Source: https://www.hurwitzfine.com/news/coverage-pointers-volume-ix-no-3
Timestamp: 2019-09-19 06:39:56
Document Index: 708534487

Matched Legal Cases: ['§ 3420', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§65', '§65', '§7511', '§7511', '§ 5102', '§ 3', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§3212', '§3212', '§3126', '§3212', '§3212', '§3212', '§3212', '§3212', '§3212', '§3212']

Coverage Pointers - Volume IX, No. 3 | Hurwitz & Fine, P.C.
Coverage Pointers - Volume IX, No. 3
I read the new Harry Potter book. Loved it. Just thought I'd pass that along. Most would not have imagined that Harry Potter's greatest dream was to be a coverage lawyer and that Hogwarts in parseltongue (the language by which one communicates with serpents) means "Duty to Defend." Surely that ending didn't surprise me! Oh, sorry to spoil it for you.
Program announcement: I'll be a speaker at the DRI Insurance Coverage and Practice Symposium in New York City on December 13th and 14th. Registration material is available on the DRI website, www.dri.org . I'll be speaking on two topics. The first is the insured's duty to cooperate under a liability policy, the program being entitled: Can't We All Just Get Along - The Insured's Duty to Cooperate Under a Liability Policy. The second presentation, along with Bob Peahl from AIG, is entitled, The State of the Relationship - 2007 and reviews a recent FDCC survey examining the challenges of the insurer-defense counsel interface.
OK, on to the news ...
The governor vetoed one bill, but another is being proposed, as we speak.
Just when you think it's safe to walk the streets, after the Governor's veto of the prejudice and standing bill, we are warning you that there are meteors heading this way. Read on, under Legislative Update. It's only just begun .
First of all, on the judicial side, the courts continue on summer recess, with very, very few appellate decisions being released over the past two weeks. We offer you what's there, a whopping seven appellate decisions, five of which are in the Starosielec "serious injury" column and two from your editor (who struggled to find anything upon which to report).
But while those judicial cats are away, the Insurance Department can (and is) playing.
Legislative Update and Very Significant Insurance Department Proposal
As you are aware from our "Special Edition," S6306, the bill which would have added a prejudice requirement to disclaimers by liability carriers based on late notice of claim and permits "claimants" to commence declaratory judgment actions against liability carrier before securing judgments against the insured was vetoed by the Governor. Accordingly, the status quo remains - a demonstration of prejudice is not required for late notice disclaimers and claimants still cannot commence declaratory judgment actions.
However, here's the flash news, for those who haven't seen it. This issue contains the full text and a detailed, section-by-section analysis of (what we understand to be) the Insurance Department's proposed amendments to the Insurance Law provisions regarding liability insurance, the August 3rd draft. I just received my copy of that draft today and my summary, created as I read the proposal for the first time, runs about six pages in length. It deserves very close reading. It must be very carefully considered and substantial changes to this proposal need to be considered.
Audrey Seeley, the undisputed Queen of No Fault, offers these greetings:
In reviewing recent cases for my column I am noticing a SUBSTANTIAL decrease in the amount of litigated matters downstate. This could be attributed to a few things - 1. It's summer; 2. Based upon the state of the case law there are more and more settlements; or 3. Plaintiffs are moving toward arbitration. I am keeping my eye on this in the coming months.... I can tell you that I have seen more and more arbitrations upstate recently.
One decision from the Appellate Term of the 2d Department Appellate Division caught my attention. It was an interesting discussion and almost a discouragement to anyone seeking to vacate a Master Arbitrator's award. The standard under CPLR 7511 is a difficult one to meet if you are trying to vacate an arbitration award, particularly in no-fault. I throw out for discussion - if providers are turning back toward arbitration, could this be coming out now to curb a potential onslaught of petitions to vacate an award that did not go in the provider's favor.
OK, on the appellate front, we have these decisions
Questionable Loan Transactions Leads by Liquidating Carrier Leads to Trouble
Conditions Precedent Under Performance Bond Appear to be Satisfied
Jury: While Defendant Caused Accident, Plaintiff Did Not Sustain A Serious Injury
Unsworn, Uncertified Reports Undoes Lower Court Order Which Had Denied SJ Motion
Try, Try Again: Defendants' Appeal of Order of Trial Court's SJ Denial is Affirmed
Defense Doctors' Findings of ROM Limitations Squashes Summary Judgment Hopes
Carpel Tunnel Syndrome Can Be Considered a Serious Injury But Not Here
Hosting the Place for Conducting Electrodiagnostic Testing Alone Does Not Entitle Provider to Bill for Service It Never Provided
Multiple Re-Evaluations of Applicant Regarding Necessity for Physical Therapy Properly Support Insurer's Basis for Denial
Vacation of a Master Arbitration Award Under CPLR Article 75 Denied to Applicant
Question of Fact as to Whether a Fire was the Proximate Cause of Property Damage Arising From the Subsequent Cleanup
Plaintiff Homeowners Who Sued Their Insurers, Alleging Their Homes Were Totally Destroyed In Hurricanes Katrina And/Or Rita, Appeal District Court's Order Granting Defendant-Insurers' Motions To Dismiss And/Or Motions For Judgment On The Pleadings, Concluding That Louisiana's Value Policy Law Does Not Apply When A Total Loss Does Not Result From A Covered Peril
Anyway, stay in touch and let's hope for a long, hot summer.
As you are aware from our “Special Edition,” S6306, the bill which would have added a prejudice requirement to disclaimers by liability carriers based on late notice of claim and permits “claimants” to commence declaratory judgment actions against liability carrier before securing judgments against the insured was vetoed by the Governor. Accordingly, the status quo remains – a demonstration of prejudice is not required for late notice disclaimers and claimants still cannot commence declaratory judgment actions.
However, here’s the flash news, for those who haven’t seen it. What follows is (what we understand to be) the Insurance Department’s proposed amendments for consideration by the Legislature, the August 3rd draft. It deserves close reading. The underscored portions of the proposal constitutes new language and [bracketed words signify deletions].
Our comments (as Editor’s Notes) follow each proposed change:
AN ACT to amend the insurance law, in relation liability insurance policies.
§ 3420. Liability insurance; standard provisions; right of injured person.
Section 1. Subsection (a) of section 3420 of the insurance law is amended to read as follows:
Editor’s Note: Section 3420 of the Insurance Law applies to all liability policies that provide protection for bodily injury or property damage claims. Thus, these changes would affect homeowners, auto, CGL and virtually any other kind of liability policy where such claims might be covered.
(a) No policy or contract insuring against liability for injury to person, except as provided in subsection (g) hereof, or against liability for injury to, or destruction of, property shall be issued or delivered in this state, unless it contains in substance the following provisions or provisions [which] that are equally or more favorable to the insured and to judgment creditors so far as such provisions relate to judgment creditors:
(1) A provision that the insolvency or bankruptcy of the person insured, or the insolvency of [his] the insured’s estate, shall not release the insurer from the payment of damages for injury sustained or loss occasioned during the life of and within the coverage of such policy or contract.
Editor’s Note: These changes are typographical and inconsequential.
(2) A provision that in case judgment against the insured or [his] the insured’s personal representative in an action brought to recover damages for injury sustained or loss or damage occasioned during the life of the policy or contract shall remain unsatisfied at the expiration of thirty days, or ninety days in the case of a directors’ and officers’ liability insurance policy, from the serving of notice of entry of judgment upon the attorney for the insured, or upon the insured, and upon the insurer, then an action may, except during a stay or limited stay of execution against the insured on such judgment, be maintained against the insurer under the terms of the policy or contract for the amount of such judgment not exceeding the amount of the applicable limit of coverage under such policy or contract.
Editor’s Note: Section 3420(a) is the “direct action” statute. Under its current configuration, if a claimant takes a verdict or obtains a judgment against a defendant (and thereby becomes a judgment creditor, that judgment creditor can present that judgment to the defendant (who is now a judgment debtor) and to a carrier the creditor believes provides coverage for the judgment. If 30 days goes by and the judgment is not paid, the judgment creditor can bring a direct action against the insurer, under the term of the policy, to try to recover that judgment. The carrier, of course, can raise all policy defenses.
This proposal maintains the current protocol, except in the case of Directors & Officers insurance and with that policy, extends the 30 days to 90 before such a direct action can be brought.
Editor’s Note: No change here. Present law permits the injured person “or any other claimant” to give notice to a liability carrier and measures that notice by the ability of the injured party to have learned of the carrier’s identity and considers the promptness of any attempt to identify the carrier.
(4) A provision that failure to give any notice required to be given by such policy within the time prescribed therein shall not invalidate any claim made by the insured, injured person or [by] any other claimant:
(i) if it shall be shown not to have been reasonably possible to give such notice within the prescribed time and that notice was given as soon as was reasonably possible; and,
(ii) except with respect to a claims-made policy (as defined pursuant to a regulation promulgated by the superintendent), unless the insurer demonstrates that the failure to provide timely notice has prejudiced the insurer’s rights. The insurer’s rights shall not be deemed prejudiced unless the insurer demonstrates that such failure hampers or hinders the insurer’s ability to effectively investigate, negotiate, settle, or defend the claim.
Editor’s Note: Ok, here’s the first big change. This proposal institutes a requirement that (except with respect to claims made policies) a carrier must demonstrate that its rights to effective investigate, negotiate, settle or defend the claim were hampered or hindered (whatever that means) if it is to deny coverage for failure to give prompt notice. Without the carrier establishing that those rights were hampered or hindered, it cannot demonstrate prejudice and without prejudice, it cannot deny coverage based on late notice. These provision would apply to any notice under the policy, e.g. notice of the accident or occurrence and notice of the claim or suit.
The floodgates of litigation will open, as court struggle to determine what the term effectively investigate, negotiate, settle or defend the claim might mean.
(5) A provision that if the insurer disclaims liability or denies coverage based upon the failure to provide timely notice, and if, within one hundred eighty days following such disclaimer or denial, the insured does not initiate an action against the insurer appealing such a determination, an injured person or other claimant may maintain an action directly against the insurer on the sole question of whether the insurer’s rights have been prejudiced, as provided in paragraph (4) of this subsection.
