Thursday, July 31, 2008

Psychiatric Evaluation & Testing Services Found Medically Unnecessary

CityWide Social Work & Psychological Servs., PLLC v. Allstate Ins. Co.
(Dist. Ct., Nassau Co., decided 7/1/2008)

This decision includes a good discussion of a no-fault insurer's burden of proof on a medical necessity defense. Allstate timely denied payment of plaintiff medical provider's $958.32 bill for psychiatric evaluation and testing services. Nassau District Court Judge Robert Bruno conducted a trial on Allstate's lack of medical necessity defense, noting preliminarily in his decision:
A no-fault insurer defending a denial of first-party benefits on the ground that the billed for services were not medically necessary must show that the services provided were inconsistent with generally accepted medical/professional standards. The opinion of the insurer's expert, standing alone, is insufficient to carry the insurer's burden of proof that the services were not medically necessary (see CityWide Social Work & Psychological Services v. Travelers Indem. Co., 3 Misc 3d 608, 777 NYS2d 241 [Civ. Court Kings County 2004]; Ultimate Medical Supplies v. Lancer Insurance Co., 7 Misc 3d 1002(A), 801 NYS2d 243, 2004 NY Slip Op 51860(U) [Civil County Kings County 2004]; Expo Medical Supplies, Inc. v. Clarendon Insurance Company, 12 Misc 3d 1154(A), 819 NYS2d 209, 2006 NY Slip Op 50892(U), 2006 WL 1341418). At trial, Defendant bears the burden of proof for its claim of lack of medical necessity (see Expo Medical Supplies, Inc. v. Clarendon Insurance Company, supra; A.M. Medical Services v. Deerbrook Insurance Co., Slip Copy, 18 Misc 3d 1139A, 2008 NY Misc. LEXIS 749, 2008 WL 518022 (NY City Civ. Ct.), 2008 NY Slip Op. 50368(U)).

In order for Defendant to prevail, Defendant must establish a factual basis and medical rationale for its claim of lack of medical necessity (see Nir v. Allstate Insurance Co., 7 Misc 3d 544, 796 NYS2d 857 [Civ. Ct. Kings Co. 2005]).
Allstate produced Dr. Samuel Rock for testimony at trial. Plaintiff called no witnesses to rebut Dr. Rock's testimony. Judge Bruno summarized Dr. Rock's testimony as follows:
Defendants' medical expert, Dr. Samuel Rock, testified that he reviewed the medical records and reports of the claimant and that he had sufficient information to render an opinion as to whether the services rendered were medically necessary. Dr. Rock testified on direct examination that he reviewed the medical records he received from Dr. Braun as well as other medical reports and results of the Beck inventory tests.

Dr. Rock also testified that the general accepted medical/professional standard for conducting the initial interview is six (6) weeks post-accident and to conduct the initial interview any earlier could result in a false positive, as most individuals experience some type of psychological stress after an accident, but the initial stress dissipates several weeks thereafter.

In the instant case, Dr. Braun conducted the initial interview on September 12, 2003, thirteen (13) days post accident, which according to Dr. Rock was improper and against generally accepted medical/professional standards.

In addition to the foregoing, Dr. Rock testified that had the initial interview been properly conducted, a determination could have been made that claimant was not seriously psychologically disturbed and therefore no additional testimony [sic] would be necessary.

According to Dr. Rock, the medical reports he reviewed does not indicate whether the claimant was ever treated, or whether Dr. Braun ever examined claimant or just relied upon the paperwork generated from claimant's self-administered Beck inventory tests.

In addition to the foregoing, Dr. Rock testified that the results of Dr. Braun's tests indicated claimant had the mildest form of anxiety, and in Dr. Rock's opinion, that diagnosis could have been determined during a proper forty-five (45) minute interview rendering subsequent testings unnecessary.

