Wednesday, November 23, 2016

Poults, Planes, Piling & Named Perils -- A Fowl Coverage Decision for Thanksgiving

Larson v. Fireman's Fund Insurance Company
(Iowa Sup. Ct., decided 12/14/1965)

Did you know that a "turkey intitle:insurance" search on Google Scholar in all state and federal court databases returns 54 results?  No?  Well, now you do.

And that turkeys are NOT the dumbest animal on the planet?  In fact, I've tried cases before ceiling-staring judges who may also have been suffering from tetanic torticollar spasms, and they were no dumber that the tryptophan-laden fowl that will be my main course tomorrow.

And that while turkeys can be emotionally comforting on airplanes (the Air Carrier Access Act of 1968 legally permits customers to fly with emotional support animals), they are not emotionally comforted by overflying ones?  It's the predator shadow thing, apparently (see captioned image, infra).

A poult is a young turkey being raised for food.  Plaintiff's family owned and operated a turkey farm in Iowa (still does, apparently, albeit with two fewer barns and 11,000-12,000 fewer turkeys as of two weeks ago) that as of 1965 had raised and marketed about 9,500 turkeys a year for 15 years.

On March 11, 1964 plaintiff purchased 4,335 poults and, being the prudent poultry farmer he was, that same day obtained a "turkey floater policy" from Fireman's Fund Insurance Company.  In fact, I think Fireman's Fund's company slogan just before it became "Protecting Your Future for 150 Years" was "Fireman's Fund -- We Insure Turkeys".  Rumor has it that FF's underwriters came up with that beaut.

In any event, plaintiff's turkey floater policy did not provide all-risk turkey coverage, but insured against death of the turkeys from only certain perils and causes:
INSURED AGAINST LOSS BY DEATH: * * * (A) Directly resulting from: (a) Fire, Lightning, Explosion, Smoke, Vandalism and Malicious Mischief; * * * (B) Caused by huddling, piling, smothering, drowning, or freezing ONLY: (a) As the immediate and direct result of one of the above mentioned perils insured against coming in contact with the turkeys, or (b) If one of the perils mentioned (exclusive of collision, upset or overturning) causes damage to or on the premises of the Assured[.]
As pluck would have it, on July 21, 1964 at approximately 5:00 p.m. a single engine airplane, flying at an estimated altitude of only 150-200 feet, passed over the plaintiff's turkey farm and its poult-holding turkey pens and shelters. Early that evening, plaintiff and his wife went to the turkey pens and found hundreds of dead turkeys piled tight under the shelters.  All were large birds averaging 23 ½ lbs. They were being kept in pens just east of the smaller turkeys the witnesses observed running when the plane went over at 5 p. m.

An investigation and count the next day established that 2,066 large turkeys insured by Fireman's Fund had died. Plaintiff fixed their value at five dollars each ($10,333 in 1964 dollars and $79,591 in 2016 dollars). Subsequent investigation led plaintiff to believe the turkeys had died of suffocation after being frightened by the 5 p. m. low flying plane. Piling and smothering was the cause, but plaintiff needed a covered peril to warrant recovery.  There wasn't a fire, lightning, smoke or vandalism.  Plaintiff's claim to Fireman's Fund for the dead turkeys instead asserted that their death was due to the piling-caused and smothering-caused malicious mischief of the low flying plane's unidentified pilot.

Turkey Predator Silhouettes
In support of the claim, plaintiff's turkey expert, Tom Slaughter (okay, maybe his first name was Robert), testified (yes, at trial) that turkeys are very alert to flying objects (probably because they're looking up all the time; see, tetanic torticollar spasms, supra) and are easily frightened. He spoke of his own experience of having had turkeys die because of having been frightened. "The birds that die from fright will die in a pile. I mean they will get to an object and that stops them, but they just keep piling on top of one another, whether it be from flying objects or from rats or anything else, they will do the same identical thing. I have had experience of a flock that died from the fright of an airplane. That was in 1959."

I know what you're thinking.  Doesn't help with the dumbest animal rep, now does it?

At the close of the evidence the trial court directed a verdict for Fireman's Fund, finding the evidence insufficient to raise a jury question on malicious mischief and proximate cause.   Plaintiff appealed and the Iowa Supreme Court AFFIRMED, holding that the trial evidence regarding malicious mischief was insufficient:
Plaintiff calls to our attention several cases in which recovery was allowed because of low flying planes. In Leisy v. United States, D.C., 102 F.Supp. 789, low flying Navy planes near Hackensack, Minnesota frightened plaintiff's minks, causing the mothers to kill their kits. Recovery was allowed on the theory of negligence. In Maitland v. Twin City Aviation Corporation, 254 Wis. 541, 37 N.W.2d 74, recovery was also allowed for loss of minks caused by low flying planes in violation of the 500 foot safety standard rule. Matson v. United States, 171 F.Supp. 283, 145 Ct.Cl. 225, holds plaintiff entitled to damages from military aircraft flying below the minimum altitude. In Aaron v. United States, 311 F.2d 798, 160 Ct.Cl. 295, recovery for taking of an easement of flight was allowed as a result of jets flying in violation of the 500 foot safety rule. These cases do not consider malice or malicious mischief, they only support tort liability of the pilot or owner of the low flying plane. They do not support recovery here.
Apparently prolicidal minks are sKITtish creatures, as well.  I did not know that either.

Perhaps the bestest thing of all about being an insurance coverage lawyer is the variety of factual scenarios that give rise to the coverage questions and contests I see in my practice.  Who'd a thunk I'd learn something today about named peril turkey floater insurance coverage? Not me, or Mortimer Snerd, that's for sure.

Happy Thanksgiving all.

Monday, November 14, 2016

Get Your Current 11 NYCRR Part 216 (NY Insurance Regulation 64) Here

Go on.  Find a copy of New York Insurance Regulation 64 (11 NYCRR Part 216) on the New York Department of Financial Services' website.  I double dog dare ya.  Click as many links as you want within the DFS website and you still won't find Regulation 64 in a current, single document.  Tell me I'm wrong.

Google "New York Insurance Regulation 64" (without the quotation marks) instead, and the first search result points to a non-current version of Reg 64 hidden but still found on the NYSDFS's website server.  Nice, huh?

It would appear that the only path currently existing through the NYSDFS's website to that which represents the embodiment of New York's Unfair Claims Settlement Practices Act (though the reg is not an act) is on the footer of the DFS's website under "Laws and Regs".  Of course, one would need to know that "NYCRR" refer to the New York Codes, Rule and Regulations or by process of elimination click that link to find one's way to Title 11, New York's insurance regulations.  Three clicks later (Title 11 Insurance, Chapter IX Unfair Trade Practices, and Part 216 Unfair Claim Settlement Practices and Claim Cost Control Measures) and you might find your way to what is commonly known to New York insurers and insureds as Regulation 64.  Congratulations.  Now bookmark that location.

Or click HERE and download what I compiled earlier today as what passes as the current version of Regulation 64.  You're welcome.

Monday, October 10, 2016

Can You Find The The Mistake?

State Farm Fire & Cas. Co. v. Gloria
(Sup. Ct., Suffolk Co., decided 3/14/2016)

When I was blogging regularly I rarely blogged about decisions from trial-level courts.  Trial-level decisions are rarely significant enough to merit your time and my effort on these pages.  But I came across this decision today and decided to throw it on here as a sort of can-you-find-the-mistake exercise.

We all know that for liability insurers the duty to defend is broader than the duty to indemnify and is determined, in the first instance, by the allegations of the complaint.  You may also know that once that the liability insurer can establish that it will have no duty to indemnify, its duty to defend terminates.  And that collateral estoppel, when applicable, precludes the re-litigation in a subsequent action of an issue raised and decided against an insured in a prior action.

I think the court made a mistake in deciding State Farm's motion for summary judgment.  Can you find it?  Comment below if you can.

