Source: https://www.hurwitzfine.com/news/coverage-pointers-volume-xiii-no-7
Timestamp: 2019-09-19 06:40:17
Document Index: 162264335

Matched Legal Cases: ['§ 200', '§ 349', '§ 240', '§ 240', '§ 200', '§2101', '§2101', '§2101', '§2101', '§243', '§ 349', '§ 349', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 3420', '§ 3420', '§ 202', '§ 202', '§ 240', '§ 241', '§ 23', '§ 200', '§ 240', '§ 23', '§ 23', '§ 241', '§ 200']

Coverage Pointers - Volume XIII, No. 7 | Hurwitz & Fine, P.C.
Coverage Pointers - Volume XIII, No. 7
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.
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 [email protected]
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
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 [email protected].
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!
In This Week’s Edition, Attached:
Court Allocates Sexual Abuse Coverage Over Multiple Policy Periods on Pro Rata Basis
PAUL’S MUNICIPAL LAW POINTERS
Port Authority Entitled to Protection Under Doctrine of Governmental Immunity for 1993 World Trade Center Bombing
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
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
Claim Made Within Statute of Limitations Based Upon Claims Alleged in Complaint
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
OGC Opinion 11-08-03
OGC 11-08-04
Does Insurer Have a Duty to Defend Antitrust Action Under Policy’s Coverage for “Personal and Advertising Injury”?
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
Calling Your Attorney Can Be a Good Thing
09/20/11 Roman Catholic Diocese v. National Union Fire Ins. Co.
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.
09/22/11 Matter of World Trade Ctr. Bombing Litig.
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.
09/20/11 Bonilla v. Locicero
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
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
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
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
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.
09/27/11 Applicant v. Respondent
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.
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
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
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.
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
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.
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.
09/16/11 Vincent Med. Services, PC a/a/o Rony Delmas v. New York Cent. Mut. Fire Ins. Co.
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.
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.
09/22/11 Morris v. City of New York
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
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.
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.
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.
09/19/11 Trailer Bridge Inc. v. Illinois National Insurance Company
Eleventh Circuit Court of Appeals – Florida
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.
09/14/11 Spinner v. Phoenix Ins. Co.
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.
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.
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
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.
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.
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.
09/14/11 Shattuck v. Kalispell Regional Medical Center, Inc.
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)
Bonilla v. Locicero
Siben & Siben, LLP, Bay Shore, N.Y. (Alan G. Faber of
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).
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
McCabe & Mack LLP, Poughkeepsie, N.Y. (Kimberly Hunt
Lee of counsel), for respondents.
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).
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.).
Khaimov v. Jing Fan
Robert P. Tusa, Garden City, N.Y. (Lewis Johs Avallone Aviles,
LLP [Seth M. Weinberg], of counsel),
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.
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
Raymond J. Pezzoli, Staten Island, N.Y., for respondents.
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
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
Wilson, Elser, Moskowitz, Edelman & Dicker, LLP,
New York (William F. Cusack and Ricki E. Roer of
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.
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.
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
Arnold E. DiJoseph, P.C., New York (Arnold E. DiJoseph, III of
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]).