Source: http://nycoveragecounsel.blogspot.com/2010_06_01_archive.html
Timestamp: 2014-11-26 06:16:29
Document Index: 127823872

Matched Legal Cases: ['§ 5102', '§ 1192', '§ 2801', '§ 1192', '§ 3420', '§ 120', '§ 120', '§ 15', '§ 15', '§ 240', '§ 10', '§ 120', '§ 15', '§ 15', '§ 3105', '§ 313', '§ 3105']

Coverage Counsel: June 2010
Reprise of the No-Fault Intoxication Exclusion Cut-Back Bill Has Passed the NYS Senate
It's baaaaack. And it looks like it may both pass and be signed into law this time.
Some will recall that back in September of 2008, Governor Paterson vetoed the 2008 version of the no-fault intoxication exclusion cut-back bill that removed the exclusion of health care service expenses under Insurance Law § 5102(a)(1) if a person were injured as a result of operating a motor vehicle while in an intoxicated condition or while his ability to operate such vehicle was impaired by the use of a drug within the meaning of Vehicle & Traffic Law § 1192. In his veto memorandum, however, Governor Paterson expressed his belief that the "bill's goals are sound" and instructed his staff and interested parties to "help enact a new bill that accomplishes the intended purpose...in a manner that will protect the interests of the health service providers, injured patients and the public." This is that new bill, S7854 Breslin, and it passed the state Senate by a vote of 58-0 on June 18, 2010. This bill's identical Assembly twin, A1116 Dinowicz, went to its Rules Committee on Monday, June 28th, and is expected to come out for a vote soon.
The 2010 version of the cut-back bill limits the exception to the intoxication exclusion to the payment of "necessary emergency health services rendered in a general hospital, as defined in [New York Public Health Law § 2801(10)] including ambulance services attendant thereto and related medical screening." As its 2008 predecessor did, it also provides that where a covered person is found to have violated V&T § 1192, the no-fault insurer may sue the covered person to recover the amount of first party benefits paid or payable for that person.
As one who has suspected that some hospitals play hide the toxicology report with no-fault insurers, I had to smile when reading this sentence in the sponsors' Statement in Support: By permitting reimbursement for necessary related medical screenings, such as blood alcohol and drug tests, more screenings will occur, underlying drug or alcohol problems will be more frequently identified and addressed, and ultimately fewer drug or alcohol-related injuries will occur. We'll see. If enacted, this bill will take effect 180 days after enactment and will apply to all policies that must afford no-fault insurance which are issued, renewed, modified, altered or amended on or after such date. Does anyone out there think New York no-fault insurers won't be paying for emergency services to intoxicated persons soon?
Eins, zwei, drei, zuffa!
3. With criminal negligence, he causes physical injury to another person by means of a deadly weapon or a dangerous instrument.After being notified of the incident, Nationwide denied liability coverage to Harmer based on, among other things, the criminal act exclusion of his homeowners policy with Nationwide, which negated coverage for bodily injury "caused by or resulting from an act or omission [that] is criminal in nature and committed by an insured." Gruninger sued and obtained a money judgment against Harmer, and then brought this action pursuant to New York Insurance Law § 3420(a)(2) against Nationwide, seeking payment of the underlying judgment. Nationwide successfully moved for summary judgment, and the plaintiffs appealed.
In Slayko v Security Mut. Ins. Co. (98 NY2d 289, 292), the defendant's insured had pleaded guilty to assault in the second degree (Penal Law § 120.05 [4]), arising from an incident in which he pointed a shotgun at the plaintiff and pulled the trigger, incorrectly believing that the gun was unloaded. The Court of Appeals concluded that a provision in the insurance policy issued by the defendant excluding coverage for liability “arising directly or indirectly out of instances, occurrences or allegations of criminal activity by the insured'” did not violate public policy and that it properly excluded coverage for the plaintiff's injuries (Slayko, 98 NY2d at 294-296). Here, plaintiffs correctly concede that the shooting incident falls within the criminal act exclusion in the homeowners' policy and, based on the Court's decision in Slayko, such an exclusion is not barred by public policy. Plaintiffs contend, however, that this case is of the sort anticipated by the Court when it acknowledged in Slayko that "[a] case may arise in which a broad criminal activity exclusion . . . facially applies, yet works an injustice because the prohibited act involves little culpability or seems minor relative to the consequent forfeiture of coverage" (id. at 294). We reject that contention. Pursuant to Penal Law § 120.00 (3), "[a] person is guilty of assault in the third degree when . . . [w]ith criminal negligence, he [or she] causes physical injury to another person by means of a deadly weapon or a dangerous instrument." Contrary to plaintiffs' contention, criminal negligence as defined in Penal Law § 15.05 (4) is not synonymous with the common-law negligence standard applied in civil cases (see PJI 2:10), and not every hunting accident would be excluded under the criminal activity exclusion inasmuch as such accidents do not necessarily involve criminal negligence. New York Penal Law § 15.05 defines "criminal negligence" as:
4. "Criminal negligence." A person acts with criminal negligence with respect to a result or to a circumstance described by a statute defining an offense when he fails to perceive a substantial and unjustifiable risk that such result will occur or that such circumstance exists. The risk must be of such nature and degree that the failure to perceive it constitutes a gross deviation from the standard of care that a reasonable person would observe in the situation.Is there a fundamental difference between the facts of this case and those of the 55-gallon oil drum wielding drunken college student in Massa v. Nationwide, or do the Fourth and Third Departments merely take differing views on the criminal act exclusion and when it applies? Apparently key to the non-coverage finding in this case was the fact that the insured pleaded guilty to a crime that involved conduct amounting to criminal negligence, rather than just recklessness.