Editor’s Note: You will recall that in the vetoed legislation, the undefined claimant would have been given the right to commence a declaratory judgment action against a liability insurer when there was any denial of coverage. This proposal is significantly more narrowly drafted. It provides that if an insurer denies coverage based on untimely notice and 180 days goes by and the insured has not challenged the disclaimer by commencing a declaratory judgment action, an injured person or other claimant may maintain an action against a carrier on the sole question of whether the insurer’s rights have been prejudiced.
Again, it only allows this newly created statutory action to be commenced by the injured party or other claimant if the denial is based on late notice (not other reasons), imposes a 180 day waiting period for the insured to act, and only permits the action to determine whether the insurer’s rights have been prejudiced.
The lawsuit authorized by Section 3420(a) is commonly known as a direct action. This newly created lawsuit we shall name: a prejudice action.
(6) Except as provided in a regulation promulgated by the superintendent authorizing coverage on an indemnification basis with respect to directors’
and officers’ liability insurance policies or liability insurance policies insuring large commercial risks (as defined pursuant to a regulation promulgated by the superintendent) a provision that the insurer shall have a duty to defend and pay all amounts due under the policy on behalf of the insured.
Editor’s Note: We’re not quite sure about this provision. It provides that with certain limited exceptions, policies must contain provisions that require an insurer to defend and indemnify all amounts due under the policy. Is it designed to prevent the issuance of policies where the insured shares in the defense costs or has to pay the first dollars of defense costs? Is its goal to disallow policies with self-insured retentions, unless they are D&O or “large commercial risks?” Seems so.
Section 2. Subsection (b) of section 3420 of the insurance law is amended to read as follows:
(b) Subject to the limitations and conditions of paragraph two of subsection (a) hereof, an action may be maintained by the following persons against the insurer upon any policy or contract of liability insurance [which] that is governed by such paragraph, to recover the amount of a judgment against the insured or his personal representative:
(1) any person who, or the personal representative of any person who, has obtained a judgment against the insured or [his] the insured’s personal representative, for damages for injury sustained or loss or damage occasioned during the life of the policy or contract;
(2) any person who, or the personal representative of any person who, has obtained a judgment against the insured or [his] the insured’s personal representative to enforce a right of contribution or indemnity, or any person subrogated to the judgment creditor's rights under such judgment; and
(3) any assignee of a judgment obtained as specified in paragraph one or paragraph two of this subsection, subject further to the limitation contained in section 13-103 of the general obligations law.
Section 3. Subsection (c) of section 3420 of the insurance law is amended to read as follows:
(c) (1) If an action is maintained against an insurer under the provisions of paragraph two of subsection (a) of this section and the insurer alleges in defense that the insured failed or refused to cooperate with the insurer in violation of any provision in the policy or contract requiring such cooperation, the burden shall be upon the insurer to prove such alleged failure or refusal to cooperate.
(2) If an action is maintained under the provisions of subparagraph (ii) of paragraph four, or paragraph five, of subsection (a) of this section, the burden shall be upon the insurer to prove that it has been prejudiced by the failure to provide timely notice. The determination in any action maintained under the provisions of paragraph five of subsection (a) of this section shall be binding upon the parties in any subsequent action brought pursuant to the provisions of paragraph (2) of subsection (a) of this section.
Editors Note: The section assigns the burden of proof to the insurer to demonstrate prejudice resulting from late notice. If prejudice is not established by the carrier in the prejudice action commenced under the new provisions, that finding will be binding on all parties in a subsequent declaratory judgment action that might be brought by other parties on other coverage issues.
Section 4. Subsection (d) of section 3420 of the insurance law is amended to read as follows:
(d) ( 1) Upon written request by an insured, injured person or other claimant, within forty-five days of the request, an insurer shall:
(i) confirm whether the insured had a liability insurance policy in effect with the insurer on the date of the alleged occurrence; and
(ii) specify the liability insurance limits of the coverage provided under the policy.
Editor’s Note: Now here’s an unnecessary and potentially horribly burdensome provision. It requires that an insurer must disclose, within 45 days of an injured party or insured’s request, whether or not it issued a liability insurance policy and the liability limits of such policy.
Just imagine. Injured party is hurt at an construction site, or falls on a stairway, etc. His or her lawyer then sends out 100 letters to randomly selected carriers throughout the state (or country) demanding disclosure. Each carrier will have an obligation to respond within 45 days or, as you will see below, be subject to an unfair claims practices proceeding by the Insurance Department. Is this really necessary? In litigation, coverage is disclosed in due course. In the underinsured motorists arena, there is an obligation to disclose liability limits, but that demand is made of a carrier whose identity and relationship to the defendant is known because of mandatory filings.
(2) If under a liability policy issued or delivered [or issued for delivery] in this state, an insurer shall disclaim liability or deny coverage [for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state], it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant and shall specify the reason that it has so disclaimed liability or denied coverage.
Editor’s Note: Whoa Nelly! Don’t let this seemingly simple proposal pass you by without careful consideration.
This proposal would make dramatic changes to the rules requiring prompt disclaimers. First of all, it would require that they be made in property damage claims, not presently the law. Current language (being redacted by this proposal) makes it clear (and the case law that has interpreted it, makes it clearer) that the rules requiring prompt denials of coverage (an imposing waiver penalties for failures to promptly disclaim based on exclusions and breaches of condition) apply only to bodily injury and wrongful death cases, not property damage claims. This change would extend the provisions to property damage claims.
It would also extend the requirements of prompt disclaimer to out-of-state accidents. Under the current configuration, the requirement for prompt disclaimer only applies to accidents occurring within the state.
Section 5. Paragraph (1) of subsection (j) of section 3420 of the insurance law is amended to read as follows:
(j) (1) Notwithstanding any other provision of this chapter or any other law to the contrary, every policy providing comprehensive personal liability insurance on a one, two, three or four family owner-occupied dwelling, issued or [renewed] delivered in this state on and after [the effective date of this subsection] March 1, 1984, shall provide for coverage against liability for the payment of any obligation, which the policyholder may incur pursuant to the provisions of the workers' compensation law, to an employee arising out of and in the course of employment of less than forty hours per week, in and about such residences of the policyholder in this state. Such coverage shall provide for the benefits in the standard workers' compensation policy issued in this state. No one who purchases a policy providing comprehensive personal liability insurance shall be deemed to have elected to cover under the workers' compensation law any employee who is not required, under the provisions of such law, to be covered.
Editor’s Note: Inconsequential changes updating statutory language relative to mandatory workers compensation coverage in homeowner’s policies.
Section 6. Paragraph (6) of subsection (a) of section 2601 of the insurance law is amended to read as follows:
(a) No insurer doing business in this state shall engage in unfair claim settlement practices. Any of the following acts by an insurer, if committed without just cause and performed with such frequency as to indicate a general business practice, shall constitute unfair claim settlement practices…
(6) failing to promptly disclose coverage pursuant to subsection (d) or subparagraph (A) of paragraph two of subsection (f) of section three thousand four hundred twenty of this chapter.
Editor’s note: An indicated above, this provision would make failing to disclose liability limits an unfair claim settlement practice, subject to Insurance Department sanction
Section 7. This act shall take effect on the one hundred twentieth day after it shall have become a law, with respect to a policy issued or delivered in this state on or after such date; provided, however, the superintendent of insurance is authorized to promulgate any and all rules and regulations and take any other measures necessary to implement this act on its effective date on or before such date.
Editor’s note: There are far reaching and potentially onerous and expansive changes made in this proposed legislation. It requires very careful review and significant industry input.
8/2/07 Superintendent of Insurance, etc., as Liquidator of United Community Insurance Company v. Chase Manhattan Bank
The court refused to dismiss various claims seeking to void certain advances and loans made between United Community Insurance Company and the parent company Lawrence Group. Because the court found probable cause that fraudulent transactions were involved, the Appellate Division upheld an order compelling production of attorney-client communications.
7/31/07 Klewin Building Co., Inc. v. Heritage Plumbing & Heating, Inc.
Klewin Building Company, Inc. (Klewin), was the construction manager for a building project and entered into a subcontract with a plumbing company, Heritage. Hartford Fire Insurance Co. (Hartford) provided a performance bond to Heritage, its principal, for the benefit of Klewin. The bond required that Hartford would be obliged under the bond if certain conditions occurred, including Klewin's declaration that Heritage defaulted and a termination of Heritage's right to complete the subcontract.
Klewin declared Heritage in default and terminated Heritage's rights to complete the subcontract, Klewin demanded that Hartford select which action it would take pursuant to the bond to guarantee the performance of the subcontract. Hartford refused, claiming that Klewin failed to perform the conditions precedent giving rise to Hartford's obligation to perform under the bond.
Hartford moved to dismiss a lawsuit commenced against it by Klewin but the appellate court refused to grant the application to dismiss. Hartford did not prove that any of the conditions set forth in the performance bond were unsatisfied.
8/9/07 Holbrook v. Pruiksma
Following a trial in which defendant’s car rear-ended plaintiff’s car, a jury found that defendant’s negligence was the sole cause of the accident, but that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d). Plaintiff’s motion to set aside the verdict was denied. For a number of reasons, the Appellate Division affirmed the lower court’s order.
Noting that defendant failed to call any witnesses at trial and thus arguing that her own proof was “uncontroverted,” plaintiff claims that the jury’s finding of no serious injury should be set aside as against the weight of the evidence. The standard for making such a determination is “whether the evidence so preponderated in favor of the plaintiff that the verdict could not have been reached on any fair interpretation of the evidence.” Completely lacking from plaintiff’s case, was objective proof of these particular injuries. Additionally, a CAT scan and MRI of her brain, as well as X rays of her back, were all normal following the accident. Finally, the credibility of plaintiff and her treating physician were seriously undermined during cross-examination.
8/7/07 Furrs v. Griffith
The Appellate Division held that the defendant established a prima facie showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. In opposition, the plaintiff failed to raise a triable issue of fact. The affirmation of the plaintiff’s treating physician was without probative value since he clearly relied on the unsworn reports of others in arriving at his conclusions. The remaining medical reports and records concerning the plaintiff were unsworn, uncertified, or failed to raise a triable issue of fact.
