Volume XIII, No. 7

A Biweekly Electronic Newsletter
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202

Phone: 716-849-8900
Fax: 716-855-0874
www.hurwitzfine.com

© Hurwitz & Fine, P. C.
All rights reserved

As a public service, Hurwitz & Fine, 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 our editor Dan D. Kohane at ddk@hurwitzfine.com or call 716-849-8900. You will find back issues of Coverage Pointers here.

Dear Coverage Pointers Subscribers:

I send a special welcome to those who listened to my presentation this week at the Buffalo venue of the 2001 Law School for Insurance Professionals program. I’ll see a number of others in Long Island on October 6th.

We continue to work out the kinks in our new e-mail system and again apologize to those who received multiple copies of the previous issue.  We think we have the problem solved but will not know until we send out the issue.

Thanks to Paul Suozzi, the head of our Municipal Liability Team, for his summary of the Court of Appeals decision in the World Trade Center Bombing case, in this week’s issue.

Say It Ain’t So – the New York State Insurance Department Waves Goodbye

Back on March 5, 1859, on the front page of the New York Times, Volume VIII, No. 2327, an article appeared providing information about the latest developments in the New York State Legislature.  The article read in part:

Perhaps the wisest thing done in the Assembly today was the adoption of a resolution to the effect that, hereafter, neither In the House nor In the Committee of the Whole, shall any member speak more than five minutes to any one question. It was put in on a question of privilege, by privilege, by Mr. Miller, who protested that he was bored to death by long-winded speeches, and that, as a personal matter, relief must be granted.

In the same article, and obviously not as important as silencing the windbags, was the report of a bill, from the Committee of the Whole:

By Mr. Messerole, to establish an Insurance Department

That bill passed and effective the following year, the New York State Insurance Department took over the responsibilities of overseeing the insurance industry.  No longer would it be necessary to pass special legislation to create insurance companies.

By the way, Abraham Messerole, the bill’s sponsor and a one term legislator, was described in the 1859 edition of Biographical Sketches as a “young man of fine personal appearance … who makes no pretensions as a speaker.”  Messerole Avenue in Brooklyn still retains the family name.

As of October 3, 2011, the 150-year reign of the Insurance Department is at an end. The merger with its slightly older sibling, the Banking Department, established in 1851, creates the New York State Department of Financial Services.

From Audrey Seeley, Queen of No Fault:

We have a number of reported arbitration decisions addressing the sufficiency of a peer review in denying durable medical equipment on lack of medical necessity.  A careful read is required as the issues raised are some that have repeatedly surfaced over the past year – ensuring the medical journals relied upon support the medical opinion and making sure that the peer reviewer has the medical records to review.

It is not too late to register for the DRI Annual Meeting in Washington, DC from October 26 – 30.  Please note that you are not required to be a DRI member to attend this event.  DRI has extended the early registration deadline to October 4th.  If you register by this date you will save $200.00.  The meeting this year has a number of blockbuster speakers including a former sitting President a U.S. Supreme Court Justice and current government officials.  The link for additional materials on the meeting is http://www.dri.org/open/AnnualMeeting.aspx

Also, a follow up to my last message about DRI’s Insurance Law Committee’s Insurance Coverage and Practice Symposium, December 15-16 in NYC.  Another reason to attend is to hear from the Honorable Patricia J. Kerrigan from Texas and the Honorable Jerome B. Abrams from Minnesota.  Both have experience in handling insurance coverage matters from the perspective of representing a party as well as sitting on the bench deciding an insurance coverage dispute.  Also, both have earned impressive professional accomplishments over the years.

Judge Kerrigan was the founding partner of Werner Kerrigan & Ayers LLP in Houston and is a past DRI board member as well as Secretary – Treasurer.  Judge Kerrigan was the first woman to serve as President of the Texas Association of Defense Counsel and the Association of Defense Trial Attorneys.   She is also an ABOTA member and a senior fellow of the American Leadership Forum.

Judge Abrams has practiced in the areas of insurance coverage, bad faith, complex commercial litigation, and environmental and professional liability.  He recently authored an article Failure to Allocate? Nobody Pays: Using Miller-Shugart Settlements in Cases of Questionable Insurance Coverage, 4 Wm. Mitchell J.L. & Prac., 2 (2010).  Judge Abrams is an adjunct professor of law at the University of Minnesota teaching complex litigation.  He is also a member of the Minnesota Supreme Court Civil Justice Reform Task Force and serves on the board of directors for the Minnesota District Judges Association.

Judge Kerrigan and Judge Abrams will sit on a panel which will discuss the emerging insurance coverage issues seen within their districts as well as reflect on their involvement in state civil justice reform.  They are two individuals who collectively have a wealth of experience, accomplishment, and judicial insight that you do not want to miss.

If you need information on how to register for this seminar please email me at aas@hurwitzfine.com

Audrey

One Hundred Years Ago Today – And This One’s Personal:

Today is Ruth Gruber’s 100th birthday, and I ask you to raise a glass to her continued health.  Perhaps, in a way, I owe her my life, or at least my life here.

With special recognition to the publisher of Miriam’s Cup website for permission to use the biographical information, today I celebrate the 100th birthday of Ruth Gruber, who is alive and well and living in New York City.  As the title indicates, this one’s special to me.

Ruth was born on September 30, 1911 in Brooklyn, NY, one of five children of Russian Jewish immigrant parents David and Gussie Gruber. She was a brilliant scholar, entering college at the age of 15, and becoming the youngest person in the world to obtain a Ph.D at age 20.

At the brink of World War II, Ruth Gruber started traveling alone around the world, a remarkable feat for a 19-year old single woman in the 1930′s. She won a scholarship for graduate study in Germany, and experienced first-hand the rising anti-Semitism there as Hitler came to power. Returning home, she began a career as a journalist, writing for the New York Times and the New York Herald Tribune. In 1935, she won a Guggenheim Foundation Fellowship to study women under fascism, communism, and democracy. She became the first foreign correspondent, male or female, allowed to fly into Siberia. She interviewed pioneers and prisoners in Stalin’s Soviet Gulag, many of them Jews, and wrote about her experiences in a book entitled: I Went to the Soviet Arctic.

As World War II continued, the pressure mounted on the US to allow more European refugees into the United States.  Eleanor Roosevelt championed this cause and in in 1941, Secretary of the Interior Harold I. Ickes appointed Ruth Gruber as his special assistant. Her first assignment was to make a social and economic study of Alaska to open it for homesteaders and returning veterans, and she covered the territory by plane, truck, and dogsled for 18 months.  This was followed by a secret mission that was her most important life task.

Although the U.S. Congress refused to lift the quota on Jewish immigration from Eastern Europe, President Roosevelt, as a symbolic gesture, issued an executive order to permit 1,000 Jewish refugees from Naples, Italy to “visit” America as “guests” of the President. They were to be lodged at an army training base near Oswego, New York. Ruth Gruber secretly met, selected and escorted the refugees on their journey to the United States. She was given an honorary rank of “general,” because if the Nazis were to capture her as a civilian, they would kill her as a spy. But as a general, at least the Nazis would have to feed and shelter her as a prisoner of war. Throughout the long and treacherous voyage across the Atlantic, Ruth recorded the refugees’ survival stories.

Upon arrival in the United States, the refugees were held for 18 months at the army base, and Gruber fought on their behalf until they finally were granted U.S. citizenship when the war ended. Gruber’s book about the experience, Haven, the Unknown Story of 1,000 World War II Refugees, became a musical play in 1993 and a CBS television miniseries in 2001.

The detention camp in Oswego was the only European refugee detention camp established in the United States during WW II.

Why is this one personal?  My paternal grandparents, Moses and Helena Kohane, were part of that group of Europeans hiding out in the Naples, Italy region, having escaped from Nazi Germany.  Their son Kurt, my father, went to Palestine instead of Italy.  My grandparents were part of the group of refugees that were rescued by Ruth Gruber and transported to Oswego.  When they were released from the detention camp in 1945, they moved to Queens, New York, where their daughter, my Aunt Irma, was living. But for Ruth Gruber, they may not come to New York, if they had survived the war’s end. My parents, who met and married in Palestine, arrived in the US to live near his parents in 1952, five months before I was born.

I have visited the Operation Safe Haven Museum in Oswego, and the Kohane name adorns a plaque on the wall.

Cassie’s Commentary

Greetings from Albany!  The leaves are changing and except for the past two days of rain it has been absolutely gorgeous here!  I just wanted to remind everyone that the New York State Insurance Department will be a part of the Department of Financial Services as of Monday, October 3rd.  The new website address is www.dfs.ny.gov

Cassandra A. Kazukenus
cak@hurwitzfine.com

One Hundred Years Ago – a One Day Wonder

On September 29, 1911, the Mansfield (Ohio) News reported that Howard Armstrong, a high school teacher-pitcher, who has made a great reputation in Cleveland amateur circles, has joined the Philadelphia Athletics.  Armstrong, age 21, pitched for the Athletics the following day, for three innings, giving up three hits, two unearned runs and taking the loss.  That was his one moment in the majors.  He dawdled in the minors for two years thereafter, and then one year in Canada playing ball, but never sat in a major league dugout again.  He wife, Lena, age 22, died in 1912 of “exhaustion and heart failure” according to her death certificate.  Armstrong died at 38 and was buried in the Steuben County town of Canisteo.  The town remains chock-full of Armstrongs.

Peiper’s Aloha Perspectives:

First things, first. Your author has now been awake for just shy of 32 hours, so if my humor is lacking this week I have a built-in excuse.  No, I was not up all night writing a brief.   I was doing something far more demanding and treacherous.  After tagging along with my spouse to the Association of Applied Sports Psychology annual conference, I was flying back from Honolulu to Chicago and then on to Buffalo.  Yes, they do exist; and, yes my golf game is still lousy.  Feel free to submit your sympathies to sep@hurwitzfine.com.

Alas, not wind, nor rain, nor dark of night, nor debilitating jet lag will keep this courier from his appointed rounds.  Please check out the First Department’s interesting review of non-party e-discovery.  In an apparent case of first impression for the Court, the First Department sets out what will likely become the new standard in this rapidly developing area of the law.  We also include a quick Labor Law decision from the First Department which reaffirms the rule that general supervisory authority alone will not support a finding of Labor Law 200 liability.

Speaking of Labor Law, a huge Mahalo (Hawaiian for Thank You, I think) to David Adams.  As most of you know, David is our noted Labor Law guru here at the office.  However, while I was being dragged (kicking and screaming) halfway around the world, David admirably filled in for me at this year’s Law School for Claims Professionals.  As many of you know, the Law School for Claims Professionals is one of my favorite programs of the year.   For those of you I missed this year in Syracuse, I am sorry that I missed out and I’ll look for you next time around.   I did think of you all sitting in that conference room listening to updates on lien protection, bad faith and the like…for a minute or two…and then went back to my Mai Tai.  Aloha and Good Night!

Steve Peiper
sep@hurwitzfine.com

In This Week’s Edition, Attached:

KOHANE’S COVERAGE CORNER
Dan D. Kohane
ddk@hurwitzfine.com

  • Court Allocates Sexual Abuse Coverage Over Multiple Policy Periods on Pro Rata Basis

PAUL’S MUNICIPAL LAW POINTERS
Paul J. Suozzi
pjs@hurwitzfine.com

  • Port Authority Entitled to Protection Under Doctrine of Governmental Immunity for 1993 World Trade Center Bombing

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

mml@hurwitzfine.com

  • Plaintiff Fails to Prove Inability to Perform Substantially All Acts Constituting Usual and Customary Daily Activities
  • Defendants’ Submissions Raise Issue of Fact Regarding Causation
  • Plaintiff Defeats Summary Judgment by Submitting Sufficient Rebuttal Evidence
  • Again, on Appeal, Plaintiff’s Submissions Are Deemed Sufficient
  • Affirmed Report from a Chiropractor Has no Probative Value

 

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

ARBITRATION

  • IME Did Not Support Lack of Causal Relationship Argument Particularly When Treating Records Documented Early Complaints and Treatment of Injury
  • IME Report, Coupled With Treating Records That Assignor Not Progressing With Chiropractic Care, Supports Lack of Medical Necessity Defense
  • Peer Review Report Not Persuasive on Durable Medical Equipment Denial When Based Upon Lack of Info and Outdated Journal Article
  • Peer Reviewer’s Article Does Not Indicate That Accepted Standard Is Not to Use Particular Durable Medical Equipment
  • Lack of Review of Treating Records in Peer Review Insufficient for Denial on Lack of Medical Necessity
  • Pay Attention to Additional Verification Requests and Ensure They Are Tailored to What You Are Seeking
  • Policy Condition Violation Bars Recovery of Claim Irrespective of Whether It Occurred Before or After Services Rendered

 

LITIGATION

  • Insurer Prevails on Breach of Condition for Failure to Attend IMEs
  • Claim Made Within Statute of Limitations Based Upon Claims Alleged in Complaint

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

sep@hurwitzfine.com

  • First Department:  General Supervisory Control Is INSUFFICIENT to Establish Labor Law § 200 Liability
  • First Department Sets the Standard for E-Discovery from a Non-Party

 

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
cak@hurwitzfine.com

  • OGC Opinion 11-08-03
  • OGC 11-08-04

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal

kaf@hurwitzfine.com

  • Does Insurer Have a Duty to Defend Antitrust Action Under Policy’s Coverage for “Personal and Advertising Injury”?

 

JEN’S GEMS
Jennifer A. Ehman
jae@hurwitzfine.com

  • Loss of Diamond Engagement Ring; Fraud?
  • Insurer’s Refusal to Participate in Mediation Waives Its Right to Challenge Reasonableness of Settlement
  • Owner Entitled to AI Coverage for Construction Site Accident
  • Question of Fact as to Misrepresentations on Insurance Application
  • Court Refuses to Dismiss New York General Business Law § 349 Allegation as Insured Properly Pled the Claim

 

EARL’S PEARLS
Earl K. Cantwell

ekc@hurwitzfine.com

Calling Your Attorney Can Be a Good Thing

Dan

Dan D. Kohane
Hurwitz & Fine, P.C.

1300 Liberty Building
Buffalo, NY 14202
Phone:  716.849.8942
Fax:      716.855.0874
E-Mail:  ddk@hurwitzfine.com
H&F Website:  www.hurwitzfine.com
LinkedIn: www.linkedin.com/in/kohane

 

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

NEWSLETTER EDITOR
Dan D. Kohane
ddk@hurwitzfine.com

ASSOCIATE EDITOR
Audrey A. Seeley
aas@hurwitzfine.com

ASSISTANT EDITOR
Margo M. Lagueras
mml@hurwitzfine.com

 

INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
ddk@hurwitzfine.com

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

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
as@hurwitzfine.com

Jody E. Briandi
Steven E. Peiper

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
aas@hurwitzfine.com

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

APPELLATE TEAM
Jody E. Briandi, Team Leader
jeb@hurwitzfine.com

Scott M. Duquin
Diane F. Bosse

Index to Special Columns

Kohane’s Coverage Corner
Paul’s Municipal Law Pointers
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
Jen’s Gems
Earl’s Pearls
Across Borders

KOHANE’S COVERAGE CORNER
Dan D. Kohane
ddk@hurwitzfine.com

09/20/11         Roman Catholic Diocese v. National Union Fire Ins. Co.
Appellate Division, Second Department
Court Allocates Sexual Abuse Coverage Over Multiple Policy Periods on Pro Rata Basis
In November 2003, Jeanne, individually and as mother and natural guardian of Alexandra, commenced an action against the Diocese and against Reverend Smith, alleging that Smith sexually abused Alexandra.  The complaint, as amplified by the bill of particulars, alleged that the sexual abuse commenced “just after” Alexandra’s tenth birthday which was on August 10, 1996, and continued until “in or about March to May 2002.”  The abuse allegedly occurred at different times during the day and week, and at multiple locations.
National Union (“National”), issued three annual CGL policies to the plaintiffs for the period of August 31, 1995, through August 31, 1998.  Illinois National issued three annual CGL policies for the period August 31, 1998, through August 31, 2001.  Each of the six policies provided insurance with an “each occurrence limit” of $750,000, and included an endorsement which provided, in part, that the limits for each of the coverages provided by the policy would apply in “excess of a $250,000,” per occurrence, self-insured retention (hereinafter SIR).  Between 1995 and 2002, the Diocese maintained umbrella coverages with the defendant Westchester Fire Insurance Company, pursuant to seven annual policies.
The question before the court was the allocation of policy coverage and the application of the SIR where there was on-going and progressive injury that spanned many years.

The court determined that the settlement amounts are to be allocated on a pro rata basis over seven policy periods.  The subject National CGL policies provide, in pertinent part, that: “This insurance applies to ‘bodily injury’ . . . only if . . . [t]he ‘bodily injury’ . . . is caused by an occurrence’” and “[t]he ‘bodily injury’ . . . occurs during the policy period.”  Significantly, the policies provide indemnification for liability as a result of bodily injury occurring during the policy period.  Thus, “pro rata allocation under these facts, while not explicitly mandated by the policies, is consistent with the language of the policies.”

In opposition, the plaintiffs failed to raise a triable issue of fact.  The plaintiffs seek to allocate the settlement amount using the “joint and several” method, pursuant to which an insured may choose any one of the applicable policies it wishes, and demand payment for the entire claim under that single policy, up to the policy limit  However, joint and several allocation is inconsistent with the unambiguous language of the National policies providing coverage for bodily injury that resulted from an occurrence “during the policy period”  Where it cannot be determined to what extent the bodily injury was sustained during a particular policy period, the settlement amounts should be prorated over seven policy
National also established its prima facie entitlement to judgment as a matter of law declaring that the alleged acts of sexual abuse in the underlying action constitute multiple occurrences, and that the plaintiffs must exhaust a $250,000 self-insured retention for each of the two CGL policy implicated.

PAUL’S MUNICIPAL LAW POINTERS

Paul J. Suozzi
pjs@hurwitzfine.com

09/22/11         Matter of World Trade Ctr. Bombing Litig.
New York State Court of Appeals
Port Authority Entitled to Protection Under Doctrine of Governmental Immunity for 1993 World Trade Center Bombing
In a 4-3 decision, the New York Court of Appeals has ruled that the Port Authority of New York and New Jersey is entitled to the protection of governmental immunity for the litigation arising from the 1993 terrorist bombing incident in the parking garage of the World Trade Center.  The lengthy decision was authored by Judge Theodore T. Jones, Jr., joined by Judges Susan Phillips Read and Eugene F. Pigott, Jr. and Thomas E. Mercure, presiding justice of the Appellate Division, Third Department.  Judge Carmen Beauchamp Ciparick wrote the dissenting opinion, joined by Judge Victoria A. Graffeo and A. Gail Prudenti, presiding justice of the Appellate Division, Second Department.   Justices Mercure and Prudenti replaced Chief Judge Jonathan Lippman, who recused himself because he had written the earlier First Department decision that was overturned, and Judge Robert S. Smith, who also recused himself.

The Port Authority had moved for summary judgment on the grounds that it was entitled to governmental immunity.  The trial court had denied the motion, finding that the Port Authority’s negligent acts were in its proprietary capacity as a landowner and not an exercise of a governmental function.  Government entities are only entitled to immunity while acting in a governmental capacity, not for proprietary acts that are common to non-government entities, such as landlords.

The Court describes the creation of the Port Authority, the complex of buildings including the Twin Towers, its security force of police officers and other private security forces, its membership in the New York State Terrorism Task Force and FBI’s Joint Terrorism Task Force, its access to confidential information pertaining to security threats against Port Authority facilities ad it working with federal and state agencies such as the FBI, CIA, NSA, State and local police departments to evaluate security risks at all Port Authority facilities, including the World Trade Center.  The Court noted the difficulty in determining how to assess the Port Authority’s actions when a governmental entity also performs proprietary functions.  It noted that “the relevant inquiry in determining whether a governmental agency is acting within a governmental or proprietary capacity is to examine ‘the specific act or omission out of which the injury is claimed to have arisen and the capacity in which that act or failure to act occurred.’” The Court goes on to state that the specific acts alleged that amount to a failure to provide adequate security for the World Trade Center: i.e. lapses in adequately examining the risk and nature of terrorist attack and adopting specifically recommended security protocols to deter terrorist intrusion; are a failure to allocate police resources (which is a governmental rather than proprietary function).  The majority concludes that the failures are a governmental function of providing police protection.  The court distinguishes numerous cases where the State of New York or other governmental entities were found to be operating in a proprietary capacity as a landlord failing to provide adequate security.

The lengthy dissent does a careful analysis and reaches the opposite conclusion.  As Dan likes to say in coverage opinions, the Court of Appeals decides 4-3 that something is or is not ambiguous.  I heard a long time ago that the Court of Appeals is not final because it’s right, it’s right because it’s final.

 

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

mml@hurwitzfine.com

09/20/11         Bonilla v. Locicero
Appellate Division, Second Department
Plaintiff Fails to Prove Inability to Perform Substantially All Acts Constituting Usual and Customary Daily Activities

On appeal, the trial court is reversed, defendants’ motion is granted and the complaint is dismissed where defendants submitted competent medical evidence to establish that plaintiff did not sustain serious injuries to her cervical and thoracolumbar spine and left hip.  Plaintiff also failed to explain the cessation in her medical treatment or prove that her injuries prevented her from performing substantially all her usual and customary daily activities.

09/20/11         Kelly v. Ghee
Appellate Division, Second Department
Defendants’ Submissions Raise Issue of Fact Regarding Causation

Defendants contended that plaintiff’s injuries were not causally related to the motor vehicle accident but their evidentiary submissions demonstrated that there was an issue of fact as to whether or not the alleged injuries were caused by the accident.  In addition, defendants failed to submit competent medical evidence to show that plaintiff’s alleged injuries to the cervical spine were not serious.  As such, defendants’ motion should have been denied.

09/20/11         Khaimov v. Jing Fan
Appellate Division, Second Department
Plaintiff Defeats Summary Judgment by Submitting Sufficient Rebuttal Evidence

In yet another reversal without details, on appeal plaintiff’s complaint is reinstated where he submitted sufficient competent medical evidence to rebut defendant’s proof with regard to the alleged injuries to his cervical spine, as well as a reasonable explanation for his cessation of treatment.

09/20/11         Munoz v. Irizarri
Appellate Division, Second Department
Again, on Appeal, Plaintiff’s Submissions Are Deemed Sufficient

Again, without details, the Second Department reverses the trial court, this time from Kings County, and determines that, although defendants met their prima facie burdens showing plaintiff did not sustain a serious injury, plaintiff submitted sufficient competent medical evidence in opposition to raise a triable issue of fact which warranted denial of defendants’ motion.

09/20/11         Vejselovski v. McErlean
Affirmed Report from a Chiropractor Has no Probative Value

Plaintiff alleged injuries to his spine and left shoulder and, in opposition to defendant’s prima facie showing, submitted the affirmed report of his treating chiropractor.  However, on appeal, the court reiterated that, pursuant to CPLR 2106, a chiropractor may not affirm the contents of a report but rather must do so by affidavit.

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

ARBITRATION

09/27/11         Applicant v. Respondent
Arbitrator Mary Anne Theiss, Onondaga County
IME Did Not Support Lack of Causal Relationship Argument Particularly When Treating Records Documented Early Complaints and Treatment of Injury

The insurer denied medical expenses for hip treatment to the Applicant based upon an IME conducted by Dr. Louis Nunez, an orthopedist, who opined that the injury was not causally related to the accident.  Dr. Nunez conducted his examination on October 18, 2008, and opined that while there was an aggravation of pre-existing injury to the left shoulder and a causally related tear of the medial and lateral meniscus of the right knee, the proposed right hip surgery was not causally related.  It was noted that an x-ray of the right hip conducted eight months post accident revealed severe arthritis.

The assigned arbitrator did not find the IME report persuasive on the causal relationship argument.  The Applicant’s records revealed that on the date of the accident the Applicant complained of right hip pain.  There were also additional records two months post accident where the Applicant was undergoing physical therapy complaining of right hip pain which was being treated by the therapist.  Further, the most recently cited medical record indicated that the Applicant had a traumatic hip injury which was resulting in shooting pain from the hip to the knee.

09/27/11         Applicant v. Respondent
Arbitrator Mary Anne Theiss, Onondaga County
IME Report, Coupled With Treating Records That Assignor Not Progressing With Chiropractic Care, Supports Lack of Medical Necessity Defense

The Applicant sought reimbursement for chiropractic services rendered to the Assignor which the insurer denied based upon the IME of Sean Higgins, DC.  The treating chiropractor testified that his patient had a C5/6 disc herniation causally related to the May 29, 2008, accident.  After a period of chiropractic care he could not have his patient undergo a cervical spine MRI as she was pregnant.  Further, certain chiropractic treatments could not be performed and medication could not be taken due to the pregnancy.  The Assignor’s treating orthopedist likewise told her that she must either live with pain or have surgery.  The Assignor gave birth on July 19, 2009, and thereafter resumed her chiropractic care with the Applicant.

Eventually, the Assignor discontinued treatment due to being a single parent struggling to keep appointments.  The treating chiropractic notes revealed that the Applicant did not provide his patient with a home exercise treatment program or that she was put on a reduced treatment plan.

The assigned arbitrator found Mr. Higgin’s IME report persuasive as it opined that the Assignor was not improving symptomatically with chiropractic treatment.  Further, she had not progressed with this treatment and the Assignor was still working at the time of the accident.  The assigned arbitrator further indicated that the treating records likewise reflected that the Assignor was not improving with chiropractic care.

09/26/11         Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Peer Review Report Not Persuasive on Durable Medical Equipment Denial When Based Upon Lack of Info and Outdated Journal Article

The insurer denied a lumbar-sacral orthotic to Applicant’s Assignor based upon a peer review of Kevin Portnoy, DC.  The treating chiropractor’s initial evaluation of the Assignor revealed that the primary complaint was low back pain.  Upon examination there was decreased range of motion in the lumbar spine with other positive objective tests.  At the second evaluation a little over a month post accident, the Assignor had a positive straight leg raise on the right.  An LSO brace and chiropractic manipulation were provided.

The medical necessity letter for the LSO brace provided that it was to reduce the load on the disc and relieve pressure.  Also, it was indicated that the LSO brace would support the weakened spinal muscles.

Mr. Portnoy’s peer review opined that the treating chiropractor did not provide enough medical documentation for the durable medical equipment.  The report commented that Mr. Portnoy was not provided the treating chiropractor’s records or that they simply did not exist as to specific need for the equipment, instructions on its safe use, the follow-up as to how the patient was responding to treatment and how the device was aiding in clinical progress.  Mr. Portnoy also cited to a medical journal for the proposition that such braces were controversial at best and questioned the rationale of the chiropractor providing manipulation while attempting to immobilize the spine.

The assigned arbitrator, relying upon Nir v. Allstate and other miscellaneous cases, determined that the peer review was insufficient to support the defense of lack of medical necessity.  The assigned arbitrator noted that Mr. Portnoy indicated that he did not possess adequate documentation which the insurer could have requested through verification for his review.  Also, the letter of medical necessity and the treatment records supplied did indicate the LSO brace was to reduce the load on discs which the peer review failed to address.  In addition, the Applicant did provide a contemporaneous medical record with the prescription for the LSO brace which demonstrated positive objective findings.  Finally, the assigned arbitrator did not find the cited medical journal persuasive as it was a 12 year old article pertaining to the controversial role of corsets.

09/23/11         Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Peer Reviewer’s Article Does Not Indicate That Accepted Standard Is Not to Use Particular Durable Medical Equipment

The Applicant’s Assignor was involved in a November 15, 2007, accident and came under his chiropractic care later that month complaining of mid back, low back, left shoulder, arm, and wrist pain.  Upon physical examination the Assignor had positive orthopedic testing, muscle spasms, and decreased range of motion.  A little less than a month later the Assignor was prescribed an RS4i stimulator for the low back.  The necessity for the equipment was to relieve back pain, relax muscle spasms, and increase range of motion.  It is noted that the chiropractic treatment records for the following months demonstrated continued neck and low back pain complaints.

The insurer denied the durable medical equipment based upon the peer review of Daniel Russo, DC.  The peer review indicated that the Applicant prescribed a TENS Unit and proceeded to discuss why the TENS Unit was not necessary.  The same reviewer conducted a further peer review regarding the muscle stimulator.  He relied upon additional unspecified journals to support the opinion that individuals had better results with conventional chiropractic care as opposed to electrical stimulation.

The assigned arbitrator did not find the peer review persuasive as the initial review relied upon applied to a different device not at issue in the arbitration.  Further, even with regard to the peer review that applied to the muscle stimulator, the journal relied upon did not demonstrate that the device was inconsistent with generally accepted standards of care.  Instead the article concluded that conservative care obtained better results over electrical stimulation which does not establish a standard inconsistent with generally accepted standards not to use the device in dispute.

09/23/11         Applicant v. Respondent
Arbitrator Thomas J. McCorry, Erie County
Lack of Review of Treating Records in Peer Review Insufficient for Denial on Lack of Medical Necessity

The Applicant sought reimbursement for a cervical and lumbar spine MRI conducted approximately two months post accident.  The MRIs were denied by the insurer upon a peer review conduct by Sean Higgins, DC.  Mr. Higgins opined that he could find no medical necessity for the scans yet he did not have any records from Applicant.

The assigned arbitrator agreed with the Applicant’s argument that the peer review was flawed as the peer reviewer did not examine the Assignor and had no treating records to review.

09/19/11         Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Pay Attention to Additional Verification Requests and Ensure They Are Tailored to What You Are Seeking

The Applicant sought reimbursement for an RS4i sequential stimulator prescribed to his patient.  The insurer claimed it was a premature arbitration as there was outstanding verification.  The Applicant submitted the bills for the equipment and it was determined that the insurer timely delayed the claim seeking verification in the form of an NF-3, an original assignment of benefits, the wholesale invoice for the equipment, the prescription for the equipment, documentation describing the equipment, and a medical necessity letter.  There were two other bills that the insurer delayed the claim pending an EUO.

The Applicant advised the insurer, in response to the verification request, that the requested invoice could not be supplied because it was both the manufacturer and supplier of the device.  The Applicant thereafter attached its price list.

The insurer presented several follow-up verification requests seeking the same document that apparently Applicant advised did not exist.

The assigned arbitrator determined that the claim was ripe for determination.  The assigned arbitrator determined that the insurer could not, in accordance with fair claims principles, delay the claim seeking verification that it was told did not exist or was already in its possession.  It was suggested that if additional specific questions needed to be answered, the insurer could have modified its additional requests or called the billing specialist.

09/19/11         Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
Policy Condition Violation Bars Recovery of Claim Irrespective of Whether It Occurred Before or After Services Rendered

The Applicant sought reimbursement for a cervical and lumbar spine MRI which the insurer denied based upon the Assignor’s failure to comply with a condition to coverage under the policy to submit to an EUO.  The assigned arbitrator carefully went through the verification timeframes as well as the follow up requirements and determined that the insurer timely delayed the claim pending verification in the form of an EUO of the assignor.

The assigned arbitrator upheld the denial based upon a policy condition violation and noted that the violation bars recovery of the claim regardless of whether the services were rendered prior to or subsequent to the denial.

LITIGATION

09/16/11         Vincent Med. Services, PC a/a/o Rony Delmas v. New York Cent. Mut. Fire Ins. Co.
Appellate Term, Second Department
Insurer Prevails on Breach of Condition for Failure to Attend IMEs

The insurer’s summary judgment motion on failure to appear for scheduled IMEs should have been granted.  The insurer submitted an affidavit from the IME vendor that the IME notices were timely mailed in accordance with the vendor’s standard office practice and procedures.  The insurer also submitted an affidavit from the chiropractor who was to perform the IMEs attesting to the assignor’s nonappearance at same.  Finally, the insurer submitted an affidavit from its own adjuster establishing that the denial was timely mailed in accordance with standard office practice and procedure.

09/16/11         EBM Med. Health Care, PC a/a/o Johanna Olivares v. Amica Mut. Ins. Co.
Appellate Term, Second Department
Claim Made Within Statute of Limitations Based Upon Claims Alleged in Complaint

The insurer’s motion to dismiss the complaint based upon statute of limitations should have been denied.  The timeframe to commence the action is calculated from the time the cause of action accrued until the time the claim is interposed.  Here, the claim was interposed on June 27, 2007, when the summons and complaint was filed and thus the six year statute of limitations bars any claim that accrued prior to June 27, 2001.  In determining when a particular claim accrued in this action the court held that a cause of action accrues when payment of No-Fault benefits is overdue.  Overdue means there is no payment made by the insurer within 30 days after the insurer receives proof of claim.  The complaint alleges that a claim was submitted to the insurer on June 6, 2001.  In a motion to dismiss the complaint the complaint’s allegations must be taken as true.  Thus, the claim would be overdue on July 7, 2001 which is within the six year statute of limitations.  The court further noted that while the insurer alleged that an April 3, 2001, claim was at issue the complaint itself never alleged this date but only the June 6, 2001, date.

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
sep@hurwitzfine.com

09/22/11         Morris v. City of  New York
Appellate Division, First Department
First Department:  General Supervisory Control Is INSUFFICIENT to Establish Labor Law § 200 Liability
Plaintiff commenced this action after sustaining injury when a make-shift wooden step shifted while he was in the course of moving an air tank.  Defendant NYC eventually moved for summary judgment under Labor Law §§ 240(1), 241(6) and 200.  NYC’s motions under Labor Law §§ 240(1) and 241(6) were denied on a question of fact.  However, where, as here, the plaintiff could only establish that NYC had general supervisory authority only [read did not direct, control or supervise] no liability could be found under Labor Law § 200.

09/20/11         Tener v. Cremer
Appellate Division, First Department
First Department Sets the Standard for E-Discovery from a Non-Party
Plaintiff commenced the instant action claiming that postings on a certain website defamed her.  In the course of the lawsuit, plaintiff was able to establish that the allegedly defaming comments originated from a computer in the custody and control of New York University.  Essentially, NYU provided the internet access for residents while in training at Bellevue Hospital in NYC.

Upon learning that NYU may have had file access to the identity of the person that allegedly posted the defamatory message, plaintiff immediately served a subpoena duces tecum upon NYU.  The subpoena sought production of the identity of all individuals that utilized the portal on April 12, 2009, and also advised that NYU was forbidden from continuing any normal business practices which might compromise plaintiff’s ability to inspect the user logs.

