Monday, December 28, 2015

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

NO-FAULT – DECLARATORY JUDGMENT – DEFAULT JUDGMENT – RES JUDICATA
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

NO-FAULT – 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.)

NOTE: ORDER NEW LOSS CONTROL REPORT.  DIARY FOR 07/01/16 TO DISCUSS WITH AGENT.

-- 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

PROPERTY – RENTERS POLICY – PERSONAL ARTICLES POLICY – THEFT – LATE NOTICE – LATE NOTICE EXCUSES – PREJUDICE
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

NO-FAULT – PROVIDER FEE SPLITTING WITH BILLING COMPANY – SPECIAL PROCEEDING TO VACATE MASTER ARBITRATION AWARD – LICENSING REQUIREMENTS – PROFESSIONAL MISCONDUCT
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

PERSONAL AUTO – PRIMARY POLICY – UMBRELLA POLICY – STANDING – EQUITABLE SUBROGATION – VOLUNTARY PAYMENT
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

PROPERTY – HOMEOWNERS – TWO-YEAR REPAIR/REPLACEMENT DEADLINE – REPLACEMENT COST COVERAGE 
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

NO-FAULT – MOTION TO SEVER – MEDICAL NECESSITY & FEE SCHEDULE DEFENSES  
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

NO-FAULT – SUMMARY JUDGMENT SHOWING OF EUO NO-SHOW DEFENSE – DISCOVERY ON REASONABLE OF EUO REQUESTS  
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

UM – MEANING OF "UNINSURED" – STATUTE OF LIMITATIONS  
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

NO-FAULT – COLLATERAL ESTOPPEL MALLELA DEFENSE  
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

PERSONAL AUTO – BODILY INJURY TO RESIDENT RELATIVE OF INSURED EXCLUSION – UNBORN CHILD 
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

SUM – OFFSET FOR BODILY INJURY RECOVERY – NON-DUPLICATION CONDITION – MAXIMUM SUM PAYMENT 
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.

I'm Legal, So to Speak

Twenty-one years ago today I unlocked the door of a single room on the 21st floor of the Rand Building and began the (ad)venture that has become Mura & Storm, PLLC.  With an inventory of 20 environmental coverage files and an SBA loan from HSBC collaterized by my already first- and second-mortgaged duplex in Amherst, New York, I hung out my shingle, having overnight announced to as much of the insurance world as I then had fax numbers for that the Law Office of Roy A. Mura was open for and accepting new business.  I was almost eight years an admitted lawyer at that point, confident only in two things:  (1) my family's support; and (2) the insurance coverage craft I had practiced since completing my two-year appointment as a confidential law assistant to the Appellate Division, Fourth Department, in Rochester in 1988.  I was very fortunate to have worked under and with some of the very best insurance coverage lawyers in Buffalo.

Thankfully, the dance that had brung me to that point continued, and those 20 files grew to over 6,000 to date, sustaining the many lawyers, paralegals and support staff individuals who called and continue to call the Law Office of Roy A. Mura, and then Mura & Storm their place of work.  In spite of its comparatively lower hourly billing rates, I chose the insurance coverage and defense shingle because I have always loved insurance coverage work.  That I became an insurance coverage lawyer isn't surprising, I suppose, having grown up reading William Safire's "On Language" column in the New York Times every Sunday.  Being a linguaphile and grammarian have long suited me.

So to the past and present clients and supporters of the (ad)venture originally known as the Law Office of Roy A. Mura, I say thank you.  We truly and deeply appreciate that you have enabled us to reach the law firm legal drinking age.  Cheers.  And another round, please.

Tuesday, November 3, 2015

Defending the Insured's Default Without Disclaiming Dooms the Declaratory Judgment Action

COMMERCIAL LIABILITY – LATE NOTICE – PREJUDICE – UNTIMELY DISCLAIMER
Montpelier US Ins. Co. v. 240 Mt. Hope Realty Co.
(SDNY, decided 10/22/2015)

I can see and understand what the insurer was trying to do here, but by not immediately disclaiming for late notice, it in effect conceded coverage.