Summary Judgment Granted to Commercial Property Insurer on New York General Business Law § 349 Deceptive Acts and Practices Claim

JD&K Assocs. LLC v. Selective Ins. Group, Inc.
(4th Dept., decided 10/07/2016)

During last month's NYSBA Law School for Insurance Professionals' Interactive Presentation with an Expert Engineer: Homeowners Insurance topic I reminded those attending about the importance of vetting the insurer's expert.

In this case, Selective had been sued, in part, for its allegedly deceptive act and practice of commissioning and using in the making its coverage decisions "Investigative Engineering Analysis Report[s]" that had been prepared and signed by someone who was not an engineer.  The plaintiff insured alleged that this was a general practice of Selective that violated New York General Business Law § 349.  Why add a GBL § 349 claim to a breach of contract action?  To recover treble damages and one's attorneys' fees for prosecuting the action if successful.

In June 2014, the Appellate Division, Fourth Department, agreed with Selective that Supreme Court had erred in denying its motion for summary judgment dismissing plaintiff's bad faith, misrepresentation and fraud cause of action, but affirmed the lower court's denial of Selective's dispositive motion to dismiss the complaint's GBL § 349 deceptive acts and practices cause of action because discovery relating to that cause of action was not yet complete, holding:
The court also properly denied that part of defendants' motion seeking summary judgment dismissing the fourth cause of action, alleging deceptive acts and practices under General Business Law § 349.  Plaintiff alleged that the Vallas employee who investigated the loss and prepared the Vallas Report was not an engineer, and that defendants misrepresented his credentials to plaintiff. Plaintiff further alleges that defendants' conduct was deceptive and part of a pattern of conduct that was not unique to plaintiff, but was directed at their policyholders generally. Certain discovery relevant to the General Business Law § 349 cause of action remains outstanding, and thus the court properly concluded that summary judgment with respect to that cause of action would be premature (see Skibinsky v State Farm Fire & Cas. Co., 6 AD3d 975, 976 [2004]; see generally Colombini v Westchester County Healthcare Corp., 24 AD3d 712, 715 [2005]). Inasmuch as punitive damages may be available under General Business Law § 349 (see Ural v Encompass Ins. Co. of Am., 97 AD3d 562, 565 [2012]; Wilner v Allstate Ins. Co., 71 AD3d 155, 167 [2010]), the court properly concluded that dismissal of plaintiff's claim for punitive damages would also be premature.
After discovery was complete, Selective again moved for summary judgment on the GBL § 349 cause of action, and Supreme Court again denied that motion, instead granting plaintiff's cross motion to amend that cause of action.  Selective appealed and the Fourth Department unanimously REVERSED Supreme Court's order, finding that Selective had established as a matter of law that its conduct in this case was not consumer-oriented (the first of the three required elements of a GBL § 349 claim) and that, in any event, plaintiff was not injured as a result of the allegedly deceptive act or practice (the third of the three required prima facie elements).  The Fourth Department explained: 
We agree with defendants that they met their initial burden of establishing as a matter of law that their conduct was not consumer-oriented. It is well settled that, although the conduct need not be repetitive or recurring to qualify as consumer-oriented, a plaintiff "must demonstrate that the acts or practices have a broader impact on consumers at large" and, thus, "[p]rivate contract disputes, unique to the parties, . . . [do] not fall within the ambit of the statute" (Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25; see New York Univ. v Continental Ins. Co., 87 NY2d 308, 321). Defendants established that the conflict here stems from "a private' contract dispute over policy coverage and the processing of a claim which is unique to these parties, not conduct which affects the consuming public at large" (New York Univ., 87 NY2d at 321). Indeed, the record establishes that defendants' decision to disclaim coverage was based on the particular facts concerning the nature of plaintiff's property damage and the language in the policy (see Security Mut. Life Ins. Co. of N.Y. v DiPasquale, 283 AD2d 182, 182, lv dismissed 97 NY2d 653, 700), and that the alleged deceptive practice here, i.e., defendants' use of the report from a non-engineer in disclaiming coverage, had the potential to affect only a single commercial property loss claim between plaintiff and defendants (see Canario v Gunn, 300 AD2d 332, 333). Contrary to plaintiff's contention, the information concerning defendants' prior use of Vallas' investigative services contained in the affidavit of defendants' in-house complex claims counsel, which was based upon his personal knowledge, established that defendants had not implemented any type of practice of hiring an unqualified site investigator and then misrepresenting his or her qualifications to render an investigative report as a method of deceiving unsuspecting policyholders and improperly disclaiming coverage. We further conclude that the fact that defendants may have disclaimed coverage based in part on reports drafted by Vallas in a few commercial property cases closed within the last 15 years is insufficient to raise a material issue of fact whether the allegedly deceptive practice was standard or routine such that it potentially affected similarly situated consumers (cf. Oswego Laborers' Local 214 Pension Fund, 85 NY2d at 26-27; North State Autobahn, Inc. v Progressive Ins. Group Co., 102 AD3d 5, 14), or whether the alleged conduct had a broad impact on consumers at large as contemplated by the statute (see Anesthesia Assoc. of Mount Kisco, LLP v Northern Westchester Hosp. Ctr., 59 AD3d 473, 479-480). Furthermore, we reject plaintiff's contention that the court properly determined that the investigator's deposition testimony indicating that he prepared a significant number of engineering analysis reports for defendants in the past raises a material issue of fact whether the allegedly deceptive conduct impacted consumers at large. The underlying inference supporting that determination is that, if the investigator had prepared other reports for defendants, then defendants must have also misrepresented the investigator as an engineer to other policyholders, and such an inference is purely speculative and unsupported by the evidence in the record (see generally Edelman v O'Toole-Ewald Art Assoc., Inc., 28 AD3d 250, 251, lv denied 7 NY3d 706; Drepaul v Allstate Ins. Co., 299 AD2d 391, 392-393; Teller v Bill Hayes, Ltd., 213 AD2d 141, 149, lv dismissed in part and denied in part 87 NY2d 937). 
Even assuming, arguendo, that there is an issue of fact whether defendants' conduct was materially misleading, we nonetheless further agree with defendants that the record establishes that plaintiff was not injured as a result of the allegedly deceptive act or practice. "[W]hile the statute does not require proof of justifiable reliance, a plaintiff seeking compensatory damages must show that the defendant engaged in a material deceptive act or practice that caused actual, although not necessarily pecuniary, harm" (Oswego Laborers' Local 214 Pension Fund, 85 NY2d at 26; see generally Small v Lorillard Tobacco Co., 94 NY2d 43, 55-56). Here, the submissions establish as a matter of law that the alleged misrepresentation of the investigator's credentials, and/or any reliance on the conclusions set forth in the report, did not cause actual harm to plaintiff. With respect to the claimed injury arising from the disclaimer of coverage, the record establishes that defendants' decision was based upon the factual observations contained in the report, i.e., that the depressions in the concrete slab were caused by settling of the fill with water discharge from a drain pipe as a contributing factor, coupled with defendants' interpretation of the policy exclusions as applied to those facts. The disclaimer was wholly unrelated to any misrepresentation made by defendants to plaintiff regarding the investigator's credentials. That conclusion is further supported by the fact that defendants erroneously continued to disclaim coverage even after the policy extension applicable to certain water damage was brought to their attention (see JD&K Assoc., LLC, 118 AD3d at 1402-1403). To the extent that plaintiff contends that it suffered actual harm because it was compelled to retain a professional engineer to investigate the cause of the property damage, that decision resulted from defendants' adherence to the disclaimer given its interpretation of the policy despite the investigator's factual observations that supported coverage under the applicable policy extension (see id.). We note that the factual findings in the report are not challenged by plaintiff and are essentially indistinguishable from the findings made by plaintiff's professional engineer. We thus conclude that plaintiff's alleged injuries were caused by a disclaimer made on the basis of the undisputed factual circumstances of the property damage and defendants' adherence to its erroneous interpretation of the policy language, and did not result from any misrepresentation to plaintiff about the investigator's credentials (see Amalfitano v NBTY, Inc., 128 AD3d 743, 746, lv denied 26 NY3d 913).
Important case.  Be sure to read it through if your job includes the oversight or direct handling of litigated first-party property coverage disputes.