On cross-examination, Dr. Rock admitted, he did not review the accident report, hospital records or Dr. Gelphan's report in concluding the tests performed on claimant were not medically necessary. However, on re-direct examination, Dr. Rock testified that even if he had reviewed those reports they would not have effected his opinion regarding the lack of medical necessity.
Without any rebuttal testimony from the plaintiff, Judge Bruno found that plaintiff had failed to refute Allstate's expert witness testimony that the services provided deviated from the generally accepted medical professional standards. Judgment for Allstate.

4-Month Delay in Disclaiming Based on Family Member Exclusion Held to be Timely

Matter of New York Central Mut. Fire Ins. Co. v. Steiert
(Sup. Ct., Nassau Co., decided 7/17/2008)

Dawn Steiert was injured in a motor vehicle accident with a vehicle owned and/or driven by Erich John Bohn and insured by Eagle Insurance Company. The Eagle policy had a $50,000 per person liability coverage limit. Bohn apparently lived with his grandfather, who owned a car insured by Kemper. Excess coverage was sought for Bohn under his grandfather's policy.

Kemper received notice of the accident on October 18, 2001 and issued a reservation of rights letter on October 26, 2001. It conducted EUOs of Bohn and his grandfather on January 2, 2002 and received the EUO report on January 21, 2002. Thirty-six days later, Kemper issued a disclaimer on February 27, 2002 based on its policy's exclusion for autos owned by a family member that were not covered autos.

Although the decision does not say so, Steiert presumably collected the $50,000 policy limit from Eagle and then made a claim for supplementary uninsured motorist (SUM) coverage benefits to New York Central, which commenced this special proceeding for a stay of arbitration based on its assertion that Kemper owed excess coverage to Bohn. New York Central argued that Kemper's disclaimer, sent four months and nine days after Kemper first received notice of the accident was untimely under Insurance Law § 3420(d).

Nassau County Supreme Court Justice Kenneth Davis disagreed and dismissed New York Central's petition, finding that Kemper's 36-day delay after receiving the EUO report in issuing the disclaimer was reasonable:
The issue currently before this court is whether Kemper timely disclaimed. Where, as here, Insurance Law § 3420 (d) is applicable and a disclaimer is based on a policy exclusion, a timely disclaimer of coverage is required. Given that Kemper's disclaimer of coverage rested on an exclusion in the insured's policy, Kemper had a statutory duty to timely disclaim. On the facts presented, the court finds that Kemper credibly testified that it did not have " sufficient knowledge of the facts entitling it to disclaim" until after receipt of the Examinations Under Oath report. As such, we conclude that Kemper's disclaimer of coverage, made approximately 36 days after receipt of the report, satisfied the statute and was timely as matter of law.
Finding that Kemper "offered a sufficiently reasonable explanation for the delay, accounting for the time that [it] took to issue the disclaimer", Justice Davis rejected New York Central's argument that Kemper could have and should have used more expedient means of investigating coverage than conducting EUOs:
In the instant case, the claim against Kemper was for excess coverage, and respondent Steiert had a viable primary claim against Eagle and NYCM. Kemper issued a reservation of rights letter twelve days after receiving first notice of the claim. Kemper then initiated an investigation in order to flesh out the basis for denying coverage. This investigation, which according to the testimony of the senior claim representative handling the litigated first and third-party claims William Lavoie, included Examinations Under Oath of both the defendant/grandson , Erich John Bohn, and the insured/grandfather, was needed to attain the facts providing the basis on which to disclaim. Contrary to petitioner's contention that Kemper could have used a method other than Examination Under Oath, Mr. Lavoie credibly testified that examinations are the primary tool used by Kemper to determine coverage in these types of instances. Mr. Lavoie also credibly testified that in accordance with Kemper's internal policy, the next step in the investigation into the propriety of the claim was to refer the claim to the technical claim manager who consults with the home office liability executive, who ultimately makes the decision whether to approve or deny coverage.

Wednesday, July 30, 2008

Injured Party's Notice to Excess Insurer on Eve of Trial Found Timely

Cicero v. Great Am. Ins. Co.
Cicero v. Great Am. Ins. Co.