Further, the plaintiff failed to proffer competent medical evidence that she sustained a medically-determined injury of a nonpermanent nature which prevented her, for 90 of the 180 days following the subject accident, from performing her usual and customary activities. The plaintiff admitted that she returned to work within three days of the accident.
8/7/07 Jenkins v. Miled Hacking Corp.
Try, Try Again: Defendants’ Appeal of Order of Trial Court’s SJ Denial is Affirmed
Here, the court held that the defendants failed to establish their prima facie entitlement to summary judgment by showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). The defendants’ examining orthopedist conclusions, that the plaintiff had minor limitations in range of motion, was inconsistent with the orthopedist’s findings of substantial limitations in range of motion in the plaintiff’s cervical flexion and bilateral lumbar lateral bending. The assertion that these limitations were unrelated to the accident was conclusory.
7/31/07 Bentivegna v Stein
Defense Doctors’ Findings of ROM Limitations Squashes Summary Judgment Hopes
Defendant’s appeal of denial of summary judgment motion falls on deaf ears as he failed to make a prima facie showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). The affirmed medical reports prepared by the defendant’s examining orthopedist and neurologist disclosed that they found limitations in the plaintiff’s cervical and lumbar ranges of motion, respectively. As such, it was unnecessary for the Appellate Division to determine whether plaintiff’s opposition papers and evidence were sufficient.
8/2/07 Baker v. Thorpe
After getting rear-ended, plaintiff had a burning sensation in his left arm. Afterwards, he was diagnosed with moderate carpel tunnel syndrome and had successful surgery 13 months post accident. After defendants’ successful motion for summary judgment, plaintiffs limited their appeal to claims that the surgical scar constituted a severe disfigurement and carpel tunnel syndrome constituted a significant limitation of use of a body function or system and prevented him from performing his usual and customary activities for 90 out of the first 180 days following the accident.
The court held that defendants proved their prima facie case. With the burden shifted to plaintiffs to raise a triable issue of fact, the court recognized that carpal tunnel syndrome can form the basis for a significant limitation of use. Here, however, it did not as surgery was successful and residual symptoms were minor. The court held that plaintiff did not prevail under the 90/180 category either. Plaintiff was on “light duty” at work for four to six weeks and had no difficulties. Finally, the scar was not a significant disfigurement within the meaning of Insurance Law § 5102 (d), as the court found that a reasonable person would not conclude that it is unattractive, objectionable or the subject of pity or scorn.
7/30/07 In the Matter of the Arbitration of the Applicant and the Respondent
Hosting the Place for Conducting Electrodiagnostic Testing Alone Does Not Entitle Provider to Bill for Service It Never Provided.
The Angle: The Applicant sought reimbursement for electrodiagnostic testing yet the chiropractor who demanded reimbursement never performed the testing. The chiropractor purportedly brought in the service which performed the testing and interpreted the data.
The Analysis: The Applicant, eligible injured person, sought reimbursement for, inter alia, EMG/NCV/SSEP testing. The chiropractor who attempted to bill for the testing did not perform the service himself. Instead, he brought the service into his office and that service not only performed the testing but also interpreted the raw data. Despite this, it appears that two bills were submitted, one for the interpretation of the testing and another for the interpretation and technical component of the testing.
This portion of Applicant’s claim was justly denied on not only the basis that the provider could not be reimbursed for a service he never performed but also that the testing was not medically necessary as demonstrated by the peer review of Mr. Wolin.
7/27/07 In the Matter of the Arbitration of the Applicant and the Respondent
Multiple Re-Evaluations of Applicant Regarding Necessity for Physical Therapy Properly Support Insurer’s Basis for Denial.
The Angle: Many times we see that an insurer who has multiple re-evaluations of an eligible injured person by the same physician has a greater likelihood of success in supporting a denial for a particular type of medical benefit. In this case, it pertained only to physical therapy.
The Analysis: The Applicant, eligible injured person, was involved in a September 24, 2004, accident where a truck backed into him causing him to fall to the ground. The Applicant was 70 years old at the time of the accident.
The Applicant sought reimbursement of physical therapy which the insurer denied based upon multiple independent medical examinations by Dr. Steven Hausmann. Dr. Hausmann’s initial evaluation indicated that it was unclear what the etiologies of the Applicant’s symptoms were but could be related to an underlying degenerative disease. Dr. Hausmann recommended supportive care and anti-inflamatory medication.
The second evaluation indicated that the Applicant required further care but in the form of home exercise and medications. The Applicant was to be re-examined to determine only if medication was still required.
The third evaluation revealed that Dr. Hausmann did not feel the prescription for physical therapy was related to the any injury from the motor vehicle accident. Further, the need for physical therapy was related to underlying cervical degenerative disc disease. It is noted that the Applicant never submitted the prescription for physical therapy to the arbitrator.
The assigned arbitrator determined that after three medical evaluations the insurer’s denials were appropriate.
7/13/07 Brooklyn Chiropractic Assoc., P.C. a/a/o Victor Quaranta v. Progressive Cas. Ins. Co., 2007 NYSlipOp 27323 (2d Dept. App. Term)
Parties in no-fault litigation, usually the plaintiff, find it difficult to ascertain how much interest is owed and what date interest begins to accrue. Interestingly here, the plaintiff obtained a judgment which entitled the plaintiff to interest only if the judgment was not satisfied within five days from its entry. Furthermore, the insurer would have to pay interest from May 4, 2000, which was the date of the first denial of claim! The insurer paid the judgment after the five days elapsed but rightfully refused to pay the interest.
The Appellate Term set the plaintiff straight – 11 NYCRR §65-3.8(c) requires an insurer to pay 2% interest per month if the claim is not paid within 30 days. The 2% interest continues to accrue until the claim is paid. HOWEVER, 11 NYCRR §65-3.9(c) provides that accrual of interest is tolled where the claimant fails to submit the claim to arbitration or commence an action within 30 days after receipt of the denial of claim. Furthermore, interest does not begin to accrue until either action is taken.
The Court, applying the law to the facts presented here, held that the insurer never paid or issued a timely denial of claim. Interest accrued when the 30 days elapsed after the claim was presented for payment to the insurer. Yet, here the plaintiff, provider, never commenced an arbitration or action within 30 days after receiving the insurer’s denials. Interest did not begin to accrue until Applicant filed the lawsuit and continued to accrue until the judgment was entered on August 3, 2004.
7/12/07 101 Acupuncture, P.C. a/a/o Julio Mejia-Tejada v. Utica Mut. Ins. Co., 2007 NYSlipOp 51488 (U) (2d Dept. App. Term)
Vacation of a Master Arbitration Award Under CPLR Article 75 Denied to Applicant.
The Applicant, provider, under CPLR §7511 sought to vacate a Master Arbitration award. The Appellate Term reviewed the famous Petrofsky case that we have all or should have grown to tolerate. In Petrofsky, the Court of Appeals determined that a Master Arbitrator may review an arbitration award on the grounds set forth in CPLR §7511 and whether the lower arbitrator’s decision was arbitrary and capricious, irrational, or without a plausible basis. A Master Arbitrator under Petrofsky is precluded from reviewing factual or procedural errors or in other words substituting his or her judgment for that of the lower arbitrator.
Furthermore, in the situation where the lower arbitrator’s determination is based upon a factual error the Master Arbitrator must uphold that determination if it has a rational basis. Likewise, if the lower arbitrator’s determination is based upon the misapplication of substantive law then the Master Arbitrator must uphold that determination if it is a mere error of law. A determination based upon a question of substantive law will be upheld if there is a rational basis for it.
The Court properly upheld the Master Arbitrator’s award and declined to vacate the award.
8/06/07 O’Brien v Citizens Ins. Co. of America
Supreme Court, Suffolk County (Trial Court)
This decision involves a fire remediation gone horribly wrong. On August 10, 2002, a fire occurred at plaintiffs’ family residence. After a brief inspection, plaintiffs’ carrier promptly arranged for cleanup and smoke remediation to occur on August 13-14, 2002. However, plaintiffs alleged that chemicals used in the cleanup project polluted the air within the home to such an extent that plaintiffs were unable to return.
After a series of events aimed at removing the noxious odors, plaintiffs finally returned to the residence in April of 2003. However, by June of 2003, plaintiffs vacated the premises for a final time. Thereafter, plaintiffs commenced the instant lawsuit alleging that the carrier, among others, was negligent in the cleanup project, and that as a result the residence had become uninhabitable. In addition, plaintiffs also alleged that the carrier had breached its duty to provide coverage for the property damage which occurred at the premises. The carrier subsequently moved for summary judgment against all causes of action, and the Trial Court denied the application for the following reasons:
Breach of Contract Cause of Action:
Carrier opposed plaintiffs’ breach of insuring agreement claim by arguing that the homeowner’s policy in question did not provide coverage for the acts of third parties. Holding that no such exclusion/limitation existed in the policy, the Court further added that coverage was available for the direct physical loss of property which was occasioned by a fire. As there was a question of fact regarding whether the fire was the proximate cause of the subsequent chemical smell, the Court ruled that summary judgment was not appropriate.
Negligence Causes of Action:
Carrier opposed plaintiffs’ causes of action based upon the negligent cleanup of the premises on the grounds that any negligence (if any at all) was solely attributable to the acts of the contractor conducting the cleanup. As the entity performing the remediation was an independent contractor, the carrier argued that it was insulated from liability. However, the Trial Court ruled that because some evidence indicated that the carrier was involved in the direction of work at the premises, a question of fact existed as to whether the carrier was involved enough to be vicariously liable for the acts of the contractor. Accordingly, this aspect of the application for summary judgment was denied as well.
Visit the Hot Cases section of the Federation of Defense & Corporate Counsel website, www.thefederation.org. Dan Kohane serves as the FDCC’s Immediate Past President and Board Chair and past Website Editor.
8/06/07 Chauvin v. State Farm Fire & Casualty Co.