Tuesday, October 4, 2016

Multiple Claimants But Limited Coverage: Chronological Priority or Pro Rata Payments?

One of our auto insurer clients called me this morning with a question.  Does New York follow the "first in time, first in right" (or first come, first served) or pro rata method of making payments of limited coverage to a single occurrence's multiple claimants?  The loss scenario was a familiar one:  insured with a $25,000 property damage coverage limit totals five autos in one swell foop.  Four of the vehicles had physical damage coverage; one did not.  By what method should the auto insurer pay each of the five claimants?  

It had been a while since I looked at that question, so I did a smidge of research (on Google Scholar of course) and rediscovered that New York generally follows the “first in time, first in right” or pro rata payment rule for third-party liability coverage payments in cases where there is limited liability coverage but multiple claimants.  There is no statutory (Vehicle & Traffic Law or Insurance Law) or regulatory (Regulation 64) law in New York controlling or answering this question other than for vehicles for hire (Vehicle & Traffic Law § 370[1]).  Case law, however, indicates that the New York follows the “first in time, first in right” method or principle in paying multiple PD claims for other than damages caused by vehicles for hire. 

In Cruz v. Covert (2013 NY Slip Op 30874 [Sup. Ct., Suffolk Co., 2013], for example, the court held:

Generally, absent bad faith, an insurer is not obligated to pay out claims ratably and/or consolidate them (Allstate Ins. Co. v Russell, 13 AD3d 617). Instead, under the "first to settle rule," it is recognized that insurers are able to settle with any or several of multiple claimants, even though these settlements deplete or exhaust the policy limits (see STV Group v American Cont. Props., 234 AD2d 50Duprey v Security Mut. Cas. Co., 22 AD2d 544David v Bauman, 24 Misc 2d 67).

In an auto bodily injury context, the court in Gerdes v. Travelers Ins. Co. (109 Misc. 2d 816 [Sup. Ct., Suffolk Co., 1981]), similarly held:

It is not asserted that the policy at issue here provided for ratable distribution (Stolove v Fidelity & Cas. Co. of N. Y., 157 Misc 106) and, with one exception, there appears to be no statutory provision which requires a liability insurer to make a distribution of the proceeds of a policy among multiple claimants injured in an automobile accident on a pro rata basis. The one exception is section 370 of the Vehicle and Traffic Law which provides for such a distribution with respect to vehicles for hire. The fact that the Legislature has explicitly named a class of persons who are to be benefited by a ratable distribution of insurance proceeds raises an inference that the omission of such a provision with respect to others was intentional (see McKinney's Cons Laws of NY, Book 1, Statutes, § 240; see David v Bauman, 24 Misc 2d 67).

Where section 370 is not applicable and there is no pro rata provision in the policy, the contest of multiple plaintiffs for the limited assets of a common defendant has generally — at least in this jurisdiction — been solved in terms of chronological priority, the "first in time, first in right" rule (David v Baumansupra; see 32 U of Chi L Rev 337). Thus, an insurer who settles with some parties injured in a collision is liable only for the remainder of the policy limits even though it may have been aware that the total claims would probably exceed the policy limits (Duprey v Security Mut. Cas. Co., 22 AD2d 544O'Dwyer v Grove Serv. Corp., 15 Misc 2d 154, affd 15 AD2d 457), and an injunction enjoining payment by an insurer on judgments already obtained until after all claims have been reduced to judgment so there can be a pro rata distribution will not issue (Pisciotta v Preston, 170 Misc 376; see Ann., 70 ALR2d 416).  Research reveals only one recorded case in New York where a court has ordered a ratable distribution among multiple plaintiffs (see Wasserman v Glens Falls Ins. Co., 19 AD2d 552) but in the cited case the two claims (that of the injured plaintiff and the derivative claim of her spouse) were joined in one suit.

In answering the client's question, I presumed that the policy at issue does not provide for ratable payments in cases of multiple claimants from a single occurrence.  In the loss scenario described, therefore, the insurer could elect to follow the “first in time, first in right” or chronological priority method of paying the multiple claims. 

What I recommended the insurer do was to try to obtain agreements from all five claimants (the one uninsured claimant and four subrogating insurer claimants) to accept a pro rata share of the $25,000 policy limit.  Section 216.10(e) of Regulation 64 would still require written offers “[w]ithin ten business days of the completion of [the insurer's] investigation of [each] property damage claim”, and I recommended each such written offer advise each claimant that the sum of all five claims exceeds the $25,000 policy limit, just to be on the safe side of Regulation 64 compliance.

The best outcome for the insured obviously would be for the insurer to obtain releases from all five claimants for pro rata payments to all five claimants, but the uninsured claimant may not be as willing to accept a pro rata amount as the subrogating auto physical damage insurers likely will be.  In such a case, I would make the best deal possible with the uninsured claimant and pay a pro rata  amount to the remaining insurer claimants in exchange for releases.  Any claimant not willing to provide a release of the insured in exchange for a pro rata payment could be paid in full from any remaining coverage limit on a chronological priority -- first in time, first in right -- basis. 

Sound right?  Let me know by commenting below if you think differently.    

Monday, December 28, 2015

Declaratory Judgment Granted on Default Serves as Res Judicata of Previously Commenced Provider Recovery Claim

Daily Med. Equip. Distrib. Ctr., Inc. v. American Tr. Ins. Co.
(App. Term, 2nd Dept., decided 12/18/2015)

Collateral estoppel is issue preclusion.  Res judicata, Latin for "a matter [already] judged", is claim preclusion.

Plaintiff provider sued American Transit in Queens Civil for for medical supplies provided to its assignor.  After this action was commenced, American Transit commenced a declaratory judgment action in Bronx Supreme against the assignor and all billing providers.  All defendants defaulted in that Bronx Supreme action, and Supreme Court granted American Transit's motion for a default judgment against all defendants, finding that all defendant providers, including the plaintiff in this action, Daily Medical Equipment Distribution Center, were not entitled to recover no-fault benefits arising out of the subject motor vehicle accident.  American Transit then cross-moved for summary judgment in this action based on the declaratory judgment that had been granted by default in Bronx Supreme.

In AFFIRMING Queens Civil's order that denied plaintiff's motion and granted American Transit's cross motion for summary judgment, the Appellate Term agreed that res judicata applied to preclude plaintiff's claim for recovery, even though the declaratory judgment had been granted on default:
Contrary to plaintiff's contention, the instant action is barred under the doctrine of res judicata based upon the declaratory judgment (see Vital Meridian Acupuncture, P.C. v Republic W. Ins. Co., 46 Misc 3d 147[A], 2015 NY Slip Op 50222[U] [App Term, 2d, 11th & 13th Jud Dists 2015]; EBM Med. Health Care, P.C. v Republic W. Ins., 38 Misc 3d 1 [App Term, 2d, 11th & 13th Jud Dists 2012]). To hold otherwise could result in a judgment in this action which would destroy or impair rights established by the Supreme Court (see Schuykill Fuel Corp. v Nieberg Realty Corp., 250 NY 304, 306—307 [1929]; Ava Acupuncture, P.C. v NY Cent. Mut. Fire Ins. Co., 34 Misc 3d 149[A], 2012 NY Slip Op 50233[U] [App Term, 2d, 11th & 13th Jud Dists 2012]). Moreover, the declaratory judgment is a conclusive final determination notwithstanding that it may have been entered on default (see Lazides v P & G Enters., 58 AD3d 607 [2009]; Matter of Allstate Ins. Co. v Williams, 29 AD3d 688, 690 [2006]; Matter of Eagle Ins. Co. v Facey, 272 AD2d 399 [2000]; Ava Acupuncture, P.C. v NY Cent. Mut. Fire Ins. Co., 34 Misc 3d 149[A], 2012 NY Slip Op 50233[U]). 