When the requested documentation was not produced voluntarily, plaintiff moved for a contempt sanction against NYU.  In response, NYU argued that the user logs are written over every 30 days.  Moreover, it did not have the appropriate software to enable it to cull the identities of users from a system that had been written over more than 12 times since the statements at issue were posted.  In short, NYU argued that the request was not feasible under the circumstances of this case.

In reply, plaintiff’s counsel submitted an expert affidavit which detailed the manner, and specific programs, which would enable NYU to access the requested information.  In short, the expert appears to have opined that it was feasible to locate the information, and even provided a roadmap on how to go about accessing the material.

The Supreme Court denied plaintiff’s contempt motion on the basis that NYU simply did not possess the ability to adequately respond to plaintiff’s subpoena.  In overturning the trial court’s decision, the First Department initially stated the CPLR does not address the scope, guidelines or content that is permissible for an e-discovery request.  However, numerous other courts, including the Nassau County Supreme Court, Commercial Division, have adopted guidelines to govern e-discovery exchange.

Although the Court was quick to point out its decision was “based on the specific facts of this case”, the First Department appears to have, for now, adopted the Nassau County guidelines in their entirety.  The guidelines are really a balancing test based upon several factors:

  • Identification, in reasonable detail, that the requested e-discovery is reasonably accessible;
  • Demonstration that the endeavor to recovery the e-discovery is not unduly burdensome or costly;
  • Demonstration that the storing and retrieving the e-discovery is reasonably accessible; and,
  • Estimating the difficult and cost of such a recovery.

 

In the instant case, the Court ruled that plaintiff had established the likely existence of e-discovery.  Likewise, the Court agreed that plaintiff had also established the method and manner by which the e-discovery could be located and accessed.  However, given the record before the Court, the First Department refused to complete the cost/benefit analysis of any effort to recover the missing documentation.

The matter was remanded back to the trial court for a hearing to determine the following factors:

  • Whether the sought information was written over, and if it was available from a different location on the computer’s hard drive;
  • Whether the retrieval software will actually locate the requested material;
  • Whether the material will actually identify actual users, and if so whether the software can then identify which individual users accessed the website where the allegedly defamatory statement was posted;
  • A proposed budget for the implementation of the discovery plan.

 

Finally, the Court noted that per the CPLR, the plaintiff (as requesting party) should defray the costs incurred by NYU to access the information.  This presumes, of course, that plaintiff’s expert’s plan is feasible.

 

 CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
cak@hurwitzfine.com

OGC Opinion 11-08-03

The Office of General Counsel for the NYS Insurance Department was asked two questions:

  • Must a person be a licensed public adjuster to appear in court and negotiate a settlement on behalf of a personal injury plaintiff?
  • What are the consequences of acting as a public adjuster without a license?

 

The OGC says that you do not have to be a licensed public adjuster to appear in court and negotiate a settlement on behalf of an injured plaintiff (BI claim).  The opinion states that it is because NY Ins. Law §2101(g)(2) only requires licensure of a public adjuster if he or she is negotiating or effecting a property damage settlement for compensation.  Insurance Law §2101(g)(2) defines a public adjuster as any person who, for money, aids on behalf of an insured in negotiating a claim for property.  Thus, if you do not receive compensation and the claim is not for property damage, you are not a public adjuster, and Insurance Law §2101 does not apply.

The Opinion goes on to caution that an individual who adjusts claims outside the scope of the statute may well be practicing law without a license and cites Gross v. Reliance Ins. Co., 119 Misc. 2d 270 (N.Y. Sup. Ct. 1983).  In that case, the court stated “It is beyond peradventure that HN4negotiation, adjustment and collection of claims or demands based upon an insurance loss constitutes the practice of law and, but for certain exceptions authorized by statute, should be conducted by  attorneys at law, and if not, would constitute the unlawful practice of law.”  Id.

Under Insurance Law §2101, an adjuster acting without a license is subject to a potential $500 penalty per transaction, and such action is considered a misdemeanor.

OGC 11-08-04

The OGC was provided with the following scenario:

ABC is licensed as an independent adjuster, and the adjuster stores both electronic and paper copies of all medical and administrative documents received from clients as well the original documents generated by ABC’s office.  ABC would like to discard its paper copies and only keep the files electronically.  ABC’s Records Retention Plan stated:

  • All original documents received from ABC’s clients are scanned upon receipt and returned to the client;
  • All incoming x files are transferred to the paperless serverAll diagnostic films are scanned and returned to provider or insurer.
  • All certified return receipt notices are scanned when mailed and scanned when signature card is received.
  • A back up of the paperless server is performed each evening and is removed to another location.
  • All records are scanned as PDF docs and cannot be altered.
  • All files are re-verified before destruction to insure all documentation contained in the file is in its original form within the paperless server.

 

The Opinion finds there are no specific rules or regulations governing the maintenance of records by independent adjusters.  However Regulation 152 does establish the minimum standards for records retention by insurers.  Essentially, §243.2(d) of Regulation 152 requires an insurer to require any person that is authorized to act on its behalf to comply with these provisions in maintaining records insurers would otherwise be required to maintain.  Thus, to the extent that an adjuster maintains records on behalf of insurers, the adjuster must comply with Regulation 152.

The Opinion went on to find that the proposed records retention plan appears to comply with the requirements of Regulation 152 because the PDF does not permit alteration.  The Opinion cautions that the documents may contain private and protected information concerning the insured and they must comply with Regulation 173 to protect that data.

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
kaf@hurwitzfine.com

09/19/11         Trailer Bridge Inc. v. Illinois National Insurance Company
Eleventh Circuit Court of Appeals – Florida
Does Insurer Have a Duty to Defend Antitrust Action Under Policy’s Coverage for “Personal and Advertising Injury”?
In 2008, various entities sued Trailer Bridge and other defendants for conspiring to fix prices of cabotage services between the United States and Puerto Rico in violation of the Sherman Antitrust Act.  In a section titled “Fraudulent Concealment,” the underlying antitrust complaint alleged that, between 2002 and April 2008, the defendants affirmatively concealed their unlawful activity.  The complaint alleges that the defendants met in secret and issued materially false public statements about the reasons for rate and surcharge increases.  As an example, the complaint alleges that Trailer Bridge’s CEO  noted in an interview “that customer decisions were driven by ‘prince in an all-inclusive sense, which starts with the freight rate”, implying that Defendants could not rig bids or set and increase rates, surcharge or fees, and therefore were not doing so, or otherwise acting anti-competitively.  The complaint asserts that this allegedly misleading statement was an attempt to conceal Trailer Bridge’s ability to rig bids and effect supra-competitive rates.

In the district court Trailer Bridge argued that Illinois National owed a duty to defend the anti-trust action under the Policy’s coverage for “personal and advertising injury.”  Trailer Bridge pointed out that the CEO’s interview was published The Wall Street Transcript, a newsletter targeted at long-term investors.  Trailer Bridge argued that the interview was an advertisement within the meaning of the Policy and that the CEO’s statement deployed the “advertising idea” of “another” because the CEO’s misleading justifications for price increases must have originated with Trailer Bridge’s competitors – and alleged co-conspirators.

After motions for summary judgment were filed the district court granted summary judgment to defendant, Illinois National concluding that the insurer had no duty to defend because (1) the CEO’s allegedly misleading statement was not an “advertisement” for the company; (2) even if the statement was an “advertisement”, the CEO’s brief description of market conditions did not involve the use of an advertising idea; (3) even if the CEO’s statement was an advertising idea, the antitrust complaint failed to allege that the advertising idea “belonged to another;” and, (4) even if the antitrust complaint alleged an advertising idea under the Policy, the injury did not cause the antitrust plaintiffs’ damages because the antitrust plaintiffs sought relief only for antitrust violations, not for misappropriation of an advertising idea.

The Eleventh Circuit Court of Appeals [the “Court”] agreed with and affirmed the district court’s ruling.  In particular, the Court agreed with the district court’s rejection of Trailer Bridge’s convoluted argument that the CEO’s statement deployed the advertising idea of “another”.  In analyzing the policy the Court looked to the definition of “advertising injury” which provides that advertising injury is an injury arising from “the use of another’s advertising idea in your ‘advertisement’”.

On appeal, Trailer Bridge argued that the allegations against it potentially evidence use of another’s advertising idea in its advertisement so as to fall within the potential coverage for offense section of the policy. It argued that an implication of market driven pricing constitutes an advertising idea, and the Antitrust Complaint indicates the idea was already used by co-defendants in the underlying action, thus making it an idea of another.

Illinois National took issue with Trailer Bridge’s interpretation of the Policy.  According to Illinois National, the Antitrust Complaint did not allege wrongful acts were committed in Trailer Bridge’s “advertisement,” or that Trailer Bridge used “another’s advertising idea.”  Because the Antitrust Complaint failed to contain allegations comprising an advertising injury offense, the insurer argued that coverage was not triggered under the policy.

The disputed quotation which forms the basis for Trailer’s Bridge’s coverage position was based on an interview of Trailer Bridge’s past CEO and covered multiple topics ranging from what types of assets the company owns and descriptions of its services, to the CEO’s general outlook on the relevant market.  The Court stated that while the article could conceivably lead to additional customers or supporters for Trailer Bridge, that in no way appeared to be the article’s purpose.  The Court was of the opinion that the purpose of the article seemed to be purely informational.  There was no representation that Trailer Bridge paid the Periodical to publish the article or direct its content in any way.  The Court determined that including quotes from Trailer’s Bridge’s CEO, which happened to be beneficial to the company, does not transform the article into an advertisement for the company.  Further, the Court pointed out, that even if the Antitrust Complaint identified a relevant advertisement, it still failed to allege facts showing use of “another’s advertising idea.”  The Court disagreed with Trailer Bridge’s argument that the broad assertion, “from 2002 through April 2008, Defendants . . . affirmatively and wrongfully concealed their unlawful conduct through misrepresentations . . . concerning the reasons for increases in rates, surcharges and other fees.” It was the Court’s opinion that this statement did not imply another individual originated or used the purported advertising idea prior to Trailer Bridge.

The Court concluded that the Antitrust Complaint simply failed to allege an advertising idea belonged in any way to another entity and affirmed the district court’s decision in its entirety.

JEN’S GEMS
Jennifer A. Ehman
jae@hurwitzfine.com

09/14/11         Spinner v. Phoenix Ins. Co.
Supreme Court, Nassau County
Loss of Diamond Engagement Ring; Fraud?
Elaine Spinner’s birthday was approaching and her husband, Steven Spinner, decided that he would surprise his wife by having her diamond engagement ring reset.  Accordingly, Mr. Spinner removed the ring, valued at $21,000, from the home safe where it was stored and put it into his pocket.  He then set out to take the ring to a jeweler in New York City.  However, en route, he became preoccupied with his business appointments and never made it to the jeweler.  A few days later, when Mr. Spinner went to retrieve the ring from his pocket, it was gone.

As a result of the loss, in 2009, Mr. Spinner placed a claim with his homeowners’ insurer, Phoenix Ins. Co. (“Phoenix”).  While investigating the claim, Phoenix realized that, only a year earlier, the Spinners filed a claim for the loss of an earring, valued at $5,665.  In reviewing the documents from the earlier claim, Phoenix noted inconsistencies.  When it interviewed Ms. Spinner about the loss, she told investigators it was lost on a golf course; however, in a written statement she provided, she indicated that it was lost in a shopping center when she was trying on clothes.  Phoenix also noted that the Spinners had the jewelry appraised about a year prior to filing their claims and that, at the time of the most recent loss, Mr. Spinner was experiencing financial difficulties which included federal and state tax liens.

Thus, Phoenix denied the claim for the lost ring on the grounds that the Spinners misrepresented the facts and circumstances regarding the 2008 loss.  In support, it pointed to Ms. Spinner’s responses during the investigatory interview.  Phoenix cited the following policy condition, “CONCEALMENT AND FRAUD. We shall not provide coverage, if whether before or after a loss, an ‘insured’ has:  a. Intentionally concealed or misrepresented any material fact or circumstance; or b. Engaged in fraudulent conduct…”

On this motion for summary judgment, resulting from an action brought by the Spinners to recover the insurance proceeds, the court found a question of fact as to the applicability of the CONCEALMENT AND FRAUD provision.  Phoenix was required to demonstrate, as a matter of law, that there were no triable issues of fact regarding whether the Spinners acted with willful intent to defraud or misrepresent material facts.  The court determined that the evidence submitted by Phoenix created a credibility issue which could not be resolved on summary judgment.  It further stated, based on the record, that there was no question that Ms. Spinner gave contradictory and inaccurate information in her interview; however, a triable issue of fact existed as to whether the Spinners intended to defraud the insurer.

09/13/11         Utica Mut. Ins. Co. v. Government Empls. Ins. Co.
Supreme Court, Nassau County
Insurer’s Refusal to Participate in Mediation Waives Its Right to Challenge Reasonableness of Settlement
Wilner Hippolite sustained serious injuries when he was struck by a vehicle, owned by State Bancorp., Inc. d/b/a State Bank of L.I. (insured by Utica Mutual for both primary and excess coverage) and operated by Brian Finneran (insured by GEICO for excess coverage).

GEICO denied coverage for this claim.  Notably, the reasons for the denial are not given.  Plaintiff then brought this declaratory judgment action seeking a determination as to GEICO’s obligations to Mr. Finneran and the priority of coverage.  In January 2011, this court determined that GEICO was obligated to defend and indemnify Mr. Finneran for any damages awarded as a result of Mr. Hippolite’s accident and that the Utica Mutual Umbrella Policy was excess to the GEICO Personal Umbrella Policy.

With this determination made, the underlying action went to mediation where Utica Mutual and Mr. Finneran settled it for $6,750,000 (which Utica Mutual paid upfront).  Prior to the mediation, GEICO was invited to participate in order to express its opinion as to the reasonableness of any settlement.  Although it is not clear why, perhaps GEICO was appealing the prior ruling, it opted not to participate.

After Utica Mutual paid the full amount of settlement, it demanded that GEICO reimburse it for $3,000,000, the limit of the Personal Umbrella Policy.  GEICO did not pay and Utica Mutual brought this motion seeking an order from the court requiring the reimbursement.  GEICO opposed the motion on the grounds that the settlement was not reasonable.  The court disagreed.  It determined that ample evidence had been presented that there were no legitimate issues with liability and the economic damages, conscious pain and suffering, and loss of parental guidance far exceeded the settlement value.  The court also explained that if GEICO wanted to challenge the reasonableness of the settlement, it should have attended the mediation.

09/07/11         City of New York v. Nova Cas. Co.
Supreme Court, New York
Owner Entitled to AI Coverage for Construction Site Accident
In this action, the City of New York (“the City”) seeks additional insured coverage for a lawsuit brought by a worker injured on a construction site owned by the City.  Dart Medical Corp. (“Dart”), insured by Nova Casualty, was the project’s general contractor.  Pursuant to Dart’s contract with the City, it was required to obtain an occurrence-based CGL policy covering all of its work naming “the City” as an additional insured.  Notably, while the contract listed “the City” as a required additional insured, the bidding documents listed the Department of Sanitation (“DOS”).   Accordingly, Nova made the argument that the contract was ambiguous.  It further argued that the injured worker was not working for Dart at the time of the accident.

In determining that Nova was required to assume the City’s defense, the court held that the Nova policy provided AI coverage if required by contract.  While the bidding documents only referenced DOS as an additional insured, there was no ambiguity within the contract itself, which just referenced the City.  Also, the court held that the duty to defend is broader than the duty to indemnify and arises whenever the allegations in the complaint suggest a reasonable possibility of coverage.  As the injured party alleged that Dart’s negligence caused the accident, it was possible that his injuries arose out of Dart’s operations at the construction site.

The City also sought coverage from Tower Insurance/Castlepoint Insurance Company, who issued a policy to a plumbing subcontractor.  Tower/Castle denied coverage based on the City’s late notice.  While the City did not deny that its notice was untimely, it asserted that Tower/Castle waived this ground by failing to deny coverage as soon as reasonably possible.  The court, however, disagreed and held that a two week delay in issuing a denial is reasonable.  The court also dismissed an argument put forth by Nova that the City’s notice was not late because it was united in interest with Tower/Castlepoint’s named insured, who provided timely notice.  The court determined that since both the City and the named insured were defendants in the underlying lawsuit, they were not united in interest.

Lastly, Nova sought contribution from Harleysville, the employer’s insurer.  Pursuant to the Dart-employer contract, the employer agreed to procure insurance “for the same coverage, conditions, additional insureds and limits as are required of Dart” in the prime contract.  The court determined that the prime contract was incorporated into the employer’s contract and the employer was required to obtain insurance which named the City as an additional insured.  Thus, the City qualified as an insured on the Harleysville policy.

08/08/11         BW Sportswear, Inc. v. Those Certain Underwriters at Lloyd’s of London, Subscribing to Certificate Number 34665
Supreme Court, New York County
Question of Fact as to Misrepresentations on Insurance Application
BW Sportswear, Inc. (“BW”), a clothing retailer, submitted a commercial insurance application to its insurance broker.  The application was then submitted to Lloyd’s cover holder for review and consideration.  The application’s “Loss History” section required BW to enter all claims or losses or occurrence that may give rise to claims for the prior 5 years (3 years in NY).  BW checked none.

Based on this information, Lloyds issued a policy.  Thereafter, approximately four months later, BW reported a property damage claim resulting from water leaking into its property and damaging inventory.  In response, Lloyds notified BW that the policy was void based on material misrepresentations on the application and that BW provided false documents, false testimony, and a fraudulent sworn statement in its proof of loss.

Lloyds claimed misrepresentation based on its investigation which discovered that there had been three previous water damage losses (although one occurred prior to the 3 year look back) at the insured’s premises.  Apparently, the losses occurred while BW’s principal was running a retail clothing business under a different name, the existence of which was not disclosed.  In reply, BW pointed out that the application did not seek to ascertain whether any loses had occurred at the insured location.  It was not BW, but a different entity that sustained the loss.

In considering this issue, the court found a question of fact.  It held that, for the sake of argument, even assuming that BW was required to report the prior losses, Lloyds did not meet its burden of providing uncontradicted evidence that this was a material misrepresentation.  The affidavits submitted did not state that Lloyds would not have issued the policies had it know of the two occurrences, which it may have been required to disclose.

07/08/11         Jackson v. AXA Equitable Life Ins. Co.
Supreme Court, New York County
Court Refuses to Dismiss New York General Business Law § 349 Allegation as Insured Properly Pled the Claim
Ralph Jackson brought this action against AXA Equitable Life Ins. Co. (“AXA”) and its administer after AXA denied him disability insurance payments.  His complaint alleged breach of the covenant of good faith and fair dealing, consumer fraud, and breach of contract.  Mr. Jackson sought to recover, among other things, damages for emotional distress and attorneys’ fees.

In this motion to dismiss, the court analyzed each claim separately.  With regard to the allegation of breach of the covenant of good faith and fair dealing, the court found that while Mr. Jackson’s allegations alleged that AXA conducted a sham investigation of his disability claims (a breach of contract), they did not establish the breach of a duty separate from the agreement.

Next, Mr. Jackson alleged consumer fraud in violation of New York General Business Law § 349.  To establish a consumer fraud claim, a plaintiff must show a deceptive act (1) that is consumer oriented, (2) that defendants engaged in to mislead a reasonable consumer, and (3) that caused plaintiff’s injury.  In other words, plaintiff must plead his own actual injury from deceptive or misleading practices, which also must impact consumers at large.  The court determined that this claim was sufficiently pled since Mr. Jackson alleged that both AXA and its administrator participated in the sham evaluation of claims and fraudulent scheme of delaying and denying policyholders’ indemnification.

Mr. Jackson further alleged breach of contract.  AXA’s administer sought to dismiss the claim due to a lack of privity.  The court agreed and dismissed the claim.

Lastly, with regard to Mr. Jackson’s alleged damages for emotional distress and attorneys’ fees, the court held that while these amounts could not be recovered based on breach of contract, they may be recoverable under GBL § 349.  This statute authorizes “actual damages.”  There is no requirement that the damages be pecuniary.  Thus, the court refused to dismiss these claims.

EARL’S PEARLS
Earl K. Cantwell
ekc@hurwitzfine.com

CALLING YOUR ATTORNEY CAN BE A GOOD THING

            When confronted with a bad faith claim, an important fact in possible defense is that the insurance company had experienced coverage counselor review the claim and draft or at least endorse the declination of coverage letter and its basis.  This was the holding in the case of Finger v State Farm Fire & Casualty Insurance Company, 2011 WL 2621020 (S.D. Alabama July 5, 2011).

In Finger, the U.S. District Court held that the insured’s post-verdict coverage denial “unusual”, but ruled that reliance on an experienced and highly qualified coverage counsel opinion was in good faith.  While the Court ordered State Farm to pay the policy holder nearly $800,000.00 to cover the underlying judgment, nothing further was considered or awarded on the “bad faith” claim.

The insured had an umbrella policy for $2 Million dollars in coverage for personal injury damages.  There was an exclusion in coverage for personal injury for acts with specific intent to cause harm or injury.  The insured was sued for slander and State Farm provided the insured a defense under reservation of rights.  A jury awarded damages and found that the insured intended to harm the plaintiff.  The total verdict, including attorneys’ fees and costs was $785,300.00.  State Farm then denied coverage based on counsel advice that the “intent to harm” exclusion applied.

The insured sued for declaratory judgment, breach of contract and bad faith.  The Court ruled that the policy exclusion for intentional harm was ambiguous with respect to slander.  However, that ambiguity did not make a finding of bad faith automatic.  State Farm was permitted to assert an affirmative defense of advice of counsel based on the following criteria:

  • The relevant facts were disclosed to its attorney.
  • The insurance company sought the advice of counsel with respect to the legality of the coverage decision.
  • The insurance company received express advice that the action (denial of coverage) was legal.
  • The insurance company proceeded to deny coverage based on the attorneys’ advice.

 

The court held that State Farm’s reliance on its counsel opinion was in good faith and that the insurance company did not act in bad faith in denying coverage.  However, the insurance company was ordered to pay the plaintiff the $785,300.00 awarded by the judgment.

There are several lessons to be learned from the Finger case.  First, consult coverage counsel early and throughout the course of a case where coverage is not clear, where there has been a reservation of rights letter issued, or where there is a significant possibility that coverage may be denied short term or long term.  Second, establish at least some paper trail corroborating consultation with counsel, receipt of opinion and reliance on advice of counsel as part of the coverage decision so that the insurance company can truly say that it acted upon receiving counsel’s advice.  Third, the fact that the insurance company consulted at some level with coverage counsel in reviewing the claim and/or issuing a declination letter may help offset or negate allegations that the insurance company was taking a spurious position or was acting in bad faith.

One potential downside of this defense, however, is that in presenting such a defense, the insurance company likely opens up for discovery all communications with counsel concerning the coverage opinion.  Therefore, be careful on what information is presented to counsel, what statements about the insured may be made to counsel and what is the insurance company’s position with respect to coverage since such sensitive statements and matters may wind up being disclosed in discovery.

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

09/14/11         Shattuck v. Kalispell Regional Medical Center, Inc.
Supreme Court of Montana
Supreme Court of Montana Holds That CHIP Is Not “Insurance” and Is Not Subject to Montana’s “Made Whole” Rule
Dane Shattuck, a minor who was enrolled in the Children’s Health Insurance Program, died from injuries sustained after being hit by an automobile. Dane received medical treatment at a hospital which was billed in the amount of approximately $2300.00. The hospital asserted a corresponding lien on any amount Dane’s estate recovered from responsible third parties. Dane’s estate brought an action against the hospital and Blue Cross and Blue Shield of Montana – the third party administration of the CHIP program – challenging the lien’s validity. The defendants argued that CHIP is not “insurance” within the meaning of the Montana Insurance Code because it is legislatively-provided public assistance. After an extensive discussion of the insurance code and the structure and administration of CHIP in Montana, the Supreme Court agreed and held that CHIP is not “insurance” under Montana law and is not subject to either a statutory or common law “made whole” rule. The Court also held that, because CHIP is not “insurance,” Blue Cross, in its capacity as third-party administrator of CHIP, was not acting as an “insurer” and therefore also was not subject to the “made whole” rule.
Submitted by: Brett J. Preston and Casey G. Reeder (Hill Ward Henderson)

Reported Decisions

Bonilla v. Locicero

Richard T. Lau, Jericho, N.Y. (Linda Meisler of counsel), for
appellants.
Siben & Siben, LLP, Bay Shore, N.Y. (Alan G. Faber of
counsel), for respondent.

DECISION & ORDER
In an action to recover damages for personal injuries, the defendants appeal from an order of the Supreme Court, Suffolk County (Tanenbaum, J.), dated December 2, 2010, which denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed, on the law, with costs, and the defendants’ motion for summary judgment dismissing the complaint is granted.
The defendants met their prima facie burden of establishing 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 that, as a result of the subject accident, she sustained certain injuries to the cervical and thoracolumbar regions of her spine, and her left hip. However, the defendants submitted competent medical evidence establishing, prima facie, that none of those alleged injuries constituted a serious injury within the meaning of Insurance Law § 5102(d) (see Staff v Yshua, 59 AD3d 614; Rodriguez v Huerfano, 46 AD3d 794, 795). Furthermore, while the plaintiff also alleged that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d), the defendants submitted evidence establishing, prima facie, that during the 180-day period immediately following the subject accident, the plaintiff did not have an injury or impairment which, for more than 90 days, prevented her from performing substantially all of the acts that constituted her usual and customary daily activities (cf. Kin Chong Ku v Baldwin-Bell, 61 AD3d 938, 939).
In opposition, the plaintiff failed to provide a reasonable explanation for a cessation of her medical treatment (see Pommells v Perez, 4 NY3d 566, 574) and failed to raise a triable issue of fact. Accordingly, the Supreme Court should have granted the defendants’ motion for summary judgment dismissing the complaint.
Kelly v. Ghee
Goldstein & Metzger LLP, Poughkeepsie, N.Y. (Paul J. Goldstein
of counsel), for appellants.
McCabe & Mack LLP, Poughkeepsie, N.Y. (Kimberly Hunt
Lee of counsel), for respondents.

DECISION & ORDER
In an action to recover damages for personal injuries, etc., the plaintiffs appeal from an order of the Supreme Court, Dutchess County (Wood, J.), dated August 5, 2010, which, in effect, granted the defendants’ motion for summary judgment dismissing the complaint on the ground that the plaintiff Kevin P. Kelly did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed, on the law, with costs, and the defendants’ motion for summary judgment dismissing the complaint is denied.
The defendants failed to meet their prima facie burden of showing that the injured plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The plaintiffs alleged, inter alia, that as a result of the subject accident, the injured plaintiff sustained certain injuries to the cervical region of his spine. However, the defendants failed to provide competent medical evidence establishing, prima facie, that those alleged injuries did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Torres v Torrano, 79 AD3d 1124; Connors v Flaherty, 32 AD3d 891, 893). Furthermore, although the defendants contended that those alleged injuries were not caused by the subject accident (see Pommells v Perez, 4 NY3d 566, 579), the defendants’ evidentiary submissions actually demonstrated the existence of a triable issue of fact as to whether those alleged injuries were caused by the subject accident (see Coscia v 938 Trading Corp., 283 AD2d 538).
Since the defendants failed to meet their prima facie burden, it is unnecessary to consider whether the papers submitted by the plaintiffs in opposition were sufficient to raise a triable issue of fact (id.).
Accordingly, the Supreme Court should have denied the defendants’ motion for summary judgment dismissing the complaint.
Khaimov v. Jing Fan
Harmon, Linder & Rogowsky, New York, N.Y. (Mitchell Dranow
of counsel), for appellant.
Robert P. Tusa, Garden City, N.Y. (Lewis Johs Avallone Aviles,
LLP [Seth M. Weinberg], of counsel),
for respondent.

DECISION & ORDER
In an action, inter alia, to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Lane, J.), dated June 14, 2010, which granted the defendant’s motion for summary judgment dismissing the complaint on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed, on the law, with costs, and the defendant’s motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) is denied.
The defendant met his prima facie burden of establishing 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 the cervical region of his spine sustained certain injuries as a result of the subject accident. The defendant provided, inter alia, competent medical evidence establishing, prima facie, that those alleged injuries did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Rodriguez v Huerfano, 46 AD3d 794, 795).
However, in opposition, the plaintiff provided competent medical evidence raising a triable issue of fact as to whether the alleged injuries to the cervical region of his spine constituted a serious injury within the meaning of Insurance Law § 5102(d) (see Dixon v Fuller, 79 AD3d 1094, 1094-1095). He also provided a reasonable explanation for a cessation of his medical treatment (see Pommells v Perez, 4 NY3d 566, 574; Abdelaziz v Fazel, 78 AD3d 1086). Accordingly, the Supreme Court should have denied the defendant’s motion for summary judgment dismissing the complaint.
Munoz v. Irizarri
Mallow, Konstam & Nisonoff, P.C., New York, N.Y. (Mirra
Khavulya of counsel), for appellant.
Wallace D. Gossett, Brooklyn, N.Y. (Michael Rabinowitz of
counsel), for respondents Jimmie
Irizarri and New York City Transit Authority.

DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Kings County (Velasquez, J.), dated June 3, 2010, which granted the separate motions of the defendants Jimmie Irizarri and New York City Transit Authority, and the defendants Josephine Pantano and Nunzio Pantano, 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).
ORDERED that the order is reversed, on the law, with costs, and the defendants’ motions for summary judgment are denied.
The defendants met their prima facie burdens of establishing 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 she sustained certain injuries to the cervical and lumbosacral regions of her spine as a result of the subject accident. The defendants provided, inter alia, competent medical evidence establishing, prima facie, that those alleged injuries 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 provided competent medical evidence raising a triable issue of fact as to whether the alleged injuries to the cervical and lumbosacral regions of her spine constituted serious injuries within the meaning of Insurance Law § 5102(d) (see Dixon v Fuller, 79 AD3d 1094, 1094-1095). Accordingly, the Supreme Court should have denied the defendants’ motions for summary judgment.
Vejselovski v. McErlean
Martin, Fallon & Mullé, Huntington, N.Y. (Richard C. Mullé of
counsel), for appellant.
Raymond J. Pezzoli, Staten Island, N.Y., for respondents.

DECISION & ORDER
In an action to recover damages for personal injuries, etc., the defendant appeals from an order of the Supreme Court, Richmond County (McMahon, J.), dated March 15, 2011, which denied his motion for summary judgment dismissing the complaint on the ground that the plaintiff Atli Vejselovski did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed, on the law, with costs, and the defendant’s motion for summary judgment dismissing the complaint is granted.
The defendant met his prima facie burden of showing that the plaintiff Atli Vejselovski (hereinafter the injured plaintiff) did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The plaintiffs alleged that certain regions of the injured plaintiff’s spine, as well as the injured plaintiff’s left shoulder, sustained certain injuries as a result of the subject accident, and the defendant provided competent medical evidence establishing, prima facie, that those alleged injuries did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Rodriguez v Huerfano, 46 AD3d 794, 795).
In opposition, the plaintiffs failed to raise a triable issue of fact (see Casas v Montero, 48 AD3d 728, 728-729; Guzman v Bowen, 46 AD3d 617; Rameau v King, 245 AD2d 557). The affirmed report the plaintiffs submitted from the insured plaintiff’s treating chiropractor was without probative value, since a chiropractor may not affirm the contents of a report pursuant to CPLR 2106 (see Casas v Montero, 48 AD3d at 728-729; Guzman v Bowen, 46 AD3d 617; Kunz v Gleeson, 9 AD3d 480). Accordingly, the Supreme Court should have granted the defendant’s motion for summary judgment dismissing the complaint.

Roman Catholic Diocese of Brooklyn v. National Union Fire Insurance Company of Pittsburgh, Pa

Edwards Angell Palmer & Dodge, LLP, New York, N.Y. (John
D. Hughes and Robert W. DiUbaldo of counsel), for appellant.
Herzfeld & Rubin, P.C., New York, N.Y. (David B. Hamm and
Linda M. Brown of counsel), for
respondents.

DECISION & ORDER

In an action, inter alia, to recover damages for breach of contract and for a judgment declaring that the defendant National Union Fire Insurance Company of Pittsburgh, Pa., is obligated to indemnify the plaintiffs, up to the limits of the subject insurance policies in excess of a $250,000 self-insured retention, for all costs and expenses incurred in connection with the defense and settlement of an underlying action entitled N.-L. v Smith, commenced in the Supreme Court, Queens County, under Index No. 25918/03, the defendant National Union Fire Insurance Company of Pittsburgh, Pa., appeals, as limited by its notice of appeal and brief, from so much of an order of the Supreme Court, Kings County (Solomon, J.), dated March 12, 2010, as denied those branches of its motion which were for summary judgment, in effect, declaring that the alleged acts of sexual abuse in the underlying action constitute multiple occurrences, that the settlement amount and any “additional consideration” are to be allocated on a pro rata basis over seven policy periods, and that the plaintiffs must exhaust a $250,000 self-insured retention for each commercial general liability policy implicated, and granted those branches of the plaintiffs’ cross motion which were for summary judgment dismissing its fourth and sixth affirmative defenses.
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, those branches of the motion of the defendant National Union Fire Insurance Company of Pittsburgh, Pa., which were for summary judgment, in effect, declaring that the alleged acts of sexual abuse in the underlying action constitute multiple occurrences, that the settlement amount and any “additional consideration” are to be allocated on a pro rata basis over seven policy periods, and that the plaintiffs must exhaust a $250,000 self-insured retention for each commercial general liability policy implicated are granted, those branches of the plaintiffs’ cross motion which were for summary judgment dismissing the fourth and sixth affirmative defenses of the defendant National Union Fire Insurance Company of Pittsburgh, Pa., are denied, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment, inter alia, declaring that the alleged acts of sexual abuse in the underlying action constitute multiple occurrences, that the settlement amount and any “additional consideration” are to be allocated on a pro rata basis over seven policy periods, and that [*2]the plaintiffs must exhaust a $250,000 self-insured retention for each commercial general liability policy implicated.

In November 2003, Jeanne M. N.-L., individually and as mother and natural guardian of Alexandra L., a minor under the age of 18 years, commenced an action against the plaintiffs herein and against Reverend James Smith, alleging that Smith sexually abused and otherwise assaulted Alexandra. The complaint, as amplified by the bill of particulars, alleged that the sexual abuse commenced “just after” Alexandra’s tenth birthday which was on August 10, 1996, and continued until “in or about March to May 2002.” The abuse allegedly occurred at different times during the day and week, and at multiple locations. The underlying action ultimately was settled for the sum of $2,000,000 plus “additional consideration.”