Court concluded that the focus of the Value Policy Law ("VPL") is on establishing the value of the property in the event of a total loss, and is not intended to expand coverage to excluded perils. Thus, the VPL does not apply when a total loss does not result from a covered peril. Homeowners had maintained that they were entitled to the agreed face value of their policy under the VPL because their home sustained some damage from wind, a covered peril, even though the total loss resulted from flooding, a non-covered peril.
Submitted by: Gregory A. Witke (Bradshaw, Fowler, Proctor & Fairgrave, P.C.)
My thanks to my friend D. David Keller (the other DDK) for this next submission and his summary:
7/26/07 Woo v. Fireman’s Fund
Oral Surgeon sued for playing practical joke on one of his assistants (whose family raises potbellied pigs) while doing a surgical procedure. Seems he inserted temporary partial bridges shaped like boar tusks and took photos, which he ultimately decided not to share with his
employee/patient. But as luck would have it other employees decided she needed to see them, on her birthday! She sued, he reports claim to malpractice carrier which decided it should not have to defend him. Trial court ruled for doctor, intermediate appellate court for insurer, and finally Wash. Sup. Court for doctor again. Apparently, the patient didn’t think it was so funny. Some people just can’t take a joke
Holbrook v. Pruiksma
Before: Cardona, P.J., Peters, Spain, Carpinello and Kane, JJ.
Lewis & Stanzione, Catskill (Ralph C. Lewis Jr. of
Boeggeman, George & Corde, P.C., Albany (Cynthia
Dolan of counsel), for respondent.
Appeal from a judgment of the Supreme Court (Doyle, J.), entered June 8, 2006 in Greene County, upon a verdict rendered in favor of defendant.
On May 7, 2004, plaintiff's car was rear-ended by defendant's car and thereafter plaintiff commenced this action to recover for her alleged injuries. Following a trial, a jury found that defendant's negligence was the sole cause of the accident, but that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d). Plaintiff's motion to set aside the verdict was denied and this appeal ensued.
Noting that defendant failed to call any witnesses at trial and thus arguing that her own proof was "uncontroverted," plaintiff claims that the jury's finding of no serious injury should be set aside as against the weight of the evidence. We are unpersuaded. The standard for making such a determination is "whether the evidence so preponderated in favor of the plaintiff that the verdict could not have been reached on any fair interpretation of the evidence" (Lolik v Big V Supermarkets, 86 NY2d 744, 746 [1995] [internal quotation marks and citations omitted]). Upon our review of the evidence, we cannot conclude that the proof presented so preponderated in favor of plaintiff that the verdict finding that she did not sustain a serious injury could not have been reached on any fair interpretation of the evidence.
According to plaintiff, she began suffering from numerous ailments within a few days of the May 2004 accident, many of which continued until the April 2006 trial in this matter. Specifically, following the accident, she complained of back pain, neck pain and stiffness, frequent headaches, dizziness, confusion, concentration and memory problems, uncoordination and fatigue. Completely lacking from her case, however, was objective proof of these particular injuries. While she went to the hospital immediately following the accident and again two days later, she made no complaints of neck pain, her neck on both occasions was supple with a full range of motion without pain, her cranial nerves were intact, her cervical spine was normal and her orientation was normal. Additionally, a CAT scan and MRI of her brain, as well as X rays of her back, were all normal following the accident. Indeed, it was established during the testimony of plaintiff's treating neurologist that she always had entirely normal physical and neurological examinations except for her subjective complaints.
Additionally, suffice it to say, plaintiff's testimony concerning the nature and extent of her injuries as a result of the subject accident was seriously undermined on cross-examination. She was questioned about a significant history of similar, if not identical, preexisting medical complaints, mental-health related complaints and interpersonal problems at work and at home. In particular, she had a motor vehicle accident in 1989 following which she made complaints of fatigue, nervousness, depression, back pain, neck pain and stiffness, dizziness and loss of balance. Many such complaints continued in the ensuing 15-year period prior to this accident. Notably, more often than not during her cross-examination, plaintiff could not recall whether she told her current treating physicians about these prior complaints.
The cross-examinations of plaintiff's experts were equally desolating in terms of her ability to demonstrate a serious injury. By way of example, on direct examination, plaintiff's treating chiropractor opined to a reasonable degree of medical certainty that, "based upon the history . . . indicating she had no prior neck complaints," the subject auto accident was the cause of her current neck pain. On cross-examination, it was revealed that plaintiff never told him about the 1989 motor vehicle accident or her resulting symptoms from it, including neck pain and stiffness. Nor did this chiropractor know that she was treated by another chiropractor for these complaints following that accident. He also did not know that she had previously been diagnosed with cervical cranial syndrome. It was further revealed during his cross-examination that plaintiff denied having migraine headaches before the subject accident despite medical records indicating otherwise. Indeed, plaintiff never told this treating chiropractor that just one day before the subject accident (which was four days before her first appointment with him), she saw her primary care physician with complaints of joint pain and stiffness.
Next, plaintiff's treating neurologist testified to a reasonable degree of medical certainty that she suffered from concussive syndrome (i.e., post-concussion syndrome) and that same was caused by the subject motor vehicle accident. He further opined that her prognosis was "guarded and by that [he meant] that it is unlikely that she will completely recover fully to the pre-accident state" (emphasis added). Cross-examination revealed that the neurologist was not well versed in plaintiff's actual "pre-accident state." For example, he acknowledged during cross-examination that plaintiff did not tell him, or a colleague who initially treated her, that she had the 1989 accident following which she made complaints of loss of balance, dizziness, neck pain and neck stiffness. Nor did she tell either treating neurologist about her prior cervical cranial syndrome diagnosis, prior treatment for headaches or prior chiropractic treatment. Nor did either know that she was taking prescription medication on the day of the subject accident for migraines, anxiety and depression. She also never reported her prior complaints of fatigue, dizziness, depression or poor concentration. In fact, plaintiff reported that she had no "significant past medical history." Similarly, plaintiff's treating psychologist knew about the 1989 motor vehicle accident but was informed that she had no resulting injuries. Therefore, the verdict of no serious injury was not against the weight of the evidence.
Finally, we find no abuse of discretion in Supreme Court's denial of plaintiff's request for a missing witness charge with respect to a physician who conducted an independent medical examination of her 2½; weeks before trial but then thereafter never provided defense counsel with an oral or written report of any findings [FN1]. Since it was established that neither party, particularly defendant, had any idea about the substance of this physician's findings, plaintiff did not meet her burden of demonstrating that his testimony would be expected to be favorable to defendant (see e.g. People v Gonzalez, 68 NY2d 424, 427 [1986]; see also Prince, Richardson on Evidence § 3-140 [Farrell 11th ed]). In any event, even assuming that plaintiff sustained her initial burden of demonstrating entitlement to the charge (see People v Gonzalez, supra at 427-428), defendant "otherwise demonstrate[d] that the charge would not be appropriate" (id. at 428) given the proof that defense counsel never received a copy of the physician's report. Indeed, since plaintiff's counsel was able to comment during summation on defendant's failure to call any witnesses at trial, particularly an independent medical examination physician, and also given the undeniable weakness of plaintiff's case on serious injury, any error in failing to give the charge was harmless and did not deprive her of a fair trial (see Goverski v Miller, 282 AD2d 789, 791 [2001]; see generally DeVaul v Carvigo Inc., 138 AD2d 669, 670 [1988], lv denied 72 NY2d 806 [1988], appeal dismissed 72 NY2d 914 [1988]).
Cardona, P.J., Peters, Spain and Kane, JJ., concur.
Footnote 1: Significantly, Supreme Court found credible defense counsel's representations that, despite efforts, he never learned of this physician's findings. Of note, there is no indication what disputed issue this physician's examination was meant to address, i.e., liability, which plaintiff in any event succeeded in proving, serious injury or damages (see e.g. Leahy v Allen, 221 AD2d 88, 91-92 [1996]; Savage v Shea Funeral Home, 212 AD2d 875, 876 [1995]; Burstein v Richmond Mem. Hosp. & Health Ctr., 167 AD2d 151, 151-152 [1990]).
Klewin Building Company, Inc. v. Heritage Plumbing & Heating, Inc.,
Lambert & Weiss, New York, N.Y. (Monroe Weiss and Marc
Lepelstat of counsel), for appellant.
Torre, Lentz, Gamell, Gary & Rittmaster, LLP, Jericho, N.Y.
(Benjamin D. Lentz and Lawrence
S. Novak of counsel), for
In an action to recover damages for breach of contract, the defendant Hartford Fire Insurance Company appeals from so much of an order of the Supreme Court, Westchester County (Rudolph, J.), entered July 10, 2006, as denied that branch of its motion which was for summary judgment dismissing the second cause of action in the complaint insofar as asserted against it.
The plaintiff, Klewin Building Company, Inc. (hereinafter Klewin), the construction manager for a building project, entered into a subcontract with the defendant Heritage Plumbing & Heating, Inc. (hereinafter Heritage), pursuant to which Heritage was required to supply plumbing materials and services for the project. The defendant Hartford Fire Insurance Co. (hereinafter Hartford) provided a performance bond to Heritage, its principal, for the benefit of Klewin. Hartford's obligations to Klewin under the bond would only arise upon certain conditions, including, inter alia, Klewin's declaration that Heritage defaulted and a termination of Heritage's right to complete the subcontract.
After Klewin declared Heritage in default and terminated Heritage's rights to complete the subcontract, Klewin demanded that Hartford select which action it would take pursuant to the bond to guarantee the performance of the subcontract. Hartford refused, claiming that Klewin failed to perform the conditions precedent giving rise to Hartford's obligation to perform under the bond. Klewin commenced this action, alleging in its second cause of action that Hartford breached the performance bond. Hartford moved for summary judgment, inter alia, seeking to dismiss the second cause of action insofar as asserted against it. In the order appealed from, the Supreme Court, inter alia, denied that branch of Hartford's motion. We affirm the order insofar as appealed from.
"A condition precedent is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises" (Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 337 n 2). "Express conditions precedent, which are those agreed to and imposed by the parties themselves, must be literally performed'" (Preferred Mtge. Brokers v Byfield, 282 AD2d 589, 590, quoting Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690).