"Not It" Affidavit Sufficient to Merit Summary Judgment on Lack of Coverage Defense

New Way Med. Supply Corp. v. Dollar Rent A Car
(App. Term, 2nd Dept., decided 12/8/2015)

In support of its motion for summary judgment to dismiss this provider recovery action, Dollar Rent A Car submitted an affidavit from its third-party claims examiner, which stated:
     2.  [A] Dollar vehicle was not involved in an alleged vehicular collision on June 18, 2011, a loss for which plaintiff's assignor allegedly received medical treatment[.] 
     6.  The claimant Jacen Adams (nor Adams Jacen) did not appear in any claimant name search. There are no records of an accident associated with said individual in Dollar's system.  
     7.  Secondly, Dollar is a self-insured entity and does not issue automobile policies to individuals or other entities.  
     8.  Based upon the foregoing, I can attest with certainty that a Dollar vehicle was not involved in this particular vehicular collision on June 18, 2011, the loss for which plaintiff claims entitlement to No-Fault reimbursement.
Plaintiff provider argued that Dollar's denial of coverage as supported by this affidavit was insufficient to warrant summary judgment.  Queens Civil (Cheree A. Buggs, J.) and the Appellate Term disagreed:
In our view, contrary to plaintiff's contention on appeal, this was sufficient to establish, prima facie, defendant's lack of coverage defense (see Delta Diagnostic Radiology, P.C. v American Tr. Ins. Co., 44 Misc 3d 136[A], 2014 NY Slip Op 51240[U] [App Term, 2d, 11th & 13th Jud Dists 2014]; Jesa Med. Supply, Inc. v NYC Tr. Auth., 38 Misc 3d 138[A], 2013 NY Slip Op 50188[U] [App Term, 2d, 11th & 13th Jud Dists 2013]). Moreover, contrary to plaintiff's further contention on appeal, "defendant was not required to describe in detail the steps which it had taken in searching its records in order to demonstrate that there was no coverage in effect at the time of the accident" (Delta Diagnostic Radiology, P.C. v American Tr. Ins. Co., 44 Misc 3d 136[A], 2014 NY Slip Op 51240[U], *1). In opposition to defendant's prima facie showing, plaintiff failed to demonstrate the existence of a triable issue of fact.

Monday, December 21, 2015

'Twas The Risky Night Before Christmas -- How an Insurance Professional Reads the Classic (Reprised)

[Those of you who have been reading this blog for at least the past five years will recognize this.  Reprised for our more recent and current readers.] 


'Twas the night before Christmas (12:01 a.m. 12/25) and all through the house (single family, joisted masonry, e.c.3, terr. 44, pc5), not a creature was stirring, not even a mouse (thorough pride of ownership and excellent maintenance).
The (flame-retardant) stockings were hung by the (contractor-installed?) chimney with care, in hopes that St. Nicholas soon would be there (check protective safeguard discount -- application lists deadbolt locks and central station alarm system).

The children (ages 4, 8, 14, & 16) were all nestled snug in their beds (check MVR on 16-year-old) while visions of sugar plums danced in their heads (check for drug use; possible malfunctioning furnace/CO poisoning issue).

Ma in her kerchief (scheduled heirloom) and I in my cap (wearing headgear to bed? possible inadequate heating system) had just settled down for a long winter's nap. (Check employment -- is insured sleeping all day?)

When out on the lawn there arose such a clatter (check into condition of premises, housekeeping, etc.), I jumped out of bed to see what was the matter.

Away to the window I flew like a flash, threw back the curtains and tore open the sash (intentional destructive act, no coverage; also, appears insured only wearing a cap in front of uncovered window -- possible emotional distress claim by neighbors).

When what to my wondrous eyes should appear, but a miniature sleigh and eight tiny reindeer. (check if sleigh is rated business use and corporate owned.) With a little old driver so lively and quick, I knew in a moment it must be St. Nick. (Notify life underwriting, order medical on 600-year-old driver).

More rapid than eagles (check MVR for speeding violations) his coursers they came and he whistled and shouted and called them by name (possible aggressive driver).

Now Dasher (turbo equipped?), now Dancer (classic?), now Prancer (check occupation), now Vixen (definitely check occupation), on Comet (possible muscle deer), on Cupid (check credit score), on Donner (4x4) and Blitzen (possible drinking problem?).

To the top of the porch, to the top of the wall (check for structural damage; also look into height exposures), now dash away, dash away, dash away all (old man climbing walls either in great shape or overly medicated).

So up to the housetop his coursers they flew, with a sleigh full of toys and Saint Nicholas, too. (Check for possible retail delivery or livery classification of autos). And then, in a twinkling, I heard on the roof, the prancing and pawing of each little hoof. (Check for shingle damage; also classification of operations—roofing is a prohibited class).

As I drew in my head and was turning around, down the chimney he came with a bound (comp neg for using unusual ingress).

He was dressed all in fur (scheduled items) from his head to his foot, and his clothes were all tarnished with ashes and soot. (Part-time job as firefighter?)

A bundle of toys he had flung on his back. (Check to see if insured has safety committee; check lifting training). His eyes how they twinkled, his dimples how merry, his cheeks were like roses, his nose like a cherry (order updated medical report, possible drinking and/or drug abuse).

The stump of a pipe he held tight in his teeth (ineligible for nonsmoker discount) and the smoke encircled his head like a wreath (check batteries in smoke detectors to make sure operational).

He was chubby and plump a right jolly elf (overweight for height) and I laughed when I saw him in spite of myself. A wink of his eye and a nod of his head soon gave me reason I had nothing to dread (Stranger enters past alarm and insured not worried? Sounds suspicious.)

He spoke not a word, but went straight to his work, and filled all the stocking, then turned with a jerk (review workplace for ergonomic compliance).

And laying his finger aside of his nose (obscene gesture?), and giving a nod, up the chimney he rose. (Check operations, chimney sweeps are prohibited classification, look into GL PD deductible.)

He sprang to his sleigh, to his team gave a whistle, and away they all flew like the down of a thistle (not likely with fat man and sleigh full of toys. Check GVW for proper classification, light/service/local seems unlikely).

And I heard him exclaim as he drove out of sight, "Merry Christmas to all, and to all a good night!" (Check hours of operation; 24-hour service operations prohibited. Also check into seasonal nature of business.)


-- Source (Still) Unknown

Tuesday, December 15, 2015

86-Day Delayed Notice of an Approximately $200,000 Claimed Theft Loss Found Inexcusable as a Matter of Law

Minasian v. IDS Prop. Cas. Ins. Co. and State Farm Fire & Cas. Co.
(SDNY, decided 12/9/2015)

Plaintiffs Nikolai Minasian and Harutyun Minasian, son and father, respectively, made claims to the defendant insurers for the reported theft on January 1, 2014 of approximately $190,000 in jewelry and $1,150 in cash from their apartment.  Plaintiffs' claims for their cash and "rather remarkably similar" (the court's words, not mine) two watches, two bracelets and two rings were to their two renters insurers: IDS Property Casualty Company under a tenants policy that incepted on September 23, 2013; and State Farm Fire & Casualty Company under a renters policy and a personal articles policy (PAP) that both incepted on October 23. 2013.

The facts of the reported loss and claim are worth reading for anyone who investigates theft claims  Although plaintiffs reported the purported theft to local police within 15 minutes of allegedly discovering it, it took them 86 days to report the burglary and alleged theft to IDS and State Farm.  Why?  They wanted to see whether the police would recover the items.  They were unsophisticated and had no prior experience with reading or understanding insurance policy conditions.  They did not have counsel at the initial claim stage.  Harutyun didn't read or write English.  Besides, State Farm wasn't prejudiced by the delayed loss notice, and it's PAP's notice condition was ambiguous.  Such were the plaintiffs' excuses for their late notice.

Both insurers investigated the plaintiffs' claims, and both insurers denied those claims: IDS based on fraud and failure to give timely notice; and State Farm based on plaintiffs' breach of the policies' notice conditions, plaintiffs' intentional concealment and misrepresentation of material facts or circumstances during the presentation of the claim, the absence of an accidental direct physical loss, the theft exclusion and the fact that the loss involved an intentional act.