In ruling that Supreme Court properly denied summary judgment to Sirius, the Fourth Department found that the fact that Sirius's third-party claims administrator did not locate any documentation in the named insured's underwriting file was, by itself, insufficient to establish as a matter of law that neither Sirius nor one of its agents possessed documentation naming plaintiffs as additional insureds. The Fourth Department, however, disagreed with the lower court's ruling that Sirius was estopped from denying AI coverage to the plaintiffs:
Nevertheless, an insurance company that issues a certificate of insurance naming a particular party as an additional insured may be estopped from denying coverage to that party where the party reasonably relies on the certificate of insurance to its detriment (see Lenox Realty v Excelsior Ins. Co., 255 AD2d 644, 645-646, lv denied 93 NY2d 807; Bucon, Inc. v Pennsylvania Mfg. Assn. Ins. Co., 151 AD2d 207, 210-211). For estoppel based upon the issuance of a certificate of insurance to apply, however, the certificate must have been issued by the insurer itself or by an agent of the insurer (see Tribeca Broadway Assoc., LLC, 5 AD3d at 200; Niagara Mohawk Power Corp. v Skibeck Pipeline Co., 270 AD2d 867, 869; Lenox Realty, 255 AD2d at 646; see also American Ref-Fuel Co. of Hempstead v Resource Recycling, 248 AD2d 420, 423-424). The Fourth Department held that both parties failed to eliminate all triable issues of material fact regarding whether the COI was issued by or at the direction of an agent of Sirius.
HOMEOWNERS – INTENTIONAL ACT EXCLUSION – CRIMINAL ACT EXCLUSION – "CRIMINAL IN NATURE"
Massa v. Nationwide Mut. Fire Ins. Co.
(3rd Dept., decided 6/24/2010)
This is a good news/bad news post. If you live in the Third Department and are injured when a crazed teenager seeking revenge deliberately drives his car over the tent in which you are sleeping at a state park campsite at 6:15 in the morning, or when a hostile, drunken college student hurls a 55-gallon metal oil drum out of a second-story fraternity house window you just told him to get away from onto your head, there may be liability coverage for your assailants. Good news if you're the injured person; not so good news if you're the miscreant's auto or homeowners insurer.
In New York Cent. Mut. Fire Ins. Co. v Wood, 36 AD3d 1048 (3d Dept 2007), the Third Department affirmed the Supreme Court's denial of summary judgment to Progressive Northeastern, finding there to be a question of fact as to whether Progressive's insured, defendant Charles Young, knew the tent he deliberately drove over at 6:15 in the morning at a state park campsite was occupied. Young pleaded guilty attempted reckless assault and was sentenced to 11 years in prison. Said the Court:
Here, Young's assertion that he did not know that the tent was occupied could provide a sufficient basis for a finding that his conduct was merely reckless, rather than intentional or expected. Although one could conclude that Young must have appreciated the substantial risk that a tent would be occupied at such an early hour of the morning, his conduct would not be intentional, but reckless, if he disregarded that known risk in a desire to wreak havoc and damage property, without forming a specific intent to drive over an occupied tent. In the view of the Third Department, it could not be said as a matter of law that the underlying plaintiff's crushing injuries from having been driven over by the insured's car at 6:15 in the morning were "bodily injur[ies] caused by an intentional act of an insured person or at the direction of an insured person."
It's a tent. At 6:15 in the morning. At a campsite where you know people are camping. And sleeping. In tents.
