, 962). Although the issue whether a dangerous condition is open and obvious is generally one of fact for a jury, courts "may determine that a risk was open and obvious as a matter of law when the established facts compel that conclusion" (Tagle, 97 NY2d at 169). The facts of this case compel such a conclusion. Defendants established as a matter of law that the dangerous condition was open and obvious and that plaintiff "fully appreciated the danger [the wet floor] presented" (Duclos v County of Monroe, 258 AD2d 925, 926). Inasmuch as "a plaintiff's theory of negligence based upon the claim that the property owner violated its duty to warn of the claimed hazard may be dismissed upon a demonstration that the hazard was open and obvious" (Westbrook v WR Activities-Cabrera Mkts., 5 AD3d 69, 71), the court should have granted that part of defendants' cross motion for summary judgment dismissing the complaint, as amplified by the bill of particulars, insofar as it alleges that defendants were negligent in failing to warn plaintiff of the dangerous condition.

We further conclude, however, that defendants failed to establish as a matter of law that plaintiff's conduct was the sole proximate cause of her fall (see Mooney v Petro, Inc., 51 AD3d 746, 747), and thus that defendants are not entitled to summary judgment dismissing the complaint in its entirety on that additional ground. "[U]nder the circumstances presented, it cannot be said that plaintiff's conduct in [walking across the wet floor] was unforeseeable . . . [and rose] to such a level of culpability as to replace [defendants'] negligence as the legal cause of the accident" (Oliver v Tanning Bed, Inc., 50 AD3d 1259, 1261-1262 [internal quotation marks omitted]; cf. Tkeshelashvili v State of New York, 18 NY3d 199, 205-207). We also conclude that defendants failed to establish as a matter of law that they lacked any authority to prohibit plaintiff or others from being present in the kitchen on the day of plaintiff's accident, and we therefore conclude that they are not entitled to summary judgment dismissing the complaint, as amplified by the bill of particulars, insofar as it alleges that defendants were negligent in permitting access to the kitchen area.

With respect to the motion of Fanara's and the cross motion of Roy's Plumbing, we note that there were no written contracts requiring them to indemnify defendants or to procure insurance in favor of defendants. Thus, we conclude that they established their entitlement to summary judgment dismissing the contractual indemnification and breach of contract causes of action in the third-party complaint. We also conclude that they established their entitlement to summary judgment dismissing the causes of action for common-law indemnification in the third-party complaint inasmuch as they both established as a matter of law that "plaintiff's accident was not attributable to [their] negligent performance or nonperformance of an act solely within [their] province" (Bermingham v Peter, Sr. & Mary L. Liberatore Family Ltd. Partnership, 94 AD3d 1424, 1425; see Littleton v Amberland Owners, Inc., 94 AD3d 953, 953-954; cf. Trzaska v Allied Frozen Stor., Inc., 77 AD3d 1291, 1293). Defendants failed to raise a triable issue of fact with respect to any of those causes of action in the third-party complaint.

Finally, we conclude that Fanara's and Roy's Plumbing established their entitlement to summary judgment dismissing the remaining causes of action in the third-party complaint, which sought common-law contribution. It is well established that there are "three situations in which a party who enters into a contract to render services may be said to have assumed a duty of care—and thus be potentially liable in tort—to third persons: (1) where the contracting party, in failing to exercise reasonable care in the performance of his duties, launche[s] a force or instrument of harm' . . .; (2) where the plaintiff detrimentally relies on the continued performance of the contracting party's duties . . . and (3) where the contracting party has entirely displaced the other party's duty to maintain the premises safely" (Espinal v Melville Snow Contrs., 98 NY2d 136, 140; see Anderson v Jefferson-Utica Group, Inc., 26 AD3d 760, 760-761). Because there are no allegations in the pleadings that would establish the applicability of any of the three exceptions set forth in Espinal, Fanara's and Roy's Plumbing, "in establishing [their] prima facie entitlement to judgment as a matter of law, [were] not required to negate the possible applicability of any of [those] exceptions' " (Brathwaite v New York City Hous. Auth., 92 AD3d 821, 824, lv denied 19 NY3d 804). In any event, we conclude that Fanara's and Roy's Plumbing established that none of the exceptions applies. They established as a matter of law that they did not launch a force or instrument of harm by creating or exacerbating a dangerous condition (see Stiver v Good & Fair Carting & Moving, Inc., 9 NY3d 253, 257; Achtziger v Merz Metal & Mach. Corp., 27 AD3d 1137, 1138; Anderson, 26 AD3d at 761); that plaintiff did not detrimentally rely on their continued performance of any repairs (see Vushaj v Insignia Residential Group, Inc., 50 AD3d 393, 394; Anderson, 26 AD3d at 761); and that the oral plumbing repair contracts at issue in this case were "not so comprehensive and exclusive that [they] entirely displaced [defendants'] duty to maintain the premises safely' " (Anderson, 26 AD3d at 761, quoting Espinal, 98 NY2d at 140; see Bermingham, 94 AD3d at 1425).