Plaintiffs sued IDS and State Farm in federal court alleging claims for breach of contract and violations of New York General Business Law § 349 and New York Insurance Law § 2601.  Defendants answered the complaint and successfully moved to dismiss the GBL § 349 claims.  The insurers then each moved for summary judgment on their late notice defenses.

In GRANTING the insurers' summary judgment motions, District Court Judge Katherine B. Forrest found that the plaintiffs' notice was untimely and their delay was inexcusable as a matter of law.  The decision sets forth an excellent digest of salient New York case law regarding late notice of property claims, the court noting:
Th[e cited] decisions reflect the well-supported justification for a duty of timely notice, which is to allow the insurer an opportunity to promptly investigate so that it may protect itself from fraud, take early control of the direction in which a claim might lead, and provide for an adequate reserve fund. 
As to each of the plaintiffs' excuses for their delayed notice, the court held:
  • They wanted to see whether the police would recover the items, and the policies' notice conditions weren't triggered until the plaintiffs' subjectively believed that the police investigation had failed and the jewelry would not be recovered.  
Courts have routinely rejected claims by plaintiffs that notice is triggered by their subjective understanding of the availability of coverage. See Pfeffer v. Harleysville Grp., Inc., 502 F. App'x 28, 30 (2d Cir. 2012) (summary order) ("When the insured indefinitely reserves to itself the determination of whether a particular loss falls within the scope of coverage it does so at its own risk." (quoting Power Auth. v. Westinghouse Elec. Corp., 117 A.D.2d 336, 343 (1st Dep't 1986)). Under New York law, a plaintiff is not excused from timely notice by his belief that the loss will be recovered or otherwise reimbursed elsewhere. 
In light of the applicable standards, the Court easily rejects plaintiffs' interpretation of the notice provisions and their assertion that notice was timely. Plaintiffs do not dispute that they were aware that the Apartment had been burglarized and that the subject property had been stolen as of January 1, 2014. That awareness led plaintiffs to immediately contact the police. Plaintiffs also do not dispute that they were aware that the policies covered losses arising from theft and that the policies pertained to the property (i.e. the six pieces of jewelry and cash) that was stolen. No rational factfinder could find that a reasonable person, armed with that knowledge, would fail to understand that the facts suggested the possibility of claims under all three policies. Under New York law, plaintiffs adopted their "wait and see approach" at their own risk.
  • Plaintiffs were unsophisticated and had no prior experience with reading or understanding insurance policy conditions.  
As for plaintiffs' purported mitigating factors (i.e. their lack of sophistication and experience with filing insurance claims), they have failed to provide any authority supporting the proposition that these reasons are sufficient to excuse late notice under the sort of circumstances at issue here.  Even if any of plaintiffs' asserted excuses could be viable as to certain types of insurance policies in certain circumstances, plaintiffs have failed to present a genuine issue of material fact that the circumstances here provided a reasonable excuse for their lengthy delay.  Plaintiffs baldly assert their lack of sophistication and experience, yet the record shows that they were sophisticated enough to obtain appraisals, insurance coverage, safety deposit boxes, and specifically schedule the jewelry for coverage.  If plaintiffs were sophisticated enough to take each of these steps, they were certainly capable of providing timely notice to IDS and State Farm.
  • State Farm wasn't prejudiced by the plaintiffs' delayed loss notice.
[E]ven if [the investigating detective] provided [the State Farm producing agent] with information that gave State Farm good reason to begin investigating any potential claim, New York law does not require an insurer to demonstrate prejudice to successfully invoke a late notice defense, see AXA Marine, 84 F.3d at 624-25; Briggs, 11 N.Y.3d at 382, nor is an insurer deemed to have received notice by learning of the occurrence from a third party, Ins. Co. of the State of Pennsylvania v. Argonaut Ins. Co., No. 12 CIV. 6494 DLC, 2013 WL 4005109, at *10 (S.D.N.Y. Aug. 6, 2013); Heydt Contracting, 146 A.D.2d at 499. Plaintiffs fail to cite any authority for the proposition that the lack of prejudice is a mitigating factor that can itself create or support an excuse for late notice, FN9 and the Court does not find it appropriate to create or invoke such a rule on these facts. (Emphasis added.)
FN9   Plaintiffs concede that New York Insurance Law § 3420, which does impose a prejudice requirement, applies only to policies insuring against claims by third parties for bodily injury and property damage, and not to first-party policies insuring against claims by the named insured. N.Y. Ins. Law § 3420(a)(5). 
  • The notice condition of the State Farm PAP was ambiguous.  
Plaintiffs next argue that State Farm is not entitled to summary judgment as to the PAP Policy on the ground that the phrase "In case a covered loss occurs" in the duty of notice provision is ambiguous. * * * Here, plaintiffs' reading strains the plain meaning of the PAP Policy and there is nothing ambiguous about the duty of notice provision. As with the IDS Tenants Policy and the State Farm Renter's Policy, the language in the PAP Policy clearly indicates that plaintiffs' duty to notify was triggered as soon as they learned that the jewelry was stolen on January 1, 2014. Use of the term "covered loss" clearly connotes that property which is covered under the policy is no longer in the physical possession of the insured, and use of the phrase "loss . . . which may become a claim" indicates that an insured need not (and should not) wait until the loss has definitively ripened into a meritorious claim for payment. No reasonable person could interpret this language to mean that a known theft of property only becomes a covered loss once the police cease to conduct an active investigation. As discussed above, such an interpretation places no reasonable limit on the time by which an insured must provide notice of loss. Finally, the Court notes that the lost jewelry was the only property covered by the PAP Policy; no reasonable person who has taken out an insurance policy solely to insure specified personal property would believe that the theft of such property would not be a loss covered by that policy. (Emphasis added.)
Lot in here.  'Cept coverage.

Sunday, December 13, 2015

Provider's Fee Splitting With Billing Company Does Not Constitute a Defense to Provider's No-Fault Claim for Payment

Matter of Allstate Prop. & Cas. Ins. Co. v. New Way Massage Therapy P.C.
(1st Dept., decided 12/10/2015)

It is "professional misconduct" and illegal in New York for any licensed professional to "[p]ermit[] any person to share in the fees for professional services, other than: a partner, employee, associate in a professional firm or corporation, professional subcontractor or consultant authorized to practice medicine, or a legally authorized trainee practicing under the supervision of a licensee." New York Education Law § 6530(19).

11 NYCRR § 65-3.16 (a)(12) states:
A provider of health care services is not eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York or meet any applicable licensing requirement necessary to perform such service in any other state in which such service is performed.
So if a New York-licensed health care provider shares or splits its professional fees with a non-professional, may the no-fault insurer deny payment?

Allstate denied payment for massage therapy services to provider New Way Massage Therapy PC based on its conclusion that in violation of New York Education Law § 6530(19) New Way was illegally splitting or sharing 5% of its fees with its billing company, Island Billing and Processing LLC.

New Way contested Allstate's denial in arbitration and initially lost, arbitrator Marilyn Felenstein finding that New Way had not convinced her that its fee-splitting agreement with Island Billing "does not violate the rules of the New York State Education Department or that the agreement does not violate the prohibitions of the New York State Department of Health Medicaid regulations."