The defendant National Union Fire Insurance Company of Pittsburgh, Pa. (hereinafter National), issued three annual commercial general liability (hereinafter CGL) policies to the plaintiffs for the period of August 31, 1995, through August 31, 1998. Nonparty Illinois National Insurance Company issued three annual CGL policies to the plaintiffs for the period of August 31, 1998, through August 31, 2001. Each of the six policies provided insurance with an “each occurrence limit” of $750,000, and included an endorsement which provided, in part, that the limits for each of the coverages provided by the policy would apply “excess of a $250,000,” per occurrence, self-insured retention (hereinafter SIR). Between 1995-2002, the plaintiffs also maintained umbrella coverage with the defendant Westchester Fire Insurance Company, pursuant to seven annual policies.

In January 2009 the plaintiffs commenced this action against National and Westchester seeking damages for breach of contract and a judgment declaring that National and Westchester were obligated to pay all costs and expenses incurred in connection with the defense and settlement of the underlying action. The plaintiffs sought coverage solely under the National CGL policies and the Westchester umbrella policies in effect between 1995-1996 and 1996-1997. In an order dated March 12, 2010, the Supreme Court, inter alia, denied those branches of National’s motion which were for summary judgment, in effect, declaring that the alleged acts of sexual abuse in the underlying action constitute multiple occurrences, that the settlement amount and any “additional consideration” are to be allocated on a pro rata basis over seven policy periods, and that the plaintiffs must exhaust a $250,000 self-insured retention for each commercial general liability policy implicated, and granted those branches of the plaintiffs’ cross motion which were for summary judgment dismissing National’s fourth and sixth affirmative defenses. This appeal by National ensued.
“Where there is on-going and progressive injury that spans many years . . . the question is whether each [triggered] policy is liable for the entirety of [the liability for the injury] or whether each policy is responsible for paying only the portion of the [liability] somehow attributable to the amount of injury during the policy period’” (Olin Corp. v Insurance Co. of N. Am., 221 F3d 307, 322, quoting In re Prudential Lines Inc., 158 F3d 65, 84).

Here, National established its prima facie entitlement to judgment as a matter of law declaring that the settlement amount and any “additional consideration” are to be allocated on a pro rata basis over seven policy periods. In determining a dispute over insurance coverage, courts must first look to the language of the policy (see Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 221). The subject National CGL policies provide, in pertinent part, that: “This insurance applies to bodily injury’ . . . only if . . . [t]he bodily injury’ . . . is caused by an occurrence’” and “[t]he bodily injury’ . . . occurs during the policy period.” Significantly, the policies provide indemnification for liability as a result of bodily injury occurring during the policy period. Thus, “[p]ro rata allocation under these facts, while not explicitly mandated by the policies, is consistent with the language of the policies” (id. at 224).

In opposition, the plaintiffs failed to raise a triable issue of fact. The plaintiffs seek to allocate the settlement amount using the “joint and several” method, pursuant to which an insured may choose any one of the applicable policies it wishes, and demand payment for the entire claim [*3]under that single policy, up to the policy limit (see Olin Corp. v Insurance Co. of N. Am., 221 F3d at 322; Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d at 221-222). However, joint and several allocation is inconsistent with the unambiguous language of the National policies providing coverage for bodily injury that resulted from an occurrence “during the policy period” (Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d at 224 [emphasis added]; cf. Olin Corp. v Insurance Co. of N. Am., 221 F3d at 323-324). “[C]ollecting all the indemnity from a particular policy presupposes ability to pin an accident to a particular policy period” (Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d at 224). Here, however, it cannot be determined to what extent the bodily injury allegedly sustained occurred during a particular policy period. Accordingly, the Supreme Court should have granted that branch of National’s motion which was for summary judgment, in effect, declaring that the settlement amount and any “additional consideration” are to be allocated on a pro rata basis over seven policy periods (see Crucible Materials Corp. v Certain Underwriters at Lloyd’s London & London Market Cos., 681 F Supp 2d 216, 226; Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d at 216, 225; Serio v Public Serv. Mut. Ins. Co., 304 AD2d 167, 172).
National also established its prima facie entitlement to judgment as a matter of law declaring that the alleged acts of sexual abuse in the underlying action constitute multiple occurrences, and that the plaintiffs must exhaust a $250,000 self-insured retention for each of the two CGL policy implicated. “Occurrence” is defined in the National policies as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” This language does not reflect an intent by the parties to aggregate claims for the purpose of subjecting them to a single policy deductible or SIR (see Appalachian Ins. Co. v General Elec. Co., 8 NY3d 162, 173 n 3; ExxonMobil Corp. v Certain Underwriters at Lloyd’s, London, 50 AD3d 434, 434-435; International Flavors & Fragrances, Inc. v Royal Ins. Co. of Am., 46 AD3d 224, 226).

“In the absence of a specific aggregation-of-claims provision precisely identifying the operative incident or occasion giving rise to liability, the court must apply the unfortunate events’ test (see Arthur A. Johnson Corp. v Indemnity Ins. Co. of N. Am., 7 NY2d 222 [1959]) to determine whether the underlying multiple claims constitute multiple occurrences’ under the policy” (ExxonMobil Corp. v Certain Underwriters at Lloyd’s, London, 50 AD3d at 435). In this regard, courts “must analyze the temporal and spatial relationships between the incidents and the extent to which they were part of an undisrupted continuum to determine whether they can . . . be viewed as a single unfortunate event—a single occurrence” (Appalachian Ins. Co. v General Elec. Co., 8 NY3d at 174).

Here, the sexual abuse allegedly occurred over a seven-year period, at different times, and at multiple locations. Thus, it cannot be said that there was a close temporal and spatial relationship between the acts of sexual abuse (id.). Under the circumstances, National demonstrated, prima facie, that the alleged acts of sexual abuse constituted multiple occurrences (see Interstate Fire & Cas. Co. v Archdiocese of Portland in Oregon, 35 F3d 1325, 1331; Society of Roman Catholic Church of Diocese of Lafayette and Lake Charles, Inc. v Interstate Fire & Cas. Co., 26 F3d 1359, 1365; Safeguard Ins. Co. v Angel Guardian Home, 946 F Supp 221, 231; Roman Catholic Diocese of Joliet, Inc. v Interstate Fire Ins. Co., 292 Ill App 3d 447, 456, 685 NE2d 932 [1997]). Moreover, where, as here, “multiple policies are triggered and liability is allocated to each, each policy’s deductible is applicable” (Olin Corp. v Insurance Co. of N. Am., 221 F3d at 328). In opposition to National’s prima facie showing, the plaintiffs failed to raise a triable issue of fact. Accordingly, the Supreme Court should have granted those branches of National’s motion which were for summary judgment, in effect, declaring that the alleged acts of sexual abuse in the underlying action constitute multiple occurrences, and that the plaintiffs must exhaust a $250,000 self-insured retention for each of the two CGL policy implicated.

Turning to the plaintiffs’ cross motion, the plaintiffs failed to establish their prima facie entitlement to judgment as a matter of law dismissing National’s fourth affirmative defense on the ground that National waived that defense pursuant to Insurance Law § 3420(d). National’s fourth affirmative defense alleged that “[t]o the extent coverage exists for plaintiffs’ claim, it is subject to multiple [SIRs] under the Policies.” The SIRs, which are contained in endorsements, do not ]implicate exclusions in the policies. Therefore, “the time requirements for disclaiming coverage under Insurance Law § 3420(d) are inapplicable” (Power Auth. v National Union Fire Ins. Co. of Pittsburgh, 306 AD2d 139, 140; see Pav-Lak Indus., Inc. v Arch Ins. Co., 56 AD3d 287, 288). Accordingly, the Supreme Court should have denied that branch of the plaintiffs’ cross motion which was for summary judgment dismissing National’s fourth affirmative defense.
Finally, the plaintiffs failed to establish their prima facie entitlement to judgment as a matter of law dismissing National’s sixth affirmative defense. Thus, the Supreme Court should have denied that branch of the plaintiffs’ cross motion, regardless of the sufficiency of the opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).

Since this is, in part, an action for a declaratory judgment, we remit the matter to the Supreme Court, Kings County, for the entry of a judgment, inter alia, declaring that the alleged acts of sexual abuse in the underlying action constitute multiple occurrences, that the settlement amount and any “additional consideration” are to be allocated on a pro rata basis over 7 policy periods, and that the plaintiffs must exhaust a $250,000 self-insured retention for each CGL policy implicated (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

Tener v Cremer
Plaintiff appeals from an order of the Supreme Court, New York County (Doris Ling-Cohan, J.), entered September 14, 2010, which denied her motion to hold nonparty New York University Langone Medical Center in contempt for failing to comply with a judicial subpoena, and from an order, same court and Justice, entered September 24, 2010, which transferred the action to the Civil Court pursuant to CPLR 325(d).

Wagner Davis, P.C., New York (Bonnie Reid Berkow
of counsel), for appellant.
Wilson, Elser, Moskowitz, Edelman & Dicker, LLP,
New York (William F. Cusack and Ricki E. Roer of
counsel), for respondent.

MOSKOWITZ, J.,
This appeal provides us with the first opportunity to address the obligation of a nonparty to produce electronically stored information (ESI) deleted through normal business operations. The action underlying this discovery dispute concerns a statement about plaintiff that someone posted on a website known as Vitals.com on April 12, 2009. Plaintiff claims this statement defamed her.[FN1]
Plaintiff claims that through discovery she managed to trace the Internet protocol (IP) address of the computer from which the allegedly defamatory post originated “to a computer in the custody and control of New York University.” This computer had accessed the Internet through a portal located at Bellevue Medical Center and registered to nonparty New York University Langone Medical Center (NYU). According to NYU’s Chief Information Security Officer, NYU had installed the Internet portal at Bellevue for the convenience of its residents who train there. The portal is a network address translation (NAT) portal that is essentially a switchboard through which a person can access the Internet. While only NYU personnel with proper security codes can gain access to NYU’s computer system and medical records, anyone using a computer plugged into an ethernet outlet at Bellevue can access other web sites through the NYU portal. On April 12, 2009, as many as 2,000 NYU personnel and an untold number of Bellevue physicians, staff, and visitors could have accessed a web site through the NYU portal. In fact, the portal is capable of allowing access to up to 65,000 users at any one time.
On April 30, 2010, plaintiff served a subpoena on NYU seeking the identity of all persons who accessed the Internet on April 12, 2009, via the IP address plaintiff previously identified [FN2]. With the subpoena, plaintiff served a preservation letter advising NYU that the identity of the person who posted the remarks was at issue and that NYU should halt any normal business practices that would destroy that information.
When NYU did not produce the information, plaintiff moved for contempt. In opposition to plaintiff’s contempt motion, NYU’s Chief Information Security Officer stated that “[c]omputers that simply access the web through NYU’s portal appear as a text file listing that is automatically written over every 30 days. NYU does not possess the technological capability or software, if such exists, to retrieve a text file created more than a year ago and written over’ at least 12 times.”
Plaintiff, in reply, submitted an affidavit from a forensic computer expert opining that NYU could still access the information using software designed to retrieve deleted information. The expert stated that “the term written over’ is deceptive” because what really occurs is that ” old’ information or data is typically allocated to free space’ within the system.” Plaintiff’s expert suggested using “X-Rays Forensic” or “Sleuth Kit” to retrieve the information from unallocated space.
Supreme Court denied the contempt motion in part because it found that NYU did not have the ability to produce the materials plaintiff demanded and that “this allegation is unrefuted as a reply affidavit contradicting such allegation has not been supplied.”[FN3]
Supreme Court was incorrect. As just mentioned, plaintiff had interposed an affidavit in reply from an expert detailing the steps NYU could take to obtain the data, including the utilization of forensic software.
In its papers in opposition to the motion, NYU offered no evidence that it made any effort at all to access the data, apparently because it believed it could not, as a nonparty, be required to install forensic software on its system. However, the cases that NYU cites to support its assertion that it need not install forensic software are outdated. The most recent is from 1993, nearly 20 years ago (see Carrick Realty Corp v Flores, 157 Misc 2d 868 (Civ Ct, New York County 1993). Thus, as discussed below, there are several unanswered questions regarding NYU’s ability to produce the requested documents.
The party moving for civil contempt arising out of noncompliance with a subpoena duces tecum bears the burden of establishing, by clear and convincing evidence, that the subpoena has been violated and that “the party from whom the documents were sought had the ability to produce them” (Yalkowsky v Yalkowsky, 93 AD2d 834, 835 [1983]; see also Gray v Giarrizzo, 47 AD3d 765, 766 [2008]).
In this day and age the discovery of ESI is commonplace. Although the CPLR is silent on the topic, the Uniform Rules of the Trial Courts, several courts, as well as bar associations, have addressed the discovery of ESI and have provided working guidelines that are useful to judges and practitioners. Indeed, in 2006, the Conference of Chief Justices approved a report entitled “Guidelines for State Trial Courts Regarding Discovery of Electronically Stored Information.” New York’s Uniform Rules For the Trial Courts specifically contemplate discovery of ESI. Rule 202.12(c)(3) allows a court, where appropriate, to establish the method and scope of electronic discovery (Uniform Rules for Trial Courts [22 NYCRR] § 202.12 [c][3]).
The Uniform Rules addressing the discovery of ESI are fairly recent. They took effect in 2009. However, the Commercial Division Rules have addressed discovery of ESI for some time. Rule 8(b) of the rules contains requirements similar to those in the Uniform Rules. The Commercial Division for Supreme Court, Nassau County has built on Commercial Division rule 8(b) to develop the most sophisticated rules concerning discovery of ESI in the State of New York. That court also publishes in depth guidelines for the discovery of ESI (the Nassau Guidelines). While aimed at parties, the Nassau Guidelines are appropriate in cases, such as this, where a nonparty’s data is at issue.
ESI is difficult to destroy permanently. Deletion usually only makes the data more difficult to access. Accordingly, discovery rules contemplate data recovery. For instance, the Uniform Rules include the “anticipated cost of data recovery and proposed initial allocation of such cost” in the scope of electronic discovery (Uniform Rules for Trial Courts [22 NYCRR] § 202.12[c][3]).
The Nassau Guidelines urge that parties should be prepared to address the production of ESI that may have been deleted. The Nassau Guidelines state that at the preliminary conference, counsel for the parties should be prepared to discuss:
“identification, in reasonable detail, of ESI that is or is not reasonably accessible, without undue burden or cost, the methods of storing and retrieving ESI that is not reasonably accessible, and the anticipated costs and efforts involved in retrieving such ESI.”

(New York State Supreme Court, Commercial Division, Nassau County, Guidelines for Discovery of Electronically Stored Information [ESI]), effective June 1, 2009, II[c][4]).
The Nassau Guidelines also suggest that the parties be prepared to discuss “the need for certified forensic specialists and/or experts to assist with the search for and production of ESI” (id. at II [c][13]) Most important, the Nassau Guidelines do not rule out the discoverability of deleted data, but rather suggest a cost/benefit analysis involving how difficult and costly it would be to retrieve it:
“As the term is used herein, ESI is not to be deemed inaccessible’ based solely on its source or type of storage media. Inaccessibility is based on the burden and expense of recovering and producing the ESI and the relative need for the data” (id. at IV).[FN4]
The Federal Rules of Civil Procedure take a similar, although slightly more restrictive, approach. Rule 45 provides specific protections to non-parties. A person responding to a subpoena “need not provide discovery of electronically stored information from sources that the person identifies as not reasonably accessible because of undue burden or cost” (Fed Rules Civ Pro rule 45[d][1][D]). Moreover, “non-party status is a significant factor in determining whether the burden imposed by a subpoena is undue” (Whitlow v Martin, 263 FRD 507, 512 [CD Ill 2009]). Nevertheless, a federal court may still “order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C)” (Fed Rules Civ Pro rule 45[d][1][D]). Rule 26(b)(2)(C)(i)-(iii) requires a court to limit any discovery: (1) “that is unreasonably cumulative or duplicative,” (2) “can be obtained from some other source that is more convenient, less burdensome or less expensive,” (3) “where the party has already had ample opportunity to obtain the information by discovery in the action” or (4) when “the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of discovery in resolving the issues.” The Advisory Committee Notes explain that the costs of retrieving the information are properly part of this analysis.
Meanwhile, some federal courts have suggested strict limits on the discovery of specific types of data that are typically overwritten or ephemeral. For example, the Seventh Circuit Electronic Discovery Pilot Program has adopted several “principles” to guide litigants through the discovery of ESI. In particular, Principle 2.04 governing the scope of preservation states that certain categories of ESI “generally are not discoverable in most cases.” (Seventh Circuit Electronic Discovery Committee, Seventh Circuit Electronic Discovery Pilot Program, 14-15, Oct. 1, 2009). These categories include:
1 “Deleted,” slack,” fragmented,” or “unallocated” data on hard drives; 2 Random access memory (RAM) or other ephemeral data; 3 On-line access data such as temporary internet files, history, cache, cookies etc; 4 Data in metadata fields that are frequently updated automatically, such as last-opened dates; 5 Backup data that is substantially duplicative of data that is more accessible elsewhere; and 6 Other forms of ESI whose preservation requires extraordinary affirmative measures that are not utilized in the ordinary course of business (id.). However, the federal courts may still order the discovery of data from these sources in an appropriate case (see Victor Stanley, Inc. v. Creative Pipe, Inc. 269 FRD 497, 524 [D Md. 2010]["[t]he general duty to preserve may also include deleted data, data in slack spaces, backup tapes, legacy systems, and metadata.”]); Columbia Pictures, Inc. v. Bunnell, 245 FRD 443 [CD Cal. 2007] [ordering production of server log data]). We also note Judge Scheindlin’s groundbreaking decision in Zubulake v UBS Warburg, LLC, 217 FRD 309, 316 [SDNY 2003] [in developing framework for cost/benefit analysis, court noted that discovery obligations apply not only to "electronic documents that are currently in use, but also [to] documents that may have been deleted and now reside only on backup disks.”]).
Based on the specific facts of this case, we find that the Nassau Guidelines provide a practical approach. To exempt inaccessible data presumptively from discovery might encourage quick deletion as a matter of corporate policy, well before the spectre of litigation is on the horizon and the duty to preserve it attaches. A cost/benefit analysis, as the Nassau Guidelines provide, does not encourage data destruction because discovery could take place regardless. Moreover, similar to rule 26(b)(2)(C)(iii), the approach of the Nassau Guidelines, has the benefit of giving the court flexibility to determine literally whether the discovery is worth the cost and effort of retrieval.
Here, plaintiff has variously described the information it seeks as stored in a “cache” file, as “unallocated” data or somewhere in backup data. Data from these sources is difficult to access. But, plaintiff’s only chance to confirm the identity of the person who allegedly defamed her may lie with NYU. Thus, plaintiff has demonstrated “good cause” (see Fed Rules Civ Pro rule 45[d][1][D]) necessitating a cost/benefit analysis to determine whether the needs of the case warrant retrieval of the data.
However, the record is insufficient to permit this court to undertake a cost/benefit analysis. Accordingly, we remand to Supreme Court for a hearing to determine at least: (1) whether the identifying information was written over, as NYU maintains, or whether it is somewhere else, such as in unallocated space as a text file; (2) whether the retrieval software plaintiff suggested can actually obtain the data; (3) whether the data will identify actual persons who used the internet on April 12, 2009 via the IP address plaintiff identified; (4) which of those persons accessed Vitals.com and (5) a budget for the cost of the data retrieval, including line item(s) correlating the cost to NYU for the disruption [FN5]. Some of these questions (particularly [1] and [2]) may involve credibility determinations. Until the court has this minimum information, it cannot assess “the burden and expense of recovering and producing the ESI and the relative need for the data” (Nassau Guidelines) and concomitantly whether the data is so “inaccessible” that NYU does not have the ability to comply with the subpoena. That NYU is a nonparty should also figure into the equation (see Whitlow 263 FRD at 512). Of course in the event the data is retrievable without undue burden or cost, the court should give NYU a reasonable time to comply with the subpoena.
Further, it is worth mentioning that CPLR 3111 and 3122(d) require the requesting party to defray the “reasonable production expenses” of a nonparty. Accordingly, if the court finds after the hearing that NYU has the ability to produce the data, the court should allocate the costs of this production to plaintiff and should consider whether to include in that allocation the cost of disruption to NYU’s normal business operations. In this latter consideration, the court should also take into account that plaintiff waited one year before sending the subpoena and preservation letter.
The court also erred in transferring the case to Civil Court. Although the complaint seeks damages, it also seeks equitable relief that is not within the jurisdiction of Civil Court (see CPLR 325[d]; W.H.P. 20 v Oktagon Corp., 251 AD2d 58, 59 [1998]).
Accordingly the order of the Supreme Court, New York County (Doris Ling-Cohan, J.), entered September 14, 2010, that denied plaintiff’s motion to hold nonparty NYU in contempt for failing to comply with a judicial subpoena, should be reversed, on the law, without costs, and the matter remanded to Supreme Court for a hearing on whether the information plaintiff seeks is “inaccessible” and hence whether NYU has the ability to comply with the subpoena. The order of the same court and Justice, entered September 24, 2010, that sua sponte transferred the action to the Civil Court pursuant to CPLR 325(d), should be reversed, on the law, without costs, and the order of transfer vacated.
All concur.

Order, Supreme Court, New York County (Doris Ling-Cohan, J.), entered September 14, 2010, reversed, on the law, without costs, and the matter remanded to Supreme Court for a hearing on whether the information plaintiff seeks is “inaccessible” and hence whether nonparty New York University Langone Medical Center has the ability to comply with the subpoena. Order, same court and Justice, entered September 24, 2010, reversed, on the law, without costs, and the order of transfer vacated.
Opinion by Moskowitz, J. All concur.
Gonzalez, P.J., Tom, Andrias, Moskowitz, Freedman, JJ.
Footnotes
Footnote 1: For the purposes of this appeal, we assume that plaintiff has stated a valid claim for defamation.

Footnote 2: The record is unclear whether the IP address plaintiff uncovered refers to the IP address of the exact computer that posted the allegedly defamatory material or more broadly to NYU’s Internet portal.

Footnote 3: NYU does not dispute plaintiff’s assertion that the subpoena was not facially defective.

Footnote 4: The prestigious Sedona Conference also recommends analyzing accessibility as a relative concept and includes the ease with which the data can be searched as a factor: “The relative accessibility of a source of potentially discoverable information is best evaluated by assessing the burdens involved in viewing, extracting, preserving, and searching the source as well as other relevant factors imposed by the location, including the dispersion and the volumes involved.” (The Sedona Conference Working Group, The Sedona Conference Commentary on: Preservation, Management and Identification of Sources of Information that are Not Reasonably Accessible, at pg. 9 (July 2008).

Footnote 5: It is likely inappropriate to allow outside forensic computer experts access to NYU’s computers because of privacy concerns.

Morris v. The City of New York.

Baxter, Smith & Shapiro, P.C., Hicksville (Margot L. Ludlam
of counsel), for appellant.
Arnold E. DiJoseph, P.C., New York (Arnold E. DiJoseph, III of
counsel), for respondent.
Order, Supreme Court, Bronx County (Wilma Guzman, J.), entered September 1, 2010, which denied so much of defendant’s motion for summary judgment as sought to dismiss the Labor Law §§ 240(1) and 200 and common-law negligence causes of action and the Labor Law § 241(6) cause of action predicated upon Industrial Code (12 NYCRR) §§ 23-1.7(d)(e)(1) and (2) and 23-2.7(b), unanimously modified, on the law, to grant the motion as to the Labor Law § 200 and common-law negligence causes of action, and otherwise affirmed, without costs.
Plaintiff Omrie Morris was injured when a temporary wooden step on which he was standing shifted as he and another employee were moving an air tank up a concrete stairway from the basement of the work site to the first floor. There is an issue of fact as to whether the temporary step had been placed at the bottom of the concrete stairway to aid employees in ascending the stairway to different levels of the site, and thus constituted a device to protect employees against elevation-related risks within the meaning of Labor Law § 240(1) (see Megna v Tishman Constr. Corp. of Manhattan, 306 AD2d 163 [2003]; see also McGarry v CVP 1 LLC, 55 AD3d 441 [2008]).
In view of the evidence that the temporary step was unstable and that snow and debris accumulated in the working areas and in the hallways and other passageways that plaintiff and the other employee had to traverse to reach the air tanks, defendant failed to demonstrate that Industrial Code (12 NYCRR) §§ 23-1.7(d)(e)(1) and (2) and (f), which address slipping, tripping and other hazards, and vertical passages, and § 23-2.7(b), which addresses temporary stairway construction, are inapplicable to the facts of this case and thus do not support the Labor Law § 241(6) cause of action.
The record demonstrates only that defendant had general supervisory authority at the work site, which is insufficient to trigger liability under Labor Law § 200 and common-law negligence principles (Burgalassi v Mandell Mech. Corp., 38 AD3d 363 [2007]).

 

Volume XIII, No. 6

A Biweekly Electronic Newsletter
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202

Phone: 716-849-8900
Fax: 716-855-0874
www.hurwitzfine.com

© Hurwitz & Fine, P. C.
All rights reserved

As a public service, Hurwitz & Fine, 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 our editor Dan D. Kohane at ddk@hurwitzfine.com or call 716-849-8900. You will find back issues of Coverage Pointers here.

Dear Coverage Pointers Subscribers:

We bring late summer greetings from Long Island and the Long Island Insurance Community Gala.

We apologized in advance last week for e-mail gaffes caused by our migration from one e-mail program to another.  We have tried to work out the kinks, but are bound to have some difficulties this week as well, albeit fewer.  For those who received four copies of Coverage Pointers, we hope you shared the extras with friends and colleagues.  Please continue to be patient with us and thanks.

As the courts return to their regular schedules, decisions will come fast and furiously in the next few weeks.  We’re still suffering from the drought caused by the summer oral argument hiatus.

New York State Weighs in On Flood Insurance Coverage for Irene

Our new Superintendent of the Department of Financial Services, the agency created by the merger of the Insurance and Banking Departments, has issued a press release on flood insurance:

Superintendent Lawsky: Flood Insurance Will Cover Flood Damage Caused by Irene
Irene was tropical storm in New York so hurricane deductibles should not apply

NEW YORK, NY (09/01/2011) — Benjamin M. Lawsky, Superintendent of the Department of Financial Services, announced today flood insurance does cover flood damage caused by Irene. Some individuals who have suffered severe flood damage in New York are being told by their insurers that flood insurance does not apply. In fact, flood insurance covers flooding caused by tropical storm Irene and no insurer should even think about not honoring its commitments under a flood insurance policy.
Separately, Superintendent Lawsky noted that Irene has been designated a tropical storm, not a hurricane, when it reached New York and therefore hurricane deductibles should not apply on homeowners’ insurance policies. Homeowners should not have to pay this deductible and insurers should be aware that the Department will make sure they are not hitting consumers with a hurricane deductible, which is often a full five percent of the insured property’s value.

Superintendent Lawsky stated, “Homeowners are suffering terribly from this storm and we will continue to ensure that insurers do not abuse those they insure by not paying flood insurance or by forcing homeowners to pay big hurricane deductibles that just don’t apply. While Irene obviously started out as a hurricane, by the time it reached New York it was a tropical storm, with winds in the 60 mph range. This makes a big difference for homeowners because it means that special hurricane deductibles will not kick in, saving them thousands of dollars.”

One Hundred Years Ago (and two weeks)
A Bill McKechnie (Post-script)

We know that our readership is comprised of insurance coverage aficionados and surely we try to satisfy all of your craving for cogent coverage commentary.  But regular readers of this column know that your editor has a passion for history and our “Hundred Years Ago Today” vignettes are among our most popular features.   Those who read the fine print know that we often look for “the rest of the story,” and try to bring you some “color” or “completeness” to the century-old snapshot.  The most fun for me is when I am able to track down a descendent of the focus of the story.

In the previous issue of Coverage Pointers, we told the story of Hall of Fame Pittsburgh Pirate infielder, Bill “Deacon” McKechnie, who hit two inside-the-park homeruns on September 2, 1911.  We included some commentary from Jim McKechnie, a descendent.  The day after our issue went to press, I received this generous e-mail from Bill McKechnie’s last surviving child – who by her note will turn 80 in December – and I wanted to share it with you:

Hi Dan,

I got your message by a very round-about way but thought I could shed a bit of light on your query about my dad, Bill McKechnie, the ballplayer. I wish I would have gotten it in time to make your Sept 2 deadline but I was out of town several days and am just now wading through the e-mails.

I am the last surviving offspring of mother and dad out of four. I had two brothers and a sister who were older than I and now, other than grandchildren and cousins, am all that is left.

I do indeed remember hearing mother tell of the two inside the parkers but I had no idea of the date. It must have been when Daddy was playing with Pittsburgh. Since I didn’t arrive until Dec. of ‘31, there were many stories that I heard that I had not been able to witness in person.

I did just finish a short book on my rather unusual childhood as a baseball brat which is at the publisher as I write. I hope to have it for sale within a few weeks. It’s called “The Deacon’s Daughter”. I wrote it mainly so that my children and grandchildren could share in some of the wonderful times I remember so vividly.

If you decide to do a late note on the Sept.2 item I would love to see your publication.

Sincerely,

Carol McKechnie Montgomery

Editor’s Note:  Thanks Carol.  Your dad’s legacy lives own with our readership.  More than a few people dropped me notes with your father’s stats and accomplishments.

Audrey’s Angle:

Thank you to those who attended the NBI Seminar on No-Fault Law in Syracuse and Buffalo and welcome to those who joined Coverage Pointers after attending the seminar.  Each location had a good mix of plaintiff and defense counsel as well as insurance adjusters.  It was nice to hear from Arbitrators Benziger and O’Connor with regard to what they expect to see from both sides at a No-Fault arbitration.  The following is a summary of the points made and they are worth carefully reviewing and considering.

Be prepared.  The arbitrator should not have to spend a lot of time on “housekeeping.”  This means BOTH sides should know what the amount in dispute is; what the fee schedule is; what the basis for denial is; and whether there is an issue with standing which should be raised immediately at the hearing.

Insurers should have succinct evidence submissions and consider having an outline of all of the defenses you will raise at the hearing.  One arbitrator mentioned that an insurer routinely copies nearly the entire file and mails it in with a one sentence cover note.  Further, when looking at the file three copies of the same denial for the same service will be provided when only one is needed.  Unfortunately, this leads the arbitrator to think that the insurer has not placed much thought into the evidence submission.  Also, it leaves the arbitrator searching for something and ultimately becoming frustrated because it cannot be easily found.  Also, insurers are sending in one sentence cover letters indicated that the attached is the evidence and the insurer is standing behind its denials.  The arbitrators would like to see some outline of what the defenses will be asserted at the arbitration.  Apparently, some insurers were advised by counsel that less said is better.  [I tend to agree in some cases.]  The point is that you should enumerate whether there is a standing or fee schedule defense and what dates your denials were and the basis for same that you are relying upon.  This provides the arbitrator with information up front on the issues to be addressed at a hearing and provides useful information as to the denial dates, which are referenced in decisions, as well as whether the denial is based upon an IME, peer review, breach of a policy condition, etc.  The arbitrators did not indicate that wanted to see full arguments in writing on the merits in the submissions.

Applicants that have lost wage claims should be prepared to be able to break down the monthly wage calculation and not just submit the time period and total amount.  Also, Applicants should be prepared to advise of any disability offsets, etc.

Counsel should be respectful to the arbitrator and each other.  An arbitrator commented how some attorneys, in particular some who have been practicing for fewer years, have been overly aggressive at arbitrations and engaged in personal attacks.  The arbitrators gently reminded that those tactics are not helpful to your client and only make the hearing run longer than it needs to on irrelevant issues.

Finally, both parties should know the arbitrator they are appearing in front of by reviewing decisions that are on line with AAA on particular issues being arbitrated.  If you have prior reported decisions on that issue you should bring them with you to the hearing and provide a copy to the arbitrator and your opponent.  The arbitrator wants to know if he or she took a particular position on this exact issue before and what it was to ensure consistency.

If you are looking for another top notch program to attend then mark your calendar for December 15-16 as DRI’s Insurance Law Committee is presenting the Insurance Coverage and Practice Symposium in New York City.  The program has great topics regarding successfully using an expert in insurance coverage litigation, the insurer’s strategy in defending class actions, and litigating the confessed judgment.  Aside from the timely topics, there will be industry representatives from Chartis Claims, Inc., Ironshore Inc., Munich Reinsurance America, Willis Re and others attending.  Registration is due by November 25, 2011, but recommended that you get it in and book your hotel room as early as possible as it fills up fast around this holiday season.  Further, if you are an insurer interested in catching up with your panel counsel DRI has great incentives and makes it easy for you to hold a panel counsel meeting at this program.  If you need a brochure or want more details on the panel counsel meeting please send me an email at aas@hurwitzfine.com.

Audrey A. Seeley

Super Good News
While we are proud to announce that 15 of the firm’s attorneys were identified by other lawyers as outstanding in their respective fields in the 2011 New York Super Lawyers Magazine Upstate Edition (everything outside of NYC), we are especially proud to have firm President Ann Evanko gracing the cover of this highly respected annual publication. For those who don’t receive New York Super Lawyers Magazine you may wish to follow this link to the article Leading By Example: Ann E. Evanko solves employment law problems and mentors the next generation. Great article on a great person and attorney.

Only 5% of lawyers statewide make the final list yet over 50% of our attorneys were recognized through this multi-phase selection process which surveys attorneys across the state to determine which counsel have attained the highest degree of peer recognition and professional achievement.

Named lawyers include:

Robert P. Fine (Top 50)
Business/Corporate
Lawrence C. Franco (Top 50)
Business/Corporate
Dan D. Kohane (Top 50)
Insurance Coverage
Harry F. Mooney (Top 10 and Top 50)
Personal Injury Defense: Products
Ann E. Evanko (Top 50, Top 25 Female)
Employment & Labor
Paul J. Suozzi
Personal Injury Defense: General
Roger L. Ross
Real Estate
Lawrence M. Ross
Health Care
Michael F. Perley (Top 50)
Personal Injury Defense: General
Diane K. Church
Banking
Andrea Schillaci (Top 25 Female)
Business Litigation
Edward C. Robinson
Estate Planning & Probate
Earl K. Cantwell
Business Litigation
Kevin J. Zanner
Business/Corporate
Diane F. Bosse
Insurance Coverage

The Best of News
Please join me in congratulating our nine attorneys honored by inclusion in Best Lawyers in America – now in even more categories than ever. Best Lawyers in America is the oldest peer-review publication in the legal profession with results published annually in an advertisement-free publication – no fluff, just good stuff. The Best Lawyers list features the results of an exhaustive peer-review survey with more than 3.1 million votes cast on the legal abilities of other lawyers in the same and related specialties. Because of the rigorous and transparent methodology used by Best Lawyers, and because lawyers are not required or allowed to pay a fee to be listed, inclusion in Best Lawyers is considered a singular honor.