(1st Dept., decided 7/29/2008)

Don't adjust your monitor. The First Department issued a pair of decisions yesterday in the same case involving late notice of occurrence/suit to an excess insurer.

Lydia Cicero sued Western Beef, Inc., for serious injuries she suffered on January 20, 1998, when she slipped and fell in its supermarket. A preliminary conference order directed Western Beef to respond to plaintiffs' combined demands, dated May 27, 1999, and disclose "the existence and contents of any insurance agreement as described in CPLR § 3101(f)." On January 21, 2000, defense counsel retained by Zurich American Insurance Group, Western Beef's primary insurer, responded that, at the time of plaintiff's accident, Western Beef was insured by Zurich American Insurance Group under a policy that had a single limit coverage of $1,000,000. Almost four years later, on the eve of trial, Western Beef's broker notified Zurich American that Western Beef had $25 million in excess coverage with Great American Insurance Company. Western Beef's defense counsel then notified plaintiffs' counsel, who promptly gave notice of plaintiffs' claim to General American on January 9, 2004, nearly six years after the slip-and-fall accident.

General American disclaimed coverage because it did not receive timely notice of the accident from its insured, Western Beef. Western Beef then commenced a DJ action against, among others, Great American and the broker who sold it the excess insurance. Cicero settled the underlying personal action (for approximately $2.5 million) and, as part of the settlement, Western Beef assigned to Cicero its rights against Great American and the other defendants in the DJ action.

Cicero then took over the prosecution of the DJ action and also commenced this direct action pursuant to Insurance Law § 3420(a)(2) against Great American to recover the portion of the settlement exceeding the primary policy limit. A motion for summary judgment in the DJ action resulted in a declaration that Great American was under no obligation to satisfy the judgment against Western Beef in the underlying action, the court holding that timely notice by Western Beef to its insurance broker did not constitute timely notice to Great American because the evidence failed to show that the broker was Great American's agent as well as Western Beef's.

Great American moved for leave to amend its answer in this direct action to include an affirmative defense of res judicata and, upon amendment, for summary judgment dismissing the complaint on that ground. In AFFIRMING the New York County Supreme Court's denial of that motion, the First Department held:

We reject Great American's argument that the instant action is precluded by this declaration. The assignment to plaintiffs of Western Beef's rights under its policy with Great American did not diminish their statutory right to pursue a direct action against the insurer, which is independent of the insurance contract (see Lauritano v American Fid. Fire Ins. Co., 3 AD2d 564, 567 [1957], affd 4 NY2d 1028 [1958] [noting the absence of privity]). The determinative issue in the declaratory judgment action was whether notice of plaintiffs' claims in the underlying action given by Western Beef to its broker could be imputed to Great American; here, no contract, agency or insurance coverage issues are involved. Rather, this is a statutory action to collect an unpaid settlement in which the only defense available to Great American is that plaintiffs did not satisfy their statutory obligation to provide notice as soon as reasonably possible "in light of the opportunities to do so afforded [them] under the circumstances" (Appel v Allstate Ins. Co., 20 AD3d 367, 369 [2005] [internal quotation marks and citations omitted]). "While a valid final judgment bars future actions between the same parties on the same cause of action, [a] subsequent action will not be barred by res judicata where the nature or object of the second action is distinct from that in the prior action in which the judgment was rendered" (GTFM, LLC v Nagy, 18 AD3d 266, 268 [2005] [internal quotation marks and citations omitted]).
As to the timeliness of Cicero's 6-year delayed notice to Great American, the First Department REVERSED the New York County Supreme Court's denial of summary judgment to Cicero and awarded judgment to her against Great American in the sum of $1,501,211.00 plus statutory interest from December 8, 2004 (approximately $490,000) and costs. Having noted that an injured party's delay in providing notice to a tortfeasor's liability insurer is measured less rigidly than the insured's delay (see Appel v. Allstate Ins. Co., 20 AD3d 367, 369 [1st Dept. 2005]), the First Department held:

While, ordinarily, whether plaintiffs acted diligently in ascertaining the identity of Western Beef's insurer or insurers would present an issue of fact, under these circumstances, where Western Beef affirmatively misled plaintiffs as to even the existence, let alone the identity, of its excess insurer and failed to cooperate with its primary insurer, Zurich American, in the latter's attempts to ascertain whether there was any excess coverage, plaintiffs' efforts were sufficient and the notice given by them shortly after they learned of the excess coverage and American National's identity was timely as to them.
The decision does not indicate what evidence supported the First Department's conclusion that Western Beef "affirmatively misled" plaintiffs of the existence and identity of its excess insurer and "failed to cooperate" with its primary insurer in its attempts to ascertain whether there was any excess coverage. Certainly, there must have been more at work than simply an incorrect CPLR § 3101(f) disclosure. Although it does not explicitly say so, however, these decisions imply that an injured plaintiff may do nothing more than rely on the accuracy of a defendant's CPLR § 3101(f) insurance disclosure. Inasmuch as New York courts have held that 3101(f) permits the discovery of the insurance agreements themselves, could a plaintiff's failure to demand insurance agreement materials -- declarations pages, certificates of insurance, policies themselves, etc. -- or subpoena records directly from a defendant's agent or broker present a question of fact as to the plaintiff's diligence in seeking to identify and then notify all liability insurers of the tortfeasor(s)?

Monday, July 28, 2008

People Who Live In Glass Houses Should Not Throw Stones

Lenox Hill Radiology a/a/o Jose Almadovar v. New York Central Mut. Fire Ins. Co.
(Dist. Ct., Nassau Co., decided 7/25/2008)

Nassau County District Court Judge Andrew Engel has authored another instant classic on issues of no-fault claim verification and the workers' compensation fee schedule. Never shy of expressing his judicial sentiment on an issue or argument, Judge Engel ends his lengthy, citation-rich decision with:

Finally, that branch of the Plaintiff's motion which seeks the imposition of sanctions against the Defendant, pursuant to 22 N.Y.C.R.R. § 130-1, for alleged frivolous conduct, is denied. "People who live in glass houses should not throw stones."
Med providers' and insurers' houses, or lawyers' houses? Hold that question.

Plaintiff performed cervical and lumbar MRIs on January 4, 2002. Billed for $1,791.16 on April 5, 2002 (old Reg 68 rules). New York Central received the bill on April 11, 2002 and sent a verification request for records from the referring DC on April 24, 2002. Having received nothing within 30 days, New York Central sent a follow-up request on May 28, 2002. New York Central received the requested verification information on June 5, 2002, made partial payment of the bill in the amount of $1,571.24 on July 1, 2002, and denied the balance of $219.92, asserting that the fees charged for the MRIs in question were in excess of the Workers' Compensation fee schedule. Plaintiff commenced this action on July 15, 2002. New York Central moved and plaintiff crossmoved for summary judgment.

In denying New York Central's motion, Judge Engel agreed with plaintiff that New York Central had failed to submit proper proof in admissible form that plaintiff's bills were in excess of the appropriate Workers' Compensation Fee Schedule. The court found defense counsel's affirmation to be of no probative value, the statement of one of New York Central's litigation examiners regarding the correct fee schedule amounts to be "conclusory", and New York Central's reliance on an unreported federal court decision to be "misplaced." Judge Engel also rebuffed plaintiff's counsel's castigation of New York Central's verification requests, holding:

The Plaintiff accuses the Defendant of "us[ing] the verification protocols to delay payment of the claim, and than (sic) once it determined the services were medically necessary, sought out a different basis to refuse payment. The verification requests do not extend the time in which the defendant has to deny the claim unless the defendant bases its denial on the requested verification." (Hayes Affirmation 4/2/08) The Plaintiff further posits that "a failure by the insurer to issue a denial when it is in possession of the necessary information serves as a waiver of any right to deny a claim based on such information." (Hayes Affirmation 4/2/08) The Plaintiff does not cite any case law or regulation that supports either of these propositions. The controlling regulations and case law are, in fact, contrary to the Plaintiff's argument.
Similarly, the court denied plaintiff's cross motion for summary judgment or partial summary judgment, finding that plaintiff had failed to lay a proper business record foundation for the admission of its claim form:
The Plaintiff attempts to lay this foundation through the affidavit of Nicole Simeona, who advises the court that she is "employed by plaintiff's counsel[,] (Simeona Affidavit 4/3/08) not by the Plaintiff. Ms. Simeona further avers that she is intimately familiar with the administration of all aspects of the collection department." (Simeona Affidavit 4/3/08) She does not indicate whose collection department, the Plaintiff's or her employer's. Moreover, nowhere does Ms. Simeona allege that she has any knowledge of the Plaintiff's record keeping practices and the creation of the Plaintiff's claim form.
Which brings us back to where we started. Plaintiff's motion apparently included a request for sanctions against New York Central for alleged "frivolous conduct", which Judge Engel summarily denied with the "people who live in glass houses..." reference. Lawyers are people, too.

55-Day Delay in Disclaiming Based on Livery Exclusion Held to Be Unreasonable in Light of Complaint Allegations

Long Is. Ins. Co. v Johnson
(Sup. Ct., Kings Co., decided 7/22/2008)

This is the second time in a month that a New York court has held that when the allegations of a personal injury complaint make it clear that a policy exclusion applies, further investigation may be deemed "superfluous" or unnecessary, and the insurer will be found to owe coverage if it has not issued a timely declination of coverage based on that exclusion. The first time was in the GEICO v. Liberty Mutual case, posted last week.

On July 3, 2007, Ann Gulston was allegedly injured in a head-on collision with a van owned and operated by Oneil Johnson in which Deon Denny was a paying passenger. At the time of the accident, Johnson was insured by the then nine-year-old Long Island Insurance Company (LIICO) under an automobile insurance policy that excluded "liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance[.]" Gulston sued Johnson for her personal injuries.

LIICO first learned of the underlying lawsuit on July 26, 2007, when it received a copy of Gulston's verified complaint, which alleged, in relevant part, that:
"defendant Johnson was in the course of his employment by defendant Rescue Car Service, Inc. at the time of the below referenced motor vehicle accident"; and

"defendant Johnson operated the above reference[d] motor vehicle with the permission and in the business of [defendant] Rescue Car Service, Inc."
LIICO sought unsuccessfully to EUO its insured, Johnson, but was able to conduct an EUO of his passenger, Denny, on August 30, 2007. On September 19, 2007 -- 55 days after receiving the underlying personal injury complaint -- LIICO issued a written disclaimer to Johnson and Gulston based on the policy's livery exclusion.

In granting Gulston's cross motion for summary judgment and declaring that LIICO's 55-day delay in disclaiming was unreasonable as a matter of law, Kings County Supreme Court Justice Robert Miller held:
Investigation into issues affecting an insurer's decision whether to disclaim coverage may excuse the delay in notifying the policyholder of a disclaimer (see First Fin. Ins. Co., 1 NY3d at 69; Delphi, 43 AD3d at 852) if such excuse relates to the insurer's decision to disclaim (see First Fin. Ins. Co., 1 NY3d at 69). If the reason for the delay is not excusable, the final inquiry is whether the delay is unreasonable as a matter of law (see First Fin. Ins. Co., 1 NY3d at 69-70).