Here, Hartford was not entitled to summary judgment dismissing the second cause of action insofar as asserted against it since it failed to establish that any of the conditions precedent set forth in the performance bond were not satisfied by Klewin (see Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., supra; see generally Zuckerman v City of New York, 49 NY2d 557, 559). Accordingly, it is unnecessary to consider whether Klewin's opposition papers were sufficient to raise a triable issue of fact (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851).
SPOLZINO, J.P., FISHER, COVELLO and McCARTHY, JJ., concur.
Furrs v. Griffith
Newman & Okun, P.C., New York, N.Y. (Darren R. Seilback of counsel), for respondent.
In an action to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Kings County (Bayne, J.), dated September 26, 2006, which denied the defendant's motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
The defendant established a prima facie entitlement to judgment as a matter of law by showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957; see also Kearse v New York City Tr. Auth., 16 AD3d 45). In opposition, the plaintiff failed to raise a triable issue of fact. The affirmation of the plaintiff's treating physician was without probative value in opposing the motion since he clearly relied on the unsworn reports of others in arriving at his conclusions (see Phillips v Zilinsky, 39 AD3d 728; Porto v Blum, 39 AD3d 614). The remaining medical reports and records concerning the plaintiff were unsworn, uncertified, or failed to raise a triable issue of fact (see Mejia v DeRose, 35 AD3d 407; see also Rodriguez v Cesar, 40 AD3d 731; Phillips v Zilinsky, supra). The mere existence of a herniated or bulging disc, or even of radiculopathy, is not evidence of a serious injury in the absence of objective evidence of the extent of the alleged physical limitations resulting from the disc injury and its duration (see Mejia v De Rose, supra; Yakubov v CG Trans Corp., 30 AD3d 509; Cerisier v Thibiu, 29 AD3d 507; Bravo v Rehman, 28 AD3d 694; Kearse v New York City Tr. Auth., supra at 50; Diaz v Turner, 306 AD2d 241; see also Foley v Karvelis, 276 AD2d 666).
The plaintiff failed to proffer competent medical evidence that she sustained a medically-determined injury of a nonpermanent nature which prevented her, for 90 of the 180 days following the subject accident, from performing her usual and customary activities (see Sainte-Aime v Ho, 274 AD2d 569). The plaintiff admitted in her own deposition testimony that she returned to work within three days of the subject accident.
Jenkins v. Miled Hacking Corp.
Fishlinger, Uniondale, N.Y. (Gregory A. Cascino of counsel), for
Friedman, Khafif & Sanchez, LLP, Brooklyn, N.Y. (Fabien A.
Robley of counsel), for respondents.
In an action to recover damages for personal injuries, etc., the defendants appeal from an order of the Supreme Court, Kings County (Harkavy, J.), dated November 8, 2006, which denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff Tristen Jenkins did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
The defendants failed in the first instance to establish their prima facie entitlement to summary judgment by showing that the plaintiff Tristen Jenkins (hereinafter 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, 350-351; Gaddy v Eyler, 79 NY2d 955, 956-957). The conclusion of the defendants' examining orthopedist, that the plaintiff had minor limitations in range of motion or limitations that were not permanent, was belied by the orthopedist's findings of substantial limitations in range of motion in the plaintiff's cervical flexion and bilateral lumbar lateral bending which existed more than one year and four months after the accident (see Brown v Motor Veh. Acc. Indem. Corp., 33 AD3d 832; Scotti v Boutureira, 8 AD3d 652). The assertion that these limitations were unrelated to the motor vehicle accident was conclusory. The defendants also relied on various treatment records of the treating physicians of the plaintiff that additionally underscored the existence of limitations in cervical and lumbar spine ranges of motion, which were not adequately quantified so as to establish the absence of a significant limitation of motion that could be permanent in nature (see Dzaferovic v Polonia, 36 AD3d 652, 653; Whittaker v Webster Trucking Corp., 33 AD3d 613).
Since the defendants failed to satisfy their prima facie burden, it is unnecessary to consider whether the plaintiffs' papers in opposition were sufficient to raise a triable issue of fact (see Dzaferovic v Polonia, supra at 653; Brown v Motor Veh. Acc. Indem. Corp., supra; Coscia v 938 Trading Corp., 283 AD2d 538).
CRANE, J.P., SANTUCCI, FLORIO, DILLON and BALKIN, JJ., concur.
Bentivegna v. Stein
Quirk and Bakalor, P.C., New York, N.Y. (Dara L. Rosenbaum of counsel), for appellant.
Subin Associates, LLP (Pollack, Pollack, Isaac & De Cicco, New York, N.Y.
[Brian J. Isaac and Julie T. Mark] of counsel), for respondent.
In an action to recover damages for personal injuries, the defendant Brian Stein appeals, as limited by his brief, from so much of an order of the Supreme Court, Kings County (Bayne, J.), dated January 10, 2006, as denied his motion for summary judgment dismissing the complaint insofar as asserted against him on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d), and granted that branch of the plaintiff's cross motion which was for summary judgment on the issue of liability insofar as asserted against him.
ORDERED that the order is modified, on the law, by deleting the provision thereof granting that branch of the plaintiff's cross motion which was for summary judgment on the issue of liability insofar as asserted against the defendant Brian Stein, and substituting therefor a provision denying that branch of the cross motion; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.
The appellant failed to make a prima facie showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) (see Tchjevskaia v Chase, 15 AD3d 389). The affirmed medical reports prepared by the appellant's examining orthopedist and neurologist disclosed that they found limitations in the plaintiff's cervical and lumbar ranges of motion, respectively.
The evidence submitted by the plaintiff in support of that branch of her cross motion which was for summary judgment on the issue of liability insofar as asserted against the appellant failed to establish a prima facie case (see CPLR 3212[b]) that the subject motor vehicle accident was proximately caused by negligence on the part of the appellant.
Under these circumstances, it is unnecessary for us to consider the sufficiency of the evidence submitted in opposition to the motion and the relevant branch of the cross motion (see Chaplin v Taylor, 273 AD2d 188). MILLER, J.P., GOLDSTEIN, FISHER and COVELLO, JJ., concur.
Baker v. Thorpe
Calendar Date: June 4, 2007
Finkelstein & Partners, Newburgh (Kara L. Campbell of counsel), for appellants.
Hiscock & Barclay, L.L.P., Albany (David M. Cost of counsel), for respondents.
Appeal from an order of the Supreme Court (Krogmann, J.), entered May 12, 2006 in Washington County, which granted defendants' motion for summary judgment dismissing the complaint.
In October 2003, the motor vehicle driven by defendant Lori Fleming (hereinafter defendant) collided into the rear of the stopped vehicle driven by plaintiff Thomas Baker (hereinafter plaintiff). Plaintiff, a correction officer, was taken to the hospital and released later that day. Plaintiff went to his physician, Thomas Coppens, the next day with complaints concerning his hip, head, neck and back where he was prescribed pain medication and a six-week session of physical therapy. At the conclusion of that session, his neck pain was relieved but he continued to have a burning sensation in his left arm. After another session of physical therapy, plaintiff was diagnosed with moderate carpel tunnel syndrome in his left arm and wrist. Cortisone injections were unsuccessful but surgery performed in November 2004 relieved his symptoms.
Plaintiff and his wife, derivatively, commenced this action, contending that he suffered a serious injury within the meaning of Insurance Law § 5102 (d). Upon defendants' successful motion for summary judgment, plaintiffs limited their appeal to the contentions that the surgical scar constituted a severe disfigurement and the effects of carpel tunnel syndrome constituted a significant limitation of use of a body function or system and prevented him from performing his usual and customary activities for 90 out of the first 180 days following the accident.
Where, as here, defendants move for summary judgment in a no-fault action, they bear the initial burden of demonstrating that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d) (see John v Engel, 2 AD3d 1027, 1028 [2003]). If successful, the burden shifts to plaintiffs to present competent medical evidence to raise a triable issue of fact (see Haddadnia v Saville, 29 AD3d 1211, 1211 [2006]). In support of defendants' motion, plaintiff's medical records and deposition testimony were proffered. Diagnostic tests classified plaintiff's limitation as "moderate with involvement of both the median motor and sensory nerves [with] . . . no evidence of an ulnar neuropathy or cervical radiculopathy involving the left upper extremity." After the surgical release to plaintiff's left wrist, his carpal tunnel complaints abated. Medical records from plaintiff's first postsurgery visit on November 30, 2004 found him to be healing properly, while his last visit on December 29, 2004 declared him to have "full [range of motion] and no pain. He is fully active without restriction or limitation." Plaintiff's deposition testimony confirmed the success of the surgery, but noted that his ability to care for his six horses was limited to being able to carry only one bale of hay, instead of two, and one bucket of water, instead of two. Plaintiff further stated that his grip was now compromised, effecting both his ability to use a pitchfork to muck the horse stalls and hold a golf club, now limiting his outings to three times a week instead of five. As to the impact of the injury upon employment, he missed only one day of work. At the time of his examination before trial, he had retired for non-medical reasons and was working as a golf course greens keeper.
Viewing this evidence in a light most favorable to plaintiffs (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 355 [2002]), we agree that despite objective medical evidence supporting the conclusion that plaintiff's carpal tunnel syndrome was caused by the accident, the resulting limitations were not sufficiently significant to permit recovery beyond that authorized by the no-fault law (see Tuna v Babendererde, 32 AD3d 574, 575-576 [2006]; compare Toure v Avis Rent A Car Sys., supra at 355).
With the burden shifted to plaintiffs to raise a triable issue of fact regarding a significant limitation, we premise our review with a recognition that carpal tunnel syndrome can form the basis for a significant limitation of use under Insurance Law § 5102 (d) (see Apuzzo v Ferguson, 20 AD3d 647, 648 [2005]). However, where, as here, there are no significant problems after successful surgery (see Palmer v Moulton, 16 AD3d 933, 934-935 [2005]) and the residual symptoms are nothing more than mild, minor or slight impairments, no triable issues will be raised by this proof (see Tuna v Babendererde, supra at 576; Simpson v Feyrer, 27 AD3d 881, 884 [2006]).