Hurwitz & Fine, P.C. Best Lawyers include:

Ann E. Evanko
Corporate Law
Employment Law – Management
Robert P. Fine
Corporate Law
Health Care Law
Mergers & Acquisitions Law
Trusts and Estates
Lawrence C. Franco
Corporate Law
Trusts and Estates
Dan D. Kohane
Commercial Litigation
Insurance Law
Harry F. Mooney
Civil Rights Law
Commercial Litigation
Product Liability Litigation – Defendants
Professional Malpractice Law – Defendants
Michael F. Perley
Litigation – Municipal
Personal Injury Litigation – Defendants
Lawrence M. Ross
Corporate Law
Health Care Law
Roger L. Ross
Real Estate Law
Paul J. Suozzi
Personal Injury Litigation – Defendants

Peiper’s Postulates:

Times are, again, slow this week.   We do offer two fine Labor Law decisions out of the First Department for your review this week.  The second case discussed, Cordeiro, references one our favorite contractual indemnity cases Tonking v Port Authority.  For those of  you that have not reviewed it in a while, Tonking is the Court of Appeals famous ruling on the specificity requirements of indemnity provisions.

The Tonking case a involved a situation where Bovis, as an agent to the Port Authority, claimed a right to indemnification under a contract the Port Authority entered into with V.P.H.  The Court noted, however, that Bovis was never identified as an agent of the Port Authority at any point in the body of the contract at issue.  As succinctly stated by the Court of Appeals, “[i]f the parties intended to cover Bovis [here a non-party agent of a co-signee of the agreement Port Authority] as a potential indemnitee, they had only to say so unambiguously”

We couldn’t have said it better ourselves.  In a nutshell, Tonking and its progeny stand for the proposition if you want contractual indemnity in a construction contract, you’d better ask for it!

That’s it for this week.  See you on the 30th.

Steve
sep@hurwitzfine.com

 

One Hundred Years Ago Today – the Beginning of the Green Race Car Taboo:

The September 16, 1911 headline of the Syracuse Herald screamed:

Speed Kings Vie For Records
World’s Auto Records to Go
State Fair Ends in Glory

The crack of the starter’s pistol, the chug, chugging of powerful motors and then a gray streak, fleeting around a circular track, daring death at every turn: a big field thronged with thousands, speed-mad, watching the cars that seem to have no wheels — that is Automobile day at the State Fair.

The President of the United States is a guest of Syracuse and the State Fair to-day.

Daring death at every turn?  How right they were.  Speed?  About 70 mph

As the story indicated, President William Howard Taft visited the New York State Fair in Syracuse.  Shortly after he left the fairgrounds, disaster struck. The newspaper story in the following day’s paper, told the story:

Syracuse Herald
September 17, 1911
NINE KILLED WHEN AUTO PLUNGES THROUGH CROWD

RACES AT FAIR
END IN TRAGEDY
Lee Oldfield’s Racing Machine Leaves
Track and Crashes Into Fence.
SCATTERS DEAD AND INJURED
ABOUT INCLOSURE OF FIELD
Two of Wounded Are Dying and Nine Others Are Seriously Hurt

  • Car Somersaults and Hurtles Through Air Into Maw of

People — Accident Occurs Daring Fifty-mile Race —Seven
of Dead Killed Outright or Died Soon After Arriving at the
Hospital—Races Continue After Catastrophe—The Accident
Occurred After President Taft Had Left Grounds.

Nine persons are dead, two are dying and nine others are injured, some of them seriously, as the result of the catastrophe during the automobile races at the State fair yesterday afternoon, when a Knox racing car, driven by Lee Oldfield, leaped from the track and in a series of somersaults hurtled through the mass of people lined up beside the track.

At least seven of the dead were killed outright or died on their way to the hospital. One died three hours after the Accident in St. Joseph’s Hospital. Of the injured, two are ‘expected to die before morning. One of those in a critical condition is Lee Oldfield, the driver of the car.

The tragedy occurred shortly after 5:30 o’clock, when the racers in the fifty-mile automobile race were just entering upon the forty-third mile of the race. The track on either side was lined with people and they were six and seven deep on either side.

PEOPLE CRUSHED LIKE PAPER. The machines, with Ralph De Palma in the lead, had just swung into the quarter beyond the grandstand when a report like the crack of a pistol was heard. Oldfield’s car leaped from the track. Crashing through the fence, it somersaulted through the crowd on the other side. People went down before the great weight and were crushed like paper.

Oldfield was thrown from the car. When he was picked up later he still held in one hand a part of his steering grip, the rest of it having been shattered in the crash. As the car broke through the fence pieces of wood were hurled in every direction. Sharp pointed splinters were hurled into the spectators as if shot from a gun. Most of the spectators were men. Many of these were crushed beneath the machine and frightfully mashed. For a minute after the crash came people stood in awe not realizing that dead and injured people lay at their feet!

Then the cries of the wounded aroused them. People from all over the track flocked to the scene. It was with difficulty that doctors and others bringing water and aid were able to get to the injured.

Editor’s Note — Despite the early report of the driver being in critical condition, Oldfield suffered only minor injuries and stayed in the race game for many, many years, primarily off the track and very involved in racing rules development and enforcement.  The coroner’s report, issued in October sprinkled the blame all around, on the driver for not stopping to change his tire when it became damages and likely to burst, on the sponsor, the American Automobile Association, for not keeping the track in proper condition, on the referee, for not inspecting the track conditions, on the State Fair, for not providing sufficient police protection at the race and on the crowd, for standing up against the fences when danger was clear.

When interviewed by the Syracuse Herald in 1958, Oldfield blamed the condition of the track, caused by the hoopla of President Taft’s visit, and the positioning of the crowd, for the loss of eleven lives.   To this date, because of Oldfield’s accident in a green race car and another, just nine years later involving race car driver Gaston Chevrolet, green cars are considered unlucky by some and rarely seen on a racetrack.

Lee Oldfield was not related to Barney Oldfield, one of the premier racers of that age.

In this Week’s Coverage Pointers:

KOHANE’S COVERAGE CORNER
Dan D. Kohane
ddk@hurwitzfine.com

For the first time in 12+ years, not a single decision was reported that would fall within the venue of this column’s coverage.  Fortunately for our readership, we summer drought of decisions will soon end as all appellate courts are now in session.

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

mml@hurwitzfine.com

  • Plaintiff’s Reports Fail to Address Etiology of Alleged Injuries and Therefore Fail to Rebut Defendants’ Prima Facie Case

 

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

ARBITRATION

  • Peer Review Insufficient To Deny Durable Medical Equipment As Cited Articles Do Not Present Sufficient Evidence To Meet Burden
  • Failure To Submit A Rebuttal Report Results In Denial Being Upheld
  • Peer Review Valid To Partially Deny Claim As Applicant Did Not Submit Rebuttal Letter
  • Lack of Gas And Inability To Find Location Without Contacting Insurer To Discuss Not Excuse For Failing To Appear For IMES.

LITIGATION

  • Insurer Prevails On Breach Of Condition For Failure To Attend IMEs
  • Defendant Raised No Issue of Fact Precluding Summary Judgment
  • Insurer’s Motion On Lack Of Medical Necessity Granted.

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

sep@hurwitzfine.com

  • Rail Is Considered a “Structure” for Labor Law § 241(6) Purposes
  • Direction, Supervision or Control Not Necessary Where There Is a Dangerous Worksite Condition Present

 

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
cak@hurwitzfine.com

  • Press Releases/Announcements from Governor Cuomo and Superintendent Lawsky
  • Reporting Under Medicare Secondary Payer

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal

kaf@hurwitzfine.com

  • Did “Wrongful Act” Occur Wholly After Retroactive Date in Policy?

 

JEN’S GEMS
Jennifer A. Ehman
jae@hurwitzfine.com

  • Definition of “Who Is An Insured” Does Not Include A Car Thief
  • Permanent Stay of Arbitration Denied; Framed Issue Hearing Ordered to Determine Whether Vehicle Was Insured at Time of Accident
  • Where Two Policies Purport to Be Excess, They Cancel Each Other Out And the Insurers Are Required to Contribute Ratably in such Proportion as its Policy Limit Bears to the Total of all Policy Limits
  • Insurer Failed to Submit Sufficient Evidence to Establish that the Infant Plaintiff First Ingested Lead at the Insured Premises Prior to the Effective Date of the Policy

 

EARL’S PEARLS
Earl K. Cantwell

ekc@hurwitzfine.com

Professional Errors and Omissions Policies : the Perils and Pitfalls of Prior Knowledge

All the best to you and yours.

Dan

Dan D. Kohane
Hurwitz & Fine, P.C.

1300 Liberty Building
Buffalo, NY 14202
Phone:  716.849.8942
Fax:      716.855.0874
E-Mail:  ddk@hurwitzfine.com
H&F Website:  www.hurwitzfine.com

LinkedIn: www.linkedin.com/in/kohane

 

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

NEWSLETTER EDITOR
Dan D. Kohane
ddk@hurwitzfine.com

ASSOCIATE EDITOR
Audrey A. Seeley
aas@hurwitzfine.com

ASSISTANT EDITOR
Margo M. Lagueras
mml@hurwitzfine.com

 

INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
ddk@hurwitzfine.com

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

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
as@hurwitzfine.com

Jody E. Briandi
Steven E. Peiper

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
aas@hurwitzfine.com

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

APPELLATE TEAM
Jody E. Briandi, Team Leader
jeb@hurwitzfine.com

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
Jen’s Gems
Earl’s Pearls
Across Borders

KOHANE’S COVERAGE CORNER
Dan D. Kohane
ddk@hurwitzfine.com

For the first time in 12+ years, not a single decision was reported that would fall within the venue of this column’s coverage.  Fortunately for our readership, the summer drought of decisions will soon end as all appellate courts are now in session.

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

mml@hurwitzfine.com

09/08/11         Graves v. L&N Car Service
Appellate Division, First Department
Plaintiff’s Reports Fail to Address Etiology of Alleged Injuries and Therefore Fail to Rebut Defendants’ Prima Facie Case

Upon reargument, defendants’ motion is granted where the affirmations of their expert radiologist explained with particularity that the alleged injuries to plaintiff’s cervical and lumbar spine, and right shoulder, appeared to be the result of chronic and degenerative conditions and not trauma.  In opposition, the radiology reports submitted by plaintiff did not address the etiology of the alleged injuries and plaintiff’s chiropractor merely gave a conclusory opinion that the injuries were causally related to the accident.  In addition, plaintiff admitted in her deposition testimony and bill of particulars that she only missed three weeks of work following the accident.  Therefore, her claims under the permanent consequential and significant limitation of use categories, as well as the 90/180-day category of serious injury were dismissed.

The one-judge dissent agreed with the majority with regard to the 90/180-day claim, but opined that the reports of plaintiff’s chiropractor and radiologist were sufficient to raise issues of fact with respect to the permanent consequential and significant limitation of use categories.

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

ARBITRATION

09/14/11         Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Peer Review Insufficient to Deny Durable Medical Equipment as Cited Articles Do Not Present Sufficient Evidence to Meet Burden

The applicant’s assignor was involved in a June 17, 2005, accident and was subsequently prescribed an RS4i Sequential Stimulator for three months.  The assignor was rented to the applicant’s assignor.  The insurer denied the equipment based upon a peer review conducted by Dr. Mary Bezkor.  Dr. Bezkor opined that the eligible injured person’s clinical profile was not reflective of a rapid neurological deterioration or any acute decline.  Dr. Bezkor cited to a few medical articles to support her position.  The assignor received office physical modalities and there was no necessity for an additional rental of the unit.

The assigned arbitrator determined that the peer review report was not persuasive as the articles relied upon failed to establish it was against accepted medical practice to prescribe such a device.  One article questioned the passive nature of the device and recommended active exercise.  Another article cautioned about making predictions regarding enhanced neurological recovery in using this device.  Yet another article determined there was no proven superiority between a TENS unit and this device.  In all, the assigned arbitrator determined that none of the articles provided evidence that the device was not medically necessary.

09/14/11         Applicant v. Respondent
Arbitrator Thomas J. McCorry, Erie County
Failure to Submit a Rebuttal Report Results in Denial Being Upheld

The applicant’s assignor was involved in an April 30, 2007, accident and was thereafter prescribed a RS-4 interferential stimulator to relieve chronic pain, relax muscle spasm, and maintain as well as increase range of motion.  The insurer denied the equipment based upon an independent medical examination of Dr. Polavarpu.  Dr. Polavarpu opined that while the assignor sustained multiple strains, they had resolved.  Therefore, there was no evidence of any need for durable medical equipment.

The assigned arbitrator determined that the insurer met its burden and that the applicant failed to rebut the conclusions in the report.  Also, the prescription submitted to establish medical necessity was deemed a form prescription that did not offer enough detail to overcome the conclusions in the independent medical examination.

09/12/11         Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
Peer Review Valid to Partially Deny Claim as Applicant Did Not Submit Rebuttal Letter

The applicant’s assignor sought reimbursement for an LSO, interferential unit and associated supplies.  The insurer denied the claim for the durable medical equipment based upon the peer review of Dr. Jeffrey Passick.  Dr. Passick opined that the assignor was receiving physical therapy and a comprehensive course of conservative care in the office.  Dr. Passick further opined that it was excessive to prescribe the muscle stimulator for home use when the assignor was undergoing supervised in-office care.

The assigned arbitrator partially upheld the insurer’s denial for the interferential unit and supplies based upon this peer review report.  The applicant did not interpose a rebuttal letter as to the conclusions set forth in the peer review report.  However, the denial as to LSO brace was not upheld as the peer review did not address this equipment.

[Great job to our own Cassie for handling this one on the insurer’s behalf!]

09/12/11         Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
Lack of Gas and Inability to Find Location Without Contacting Insurer to Discuss Not Excuse for Failing to Appear for IMES

The insurer denied the applicant’s entire No-Fault claim for breach of condition precedent to coverage under the policy in failing to appear for two scheduled independent medical examinations (“IME”).  The applicant was scheduled for an IME on December 22, 2010 and January 17, 2011, to which she did not appear.  The applicant contended that she tried to attend the first IME but could not find the location.  She called her attorney for assistance and eventually gave up attempting to find the location.  Neither the applicant nor her attorney’s office contacted the IME vendor to tell the vendor she could not find the IME location and needed further direction.

The applicant attempted to have the second IME located closer to her home and testified she discussed same with her attorney.  Apparently, her attorney contacted the insurer requesting this change but the location remained the same.  Then on the date of the IME the applicant again called her attorney to advise she could not attend because she had no gas for her vehicle.

The insurer’s activity log reflected one contact from counsel after the applicant failed to appear for two scheduled IMEs.

The assigned arbitrator determined that the applicant did not submit to the two IMEs and there was no reasonable excuse as to why the applicant could not attend same.

LITIGATION

09/14/11         Multi-Specialty Pain Mgt PC a/a/o Jurie Burke v. New York Cent. Mut. Fire Ins. Co.
Appellate Term, First Department
Insurer Prevails on Breach of Condition for Failure to Attend IMEs

The insurer’s summary judgment motion on failure to appear for scheduled IMEs was properly granted as the insurer demonstrated proper mailing and follow up notices for IMEs.  The plaintiff failed to raise a triable issue regarding the reasonableness of the insurer’s requests or the assignor’s failure to appear.

09/09/11         Devonshire Surg. Facility and Carnegie Hill Orthopedic Services, PC a/a/o Olga Mashurova v. American Tran. Ins. Co.
Appellate Term, First Department
Defendant Raised no Issue of Fact Precluding Summary Judgment

The plaintiff was entitled to summary judgment as the insurer failed to raise a triable issue of fact after the plaintiff established its prima facie case that the prescribed statutory billings were mailed and received by the insurer without any payment.

09/09/11         Triangle R Inc.  a/a/o Michael Torres v. New York Cent. Mut. Fire Ins. Co.
Appellate Term, Second Department
Insurer’s Motion on Lack of Medical Necessity Granted

The insurer was entitled to summary judgment as the plaintiff submitted, in opposition to the motion on lack of medical necessity, an undated medical report which was not properly sworn and in admissible form.

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
sep@hurwitzfine.com

09/15/11         Medina v. City of New York
Appellate Division, First Department
Rail Is Considered a “Structure” for Labor Law § 241(6) Purposes
Plaintiff, an employee of the NYC Transit Authority, was in the course of his employment when he was struck with a subway rail that “sprang upward and the fell, striking his leg.”  At the time of the incident, members of a crew supervised by plaintiff were removing old rails as part of an overall upgrade to at least 400 to 500 obsolete signal rails.

The process of removing the rail simply involved cutting it out of the system (section by section).  During the process of removing the rail in question, it was realized that the rail was under extreme pressure from both ends.  This kinetic energy was ultimately released, which resulted in the rail jumping loose from its position in the track bed.

Plaintiff’s claim was premised on Labor Law § 240(1) and Labor Law § 241(6) violations.  The Labor Law § 240(1) was dismissed because the incident was not a result of gravity, but rather kinetic energy “loaded” into the rail due to the pressures exerted on each end of it.

The trial court also dismissed the Labor Law 241(6) claim on directed verdict.  However, this portion of the trial court’s order was overturned by the First Department.  In reinstating plaintiff’s Labor Law § 241(6) claim, the Court noted that plaintiff’s claim was premised upon the section of the Labor Law which required “continuing inspections” for hand-related demolition work.  The term “demolition”, as defined in the statute, is “the total or partial dismantling or razing of a…structure including the removing or dismantling of machinery or other equipment.”  It follows that the First Department found the rail in question to qualify as a “structure,” and therefore the protections for hand-held demolition triggered.  Finally, the Court noted that a question of fact existed as to whether the plaintiff was engaged in “routine maintenance” or a physical “alteration.”

09/15/11         Cordeiro v TS Midtown Holdings, LLC
Appellate Division, First Department
Direction, Supervision or Control Not Necessary Where There Is a Dangerous Worksite Condition Present
This action has its roots as a Labor Law § 240(1) case.  Plaintiff sustained injury when he fell into an elevator shaft while in the course of his employment for Third-Party Defendant Schindler.  While the issues of Labor Law § 240(1) are relatively straight-forward, the indemnity claims against Schindler (as well as a cross-claim for common law indemnity) are much more interesting.  In case there was any question, the trial court found a violation of Labor Law § 240(1) and the First Department affirmed on Appeal.

With regard to TS Midtown Holdings’ (“owner”) cross claim for common law indemnification, the motion was denied where, as here, there was a finding that the worksite was unsafe.  As such, TS Midtown’s potential liability was not based upon direction, supervision or control as it usually is in a Labor Law case, but rather upon whether it had knowledge (actual or constructive) of the defective condition prior to plaintiff’s fall.  If it did, it would have negligence and the common law indemnity claim against a co-defendant would be inapplicable.

Moreover, TS Midtown’s third-party claim for contractual indemnification against plaintiff’s employer, Schindler, failed where the indemnity clause at issue was impermissibly vague.  Citing one of our favorite decisions, Tonking v. Port Authority, the First Department reaffirmed the long standing rule that indemnity provisions “must be strictly construed to avoid reading into a duty which the parties did not intend to be assumed.”

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
cak@hurwitzfine.com

Press Releases/Announcements from Governor Cuomo and Superintendent Lawsky

            Normally, I do not report on the press releases from the Governor’s office or the Department of Insurance, soon to be known as The Department of Financial Services (October 3rd), but in the aftermath of Tropical Storm Irene, two press releases were sent out that dealt with insurance that caught my eye.

On September 2nd, the new Superintendent of the Department of Financial Services, Benjamin Lawsky, put out a press release that may be found on the Insurance Department’s website that said “At Governor Cuomo’s direction, the state will do everything in its power to ensure that insurance companies are properly paying claims.”  It goes on to state that if homeowners are being told that “insurance doesn’t at all cover the damage caused by Irene, that is just plain wrong” and insurance companies and their personnel will be held accountable.

The press release then provides insureds some advice such as the fact that they should report the claim even if they don’t believe it is covered and that FEMA may be available to provide some assistance.  Superintendent Lawsky goes on to state “Most insurance companies are working hard to do the right thing and serve their customers.  However, in some situations there has been misinformation about what losses are covered, how they are covered and what types of losses are not covered by insurance.”  The press release does state that most homeowner policies do not cover damage from flooding but they do provide coverage for damage from wind and that the hurricane deductible should not be applied because the storm was downgraded to a tropical storm before it hit New York.

This week, on September 13th, another press release was published on the Insurance Department website.  Generally this press release has a lot of good tips for insureds regarding what steps they should take to protect themselves if they sustained damage as a result of Tropical Storm Irene, including take photos of the damage before repairs are made, the time limits for submitting a claim to FEMA, save all receipts for costs incurred in the repair or clean up, ask if there are expenses for additional living expenses (ALE) under your policy if it is uninhabitable.  The press release also states that if the first offer made by the insurance company does not meet your expectations you should:

  • Be prepared to negotiate
  • Ask for the specific policy language the company is relying upon and
  • If you are being treated unfairly contact the Insurance Department

 

Although not surprising after an event such as Tropical Storm Irene, I suspect the number of insurance department complaints will increase this year. Both of these press releases, as well as others, may be found on the Insurance Department website.  I will gladly provide a copy to you if you wish as well.

Reporting Under Medicare Secondary Payer

For those who have the daunting responsibility of interpreting and implementing the Medicare Secondary Payer Reporting rules, a new User Guide (3.2) was recently updated and posted to the CMS website.  Many of the changes to the User Guide pertain to the technical aspect of the reporting.  I am going to highlight some of the changes to the User Guide that pertain to the data that needs to be reported.  Also, as a quick reminder, TPOC (total payment obligation claims) reporting is necessary for liability claims that are settled on or after October 1, 2011.  CMS will reject any reported TPOC settlements that had no ORM component that total less than $5000.  That date is quickly approaching!

Changes Made

ICD-9 Codes

  • Four previously excluded codes are not available as cause of injury codes.  Generally these codes are to be used when none of the other available E codes are applicable.  Generally, these are extremely generic accident codes such as the accident occurred at an unspecified location.  The codes are:
    • E0008
    • E0009
    • E8498
    • E8499
  • Also, E9670-E9679 are removed from the excluded ICD-9 codes list.
  • A reminder – the new ICD-9 code list comes out January 1st and can be found on the CMS website.  As always, if you need a copy, I will be happy to provide it for you.
  • Section 11.2.5.1 of the User Guide now allows the use of code NOINJ in both the cause of injury and diagnosis sections when the settlement between the carrier and the injured person releases medicals but there was no medical treatment sought as a result of the incident.
    • This code must be input as both the cause and diagnosis ICD-9
    • There can NOT be an associated ORM
    • CMS cautions this code will be closely monitored as it does not want this code being used when it is not appropriate.  An example of when CMS anticipates the use of this codes is when there is a loss of consortium claim or an employment action that alleges mental distress but no medical treatment was sought.

 

Direct Data Entry Dos & Don’ts

  • Only delete a record if the entire record was added in error or if a key field (CMS Date of incident, Plan Insurance Type, ORM indicator) was improperly entered.
  • Cannot submit partial ICD-9 codes and no decimal points are allowed.
  • ORM indicator should never be switched from Y to N.  If Y at any point, it remains Y.
  • Be sure to update ORM termination dates.

 

ORM (Ongoing Responsibility for Medicals)

  • Previously you could not submit an ORM termination date that was less than 30 days from the assumption date.  This is no longer true.  The actual ORM termination date is acceptable even if it is the same date the ORM was accepted

 

What claims must be reported?

  • The User Guide stresses that any claim involving a Medicare beneficiary where medicals are claimed and/or releasedin the settlement must be reported.
    • This is extremely broad!  My understanding from participating in the various conference calls is that this would include a property damage claim where the settlement releases any and all claims that could possibly be submitted even those that were not alleged.  For example, if you settle the PD liability claim for water intrusion and mold and the release also releases you from any bodily injury claims (BI from the mold) you will need to report even if there is no allegation at the time of settlement there were bodily injuries.

Querying

  • Medicare now allows an insurer to look up a claimant’s Medicare status without being limited to the once a month query.
    • This is limited to 100 query look ups per month
    • This is a manual process as compared to the large submissions done once a month
    • Only available for RREs in production status
    • Not available for DDE (direct data entry) participants

 

Changes to Field Descriptions

  • Field 12 – Cumulative Injury description now says “the DOI is the earlier of the date that treatment for any manifestation of the cumulative injury began, when such treatment preceded formal diagnosis; or the first date that formal diagnosis was made by any medical practitioner.”

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
kaf@hurwitzfine.com

09/07/11         American Automobile Insurance Company v. Murray
Third Circuit Court of Appeals – Pennsylvania
Did “Wrongful Act” Occur Wholly After Retroactive Date in Policy?
In the district court American Automobile Insurance Company [“AAIC”] sought and received a declaratory judgment that its insured, insurance agent Tyrone Murray, is not covered under its professional liability policy.  The issue that the court faced was whether the alleged “wrongful act” of Murray fell wholly within retroactive date of the AAIC professional liability policy.

The claim against Murray arose out of a motor vehicle accident which took place on March 23, 2006, when 19 year old Stephen Meloni drove his vehicle while intoxicated and struck a pole killing his passenger Jessica Easter. Jessica’s father filed suit on October 25, 2006, against Ennie and Steven Meloni in the Philadelphia County Court of Common Pleas [“Easter lawsuit”].  In his suit, Easter alleged that Ennie illegally sold alcohol to 19 year old Gary Grato, who then supplied that alcohol to Meloni causing him to operate his vehicle negligently and recklessly.

Upon receipt of the lawsuit, Ennie sought a defense and indemnification from its general liability insurer, Century Surety Company [“Century”]. Century provided a defense under a reservation of rights and then filed a declaratory judgment action in the United States District Court for the Eastern District of Pennsylvania.  The district court ultimately granted summary judgment to Century because the insurance policy in effect during the relevant time period contained a liquor liability exclusion.

In response to the district court’s decision Ennie filed suit against its insurance agent, Tyrone Murray [“Ennie lawsuit”], alleging that Murray negligently failed to place liquor liability insurance coverage for Ennie. Ennie claimed that it consulted with Murray on August 23, 2000, for the purpose of obtaining insurance that would protect the company from any and all risks arising out of the business of operating a beer distributorship.  Ennie alleged that in 2002, Murray sold it the Century insurance policy under the pretense that it protected Ennie from these risks.  Ennie then renewed the policy annually believing that it covered these risks.  Ennie alleged that Murray, as a licensed commercial insurance agent, breach his duty to advise it properly of the necessity or availability of liquor liability coverage.

In response to the Ennie lawsuit, Murray sought a defense under his professional liability policy with AAIC.   The AAIC policy was a “claims made and reported” errors and omissions liability policy.  The insuring clause in the AAIC policy provided that, “we will pay on the Agent’s behalf all Loss which such agent is legally obligated to pay as a result of the Claim first made against such Agent . . . to Us during the Policy Period . . . provided that such claim for a Wrongful Act in the rendering of or failure to render Professional Services in connection with a Covered Product if that Wrongful Act occurs wholly after the Retroactive Date.”

A Wrongful Act is defined as, “any actual or alleged negligent act, error or omission, or negligent misstatement or misleading statement by any Agent . . . in the rendering of or failure to render Professional Services.”

An amendatory endorsement on the AAIC policy defines Retroactive Date stating that “the Retroactive Date, if any, shown on the Agent’s Property/Casualty Insurance Agent’s Error and Omissions Liability Policy; (a) which immediately proceeded the first policy AAIC issued to the Agent; or (b) which immediately preceded the date the Agent was first added to the AAIC policy, if the Agent was added after the inception date of the first AAIC policy, provided that there is no lapse in coverage between the termination date of that other policy and the inception date of coverage for the Agent under the AAIC Policy. If a lapse in the coverage exists, the Retroactive Date shall be:  (a) the inception date of the first policy AAIC issued to the Agent; or (b) the inception date of coverage when the Agent was first added to the AAIC policy, if the Agent was added after the inception of the first AAIC policy.”

In order to determine whether coverage was triggered the Court had to first determine the Retroactive Date on the policy and then decide whether Murray’s “wrongful act” occurred “wholly after” that retroactive date.  Interpretation of the amendatory endorsement, specifically the term “immediately preceded” determined the retroactive date.

In support of coverage Ennie argued that the retroactive date must be determined by considering only the first paragraph of the amendatory endorsement, and, as such, the retroactive date must be the retroactive date which immediately preceded the first policy AAIC issued to Murray.  It was Ennie’s contention that the policy which “immediately preceded” the first AAIC policy beginning 1/1/06 was a policy issued by USLIC covering the period 11/24/04 to 11/24/05 because that policy was the last in time. In the alternative, Ennie argued that if “immediately preceded” is open to two different interpretations, then we must construe the term against the insurer and conclude that “immediately preceded” means “next in line.”  Ennie also dismissed the second paragraph of the amendatory endorsement, maintaining that its language and lapse provisions are not applicable to Murray.  Ennie argued that the lapse provisions apply only if the agent was added after the inception date of the policy and since Murray was insured under the first AAIC policy since inception, there were no lapses in AAIC coverage because the two policies were continuous.

On the other hand, AAIC argues that the first paragraph of the amendatory endorsement supports a retroactive date of January 1, 2006.  AAIC contends there was no policy that “immediately preceded” the first AAIC policy since there was a delay and lapse of time between Murray’s coverage with USLIC and AAIC.  As a result, Murray’s retroactive date would be the first effective date for his AAIC policy, January 1, 2006.

The Third Circuit [“Court”] agreed with what it called the district court’s thorough and thoughtful analysis regarding the retroactive date.  In analyzing the amendatory endorsement, the district court pointed out that AAIC’s policy was poorly drafted. The district court noted that not applying the lapse language to the first paragraph of the amendatory endorsement renders it superfluous and creates absurd results, and then determined that the only reasonable interpretation of the endorsement as a whole “is to give effect to the lapse provision in all instances of lapse in coverage.”  The district court concluded that because of Murray’s lapse in coverage the retroactive date was January 1, 2006, the inception date of the AAIC policy.

In agreeing with the district court’s decision the Court noted that Pennsylvania law requires that the Court read the policy language regarding the retroactive date as a whole in the context of the entire amendment and that the Court must attempt to give effect to all its provision.  In doing this the court determined that the lapse provisions must be applicable to both paragraphs of the amendatory endorsement in order to give logical meaning to paragraph one and the lapse provisions themselves.  The Court also noted that this interpretation also protects the purpose of claims made policies and retroactive dates, which are meant to limit an insurer’s coverage, and avoids the absurd result of giving effect to dates decades in the past.

In addition, the Court was not persuaded that the term “immediately preceded” in the amendatory endorsement was an ambiguous term. The Court stated that reading “immediately preceded” in light of the lapse provision removes any ambiguity about the term, the date of retroactivity in the policy that “immediately preceded” the AAIC policy is only relevant if the insured has maintained continuous insurance coverage.  Since Murray allowed his coverage to lapse, the retroactive date is the inception date of the first AAIC policy issued – January 1, 2006.

In order to trigger coverage under the AAIC policy, both the claim and the wrongful act by Murray must have occurred “wholly after” the retroactive date of January 1, 2006.  Since there was no dispute that the claim occurred after the retroactive date the issue was whether Murray’s “wrongful act” occurred after that date.  Ennie argued that Murray’s only wrongful act was failing to advise and provide liquor liability insurance to Ennie on the specific date of the accident, March 21, 2006.  Ennie argues that any negligence attributable to Murray before that time did not result in any harm and therefore, did not give rise to any claims for which coverage is sought under the AAIC policy.

AAIC, on the other hand, argued that Murray’s wrongful act occurred in the fall of 2002 when he failed to provide liquor liability coverage and continued at each policy renewal through the last renewal in December 2005.

The Court agreed with AAIC and concluded that the “wrongful act” occurred when Murray failed to exercise the proper degree of care in placing insurance for Ennie and exposed it to unreasonable risk of harm, i.e., when Murray first procured coverage for Ennie in 2002.  The Court concluded that Murray created an “unreasonable risk of harm” to Ennie at the earliest in the fall of 2002 and at the latest during the last policy renewal in December 2004.  Any meeting between Ennie and Murray that occurred in 2006 regarding insurance coverage was a continuation of Murray’s wrongful act of failing to provide the proper coverage.  The Court held that because Murray’s acts did not occur “wholly after” the retroactive date of January 1, 2006, coverage was not triggered.

JEN’S GEMS
Jennifer A. Ehman
jae@hurwitzfine.com

08/26/11         Travelers Indem. Co. of Connecticut v. Conroy
Supreme Court, New York County
Definition of “Who Is an Insured” Does Not Include a Car Thief
Defendant, Scott Thomas Conroy (“Conroy”), stole a 1995 Dodge Intrepid.  While in the process of stealing the vehicle, the owner’s son attempted to stop Conroy who then lost control of the vehicle and struck a pedestrian.

The pedestrian commenced an action again Conroy, the owner and the owner’s son.  The complaint alleged that, at the time of the accident, Conroy was operating the vehicle with the permission and consent of the owner.  Based on this allegation, the vehicle’s insurer, Travelers, correctly provided all parties a defense in the action.

Thereafter, during the course of Traveler’s investigation of the underlying action, it was discovered that Conroy pled guilty to Robbery in the Third-Degree and admitted, in open court, that he forcibly took the vehicle and had no authority or permission to take it.  Based on this statement, the owner and her son moved for summary judgment, which was granted.  This left Conroy as the only remaining defendant in the underlying action.

Travelers then commenced a declaratory judgment action naming Conroy and the injured pedestrian.  While Conroy appeared in the action, the pedestrian did not.  Shortly thereafter, Travelers brought this motion seeking a default judgment against the pedestrian and summary judgment as to it duty to defend and indemnify Conroy.