12/07/12     tenant's pit bull bites a child attending a birthday party at the insured premises
01/07/13     insured served with summons and complaint
07/08/13     default judgment granted against insured
08/19/13     insurer (MUSIC) receives first notice of the incident, claim, suit and default
11/18/13     defense counsel retained by MUSIC succeeds in vacating the default
05/15/14     Appellate Division, First Department, reverses the vacatur and reinstates the default
06/12/14     MUSIC sends letter to insured reserving MUSIC's right to disclaim based on late notice
08/12/14     MUSIC commences declaratory judgment action in state court
02/13/15     MUSIC recommences DJ action in federal court

New York Insurance Law § 3420(d)(2) provides:
(2) If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.
In GRANTING the insured's cross motion for summary judgment, the District Court agreed that MUSIC was required to defend and indemnify the insured the underlying personal injury action action due to MUSIC's failure to disclaim coverage in a reasonably timely fashion as required by Insurance Law § 3420(d)(2):
Time begins to run for purposes of such disclaimer when the insurer knows the grounds for its entitlement to disclaim. See First Fin. Ins. Co. v. Jetco Contracting Corp., 1 N.Y.3d 64, 66 (2003) ("[O]nce the insurer has sufficient knowledge of facts entitling it to disclaim, or knows that it will disclaim coverage, it must notify the policyholder in writing as soon as is reasonably possible."); accord Liberty Ins. Underwriters Inc. v. Great Am. Ins. Co., No. 11-CV-6973 (DLC), 2012 WL 2359876, at *6 (S.D.N.Y. June 20, 2012). And where Section 3420(d)(2) applies, the insured need not show prejudice from the delayed disclaimer; instead, the only question is whether the delay was "unreasonable." See Adams v. Chi. Ins. Co., 49 F. App'x 346, 349 n.** (2d Cir. 2002) (summary order); Jewish Cmty. Ctr. of Staten Island v. Trumbull Ins. Co., 957 F. Supp. 2d 215, 236-37 (E.D.N.Y. 2013) (citing cases); KeySpan Gas E. Corp. v. Munich Reinsurance Am., Inc., 23 N.Y.3d 583, 590 (2014) (noting that 3420(d)(2) "creates a heightened standard for disclaimer that depends merely on the passage of time rather than on the insurer's manifested intention to release a right as in waiver, or on prejudice to the insured as in estoppel" (internal quotation marks omitted)); First Fin. Ins., 1 N.Y.3d at 67 n.2 (noting that, under Section 3420(d)(2), "prejudice is of no legal relevance"). 
 Here, MUSIC had knowledge of sufficient facts to disclaim coverage when it received notice of the default judgment on August 19, 2013. At that point, MUSIC would indisputably have been entitled to disclaim on the ground that Defendants' notice was untimely and that MUSIC was prejudiced by the delay; in fact, there is an "irrebuttable presumption of prejudice" that applies when, as here, an insurer receives notice of a claim only after the insured's liability has been determined. See N.Y. Ins. Law § 3420(c)(2)(B). But MUSIC elected not to disclaim coverage and did not make any reservation of its right to disclaim coverage, instead taking up Defendants' defense in the underlying lawsuit; indeed, it did not disclaim coverage until nearly ten months later, on June 12, 2014. (See Compl. ¶¶ 30, 34; Defs.' Mem. 4, 6). That ten-month delay, with no explanation, is comparable to — indeed, longer than — unexcused delays that the Second Circuit and other courts have held to be unreasonable as a matter of