GENESEE/WYOMING YMCA v BOVIS LEND LEASE LMB, INC.

Appeal from an order of the Supreme Court, Erie County (John A. Michalek, J.), entered November 17, 2011. The order, insofar as appealed from, denied that part of the motion of third-party defendant Thomas Associates Architects & Engineers, P.C. seeking to dismiss the fourth cause of action of third-party plaintiff's complaint.


SUGARMAN LAW FIRM, LLP, SYRACUSE (DAVID C. BRUFFETT, JR., OF COUNSEL), FOR THIRD-PARTY DEFENDANT-APPELLANT.
HANCOCK ESTABROOK, LLP, SYRACUSE (JAMES P. YOUNGS OF COUNSEL), FOR THIRD-PARTY PLAINTIFF-RESPONDENT.


It is hereby ORDERED that the order insofar as appealed from is unanimously reversed on the law without costs, that part of the motion of third-party defendant Thomas Associates Architects & Engineers, P.C. to dismiss the fourth cause of action in the third-party complaint is granted and the third-party complaint is dismissed in its entirety against it.

Memorandum: Plaintiff, Genesee/Wyoming YMCA (YMCA), commenced an action seeking damages for breach of contract and unjust enrichment against defendant-third-party plaintiff, Bovis Lend Lease LMB, Inc. (Bovis). Bovis in turn commenced a third-party action seeking contribution and common-law indemnification from third-party defendants, Thomas Associates Architects & Engineers, P.C. (Thomas) and Whitney East, Inc. (Whitney). In appeal No. 1, Thomas appeals from an order insofar as it denied that part of Thomas's motion seeking dismissal of the indemnification cause of action against it in the third-party complaint. In appeal No. 2, Bovis appeals from an order denying its motion for summary judgment dismissing the complaint in the main action.

In 1999 the YMCA decided to construct a wellness facility, which included an indoor swimming pool, at its Wyoming County location (project). The YMCA entered into an agreement with Bovis calling for Bovis to oversee the project (hereafter, Agreement). The YMCA also hired Thomas as the architect and Whitney as the general contractor for the project. As relevant, Thomas designed a "standing seam roof" with a "flat (or near flat) pitch" and a "taped insulation system" using "fiberglass batt insulation" above the swimming pool (collectively, proposed design). In the spring of 2001, before construction commenced, Whitney questioned the proposed design. Bovis allegedly reviewed the proposed design and Thomas's selection of materials for the construction thereof and recommended that the YMCA move forward with the project as designed and with the materials selected. The project was completed during 2002. In January 2003, it was discovered that the roof and insulation system were defectively designed and that the materials used were improper or of inferior quality.

After expending significant funds to repair and eventually replace the roof and insulation system, the YMCA commenced an action against Bovis,alleging that, pursuant to the Agreement, Bovis "agreed to review and approve design, constructability and materials used to construct the roof and insulation systems." The YMCA further alleged that Bovis breached its contractural obligations to the YMCA by "approving" the defective proposed design and the inferior or improper materials for the construction thereof. The YMCA also alleged that Bovis was unjustly enriched inasmuch as the YMCA compensated Bovis in accordance with the Agreement even though Bovis did not "fully and effectively provide all of the services" set forth therein. Bovis then commenced a third-party action against Whitney and Thomas. As relevant, Bovis's fourth cause of action sought common-law indemnification from Thomas, alleging that, if Bovis is held liable to the YMCA in the main action, Thomas is in turn liable to Bovis based on Thomas's "affirmative action and primary negligence . . . without any active or primary negligence or active participation" by Bovis.

By the order in appeal No. 1, the court denied that part of Thomas's motion seeking dismissal of the fourth cause of action in the third-party complaint and otherwise granted Thomas's motion. Preliminarily, we note that Thomas's motion to dismiss was based solely on CPLR 3211 (a) (7), and we therefore must "accept the facts as alleged in the [third-party] complaint as true, accord [Bovis] the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory . . . [T]he criterion is whether [Bovis] has a cause of action, not whether [it] has stated one' " (Leon v Martinez, 84 NY2d 83, 87-88; see Burton v Matteliano, 81 AD3d 1272, 1274, lv denied 17 NY3d 703). Applying that standard of review, we conclude that the court should have granted Thomas's motion in its entirety.