Notwithstanding this nearly two-month delay, LIICO asserts that its disclaimer was timely "[s]ince the primary reason for disclaiming coverage herein was not readily apparent and required investigation," including an examination before oath of the paying passenger. LIICO's investigation, however, was superfluous, as the grounds for its disclaimer were readily apparent, before the onset of the delay, from the face of the complaint, which alleged that, at the time of the accident, Johnson was using his van as a livery vehicle in connection with his employment with Rescue. Several courts have held relatively short delays in notifying the insured of denial of coverage to be unreasonable as a matter of law (see First Fin. Ins. Co., 1 NY3d at 69-70 [a 48-day delay was unreasonable as a matter of law]; Matter of Nationwide Mut. Ins. Co. [Steiner], 199 AD2d 507, 508 [1993] [an unexplained 41-day delay was unreasonable as a matter of law]; Transcontinental Ins. Co. v Gold, 18 Misc 3d 1135 [A], 2008 NY Slip Op 50322, *1 [U] [2008] [even a "thirty-day delay is unreasonable as a matter of law where the sole ground on which coverage is disclaimed is obvious from the face of the notice of claim and the accompanying complaint, and there existed no need to conduct an investigation before determining whether to disclaim"]; but see New York Central Mut. Fire Ins. Co. v Majid, 5 AD3d 447, 448 [2004] [a 31-day delay in issuance a disclaimer letter based upon a livery vehicle exclusion was reasonable in light of the insurer's need to consult with counsel prior to the issuance of the disclaimer]). Accordingly, due to its untimely disclaimer, LIICO waived its right to rely upon the livery/public conveyance exclusion contained within its policy.

The court's ruling is consistent with Halloway v State Farm Ins. Cos. (23 AD3d 617 [2005], lv denied 6 NY3d 708 [2006]), on which LIICO relies. In Halloway, the Appellate Division, Second Department held that the insurer's disclaimer, which was issued five months from the date of the accident but immediately after the completion of an investigation, was timely based on the objective need for the insurer's prior investigation. "[I]n view of the contradiction between [the insured's] alleged statement at the time of the accident as related by the plaintiffs' attorney, and [the insured's] subsequent denial that passengers were present and the police report, it was reasonable for [the insurer] to investigate the incident to determine, inter alia, whether the livery vehicle exclusion applied" (id. at 618). The holding in Halloway was a justified departure, based on the numerous inconsistencies in the insured's testimony and in the police report, from the general rule enunciated in Republic Franklin Ins. Co. (16 AD3d at 479) that "[w]hen in doubt, an insurer should issue a prompt disclaimer and then seek a declaratory judgment concerning its duty to defend or indemnify" (id. at 618). After deciding Halloway, the Appellate Division, Second Department applied Republic's "disclaim first" approach, albeit without citing to it, in Allstate Ins. Co. v Swinton (27 AD3d 462 [2006]). In Allstate, an insurer's 34-day delay in disclaiming coverage, based upon lack of notice of the accident and the fact that the driver was not listed as an insured driver, was held to be unreasonable as a matter of law. The Appellate Division stated that the insurer "could have immediately disclaimed based upon lack of notice and thereafter disclaimed in a separate letter on the additional ground that the driver was not listed as insured driver once that fact was ascertained" (id. at 463). Subsequent to Allstate, the Appellate Division, Second Department held in Tully Const. Co., Inc. v TIG Ins. Co. (43 AD3d 1150 [2007]), that a 42-day delay in the issuance of the disclaimer was reasonable in light of the discrepancies in the oral and written communications by the insured, warranting further investigation by the insurer, including obtaining a copy of the summons and complaint in the underlying action. The court acknowledges that investigation into issues affecting an insurer's decision whether to disclaim coverage obviously may excuse delay in notifying the insured of a disclaimer (see e.g. DeSantis Bros. v Allstate Ins. Co., 244 AD2d 183, 184 [1997] [delay reasonable because of need to review 500-page file and conduct legal research], lv denied 91 NY2d 808 [1998]; Aetna Cas. & Sur. Co. v Brice, 72 AD2d 927, 928-929 [1979] delay reasonable due to insurer's difficulty gathering evidence because all those involved in accident had been killed], affd 50 NY2d 958 [1980]). In the instant case, however, it bears repeating that the excluded use of the insured van as a livery vehicle was readily apparent upon LIICO's receipt of the complaint in the underlying action.
Commentary: I am mildly troubled by this decision. Liability insurers should be encouraged, not discouraged, to make contact with their insureds and ask, "Hey, is what this complaint says true?", rather than accepting the allegations as accurate and issuing uninvestigated disclaimers to their insureds, leaving them without defense or indemnification coverage. In 1991, the New York Court of Appeals held in Fitzpatrick v. American Honda Motor Co., Inc., that even in cases in which pleadings do not allege a covered occurrence, a liability insurer must defend its insured when it has actual knowledge of facts demonstrating that the lawsuit does involve such an occurrence. The "disclaim first" and investigate or DJ later rule potentially leads to a number of problems. Nonetheless, liability insurers should take note of what seems to have become a prevailing view in the First and Second Departments.