New York law. See, e.g., Bluestein & Sander v. Chi. Ins. Co., 276 F.3d 119, 122 (2d Cir. 2002) (nine months); Adams, 49 F. App'x at 349 (eight months); First Fin., 1 N.Y.3d at 66 (forty-eight days); West 16th St. Tenants Corp. v. Pub. Serv. Mut. Ins. Co., 736 N.Y.S.2d 34, 35 (1st Dep't 2002) (thirty days); Colonial Penn Ins. Co. v. Pevzner, 698 N.Y.S.2d 310, 310 (2d Dep't 1999) (forty-one days); Hartford Ins. Co. v. Nassau Cnty., 46 N.Y.2d 1028, 1029-30 (1979) (two months); Allstate Ins. Co. v. Gross, 27 N.Y.2d 263, 266-67 (1970) (seven months); see also, e.g., N.Y. State Ins. Fund v. Mt. Vernon Fire Ins. Co., 371 F. App'x 207, 210 (2d Cir. 2010) (amended summary order) (discussing cases involving unexplained delays of two months and forty-eight days); cf. O'Dowd v. Am. Sur. Co. of N.Y., 3 N.Y.2d 347, 355 (1957) ("It is clear that when an insurer defends an action on behalf of an insured, in his stead, with knowledge of facts constituting a defense to the coverage of the policy, it is thereafter estopped from asserting that the policy does not cover the claim."). It follows that MUSIC must defend and indemnify Defendants and the latter are entitled to summary judgment. 
MUSIC unsuccessfully argued that its time to disclaim did not begin to run until the First Department, Appellate Division, reinstatement the default against the insured in the underlying personal injury action:
As the New York Court of Appeals has explained, in enacting Section 3420(d), the New York State Legislature "intended to expedite the disclaimer process, thus enabling a policyholder to pursue other avenues expeditiously." First Fin. Ins., 1 N.Y.3d at 68. Thus, the "timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage." Id. at 68-69 (internal quotation marks omitted) (emphasis added). Here, MUSIC first learned of the grounds for denial of coverage on August 19, 2013, when it received notice of the underlying lawsuit and the default judgment entered against Defendants. See, e.g., West 16th St. Tenants Corp., 736 N.Y.S.2d at 35 (holding that an insurer's thirty-day delay in disclaiming coverage was unreasonable as a matter of law because the lack of timely notice by the insured "was obvious from the face of the notice of claim" and the insurer "had no need to conduct an investigation before determining whether to disclaim"). At bottom, MUSIC's argument is that it was in the interest of Defendants for it to provide a defense until the appellate process ran its course. But that argument is effectively the same as the policy argument rejected by the New York Court of Appeals in First Financial Insurance Co. See 1 N.Y.3d at 69 (rejecting an argument that delays to explore other sources of insurance for policyholders "should be encouraged because they are for the benefit of the insured," explaining "that they may also be in the insurer's interest in reducing its ultimate risk, and further may detrimentally delay the policyholder's own search for alternative coverage"). And ultimately, in analyzing whether an insurer gave timely notice of its intent to disclaim coverage, it makes more sense to look at the delay in giving such notice and the reasons (or lack thereof) for that delay than it does to the results of litigation thereafter, which could conceivably take months or years to resolve.
In New York, the timeliness of a liability insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for the disclaimer of liability or denial of coverage.  Write that down.  Or memorize it.