Travelers argued that Conroy did not fall within the “Who is an Insured” section of the policy, which included as insureds “you, any relative, and anyone else using your car if the use is or is reasonably believed to be with your permission…”  In support, Travelers submitted Conroy’s statements.  In opposition, Conroy submitted an affidavit attesting that he had implied permission.  Specifically, he alleged that his car was broken and at the mechanic’s shop.  His girlfriend called a man named Rufio, who gave Conroy the keys to the vehicle, which he assumed Rufio owned.

The court granted the default as to the pedestrian and ruled that Conroy failed to raise a triable issue of fact to defeat summary judgment.  The implied permission cases relied upon by Conroy involved owners who placed their vehicles under the unrestricted control of a second party who allowed a third person to operate them.  This was not the case here.  Rather, Conroy never provided proof that Rufio had the owner’s permission to operate the vehicle.  Further, he failed to provide any evidence to contradict his own statements made in Criminal Court.

08/23/11         Matter of Government Empls. Ins. Co. v. Toise
Supreme Court, Nassau County
Permanent Stay of Arbitration Denied; Framed Issue Hearing Ordered to Determine Whether Vehicle Was Insured at Time of Accident
GEICO moved to permanently stay an uninsured motorist arbitration or, in the alternative, it moved for a temporary stay pending a framed issue hearing on whether the vehicle its insured struck was, in fact, insured.  GEICO also asserted that if a framed hearing was ordered, its insured was required to furnish it with a copy of all relevant medical records and authorizations and submit to an examination under oath and physical examinations prior to proceeding to arbitration.

The insured, Tony Toise, opposed the permanent stay, but consented to a temporary stay pending a hearing.  He also agreed to comply with any and all discovery demands as a condition precedent to arbitration.

After the insured submitted his papers, in its reply, GEICO asserted that it had since ascertained that the vehicle that struck Mr. Toise was insured by General Ins. Co. of America; however, the claim was under investigation for a possible fraudulently issued insurance identification card.  Nevertheless, a denial had not yet been issued.

Accordingly, the court denied the request for a permanent stay, ordered a framed issue hearing, and ordered that the caption be amended to include General Ins. Co. of America and the owner and/or operator of the vehicle that struck Mr. Toise.

 

08/21/11         National Fire Ins. Co. of Hartford v. Harleysville Ins. Co.
Supreme Court, New York County
Where Two Policies Purport to Be Excess, They Cancel Each Other Out and the Insurers Are Required to Contribute Ratably in Such Proportion as Its Policy Limit Bears to the Total of All Policy Limits
This is a dispute between two insurance carriers over priority of coverage in a labor law case.  National Fire Ins. Co. of Hartford (“National Fire”) issued a policy to Americon Construction, Inc. (“Americon”), as the named insured while Harleysville Ins. Co. (“Harleysville”) issued a policy to a subcontractor of Americon, Gallagher Electrical Contractors, Inc.  Under the Harleysville policy, Americon qualified as an additional insured.

Thus, in order to resolve this issue, the court examined the relevant “other insurance” clauses.  The Harleysville policy provided, in relevant part:

  • If there is other insurance covering the same loss or damage, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect it or not….

The court reasoned that the National Fire policy covered the same loss or damage as the Harleysville policy; thus, this “other insurance” clause rendered the Harleysville policy excess insurance.

In comparison, the National Fire policy provided in relevant part:

  • Primary Insurance

This insurance is primary except when b. below applies.  If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary.  Then, we will share with all that other insurance by the method described in c. below.

  • Excess Insurance

 

This insurance is excess over:
***

(2)       Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.

The court determined that this “other insurance” cause provided that that National Fire policy was primary unless there was other primary insurance coverage for the same occurrence.  Since Americon was entitled to additional insured coverage on a primary basis on the Harleysville policy, the Harleysville policy, based purely on this language, would be primary; thus, the National Fire would be excess.

Where two policies both purport to provide excess coverage, they cancel each other out and each carrier is required to contribute ratably in such proportion as its policy limit bears to the total of all policy limits.  Here, both insurers were required to share defense and indemnity of Americon equally.

08/19/11         Vigilant Ins. Co. v. Sibbio
Supreme Court, New York County
Insurer Failed to Submit Sufficient Evidence to Establish That the Infant Plaintiff First Ingested Lead at the Insured Premises Prior to the Effective Date of the Policy
An action was brought against Ralph Sibbio, by an infant plaintiff, seeking damages for personal injuries caused by exposure to lead paint.  The underlying complaint alleged that the exposure occurred between July 2003 and July 2004, during the period of the infant’s tenancy at a premises owned by Mr. Sibbio.

Upon receipt of the suit papers, Mr. Sibbio’s insurer, Vigilant Ins. Co., denied coverage citing the definition of “occurrence,” which provided that the term meant “an accident to which this insurance applies which begins within the policy period…”  Since the policy became effective on December 3, 2003, Vigilant denied coverage asserting that the suit was outside the grant of coverage.

Ultimately a declaratory judgment action was brought, and Vigilant moved for summary judgment seeking a declaration that it was under no obligation to defend or indemnify Mr. Sibbio.  In support of its motion, it submitted a copy of the complaint and a copy of the lease agreement showing the child’s mother lived at the subject premises from June 1, 2003 (before the policy began) through May 31, 2005.  Vigilant also pointed to portions of a sworn affidavit submitted by Mr. Sibbio in which he stated that he bought the property in March 2004 and, at the time he purchased, the child’s mother lived in the building.  Further, he attested that when he closed on the property he was not able to gain access to the subject apartment and, in turn, did not have an opportunity to observe it conditions, including whether it had any dangerous condition involving lead paint.

The court found that this information was insufficient to establish when the infant plaintiff, who tested positive for lead in July, 2004 and was born in April 2002, first ingested the lead, or how long the hazard existed in the relevant apartment.  In other words, based on the evidence presented, the court could not determine when the injury occurred and, therefore, whether it qualified as an “occurrence” within the policy period.  Accordingly, Vigilant’s motion was denied with leave to renew upon additional proof.

 

EARL’S PEARLS
Earl K. Cantwell
ekc@hurwitzfine.com

PROFESSIONAL ERRORS AND OMISSIONS POLICIES: THE PERILS AND PITFALLS OF PRIOR KNOWLEDGE

            Standard professional errors and liability policy applications contain questions that the insured inform the carrier as part of an original or renewal application of existing or pre-existing matters that might give rise to a claim under the policy.  An accounting firm failed to fulfill this obligation, and as a result it was denied liability insurance coverage in the case of Cuthill & Eddy, LLC v Continental Casualty Company, 2011 W L 1835851 (Middle District Florida, Orlando Division, May 16, 2011).

The insureds were long-time clients of the accounting firm Cuthill & Eddy.  The accounting firm was insured under two consecutive one year professional liability policies issued by Continental Casualty starting in August, 2005.  In April, 2006, the customers’ counsel sent a letter to the accounting firm complaining of “several acts or omissions” that gave rise to professional malpractice, and the attorney advised the accounting firm to forward the letter to its insurance company.  The accounting firm did not send the letter to Continental, although it later asserted it did notify its insurance broker.

In 2007, while the renewal policy was in force, the customer again told the accounting firm that it would file a lawsuit for professional negligence in handling the family’s income tax returns.  The accounting firm then notified Continental, but the insurance company denied coverage under both policies.  The court granted the insurer’s motion finding no coverage available under either policy.

First, the renewal policy’s “prior knowledge” exclusion conditioned coverage on the accounting firm having no knowledge or basis to believe prior to the effective date of the renewal policy that a pre-existing act or omission “might reasonably be expected to be the basis of a claim.”  Here, the accounting firm knew in April, 2006, which was confirmed in an internal firm memo in May, 2006, that there were obvious concerns that a malpractice claim might be filed.  Therefore, the renewal policy’s prior knowledge exclusion applied and precluded coverage under that policy for this particular claim.

The court then rejected the accounting firm’s alternative argument that it gave notice to Continental during the first policy period.  Even if the accounting firm had notified its broker of the attorney letter of April, 2006 (which the broker disputed), the notification would not have constituted a sufficient claim notice under the policy since the plain language of the policy required the accounting firm to give notice of any claim or potential claim to the insurer directly, not to any “agent” of the company.  Therefore, the accounting firm failed to give notice in the manner specified and the first policy also afforded no coverage.

The one basic lesson of this case is that no matter how contested, embarrassing or fraught with pain it may be, when applying for a new or renewal professional liability policy the applicant must candidly disclose any event or pre-existing state of affairs which might give rise to a professional liability claim.  Actually, in Cuthill & Eddy, the April, 2006 letter from the customer’s attorney alleging the malpractice was a fairly bright line threat of a possible claim.  The accounting firm also had circulated an internal memo in May 2006 that “clearly disclosed” concerns that a malpractice claim might be filed.  Based on such factual and documentary evidence, the court ruled there was no issue of fact but that the accounting firm had “prior knowledge” of the possible malpractice and threat of a legal claim in April/May, 2006, which was not disclosed in the renewal policy application.
The advice is do not hide, do not fail to disclose, and do not run away from the situation since it will only make matters worse, such as in this case resulting in denial of insurance coverage to the accounting firm.  While public airing of client complaints and possible performance problems is not comfortable or pretty, here the alternative of secrecy and non-disclosure proved far worse.

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

09/07/11         Swartzbaugh v. Encompass Ins. Co. of America
Maryland Court of Appeals
Being “First” Is Not a Question of Location in an Insurance Policy Application
In 1998, “Kenneth and Lynne S. Swartzbaugh” applied for car insurance from Encompass. The application was signed by Lynne. That same year, Lynne signed a statutorily-mandated waiver of uninsured motorist coverage. That waiver stated that the person executing it was “the first named insured/applicant” and that they had been offered and refused excess UM coverage, opting only for the statutory minimum of $20,000/$40,000 for bodily injury. Years later, the Swartzbaugh’s daughter Kelly was seriously injured in an automobile accident caused by an uninsured driver, and brought a declaratory judgment action to declare the UM waiver invalid and compel Encompass to pay the full policy limits on her UM claim. Kelly noted that § 19-510 of the Maryland Insurance Article required the “first named insured” to sign the UM waiver.
Because the policy was issued to “Kenneth and Lynne,” and Lynne signed the waiver, Kelly argued Encompass had failed to comply with § 19-510, and the waiver was therefore invalid. The Court of Special Appeals disagreed. Finding no statute or case, in Maryland or otherwise, construing the phrase “first named insured,” the Court resorted to dictionary definitions. It disagreed with Kelly that “first” meant the first name listed, noting “first” could also mean “primary.” Since Lynne had signed the application and the waiver, and since the waiver had noted the person signing the waiver was the “first named insured,” the Court upheld the waiver as valid.
Submitted by: Jennifer Johnsen, Paul Greene, and Nick Farr, Gallivan, White & Boyd, PA

09/06/11         Ins. Commissioner for State of Maryland v State Farm Cas.
Maryland Court of Special Appeals
An Insurance Binder Is Not an Insurance Policy
D.C. Washington attempted to purchase car insurance through State Farm. Washington’s insurance agent noted that Washington, in light of his accident history, was eligible for insurance at a premium of $1,401.46. The agent issued a binder to that effect. When State Farm underwriting received the application, it noted Washington was at fault for two accidents, which resulted in a policy premium of $2,512.62, rather than the amount noted in the binder. It issued the policy at that premium, with no advance notice to Washington of the change from the binder amount. Washington filed suit, alleging, among other things, that State Farm had failed to comply with § 27-614 of the Maryland Insurance Article, pursuant to which an insurer must give a policyholder written notice 45 days prior to any “increase in the total premium for a policy of private passenger motor vehicle liability insurance.” After administrative reviews and intermediate appeals, the court held State Farm could not have violated Maryland law because the statutory notice provision only applies to policy premium increases, not changes between an insurance binder and a policy. In reaching that conclusion, the court specifically noted “binder” and “policy” are not interchangeable words, and that the Maryland legislature omitted “binders” from the statutory scheme intentionally.
Submitted by: Jennifer Johnsen, Paul Greene, and Nick Farr, Gallivan, White & Boyd, PA

Reported Decisions

Graves v. L & N Car Service

Baker, McEvoy, Morrissey & Moskovits, P.C., New York
(Stacy R. Seldin of counsel), for appellants.
Michael D. Hassin, Rockville Centre (Randall A. Sorscher of
counsel), for respondent.
Order, Supreme Court, Bronx County (Mary Ann Brigantti-Hughes, J.), entered July 19, 2010, which, upon reargument, denied defendants’ motion for summary judgment dismissing the complaint on the threshold issue of serious injury, reversed, on the law, without costs, and the motion granted. The Clerk is directed to enter judgment in favor of defendants dismissing the complaint.
This is an action seeking damages for “serious injury” within the meaning of Insurance Law § 5102(d) allegedly resulting from a motor vehicle accident. In support of their motion for summary judgment, defendants submitted affirmations of a radiologist, Dr. Jessica Berkowitz, attesting that she examined MRIs of plaintiff’s cervical spine, lumbar spine and right shoulder, and found no evidence of a causal relationship between plaintiff’s injuries and the subject accident. Rather, for reasons Dr. Berkowitz explained with particularity in her affirmations, the injuries appeared to result from chronic and degenerative conditions and were not the type of injuries that are caused by trauma. The radiology reports submitted by plaintiff, by contrast, said nothing about the etiology of the injuries, and the report of plaintiff’s chiropractor contained only a conclusory assertion that there was a causal connection between the injuries and the accident. On this record, defendants established a prima facie case for dismissal of the complaint insofar as based on an alleged permanent, consequential and significant serious injury, and plaintiff failed to meet her burden to come forward with competent medical evidence specifically refuting the claimed lack of causal connection to the accident (see Pommells v Perez, 4 NY3d 566, 579-580 [2005]; Charley v Goss, 54 AD3d 569, 571-572 [2008], affd 12 NY3d 750 [2009]). Moreover, plaintiff’s admissions in her bill of particulars and deposition testimony that she missed only three weeks of work as a result of the accident established as a matter of law that she did not suffer a serious injury within the meaning of the 90/180-day prong of Insurance Law § 5102(d).
Accordingly, defendants’ summary judgment motion should have been granted.
All concur except Moskowitz, J. who dissents in part in a memorandum as follows:

MOSKOWITZ, J. (dissenting in part)
I agree with the majority that plaintiff has not raised an issue of fact with respect to her 90/180-day claim. However, I disagree with the dismissal of the complaint under the permanent, consequential and significant limitation categories of serious injury under Insurance Law § 5102(d).
While defendants’ experts concluded that plaintiff had normal range of motion in her shoulder and cervical and lumbar spine, plaintiff raised an issue of fact through the affidavit of her chiropractor, Dr. Rosenfeld, who first examined plaintiff a week after the accident and again in October 2009. Specifically, Dr. Rosenfeld opined that plaintiff did not have normal range of motion and had “sustained a permanent disability as a result of the bulging and herniated discs in her cervical spine and lumbar spine.” He concluded that “based upon this patient[']s history, treatment, physical examination, range of motion testing, and review of the MRI and EMG test results,” these injuries “are the direct result of the automobile accident of July 23, 2007.”
Moreover, Dr. Shapiro, a radiologist, attested to MRI studies (upon which Dr. Rosenfeld relied) that revealed, inter alia, “focal disc bulge at C4-5[,] right paracentral herniation at C5-6,” “right foraminal herniation at L3-4, [and] loss of signal and central herniation at L4-5 with extension of disc into the neural foramen bilaterally.” Accordingly, this case involves contested issues of fact inappropriate for summary adjudication (see de La Cruz v Hernandez, 84 AD3d 652 [2011]; see also Linton v Nawaz, 62 AD3d 434, 440-441 [2009], affd 14 NY3d 821 [2010]).

Medina v City of New York

Law Offices of Lawrence P. Biondi, Garden City (Lisa M.
Comeau of counsel), for appellant.
Wallace D. Gossett, New York (Steve S. Efron of counsel), for
respondent.
Judgment, Supreme Court, Bronx County (Mary Ann Brigantti-Hughes, J.), entered March 1, 2010, upon a directed verdict, dismissing the complaint, unanimously modified, on the law, to reinstate plaintiff’s Labor Law § 241(6) claim, the matter remanded for a new trial on said claim, and otherwise affirmed, without costs.
Plaintiff, an inspector for the New York City Transit Authority (TA), was injured on September 17, 2005 while inspecting a subway rail. Plaintiff was standing on the track bed when a 12-foot section of the rail, unsecured and weakened by saw cuts, suddenly sprang upward and then fell, striking his leg. Plaintiff brought this action asserting claims pursuant to, inter alia, Labor Law § 240(1) and § 241(6).
During the liability portion of the bifurcated trial, plaintiff testified that he was installing new track. He stated that this was part of a subway system modification project and not a repair project to replace worn rails. At the time of his accident, plaintiff and his crew were attempting to “strip” and remove a rail.
The operating superintendent for the track department of TA testified at trial that during three attempts to cut the rail, the saw blade jammed, indicating that the rail was expanding. He explained that the welded rails could expand significantly due to temperature variations, placing the rails under significant compression tension. The superintendent testified that typically spike anchors were installed every 10 feet to keep the rails from expanding and moving vertically or laterally. However, his post-accident investigation revealed that there were no anchors in place along a 600-foot section of rail that included the section where plaintiff was injured. The superintendent testified that he did not know how long the anchors had been missing, but the fact that there were no anchors should have been discovered during twice-weekly track inspections.
The superintendent characterized plaintiff’s work as “routine maintenance.” However, he later conceded that the upgrade to the D subway line was part of a five-year signal improvement contract, which entailed replacement of 400 to 500 obsolete signal rails that were incompatible with updated braking and signaling systems.
At the close of plaintiff’s case, the parties moved for directed verdicts. Defendant contended that plaintiff was engaged in routine maintenance and that his work did not pose an elevation-related risk as contemplated by § 240(1). Defendant further contended that with regard to the § 241(6) claim, plaintiff was not engaged in “demolition” within the meaning of Industrial Code (12 NYCRR) § 23-3.3. Plaintiff argued that the work was “alteration” pursuant to § 240(1) and/or “demolition,” which is covered by both sections of the Labor Law.
On March 1, 2010, a judgment on the verdict was entered in favor of defendant on the grounds that plaintiff’s work was “routine maintenance” and therefore not within the scope of the Labor Law. For the reasons set forth below, we find that plaintiff’s § 240(1) claim was properly dismissed, but that the court erred in dismissing plaintiff’s § 241(6) claim.
A directed verdict may be rendered where the court finds that, “upon the evidence presented, there is no rational process by which the fact trier could base a finding in favor of the nonmoving party” (Sorrentino v Fireman, 13 AD3d 122, 123 [2004], quoting Szczerbiak v Pilat, 90 NY2d 553, 556 [1997]). The facts established at trial must be considered in the light most favorable to plaintiff, and the court must afford plaintiff every favorable inference which may properly be drawn from those facts (Sorrentino at 123; Villoch v Lindgren, 269 AD2d 271 [2000]). Applying this standard, defendant’s motion for a directed verdict on plaintiff’s Labor Law § 241(6) claim should have been denied.
In order to recover under § 241(6), a plaintiff must demonstrate that there was a violation of a specific regulatory provision of the Industrial Code which resulted in his injury (Rizzuto v L.A. Wenger Contr. Co., 91 NY2d 343, 350 [1998]). 12 NYCRR 23-3.3(c), the section relied upon by plaintiff, requires “continuing inspections” during “hand demolition operations” to protect against hazards “resulting from weakened or deteriorated floors or walls or from loosened material.” “Demolition” is defined in the Industrial Code as “work incidental to or associated with the total or partial dismantling or razing of a … structure including the removing or dismantling of machinery or other equipment” (12 NYCRR 23-1.4[b][16]).
Under this definition, the removal and dismantling of the rail constituted demolition of a structure. The record supports the view that the repeated saw cuts loosened the rail, rendering it unstable. We find that on this record, the stressed rail was the kind of hazard contemplated by section 23-3.3(c) (see e.g. Wade v Atlantic Cooling Tower Servs., Inc., 56 AD3d 547 [2008]). We further find questions of fact on the existing trial record as to whether defendant conducted the “continuing inspections” required by section 23-3.3(c) (see e.g. Salinas v Barney Skanska Constr. Co., 2 AD3d 619, 622-623 [2003]).
Furthermore, uncontradicted testimony establishes that the rails at issue were being removed for the purpose of upgrading the subway signal system, and not because they were worn, and that the “general context of the work” was a five-year capital improvement contract. These factors raise triable issues that militate against a finding, as a matter of law, that plaintiff was engaged in routine maintenance (see Prats v Port Auth. of N.Y. & N.J., 100 NY2d 878, 881-82 [2003]; Joblon v Solow, 91 NY2d 457, 466 [1998]; cf. Esposito v New York City Indus. Dev. Agency, 1 NY3d 526, 528 [2003]). Thus, the court should not have directed a verdict for defendant dismissing plaintiff’s § 241(6) claim (see Koren-DiResta Constr. Co. v New York City School Constr. Auth., 2 AD3d 114 [2003]; see e.g. Hamill v Mutual of Am. Inv. Corp., 79 AD3d 478 [2010]).
We find, however, that plaintiff’s Labor Law § 240(1) claim was properly dismissed, albeit on different grounds. In order to recover under § 240(1), the hazard to which plaintiff was exposed must have been one “directly flowing from the application of the force of gravity to an object or person” (Prekulaj v Terano Realty, 235 AD2d 201, 202 [1997], citing Ross v Curtis-Palmer Hydro-Elec. Co., 81 NY2d 494 [1993]). Here, the rail was propelled by the kinetic energy of the sudden release of tensile stress in the steel rail. Thus, plaintiff’s injuries were not the result of the effects of gravity (see Daley v City of New York Metro. Transp. Auth., 277 AD2d 88 [2000]).
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
Cordeiro v TS Midtown Holdings, LLC,

Mischel & Horn, P.C., New York (Scott T. Horn of counsel),
for appellants-respondents.
Pollack, Pollack, Isaac & De Cicco, New York (Brian J. Isaac
of counsel), for respondents-appellants.
Sonageri & Fallon, LLC, Garden City (James C. De Norscia of
counsel), for respondent.
Order, Supreme Court, New York County (Paul G. Feinman, J.), entered June 16, 2010, which, to the extent appealed from as limited by the briefs, denied plaintiffs’ motion for partial summary judgment as to liability on their Labor Law § 240(1) claim and granted their motion to strike defendants’ answer to the extent of ordering that an adverse inference charge be given at trial, granted defendants’ cross motion for summary judgment dismissing the complaint and all counterclaims against them to the extent of dismissing plaintiffs’ Labor Law § 241(6) claim, and granted third-party defendant Schindler Elevator Corporation’s motion for summary judgment dismissing the third-party complaint, unanimously modified, on the law, to grant plaintiffs’ motion for partial summary judgment as to liability on their Labor Law § 240(1) claim and to deny defendants’ cross motion for summary judgment dismissing plaintiffs’ Labor Law § 241(6) to the extent it is based on a violation of Industrial Code (12 NYCRR) § 23-1.7(b)(1), and otherwise affirmed, without costs.
Plaintiff John Cordeiro, an employee of third-party defendant Schindler, was injured while preparing to remove elevator equipment from a building owned and managed by defendants by hoisting it through hatchway doors connecting a motor room with the floor below it. As plaintiff was sliding open the latch to the doors, they unexpectedly opened, causing him to fall to the floor below.
Plaintiffs met their prima facie burden of establishing entitlement to partial summary judgment on their Labor Law
§ 240(1) claim. Although the doors through which plaintiff fell were a permanent fixture of the building, they were not a “normal appurtenance,” but rather, an access opening specifically built for the purpose of allowing workers to perform their work on the building elevators by hoisting materials to the building’s motor rooms (Brennan v RCP Assoc., 257 AD2d 389, 391 [1999], lv dismissed 93 NY2d 889 [1999]). Accordingly, we find that the hatch in this case was a “device” within the meaning of § 240(1) (see id.; Crimi v Neves Assoc., 306 AD2d 152, 153 [2003]). Further, plaintiff did not step onto hatchway doors that opened accidentally (compare Bonura v KWK Assoc., 2 AD3d 207 [2003], and Rodgers v 72nd St. Assoc., 269 AD2d 258 [2000]). Rather, plaintiff was required to open the doors in order to hoist up the governor from the 19th floor hallway below. This exposed plaintiff to a gravity-related risk of falling into the hallway from the motor room (see Godoy v Baisley Lbr. Corp., 40 AD3d 920 [2007]).
In opposition, defendants failed to raise a triable issue of fact as to whether plaintiff was the sole proximate cause of the accident (see Gallagher v New York Post, 14 NY3d 83, 88 [2010]; Blake v Neighborhood Hous. Servs. of N.Y. City, 1 NY3d 280, 289 n 8 [2003]; see also Miglionico v Bovis Lend Lease, Inc., 47 AD3d 561, 565 [2008]). Defendants did not submit any admissible evidence that plaintiff knew he should have used his safety harness under these circumstances, or that he knew his partner had a suitable 50-foot lifeline to which the harness could have been attached. While defendants argue that plaintiff could have tied his six-foot lanyard to a nearby beam or staircase, no evidence, expert or lay, was submitted that either of these options were appropriate anchorage sites (see Miglionico, 47 AD3d at 564-565). Accordingly, plaintiffs were entitled to partial summary judgment as to liability on their Labor Law § 240(1) claim.
Supreme Court improperly dismissed plaintiff’s Labor Law § 241(6) claim to the extent it is based on an alleged violation of Industrial Code (12 NYCRR) § 23-1.7(b)(1). Plaintiffs first alleged this particular Code provision concerning hazardous openings in a third supplemental bill of particulars served, without leave of court, after plaintiffs moved for summary judgment. However, plaintiffs’ original bill of particulars claimed that defendants failed to adequately maintain the hatchway, causing plaintiff to fall when it suddenly opened. Accordingly, plaintiffs’ belated identification of 12 NYCRR 23-1.7(b)(1) “entails no new factual allegations, raises no new theories of liability, and has caused no prejudice to defendant[s]” (Noetzell v Park Ave. Hall Hous. Dev. Fund Corp., 271 AD2d 231, 233 [2000]; see Cevallos v Morning Dun Realty, Corp., 78 AD3d 547, 549 [2010]). Further, the provision is sufficiently specific to support a Labor Law § 241(6) claim (see Luckern v Lyonsdale Energy Ltd. Partnership, 281 AD2d 884, 886 [2001]), and issues of fact exist as to whether it was violated.
Supreme Court properly dismissed plaintiff’s Labor Law § 241(6) claim to the extent it is based on 12 NYCRR 23-1.16, since plaintiffs never alleged in their original bill of particulars that plaintiff was given defective safety equipment (see Gaisor v Gregory Madison Ave., LLC, 13 AD3d 58, 59-50 [2004]). Plaintiffs’ § 241(6) claim based on an alleged violation of 12 NYCRR 23-1.5 was also properly dismissed, since that section is insufficiently specific to support such a claim (see Carty v Port Auth. of N.Y. & N.J., 32 AD3d 732, 733 [2006], lv denied 8 NY3d 814 [2007]).
Supreme Court properly denied defendants’ cross motion for summary judgment dismissing plaintiffs’ common-law negligence and Labor Law § 200 claims. Proof of defendants’ supervision and control over plaintiff’s work is not required to impose liability under the statute and the common law where, as here, the accident results from a dangerous work site condition (see Makarius v Port Auth. of N.Y. & N.J., 76 AD3d 805, 808 [2010]). The building superintendent testified that he had seen an unusual configuration in the hatchway doors prior to the accident. Thus, issues of fact exist as to whether defendants had notice of the dangerous or defective doors (id. at 808-809).
Supreme Court providently exercised its discretion in declining to impose the drastic sanction of striking defendants’ answer due to their loss of the accident report, and instead, ordering that an adverse inference charge be given at trial (see Hall v Elrac, Inc., 79 AD3d 427 [2010]).
Supreme Court properly dismissed the third-party action, since the contract between Schindler and defendant/third-party plaintiff TS Midtown Holdings, LLC does not contain a clear and unambiguous indemnity provision running in favor of TS Midtown. When a party is under no legal duty to indemnify, a contract assuming that obligation “must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed” (Tonking v Port Auth. of N.Y. & N.J., 2 AD3d 213, 214 [2003], affd 3 NY3d 486 [2004] [internal quotation marks and citation omitted]).
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

Volume XIII, No. 5

A Biweekly Electronic Newsletter
Hurwitz & Fine, P.C.
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Phone: 716-849-8900
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As a public service, Hurwitz & Fine, 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 our editor Dan D. Kohane at ddk@hurwitzfine.com or call 716-849-8900. You will find back issues of Coverage Pointers here.

Dear Coverage Pointers Subscribers:

We surely hope that you have recovered, or in the process of recovering, from Irene.  I know that Cassie Kazukenus is still awaiting the restoration of power in Albany, my sisters in Sullivan County and northwest Jersey were without power for four days and my 90-year old mother lost power as well, complaining that she couldn’t get on the Internet!

Database Development

We’ve upgraded our e-mail system over here and that, of course, may result in some Coverage Pointers mailing snafus.  I hope not, but no promises of easy sailing.

Educational Events to Schedule:
Here are some upcoming programs that I’m certain you will want to consider scheduling:

2011 Insurance Industry Institute
Federation of Defense & Corporate Counsel

Wednesday to Friday, November 16-18, 2011 – NYC

Building on the success and critical acclaim of 2009′s 20/20 Insurance Symposium, the FDCC is presenting a program that focuses on emerging issues of interest to the insurance industry over the next three to five years. This year’s institute focuses on four broad areas where significant change is occurring in the legal environment, the increase in regulation at the federal level, the preservation of the attorney-client privilege, the challenge of protecting both insurers and policyholders from breaches of privacy and the globalization of the claim environment.

I am pleased to be part of the “attorney-client” privilege panel and hope to see you there. Information is available on the FDCC website, www.thefederation.org.

2011 Law School for Insurance Professionals
Torts, Insurance and Compensation Law Section of the NYS Bar Association.

Friday, September 23, 2011 – Albany

Friday, September 23, 2011 – Syracuse            (Peiper on the program)

Wednesday, September 28, 2011 – Buffalo     (Kohane on the program)

Thursday, October 6, 2011 – Long Island          (Kohane on the program)

Wednesday, October 12, 2011 – NYC

I will be presenting the kick-off topic, An Overview of the Coverage Analysis, including disclaimers, partial disclaimers and reservation of rights letters, timely notice under a CGL, auto, homeowners policy (the Prejudice Standard) and the right to independent counsel at the Long Island and Buffalo locations

Steve Peiper will be presenting an Update on Bad Faith in New York, including proper file handling and documentation, discovery in bad faith actions and available damages in first and third party suits in the Syracuse location.

One Hundred Years Ago – Baseball and Bill McKechnie
Regular readers know how much your Editor enjoys baseball stories.  My son Jacob, a die-hard Yankee fan (he did not get that from my side of the family), was impressed by the record breaking three-grand-slams-in-a-game accomplished by the pin-stripers the other day.  So, not to be undone, I wondered what baseball record may have been set or tied on September 2, 1911.

Well, I found one.

Future Pirate Hall of Famer, Bill “Deacon” McKechnie – a third-baseman and later a coach and manager, tied a NL record with two inside-the-park homeruns on that day as the Pirates drubbed the St. Louis Cardinals 12-1.  Do you know of Bill?  I didn’t, but do now.

The McKechnie Family Legacy:  I had the pleasure of tracking down some of Bill McKechnie’s descendants during the past couple of week, to get some remembrances of this superb ballplayer and manager.  I thank them for their insight and kindness in responding to me.  A special thanks to Jim McKechnie who tried to contact Bill McKechnie’s daughter without success.  Jim offers the following comments:

Bill McKechnie was an extremely proud member of the McKechnie Clan.  As a child, I remember receiving autographed baseballs and Louisville Slugger’s from him.  Actually, he gave them to my grandfather (his cousin), who shared them with his kids and grandkids.  I wish I still had one of them.  I can tell you that he is the only I know of that took three different teams to the World Series.  The Pittsburgh Pirates and the Cincinnati Reds were the two teams, but only the Pittsburgh team won its series.

Thanks, Jim. Visit the McKechnie’s at Customized Creationzthe family’s customized gun shop.

From Audrey Seeley, Queen of No Fault:

I hope that those hit by the hurricane are hanging on.  I have a family member in Virginia who will be without power for another two weeks and know that many have seen devastating flooding as well as seeing neighborhoods completely destroyed.  You are in our thoughts and prayers in this difficult time.

I wanted to thank the Negligence Chair of the Erie County Bar Association, Greg Pajak, Esq. of Cellino & Barnes for asking me to address the committee on No-Fault.  There was a much bigger turn out than I expected and many people had questions.  Also, it was nice of JW Hunt to provide the food.   I am rarely fed when I show up for a presentation and it was very nice to have lunch waiting for me.  By the way, Mr. Pajak there is an arbitration summary on MRI’s within a month of the accident that you should review.  I found it after the lecture and thought it may be useful.

There are a number of upcoming programs that may be of interest to you.

September 13 and 14 – NBI No-Fault Seminar

This seminar is being held in Buffalo and Syracuse.  It is not too late to sign up and I believe you can walk in and register the day of.  If you need the brochure please let me know.  Again, the American Arbitration Association is participating and bringing local arbitrators for you to ask questions of at this seminar.  It is a unique opportunity that you should not miss.

October 26-30 – DRI Annual Meeting in Washington DC

This is going to be an amazing conference in the Nation’s Capital with a former President and a Supreme Court Justice speaking.  The Insurance Law and the Trucking Law committees are presenting a program featuring a Pulitzer Prize Winning Journalist speaking about how the heavy use of electronic devices and technology alter our behavior and our brain.  There are presentations from every substantive committee of DRI.  The presentations range from representing corporations against disclosure of confidential information of WikiLeaks sized proportions to Hydraulic Fracturing and the environmental and legal issues it creates.  To sign up for the meeting go to www.dri.org.

December 15-16 – Insurance Coverage and Practice Symposium in NYC

I am very proud to be Vice Chair of the program and know that Matt Foy, Esq. of Gordon Rees has created an amazing program this year.  The program has a diverse and interesting selection of topics from a Coverage B emerging claims discussion to strategy in defending class actions to the evolution of D&O claims and coverage issues.  The professional liability committee is also having its conference at the same time and location.  If you would like to register please send me an email.  Also, if you are an insurer or in house counsel and interested in attending please contact me as you may be eligible to attend the conference for free.  Please note that even if your office only sends one person they could attend for free!!  If you need more information send me an email at aas@hurwitzfine.com.