Now find and cue Animal House on your DVR. In this case, the insureds' college-aged son, David Massa, became very intoxicated at a fraternity house and was asked to leave. He did so, for a while, but later returned and reentered the frat house, where students who were outside saw him standing at an open upstairs window. The inebriated David threw a piece of garbage toward the students below and "reacted with confusion and hostility" when they told him to move away from the window, which he eventually did. Thirty seconds after disappearing from the window's opening, a 55-gallon oil drum exited that window and dropped onto one of the students below, injuring that person. An eyewitness who was upstairs in the fraternity house stated to police that Massa was "really drunk" and said she saw him at the window, apparently about to "dump" what she described as a garbage can outside. She took it away and told him to stop, and Massa pushed her, causing her to fall. He then "put the oil drum through the window" and let go; it lodged briefly in the window before dropping to the ground.
Is there liability coverage for the drunken David's drum dropping conduct under his parents' homeowners policy? Supreme Court, Schenectady County (Aulisi, J.) said absolutely, and granted plaintiffs' motion for summary judgment. While agreeing with the lower court's finding that the policy's intentional act exclusion was inapplicable, the Third Department ruled that a jury must decide whether David's conduct was "criminal in nature", thereby triggering the criminal act exclusion of the parents' homeowners policy with Nationwide applies to negate coverage. In rejecting Nationwide's contention that the resulting harm was inherent in the nature and force of David's wrongful act, the appellate court held that Supreme Court properly determined that the intentional act exclusion, which negated coverage for bodily injury "caused intentionally by or at the direction of an insured, including willful acts the result of which the insured knows or ought to know will follow from the insured's conduct", was inapplicable:
The evidence does not conclusively establish that anyone was directly below the window when plaintiff looked outside, that he saw anyone below, or that he knew there was anyone there when he pushed or threw the drum outside. Therefore, there is a possible basis for a factual determination that, from plaintiff's point of view, it was unexpected, unintended, and unforeseen that the drum would strike someone, despite the fact that other interpretations are also possible. Defendant contends that plaintiff's actions were nonetheless intentional within the meaning of the exclusion because the resulting harm "'was inherent in the nature and force'" of the wrongful act (Clayburn v Nationwide Mut. Fire Ins. Co., 58 AD3d at 991, quoting Pennsylvania Millers Mut. Ins. Co. v Rigo, 256 AD2d 769, 770 [1998]). However, as no injuries would have occurred if no one had been below the window, the question as to whether plaintiff knew anyone was there prevents a determination, as a matter of law, that "'to do the act [was] necessarily to do the harm which [was] its consequence'" (New York Cent. Mut. Fire Ins. Co. v Wood, 36 AD3d 1048, 1050 [2007], quoting Progressive N. Ins. Co. v Rafferty, 17 AD3d 888, 889 [2005]). David's parents' homeowners policy with Nationwide also contained a criminal act exclusion, which negated liability coverage for injury "caused by or resulting from an act or omission which is criminal in nature and committed by an insured ... regardless of whether the insured is actually charged with, or convicted of a crime[.]" In this case, David had been charged with second degree assault, a felony, but pleaded guilty only to disorderly conduct, a violation.