Monday, November 2, 2015

Health Care Provider's Voluntary Discontinuance Without Prejudice Conditioned on Payment of No-Fault Insurer's Attorneys' Fees for Defending Discontinued Action

NO-FAULT – VOLUNTARY DISCONTINUANCE – CHANGE OF VENUE
Walden-Bailey Chiropractic aao Harvey Siegel v. Erie Ins. Co.
(App. Term, 2nd Dept., decided 10/19/2015)

Plaintiff commenced this action in Queens County Civil Court and litigated it for three years before making an oral application for a discontinuance without prejudice.  Over defendant's objection, the court granted plaintiff's application.  Defendant Erie Insurance subsequently moved to modify the civil court's order to provide that the discontinuance was with prejudice and for attorneys' fees and sanctions. The court denied Erie's motion, and it appealed.

In MODIFYING the order appealed from to grant that part of Erie's motion that had sought attorneys' fees, the Appellate Term, Second Department, held:
Generally, courts are reluctant to compel a party to litigate (see DuBray v Warner Bros. Records, 236 AD2d 312, 314 [1997]), and it is well settled that courts have the discretion to grant a motion for discontinuance, without prejudice, if no special circumstances exist, such as prejudice to a substantial right of the defendant or other improper consequences (see Tucker v Tucker, 55 NY2d 378, 383 [1982]; GMAC Mtge., LLC v Bisceglie, 109 AD3d 874, 876 [2013]; Wells Fargo Bank, N.A. v Fisch, 103 AD3d 622, 622 [2013]; Mathias v Daily News, 301 AD2d 503, 504 [2003]; Valladeres v Valladares, 80 AD2d 244, 257-258 [1981], mod on other grounds sub nom Tucker v Tucker, 55 NY2d 378). "Unlike a motion for change of venue which involves the affirmative selection of another forum, a court in granting discontinuance merely makes it possible for the action to be brought elsewhere" (Urbonowicz v Yarinsky, 290 AD2d 922, 923 [2002] [citations omitted]). However, motions for discontinuance should not be used to enable plaintiffs to "do indirectly what they are not permitted to do directly" (Katz v Austin, 217 App Div 217, 218 [1946]; see also DuBray v Warner Bros. Records, 236 AD2d at 314).  
In support of the branch of its motion seeking to vacate or modify the February 6, 2013 order, defendant did not provide any information regarding the arguments that had been made before the Civil Court in support of, and in opposition to, plaintiff's oral application. Despite the fact that plaintiff subsequently commenced an action against defendant in the Civil Court, Bronx County, to recover the same no-fault benefits as sought herein, defendant's argument—that plaintiff sought the discontinuance because it did not have a witness to provide testimony establishing its billing and wanted to commence an action in the Civil Court, Bronx County, where a witness allegedly is not required to establish billing—is not supported by the record, which indicates that a trial had yet to commence in the case at bar. The record does not establish that plaintiff expressed its intention to discontinue the Queens County action in order to commence an action in Bronx County (cf. DuBray v Warner Bros. Records, 236 AD2d at 314). Consequently, defendant did not establish that plaintiff indirectly sought to do what it was not permitted to do directly, i.e. change venue, when it moved for discontinuance.  
Notwithstanding the foregoing, inasmuch as it is uncontroverted that defendant had defended the instant action for three years during which time it had made numerous motions, engaged in discovery practice, and repeatedly appeared in court, defendant is entitled to recover the reasonable attorney's fees it incurred in its defense of the instant action up to the date of discontinuance, in order to eliminate any possible prejudice attributable to the discontinuance (see Carter v Howland Hook Housing Co., Inc., 19 AD3d 146,146-147 [2005]). We pass on no other issue.
Bottom line:  plaintiff health care provider gets to discontinue its Queens County Civil Court action without prejudice and recommence it in Bronx County Civil Court BUT it must pay Erie's attorneys' fees for defending the Queens County Civil Court action for three years.

"Continuous Input" Not Required for Public Adjuster Who Provided "Valuable Services"

COMMERCIAL PROPERTY – PUBLIC ADJUSTER COMPENSATION – "VALUABLE SERVICES"
Public Adjustment Bureau, Inc. v. Greater New York Mut. Ins. Co.
(1st Dept., decided 10/29/2015)

When an insured hires a public adjuster but the claim is not resolved short of a lawsuit that an attorney for the insured eventually settles, is the public adjuster still entitled to its agreed-upon compensation percentage of the insured's recovery?  It is if it performed "valuable services" for the insured.

Section 25.10(b) of New York's insurance regulations (Title 11 NYCRR), entitled "Right to compensation", states:
(b) If a public adjuster performs no valuable services, and another public adjuster, insurance broker (in accordance with section 2101[g][2] of the Insurance Law) or attorney subsequently successfully adjusts such loss, then the first public adjuster shall not be entitled to any compensation whatsoever. 
Following a partial collapse of a garage at the Seward Park Housing Complex on January 15, 1999, defendant Seward Park Housing Corp. made a claim to its insurer, defendant Greater New York Mutual Insurance Company (GNYMIC), for repair/rebuilding costs. To help with its insurance claim, Seward Park retained plaintiff, Public Adjustment Bureau, Inc. (PAB), a licensed public adjuster. Seward Park's retainer agreement with PAB stated that PAB would "perform valuable services, to include preparation and submission of claim detail and to advise and assist in the adjustment of the loss," and would be paid "seven percent of the amount of loss and salvage . . . when adjusted or otherwise recovered."

Following extensive first-party coverage litigation Seward Park eventually settled with GNYMIC in May 2010, but disputed its obligation to pay PAB its fee.  PAB commenced this action against Seward Park and GNYMIC to collect its percentage fee of Seward Park's settlement recovery.  Seward Park moved and PAB cross-moved for summary judgment. Supreme Court granted Seward Park's motion, dismissing PAB's complaint, but in 2012 the First Department, Appellate Division, reversed that order and reinstated the complaint, holding that the question of whether PAB performed "valuable services" for Seward Park presented a question of fact.