Nor do we find an issue of fact concerning whether plaintiff was prevented from performing substantially all of his usual and customary activities for 90 out of the first 180 days immediately following the accident. The curtailment of plaintiff's daily activities must be to a "great extent rather than some slight curtailment" (Licari v Elliott, 57 NY2d 230, 236 [1982]; see Palmer v Moulton, supra at 935). Plaintiff was on "light duty" at work for four to six weeks and thereafter encountered no difficulties performing either his employment or the activities of daily living. Plaintiff's reported limitations in his care for his horses and golf game were not, in our view, sufficient (see Simpson v Feyrer, supra at 882; Clements v Lasher, 15 AD3d 712, 713 [2005]).
Next reviewing whether there is an issue of fact as to whether the scar from the surgery constitutes a significant disfigurement within the meaning of Insurance Law § 5102 (d), we find, after a review of the photographs, that a reasonable person would not conclude that it is unattractive, objectionable or the subject of pity or scorn (see Johnson v Grant, 3 AD3d 720, 721 [2004]; Edwards v DeHaven, 155 AD2d 757, 758 [1989]).
For all of these reasons, we affirm.
O’Brien v Citizens Ins. Co. of America
Wilkofsky Friedman, Karel & Cummins
L'Abbate, Balkan, Colavita & Contini
ORDERED that the motions by the defendant H2M Labs Inc. (hereinafter H2M Labs) pursuant to CPLR 3212 as to Causes of Action Two through Ten are determined herein, and it is further
ORDERED, that the motions by the defendant H2M Labs Inc. to dismiss all cross-claims are determined herein, and it is further
ORDERED that the motions by the defendant Alexander Wall Corp. (hereinafter Alexander Wall) pursuant to CPLR §3212 as to Causes of Action Two through Ten are determined herein, and it is further
ORDERED that the motions by the defendant Alexander Wall for default against the second third party defendant Meticulous On Site Soot Service are determined herein, and it is further
ORDERED, that the motions by the defendant Citizens Insurance Company (hereinafter Citizens) pursuant to CPLR §3212 for as to Causes of Action One through Ten and all cross-claims are determined herein, and it is further
ORDERED, that the motion to preclude the admissibility of the alleged diagnosis known as Multiple Chemical Sensitivity Syndrom (hereinafter MCSS) is granted to the extent that the Court will conduct a "Frye" hearing (Frye v United States, 293 F. 1013; People v Wesley, 83 NY2d 417), and it is further
ORDERED, that the plaintiffs' motion to strike the answer of the defendant Alexander Wall pursuant to CPLR §3126 is granted to the extent that the Court will hold a hearing to determine the issue of whether and to what extent a sanction should be ordered, and it is further,
ORDERED, that at the Compliance Conference presently scheduled for August 7, 2007, the Court will determine the appropriate date for conducting both aforementioned hearings.
Plaintiffs commenced this action for personal injury and property damage allegedly caused by faulty remediation work and air testing following a residential fire. The premises were insured by a policy through defendant Citizens Insurance Company.
The plaintiffs allege a breach of the insurance contract against the defendant Citizens in the First Cause of Action. The Second through the Ninth Causes of Action are against all defendants for damages to property from the negligent use of inappropriate and harsh chemicals used in the fire remediation. The Tenth Cause of Action alleges fraud against all defendants.
The Plaintiffs are a family of five who resided in a single family home located at 250 Eastwood Avenue, Deer Park, New York. On August 10, 2002, a fire occurred at the residence requiring the evacuation of the family.
Upon the recommendation of the carrier of the insured's Homeowner's policy, defendant Citizens chose defendant Alexander Wall to conduct the clean-up and remediation of the premises. On August 13, 2002, Jim Cavo of defendant Alexander Wall and John Conlon of defendant Citizens (Hanover) conducted a walk-through of the premises and recommended cleaning the walls, ceiling and floors.
Between August 13th and August 14th, 2002, the residence was cleaned by the defendant Alexander Wall with certain chemicals. This included cleaning the walls, ceiling and other items that might retain smoke odor. After this first clean up, the plaintiffs conducted a walk-through of the home with John Conlon of Citizens and Jim Cavo of Alexander Wall and noticed an unpleasant smell.
Predicated on the continued presence of the smell, ozone generators were placed in the home to alleviate the odor. There is testimonial evidence submitted that John Conlon (Citizens) ordered Alexander Wall to install these ozone generators (Alexander Wall, Exhibit F pages 40-41), a fact which Mr. Conlon denies. There is further evidence that these generators were placed in position in the home by Citizens and Alexander Wall. The plaintiffs submit an affidavit from an expert indicating that the use of ozone generators may be contraindicated in situations such as the case at bar. After approximately four days, the plaintiffs met with Conlon and Cavo and conducted an additional inspection of the house and noticed the continuing presence of the smell. At this point, both Conlon and Cavo (Citizens and Alexander Wall) agreed to send in a new crew to wash down the walls using different cleaning products and an iodizing machine to further alleviate the odor. After this clean-up, the plaintiffs still complained of odor in the home. Concerned with the air quality, Jim Boos of Citizens contacted H2M Labs on August 20, 2002 for the purpose of conducting air quality tests.
THE PARTICIPATION OF H2M LABS
H2M Labs performed certain air quality tests, the results of which were filed in a written report dated September 3, 2002. After the issuance of the report, the plaintiffs conducted another walk through of their residence and still noticed the smell. Delora O'Brien stated it felt like knives in her nostrils. The plaintiffs allege that the report was never tendered to them and that they were told orally that the air quality was nothing to worry about. The report itself states that all levels of volatile compounds were within the guidelines issued by the World Health Organization (hereinafter WHO).A review of the report reveals that the levels of Toluene in the home were double the WHO guidelines. There is evidence adduced that the tester employed by H2M Labs for the taking of the samples was incompetent. (The tester admitted that he had never done an air quality testing before [see, Alexander Wall, Exhibit F]). Ken Skipta, principal of RTP Environmental (hereinafter RTP), a former third-party defendant in the case, testified that an air collector should be"someone who has physically performer the test before". . . and that it requires a trained individual to be aware of the problems you can run into during sampling (see, Plaintiffs' Exhibit 2, the second Skipta deposition, pages 141,142). On October 18, 2002, Mr. Charles Erlanger of H2M Labs sent a letter to ?? representing that the volatile organic compounds tested were within normal limits ???the EPA and NIOSH as well as WHO. ???? (see, Alexander Wall, Exhibit P, pages 144-147). Gary Miller, Charles Erlanger's superior at H2M Labs testified "the tabulated results (in the report) did not seem to correlate with the laboratory reports" (see, Alexander Wall, Exhibit Q, page 29). He further testified that Mr. Erlanger under reported the amount of Toluene, so that it was 44 times??? higher than reported and the chemical carcinogens, benzene and styrene, were each under-calculated by a factor of 3 (see, Alexander Wall, Exhibit Q, pages 104 and105). The plaintiffs, therefore, allege that the misrepresentations as to the air quality induced them to believe that their home was safe for occupation. Based on these representations, Delora O'Brien continued to enter the home for various purposes between September 2002 and April 2003.
Upon noticing the continuing smell during their walk through of the premises immediately subsequent to the issuance of the H2M Lab report of September 3, 2002, a company called RTP Environmental Association was retained to conduct its own evaluation of the air samples. Although RTP found various inconsistencies in the H2M Lab report, it confirmed that the air quality was still within New York State and Department of Environmental Conservation (hereinafter DEC) guidelines. In October 2002, the plaintiffs contacted RTP and informed RTP that there was still an unpleasant odor in the residence. RTP then devised a course of action which included heating and ventilating the home for several days and placing pans of hydrochloride in the house in an attempt to absorb and eliminate the remaining odor. RTP then conducted further tests and issued a report on March21, 2003 indicating that all volatile organic compounds in the residence were within acceptable guidelines. The plaintiffs moved back into their house on a permanent basis in April 2003. They remained until June 2003 when they moved out, alleging that the problem continued to persist.
H2M Labs seeks relief pursuant to CPLR §3212. In support of the relief requested H2M Labs takes the position that they had no involvement with the remediation or clean-up process, which is the substantive basis of the plaintiffs' negligence claims. They also argue that the fraud cause of action must be dismissed as H2M Lab did not have knowledge that the September 3, 2002 report which they authored contained miscalculations, that subsequent retesting demonstrated that the air quality was, in fact, within acceptable guidelines, and that the plaintiffs' could not have relied on them in that they did not move back into their house until April of 2003. They also argue that New York does not recognize a cause of action for Multiple Chemical Sensitivity Syndrome.
There is evidence that H2M Lab participated in the clean-up process by participating in the discussion and ultimate recommendation of the use of a negative air machine (see, Alexander Wall, Exhibit K, pages 75-80), using low VOC paints, painting the upstairs to "get the smell out" (see, Alexander Wall, Exhibit O, page 63) and re-cleaning the contents using a HEPA filter. The plaintiffs' submit the affidavit of L. Brumley, a disaster reclamation expert who opines that the use of a negative air machine can cause indiscriminate contamination of a clean area unless a HEPA filter is used (see, Alexander Wall, Exhibit K, page 76, lines 8-24). Although there is an apparent concurrence that contamination will not occur if a "HEPA" filter is used in conjunction with the negative air machine, there is no evidence from which the Court can divine that such a filter was used in the instant matter. There is evidence that a negative air machines are not ordinarily used in a residential setting.
The discussions and recommendations that H2M Lab participated in that low volatile organic compound paints be used, painting the upstairs to "help get the smell out," cleaning the duct work, as well as the recommendation that a negative air machine be used, demonstrate that questions of fact exist as to whether H2M Lab merely collected air samples or were active participants in the remediation process.
It is well settled that the remedy of summary judgment is a drastic one and there is considerable reluctance to grant summary judgment in negligence actions (Andre v Pomeroy, 35 NY2d 361). Summary judgment should not be granted where there is any doubt as to the existence of a triable issue of fact or where an issue of fact is even arguable since it deprives a party of his day in court (see also, Henderson v City of New York, 178 AD2d 129).