Have a great Labor Day Weekend!

Audrey

Modern Justice: Texas-Style: 
This order, from the Hon. Sam Sparks, USDJ, was entered on the federal docket on August 26h:

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS

AUSTIN DIVISION

MORRIS, etc. v. COKER, et al

BE IT REMEMBERED on this day the Court reviewed the files in the above-styled causes, and now enters the following opinion and orders. Non-parties Langford, Erik Hoover, and Brigham Oil & Gas, L.P. invite the Court to quash subpoenas issued to them on behalf of Jonathan L. Woods, in relation to a matter currently pending in the United States District Court for the Western District of Louisiana, Lafayette-Opelousas Division, because the subpoenas were not properly served, are overly broad and unduly burdensome, and seek privileged information. In response, the Court issues the following invitation of its own:

Greetings and Salutations!

You are invited to a kindergarten party on THURSDAY, SEPTEMBER 1 2011, at 10:00 a.m. in Courtroom 2 of the United States Courthouse, 200 W. Eighth Street, Austin, Texas. The party will feature many exciting and informative lessons, including:

  • How to telephone and communicate with a lawyer; How to enter into reasonable agreements about deposition dates;
  • How to limit depositions to reasonable subject matter;
  • Why it is neither cute nor clever to attempt to quash a subpoena for technical failures of service when notice is reasonably given; and;
  • An advanced seminar on not wasting the time of a busy federal judge and his staff because you are unable to practice law at the level of a first year law student.

 

Invitation to this exclusive event is not RSVP. Please remember to bring a sack lunch!

The United States Marshals have beds available if necessary, so you may wish to bring a toothbrush in case the party runs late.

Accordingly,

IT IS ORDERED that defense counsel Jonathan L. Woods, and movants’ attorney Travis Barton, shall appear in Courtroom 2 of the United States Courthouse, 200 W. Eighth Street, Austin, Texas, on THURSDAY, SEPTEMBER 1, 2011, at 10:00 a.m., for a memorable and exciting event;

IT IS FINALLY ORDERED that Mr. Barton is responsible for notifying Mr. Woods of this order by providing him with a copy by mail or fax on this date.

Editor’s Note:  We checked – the case settled before the hearing.   Smart lawyers, indeed.

Peiper’s Perspective

The trend continues for another issue.  Still very slow in the App Div these days.   Unlike last issue, however, we actually have a few cases for your consideration this week.  The liquidator for Midland is back in the news; this time in a dispute with re-insurer Everest.  In addition, we have highlighted an interesting dispute among the fine Justices of the Fourth Department in Oakes v. Patel.  For those of you representing municipalities, please take a moment to review the  Third Department’s latest musing on the standard governing Late Notices of Claim.

As noted in our column, we found the most interesting discussion point in this week’s edition to be buried within the Midland case.  The First Department appears to acknowledge that discovery of how a carrier handled similarly situated claims is relevant to determining whether a carrier’s conduct in an unrelated case is reasonable.   This is  a classic case of the slippery slope, my friends.  The court’s reference to this issue, which is really tangential to the disputed matter, could provide the basis for a similar requests in other areas of civil litigation.  Certainly, this issue has been contested in bad faith litigation for years, but for the most part has stayed in that arena alone.

All of this brings us to again remind everyone to pay close attention to discovery demands, and the timelines for responding/objecting.  With the Court’s decision, is a request for similarly situated cases now “proper?”  What about the claims files in those “similarly situationed” cases?  If so, one had better protect his or her file (and the carrier’s) by objecting on basis of breadth, relevancy and cost.  As we’ve detailed several times before, missing the deadline to respond can, and often will, result in the loss of an opportunity to trim an overgrown discovery demand down to size.
That’s it for this week.  Best wishes to everyone for a safe and enjoyable Labor Day weekend.

Steve Peiper
sep@hurwitzfine.com

One Hundred Years Ago:

The front page of the Syracuse Herald contained a little squib on an advertisement for cigars, referencing a murder:

Syracuse Herald
September 2, 1911
Page 1
Escaped the Electric Chair

The bellboy murderer escaped the electric chair and many boxes of Napoleon
Full Dress and 370 cigars were lost and won on the verdict. These brands are favorites with betting and all sensible men who appreciate quality.—Adv.

So, we wondered.  Who was the Bellboy Murderer?  Well, on the same day we found an article about him:

GEIDEL READY FOR PRISON
Twenty Years to Life Imprisonment for His Crime

Paul Geidel, the seventeen-year-old bellboy who has been found guilty of the murder of William H. Jackson, an aged broker in the Hotel Iroquois on July 20, will be sentenced on Tuesday before Judge Crain

The jury brought in a verdict of murder in the second degree after an all-night deliberation.  By this verdict, Geidel escapes the electric chair, but he will be sentenced to a long term in either Sing Sing or Auburn Prison.  A verdict of murder in the second degree provides for imprisonment for a minimum term of twenty years and a maximum term of life.

Editor’s Note:

Geidel, born April 21, 1894 was the longest serving American prison inmate whose sentence ended with his release. After being convicted in 1911, Geidel served 68 years and 245 days in various New York State prisons. He was released on May 7, 1980, at the age of 86.

On July 26, 1911, Geidel decided to rob Jackson, a wealthy broker, who was a guest at the Iroquois Hotel on West 44th Street in New York City where Geidel was working at the Iroquois as a bellhop. Geidel sneaked into Jackson’s room, and suffocated him to death with a rag filled with chloroform. Geidel only made off with a few dollars.

Two days later, Geidel was arrested. He was subsequently convicted of second-degree murder and sent to prison for 20 years to life, starting his sentence in Sing Sing.  His sentence was shortened for good behavior, but in 1926, he was declared to be legally insane and confined in a state hospital for the criminally insane for the next 46 years before being transferred to the Fishkill Correctional facility. Geidel was granted parole in August 1974, but the now 80 year old inmate did not want to leave. Having lived in prison for 63 years–his entire adult life–and having no family, he believed that he would not make it on the outside. He chose to remain in prison for almost six more years.

 

One Hundred Years Ago — Justice:  Oklahoma Style:

Stevens Point (WI) Daily Journal
September 2, 1911

FOUR MEN ROUTED
BY CONGRESSMAN

Charles D. Carter Drubs Clerks
In Store

ONE IS GIVEN BLACK EYE

Oklahoman Alleges Man Insulted Daughter — She Attracts Big Crowd While Fracas Is Going On by Her Screams

Washington, Sept. 2.—Representative Charles D. Carter of Oklahoma created a deal of excitement in fashionable F street and incidentally gave a severe drubbing to four clerks In a department store whom he accused of Insulting his eighteen-year old daughter, Miss Italy Carter.

The Oklahoma congressman, who is seven-sixteenths Indian, put one of the clerks out of commission with his fists and later put the other three, who had come to the rescue of heir associate, to route with his cane.

Surrenders to Police

He quickly departed from the store and, placing his daughter in a passing automobile, hurried to the nearest station house, where he introduced himself, and gave himself up. He explained to Captain Hollinberger the causes leading up to the trouble. He was not detained.

Unless the four clerks demand satisfaction, the incident will be closed, Representative Carter said.

One of the clerks, Joseph Josephson, who is said to have insulted Miss Carter, shows many signs of the encounter. His companions escaped with minor bruises, as the rattan cane carried by the sturdy Oklahoman was not of a dangerous type.

Carter Tells of Insult.

According to Representative Carter his daughter entered the store and asked for a certain make of coat giving a description. The clerk, thinking her alone, Mr. Carter said, tried to encase her in a conversation. “Italy refused to converse with the clerk.” “Continuing his advances, which were followed by repulses from my daughter, he became insulting. I took a hand in the conversation at this juncture and politely asked the clerk the cause of the trouble.  He became infuriated and said several uncomplimentary things about my daughter. I told her to accompany me from the store and as we reached the door, he called me several names. I returned and prepared to strike him, when he started toward me. I then gave him a good licking as my long experience on the plains as a boxer would permit. I then started to leave when three of his associates took up the fight.  I struck them right and left with my cane and routed the whole bunch.”

Editor’s Note – In almost every article around the country reporting on this incident, the papers included the reference to Carter being 7/16th “Indian,” race being so important in those days.  At statehood, Carter became the first person to represent Oklahoma’s Fourth District in the U.S. House of Representatives.  His 1914 visit to the school in Bug Tussle inspired the career of future Speaker of the House. Carl Albert. Carter worked on legislation affecting Oklahoma’s Indians and played a role in keeping Indian homesteads under the protection of the federal government. He served as chair (1917-19) and ranking minority member (1919-21) on the Committee on Indian Affairs and as a member of the Appropriations Committee (1921-27).

In This Week’s Coverage Pointers:

KOHANE’S COVERAGE CORNER
Dan D. Kohane
ddk@hurwitzfine.com

  • Late Notice of Disclaimer, Based on Policy Exclusion, Renders Disclaimer Invalid
  • New York Law Applies in Malpractice Action Against Insurance Broker

 

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

mml@hurwitzfine.com

  • Affidavit Based on Contemporaneous and Recent Examinations Raises Issue of Fact Sufficient to Defeat Summary Judgment
  • Judge Voices Strong Dissent Regarding Both Grant of Leave to Renew and Acceptance of Surgical Report from Four Months after Accident as Meeting “Contemporaneous” Requirement
  • Summary Judgment Denied Where Examining Orthopedist Used Inconsistent Norms for Various ROM Findings

 

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

ARBITRATION

  • Denial of Various Medical Specialties Not Denial of Lost Wages
  • MRIs Conducted Within One Month Of Accident Properly Denied On Peer Review
  • One Year Rule Defense Upheld On Low Back Claim.

LITIGATION

  • Insurer Prevails On Breach Of Condition For Failure To Attend IMEs
  • Sua Sponte Severance Improvident Exercise Of Judicial Discretion In This Case
  • Portion of Claim Premature and Remainder Properly Denied On Lack Of Medical Necessity
  • Plaintiff Failed to Meaningfully Address Peer Reviewer’s Conclusions

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

sep@hurwitzfine.com

  • Absent Fraud or Bad Faith, a Re-insurer is Bound by the Investigation and Claims Handling of the Primary Carrier
  • Failure to Object to Trial Court’s Additur After Trial #1, Precludes Defense From Challenging It
  • At the Conclusion of Trial #2 Existence of Police and Accident Reports Establishes Notice to Municipality, and Saves Petitioner’s Late Notice of Claim

 

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
cak@hurwitzfine.com

  • Powerless to report

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal

kaf@hurwitzfine.com

  • Products/Completed Operations Exclusion

 

JEN’S GEMS
Jennifer A. Ehman
jae@hurwitzfine.com

  • Question of Fact as to How Water Entered Building
  • Assault and Battery Exclusion Triggered
  • Framed Hearing Ordered Where Respondent Purportedly Failed to Obtain SUM Insurer’s Consent Before Settling with Tortfeasor

EARL’S PEARLS
Earl K. Cantwell

ekc@hurwitzfine.com

Behind the Increase in Legal Malpractice Claims

That’s all for now.  Happy Labor Day.

See you in a couple.

Dan

Dan D. Kohane
Hurwitz & Fine, P.C.

1300 Liberty Building
Buffalo, NY 14202
Phone:  716.849.8942
Fax:      716.855.0874
E-Mail:  ddk@hurwitzfine.com
H&F Website:  www.hurwitzfine.com
LinkedIn: www.linkedin.com/in/kohane

 

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

NEWSLETTER EDITOR
Dan D. Kohane
ddk@hurwitzfine.com

ASSOCIATE EDITOR
Audrey A. Seeley
aas@hurwitzfine.com

ASSISTANT EDITOR
Margo M. Lagueras
mml@hurwitzfine.com

 

INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
ddk@hurwitzfine.com

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

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
as@hurwitzfine.com

Jody E. Briandi
Steven E. Peiper

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
aas@hurwitzfine.com

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

APPELLATE TEAM
Jody E. Briandi, Team Leader
jeb@hurwitzfine.com

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
Jen’s Gems
Earl’s Pearls
Across Borders

KOHANE’S COVERAGE CORNER
Dan D. Kohane
ddk@hurwitzfine.com

09/01/11         GPH Partners, LLC v. American Home Assurance Company
Appellate Division, First Department
Late Notice of Disclaimer, Based on Policy Exclusion, Renders Disclaimer Invalid

Admiral has a duty to defend.  While a disclaimer is unnecessary when a claim does not fall within the coverage terms of an insurance policy , a timely disclaimer pursuant to Insurance Law § 3420 (d) is required when a claim falls within the coverage terms but is denied based on a policy exclusion”.

The timeliness of disclaimer is measured from the time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage.” Thus, where an insurer “becomes sufficiently aware of facts which would support a disclaimer,” the time to disclaim begins to run, and the insurer bears the burden of explaining any delay in disclaiming coverage including its failure to investigate the claim.

Here, Admiral was on notice of the plaintiff’s claims since January 2007 but did not disclaim until May. Grounds for disclaimer based on either delay in notice of the occurrence or the wrap-up exclusion should have been readily apparent to Admiral in January 2007, and, even if they were not, at a minimum, Admiral should have started an investigation at that time.

Admiral’s position that it only learned that plaintiff was making a coverage request via its attorney’s April 23, 2007 letter requesting “confirmation” of coverage, and that it could not have known about the existence of the wrap-up policy until May 10, 2007, is not borne out by the record.

08/30/11         Rose v. Arthur J. Gallagher & Co.
Appellate Division, Second Department
New York Law Applies in Malpractice Action Against Insurance Broker
This was an action for professional malpractice against an insurance broker.  The question is the case is which of two states’ laws should apply. In a contract action, the law of the jurisdiction where the contract was created is often selected.  However, in a malpractice case – which sounds in tort – it the place of the tort that applies.

In this case, the allegedly negligent quote was requested by the plaintiffs, and provided by the defendants, through e-mail communications that were sent from and received in New York. Thus, the tortious conduct alleged in the amended complaint is governed by New York law.

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

mml@hurwitzfine.com

08/30/11         Kanarad v. Setter
Appellate Division, Second Department
Affidavit Based on Contemporaneous and Recent Examinations Raises Issue of Fact Sufficient to Defeat Summary Judgment

In opposition to defendant’s motion, plaintiff submitted the affidavit of his treating chiropractor which was based on both contemporaneous and recent examinations which revealed significant range-of-motion limitations of plaintiff’s cervical and lumbar spine.  In addition, the chiropractor reviewed MRI reports showing disc bulging.  He therefore concluded that plaintiff’s injuries were significant and causally related to the accident.  This affidavit was sufficient to raise a triable issue of fact and defeat defendant’s motion.

08/25/11         Salman v. Rosario
Appellate Division, First Department

Judge Voices Strong Dissent Regarding Both Grant of Leave to Renew and Acceptance of Surgical Report from Four Months after Accident as Meeting “Contemporaneous” Requirement
Plaintiff, a 21-year old passenger, was involved in an accident in November 2005.  She complained of a burning sensation going up her spine, a headache and pain in her right knee.  According to her testimony, she missed three days of work and underwent physical therapy five days per week for three months.  She later quit her job approximately three weeks before having knee surgery in March 2006, after which she underwent physical therapy for about one month.  She explained that the subsequent gap in treatment was because her no-fault benefits stopped and she could not afford the treatment.  Her experts also explained that she had reached maximum benefit from the therapy.

The trial court granted defendants’ motion and dismissed the complaint.  However, she was granted renewal because, although plaintiff’s experts’ conclusions were based on medical evidence that arguably could have been included in her original motion, her attorney averred that the medical office where she initially received treatment had closed and they had difficulty obtaining her records.  Upon renewal, the order was modified to deny the motion with respect to the claim of permanent limitation to the right knee.

On appeal, the court found that the report by plaintiff’s orthopedic surgeon, four months after the accident, was “sufficiently contemporaneous” to establish serious injury.  Her surgeon stated, based on his observations during the surgery, that the accident was the proximate cause of the injury and not pre-existing degenerative processes.  In addition, the MRI report submitted with her original motion revealed no osteophytes, spondylosis or other evidence of degenerative conditions.  The court reasoned that the initial medical exam, the physical therapy, her young age and the subsequent surgery combined to make the four months between the accident and plaintiff’s objective medical evidence (the surgical report) sufficiently contemporaneous.

The dissenting judge reasoned that renewal should have been denied because plaintiff’s evidentiary submissions on renewal did not establish any injury contemporaneous with the accident but rather only evinced an examination two months after the accident.  As such, the evidence submitted on renewal would not have changed the outcome of the prior motion as it established medical treatment beginning more than a month after the accident.  An examination one month after an accident is not contemporaneous.  Therefore, an examination four months after the accident certainly cannot be contemporaneous.  The dissenting judge additionally found that, even if it had been contemporaneous, the surgeon’s report was completely lacking in any objective, qualitative or quantitative evidence of injury as is required.  Furthermore, although it might have been probative on the date of the surgery, the surgeon’s observations could not be probative as to whether the accident caused the injury given the fact that the surgeon did not see plaintiff for the first time until substantially after the accident.
Note:  The footnote indicates that the medical report of Dr. Cordaro was unsworn but that this fact was not significant as it was certified as a business record and submitted only to show plaintiff’s complaints and Dr. Cordaro’s referral, but not his opinion as to causality.  It is interesting, however, that Dr. Cordaro first saw plaintiff one month after the accident and apparently this unsworn report was the initial treatment report concerning the knee.

08/23/11         Cracchiolo v. Omerza
Appellate division, Second Department

Summary Judgment Denied Where Examining Orthopedist Used Inconsistent Norms for Various ROM Findings
On appeal, the court reverses the grant of summary judgment to defendants finding they did not meet their burden where their examining orthopedist used inconsistent norms in the range of motion findings of the cervical and thoracolumbosacral spine of each plaintiff.

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

ARBITRATION
8/26/11           Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Denial of Various Medical Specialties Not Denial of Lost Wages

The Applicant sought lost wages, in form of unemployment benefits, in the amount of $14,600.40 from September 1, 2009 through January 9, 2011. The parties stipulated that the amount sought was correct.

The Applicant was involved in a January 18, 2009, accident and treated at the emergency room with complaints of neck, back, and knee pain.  In March 2009, the Applicant treated with a chiropractor with complaints of head and complete back pain.  An EMG/NCV study was normal other than highly suggestive findings of mild bilateral carpel tunnel syndrome.  In May 2009, the Applicant treated with an orthopedic surgeon regarding bilateral knee complaints.  The Applicant underwent an MRI of the right knee which revealed a linear tear of the posterior of the medial meniscus.  The MRI of the left knee revealed an impression of a medial meniscus tear.  The orthopedic surgeon recommended bilateral knee surgery.

The Applicant treated with an orthopedist with bilateral shoulder complaints which resulted in an impression of muscular strain about the shoulders.  By February 2010, the Applicant treated with a different orthopedic surgeon in Florida who recommended bilateral knee surgery.  Ultimately, the Applicant underwent left knee surgery in March 2010.

The assigned arbitrator noted that it did not possess the lost wage denial but only a denial for orthopedic treatment including surgery.  This denial was based upon the IME conducted by Dr. Joseph Elfenbein which the assigned arbitrator reviewed.  It was noted that denials were also issued based upon specialty IMEs in neurology, ophthalmology, acupuncture, and chiropractic.  In reviewing Dr. Elfenbein’s report, it was noted that there was mild cervical and lumbar spine tenderness but normal range of motion.  The neurological findings were normal.  Also, bilateral shoulder testing and bilateral knee testing was limited due to pain.  It was noted that the Applicant had refused to perform some testing and had restricted range of motion due to pain.  Thereafter, she broke down during the examination.  Dr. Elfenbein concluded that the Applicant had resolved sprains of the entire spine, bilateral knees and shoulders.  It was also noted that the IME reports of the chiropractor and acupuncturist also found no disability.

The assigned arbitrator did not find Dr. Elfenbein’s report persuasive.  He failed to address positive MRI findings as well as the treating physician’s opinion as to a knee injury requiring surgery.  Likewise, the Applicant received a number of treatments from physicians that were never mentioned by Dr. Elfenbein who had positive objective findings regarding disability.

The most problematic aspect for the assigned arbitrator was that there was no denial for lost wages but a multitude of denials of medical treatment in different specialties.  The assigned arbitrator determined that the Applicant was entitled to be specifically advised what part of her claim was being denied.  Since she was not informed the insurer was obligated to pay lost wages.

8/22/11           Applicant v. Respondent
Arbitrator Mary Anne Theiss, Onondaga County
MRIs Conducted Within One Month of Accident Properly Denied on Peer Review

The Applicant was involved in an August 18, 2008, accident and underwent two MRIs on September 20, 2008.  The insurer denied the MRI based upon the peer review of Dr. Sachdev.  The assigned arbitrator upheld the denial on the ground that the Applicant’s neurological examination was normal; the range of motion in the spine was normal; she had no x-rays; and there was no documentation of progressive persistent weakness or reflex change.

8/19/11           Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
One Year Rule Defense Upheld On Low Back Claim

The issue in the arbitration was whether the assignor’s lumbar spine injury was ascertained within one year of the accident.  The assignor was involved in a July 30, 2008, motor vehicle accident and was documented as complaining of neck and left hip pain at the emergency room.  The assignor treated with her primary care physician and complained of abdomen, left flank, shoulder and thigh pain.  By November 2009, the assignor treated with a neurosurgeon for low back pain which she related to the July 2008, accident.

The insurer denied the neurosurgeon treatment on the ground that the low back injury as not ascertained within a year of the accident.  The assigned arbitrator upheld the denial as there was no evidence that demonstrated that the assignor treated for low back pain within a year after the accident occurred.

LITIGATION

8/24/11           Harmonic Physical Therapy, PC a/a/o Victor Giron v. Praetorian Ins. Co.
Appellate Term, First Department
Insurer Prevails On Breach of Condition for Failure to Attend IMEs

The insurer demonstrated entitlement to summary judgment on breach of condition precedent under the policy to attend scheduled IMEs.  The insurer demonstrated that it timely mailed IME notices and that the assignor failed to appear.  The plaintiff failed to raise any triable issue regarding the reasonableness of the insurer’s requests or the assignor’s failure to appear.

8/16/11           New York Cent. Mut. Ins. Co. v. John McGee
Appellate Division, Second Department
Sua Sponte Severance Improvident Exercise of Judicial Discretion in This Case

The insurer commenced an action against the defendant, a medical provider, and 12 professional medical service corporations that defendant owned and operated alleging they were fraudulently incorporated.  The corporations were actually owned, operated, and controlled by unlicensed persons and their management companies.  The insurer sought a declaration that it was not obligated to pay outstanding or future no-fault claims from these entities due to the fraudulent incorporation.  Alternatively, the insurer sought a declaration that the entities breached a condition to coverage under the policy by failing to attend examination under oaths and that there was outstanding verification owed to the insurer.

The defendant asserted counterclaims which the insurer moved to dismiss.  The court, sua sponte, severed the action as to the 12 corporations and denied the motion to dismiss.  Thus, the insurer could proceed against the defendant and three of the 12 entities on the issue of fraudulent incorporation.  The insurer appealed and the Appellate Division held that the lower court improvidently exercised its discretion in sua sponte severing the action against the 12 corporations.  The Court reasoned that the legal theory against all 12 corporations was fraudulent incorporation and to fragment the litigation was an undue increase on court resources.

8/16/11           Jesa Med. Supply, Inc. a/a/o Grigoryan Aris v. Progressive Ins. Co.
Appellate Term, Second Department
Portion of Claim Premature and Remainder Properly Denied on Lack of Medical Necessity

The insurer’s summary judgment motion should have been granted as the insurer had timely requested verification which was outstanding at the time the action was commenced.  Hence, the action was prematurely commenced.  The insurer was also entitled to summary judgment on the issue of lack of medical necessity as the insurer demonstrated timely denial issuance and the IME report set forth sufficient factual and medical rationale that the treatment was not medically necessary.  The plaintiff failed to submit any medical evidence to rebut the insurer’s showing.

8/16/11           MSSA Corp. a/a/o Josephine Pizarro v. Redland Ins. Co.
Appellate Term, Second Department
Plaintiff Failed to Meaningfully Address Peer Reviewer’s Conclusions

The insurer’s summary judgment motion on lack of medical necessity based upon a peer review should have been granted.  The insurer demonstrated a timely denial based upon a sufficient peer review with the plaintiff not proffering any affidavit from a provider that meaningfully referred to the peer reviewer’s conclusions.

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
sep@hurwitzfine.com

8/25/11           In re: Liquidation of Midland Ins. Co.
Appellate Division, First Department
Absent Fraud or Bad Faith, a Re-insurer is Bound by the Investigation and Claims Handling of the Primary Carrier
As we all know by now, Midland Insurance Company was placed into liquidation in the mid-1980’s.  At that time, the trial court issued a permanent injunction which effectively precluded any actions against Midland.

The latest Midland decision focuses on claims made by Midland’s reinsurer, Everest Reinsurance Company.  Essentially, Everest sought a declaratory judgment that it owed no reinsurance obligations for certain losses under Midland policies due to the liquidator’s breach of the reinsurance agreement between Everest and Midland.   In short, Everest maintained that the liquidator breached the agreement by failing to provide proper reporting on claims, by precluding Everest from participating in settlement discussion and otherwise blocked Midland from participating in the defense from the inception of a claim.

In affirming the trial court’s denial of Everest’s petition, the First Department noted that the primary insurer is “solely responsible for the investigation and defense of claims.”  As such, unless a settlement is fraudulent, in bad faith, or plainly beyond the accepted range of the damage the re-insurer is bound by the decisions and actions of the primary insurer.  It follows that Everest had no right to insist on investigation of claims.  Likewise, Everest had no right to interpose defenses on claims at the outset of litigation.   It is noted that, per an earlier Court Order, re-insurers are permitted to interpose defenses to a referee at a later stage in the claims process.

The First Department also addresses an interesting secondary issue in this decision.  In response to Everest’s challenge of the liquidator’s claims handling, the liquidator sought to introduce evidence of settlements that were negotiated by Everest as a primary carrier.  The thought being, presumably, that the liquidator wanted to show that Everest (as a primary insurer) had conducted itself in the same manner as the liquidator had on behalf of Midland.  Interestingly, the First Department held that the information was relevant and necessary for the liquidator’s defense.

8/19/11           Oakes v. Patel
Appellate Division, Fourth Department
Failure to Object to Trial Court’s Additur After Trial #1, Precludes Defense From Challenging It At the Conclusion of Trial #2

The instant case involved a medical malpractice claim, and the resulting jury verdict.  After returning a finding of liability, the jury returned a verdict that appeared to be inadequate.  In particular, the jury awarded $1,000,000 in past pain and suffering, $1,000,000 in future pain and suffering and $1,800,000 in future supportive living expenses.

As a result, the trial court granted plaintiff’s request for a new damages trial, or, in the alternative, requested that the defendants stipulate to a damages calculation that was significantly higher than the verdict returned by the jury.  The defendants rejected the trial court’s proposed additur, and elected to proceed with a new trial.

At the same time, the defendants also moved to add an affirmative defense when it was learned that the plaintiff has previously reached a settlement agreement (with Release) with the insurance carrier for one of the defendants.  In support of its motion to add an affirmative defense, the defendant Kaleida, argued that it did not learn of the Settlement and Release until after the conclusion of the first trial.

The trial court denied Kaleida’s motion to amend.  Thereafter, at the conclusion of the second trial, the jury returned a verdict that was much more favorable to the plaintiff. At the conclusion of the second trial, plaintiff was awarded $5,600,000 in past pain and suffering, $4,000,000 in future pain and suffering and $4,720,000 in future custodial support.

Defendants’ appealed both the denial of the second award, as well as the denial of Kaleida’s motion to amend its Answer.

The Fourth Department affirmed the trial court’s decision to deny defendant Kaleida’s motion to amend.  In so holding, the Appellate Division ruled that the terms of the Release relied upon by Kaleida did not apply to the instant case.  Finally, the Court agreed that the trial properly granted a new trial, and that the second award of damages did not “materially deviate from what would be reasonable compensation.”

Finally, with respect to the trial court’s additur at the conclusion of the first trial, the Court ruled that defendant failed to object to the trial court’s recommendation.  As such, it was not properly preserved and could not be visited for a first time on appeal.

In a well-reasoned dissent, Justice Peradotto initially stated that she concurred that the first jury’s award was not appropriate compensation.  However, she then argued that the trial court’s additur at the conclusion of the first trial was excessive. Accordingly, prior to proceeding to the second trial (and the appropriateness of a second verdict), Justice Peradotto posited that the Appellate Division must review the appropriateness of the trial court’s additur.  If it was excessively high, it is argued that the defendants should have been presented with an opportunity to stipulate to “an appropriate additur.”

Accordingly, it would appear that Justice Peradotto would be in favor of the Court modifying the trial court’s initial additur.  Thereafter, the defendants would be given the opportunity to decide if the wished to resolve the matter.  This would all be done prior to the Appellate Division reaching a determination on the appropriateness of the second jury’s verdict.

Finally, Justice Smith penned a short dissent that disagreed with the majority’s ruling that the award from the second trial was proper.  Justice Smith, however, does not address to what extent the second verdict should be reduced.

8/18/11           Franco v. Town of Cairo
Appellate Division, Third Department
Existence of Police and Accident Reports Establishes Notice to Municipality, and Saves Petitioner’s Late Notice of Claim
In accordance with General Municipal Law § 50(e), Ms. Franco filed for leave to serve a late notice of claim.  The trial court denied the request on the basis that the she had failed to establish a reasonable excuse for waiting more than 90 days to provide notice, and likewise failed to establish that the municipality/defendant had knowledge of the incident for which damages were now being sought.  Finally, the trial court ruled that plaintiff failed to establish that the delay did not result in prejudice to the Town.

In reversing the trial court, the Third Department held that Ms. Franco’s petition to serve a late notice of claim was sufficiently supported where she was able to point to evidence establishing that the Town’s police and emergency medical technicians responded to the incident within minutes of its occurrence.  This resulted in a police report, and accident report, both being generated.  Accordingly, where detailed and specific knowledge of an incident is obtained by an employee of a municipality, such information will be imputed for notice purposes under the Notice of Claim requirements of the General Municipal Law.

In so holding, the Court noted that the Town’s likely defense that there was no prior written notice of a defective condition may well provide a basis for summary judgment.  However, in deciding whether Ms. Franco had alleged facts sufficient to permit a Late Notice of Claim, the Court noted that dispositive arguments are irrelevant.

In dissent, Justice Rose argued that the police and accident reports upon which the majority based its decision only vaguely referenced the accident.  Without a concrete description of the incident, injury and location of the incident, Justice Rose posits that no knowledge can be imputed to the municipality as a whole.  It follows that under the dissent’s view, the “mere presence of a medic” at the accident scene does not create actual knowledge of the possibility of a claim.

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
cak@hurwitzfine.com

Powerless to report this week, thanks to Irene.

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
kaf@hurwitzfine.com

08/07/11         Slater LCI v. Republic Vanguard Insurance Co.
Eighth Circuit Court of Appeals – Texas law applied
Products/Completed Operations Exclusion
LCI Equipments, Inc. [“LCI”], a Texas Corporation, imported and sold a Yanmar tractor that had been manufactured and used in Japan and then rebuilt in Vietnam.  Rudy Slater subsequently purchased the tractor at auction and was killed in a roll-over accident.  His wife, Arkansas resident Wanda Slater, commenced a wrongful death action in state court, asserting negligence and strict product liability claims against LCI and others. The suit focused primarily on the tractor’s lack of a Roll-Over Protection System. LCI’s insurer, Republic-Vanguard Insurance Company [“Republic”], also a Texas Corporation, denied coverage and refused to defend LCI under its Commercial General Liability policy.

With the wrongful death suit pending, LCI assigned its rights in the policy to Slater who then commenced this action against Republic in Arkansas state court, joining LCI as a nominal plaintiff and seeking a declaratory judgment that the policy covered her claims against LCI. Republic moved the action to federal court, alleging diversity jurisdiction because LCI is a nominal plaintiff. Slater neither moved to remand nor questioned federal jurisdiction.

The district court granted Republic’s motion for summary judgment, concluding it had no duty to defend or indemnity LCI because coverage was excluded by the “Products/’Completed-Operations” endorsement on the policy.

Slater appealed, asserting for the first time the absence of diversity jurisdiction and further arguing that the district court erred in construing the policy exclusion.  For the following reasons the Eight Circuit Court of Appeals [“Court”] affirmed the district court’s decision.

First, on the issue of jurisdiction Slater argued that LCI’s interest is real that there was no evidence of an improper motive to destroy diversity jurisdiction.  The Court found, however, that motive is not the dispositive issue.  The Court pointed out that Slater added LCI to the lawsuit as a nominal party; and, this created diversity jurisdiction allowing Republic to remove the case in reliance on that status giving the district court original jurisdiction over the action. The court determined that Slater could have moved to remand or otherwise deny federal jurisdiction, presenting evidence that LCI was not a nominal party.  This did not happen; instead Slater litigated her claim to judgment in the district court and then raised this issue for the first time on appeal. The Court took exception with Slater’s action because it believed she was attempting to nullify the district court’s expenditure of scarce judicial resources because she lost on the merits of her claim in federal court. The Court held that as Slater structured the case the district court properly exercised diversity jurisdiction.

Next, having settled the diversity issue, the court addressed the merits of the case.  The policy provided LCI coverage for “bodily injury,” including death, “to which this insurance applies.”  Republic denied coverage based on the Products/Completed-Operations endorsement, which provides that “no coverage is provided, nor is there any duty to defend, claims, suits, actions or proceedings against the insured arising out of ‘products’ or ‘completed operations’.

In the wrongful death lawsuit, Slater alleged that LCI “designed, manufactured, sold, marketed and/or distributed an unreasonably dangerous tractor which caused the death of Rudolph Slater.  She further alleged that LCI negligently failed to “design, manufacture and install safety features,” to adequately test and inspect the subject tractor,” and to “adequately warn of hazards in the use of the subject tractor.”  The district court concluded that Republic had no duty to defend or indemnify LCI because these claims were all excluded by the Products/Completed Operations exclusion – the tractor was a product “manufactured, sold, handled, or distributed” by LCI.  It had left LCI’s premises at the time of Rudy Slater’s accident. It was “completed” when it left LCI’s possession, despite lacking a Roll-Over Protection System, because it was put to its intended use by Rudy Slater.  The district court held that the exclusion applied to LCI’s alleged negligent failure to install a Roll-Over Protection System and to provide safety warning, as well as to the strict product liability claims, because these claims are grounded on a defect in a product sold not to a negligent omission unrelated to any product defect.