This lawsuit returned to Supreme Court and was eventually tried to a jury, which found in favor of PAB.  Supreme Court granted Seward Park's post-trial motion for judgment notwithstanding the verdict, reasoning that PAB's services were limited to a futile initial attempt to settle with GNYMIC and that none of PAB's work was used in the trial against GNYMIC or to obtain the ultimate settlement. Supreme Court expressed the view that "valuable services" "must consist of continuous input that contributed to the settlement or adjustment of the claim," and concluded that PAB made no such continuous input. PAB appealed (again).

In REVERSING the Supreme Court's judgment and reinstating the jury's verdict, the First Department found no basis in New York Insurance Law or the related regulations for the trial court's imposition of the requirement that a public adjuster provide "continuous input" in the settlement process to be entitled to its fee. Instead, the First Department concluded that when viewed in the light most favorable to PAB, evidence presented at the trial
could lead rational jurors to find that although PAB was not directly involved in the trial against [GNYMIC], it had provided "valuable services" in connection with the ultimate settlement of Seward Park's insurance claim. These services could have included the preparation of the initial claim forms, the retention of a firm to investigate the damage and repairs, meeting with that firm and with architects, engineers, and counsel to discuss the claim, communicating with the insurance company regarding those repairs, and making [PAB senior adjuster Gerald] Scheer — who was deposed — available to testify at the trial. From this, the jury could have rationally concluded that PAB's work before trial constituted a valuable contribution to the trial and to the ultimate settlement, if only by preserving Seward Park's claims and aiding in the damages assessment and investigation.
In rejecting Seward Park's argument that PAB's work could not be deemed valuable because it did not directly procure or contribute to the lawsuit or the ultimate settlement, and because Seward Park could have settled its claim without PAB's input, the First Department noted that PAB was undisputedly involved in Seward Park's substantial compliance with all policy requirements, "which is a prerequisite for an insurer's obligation to pay under the policy [.]"

Seward Park also unsuccessfully argued that PAB failed to establish that but for PAB's conduct, Seward Park would not have recovered against its insurer, the First Department observing that "neither the Insurance Law nor the retainer agreement requires a 'direct and proximate link,' or the actual procurement of a settlement. Each requires merely that the public adjuster provide 'valuable services' in connection with a settlement."

Tuesday, October 27, 2015

New Jersey Automobile Medical Fee Schedule Held to Apply to New York No-Fault Claim

NO-FAULT – NEW JERSEY FEE SCHEDULE – PREVAILING FEE IN THE GEOGRAPHIC LOCATION OF THE PROVIDER – EXCESSIVE FEE DEFENSE PRECLUSION
Surgicare Surgical Assoc. v National Interstate Ins. Co.
(App. Term, 1st Dept., decided 10/8/2015)

It's not that the care for persons injured in New York motor vehicle accidents is better in New Jersey.  It's that some providers think the New York Workers' Compensation Fee Schedule does not apply to health care services rendered in New Jersey and they get to charge New York no-fault insurers whatever they want for such services.  An appellate-level court in New York has finally addressed this issue, holding:
where a reimbursable health care service is performed outside the State of New York in a jurisdiction that has enacted a medical fee schedule prescribing the permissible charge for the service rendered, an insurer may properly rely on such fee schedule to establish the "prevailing fee" within the meaning of 11 NYCRR 68.6, and demonstrate compliance therewith by payment in accordance with that fee schedule.
Plaintiff's patient was injured in in a New York motor vehicle accident but treated at plaintiff's New Jersey location. Plaintiff billed defendant National Interstate $10,800 for arthroscopic knee surgery, but National Interstate paid only $5,996.67 in accordance with the New Jersey Automobile Medical  Fee Schedule.  Plaintiff brought this action for the $4,803.33 difference between the billed and paid amounts.  Bronx County Civil Court GRANTED National Interstate's CPLR 3211 motion to dismiss the complaint, and plaintiff appealed.