Issue finding rather than issue determination is the key to this procedure (Sillman v Twentieth Century Fox Film Corp., 3 NY2d 395).
As stated supra, one is subject to liability if he "does a tortious act in concert with the other or pursuant to a common design with him, or knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself." (Restatement of Law, Second, Torts, American Law Institute).
Thus, there are questions of fact raised as to whether H2M Labs participated in the remediation process and/or whether they aided their co-defendants as part of a joint process in remediating the plaintiffs' premises, and whether this process, including the alleged suppression of the test results contained in the report of September 3, 2002, were a substantial factor in causing injury.
Accordingly, the Court denies the relief requested by defendant H2M Labs pursuant to CPLR 3212 as to Causes of Action Two through Nine. The Court also denies the motion seeking dismissal of all cross-claims.
THE FRAUD CAUSE OF ACTION AGAINST ALL DEFENDANTS
H2M Labs concedes that the report of September 3, 2002 contains errors. They argue that, notwithstanding the errors, that the evidence indicates that VOC's (volatile organic compounds) within the home were within acceptable guidelines. The guidelines referred to throughout the proof submitted are the World Health Organization (WHO), the Environmental Protection Agency (EPA), the Occupation Safety and Health Administration (OSHA), the Department of Environmental Conservation (DEC) and National Institute of Occupational Safety (NIOSH). The submissions by the defendant do not make clear which guidelines are applicable to residential dwellings. However, there is evidence that certain VOC's (Benzene and Toluene) exceeded available workplace guidelines and that residential guidelines would be more strict than those applicable to the workplace. There is deposition testimony from Delora O'Brien that Charles Erlanger from defendant H2M Lab admitted to her in the driveway of her house in September (2002) following the fire in August, (year) that there was Benzene in her house and that it was considered a carcinogen. This discussion was in the presence of John Conlon of Citizens and Gary Alexander of Alexander Wall. Although Mr. Erlanger had a copy of the report, it is alleged that he refused to share the results with the plaintiff. All these parties participated in a general discussion of the air quality in the house which included a representation that the air quality was safe when, it is alleged, the report provided no such justification. There is EBT testimony by Mr. Erlanger where he admits that he knew the Toluene levels exceeded the WHO guidelines before he wrote a letter dated October 18, 2002 attesting to the fact the all VOC's were within normal limits. Delora O'Brien submits an affidavit alleging she entered the premises between 6 and 12 times between September, 2002 and April 2003 that Jim Cavo and Gary Alexander both told the air quality was safe and that she would not have entered the house had she known the true condition of the chemical compounds in the home.
The deposition of Gary Alexander of Alexander Wall demonstrates that the defendant Alexander Wall maintains Material Safety Data Sheets (hereinafter MSDS) in their warehouse or they are obtained from the manufacturer. These sheets are required to be kept, pursuant to regulation from OSHA, by any company who uses ozone generating machines, such as this defendant.
In keeping such reports, the defendant is arguably aware of the properties, and the hazards, associated with chemicals and cleaning solutions used in any given remediation. Review of the MSDS sheets reveals warnings that exposure to ozone can cause" inflammation of the upper respiratory tract." Ammonium Hydroxide, according to the MSDS sheets, can cause pneumonitis or pulmonary edema, both serious respiratory conditions. John Conlon of Citizens admitted that he saw a chemical on the premises of the plaintiffs in a container with a skull and crossbones. Alexander Wall, throughout the pendency of this case, maintains that they are ignorant of the exact chemical compounds used in the instant case notwithstanding the fact that OSHA requires them to maintain the MSDS sheets on all compounds used in their fire remediation work.
To prove fraud in New York "the plaintiff must prove a misrepresentation or material omission of fact which was false and was known to be false by the defendant, made for the purpose of inducing the other to rely upon it, and the justifiable reliance of the other party on the misrepresentation or material omission and injury (Lama Holding Comp. v Smith Barney Inc., 88 NY2d 413).
In this case, the plaintiff essentially asserts that all defendants suppressed and ignored the true H2M Labs test results and that all defendants "jointly conspired to falsify their test results so as to make it appear that the premises was safe for habitation." New York does not recognize conspiracy to commit a tort as an independent cause of action (Ward v. City of New York, 2005 WL 301160). New York does recognized a cause of action for fraud based on concealment, where the party to be charged has superior knowledge or means of knowledge, such that the transaction without disclosure is rendered inherently unfair (see Miele v American Tobacco Comp. 2 AD3d 799; Stevenson Equip. v Chemig Constr. Corp., 170 AD2d 769; 60A NYJur2d, Fraud and Deceit Sec. 98). Concealment with the same intent to defraud of facts which one is duty-bound in honesty to disclose is of the same legal effect and significance as affirmative misrepresentations of fact (Nasaba Corp. v Harfred Realty Corp., 287 NY 290).
Parties are acting in concert when they act in accordance with an agreement to cooperate in a particular line of conduct or to accomplish a particular result. The agreement need not be expressed in words and may be implied and understood to exist from the conduct itself. (Restatement, supra).
Based on the above, the Court concludes that there are questions of fact raised with respect to the Tenth Cause of Action and accordingly the request for relief under CPLR §3212 by all defendants is denied.
The defendant H2M Labs and defendant Alexander Wall allege that the plaintiffs cannot seek damages for MCSS as such injury is not recognized by New York Courts. In support, the defendant offers the affidavit of Dr. William Head, a neurology and psychiatric expert who states, in substance, that MCSS is a theory and is not a diagnosis generally accepted in the relevant scientific community. In opposition, the plaintiff submits the affidavit of Dr. Marvin Boris, a specialist in allergy and immunology who avers that he has been diagnosing and treating MCSS for over 35 years and that MCSS is not a theory but is an appropriate diagnosis in certain cases such as this one and is generally accepted in the relevant scientific community, the foundation required in New York courts under the Frye standard (Frye v United States, 293 F. 1013; People v Wesley, 83 NY2d 417). The defendants submit information suggesting that MCSS has not gained acceptance in the appropriate medical communities such as the AMA, American College of Physicians, the American Lung Association (see, Reply Affirmation Alexander Wall).
The Court concludes that the defendants have submitted sufficient facts to justify a Frye hearing in order to determine the admissibility of MCSS in the instant case.
MOTIONS OF DEFENDANT ALEXANDER WALL
The defendant Alexander Wall seeks dismissal, by way of relief under CPLR §3212, of the fraud cause of action and the derivative claims on the grounds that New York does not recognize MCSS. They argue that since the substantive causes of action sounding in negligence have no basis, those claims that derive from them cannot stand (Maddox v City of New York, 108 AD2d 42).
The continued viability of the loss of services causes of action may be affected after the Court makes its determination on the Frye issue.
As to the fraud cause of action, the defendant's motion under CPLR §3212 is denied for reasons stated hereinabove. The adequacy of the pleading of the fraud cause of action has already been decided pursuant of the Order of the Hon. Robert Oliver dated March 15, 2005 and thus becomes the law of the case.
The defendant has moved for default against second third-party defendants Meticulous On Site Soot Service and Gloria's Cleaning. In the Reply Affirmation, the defendant withdrew the application as it pertains to Gloria's Cleaning and, therefore ,that portion of the motion is marked withdrawn. The proper proof of service upon Meticulous On Site Soot Service and their failure to appear having been provided, the Court hereby grants the motion for default against that defendant.
MOTIONS BY CITIZENS INSURANCE COMPANY
Citizens Insurance Company moves for relief under CPLR §3212. In support they submit the affidavit of John Conlon who is the property adjuster for the defendant. He avers, in substance, that he took no part in any remediation that was conducted. Such remediation was first completed by Alexander Wall as an independent contractor. The air quality tests were done by H2M Labs, also an independent contractor. Citizens claims, therefore, that liability cannot be imposed as employers are generally not liable for the negligence of independent contractors (Kleeman v Rheingold ,81 NY2d 270; Broderick v Cauldwell-Wingate Co., 301 NY 182).
As noted above there is evidence that John Conlon of Citizens told Jim Cavo of Alexander Wall to bring in the ozone generators. The plaintiffs submit the MSDS acquired through discovery, that manifest at least some of the substances that were used in the instant clean-up. These substances are contraindicated in the presence of strong oxidizers, such as an ozone generating machine (see, Affidavit, L. Brumley, Exhibit 1, Plaintiffs' Affidavit In Opposition). Mr. Conlon (Citizens) testified he had no knowledge of what substances were used in the clean up. Failure of Citizens to know the chemicals used before ordering use of ozone generators may constitute an independent act of negligence on their part. The affidavit of plaintiffs' expert states that such an approach would violate the standard of care required in fire remediation. Testimony by Ms. O'Brien was adduced that John Conlon requested Alexander Wall to remove the contents of the attic, take out the insulation and wash down all the rafters and put in new insulation suggesting some elements of control or supervision of the remediation work.
In opposition, the plaintiff argues that the nature of the remediation work is inherently dangerous, thus making the defendant vicariously liable and that the defendant broke its insurance contract with the plaintiff.
Generally, a party may not be cast in damages for the negligent acts or omissions of an independent contractor (Rosenberg v Equitable Life Assurance Society, 79 NY2d 663; Gravelle v Norman, 75 NY2d 779, Prosser and Keeton, Torts Sec. 71 [5th edition], see also Restatement [second] of Torts Sec. 409 [1965]). The rationale is that one who employs an independent contractor has no right to control the manner in which the work is to be done and, thus, the risk of loss is more sensibly placed on the contractor (Feliberty v Damon, 72 NY2d 112).
Despite this rule, a number of noteworthy exceptions have been created in our common law jurisprudence. In fact, it has been observed that the general rule "is now primarily important as a preamble to the catalog of its exceptions" (Kleeman v Rheingold, supra, [citing Pacific Fire Ins. Comp. v Kenny Boiler & Man. Comp. ,201 Minn 500][general rule of nonliability applies only where no good reason can be found for departing from it]; Kleeman v Rheingold, supra [citing Restatement, Second, of Torts Sec. 409, comment b, at 370].