New Way appealed to master arbitration, arguing that the lower arbitrator improperly shifted the burden of proof in the matter to New Way.  Master Arbitrator Norman H. Dachs agreed and directed an award in the amount of $1,041.84 for New Way.  In vacating the lower arbitrator's award, the Master Arbitrator found that "the Lower Arbitrator not only inappropriately shifted the burden from [Allstate] to prove its defense to [New Way] to negate it, she also committed an error of law." Specifically, the Master Arbitrator found that Arbitrator Felensten had committed an error of law in two respects. First, the Master Arbitrator found that Arbitrator Felensten was incorrect in finding that New Way was involved in improper fee sharing because
an arrangement whereby a medical provider pays a bill collector a fixed percentages of amount collected on matters referred to such bill collector, after services have been rendered and where self-collection efforts have been unsuccessful, cannot be said to be within the purview of either Education Law § 6530(19) . . . or 8 NYCRR § 29.1
Additionally, the master arbitrator found that
if, in fact, the arrangement between the provider and the collection firm is, technically, illegal, the remedy lies in disciplinary proceedings or, at most, may provide a defense to the parties to the agreement. It should not be the basis for a windfall for the benefit of a non-party thereto, such as the insurer in the case. (Emphasis added.)
Allstate thereafter commenced this CPLR article 75 special proceeding to vacate the master arbitration award.  In denying Allstate's petition and confirming the master arbitration award, New York County Supreme Court Justice Cynthia Kern distinguished Allstate's fee-splitting argument from a Mallela defense, and reasoned:
In the instant action, the petition to vacate the Master Arbitration award is denied as there was a rational basis for the award. Master Arbitrator Dachs vacated and reversed the lower arbitrator's award on the ground that it was contrary to law. Specifically, Master Arbitrator Dachs found that, among other things, Arbitrator Felensten's award was incorrect as a matter of law as a provider's participation in an improper fee sharing agreement is not a valid ground to deny said provider's claim for no-fault benefits. This determination is rational as there is no statute, regulation or established precedent that gives an insurer the authority to deny no-fault benefit claims on the ground that the provider is participating in improper fee sharing. Indeed, Allstate has failed to present the court with any authority supporting its contention that it is well established law that a provider participating in illegal fee sharing is not entitled to reimbursement of no-fault benefits. Instead, the cases cited by petitioner stand for the proposition that courts will not enforce contracts between parties that are violative of the prohibition of fee-splitting and, as such, are inapposite. See Necla v. Glass, 231 A.D.2d 457 (1st Dept 1996); LoMango v. Koh, 246 A.D.2d 579 (2nd Dept 1998); Hartman v. Bell, 137 A.D.2d 585 (2nd Dept 1988); Sachs v. Saloshin, 138 A.D.2d 586 (2nd Dept 1988). Thus, the Master Arbitrator acted rationally in vacating the lower arbitrator's decision and issuing an award in favor of New Way.  (Emphasis added.)
On Allstate's appeal of Supreme Court's order confirming the master arbitration award, the First Department, Appellate Division, AFFIRMED in a two-sentence holding:
Whether or not the fee-sharing arrangement at issue constitutes unprofessional conduct (see 8 NYCRR 29.1[b][4]), it does not constitute a defense to a no-fault action (compare State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005] ["insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims"]). It is solely a matter for the appropriate state licensing board (see e.g. Necula v Glass, 231 AD2d 457 [1st Dept 1996]; see also H & H Chiropractic Servs., P.C. v Metropolitan Prop. & Cas. Ins. Co., 47 Misc 3d 1075, 1078 [Civ Ct, Queens County 2015]).  (Emphasis added.)
The court's "see also" citation to the April 24, 2015 decision of Queens Civil in H & H Chiropractic Servs., P.C. v Metropolitan Prop. & Cas. Ins. Co. is significant.  That case was the first to hold in New York that fee splitting is not a viable defense to payment of an otherwise valid no-fault claim.

Monday, December 7, 2015

Primary vs. Umbrella -- No Duty, No Standing, No Suit

Government Employees Ins. Co. v. RLI Ins. Co.
2nd Dept., decided 11/25/2015)

You probably know that an umbrella insurer may sue and maintain an action against a primary insurer, but what about the other way around?  Not in this case.

Freier had a primary personal auto policy with GEICO and an umbrella policy with RLI.  After an auto accident, GEICO undertook to defend Freier in a personal injury action against her.  RLI disclaimed coverage based on late notice.  GEICO eventually paid $200,000 more than its policy limit to settle the action against Freier and commenced this action against RLI for reimbursement of that amount, seeking to challenge RLI's disclaimer.

In AFFIRMING Supreme Court's order granting RLI's motion to dismiss the complaint, the Second Department, Appellate Division, held
As the Supreme Court properly concluded, GEICO did not have standing to seek that relief. ... Here, it is undisputed that the coverage provided by the RLI policy was excess to GEICO's policy and, thus, RLI's duty to indemnify the Freiers was not triggered until coverage under GEICO's policy was exhausted. ... Therefore, GEICO did not stand to benefit from the RLI policy, depriving it of standing to seek a declaration of RLI's duty to indemnify under that policy... Accordingly, the court properly granted RLI's motion to dismiss the complaint for lack of standing. 
The Second Department also held that: (1) GEICO failed to demonstrate the existence of any duty running from RLI, the excess carrier, to GEICO, the primary insurer, with respect to RLI's coverage determination; and (2) contrary to GEICO's contention, the doctrine of equitable subrogation cannot be invoked where, as here, the payments sought to be recovered were voluntary.

Tuesday, November 24, 2015

Replacement Cost Coverage Denied to Insured Who Did Not Replace the Dwelling Within Two Years or Show That His Actual Repair/Replacement Costs Exceeded the Insurer's ACV Payment

Mateyunas v. Cambridge Mut. Fire Ins. Co.
(Sup. Ct., Queens Co., decided 7/16/2015)

Plaintiff's residence was damaged in a fire in 2011 while insured under a policy of homeowners insurance issued by the defendant.  Under the policy defendant was obligated to pay no more in replacement cost coverage than the least of:
(a) the limit of liability under the policy that applied to the building;
(b) the replacement cost of that part of the building damaged for like construction and use on the same premises; or
(c) the necessary amount actually spent to repair or replace the damaged building.
An appraisal of plaintiff's dwelling loss was conducted, resulting in an appraisal ACV award of $400,008.90, and a RCV award of $451,232.98.  At some unspecified time prior to the two-year anniversary of the fire defendant paid a total of $415,232.98 to the plaintiff for his dwelling loss.  Plaintiff did not, however, repair or replace the damaged dwelling prior to the two-year fire anniversary. He sued just within that two-year period, however, alleging that defendant owed him more monies under the dwelling, personal property, and ALE coverages of his policy with defendant.  Both plaintiff and defendant moved for summary judgment.

In GRANTING the defendant insurer's motion for summary judgment with respect to plaintiff's dwelling loss claim, the Supreme Court held:
Defendant has paid plaintiff the amount of $415,232.98 on plaintiff’s claim for loss to his dwelling, and asserts that no further amount is due, as plaintiff has been paid the actual cash value of the dwelling as determined by the umpire. Defendant contends that the language of the Policy permits the withholding of the difference between the actual cash value and the replacement cost until the repair or replacement is completed, because only at that time could defendant ascertain whether the actual cash value or the amount spent on repairing or replacing the property is the lesser amount to which plaintiff is entitled. Defendant further contends that the replacement of the dwelling was not completed within the two-year-from-date-of-loss period required by the Policy, and that plaintiff has not demonstrated the actual cost of the replacement to be in excess of the amount already paid to plaintiff. Plaintiff contends that he is entitled, by the unreserved terms of the policy, to the replacement amount as set by the umpire; that the two-year period is unreasonable and he was entitled to notification by defendant of such limited period; and that his actual expenses exceeded the amount already paid to him, as evidenced by the bills, checks and credit card receipts he included, for the first time, in his opposition/reply papers.  
*  *  *  *  *
The court agrees with the moving parties herein that the Policy terms regarding dwelling loss are unambiguous. Pursuant to the Policy, plaintiff would be entitled to payment, of up to the amount of the replacement cost loss, upon his completion of the replacement of the dwelling within two years and his submission of proof of the costs of replacement in excess of the actual cash loss to the dwelling. Otherwise, plaintiff would be entitled only to the actual cash loss to the dwelling, which amount has already been received by plaintiff. Plaintiff’s contention that he is entitled to the stated replacement cost loss recovery purely by reason of his having maintained a “replacement loss” policy is without merit. Plaintiff does not deny that he failed to complete the replacement of the dwelling within the requisite two-year period, nor has he shown that his expenses incurred in replacing the dwelling exceeded the amount already paid to him. His introduction of the untimely, unexplained, and unsworn-to photocopies of bills, checks and credit card statements are inadmissible to evidence entitlement to summary judgment (see CPLR 3212 [b]; Seidman v Industrial Recycling Props., Inc., 52 AD3d 678 [2008]; see also CPLR 4533[a]; Daguerre S.A.R.L. v Rabizadeh, 112 AD3d 876 [2013]; Matell Contracting Co., Inc. v Fleetwood Park Development, LLC, 111 AD3d 681 [2013]). Plaintiff has failed to submit an affidavit of a person with first-hand knowledge of the facts, and counsel’s reply affirmation herein, made without asserting any personal knowledge of the facts, did not satisfy the statutory requirements of CPLR 3212, because it did not serve as a vehicle to submit admissible documentary evidence[.] 
The court denied both parties' motions for summary judgment with respect to plaintiff's ALE claim, holding that neither party carried its burden of eliminating all material issues of triable fact.