In AFFIRMING, the order appealed from, the Appellate Term, First Department, first noted that New York Insurance Regulation (11 NYCRR) § 68.6 provides that "[i]f a professional health service reimbursable under Insurance Law § 5102(a)(1) is performed outside New York State, the permissible charge for such service shall be the prevailing fee in the geographic location of the provider."  The appellate court then cited and relied on a 2003 opinion letter of the then-New York State Insurance Department (who remembers those?) in holding:
Significantly, the Superintendent of Insurance issued an opinion letter stating that the reimbursement amount under section 68.6 "is determined by the permissible cost" in the out-of-state location (Guatemala) (see Ops Gen Counsel NY Ins Dept No 03-04-03 [Apr 2003]). The Superintendent's interpretation is entitled to deference, since it is neither irrational nor unreasonable, nor counter to the clear wording of a statutory provision (see LMK Psychological Servs., P.C. v State Farm Mut. Auto. Ins. Co., 12 NY3d 217, 223 [2009]). Indeed, the Superintendent's reliance upon the "permissible cost" in the foreign jurisdiction is consistent with [*2]the legislative purpose underlying Insurance Law § 5108 and implementing regulations - to "significantly reduce the amount paid by insurers for medical services, and thereby help contain the no-fault premium" (Goldberg v Corcoran, 153 AD2d 113, 118 [1989], appeal dismissed 75 NY2d 945 [1990]). 
Applying section 68.6 as interpreted by the Superintendent, the "prevailing fee in the geographic location of a provider" is the "permissible" reimbursement rate authorized in the foreign jurisdiction. Here, the permissible rate authorized in New Jersey for the services rendered by plaintiff is set forth in New Jersey's no-fault statute and applicable fee schedule. Allowing plaintiff to bill at a rate significantly higher than the permissible charges in the New Jersey fee schedule would undermine the purpose of Insurance Law § 5108, and thwart the core objectives of the No-Fault Law - "to provide a tightly timed process of claim, disputation and payment" (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 319 [2007][citation omitted]), to "reduce the burden on the courts and to provide substantial premium savings to New York motorists" (Matter of Medical Socy. of State of NY v Serio, 100 NY2d 854, 860 [2003]).
Contrary to plaintiff's claim, the omission of the term "fee schedule" from the regulation does not indicate that its exclusion was intended. Construed within the context of the regulation, whose scope and application broadly extends to all geographic locations outside the State of New York, the legislature's use of the comprehensive term "prevailing fee," rather than the less inclusive term "fee schedule," comports with common sense and the reality that the different jurisdictions have not unanimously adopted a no-fault regime, and/or uniformly based the permissible reimbursement charge upon a medical fee schedule.
Plaintiff provider also argued that National Interstate's excessive fee/fee schedule defense was precluded because it was not raised within 30 days of defendant's receipt of the plaintiff's bill.  In rejecting that argument, the appellate court further held that "since the services here were rendered after April 1, 2013, the defense of excessive fees is not subject to preclusion (see 11 NYCRR 65-3.8[g][eff Apr. 1, 2013)."

On the same day (October 8, 2015), the Appellate Term, First Department, issued a similar decision in Cliffside Park Imaging & Diagnostic v Travelers Ins. Co., holding that "[i]nasmuch as the health services underlying plaintiff's no-fault claim were rendered in New Jersey, defendant may properly rely upon the New Jersey fee schedule to establish the 'prevailing fee' within the meaning of 11 NYCRR 68.6[.]"

Monday, October 26, 2015

George Campbell Painting Reprised

CGL – BLANKET ADDITIONAL INSURED – EMPLOYEE INJURY EXCLUSION – UNTIMELY DISCLAIMER – INSURANCE LAW § 3420(D)(2)    
Endurance Am. Specialty Ins. Co. v. Utica First Ins. Co.
(1st Dept., decided 10/8/2015)

New York Insurance Law § 3420(d)(2), where applicable, requires that written notice of a disclaimer or denial be sent "as soon as is reasonably possible ... to the insured and the injured person or any other claimant."