Campus v Brooklyn Union Gas Company (17 AD3d 500) is instructive on this legal issue. The case involved a pedestrian who was injured when he tripped and fell on a patch of asphalt covering an excavation on the walkway outside this house where a gas pipe had been installed by an installer hired by the company. The Court found that although the installer was an independent contractor there was evidence at the trial that the company was involved in the work of the company in that it made spot checks of the installer's work and provided some materials, and therefore whether or not vicarious liability could be imposed on the company was a question of fact for the jury.
Here, there is evidence submitted by plaintiffs that both John Conlon of defendant Citizens actually directed Jim Cavo of Alexander Wall to introduce ozone generators in the house and further ordered where they were to be placed. There is evidence that placement of an ozone generator in the plaintiffs' home after remediation efforts utilizing certain cleaning chemicals or solutions is contraindicated, as an ozone generator is an oxidizer.
Contrary to the assertion of defendant Citizens in their Memorandum of Law, the affidavit of John Conlon as well as other proof submitted clearly establishes that the defendant Alexander Wall was retained by the defendant Citizens and not the plaintiffs. There is also evidence that the aforementioned defendants jointly suggested a second cleaning crew and that they utilize new chemicals. In his report of September 9, 2002, ¶11, John Conlon states, "Instructed Alexander Wall to remove attic insulation and contents . . ." This statement may justify an inference of control that the employer is exerting over the independent contractor. Accordingly, there is sufficient evidence submitted that the employer herein (Citizens) may have exercised a degree of control over the independent contractor (Alexander Wall) to impose liability.
It has also been stated that "one who employs an independent contractor to do work involving a special danger to others which the employer knows or has reason to know to be inherent in or normal to the work, or which contemplates or has reason to contemplate when making the contract, is subject to liability for physical harm caused to such others by the contractors failure to take reasonable precautions against such danger (Restatement [Second] of Torts Sec. 427, comments a, b]). Whether the work is inherently dangerous is normally a question of fact to be determined by the jury (Luksik v 27 Prospect Park West Tenants Corp., 19 AD3d 557). Here, Citizens had employed Alexander Wall on numerous occasions in the past for fire remediation. The question of what Citizens knew, or should have known about the properties of the chemicals used in the process, particularly if the jury ultimately determines that they were actively involved in the placement of the ozone generating machines, is a question of fact.
Based on the evidence submitted, the Court cannot conclude as a matter of law that the work involved here by the independent contractor (use of potentially toxic chemicals for remediation in a residential dwelling) is not inherently dangerous.
Accordingly, the court finds that questions of fact have been raised by the proofs submitted. The defendant Citizens' request for relief under CPLR §3212 as to Causes of Action Two through Nine (sounding in negligence against Citizens) are, therefore, denied.
Citizens also moves for summary judgment on the plaintiffs' cause of action seeking damages for breach of the insurance contract. Defendant argues that the policy in question does not include any coverage for damages for acts attributable to third parties. A review of the policy reveals that the contract neither includes or excludes such coverage. The policy does cover for direct physical loss caused by fire. Direct loss is equivalent to proximate cause (Granchelli v Travelers Ins. Co., 167 AD2d 839). The question of proximate cause is ordinarily one for the trier of fact (Massi's Greenhouses, Inc. v Farm Family Mutual Ins. Comp., 233 AD2d 844; Derdiarian v Felix Contr. Corp, 51 NY2d 308). The Court notes that the contract of insurance in question was drafted by the insurance company. The Court concludes, therefore, that the defendants request for relief under CPLR §3212 on the breach of contract cause of action is denied.
The Court also denies the defendant's motion seeking dismissal of all cross-claims, as sufficient questions of fact have been raised as to the nature and scope of the liability of all co-defendants.
MOTION BY PLAINTIFF TO STRIKE PLEADING OF DEFENDANT ALEXANDER WALL
The plaintiff alleges that Alexander Wall has systematically violated the discovery process to justify the ultimate sanction of striking their pleading. To invoke this drastic remedy, the court must determine that the party's failure to comply with disclosure was the result of willful, deliberate, and contumacious conduct (Emanuel v Broadway Mall Properties Inc., 293 AD2d 708; Poulas v. U-Haul Intl., 288 AD2d 202). A careful review of the pleadings herein causes the Court to conclude that a hearing will be required to conclude the factual and legal issues raised by the motion.
Superintendent of Insurance, etc., as Liquidator of United Community Insurance Company v. Chase Manhattan Bank
Calendar Date: May 2, 2007
Before: Crew III, J.P., Spain, Carpinello, Mugglin and Kane, JJ.
Nixon Peabody, L.L.P., Rochester (Carolyn G.
Nussbaum of counsel) and Bingham McCutchen, L.L.P., Boston,
Massachusetts (S. Elaine McChesney, admitted pro hac vice),
Thuillez, Ford, Gold, Johnson & Butler, L.L.P.,
Albany (Jonathan Honig of Feder, Kaszovitz, Isaacson, Weber, Skala,
Bass & Rhine, L.L.P., New York City, of counsel), for
Kelley, Drye & Warren, L.L.P., New York City (John
M. Callagy of counsel), for New York Bankers Association,
Cleary, Gottlieb, Steen & Hamilton, L.L.P., New
York City (Lawrence B. Friedman of counsel), for Loan
Syndications and Trading Association, amicus curiae.
Appeal from an order of the Supreme Court (Williams, J.), entered September 27, 2006 in Schenectady County, which, inter alia, denied defendants' cross motions for summary judgment dismissing the complaint.
At all times relevant hereto, the Lawrence Group, Inc. was a New York corporation and holding company owned by Albert Lawrence and Barbara Lawrence. The Lawrence Group, in turn, was comprised, in relevant part, of Lawrence Agency Group and Lawrence Insurance Group, the latter of which included subsidiaries in the form of United Community Insurance Company (hereinafter UCIC) and what ultimately became known as United Republic Insurance Company.
Between 1988 and 1992 defendants, various financial entities, entered into credit and lending agreements with the Lawrence Group and its various affiliates, which were secured by substantial consideration. Although the Lawrence Group made all scheduled payments to defendants, it periodically was found to be in breach of certain covenants put in place to monitor its financial performance. Over time, financial difficulties ensued, and the Lawrence Group amassed a debt to defendants in excess of $27 million, the recovery of which defendants deemed doubtful.
In response to this situation, the Lawrence Group entered into negotiations with defendants in December 2003 with regard to reducing, restructuring and/or repaying the debt owed. Through a series of telephone conversations and letters, a plan emerged whereby the Lawrence Group would borrow $13 million from UCIC and $14 million from United Republic Insurance, with said funds placed in the "Alpha Trust." The Alpha Trust would then loan $27 million to the Lawrence Group, with that group executing several notes in favor of the trust. Such notes, in turn, were secured by stock pledges and other guarantees. The $13 million loaned by UCIC was not disclosed for prior approval by plaintiff, the Superintendent of Insurance. Due to his role in restructuring this transaction and repayment plan, Albert Lawrence was federally indicted for, among other things, the crimes of mail fraud and wire fraud in October 1999.
Plaintiff thereafter commenced this action seeking the return of the $13 million portion of the payment made by the Lawrence Group to defendants upon the ground that defendants knew or should have known that UCIC was or would be rendered insolvent by the Alpha Trust transaction. Plaintiff thereafter moved to compel defendants to disclose all communications with counsel pertaining to such transaction. Defendants opposed that relief and cross-moved for summary judgment dismissing the complaint. Supreme Court granted plaintiff's motion to compel and denied defendants' cross motions for summary judgment, finding numerous questions of fact. This appeal by defendants ensued.[FN1]
Initially, we agree with Supreme Court that numerous questions of fact exist on the record before us, thereby precluding summary judgment in favor of defendants as to the various violations of the Debtor and Creditor Law alleged by plaintiff. Simply put, the timing and the circumstances of the repayment negotiations between the Lawrence Group and defendants, coupled with the close working relationship and information sharing between the Lawrence Group and defendants, defendants' knowledge of the precarious financial state of both the Lawrence Group and UCIC and defendants' ultimate acceptance of the transfer of funds from UCIC, are more than sufficient to raise a triable issue of fact as to, among other things, whether defendants knew or should have known that UCIC was or would be rendered insolvent as a result of the Alpha Trust transaction, the adequacy of the consideration for such transaction and whether such transaction was undertaken with an underlying intent to defraud. Despite defendants' protestations to the contrary, such issues cannot be conclusively resolved on the record presently before us. To the extent that defendants argue that "the law of New York . . . does not recognize a fraudulent transfer claim based upon the repayment of valid, antecedent debt to an unrelated lender," we need note only that UCIC had no antecedent debt to defendants and, therefore, the cases relied upon by defendants are inapposite.
Turning to the motion to compel, the attorney-client privilege set forth in CPLR 4503 (a) "may not be invoked where it involves client communications that may have been in furtherance of a fraudulent scheme, an alleged breach of fiduciary duty or an accusation of some other wrongful conduct" (Ulico Cas. Co. v Wilson, Elser, Moskowitz, Edelman & Dicker, 1 AD3d 223, 224 [2003]). Moreover, the trial court is vested with considerable discretion to supervise the discovery process, and its determination in that regard will not be disturbed absent a demonstrated abuse of that discretion (see id. at 224).
Here, as noted previously, plaintiff has tendered sufficient admissible proof of defendants' involvement in the underlying planning and execution of the Alpha Trust transaction to demonstrate that defendants may well have known of UCIC's insolvency and/or have been aided by counsel in furthering the questionable repayment plan. Stated another way, plaintiff has articulated a sufficient "factual basis for a showing of probable cause to believe that a fraud or crime has been committed, and that the communications in question were in furtherance of such fraud or crime" (Matter of Grand Jury Subpoena, 1 AD3d 172, 173 [2003]). Under such circumstances, we cannot say that Supreme Court abused its discretion in granting plaintiff's motion to compel. Defendants' remaining arguments, to the extent not specifically addressed, have been examined and found to be lacking in merit.