Note:  this is an unreported decision from a trial-level New York state court.  Cite and rely on it accordingly.

9 Assignees + 6 MVAs + 2 Defenses = 9 Separate Actions -- Severance Granted

Austin Diagnostic Med., P.C. v Mercury Cas. Co.
(App. Term, 2nd Dept., decided 11/13/2015)

Plaintiff provider commenced this action to recover first-party no-fault benefits as assignee of nine individuals. The complaint alleged separate causes of action for each assignor. Defendant insurer moved pursuant to CPLR 603 to sever the second through ninth causes of action into separate actions, arguing that the nine causes of action arose out of six separate motor vehicle accidents and that each of the nine causes of action involves different questions of fact and law. Civil Court denied defendant's motion.

In REVERSING Civil Court's order and granting Mercury's motion to sever, the Appellate Term held:
Defendant's answer clearly places at issue with respect to each assignor, among other things, the necessity and reasonableness of the particular medical services rendered and whether the amount sought to be recovered in each cause of action exceeded the amount permitted by the workers' compensation fee schedule. The facts relating to each claim are therefore likely to raise few, if any, common issues of fact (see Radiology Resource Network, P.C. v Fireman's Fund Ins. Co., 12 AD3d 185 [2004]). 

Monday, November 23, 2015

No-Fault Insurer Establishes EUO No-Show Defense on Summary Judgment Motion

Palafox PT, P.C. v State Farm Mut. Auto. Ins. Co.
(App. Term, 2nd Dept., decided 11/12/2015)

What must a no-fault insurer demonstrate to establish its prima facie case when moving for summary judgment on an assignor EUO no-show defense?  Three things:
(1) that it twice duly demanded an EUO from the provider's assignor; 
(2) that the assignor twice failed to appear; and
(3) that the insurer issued a timely denial of the claims arising from the provider's treatment of the assignor. 
The provider in this case argued that defendant State Farm was not entitled to summary judgment because it had not responded to plaintiff's discovery demands on the reasonableness of State Farm's EUO requests.  The Appellate Term disagreed:
A party who contends that a summary judgment motion is premature is required to demonstrate that discovery might lead to relevant evidence or [that] the facts essential to justify opposition to the motion were exclusively within the knowledge and control of the movant (Cajas-Romero v Ward, 106 AD3d 850, 852 [2013]; see CPLR 3212 [f]). Here, in support of their contention that the [insurer's] motion was premature, the [providers] did not establish what information they hoped to discover that would demonstrate the existence of a triable issue of fact" (113 AD3d at 597).  
Similarly, in the instant case, plaintiff did not establish what information it hoped to discover that would demonstrate the existence of a triable issue of fact (cf. American Tr. Ins. Co. v Jaga Med. Servs., P.C., 128 AD3d 441 [2015]).

Wednesday, November 18, 2015

Not UM and SOL

Matter of American Transit Ins. Co. v. Rosario
(1st Dept., decided 11/17/2015)

If your insured's New York lawsuit against the Pennsylvania liability insurer of the tortfeasor's vehicle was dismissed for lack of  personal jurisdiction, is that vehicle uninsured?  And what's the statute of limitations for making a UM coverage claim?

Rosario allegedly was injured in a 2004 motor vehicle accident in Bronx County with Carela, who was insured by American Independent Insurance Company, a Pennsylvania corporation.  Rosario brought a personal injury action action and in 2009 obtained a default judgment against Carela.  In 2012 Rosario sued American Independent in Bronx County Supreme Court under New York Insurance Law § 3420(a)(2) to collect on her default judgment against Carela.  In 2013 American Independent's motion to dismiss Rosario's direct action was granted on the ground that Rosario lacked personal jurisdiction over American Independent.

Rosario then made and demanded arbitration of her claim for uninsured motorists (UM) coverage benefits from her own auto insurer, American Transit, claiming that the 2013 dismissal of her direct action against American Independent rendered the Carela vehicle "uninsured".  American Transit commenced this special proceeding for a permanent stay of Rosario's UM claim arbitration, arguing that the applicable six-year limitations period had expired. Supreme Court rejected that argument and denied the petition, leading to this appeal.

In REVERSING Supreme Court's order and granted the petition for a permanent stay of arbitration, the Appellate Division, First Department, held that the applicable six-year statute of limitations had expired:
A claim for UIM benefits is governed by the six-year statute of limitations applicable to contract actions (see Matter of De Luca [Motor Veh. Acc. Indem. Corp.], 17 NY2d 76, 79 [1966]). The claim accrues either when the accident occurs or when subsequent events render the offending vehicle uninsured (Matter of Allstate Ins. Co. v Morrison, 267 AD2d 381, 381 [2d Dept 1999]). Since there is more than a six-year lapse between the accident and the demand for arbitration, respondent must show that a later accrual date than the accident date is applicable, and that due diligence was used to determine whether the offending vehicle was insured on the date of the accident (id. at 381-382). Respondent failed to make this showing. 
The First Department also held that a dismissal of a direct action against the tortfeasor vehicle's liability insurer does not render that vehicle "uninsured":
Supreme Court's ruling that there was no personal jurisdiction over American Independent in New York was not an event that rendered the offending vehicle uninsured within the meaning of Insurance Law § 3420(f)(1) (see American Tr. Ins. v Barger, 13 Misc 3d 386, 389 [Sup Ct, NY County 2006]). Rather, it was simply a ruling that respondent could not pursue its action against American Independent in a New York court (accord Matter of Government Empls. Ins. Co. v Basedow, 28 AD3d 766 [2d Dept 2006]; Matter of Eagle Ins. Co. v Gutierrez—Guzman, 21 AD3d 489 [2d Dept 2005]). Because no event rendered the offending vehicle uninsured, the statute of limitations for respondent's UIM claim began to run on the date of the accident, May 6, 2004, and expired six years later. Accordingly, respondent's demand for UIM arbitration, filed on or about February 10, 2014, was untimely and the arbitration should be permanently stayed.

Sunday, November 15, 2015

Form Over Substance Does Matter -- Having Not Asserted Collateral Estoppel as an Affirmative Defense, No-Fault Insurer Is Denied Dismissal of Provider's Recovery Action

Downtown Acupuncture PC v. State Wide Ins. Co.
(NYC Civ. Ct., Kings Co., decided 10/22/2015)

In 2010, State Farm Mutual Automobile Insurance Company commenced a declaratory judgment action in Nassau County Supreme Court against Downtown Acupuncture PC and other PCs purportedly owned not by licensed professionals but by Valentina Anikeyeva, In 2013, Supreme Court granted State Farm's motion to strike the defendant PCs' answer in that action based on the defendants' non-compliance with a so-ordered discovery stipulation and, based on the defendants' default in pleading, further granted judgment to State Farm, finding that
the overwhelming evidence indicates that the P.C. defendants were not owned and controlled by a licensed acupuncturist, therefore rendering them ineligible to receive reimbursement, and to collect payment on outstanding claims. Additionally, a billing provider which utilizes an independent contractor to provide the services in question, is not a "provider" of the services in question and is not entitled to recover direct payment of assigned no-fault benefits from the defendant insurer. 
In July 2015 the Second Department affirmed that decision, finding that the defendant PCs had failed to demonstrate reasonable excuse for their default in complying with the terms of the conditional order and a meritorious defense to the complaint. 