In MODIFYING the order appealed from to deny both parties' summary judgment motions on the criminal act exclusion of the Massas' policy, the Third Department held:
Disorderly conduct is a violation rather than a felony or misdemeanor (see Penal Law § 240.20)[FN1] and, thus, is not a "crime" as defined in the Penal Law (see Penal Law § 10.00 [3], [6]; De Paulo v City of Albany, 49 NY2d 994, 995-996 [1980]). However, conduct may be found to be "criminal in nature" without regard to whether it led to actual criminal prosecution or conviction (see New York Cent. Mut. Fire Ins. Co. v Nationwide Mut. Ins. Co., 307 AD2d 449, 451 [2003]; see also Kehoe v Nationwide Mut. Fire Ins. Co., 299 AD2d 318, 319 [2002]). Defendant contends that plaintiff's conduct was "criminal in nature" even if his intoxication prevented him from forming an intention to cause injury and therefore from committing intentional assault (see Penal Law § 120.00 [2]), because proof of voluntary intoxication does not negate recklessness (see Penal Law § 15.05 [3]; People v Johnson, 277 AD2d 702, 704 [2000], lv denied 96 NY2d 831 [2001]). In defendant's view, plaintiff's conduct was criminally reckless. "A person acts recklessly . . . when that person is aware of and consciously disregards a substantial and unjustifiable risk of a result, where the risk is of such a nature and degree that to disregard it constitutes a gross deviation from the standard of conduct of a reasonable person" (Allstate Ins. Co. v Zuk, 78 NY2d 41, 46 [1991]; see Penal Law § 15.05 [3]). As previously discussed, there is a triable issue of fact as to whether plaintiff was aware that someone was below the window. Moreover, neither of the two witnesses who described the accident to police has been deposed or cross-examined. Their statements in the police report do not decisively demonstrate that plaintiff necessarily intended to throw the can through the window. Thus, there are triable issues of fact deserving of further inquiry as to whether plaintiff consciously disregarded a substantial risk that his conduct would cause injury. Construing the exclusion narrowly against the insurer (see Pepper v Allstate Ins. Co., 20 AD3d at 635), we find that these factual issues prevent a determination as to whether plaintiff's conduct was "criminal in nature" as a matter of law. Defendant did not demonstrate "that there is no possible factual or legal basis on which [it] may eventually be held liable under its policy" (First State Ins. Co. v J & S United Amusement Corp., 67 NY2d 1044, 1046 [1986]; accord Allstate Ins. Co. v Kemp, 144 AD2d 853, 854 [1988]). Thus, defendant was not entitled to a declaratory judgment in its favor as to the applicability of the criminal act exclusion, and Supreme Court properly denied its cross motion for summary judgment. Further, as defendant did not demonstrate that the allegations of negligence in the underlying complaint "cast [the] pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation" (Pennsylvania Millers Mut. Ins. Co. v Rigo, 256 AD2d at 770 [internal quotation marks and citations omitted]), summary judgment was properly granted to plaintiffs as to defendant's broad duty to provide a defense in the underlying action. However, summary determination as to defendant's narrower duty to indemnify was inappropriate, as we find triable issues of fact as to whether plaintiff's conduct was criminal in nature (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]. That determination must await trial on a full record in the declaratory judgment action (compare Allstate v Zuk, 78 NY2d at 47). It's a 55-gallon oil drum, for Pete's sake. Pushed or hurled from an open, second story frat house window at a frat party. Where students are known to congregate, both inside and outside the house. Not surprisingly striking a student below. Not intentional? Not criminal? Was liability insurance coverage designed to respond to these kind of acts? I understand the desire to find compensation sources for injured parties, but Wood and this case distort my notion of liability insurance, which I though was meant to cover accidentally and fortuitously caused injuries and damages.
SEVENTEEN INDIVIDUALS CHARGED AND TWELVE LOCATIONS SEARCHED IN MAJOR HEALTH CARE FRAUD AND MONEY LAUNDERING PROSECUTION On June 15, 2010, United States Attorney Loretta E. Lynch announced four separate indictments charging 17 individuals for their participation in health care fraud and money laundering schemes in the Eastern District of New York. In addition, agents of Immigration and Customs Enforcement (ICE), the Federal Bureau of Investigation, and Internal Revenue Service searched offices of 12 durable medical equipment retail companies located in South Brooklyn that were operated by the defendants and seized assets from bank accounts maintained by the defendants’ retail companies. According to the indictments, the defendants filed fraudulent claims with private insurance companies with no-fault insurance plans. Specifically, the defendants – through their retail companies – allegedly submitted false invoices to the insurance companies for reimbursable expenses for durable medical equipment at prices well in excess of the price paid by the defendants, as well as for durable medical equipment that was never obtained. The indictments allege that it was also part of the defendants’ schemes to engage in financial transactions to conceal the identity, source, and destination of the fraudulent proceeds by “laundering” them through checks they issued to the same wholesale companies. The checks were then negotiated at check cashing stores and the resulting cash was delivered back to the defendants.
2. As used in this section, "vehicle" means a "motor vehicle", as defined in section one hundred twenty-five of this chapter, except fire and police vehicles, self-propelled combines, self-propelled corn and hay harvesting machines and tractors used exclusively for agricultural purposes, and shall also include "semitrailer" and trailer" as defined in article one of this chapter, whether or not such vehicles are used or operated upon a public highway. For the purpose of this section, self-propelled caterpillar or crawler-type equipment while being operated on the contract site, shall not be defined as motor vehicles.This case addresses the question of whether a car sharing business, such as Zipcar, can be said to be "engaged in the trade or business of renting or leasing motor vehicles" within the meaning of the Graves Amendment. In the opinion of Queens County Supreme Court Justice Roger Rosengarten, it can and it is.