Friday, July 25, 2008

Not Sending Duplicate NF-10 to Provider Not Fatal to Claim Defenses

Prime Psychological Services, PC, a/a/o Raymond Perez v. American Transit Ins. Co.
(Civil Ct., Richmond Co., decided 6/26/2008)

On an "issue of first impression", Richmond County NYC City Civil Court Judge Katherine A. Levine has held that a no-fault insurer's failure to send a duplicate copy of a timely NF-10 is not fatal to the coverage defenses asserted therein.

American Transit issued a timely NF-10 to plaintiff medical provider, citing lack of medical necessity as the ground for denying payment. Plaintiff sought summary judgment in this action based on American Transit's alleged failure to issue the NF-10 "in duplicate", as required by 11 NYCRR §65-3.8. American Transit did not admit or deny having sent only one NF-10 to plaintiff, but merely stated that the omission, if any, was neither "basic" nor "numerous" citing Nyack Hospital v. State Farm Mutual Ins. Co., 16 AD2d 564 ( 2nd Dept. 2005).

After reviewing and distinguishing a number of New York cases addressing no-fault denial sufficiency and borrowing from the rationale of a 1966 New York County Supreme Court decision on service of legal papers (in which the court stated that is "does not count the papers. It looks rather to their merit and their substance. No litigant who states a cause of action will be turned away by mistakes in labeling or in his counting of the papers required to be served"), Judge Levine held:
The same reasoning applies to the instant matter. Plaintiff does not claim that the information contained in the NF -10 was "insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law." Nor does plaintiff contend that it was deprived of prompt specific notice as to the reasons for the insurer's denial or that it was prejudiced because it only received one copy of the NF-10. In fact, since the regulations set forth that both the original NF-10 form and its duplicate shall be served on the medical provider, the service of the duplicate NF-10 is basically redundant. As such, plaintiff's contention that it must be awarded summary judgment because the denial was not issued in duplicate runs counter to the very legislative intent behind the No-Fault Law - to process claims within a short time frame and expeditiously so as to avoid prejudice and red tape dilatory practices.

As such, both plaintiff's and defendant's motions for summary judgment are denied and this case is to proceed to trial.

CORRECTION: Effective Date of Direct DJ/Late Notice/Prejudice Bill -- January 17, 2009

I received some misinformation from the legislative sponsor's office earlier this week. The New York State Senate's bill search website is today reporting that Governor Paterson actually signed the Direct DJ/Late Notice/Prejudice bill (S.8610/A.11541) on July 21, 2008, making its effective date January 17, 2009 (which is a Saturday), not the 19th.

S8610 DEFRANCISCO Same as A11541 Rules (Weinstein)
Civil Practice Law and Rules
TITLE....Provides for a declaratory judgment action against an insurer directly where a claim is brought for personal injury or wrongful death against another
06/23/08 referred to codes
06/23/08 substituted for a11541
06/23/08 ordered to third reading rules cal.676
06/23/08 passed assembly
06/23/08 returned to senate
07/21/08 SIGNED CHAP.388

Policies issued, renewed or modified on and after that date must contain the new provisions, and the new rules regarding direct DJ actions, the prejudice requirement, and disclosing liability coverage policy limits will take effect on that date.