In this 2004-commenced action, defendant State Wide Insurance Company moved on the eve of trial in late 2014 to dismiss this action based on the doctrine of collateral estoppel, arguing that the Nassau County Supreme Court order and judgment in the State Farm DJ action precluded plaintiff from arguing that it was entitled to receive no-fault benefits.  

Noting that a New York no-fault insurer's Mallela defense is not subject to preclusion "and hence is non-waivable", Kings County Civil Court Judge Katherine Levine nevertheless denied State Wide's dismissal motion, holding:  
This Court cannot even entertain defendant's request for collateral estoppel until it seeks to amend its answer to raise Mallela as a defense and hence create an apparent identity of issues between the DJ action and the instant matter. In the same motion to amend it can also assert collateral estoppel. After defendant formally moves to amend, plaintiff will be afforded the opportunity to argue how it would be prejudiced by such a motion. The Court is quite dubious that plaintiff will be able to show any prejudice or surprise since the Appellate Term noted as early as 2012 that "(t)here exists a rich history of litigation, involving a multitude of cases before the Appellate Term, in which health care facilities allegedly owned by Ms. Anikeyeva have been asked to supply Mallela discovery." Lexington Acupuncture PC, supra, 35 Misc 3d at 49 (Golia, J. concurring). However, sometimes form over substance does matter and plaintiff must be afforded the opportunity to argue prejudice or disclaim the apparent identity of issues.
Justice delayed is justice denied?  Probably not in this case, given Judge Levine's expressed dubiousness. I see a motion to amend and dismiss coming.  

Saturday, November 14, 2015

Denial of Personal Auto Liability Coverage Based on Bodily Injury to Resident Relative of Insured Exclusion Upheld

Harrell v. State Farm Ins. Co.
(3rd Dept., decided 11/12/2015)

State Farm insured George Birdwell under a personal auto policy.  The policy excluded liability coverage for "bodily injury to: . . . c. any other person who both resides primarily with an insured and who: (1) is related to that insured by blood, marriage or adoption."  Birdwell also had a personal umbrella policy with State Farm.

Birdwell son, William Harrell, was involved in a two-car motor vehicle accident while driving Birdwell's car.  Harrell's wife, who was then pregnant with the couple's child, was a passenger in the Birdwell vehicle at the time. Thereafter, Trina Harrell commenced a personal injury action, individually and on behalf of the Harrell's child, against the driver of the second vehicle.  Eventually William Harrell and George Birdwell were joined as defendants in that lawsuit and sought liability coverage from State Farm.

Citing the BI to resident relative exclusion, State Farm denied liability coverage to Harrell and Birdwell, and they commenced this declaratory judgment action.  On cross motions for summary judgment Supreme Court granted judgment to State Farm and plaintiffs appealed.

In AFFIRMING judgment to State Farm, the Appellate Division, Third Department, agreed that Birdwell's auto policy unambiguously excluded liability coverage for injuries to the child:
Plaintiffs concede that they both qualify as "an insured" as defined in the policy. At the time of the accident, the child resided primarily with Harrell, who is her father. Thus, as the child both resided primarily with an insured and is related to that insured, there is no coverage for her injuries for either plaintiff (see Pfoh v Electric Ins. Co., 14 AD3d 777, 779 [2005], lv denied 4 NY3d 711 [2005]). This determination necessarily defeats the related claim under the umbrella policy. Accordingly, we find no error in Supreme Court's holding that defendant was not obligated to defend or indemnify plaintiffs under either of the subject policies.
The unborn child was residing with William Harrell, who qualified as an "insured" under his father's policy because Harrell was permissively operating the covered or insured auto.  Hence, the exclusion applied.

Bodily Injury Recovery from Non-Motor Vehicle Defendant Reduces SUM Coverage Recovery

Redeye v. Progressive Ins. Co.
(4th Dept., decided 11/13/2015)

Condition 11 of the prescribed New York Supplementary Uninsured/Underinsured Motorists (SUM) Endorsement (11 NYCRR § 60-2.3[f]) provides
11.  Non-Duplication: This SUM coverage shall not duplicate any of the following: 
(a) benefits payable under workers' compensation or other similar laws;
(b) non-occupational disability benefits under article nine of the Workers' Compensation Law or other similar law;
(c) any amounts recovered or recoverable pursuant to article fifty-one of the New York Insurance Law or any similar motor vehicle insurance payable without regard to fault;
(d) any valid or collectible motor vehicle medical payments insurance; or
(e) any amounts recovered as bodily injury damages from sources other than motor vehicle bodily injury liability insurance policies or bonds.
Plaintiff was a pedestrian who was injured after a vehicle operated by a drunk driver collided with a parked vehicle, which was propelled into plaintiff and two other pedestrians. Plaintiff commenced an action against the driver of the vehicle as well as a fire company that allegedly served the driver alcoholic beverages prior to the accident, and he received a settlement from both, the cumulative total of which exceeded plaintiff's SUM coverage limit with Progressive.

Contending that only his settlement from the vehicle's driver should reduce his SUM recovery, plaintiff claimed SUM coverage benefits from Progressive.  Progressive denied the SUM claim on the ground that plaintiff's SUM coverage was exhausted by the recovery from both the driver and the fire company, prompting plaintiff to commence this action.  Progressive moved for summary judgment, which Supreme Court granted.

In AFFIRMING summary judgment to Progressive, the Appellate Division, Fourth Department, rejected plaintiff's argument that Progressive improperly reduced his SUM coverage by the amount he had received in settlement from the fire company's general liability insurer:
Supreme Court properly granted defendant's motion for summary judgment seeking, inter alia, to dismiss the complaint. Plaintiff does not dispute that the SUM coverage is properly reduced by the amount he recovered from the driver's insurer. He contends, however, that it was improper to reduce the SUM coverage from the amount he received from the fire company under its general liability insurance policy. We reject that contention. Condition 11 (e) of the SUM endorsement under defendant's policy provided that SUM coverage "shall not duplicate . . . any amounts recovered as bodily injury damages from sources other than motor vehicle bodily injury liability insurance policies or bonds." Here, the payment plaintiff received from the fire company's insurer was for bodily injury damages, and thus the amount of SUM benefits available to plaintiff was properly reduced by that amount (see Weiss v Tri-State Consumer Ins. Co., 98 AD3d 1107, 1110-1111).
Condition 6 of the prescribed SUM endorsement also provides:
6.  Maximum SUM Payments: Regardless of the number of insureds, our maximum payment under this SUM endorsement shall be the difference between:
(a) the SUM limits; and
(b) the motor vehicle bodily injury liability insurance or bond payments received by the insured or the insured's legal representative, from or on behalf of all persons that may be legally liable for the bodily injury sustained by the insured. 
The SUM limit shown on the Declarations is the amount of coverage for all damages due to bodily injury in any one accident.3 (The SUM limit shown on the Declarations for “Each Person” is the amount of coverage for all damages due to bodily injury to one person. The SUM limit shown under “Each Accident” is, subject to the limit for each person, the total amount of coverage for all damages due to bodily injury to two or more persons in the same accident).4
Plaintiff also argued that the SUM endorsement of his policy with Progressive was ambiguous because Condition 11 conflicted with Condition 6 of that endorsement.  In rejecting that argument, the appellate court held:
Contrary to plaintiff's contention, the policy is not ambiguous and condition 11 does not conflict with condition 6 of the SUM endorsement (see generally Dean v Tower Ins. Co. of N.Y., 19 NY3d 704, 708; White v Continental Cas. Co., 9 NY3d 264, 267). Condition 6 provides that the maximum payment under the SUM endorsement is the difference between the SUM limit and any payments received from a motor vehicle bodily injury liability policy. It does not state that the difference is "the" SUM payment that is to be given to plaintiff, but rather it states that the difference is the "maximum" payment, which the average insured would understand to mean that it could be further reduced (see generally Dean, 19 NY3d at 708). Condition 6 and condition 11 together resulted in a reduction in the SUM benefits available by the total settlement received by plaintiff in his prior action.
Maximum is not the.  The is not maximum.  Got it.