Indemnification is "[t]he right of one party to shift the entire loss to another" and "may be based upon an express contract or an implied obligation" (Bellevue S. Assoc. v HRH Constr. Corp., 78 NY2d 282, 296, rearg denied 78 NY2d 1008). "The principle of common-law, or implied indemnification, permits one who has been compelled to pay for the wrong of another to recover from the wrongdoer the damages it paid to the injured party" (17 Vista Fee Assoc. v Teachers Ins. & Annuity Assn. of Am., 259 AD2d 75, 80; see D'Ambrosio v City of New York, 55 NY2d 454, 460-461; McDermott v City of New York, 50 NY2d 211, 217, rearg denied 50 NY2d 1059). " Since the predicate of common-law indemnity is vicarious liability without actual fault on the part of the proposed indemnitee, it follows that a party who has itself actually participated to some degree in the wrongdoing cannot receive the benefit of the doctrine' " (Great Am. Ins. Co. v Canandaigua Natl. Bank & Trust Co., 23 AD3d 1025, 1028, lv dismissed 7 NY3d 741).

Here, the liability of Bovis in the main action if any, is not vicarious or secondary, i.e., based solely on Thomas's breach of its obligations to the YMCA, but it is based on Bovis's alleged "failure to perform its own contractural obligations" pursuant to the Agreement (Board of Educ. of Hudson City School Dist. v Sargent, Webster, Crenshaw & Folley, 146 AD2d 190, 199, lv denied 75 NY2d 702). Thus, even viewing the allegations of the third-party complaint as true, we conclude that Bovis failed to state a cause of action for common-law indemnification against Thomas (see Westbank Contr., Inc. v Rondout Val. Cent. School Dist., 46 AD3d 1187, 1189-1190; Carter v Farmington Sportservice, 233 AD2d 840, 840; see also Great Am. Ins. Co., 23 AD3d at 1028; Board of Educ. of Hudson City School Dist., 146 AD2d at 199-200).

We conclude in appeal No. 2 that the court erred in denying Bovis's motion in its entirety, and instead should have granted the motion in part. We reject Bovis's contention that the court erred in failing to dismiss the complaint as time-barred. As a general rule, a breach of contract action for defective construction and design accrues upon completion of performance, i.e., the completion of the actual physical work (see City School Dist. of City of Newburgh v Stubbins & Assoc., 85 NY2d 535, 538; Cabrini Med. Ctr. v Desina, 64 NY2d 1059, 1061; Phillips Constr. Co. v City of New York, 61 NY2d 949, 951; State of New York v Lundin, 60 NY2d 987, 989). Bovis, however, failed to establish its entitlement to judgment dismissing the complaint as time-barred as a matter of law because there are issues of fact as to when construction of the project was completed and when Bovis satisfied its obligations under the Agreement (see Caleb v Sevenson Envtl. Servs., Inc., 19 AD3d 1090, 1091; City of Rochester v Holmsten Ice Rinks, 155 AD2d 939, 939; see generally Zuckerman v City of New York, 49 NY2d 557, 562).

Contrary to Bovis's further contention, we conclude that the court properly determined that it is premature to grant Bovis's motion for summary judgment dismissing the YMCA's first cause of action, for breach of contract, because discovery has not been completed, including depositions concerning Bovis's performance of its obligations under the Agreement (see CPLR 3212 [f]; Coniber v Center Point Transfer Sta., Inc., 82 AD3d 1629, 1629; Syracuse Univ. v Games 2002, LLC, 71 AD3d 1531, 1531-1532). We agree with Bovis, however, that the court should have granted its motion insofar as it sought summary judgment dismissing the YMCA's second cause of action, for unjust enrichment. Recovery for unjust enrichment is barred by the existence of a valid and enforceable contract between the YMCA and Bovis (see Goldman v Metropolitan Life Ins. Co., 5 NY3d 561, 572; Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388; Leo J. Roth Corp. v Trademark Dev. Co., Inc., 90 AD3d 1579, 1581, lv denied 92 AD3d 1269). We therefore modify the order in appeal No. 2 accordingly.

CONVERSE v DOLE FOOD COMPANY, INC.

Appeal from a judgment (denominated order and final judgment) of the Supreme Court, Steuben County (Thomas M. Van Strydonck, J.), entered December 30, 2011 in a personal injury action. The judgment, among other things, dismissed all cross claims asserted against defendant Leonard's Express, Inc.