In determining whether the Graves Amendment applies to a car-sharing company such as Zipcar, the Court begins with the statutory text. Maraia v. Orange Regional Med. Center, 63 A.D.3d 1113 [2d Dept. 2009]. The Graves Amendment does not define “the trade or business of renting or leasing motor vehicles,” or its constituent terms “renting” and “leasing.” The consistent and established understanding of “leasing” is the “transfer of the right to possession and use of goods for a term in return for consideration.” UCC 2-A-103(j); see also First Franklin Sq. Assocs., LLC v. Franklin Sq. Prop. Account, 15 A.D.3d 529, 532 [2d Dept. 2005] (“The central distinguishing characteristic of a lease is the surrender of absolute possession and control of property to another party for an agreed-upon rent.”); Black’s Law Dictionary (8th Ed., 2004) (“To grant the possession and use of (land, buildings, rooms, movable property, etc.) to another in return for rent or other consideration.”) Black’s Law Dictionary defines “rent,” used as a noun, as the “[c]onsideration paid, usu. periodically, for the use or occupancy of property (esp. real property).” (8th Ed., 2004.) “When used as verbs, the words ‘lease’ and ‘rent’ are synonymous.” Zizersky v. Life Quality Inc., 21 Misc. 3d 871, 878 [N.Y. Sup. 2008] (citing Richards v. Princeton Ins. Co., 178 F Supp 2d 386, 395 [SD NY 2001]). Zipcar’s contract with Douglas allowed him to “use Zipcar’s vehicles, to the extent available, in accordance with the terms of this Contract and subject to paying the corresponding fees.” (Supp. Opp., Exh. C.) This bargain – use of a car in exchange for a fee – appears little different from “traditional rental car[ ]” companies, notwithstanding Zipcar’s marketing statements that contrast it with those companies. The Court finds that Zipcar is in “the trade or business of renting or leasing motor vehicles” as those words are traditionally and plainly understood.The court also found that the allegation in plaintiff's complaint that Zipcar was negligent “in the manner they rented their vehicles to the people” did not preclude summary judgment from being granted to Zipcar. While acknowledging that the Graves Amendment does not preempt such claims of direct negligence, the court noted that plaintiff did not attempt to offer any evidence or argument in support of these allegations in its moving papers:
The only relevant evidence offered is by Zipcar, which states in a sworn affidavit from a company official that its policies require a valid driver’s license for at least one year and no record of an alcohol violation for at least seven years prior to renting, and that these policies were followed before renting to Douglas. (Zipcar Opp. Exh. A.) With the record containing no conflicting evidence, the Court finds Plaintiff’s claim for direct negligence cannot withstand summary judgment. In light of the plaintiff's attempted use of Zipcar's marketing statements to disqualify it from the Graves Amendment's vicarious liability exemption in this case, will Zipcar change its website statements to distance itself less from traditional car rental businesses? To read more Coverage Counsel posts about New York cases involving the Graves Amendment, click here.
We will pay damages for which the insured becomes legally responsible because of bodily injury or property damage caused by accident and arising out of the ownership, maintenance or use of your car or any non-owned car.The policy listed Henderson as the only named insured and a Chevrolet Lumina as the only covered vehicle. The policy defined "your car" as, among other things, "any vehicle described on the declarations page of [the] policy." Because the Celebrity was not listed on the declarations page, it was not covered under the "your car" category.
a land motor vehicle with at least four wheels designed to be used mainly on public roads, or a trailer. However, it must not be owned by or furnished or available for the regular use of you or a relative. The policy further explained that "You and your mean the person [listed as the named insured on the declarations page, i.e., Henderson, and that] . . . Relative means your relative, residing in your household."