Since 2012 when the First Department issued its decision in George Campbell Painting, liability insurers doing business in New York have been on notice, and on guard, that a disclaimer or denial which implicates Insurance Law § 3420(d)(2) -- one for bodily injury or death claims based on either the applicability of a policy exclusion or the breach of a policy condition -- should not await the methodical completion of the insurer's coverage investigation where at least one exclusion-based or condition-based ground for disclaiming or denying coverage is already apparent or known.  To wait to disclaim or deny until the insurer completes its coverage investigation under such circumstances is to risk having the declination challenged and found to to have not been "as soon as [was] reasonably possible" in violation of § 3420(d)(2).

This case effectively arguably extends or enlarges the preclusive impact or scope of George Campbell Painting, at least in the First Department.  New York commercial general liability insurers take note.

Plaintiff Endurance American Specialty Insurance Company insured contractor Adelphia Restoration Corporation.  Defendant Utica First Insurance Company insured subcontractor CFC Contractor Group, Inc.  The Utica First policy contained a blanket additional insured endorsement providing additional insured coverage to entities for which CFC was required to procure additional insured coverage under a written agreement executed prior to a loss.  However, the Utica First policy also contained a broad exclusion for bodily injuries sustained by employees of any insured, or by contractors or employees of contractors "hired or retained by or for any insured."

October 16, 2011 -- employee of CFC allegedly injured on the job
November 16, 2011 -- Utica First receives first notice of accident from Rockville Risk Management, TPA for Endurance (Adelphia)
November 21, 2011 -- Utica denies defense/indemnification overage to CFC; letter copied to Rockville but not to Adelphia
May 10, 2012 -- Rockville tenders Adelphia's defense and indemnity to Utica First, noting that CFC had contracted with Adelphia, but does not provide copy of contract
November 20, 2012 -- Rockville again tenders Adelphia's D&I to Utica First; requests response to tenders
January 25, 2013 -- Rockville sends copy of contract between Adelphia and CFC to Utica First
January 28, 2013 -- Utica First receives copy of contract
January 29, 2013 -- Utica First denies D&I coverage to Adelphia based on employee exclusion

Adelphi conceded that on its face, the employee exclusion in Utica First's policy with CFC precluded coverage to it and to CFC; however, Adelphi contended that the timing of Utica First's disclaimer to it precluded Utica First from denying it coverage. The First Department agreed:
Utica's disclaimer of liability for coverage by letter dated November 21, 2011 to its named insured, defendant CFC, did not constitute notice to additional insured Adelphi under Insurance Law § 3420(d)(2) (see Sierra v 4401 Sunset Park, LLC, 24 NY3d 514 [2014]). Further, although Utica knew by November 21, 2011, at the latest, that the employee exclusion applied to the employee's alleged accident, Utica did not immediately disclaim coverage on that basis; it instead waited to disclaim coverage until January 29, 2013 — one day after it had received the contract that triggered the blanket endorsement. However, Insurance Law § 3420(d) "precludes an insurer from delaying issuance of a disclaimer on a ground that the insurer knows to be valid . . . while investigating other possible grounds for disclaiming" (George Campbell Painting v National Union Fire Ins. Co. of Pittsburgh, PA, 92 AD3d 104 [1st Dept 2012]; see also City of New York v. Northern Ins. Co. of N.Y., 284 AD2d 291 [2d Dept 2001], lv dismissed 97 NY2d 638 [2001]).  
If Adelphi was not entitled to coverage because of the employee exclusion, it did not matter one way or the other whether it was an additional insured under the CFC/Utica policy, and Utica therefore did not need to investigate Adelphi's status in order to disclaim coverage under the exclusion (see George Campbell Painting, 92 AD3d at 111-112). Indeed, given its statement that it would not indemnify "our insured or any other party for any judgment awarded," Utica must have known that the employee exclusion was effective not only as to CFC but also as to Adelphi, and therefore, Utica should have immediately disclaimed to Adelphi on that basis. Thus, Utica's investigation as to whether Adelphi was an additional insured was insufficient as a matter of law as the basis for a disclaimer.
Practice Pointer:  When it appears a policy exclusion applies broadly to negate coverage to the named insured and all other persons or entities, issue the declination not only to the named insured, but also directly and separately to those persons or entities who may have claims to coverage under the policy, regardless of whether it is known for certain that those persons or entities qualify as insureds or additional insureds.