RUPP, BAASE, PFALZGRAF, CUNNINGHAM & COPPOLA, LLC, BUFFALO (R. ANTHONY RUPP, III, OF COUNSEL), FOR DEFENDANTS-APPELLANTS.
RUBIN, FIORELLA & FRIEDMAN LLP, NEW YORK CITY (STEWART B. GREENSPAN OF COUNSEL), FOR DEFENDANT-RESPONDENT.

It is hereby ORDERED that the judgment so appealed from is unanimously modified on the law by reinstating the second cross claim of defendants Dole Food Company, Inc. and Dole Fresh Fruit Company and as modified the judgment is affirmed without costs.

Memorandum: Defendants Dole Food Company, Inc. and Dole Fresh Fruit Company (collectively, Dole defendants) appeal from an "order and final judgment" (judgment) denying their motion for summary judgmenton their cross claim for contractual indemnification against defendant Leonard's Express, Inc. (Leonard's Express) and granting the cross motion of Leonard's Express for summary judgment dismissing that cross claim. Plaintiff commenced this action seeking damages for injuries she sustained when the tractor-trailer she was operating overturned while she was transporting a shipment of bananas. Plaintiff alleged, inter alia, that the Dole defendants were negligent with respect to the manner in which the cargo was loaded and that their negligence was a proximate cause of the accident. In a related appeal (Converse v Dole Food Co., Inc. [appeal No. 3], ___ AD3d ___ [Sept. 28, 2012]),we affirmed the order denying the motion of the Dole defendants for summary judgment dismissing the complaint against them.

Pursuant to the terms of the container interchange agreement (agreement) between the Dole defendants and Leonard's Express, Leonard's Express is obligated to indemnify the Dole defendants "against any and all claims . . . actions . . ., damages and liability of any nature whatsoever, including . . . bodily injuries, . . . in any manner arising out of, connected with, or resulting from the possession, use, operation, maintenance or return of the Units by [Leonard's Express] or any other person from delivery until return thereof." We agree with the Dole defendants that the agreement covers the alleged negligence here inasmuch as the claimed injuries for which plaintiff seeks damages occurred in connection with the possession and use of the trailer and chassis unit by Leonard's Express. We nevertheless conclude that the Dole defendants failed to establish their entitlement to summary judgment on their cross claim for contractual indemnification from Leonard's Express based on their liability to plaintiff. We further conclude, however, that Leonard's Express failed to establish its entitlement to summary judgment dismissing the cross claim, and we therefore modify the judgment accordingly.

The agreement expressly provides that it is to be "construed and enforced under the laws of the State of California." The California Supreme Court has explained that "the parties to an express indemnity provision may, by the use of sufficiently specific language, establish a duty in the indemnitor to save the indemnitee harmless from the results of even active negligence on the part of the latter . . . [I]n the absence of this[,] a provision will be construed to provide indemnity to the indemnitee only if [the indemnitee] has been no more than passively negligent" (E.L. White, Inc. v City of Huntington Beach, 21 Cal 3d 497, 507; see Crawford v Weather Shield Mfg., Inc., 44 Cal 4th 541, 551-552, 187 P3d 424, 430; Rossmoor Sanitation, Inc. v Pylon, Inc., 13 Cal 3d 622, 628-629, 532 P2d 97, 100-101). Indeed, in order for an indemnitee "to be indemnified for [its] own negligence . . . language on the point must be particularly clear and explicit, and will be construed strictly against the indemnitee" (Crawford, 44 Cal 4th at 552, 187 P3d at 431). We conclude that the language of the agreement herein is comparable to the language considered by the Court in E.L. White, Inc. (21 Cal 3d at 506), and that it is not "sufficiently specific" to require Leonard's Express to indemnify the Dole defendants for their own negligence (id. at 507). We note in particular that the agreement provides for indemnification regardless of whether Leonard's Express is negligent, but it is silent with respect to the effect of the Dole defendants' negligence on the right to indemnification. Thus, we conclude that the Dole defendants failed to establish their entitlement to judgment on the second cross claim.

The California Supreme Court has also explained that "[w]hether conduct constitutes active or passive negligence depends upon the circumstances of a given case and is ordinarily a question for the trier of fact; active negligence may be determined as a matter of law, however, when the evidence is so clear and undisputed that reasonable persons could not disagree" (Rossmoor, 13 Cal 3d at 629, 532 P2d at 101). As we have held in Converse v Dole Food Co., Inc. ([appeal No. 3] ___ AD3d at ___), that is not the case here. We therefore further conclude that Leonard's Express failed to establish its entitlement to summary judgment dismissing the cross claim because there is an issue of fact whether, pursuant to the laws of California, any negligence on the part of the Dole defendants was active or passive.