Contrary to plaintiff's contention, the court properly determined that the Thurston siblings were relatives of Henderson who resided in her household and that the Celebrity therefore was not a "non-owned car" for which defendant would be required to provide coverage with respect to the accident in question. A person is a resident of a household for insurance purposes if he or she " lives in the household with a certain degree of permanency and intention to remain' " (Matter of State Farm Mut. Auto. Ins. Cos. v Jackson, 31 AD3d 1171, 1171). Although Tynette Thurston lived at college at the time of the accident, defendant submitted evidence in support of the motion establishing that she was a resident of the household inasmuch as she lived with Henderson during the summers, received mail at Henderson's house, stayed there every other weekend, and listed that address on the Celebrity's title and insurance (see Dutkanych v United States Fid. & Guar. Co., 252 AD2d 537, 538; see also Matter of Prudential Prop. & Cas. Ins. Co. [Galioto], 266 AD2d 926). Thus, because the Celebrity was owned by a relative of Henderson who was a resident of her household, it was not a "non-owned car" under the terms of the policy entitled to coverage by defendant. Moreover, it was undisputed that David Thurston was a relative of Henderson who was a resident of her household, and defendant submitted evidence in support of the motion establishing that the Celebrity was available for his regular use inasmuch as he had unrestricted access to the Celebrity while Tynette Thurston was at college and had used it several times prior to the accident (see generally Newman v New York Cent. Mut. Fire Ins. Co., 8 AD3d 1059, 1060). Thus, the Celebrity also was not a "non-owned car" within the meaning of the policy because it was available for the regular use of a relative of Henderson who was a resident of her household. Contrary to plaintiff's further contention, the Celebrity is not entitled to coverage under Henderson's policy with defendant on the ground that defendant failed to disclaim coverage in a timely manner. It is well established that "[d]isclaimer pursuant to [Insurance Law § ] 3420 (d) is unnecessary when a claim falls outside the scope of the policy's coverage portion. Under those circumstances, the insurance policy does not contemplate coverage in the first instance, and requiring payment of a claim upon failure to timely disclaim would create coverage where it never existed" (Matter of Worcester Ins. Co. v Bettenhauser, 95 NY2d 185, 188; see State Farm Fire & Cas. Co. v Whiting, 53 AD3d 1033, 1035; see generally Zappone v Home Ins. Co., 55 NY2d 131, 137-139). Posted by
Non-Owned Car,
the jury returned a verdict against Fitzpatrick for $740,000, $500,000 of which was for future pain and suffering; of the $300,000 limit of Fitzpatrick's insurance policy with Merchants, the sum of $289,489 was available after other claims had been paid.
Fitzpatrick assigned his cause of action for Merchants' alleged third-party bad faith failure to settle within policy limits to Doherty, and she commenced this action directly against Merchants. Merchants successfully moved for summary judgment dismissing plaintiffs' complaint, and plaintiffs appealed.
In AFFIRMING the order appealed from, the three-justice majority held:
We conclude that defendant established that Fitzpatrick did not lose an actual opportunity to settle the claim at a time when all serious doubts about his liability were removed and it was clear that the potential recovery far exceeded the insurance coverage (see id.), and thus that it did not act with gross disregard for Fitzpatrick's interests (see id. at 453). We therefore conclude that defendant established its entitlement to summary judgment dismissing the complaint, and that plaintiffs failed to raise a triable issue of fact in opposition (see generally Zuckerman v City of New York, 49 NY2d 557, 562). The two-justice dissent disagreed, believing that there was sufficient evidence of Merchants' alleged bad faith to submit that issue to a jury for determination:
Necessarily inherent in an insurer's duty to its insured is a well-reasoned and thorough analysis leading to the establishment of a predicted jury verdict value in the event of a verdict in favor of the injured claimant (see PJI 4:67). The record is devoid of any assertion by defendant that it had evaluated and actually assigned a potential jury verdict value, as compared to a settlement value, to Doherty's personal injury claim. Indeed, defendant's claim representative admitted that she never assigned a value or even a value range to the claim and could not recall how she arrived at the $10,000 settlement offer that remained in place until the first day of trial, when it was increased to $25,000. The record does not contain evidence of any analysis by defendant of the potential for high-end jury verdicts in the trial venue or any examination of jury verdict reports in cases with similar injuries in similar venues. Thus, in our view, on this record, defendant utterly failed to satisfy one of the most fundamental factors essential to a finding of good faith. Although the majority concludes that defendant "investigated the claim in the underlying action," we submit that the quality and thoroughness of that investigation should be the subject of careful review. It is for the jury to decide if "[a] reasonable investigation of the facts . . . would indicate that the chances of successfully defending the [underlying] action were very remote" (State of New York v