On appeal Slater argued that Republic had a duty to defend LCI in the underlying lawsuit and a duty to indemnify LCI for the judgment in Slater’s favor because LCI’s failure to install the Roll-Over Protection System safety equipment on the tractor falls within an exception to the Products/Completed-Operations exclusion for bodily injury “arising out of the existence of uninstalled equipment.”  This issue was not raised by Slater in the district court, however, Slater urged the Court to consider this issue because it is “purely legal and requires no additional factual development.”

In analyzing this issue the Court found no law in Texas interpreting this exception and, after reviewing case law in other jurisdictions, accepted the decisions of those courts which determined that the “uninstalled equipment” exception to a completed-operations exclusion only applied to equipment at the site when the accident occurred.  The Court held that if it agreed with Slater’s position it could have potentially wide ranging impact, excepting from the Products/Completed-Operations exclusion all claims alleging that a completed product caused injury away from the insured’s premises because the insured failed to install a particular feature.  The court determined that such a sweeping interpretation contrasts starkly with the exception’s narrow focus on the “existence of tools, uninstalled equipment or abandoned and unused materials.”  Ultimately, the Court held that the issue as argued by Slater is not purely legal and may require additional factual development.  The Court concluded that the issue was not properly preserved in the district court and declined to consider it further.

Slater then argued that her claims for bodily injury caused by LCI’s negligent failure to inspect and test the tractor, and to provide adequate safety warnings, are not excluded because those injuries arose out of services LCI was required to perform, not its product.”  The Court rejected this argument noting that in this case there are allegations of a defective product.  The fact that plaintiffs have alleged negligence in their petition does not mean that a claim based in products liability becomes one based in negligence.

In its brief Republic argued that these are defective product claims; or, in the alternative that the claims for negligent inspection and testing are excluded because they fall within the definition of the “Your Work” portions of the Products/Completed-Operations exclusion which excludes “work or operations performed by you or on your behalf” and “the providing or failure to provide warning or instructions.”  Slater argued, without reference to relevant authority, that the “Your Work” exclusion “encompasses only affirmative work or operations performed by the insured, not omissions.”

The Court held that Republic’s contention is more consistent with the plain language of the policy and that Slater has failed to show plain error.

JEN’S GEMS
Jennifer A. Ehman
jae@hurwitzfine.com
8/23/11           Congregation Chesed L’Avraham v Nationwide Mutual Ins. Co.
Supreme Court, Kings County
Question of Fact as to How Water Entered Building
Plaintiff’s building was damaged by storm water.  Nationwide disclaimed coverage citing two exclusions.  First, Nationwide’s policy provided that it would “not pay for loss or damage caused by or resulting from…faulty, inadequate for defective…design, specifications, workmanship, repair, construction, renovation, remodeling, grading compaction or maintenance.”  Second, it excluded coverage for “loss or damage to property…caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless: (1) the building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or (2) the loss or damage is caused by or results from thawing snow, sleet or ice on the building or structure.”

Nationwide presented evidence in support of this motion for summary judgment that either the storm rain alone caused the subject loss or, alternatively, the loss was caused by plaintiff’s failure to properly maintain the roof and drain.

In denying plaintiff’s motion, the court held that a trier of fact could find that virtually every item noted by Nationwide’s inspecting adjuster and engineer—worn out air conditioning ducts, discolored patches of the roof surface, blocked or poorly functioning drains—could have been caused by the storm and not by plaintiff’s failure to clean or maintain the building.  According to the court, the presence of debris or discolored areas on the roof does not necessary have a prohibitive value concerning how well residents maintained or cleaned the subject building.

With regard to the second exclusion, the court likewise found a question of fact.  It held that a trier of fact could reasonably conclude that a covered event damaged the roof and subsequently rain water entered the building through the previously damaged areas of the roof.

8/15/11           QBE Ins. Corp. v. Jinx-Proof Inc.
Supreme Court, New York County
Assault and Battery Exclusion Triggered
During an altercation at Beauty Bar, Vera Hendrix sustained injury when a security guard threw a glass at her face.  Ms. Hendrix brought an action against, among others, the security guard and defendant, owner of Beauty Bar.  The claims against all defendants included negligence, gross negligence, violation of the Dram Shop Act and a claim of negligent hiring and supervision against defendant.

In the underlying action, the court dismissed the negligent hiring and Dram Shop Act claims.  Thus, the remaining claims were allegations that the guard: (1) caused physical contact to occur without Ms. Hendrix’s consent; (2) intentionally placed her in apprehension of imminent harmful and/or offensive contact; and (3) as an agent of defendant, was negligent in kicking and touching her.

QBE, defendant’s insurer, commenced this action seeking to deny coverage based on Assault and Battery exclusion.  In reply, defendant argued that the denial was untimely, and that the evidence indicated that no assault and battery occurred.

An assault and battery exclusion applies if the underlying causes of action alleged are “rooted in intentional tortious behavior.”  The court reasoned that the pleadings clearly demonstrated that the main act, which would give rise to any recovery, was the security guard’s alleged intentional throwing of a glass object.  Further, the court noted that the possibility that the insured may be found liable under a theory of negligence does not overcome the policy’s Assault and Battery exclusion and any injury resulting from such act.  Thus, the exclusion was triggered.

Lastly, the court determined that QBE timely disclaimed coverage.

8/11/11           Matter of Liberty Mut. Ins. Co. v Walker
Supreme Court, Nassau County
Framed Hearing Ordered Where Respondent Purportedly Failed to Obtain SUM Insurer’s Consent Before Settling with Tortfeasor
Liberty Mutual sought a permanent stay of arbitration or, in the alternative, a framed hearing on the issue of Jacqueline Walker’s compliance with the SUM endorsement.  The basis of its application was that Ms. Walker vitiated any right to SUM benefits as a result of her failure to comply with the express terms of the insuring agreement.  Specifically, Ms. Walker failed to obtain Liberty Mutual’s consent to her underlying lawsuit prior to executing a release in favor of the tortfeasor.  As a result, she forfeited any right to seek SUM benefits under the Liberty Mutual policy.

In opposition, counsel for Ms. Walker argued that, upon being retained by Ms. Walker, he immediately put Liberty Mutual on notice of the SUM claim.  Liberty Mutual acknowledged that it was a valid claim and requested documents concerning the accident and treatment received by Ms. Walker.  Counsel then provided this documentation.  Following months of contact and negotiation with the tortfeasor’s insurer, the insurer made what was essentially a policy limits offer.  Throughout the process the claims representative from Liberty Mutual has been updated concerning the progress.  After finally receiving the offer, counsel called the claim’s representative at Liberty Mutual to obtain his consent to settle and faxed a letter requesting same (the court noted that no fax confirmation sheet was provided).  Thereafter, he allegedly called the representative ten more times, each time leaving a message.

Approximately 34 days after initial verbal and written notice via fax of the maximum available settlement offer was made, the release was awarded. Thus, Ms. Walker argued that the she complied with the governing SUM endorsement.

The court determined, that under these circumstances, Liberty Mutual’s petition was granted to the sole extent that a framed hearing should be held to determine whether or not Ms. Walker complied with the SUM requirements of the subject insurance policy.

EARL’S PEARLS
Earl K. Cantwell

ekc@hurwitzfine.com

BEHIND THE INCREASE IN LEGAL MALPRACTICE CLAIMS

Statistical and anecdotal evidence indicates that law firms are being targeted with significantly more legal malpractice claims in 2011 compared to prior years.  Statistics show that legal malpractice claims may have increased by 10-20% during the first six (6) months of 2011.  The major reasons for the increase in claims appear to be the negative economy and depressed real estate markets, with lawyers being looked at as a “deep pocket” to repair a bad balance sheet or poor financial statement.

Real estate, foreclosures and securities practices are most likely to give rise to legal malpractice claims, with the primary allegations being conflicts of interest or failure to timely file or follow through on certain tasks.  These conflicts of interest can involve competing or conflicting clients and situations where attorneys in a firm may be officers, directors or shareholders of a conflicted company or entity.  One reason for the rise in real estate malpractice claims is the large volume of transactions that took place between 2005 and 2008, followed by the national economic downturn which generally weakened commercial and residential real property values.

Mortgage practices and securities are big sources of current malpractice claims. One major issue is whether large institutional investors, banks and financial firms may wind up suing their attorneys in connection with advice and transactions regarding mortgage foreclosures and the creation and sale of mortgage-backed securities.

The best protections against such legal malpractice claims are to avoid and turn down cases where there is any possibility of law firm conflicts of interest, and double and triple diary deadlines and filing obligations to avoid missing or being late with a filing.  Especially in cases of commercial real estate, mortgage practice and investments and securities, it may not even be sufficient to get written conflict waivers because the economic downturn and real estate depression can change people’s minds in a hurry about whether their lawyer was acting in their best interests.  It is also important to preserve and document conflict of interest checks and copies of any filed deeds, papers, certifications, etc.  Of course, claims of conflict of interest may in turn lead to claims and allegations of breach of attorney-client privilege and disclosure or use of confidential client information.

It is inevitable that some claims may involve genuine lawyer mistakes, but many others are simply hindsight with the plaintiff now thinking that “I should not have done that deal”, or in the current economic climate the deal is not viable.  Plaintiffs are now trying to claim that, if the attorney had not committed malpractice, they would not have done the deal, or because of attorney malpractice the property lost value.

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

08/22/11         Crossman Communities of NC, Inc. v. Harleysville Mutual Ins. Co.
South Carolina Supreme Court
South Carolina Supreme Court Adopts the “Time on Risk” Approach to Define the Scope of Multiple CGL Insurers’ Obligations in a Progressive Damage Case

Harleysville Mutual Insurance Company (“Harleysville”) issued a series of Commercial General Liability (“CGL”) policies to Crossman Communities (“Crossman”) for the development of a series of condominium complexes in Myrtle Beach, South Carolina. The condominiums were negligently constructed, allowing water to seep in over time and cause damage to otherwise sound structural components. The condominium purchasers settled their lawsuit with Crossman, so Crossman brought this action for declaratory judgment to determine the scope of Harleysville’s obligations to Crossman under their CGL policies. Prior to trial, Crossman reached a settlement with several of its other insurers, providing coverage for the homeowners’ claims. The trial court held that Harleysville’s policies also covered the homeowners’ claims, applying the precedent that CGL policies may provide coverage for property damaged as a result of faulty workmanship. The trial court also held that Harleysville, along with Crossman’s other insurers, was jointly and severally liable for the homeowners’ claims.

The Supreme Court, on rehearing, affirmed the trial court’s holding that coverage existed under Harleysville’s policies because progressive water damage could constitute an “occurrence” under the policies. But the court reversed the holding that Harleysville was jointly and severally liable for the homeowners’ claims, overruling the precedent set in its controversial Century Indemnity case. The court instead adopted the “time on risk” approach to apportioning damages against multiple insurers. Under that approach, each insurer is liable for the actual damages that occurred during its policy period. Since the exact measure of damages is not provable in most progressive damages cases, each insurer will typically be required to cover a portion of the insured’s liability directly proportionate to the length of that insurer’s policy in relation to the total period over which damages occurred.
Submitted by: Michael O’Connell, Michelle Bibeau, and Steven Zakrzewski of O’Connell, Flaherty & Attmore, LLC

08/19/11         Equine Assisted Growth, et al v. Carolina Casualty Ins. Co.
Utah Supreme Court
Utah Supreme Court Holds that Courts Must Consider Extrinsic Evidence When Comparison of Insurance Policy to Pleadings Does Not Conclusively Determine Whether Preconditions to Insurer’s Duty to Defend are Satisfied

This case stems from a lawsuit brought by the disgruntled former CEO of the Equine Assisted Growth & Learning Association (“EAGALA”) against EAGALA’s board of directors. The ex-CEO had intentionally mis-captioned his lawsuit to make it appear that EAGALA was the plaintiff bringing the action against its own board of directors. The ex-CEO’s frivolous suit was eventually dismissed, but not before the board of directors incurred substantial costs defending against the action.

When EAGALA sought coverage for its defense costs from its insurance carrier, Carolina Casualty, Carolina refused to pay because of an exception to their duty to defend for “any Claim made against an Insured … by, on behalf of, or in the right of the Insured Entity.” The trial court refused to consider extrinsic evidence establishing that EAGALA’s ex-CEO had no right to bring a claim on behalf of EAGALA, and ruled in favor of Carolina Casualty because the underlying complaint listed EAGALA as the plaintiff, bringing the action within the exception to Carolina’s duty to defend its insured. The Court of Appeals reversed the trial court, holding that it is appropriate to consider extrinsic evidence where the insurance policy at issue conditions coverage upon facts properly proven by extrinsic evidence.

The Supreme Court held that when the terms of an insurance contract condition coverage upon allegations on the face of the complaint, extrinsic evidence is irrelevant and should not be considered. But when the duty to defend is conditioned on something other than the allegations of the complaint, the court may consider extrinsic evidence. Here, the existence of a duty to defend turned on whether the underlying complaint was made “by, on behalf of, or in the right of the Insured Entity.” The court held that this required determination of an objective fact, and the disgruntled ex-CEO’s decision to name EAGALA as the plaintiff in the complaint was not controlling. Consequently, the court held that it was appropriate to consider extrinsic evidence, and affirmed the decision of the appellate court.
Submitted by: Michael O’Connell, Michelle Bibeau, and Steven Zakrzewski of O’Connell, Flaherty & Attmore, L.L.C

Reported Decisions

Salman v. Rosario

Mitchell Dranow, Mineola, for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York
(Stacy R. Seldin of counsel), for respondent.

Order, Supreme Court, Bronx County (Stanley Green, J.), entered on or about July 6, 2009, which, to the extent appealed from as limited by the briefs, upon renewal and reargument, adhered to a prior order, same court and Justice, entered December 4, 2008, granting defendant Kanate’s motion for summary judgment dismissing plaintiff Garcia’s complaint, modified, on the law and the facts and in the exercise of discretion, to deny the motion insofar as plaintiff claims a permanent limitation serious injury to her right knee, and otherwise affirmed, without costs.

As an initial matter, while plaintiff’s doctors’ conclusions were arguably based on medical information previously available and she could arguably have included this information in her original motion, a court has latitude, in the interest of justice, to grant renewal, even on facts known to the movant at the time of the original motion (see Rancho Santa Fe Assn. v Dolan-King, 36 AD3d 460 [2007]). Here, plaintiff’s lawyer avers that she was unable to locate the records from Crotona Heights Medical, the initial treating facility after her emergency room visit, in time to submit those papers in opposition to defendant’s summary judgment motion because that medical office had closed. The law firm was only able to locate the records in conjunction with another case.

On November 28, 2005, the then 21-year-old plaintiff was a passenger in a motor vehicle that defendant rear-ended with his vehicle. Shortly after the accident, an EMT removed plaintiff from the vehicle. At that time, plaintiff complained to the EMT that she had a “burning sensation going up her spine, [a] headache from her head hitting the car and [her] knee.” Plaintiff testified that she had never hurt those body parts in any other accidents before or after the accident.

After the accident, plaintiff was taken by ambulance to the emergency room at Metropolitan Hospital where she made the same physical complaints. The hospital took x-rays, but found nothing broken. Plaintiff believed she was then given a prescription for Motrin and was driven home.

Plaintiff testified that she missed three days of work after the accident and then returned to work. However, she had to quit work approximately three weeks before having knee surgery on March 30, 2006 because her knee was “extremely swollen.” Plaintiff stated that, beginning approximately one week after the accident, she received physical therapy for approximately two months. Following her surgery in March 2006, plaintiff resumed physical therapy for approximately one month. In her affidavit in opposition, plaintiff explained her gap in treatment. She stated that once her no-fault benefits stopped, she could not afford to pay for medical care (see Mendez v Mendez, 72 AD3d 402 [2010] ["(p)laintiff's experts also explained any gap in her treatment by stating that she had reached the maximum benefit possible from the treatment"]). Plaintiff also testified that, as a result of the accident, she cannot stand for long periods, has difficulty walking and running, cannot lift heavy objects, has trouble sleeping and is sensitive to light.

Dr. Andrew Cordaro, who examined plaintiff just one month after the accident, noted that plaintiff complained about her right knee. He referred her for x-rays and an evaluation with an orthopedic surgeon [FN1] . The MRI report from Dr. Andrew Caruthers, dated March 13, 2006, describes a “longitudinal tear of the lateral meniscus contacting superior surface” and “small knee joint effusion.”

Most important, plaintiff’s orthopedic surgeon, Dr. Ehrlich, who performed arthroscopic surgery on plaintiff’s knee only four months after the accident, opined that “to a reasonable degree of medical certainty, the motor vehicle accident of 11/28/05 is the proximate cause of her condition, and not from a pre-existing or long standing degenerative process.” Plaintiff’s surgeon based this conclusion on his observations of plaintiff’s knee during surgery (documented in the operative report plaintiff submitted on the original motion) and because plaintiff’s MRI films (plaintiff submitted the MRI report on the original motion) did not depict the existence of osteophytes, show evidence of spondylosis or show other symptoms of degenerative processes. Thus, plaintiff’s surgeon countered defendant’s orthopedist’s observation that plaintiff’s injuries had no traumatic basis. Plaintiff’s surgeon also documented range-of-motion limitations in the knee. Dr. Mian, who also conducted an orthopedic examination in 2008 and found deficits in plaintiff’s range of motion, opined that the right knee tear was causally related to the accident. Thus, the evidence more than amply raised an issue of fact as to whether plaintiff had sustained a “serious injury” of a permanent nature to the right knee within the meaning of Insurance Law Section 5102(d).

Plaintiff’s objective evidence of injury, four months post-accident, was sufficiently contemporaneous to establish that plaintiff had suffered a serious injury within the meaning of the statute. Dr. Ehrlich based his conclusions in large part on his actual observations of plaintiff’s knee during the surgery he performed. This conclusion is significant because the doctor was able to see exactly what the injuries were. Moreover, in her affidavit, plaintiff stated that, prior to surgery, she had physical therapy five times a week for three months. It is not unreasonable to try to resolve an injury with physical therapy before resorting to surgery. The circumstances, i.e., plaintiff’s initial medical exam that was close in time to the accident, her intensive physical therapy, her young age and eventual surgery, make the four months between the accident and plaintiff’s objective medical evidence sufficiently contemporanous to withstand a motion for summary judgment (see Gonzalez v Vasquez, 301 AD2d 438 [2003] [examining physician's affirmation correlating motorist's neck and back pain two years after rear-end collision to quantified range of motion limitations found on physical examination and bulging and herniated discs described in MRI reports, and opining that motorist's symptoms were permanent, raised genuine issue of material fact as to whether motorist suffered serious injury]; see also Rosario v Universal Truck & Trailer Serv., 7 AD3d 306, 309 [2004]).

However, defendants did establish, prima facie, that plaintiff did not suffer a 90/180-day injury, and plaintiff failed to raise a triable issue of fact, given her testimony that she was out of work for only three days (see Pou v E & S Wholesale Meats, Inc., 68 AD3d 446, 447 [2009]).
All concur except Román, J. who dissents in a memorandum as follows:

ROMÁN, J. (dissenting)

To the extent that the majority concludes that renewal of the motion court’s order granting summary judgment in favor of Kanate was warranted, and that upon renewal Garcia’s evidence precluded summary judgment, I dissent. Here, renewal would only have been warranted in the interest of justice, and to the extent that Garcia’s evidentiary submission on renewal failed to establish any injury contemporaneous with her accident, renewal should have been denied.

To the extent that Garcia submitted medical evidence failing to establish treatment earlier than January 25, 2006, two months after this accident, Garcia failed to raise a triable issue of fact as to whether she sustained a serious injury because she failed to submit competent and admissible medical evidence of injury contemporaneous with her accident (see Ortega v Maldonado, 38 AD3d 388, 388 [2007]; Toulson v Young Han Pae, 13 AD3d 317, 319 [2004]; Alicea v Troy Trans, Inc., 60 AD3d 521, 522 [2009]; Migliaccio v Miruku, 56 AD3d 393, 394 [2008]). Accordingly, the motion court properly granted Kanate’s initial motion for summary judgment with respect to all categories of injury under Insurance Law § 5102.

On her motion to renew, seeking to remedy shortcomings in her prior submission, Garcia tendered, inter alia, medical records, not previously submitted, purportedly evincing medical treatment contemporaneous with her accident. Specifically and to the extent relevant here, on renewal Garcia submitted records evincing a medical examination occurring a month after her accident. Nothing submitted competently evinced medical treatment at anytime prior thereto. A motion to renew “must be based upon additional material facts which existed at the time the prior motion was made, but were not then known to the party seeking leave to renew, and, therefore, not made known to the court” (Foley v Roche, 68 AD2d 558, 568 [1979]). However, when the proponent of renewal seeks to proffer new evidence of which he/she was previously aware but did not provide to the court on a prior motion, renewal may be granted if the interest of justice so dictate (Tishman Constr. Corp. of N.Y. v City of New York, 280 AD2d 374, 376-377 [2001]; Mejia v Nanni, 307 AD2d 870, 871 [2003]). Generally, the interest of justice require renewal when the newly submitted evidence changes the outcome of the prior motion. Here, Garcia sought renewal in order to have the motion court consider evidence previously known to her. Accordingly, renewal would have only been warranted if it served the interest of justice. At best, Garcia’s medical evidence of injury on renewal established medical treatment beginning no sooner than a month after her accident. A medical examination occurring a month after an accident is not contemporaneous. Given its plain and ordinary meaning, contemporaneous means “existing, happening in the same period of time” (Webster’s New World Dictionary 300 [3rd college ed 2004]). Accordingly, insofar as Garcia’s evidence on renewal did not evince medical treatment contemporaneous with the accident, renewal in the interest of justice should have been denied.

The majority takes the untenable position that not only is Garcia’s medical examination, occurring a month after the accident, contemporaneous with her accident, but paradoxically that the report of her surgeon, who did not see plaintiff for the first time until four months after her accident, is sufficient to establish the causal link between Garcia’s knee injury and her accident such that she raised an issue of fact precluding summary judgment in Kanate’s favor. First, if a medical examination occurring one month after an accident is not contemporaneous, then an examination occurring four months after an accident is certainly less so (Mancini v Lali NY, Inc., 77 AD3d 797, 798 [2010] [medical findings made by plaintiff's doctor four months after his accident not sufficiently contemporaneous with the accident to establish a serious injury]); Resek v Morreale, 74 AD3d 1043, 1044-145 [2010] [medical findings made by plaintiff's doctor five months after his accident not sufficiently contemporaneous with the accident to establish a serious injury]). Moreover, even if we assume that this report was temporally contemporaneous with her accident, it was nevertheless bereft of any objective, qualitative, or quantitative evidence of injury to her knee (Blackmon v Dinstuhl, 27 AD3d 241, 242 [2006]; Thompson v Abassi, 15 AD3d 95, 98 [2005]). Second, contrary to the majority’s assertion, the report of Garcia’s orthopedist might have been probative as to her knee injury on the date he performed surgery, but standing alone, his observations on that date could not have been probative as to whether that injury was caused by this accident (see Pommells v Perez, 4 AD3d 101, 101-102 [2004], affd 4 NY3d 566 [2005] [medical opinion as to causation is speculative when the record is bereft of any evidence establishing contemporaneous medical treatment and the doctor proffering opinion sees plaintiff for the first time after a substantial period of time since the accident]; Vaughan v Baez, 305 AD2d 101, 101 (2003); Shinn v Catanzaro, 1 AD3d 195, 198-199 [2003]; Komar v Showers, 227 AD2d 135, 136 [1996]).

The majority relies on two cases in support of its holding, Gonzalez v Vasquez (301 AD2d 438 [2003]) and Rosario v Universal Truck & Trailer Serv., Inc. (7 AD3d 306 [2004]), neither of which bears on the issue of contemporaneous medical treatment and both of which, to the extent that they allow a doctor to establish causation upon an initial examination conducted a substantial time after an accident, are at odds with Vaughan, Shinn, Komar and Pommells.

Footnote 1: Although the records from Dr. Cordaro’s office are unsworn, it is of no moment. The documents are properly certified as business records (see Mayblum v Schwarzbaum, 253 AD2d 380 [1998]; CPLR 4518[a]), and are referenced only to show plaintiff’s complaints and the doctor’s referral rather than a medical opinion about a causal relation to the accident.

Cracchiolo v. Omerza

Friedman, Khafif & Sanchez, LLP, Brooklyn, N.Y. (Emil J.
Sanchez and Andrew M. Friedman of counsel), for appellants.
Cheven, Keely & Hatzis, New York, N.Y. (William B. Stock
of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiffs appeal, as limited by their brief, from so much of an order of the Supreme Court, Richmond County (Maltese, J.), dated February 3, 2010, as granted the defendants’ cross motion for summary judgment dismissing the complaint on the ground that the plaintiffs did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and the defendants’ cross motion for summary judgment dismissing the complaint on the ground that the plaintiffs did not sustain a serious injury within the meaning of Insurance Law § 5102(d) is denied.

Contrary to the Supreme Court’s determination, the defendants failed to meet their prima facie burden of showing that the plaintiffs 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). Based on the inconsistent norms utilized in the findings of the defendants’ examining orthopedist, Dr. Harvey Fishman, as to the range of motion tests for the cervical and thoracolumbosacral regions of the spine of each of the plaintiffs, the defendants failed to establish their prima facie entitlement to judgment as a matter of law (see Frey v Fedorciuc, 36 AD3d 587, 588; Powell v Alade, 31 AD3d 523; see also Corcione v John Dominick Cusumano, Inc., 84 AD3d 1010).

The parties’ remaining contentions either are without merit or have been rendered academic in light of our determination.

Kanarad v. Setter

Richard T. Lau, Jericho, N.Y. (Linda Meisler of counsel), for
appellant.
Mallilo & Grossman, Flushing, N.Y. (Francesco Pomara, Jr.,
of counsel), for respondent.

DECISION & ORDER
In an action, inter alia, to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Suffolk County (Cohalan, J.), dated January 31, 2011, which denied his motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is affirmed, with costs.

The defendant met his 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, 352; Gaddy v Eyler, 79 NY2d 955, 956-957).

However, in opposition, the plaintiff raised a triable issue of fact through the affidavit of his treating chiropractor, Dr. Doug Wright. Dr. Wright concluded, based on his contemporaneous and most recent examinations of the plaintiff, which revealed significant limitations in the cervical and lumbar regions of the plaintiff’s spine, and his review of the plaintiff’s magnetic resonance imaging reports, which showed, inter alia, disc bulges in the cervical and lumbar regions of the plaintiff’s spine, that the plaintiff’s injuries were permanent and the range-of-motion limitations were significant (see Dixon v Fuller, 79 AD3d 1094, 1095; Harris v Boudart, 70 AD3d 643, 644). Dr. Wright further opined that the plaintiff’s cervical and lumbar injuries and observed range-of-motion limitations were causally related to the subject accident (see Harris v Boudart, 70 AD3d at 644).

Therefore, Dr. Wright’s affidavit was sufficient to raise a triable issue of fact as to whether, as a result of the subject accident, the plaintiff sustained a serious injury to the cervical and lumbar regions of his spine under the permanent consequential limitation of use and/or the significant limitation of use categories of Insurance Law § 5102(d) (see Dixon v Fuller, 79 AD3d at 1095; Gussack v McCoy, 72 AD3d 644).
Accordingly, the Supreme Court properly denied the defendant’s motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

Rose v. Arthur J. Gallagher & Co.

Jaspan Schlesinger LLP, Garden City, N.Y. (Steven R. Schlesinger
and Seth A. Presser of counsel), for appellants.

Venable LLP, New York, N.Y. (Edwin M. Larkin of counsel),
for respondents.

DECISION & ORDER

In an action, inter alia, to recover damages for negligence, professional malpractice, and breach of fiduciary duty, the plaintiffs appeal, as limited by their notice of appeal and brief, from so much of an order of the Supreme Court, Nassau County (Warshawsky, J.), entered May 7, 2010, as, upon converting those branches of the defendants’ motion which were to dismiss the third, fourth, fifth, and sixth causes of action of the amended complaint into a motion for summary judgment dismissing those causes of action, granted those branches of the motion which were for summary judgment dismissing the third, fourth, and fifth causes of action in the amended complaint.

ORDERED that the order is affirmed insofar as appealed from, with costs.
This action arises from the alleged failure of the defendants, in their capacity as insurance brokers, to provide the plaintiffs with an accurate quote for the cost of certain insurance coverage. The third, fourth, and fifth causes of action in the amended complaint, which are at issue on this appeal, allege negligence, professional malpractice, and breach of fiduciary duty, respectively. The only issue disputed by the parties is whether the conduct alleged in those three causes of action is governed by Louisiana law or New York law.

The three causes of action in question sound in tort and, thus, contrary to the parties’ contentions, the conflict-of-laws standard that applies in contract-based actions (see Zurich Ins. Co. v Shearson Lehman Hutton, 84 NY2d 309, 317-319) does not apply here. Since the laws alleged to be in conflict—including those regarding the availability of punitive damages, an important purpose of which is deterrence (see Ross v Louise Wise Servs., Inc., 8 NY3d 478, 489) — are of a conduct-regulating nature, the law of the place of the tort applies (see Padula v Lilarn Props. Corp., 84 NY2d 519; Cooney v Osgood Mach., 81 NY2d 66, 72; Schultz v Boy Scouts of Am., 65 NY2d 189, 198; Shaw v Carolina Coach, 82 AD3d 98, 101). In this case, the allegedly negligent quote was requested by the plaintiffs, and provided by the defendants, through e-mail communications that were sent from and received in New York. Thus, the tortious conduct alleged in the amended complaint is governed by New York law. Since the parties charted a procedural course in which the viability of the three causes of action in question depends upon whether they are governed by Louisiana law, the [*2]Supreme Court properly awarded the defendants summary judgment dismissing those causes of action.

OAKES v PATEL

Appeals from a judgment of the Supreme Court, Erie County (Timothy J. Drury, J.), entered December 23, 2009 in a medical malpractice action. The judgment awarded plaintiffs money damages upon a jury verdict.

DAMON MOREY LLP, BUFFALO (AMY ARCHER FLAHERTY OF COUNSEL), FOR DEFENDANT-APPELLANT KALEIDA HEALTH, AS SUCCESSOR IN INTEREST TO MILLARD FILLMORE HOSPITALS, DOING BUSINESS AS MILLARD FILLMORE SUBURBAN HOSPITAL.
ROACH, BROWN, MCCARTHY & GRUBER, P.C., BUFFALO (GREGORY T. MILLER OF COUNSEL), FOR DEFENDANT-APPELLANT SATISH K. MONGIA, M.D.
BROWN & TARANTINO, LLC, BUFFALO (ANN M. CAMPBELL OF COUNSEL), FOR DEFENDANT-APPELLANT RAJNIKANT PATEL, M.D.
LAW OFFICE OF FRANCIS M. LETRO, BUFFALO (RONALD J. WRIGHT OF COUNSEL), FOR PLAINTIFFS-RESPONDENTS.

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

Memorandum: Plaintiffs commenced this medical malpractice action seeking damages for the failure of defendants to diagnose and treat Daniel C. Oakes (plaintiff) for a sentinel bleed from a cerebral aneurysm. Following the first trial, the jury returned a verdict finding, inter alia, that defendants, Rajnikant Patel, M.D., Satish K. Mongia, M.D., and Kaleida Health, as successor in interest to Millard Fillmore Hospitals, doing business as Millard Fillmore Suburban Hospital (Kaleida), were negligent and also that Kaleida was vicariously liable for the negligence of third-party defendant Dent Neurologic Institute (Dent). The jury apportioned fault among defendants and awarded plaintiffs damages in various amounts including, insofar as relevant to this appeal, $1 million to plaintiff for past pain and suffering and $60,000 to plaintiff wife for past loss of services, as well as future damages covering 18 years in the amount of $1 million for plaintiff’s future pain and suffering, $1.8 million for plaintiff’s future supportive living expenses and $150,000 for plaintiff wife’s future loss of services.

Plaintiffs moved to set aside the verdict on damages only based on, inter alia, the ground that certain elements of the award were inadequate. Supreme Court, inter alia, granted the post-trial motion in part and set aside the verdict with respect to damages for past and future pain and suffering, past and future loss of services and future supportive living expenses, and the court ordered a new trial on those elements of damages unless defendants stipulated to an award of $5 million for past pain and suffering and $1.5 million for past loss of services, as well as an award covering 18 years in the amount of $5 million for future pain and suffering, $2 million for future loss of services and $3.9 million for future supportive living expenses.

Also following the jury verdict, Kaleida moved for, inter alia, leave to amend its answer to the amended complaint to include an affirmative defense of release and an affirmative defense pursuant to General Obligations Law § 15-108. According to Kaleida, plaintiffs each executed and filed a proof of claim in a liquidation proceeding in March 2003 against Kaleida’s insurer, PHICO Insurance Company (PHICO), that included a release of claims against any PHICO insured.Kaleida filed its own proof of claim in that proceeding in December 2007 with respect to this action against it and, although the deadline to file proofs of claim in the liquidation proceeding was April 1, 2003, Kaleida averred that it had been advised by PHICO that its proof of claim was timely. Kaleida alleged that it did not receive copies of plaintiffs’ proofs of claim until May 2008, after the conclusion of the first trial, and that the proposed amendments to its answer would not prejudice plaintiffs. The court denied the motion.

Defendants subsequently refused to stipulate to the court’s increased damages, and a new trial on the issue of those damages was conducted. Following the second trial, the jury returned a verdict awarding plaintiff $5.6 million for past pain and suffering and awarding plaintiff wife $1.5 million for past loss of services and society. The jury also awarded future damages covering 17 years in the amount of $4,720,000 for plaintiff’s future custodial care and supportive services, $4 million for plaintiff’s future pain and suffering, and $150,000 for plaintiff wife’s future loss of household services and $750,000 for her future loss of services and society. Defendants thereafter each moved, inter alia, to set aside the verdict on the ground that the award for past and future pain and suffering, past and future loss of services and society and future custodial home care was excessive. Kaleida and Dr. Mongia also contended that they had been prejudiced when the court erred in admitting certain evidence and precluding other evidence, and when plaintiffs’ counsel and the court engaged in inappropriate conduct. The court denied those parts of defendants’ respective motions to set aside the verdict, and this appeal ensued.