Merchant's Ins. Co. of N.H., 109 AD2d 935, 936). * * * * * We disagree with the majority's conclusion that defendant's participation in settlement negotiations is indicative of its good faith. Even the ultimate tender of full policy limits on the eve of trial cannot insulate an insurer from liability for bad faith failure to settle within policy limits (see Knobloch v Royal Globe Ins. Co., 38 NY2d 471, 478). Here, on the first day of trial, defendant's counsel advised that he needed to revise his exposure opinion and that, if the jury believed that Doherty needed surgery, the potential exposure was above $250,000. Although defendant had no expert to rebut Doherty's need for shoulder surgery, its settlement offer remained at $25,000. Four days into trial, defendant's settlement offer was increased to $55,000. The settlement demand of Doherty and her husband was $240,000—well within the policy limits and below the potential exposure indicated by defendant's counsel. Their counsel thereafter declined to continue negotiations and an opportunity to settle within the policy limits had been lost. To the extent that defendant contends that Doherty and her husband cut off settlement discussion or denied defendant an opportunity to settle, the jury could reasonably conclude that their decision to do so "was the direct result of defendant's own conduct" because "[d]efendant never indicated that it would make a fair and reasonable offer and, by failing to do so, defendant suppressed negotiations" (State of New York v Merchants Ins. Co. of N.H., 109 AD2d 935, 937). We also recognize that opportunities to settle the claim within the policy limits can be lost at various points in the evolving continuum of the litigation and claim management process. In our view, an opportunity to settle the claim may be lost early in the process and may not be recovered or the bad faith cured by subsequent conduct. In other words, we do not believe that an insurer's bad faith is measured at the moment before the jury returns a verdict. Instead, conduct by the insurer weeks or months before the jury verdict may have entrenched the parties or foreclosed the opportunity for settlement long before a jury is empaneled. Thus, in our view, the fact that defendant made a "high-low" offer four days after the trial commenced is not dispositive. Even assuming, arguendo, that the "high-low" offer was meaningful, which, in our view, it was not, such "a belated tender [does not] operate without more to exonerate a carrier from a pre-existing liability for bad-faith failure to settle within policy limits" (Knobloch, 38 NY2d at 478 [emphasis added]). Our own precedent establishes that the delayed unconditional making of a settlement offer of the full policy limits does not automatically relieve the carrier of liability (see Reifenstein v Allstate Ins. Co., 92 AD2d 715, 716). It is not the mere fact that a "high-low" offer was made, but also the timing of that offer that must be evaluated in light of all the circumstances. Therefore, we cannot agree with the majority that defendant's "high-low" offer conclusively demonstrates that defendant met its good faith obligation. Instead, it is "but a factor for the jury to consider on the question of bad faith" (id. at 716). Lastly, in our view, the contention of defendant that its reliance upon the trial court's discussions during settlement conferences provides some form of absolution from a bad faith claim is misplaced. We conclude that, had the trial court recommended a settlement figure more favorable to Doherty, such as $700,000, defendant would have summarily rejected the trial court's view. In any event, we are well aware that, during settlement conferences, a trial court is not provided full access to the files and investigative materials of the parties. In our view, defendant's good faith is measured by what it knew and had in its files—not by a trial court's view of the case based upon limited information provided during a settlement conference. Therefore, we conclude that there are issues of fact whether defendant "engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that [its] insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted" (Pavia, 82 NY2d at 453-454; see Kumar v American Tr. Ins. Co., 57 AD3d 1449). Posted by
Here's something you don't see every day: Define "thereafter"...
While doing some research earlier this week on no-fault claim presentment fraud and the concept of "fraud in part, fraud in whole" as it applies to no-fault claims, I ran across a number of American Arbitration Association no-fault arbitration decisions on policy procurement or application fraud and misrepresentation. Provable insurance fraud is often a moving target, as insureds and claimants are often slippery and indefinite in their answers about conduct suspected to have been fraudulent. Sometimes what looks like, sounds like and walks like a duck, however, turns out to not be a duck. And sometimes even honest insureds and claimants who perceive they are being investigated for possible fraud understandably will be guarded in their answers, requiring more effort in obtaining definite and precise answers. My experience is that insurers know this and require an appreciable quantum of evidence before they will deny a claim based on fraud in the policy application, loss commission, or claim presentment. This was a $339 claim for a psychiatric diagnostic interview examination, psychotherapy and review of records by the applicant's owner. The insurer denied and defended the claim based on the assignor's asserted policy application misrepresentation about her residence, a/k/a rate evasion. Arbitrator Horn's decision lays out a road map of what a no-fault insurer must do to establish a rate evasion/application material misrepresentation defense, economies of scale notwithstanding. Fatal to Esurance's application fraud defense in this matter were:
what Arbitrator Horn determined was unclear and indefinite proof from the assignor's EUO of her misrepresentations about her Rhinebeck, New York residence in applying for her personal auto policy; the lack of the policy application offered into evidence; and
The fact that Esurance's counsel, who appeared by telephone, attempted to prove that the Rhinebeck address given by the assignor during the application process was a commercial building by stating that she had called the building's owner and he had told her so probably didn't help. Arbitration Horn's decision does set forth some seminal statutory and case law on this issue, however, that is worth bookmarking:
* * * * * In the arena of No-Fault insurance coverage, it is well settled that a policy cannot be cancelled retroactively under Insurance Law § 3105 (b) even if an insured has made misrepresentations in procuring it. See, e.g., Matter of Insurance Co. of N. Am. v. Kaplun, 274 A.D.2d 293, 713 N.Y.S.2d 214 (2000); Matter of Liberty Mut. Ins. Co. v. McClellan, 127 A.D.2d 767, 512 N.Y.S.2d 161 (1987); Teeter v. Allstate Ins. Co., 9 A.D.2d 176, 192 N.Y.S.2d 610 (1959), affd 9 NY2d 655, 173 N.E.2d 47, 212 N.Y.S.2d 71 (1961). Rather, Vehicle and Traffic Law § 313 "supplants an insurance carrier's common-law right to cancel a contract of insurance retroactively on the grounds of fraud or misrepresentation, and mandates that the cancellation of a contract pursuant to its provisions may only be effected prospectively". Matter of Liberty Mut. Ins. Co. v. McClellan, 127 A.D.2d 767, 769, 512 N.Y.S.2d 161 (1987). See Cruz v New Millennium Constr. & Restoration Corp., 17 A.D.3d 19, 793 N.Y.S.2d 548, 2005 N.Y. Slip Op. 02336 (3rd Dept., March 24, 2005); Matter of Insurance Co. of N. Am. v. Kaplun, 272 A.D.2d 293 (2d Dept. 2000). See DiDonna v. State Farm Mut. Auto. Ins. Co., 259 A.D.2d 727, 687 N.Y.S.2d 175 (1999).
To be entitled to bar recovery, an insurer must establish by clear and convincing evidence that an applicant obtained the subject insurance policy by making “material misrepresentations” on the insurance policy application. See Insurance Law § 3105 (b). A misrepresentation is deemed “material” if “knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such contract”. Id. Without clear and convincing proof of both a misrepresentation and the materiality of that misrepresentation, a policy application fraud/misrepresentation defense will fail. Every time. Even if the amount in dispute is only $339.
This SUM coverage does not apply . . . [t]o bodily injury to an insured incurred while occupying a motor vehicle owned by that insured, if such motor vehicle is not insured for SUM coverage by the policy under which a claim is made. Polyakov demanded arbitration of his UM claim, and NYCM commenced this special proceeding to stay that arbitration. The Supreme Court denied NYCM's petition and directed the parties to proceed to arbitration.
The policy language in question was not ambiguous, and the petitioner was entitled to have the provisions it relied on to disclaim coverage enforced (see Matter of USAA Cas. Ins. Co. v Hughes, 35 AD3d 486, 487-488; see generally Baughman v Merchants Mut. Ins. Co., 87 NY2d 589, 592; Government Empls. Ins. Co. v Kligler, 42 NY2d 863, 864-865). The SUM endorsement under the subject policy provided, in relevant part, that "This SUM coverage does not apply . . . [t]o bodily injury to an insured incurred while occupying a motor vehicle owned by that insured, if such motor vehicle is not insured for SUM coverage by the policy under which a claim is made." This language is not ambiguous and the terms must be construed according to their plain and ordinary meaning. This policy exclusion unambiguously excluded from SUM coverage compensation for bodily injuries sustained by an insured when injured in a motor vehicle accident with an uninsured vehicle, while occupying a motor vehicle he or she owns, which vehicle was not covered under the policy (see Matter of USAA Cas. Ins. Co. v Hughes, 35 AD3d at 488; Matter of Utica Mut. Ins. Co. v Reid, 22 AD3d 127, 129; Matter of New York Cent. Mut. Fire Ins. Co. [Prehoda], 231 AD2d 829, 829-830). There is no dispute that Polyakov, at the time of the accident, was occupying a vehicle, the motorcycle, that he owned but that was not covered under the subject policy. The Appellate Division also rejected Polyakov's contention that UM coverage was available under Part C--Uninsured Motorists Coverage of his father's personal auto policy with NYCM, finding:
[T]he exclusion from coverage also would have been applicable under the mandatory uninsured motorists provision of the policy, which similarly provides that the petitioner does "not provide Uninsured Motorists Coverage for bodily injury' sustained: 1. By an insured while occupying', or when struck by, any motor vehicle owned by that insured' which is not insured for this coverage under this policy." However, as the petitioner correctly argues, the mandatory uninsured motorists provision was removed from the subject policy by amendment pursuant to Section III of the Amendment of Policy Provisions - New York, and the SUM endorsement was added (see generally 11 NYCRR 60-2.3[e]). Posted by
Owned Vehicle Exclusion,