We conclude that the court properly denied that part of Kaleida’s motion for leave to amend its answer to the amended complaint to include an affirmative defense of release and an affirmative defense pursuant to General Obligations Law § 15-108. The proofs of claim executed and filed by plaintiffs in the liquidation proceeding with respect to PHICO contained releases with respect to “any and all claims [that] have been or could be made against [a] PHICO insured based on or arising out of the facts supporting the . . . [p]roof of [c]laim up to the amount of the applicable policy limits and subject to coverage being accepted by the Liquidator . . . .” Further, the notice received by plaintiffs in connection with their proofs of claim states that, “[i]f coverage is avoided by the Liquidator, [the] release[s] become[] null and void.” Because Kaleida’s liability for the negligence of Dent is included in the claims specified to PHICO and because PHICO’s liquidators avoided, or announced that they would avoid, coverage of that portion of the claim, plaintiffs’ releases were rendered null and void.

We further conclude that defendants were not denied a fair trial based on the alleged inappropriate conduct of plaintiffs’ counsel or the court. Any improper remarks by plaintiffs’ counsel did not deny defendants a fair trial because ” they did not constitute a pattern of behavior designed to divert the attention of the jurors from the issues at hand’ ” (Kmiotek v Chaba, 60 AD3d 1295, 1296). Furthermore, although certain actions and statements of the court may have been somewhat intemperate or ill-advised, we conclude that, “overall[,] the conduct complained of was not so egregious as to have deprived the [defendants] of a fair trial” (Malaty v North Ark. Wholesale Co., 305 AD2d 556; see Sheinkerman v 3111 Ocean Parkway Assoc., 259 AD2d 480, lv dismissed in part and denied in part 93 NY2d 956).

We further conclude that the jury’s verdict on liability in the first trial is not against the weight of the evidence (see generally Cohen v Hallmark Cards, Inc., 45 NY2d 493, 499), and that the various elements of damages awarded in the second trial do not deviate materially from what would be reasonable compensation (see CPLR 5501 [c]).

Finally, we note our agreement with plaintiffs that the court properly granted those parts of their post-trial motion in the first trial to set aside certain elements of the award of damages as inadequate. With respect to the issue of the additur as raised by the dissent (Peradotto, J.), however, we conclude that, because defendants did not challenge the court’s additur before, during or after the second trial, and did not raise that issue on appeal, no such issue is properly before us. Indeed, the only contentions raised by defendants on appeal in the “argument” sections of their briefs regarding damages are that the court erred in granting in part plaintiffs’ motion to set aside the jury verdict in the first trial on the ground that certain portions of the damages award were inadequate, without addressing the amount of the court’s additur with respect thereto, and that the court erred in denying those parts of their motions seeking to set aside the second verdict on the ground that certain portions of the damages award were excessive. We cannot conclude that, by challenging the court’s order setting aside the first verdict in part, defendants thereby implicitly challenged the amount of the court’s additur (see generally Gerbino v Tinseltown USA, 13 AD3d 1068, 1072). Nor can we agree with our dissenting colleague that references to the amounts of the court’s additur in the factual recitation of defendants’ briefs on appeal constitute challenges to the court’s additur. In any event, even assuming, arguendo, that such challenges are raised in the briefs, they are raised for the first time on appeal and thus are not properly before us (see Ciesinski v Town of Aurora, 202 AD2d 984, 985). We have considered defendants’ remaining contentions with respect to both trials and conclude that they are without merit.

Lindley, Sconiers and Martoche, JJ., concur; Smith, J.P., dissents in part and votes to modify in accordance with the following Memorandum: I respectfully dissent in part, because I cannot agree with the majority that specified elements of the award of damages following the second trial are proper. Initially, I agree with the majority that the issue of the additur, which Justice Peradotto in her dissent asserts must be addressed before we review the excessiveness of the second verdict, is not before us. I also agree with the remainder of the majority’s determination, including that, contrary to defendants’ contention, Supreme Court properly granted those parts of plaintiffs’ post-trial motion to set aside the verdict from the first trial with respect to damages for past and future pain and suffering, past and future loss of services and future supportive living expenses on the ground that the award for those elements of damages “deviates materially from what would be reasonable compensation” (CPLR 5501 [c]).

I agree with defendants, however, that the award after the second trial with respect to damages for past and future pain and suffering, past and future loss of services and future custodial care and supportive services also “deviates materially from what would be reasonable compensation” (id.). Although plaintiff Daniel C. Oakes sustained severe and life-changing injuries, in my view, an award of $2 million for past pain and suffering, $3.5 million for future pain and suffering, $200,000 for past loss of services, $300,000 for future loss of services, and $3 million for future custodial care and supportive services, with all future awards covering 17 years, is the maximum amount that the jury could have awarded as a matter of law based on the evidence at the second trial (see generally Angamarca v New York City Partnership Hous. Dev. Fund, Inc., ___ AD3d ___ [June 21, 2011]; Coque v Wildflower Estates Devs., Inc., 58 AD3d 44, 56; Paek v City of New York, 28 AD3d 207, 208, lv denied 8 NY3d 805; Sawtelle v Southside Hosp., 305 AD2d 659, 660). Therefore, I would modify the judgment by vacating the award with respect to damages for past and future pain and suffering, past and future loss of services and future custodial care and supportive services and grant a new trial on those issues unless plaintiffs stipulate to a reduction of the verdict with respect to those elements of damages as indicated.

Peradotto, J., dissents and votes to modify in accordance with the following Memorandum: I respectfully dissent because, in my view, the majority’s decision improperly fails to address the issue of whether the court’s additur after setting aside the first verdict was appropriate. In my view, any issues concerning the excessiveness of the second verdict should not be addressed unless and until all issues relative to the first verdict are resolved.

As the majority states, plaintiffs commenced this medical malpractice action seeking damages for the failure of defendants to diagnose and treat Daniel C. Oakes (plaintiff) for a cerebral aneurysm. Following the first trial, the jury found that defendants Rajnikant Patel, M.D., Satish K. Mongia, M.D. and Kaleida Health, as successor in interest to Millard Fillmore Hospitals, doing business as Millard Fillmore Suburban Hospital (Kaleida), were negligent and awarded damages in the amount of $5,123,500. As relevant to this appeal, the jury awarded plaintiff $1 million for past pain and suffering, $1 million for future pain and suffering, and $1.8 million for future supportive living expenses, and awarded plaintiff wife $60,000 for past loss of services and $150,000 for future loss of services. The future damages were awarded to cover a period of 18 years. Plaintiffs moved to set aside the verdict on damages only based on, inter alia, the ground that certain parts of the award were inadequate. The court determined that the award for past and future pain and suffering, past and future loss of services and future supportive living expenses deviated materially from what would be reasonable compensation. The court therefore set aside the jury verdict with respect to those categories of damages and ordered a new trial unless defendants stipulated to increase the award to $5 million for past pain and suffering, $5 million for future pain and suffering, $1.5 million for past loss of services, $2 million for future loss of services, and $3.9 million for future supportive living costs, with all future damages awarded to cover a period of 18 years. With that additur, the verdict would have been increased from $5,123,500 to $18,513,500. Defendants rejected the additur and proceeded to a second trial.

On appeal, defendants contend that, inter alia, the court erred in setting aside certain parts of the verdict from the first trial. The order setting aside the first verdict and granting a new trial unless defendants stipulated to an additur of $13.4 million is, of course, brought up for review on this appeal from the judgment entered after the second trial (see CPLR 5501 [a] [1]). The majority, however, does not address all of defendants’ contentions with respect to the verdict after the first trial. Instead, the majority proceeds directly to the claims concerning the verdict after the second trial, concluding that the damages awarded in the second trial are not excessive. That is error. Rather, we must address the propriety of the court’s order setting aside parts of the verdict following the first trial and the appropriateness of the court’s additur before addressing any issues raised with respect to the second trial (see generally Sherry v North Colonie Cent. School Dist., 39 AD3d 986; Zeigler v Neely, 220 AD2d 345; Libman v McKnight, 204 AD2d 856, lv denied 84 NY2d 812).

In my view, the court properly set aside the award for past and future pain and suffering, past and future loss of services and future supportive living expenses inasmuch as the award with respect to those categories of damages deviated materially from what would be reasonable compensation (see CPLR 4404 [a]). I conclude, however, that the court’s additur with respect to the noneconomic damages was excessive (see generally Perlin v King, 36 AD3d 495; Rivera v Lincoln Ctr. for Performing Arts, Inc., 16 AD3d 274; Carlos v W.H.P. 19, 301 AD2d 423), inasmuch as the amounts set by the court did not represent “the minimum amount[s] that the jury could have found as a matter of law based on the evidence at trial” (Camacho v Rochester City School Dist., 20 AD3d 916; see Kmiotek v Chaba, 60 AD3d 1295, 1297; Orlikowski v Cornerstone Community Fed. Credit Union, 55 AD3d 1245, 1247, lv dismissed 11 NY3d 915; see generally Siegel, NY Prac § 407, at 689 [4th ed]). That is the applicable standard because “the amount of damages to be awarded is primarily a question of fact [and] . . . considerable deference should be accorded to the interpretation of the evidence by the jury” (Marshall v Lomedico, 292 AD2d 669, 670 [internal quotation marks omitted]). Further, the successful litigants are “entitled to the benefits of a favorable jury verdict” (Keyser v KB Toys, Inc., 82 AD3d 713, 714; see McDonald v 450 W. Side Partners, LLC, 70 AD3d 490, 491-492). In the context of plaintiffs’ motion to set aside the damages award as inadequate, it is the defendants who are entitled to that benefit. In my view, $5 million each for past and future pain and suffering and $3.5 million total for past and future loss of services are simply not “the minimum amounts the jury could have awarded as a matter of law based on the evidence at trial” (Kmiotek, 60 AD3d at 1297; see generally Doviak v Lowe’s Home Ctrs., Inc., 63 AD3d 1348). Defendants therefore were deprived of the opportunity to stipulate to an appropriate additur with respect to the award for past and future pain and suffering and past and future loss of services, and that error is not cured by a second trial on those categories of damages. Indeed, this is not a case in which defendants made the strategic decision not to accept an appropriate additur and to proceed at their peril. Thus, defendants should be afforded the opportunity to stipulate to a proper additur in the context of this appeal (see generally Perlin, 36 AD3d at 495; Rivera, 16 AD3d 274; Carlos, 301 AD2d 423). I would therefore modify the judgment accordingly.

The majority concludes that the additur issue is not properly before us because defendants “did not challenge the court’s additur before, during or after the second trial, and did not raise that issue on appeal.” I disagree. In opposition to plaintiffs’ motion to set aside the verdict on damages only after the first trial, defendants contended that the verdict should stand because the award did not deviate materially from what would be reasonable compensation. That contention necessarily encompasses the argument that an additur in any amount would be inappropriate. When the court granted plaintiffs’ motion in part, set aside the verdict with respect to certain elements of damages and ordered a new trial on those elements unless defendants stipulated to an additur of more than $13 million, defendants rejected the proposed additur and proceeded to a second trial. I cannot agree with the majority that, in addition to opposing plaintiffs’ motion and rejecting the proposed additur, defendants were somehow required to further “challenge” the amount of the additur in order to preserve the issue for our review. Throughout their briefs on appeal, defendants assert not only that the court erred in setting aside the verdict after the first trial, but they also contend that the court’s additur was excessive. Kaleida, for example, states in its brief that it “declined to stipulate to the inordinate additur,” noting that the court “ordered a five-fold increase in [plaintiff]‘s award for pain and suffering, more than doubled [plaintiff]‘s award for supportive living expenses, and increased [plaintiff wife]‘s award for loss of consortium by a factor of more than 15.” Dr. Mongia similarly notes in his brief that “[t]he trial court’s additur was more than four times the amount awarded by the jury as to the particular [elements] of damage[s] it felt to be inadequate.” I thus conclude that the issue whether the additur was excessive is properly preserved for our review.

I take no position with respect to the majority’s determination that the various elements of damages awarded in the second trial do not deviate materially from what would be reasonable compensation because, in my view, that issue should not be reached until all issues with respect to the first trial have been resolved. I also take no position with respect to defendants’ contention that the court erred in precluding the admission of evidence relative to medical causation in the second trial, a contention that the majority does not address.

In re Liquidation of Midland Insurance Company Everest Reinsurance Company
Budd Larner, P.C., New York (Joseph J. Schiavone of counsel),
for appellant-respondent.
Simpson Thacher & Bartlett, LLP, New York (Barry R.
Ostrager of counsel), for Swiss Reinsurance America Corporation, GE
Reinsurance Corporation and Westport Insurance Corporation,
and Hogan Lovells US LLP, New York (Sean Thomas Keely of
counsel), for Clearwater Insurance Company, Metropolitan
Group Property and Casualty Insurance Company, and Allianz
S.p.A., respondents-appellants.
David Axinn, New York, for James J. Wrynn, respondent-
appellant.
Nixon Peabody LLP, Boston, MA (Joseph C. Tanski, of the bar
of the State of Massachusetts, admitted pro hac vice, of
counsel), and Nixon Peabody LLP, New York (Barbara A. Lukeman
of counsel), for California Insurance Guarantee Association,
Connecticut Insurance Guaranty Association, District of
Columbia Insurance Guaranty Association, Georgia Insurers
Insolvency Pool, Maine Insurance Guaranty Association,
Massachusetts Insurers Insolvency Fund, Mississippi Insurance
Guaranty Association, New Hampshire Insurance Guaranty
Association, Rhode Island Insurers Insolvency Fund, Texas Property
& Casualty Insurance Guaranty Association, Vermont Property
and Casualty Insurance Guaranty Association, and Virginia
Property and Casualty Insurance Guaranty Association,
respondents-appellants.
Shapiro, Rodarte & Forman LLP, Santa Monica, CA (Cindy F.
Forman of counsel), for Baxter International Inc., respondent.

Order, Supreme Court, New York County (Michael D. Stallman, J.), entered on or about January 15, 2008, which denied the motions of Everest Reinsurance Company to modify an anti-suit injunction and to vacate an order, same court and Justice, entered on or about November 8, 2006, and modified a claims allowance procedure order, same court (Beverly S. Cohen, J.), entered January 31, 1997, unanimously affirmed, without costs. Order, same court (Michael D. Stallman, J.), entered June 2, 2009, which set forth certain procedures for the allowance of claims against Midland Insurance Company, unanimously affirmed, without costs.

By order entered on or about April 3, 1986, Supreme Court (Thomas J. Hughes, J.) placed Midland Insurance Company in liquidation and permanently enjoined the commencement and prosecution of all actions against it (see Insurance Law § 7419[b]). Everest Reinsurance Company entered into excess of loss reinsurance treaties and facultative reinsurance certificates with Midland for policy periods in the 1970s and 1980s (collectively, the reinsurance contracts)[FN1]. Claiming that its contractual rights were not being honored, Everest moved the court for an order modifying the injunction so as to permit an action by Everest for a judgment declaring its rights as well as those of the liquidator under the reinsurance contracts. Everest sought leave to sue for a judgment declaring that the liquidator breached the reinsurance contracts by failing to provide Everest with (a) proper information regarding claims, (b) an opportunity to participate in settlement negotiations with Midland policyholders and (c) an opportunity to participate in the claim allowance process. The relief Everest would have wanted to seek in its action was a declaration that it was not required to provide reinsurance for claims affected by the foregoing alleged breaches and a further declaration that Everest has the right to interpose defenses in the liquidator’s settlement negotiations and claims allowance processes. On this appeal, Everest argues that the court committed error in denying its motion to modify the injunction.

Insurance Law § 7419(b) vests a liquidation court with broad authority to issue injunctions as it deems necessary to prevent interference with the liquidator or the proceeding, or the waste of the insurer’s assets. Accordingly, a court has the unquestioned authority to vacate an anti-suit injunction in the interest of justice (see Matter of Bean, 207 App Div 276, 280 [1923], affd 238 NY 618 [1924]). A motion for such relief is addressed to the sound discretion of the court (see Rosemont Enters. v Irving, 49 AD2d 445, 448 [1975]). One claiming error in the exercise of a court’s discretion has the burden of showing an abuse of such discretionary power (id.). Everest correctly cites Matter of Bean v Stoddard (207 App Div 276 [1923], affd 238 NY 618 [1924]) for the proposition that in a liquidation proceeding a court may vacate an injunction in the interest of justice. “The phrase interest of justice’ implies conditions which assist, or are in aid of or in the furtherance of, justice [and] bring about the type of justice which results when the law is correctly applied and administered’ after consideration of the interests of both the litigants and society” (Hafkin v N. Shore Univ. Hosp., 279 AD2d 86, 90 [2000], affd 97 NY2d 95 [2001][citations omitted]).

In making its determination, the court found that Everest did not establish a likelihood of its success in proving that the liquidator violated its contractual investigation and interposition rights by refusing to allow Everest to participate in the allowance, disallowance and settlement of claims prior to their submission to the court. The court further noted that Everest will suffer no injury until it is called upon to make payment on claims that the liquidator allows and the court has approved. The court also recognized the public interest in the single management of a liquidation that Insurance Law § 7419(b) is intended to protect. Hence, we conclude that the court gave due consideration to the interest of justice in denying Everest’s motion for an order vacating the anti-suit injunction. Although the court misstated Everest’s burden on the motion to be proof by a preponderance of the evidence, we also find no abuse of discretion on the basis of the foregoing factors considered by the court.[FN2]

We reject Everest’s argument that the court erroneously held that Everest’s right to interpose defenses attaches only after the liquidator has allowed a claim. Under Insurance Law § 1308(a)(3), a reinsurance agreement may provide that where a claim is pending during an insurer’s insolvency proceeding the reinsurer “may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defenses which it deems available to the ceding company, its liquidator, receiver or statutory successor.” Moreover, Insurance Law § 7432 and § 7433 provide for the processing of claims by the liquidator while § 7434(a)(1) contemplates the payment of claims upon the recommendation of the liquidator under the direction of the court. Hence, claims are adjudicated after they have been filed with the court.

Everest’s claim of a right to interpose defenses at the commencement of a liquidation proceeding is also at odds with the very nature of reinsurance. Even where there is reinsurance, primary insurers are solely responsible for the investigation and defense of claims (see Unigard Sec. Ins. Co. v North Riv. Ins. Co., 79 NY2d 576, 583 [1992]). “The reinsurer does not assume liability for losses paid . . .; its only obligation is to indemnify the primary insurer (Matter of Midland Ins. Co., 79 NY2d at 258). The reinsurance contracts involved here contain typical “follow the settlements” or “follow the fortunes” provisions which leave reinsurers little room to dispute the primary insurers’ claims handling (Unigard at 583). By operation of a “follow the settlements” clause, a reinsurer is bound by the settlement or compromise of a claim agreed to by a cedent unless it can show impropriety in arriving at the settlement (Excess Ins. Co. Ltd. v Factory Mut. Ins. Co., 3 NY3d 577, 583 n 3 [2004]). The reinsured’s liability determinations are insulated from the reinsurer’s challenge ” unless they are fraudulent, in bad faith, or the payments are clearly beyond the scope of the original policy or in excess of [the reinsurer's] agreed-to exposure’” (Allstate Ins. Co. v Am. Home Assur. Co., 43 AD3d 113, 121 [2007], quoting North Riv. Ins. Co. v Ace Am. Reins. Co., 361 F3d 134, 140 [2d Cir 2004], lv denied 10 NY3d 711 [2008][internal quotation marks and citation omitted]). We are, therefore, not persuaded by Everest’s argument that a reinsurer’s right to investigate claims and interpose defenses attaches with the commencement of a liquidation proceeding and even before the liquidator has decided to allow a claim.

We also reject Everest’s claim that the court lacked the authority to order a reference for hearings before a referee on defenses to be interposed by the reinsurers. Since 1994, objections to the liquidator’s recommendations for the denial of policyholders’ claims in this proceeding have been referred to a referee to hear and report (see Matter of Midland Ins. Co., 71 AD3d 221, 223 [2010], revd on other grounds 16 NY3d 536 [2011]). The court’s January 15, 2008 order provides for “a process in which [the reinsurers'] defenses can be adjudicated as part of the judicial approval process, involving a hearing before a referee equivalent to that provided where an objection is filed to the liquidator’s disallowance of a claim.” Accordingly, the court set up a mechanism for a referee to hear and report to the court on the reinsurers’ defenses. CPLR 4001 enables a court to “appoint a referee to determine an issue, perform an act, or inquire and report in any case where this power was heretofore exercised and as may be hereafter authorized by law.” The statute carries over the appointment powers exercised by courts “traditionally” or under prior law (Siegel, Practice Commentaries [McKinney's Cons Laws of NY, Book 7B, CPLR C4001:1]). CPLR 4001 became effective in 1962 (L 1962, ch 308). Courts exercised the power to appoint referees to hear and report in liquidation proceedings prior to that time (see e.g. Matter of Natl. Sur. Co., 286 NY 216 [1941]) and since (see e.g. Matter of Union Indem. Ins. Co., 67 AD3d 469 [2009], lv denied 14 NY3d 859 [2010]; Matter of Midland Ins. Co. of New York, 269 AD2d 50 [2000]). We, therefore, find the court’s appointment of a referee to hear and report with respect to the reinsurers’ defenses to be within the proper exercise of the court’s powers pursuant to CPLR 4001. Also, contrary to the arguments of Everest and the other reinsurers, their rights to issue subpoenas and conduct discovery have not been foreclosed. Such matters are within the discretion of a referee to hear and report (see CPLR 4201).

The court properly denied Everest’s motion for an order precluding the liquidator and Midland’s policyholders from introducing evidence of settlements entered into by Everest as a direct insurer in other proceedings. The proffered evidence is relevant inasmuch as it is offered to refute Everest’s claims by showing that Everest, as a direct insurer in other proceedings, utilized the claims handling methodology it seeks to challenge as a reinsurer in this proceeding. Everest’s reliance on CPLR 4547 is misplaced because the disputed evidence is not offered “as proof of liability for or invalidity of any claim” (id.). Moreover, the statute does not limit the admissibility of evidence offered for another purpose (id.).

The guaranty associations that have appeared in this proceeding assert that the court’s order is erroneous to the extent that it allows a reinsurer to interpose defenses as to claims settled by the liquidator or claims the liquidator is bound by law to approve. The guaranty associations essentially argue that article 74 of the Insurance Law, which governs liquidation, trumps Insurance Law § 1308, which applies to reinsurance. We reject the guaranty associations’ argument on the ground that liquidation cannot place a liquidator in a position different from that in which the insolvent insurer would have found itself but for the liquidation (see Matter of Midland Ins. Co., 79 NY2d at 264-265).[FN3]

We reject the liquidator’s argument that the claims procedures set forth in the June 2, 2009 order are inefficient insofar as they allow the reinsurers to interpose defenses at the claims allowance stage. On the contrary, the court’s procedure provides a useful mechanism for the disposition of the reinsurers’ defenses during liquidation or in a subsequent action
brought by the liquidator. We have considered the parties’ remaining contentions and find them unavailing.

THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: AUGUST 25, 2011
CLERK
Footnotes

Footnote 1:“A reinsurance contract is one by which a reinsurer agrees to indemnify a primary insurer for losses it pays to its policyholders” (Matter of Midland Ins. Co., 79 NY2d 253, 258 [1992]). In exchange for the agreement to indemnify, the primary insurer “cedes” part of the premiums for its policies and the losses on those policies to the reinsurer (id.). A facultative insurance agreement is one issued to cover a particular risk while treaty reinsurance is obtained in advance of actual coverage and may apply to any risk the primary insurer covers (id.).

Footnote 2: Here the court relied on Icy Splash Food & Beverage, Inc. v Henckel (14 AD3d 595 [2005]), a case that is distinguishable because it involves the standard of proof on a trial as opposed to a motion.

Footnote 3: The appendices before this Court are insufficient to enable us to pass on the guaranty associations’ assertion that the liquidator is bound by the settlements of the associations’ claims. We note that the issue was not addressed by the court below and the liquidator states in its brief that it was first raised by the guaranty associations on a motion for leave to reargue. k of the Court
Decided and Entered: August 18, 2011

511319
FRANCO v TOWN OF CAIRO

Calendar Date: May 25, 2011
Before: Mercure, J.P., Rose, Lahtinen, Kavanagh and Garry, JJ.

Freeman Howard, P.C., Hudson (Andrew B. Howard
of counsel), for appellant.
Shantz & Belkin, Latham (Derek L. Hayden of
counsel), for Town of Cairo, respondent.
Law Office of Theresa Puleo, Albany (Norah M.
Murphy of counsel), for County of Greene, respondent.
MEMORANDUM AND ORDER

Lahtinen, J.
Appeal from an order of the Supreme Court (Teresi, J.), entered August 30, 2010 in Greene County, which denied petitioner’s application pursuant to General Municipal Law § 50-e (5) for leave to file a late notice of claim.

In December 2009, petitioner fractured her ankle when she allegedly fell on ice while walking on a sidewalk adjacent to Main Street, near Living Structures Realty and the Cairo Public Library, in the Town of Cairo, Greene County. In June 2010, she made this application for leave to serve a late notice of claim upon respondents. Supreme Court denied the motion finding that petitioner failed to establish that respondents had knowledge of the accident within 90 days, set forth a reasonable excuse for her delay and demonstrate a lack of prejudice to respondents. Petitioner appeals.

The 90-day notice requirement of General Municipal Law § 50-e is intended “to provide the municipality with the opportunity to investigate the alleged defective condition in a timely fashion and assess the merits of the claim, not to avoid liability” (Williams v City of New York, 229 AD2d 114, 116 [1997]). Supreme Court is accorded discretion in determining whether to grant leave to serve a late notice of claim and the well-recognized nonexhaustive list of relevant factors include actual knowledge of the respondent, reasonable excuse of the petitioner, and prejudice to the respondent caused by the delay (see Matter of Hayes v Delaware-Cananga-Madison-Otsego Bd. of Coop. Educ. Servs., 79 AD3d 1405, 1405 [2010]; Kirtley v Albany County Airport Auth., 67 AD3d 1317, 1318-1319 [2009]). Although we agree with Supreme Court that petitioner did not establish a reasonable excuse for the delay, petitioner sufficiently set forth the factors of knowledge by respondents of the accident and a lack of prejudice. Employees of respondents were summoned to the scene to assist petitioner, who was immobile and still positioned at the place where she had fallen when they arrived. Knowledge may be imputed to a municipality where its employees discern more than merely generalized awareness of an accident and injuries from their presence at an accident site (see Matter of Schwindt v County of Essex, 60 AD3d 1248, 1249-1250 [2009]; Matter of Dewey v Town of Colonie, 54 AD3d 1142, 1143 [2008]; cf. Matter of Curiel v Town of Thurman, 289 AD2d 737, 738 [2001], lv denied 97 NY2d 611 [2002] [knowledge not imputed where causes of accident and connection to potential negligence were not apparent to employees at the scene]).

Here, police and emergency medical personnel were present and a written report was generated that specifically referenced the ice that allegedly caused petitioner to fall (see Matter of Dewey v Town of Colonie, 54 AD3d at 1143). The report states that petitioner was lying along the sidewalk and that she indicated she had fallen because of built up ice at such location. The potential serious nature of her injury was evident not only from her immobility, but also, as related in the report, from the fact that she was crying and believed that she had broken her ankle. Moreover, less than two months after the accident, a law firm sent a letter to the Cairo Public Library regarding petitioner’s accident and requested that the letter be forwarded to the liability insurance carrier. There is sufficient evidence of actual knowledge and an opportunity to investigate within the 90 days after the accident. Accordingly, respondents were not substantially prejudiced by the delay of about three months beyond the initial 90 days (see Matter of Sutton v Town of Schuyler Falls, 185 AD2d 430, 432 [1992]; see also Matter of Hayes v Delaware-Cananga-Madison-Otsego Bd. of Coop. Educ. Servs., 79 AD3d at 1405-1406; Rosenblatt v City of New York, 160 AD2d 927, 927-928 [1990]).

Respondents’ contention that the proposed action is meritless because there was no prior written notice of the condition may ultimately be a ground for summary judgment depending on what disclosure reveals, but is insufficient on this record to serve as a ground to deny the application to serve a late notice of claim (see Miller v County of Sullivan, 36 AD3d 994, 996-997 [2007]). In light of the circumstances set forth in the record, including the proof of knowledge of respondents of the accident and the lack of prejudice, petitioner’s application should have been granted (see Matter of Ruperti v Lake Luzerne Cent. School Dist., 208 AD2d 1146, 1147 [1994]; Matter of Esposito v Carmel Cent. School Dist., 187 AD2d 854, 855 [1992]; see also Matter of Welch v Board of Educ. of Saratoga Cent. School Dist., 287 AD2d 761, 763-764 [2001]).

Mercure, J.P., Kavanagh and Garry, JJ., concur.

Rose, J. (dissenting).
I respectfully dissent. I cannot agree with the majority that petitioner sufficiently established that respondents acquired actual knowledge of the essential facts of the claim within 90 days of the accident. Although a Town of Cairo police officer responded to the scene and generated a police accident report, the content of that report is vague and ambiguous in describing the location of the accident, indicating that petitioner fell “on the ground due to ice that was built up along the sidewalk at the entrance of the driveway” to a private real estate office. It does not say that she fell on the sidewalk or that the ice was built up on the sidewalk. In short, the police report does not put respondent Town of Cairo on notice of petitioner’s claim that negligent maintenance of the Town’s sidewalk caused her to fall (see Kirtley v Albany County Airport Auth., 67 AD3d 1317, 1318-1319 [2009]; Matter of Curiel v Town of Thurman, 289 AD2d 737, 738 [2001], lv denied 97 NY2d 611 [2002]; Matter of Leiblein v Clark, 207 AD2d 348, 350 [1994]). The letter sent by petitioner’s attorney to the Cairo Public Library is also insufficient to provide notice as it only mentions the accident date but gives no indication of the location, manner or cause of the accident. Nor does it offer any clarification or amplification to the police report. Instead, it confuses the issue of where this accident occurred by implying that it occurred at the Library. Furthermore, there is no indication of any connection between the Library and the Town.

Matter of Dewey v Town of Colonie (54 AD3d 1142 [2008]), relied upon by the majority, is distinguishable. The municipality in that case had actual knowledge of the claim based on a police accident report containing sufficient detail of the essential facts of the claim as well as Freedom of Information Law requests made by the petitioners and their attorneys to the municipality’s police department and its attorney (id. at 1143). Here, there is only an ambiguous police accident report and a letter to the Library that does not include any detail about the accident.

Also, there is no evidence that respondent County of Greene acquired actual knowledge of the essential facts of the claim. The mere presence of a County medic at the scene of the accident is insufficient to satisfy the requirement of actual knowledge (see General Municipal Law § 50-e [5]; Matter of Crocco v Town of New Scotland, 307 AD2d 516, 517 [2003]). Nor is there any indication in the record that the medic generated a report that would put the County on notice of the accident, its cause or any basis upon which the County could be said to be negligent.

Given the lack of evidence that respondents had knowledge of the essential facts of the claim within 90 days, and petitioner’s lack of any reasonable excuse for the delay in filing a notice of claim, I can find no abuse of discretion in Supreme Court’s denial of the application to file a late notice of claim and, accordingly, would affirm the order (see Matter of Devivo v Town of Carmel, 68 AD3d 991, 992 [2009]; Matter of Jensen v City of Saratoga Springs, 203 AD2d 863, 864-865 [1994]; Caselli v City of New York, 105 AD2d 251, 260 [1984]).
ORDERED that the order is reversed, on the law, with costs, and application granted.

GPH Partners, LLC v. American Home Assurance Company

Ahmuty, Demers & McManus, Albertson (Brendan T.
Fitzpatrick of counsel), for appellant.
Coughlin Duffy, LLP, New York (Justin N. Kinney of counsel),
for respondent.

Order, Supreme Court, New York County (Milton A. Tingling, J.), entered January 26, 2010, which granted defendant-insurer, Admiral Insurance Company’s (Admiral) motion for summary judgment declaring that it had no duty to defend or indemnify plaintiff with regard to the underlying personal injury action, unanimously reversed, on the law, with costs, the motion denied, and it is declared that defendant Admiral had a duty to indemnify plaintiff in the underlying action.

Supreme Court erred by considering only the language of the subject policy’s wrap-up exclusion, without also examining whether Admiral timely asserted such exclusion as a basis for its disclaimer. “A disclaimer is unnecessary when a claim does not fall within the coverage terms of an insurance policy . . . [but] a timely disclaimer pursuant to Insurance Law § 3420 (d) is required when a claim falls within the coverage terms but is denied based on a policy exclusion” (Markevics v Liberty Mut. Ins. Co., 97 NY2d 646, 648-649 [2001] [citations omitted]; A. Serdivone, Inc. v Commercial Underwriter’s Ins. Co., 7 AD3d 942, 943-44 [2004], lv dismissed 3 NY3d 701 [2004]).

“[T]imeliness of disclaimer is measured from the time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage” (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 68-69 [2003]). Thus, where an insurer “becomes sufficiently aware of facts which would support a disclaimer,” the time to disclaim begins to run, and the insurer bears the burden of explaining any delay in disclaiming coverage (see Hunter Roberts Constr. Group, LLC v Arch Ins. Co., 75 AD3d 404, 409 [2010]). Where the basis for the disclaimer was, or should have been, readily apparent before onset of the delay, the insurer’s explanation for its delay fails as a matter of law (id.). Even where the basis for disclaimer is not readily apparent, the insurer has a duty to promptly and diligently investigate the claim (see Those Certain Underwriters at Lloyds, London v Gray, 49 AD3d 1, 3 [2007]; City of New York v Welsbach Elec. Corp., 49 AD3d 322, 323 [2008]).

Admiral’s May 1 and May 15, 2007 disclaimers were untimely as a matter of law. Via [*2]January 2007 emails, Admiral was on notice of plaintiff’s claim for coverage. Grounds for disclaimer based on either delay in notice of the occurrence or the wrap-up exclusion should have been readily apparent to Admiral in January 2007, and, even if they were not, at a minimum, Admiral should have started an investigation at that time. Admiral’s position that it only learned that plaintiff was making a coverage request via its attorney’s April 23, 2007 letter requesting “confirmation” of coverage, and that it could not have known about the existence of the wrap-up policy until May 10, 2007, is not borne out by the record.

We have considered Admiral’s remaining contentions and find them unavailing.
The Decision and Order of this Court entered herein on May 12, 2011 is hereby recalled and vacated (see M—2757 decided simultaneously herewith).