For a discussion of the various provisions of that bill, see my Direct DJ/Late Notice Bill label.

Since January 17th is a Saturday and most insurers don't issue, renew or modify policies on weekends, the following Monday the 19th will essentially remain the first business day on which the new law and its provisions for direct DJs, policy requirements, and the obligation to disclose primary policy liability coverage limits will take effect.

[See my post of January 16, 2009 for a summary of Chapter 388's changes to the New York Insurance Law.]

UM Arbitration Award of No Serious Injury Upheld

Matter of the Arbitration Between Reyes v. Liberty Mut. Ins. Co.
(App. Term, 2nd Dept., decided 7/10/2008)

Petitioners were involved in a motor vehicle accident with an uninsured vehicle owned and operated by Anthony Manuele. They commenced a personal injury action against Mr. Manuele and, upon his default, an inquest was conducted and default judgments were entered in their favor against Mr. Manuele. Petitioners then served Liberty Mutual with a demand for arbitration of their claims for uninsured motorist (UM) coverage. An arbitration hearing was held, and petitioners argued that the arbitrator was bound by the amount of the default judgments rendered in the personal injury action, and was obligated to render an award in the same amount of the judgments therein. Liberty argued that the arbitrator was not so bound, and offered a copy of the insurance policy which stated that any judgment for damages arising out of a lawsuit brought without its written consent was not binding upon the insurer. It was conceded that Liberty had not been aware of the default judgments rendered in the personal injury action until the date of the arbitration hearing. The arbitrator found that Liberty was not bound by the default judgments, and rendered an award in favor of Liberty, dismissing petitioners' claims based upon their failure to demonstrate that they sustained a serious injury within the meaning of Insurance Law § 5102 (d).

Petitioners then commenced this special proceeding to vacate the arbitrator's award pursuant to CPLR § 7511(b), arguing that it was irrational and that the arbitrator "exceeded his power". Although petitioners were unable to produce the UM or SUM endorsements under which they sought coverage, they claimed that their policy did not contain the language contained in the policy produced by Liberty. Petitioners argued that that it was irrational for the arbitrator to include such language as a provision in their policy. Moreover, even if such language was included in the applicable endorsement, the arbitrator exceeded his authority by determining an issue involving policy coverage rather than limiting himself solely to the issues of liability and damages. In opposition, Liberty argued that there were no grounds for vacatur of the award, since said provision was included in the policy. The arbitrator's award was neither irrational, nor did the arbitrator exceed his authority in determining petitioners' entitlement to benefits.

In AFFIRMING Queens Civil Court's denial of the petition to vacate the arbitrator's award, the Appellate Term held that the arbitrator did not exceed his authority in determining whether petitioners were entitled to benefits under their policy with Liberty, and that petitioners had failed to meet their burden of showing that the arbitrator's award was irrational or that it had no evidentiary support or was arbitrary and capricious.

Thursday, July 24, 2008

A Day Late & 1,937.58 Dollars Short

North N.Y. Med. Care, P.C. a/a/o Miledy Corniel v. New York Cent. Mut. Fire Ins. Co.
(App. Term, 2nd Dept., decided 7/10/2008)

This decision reminds no-fault insurers that the 30-day pay or deny period of Insurance Law § 5106(a) and Regulation 68 (11 NYCRR § 65-3.8) is reduced by the number of days a request for additional verification is sent after 10 business days from receipt of a prescribed claim form.

According to the decision, New York Central requested additional verification from plaintiff medical provider 12 days after receiving its NF-3 verification of treatment form. Section 65.15(d)(2) provides that additional verification required by an insurer is to be requested within 10 business days of receipt of a prescribed claim form. Pursuant to § 65-3.8(j), therefore, the 30-day period within which New York Central was required to pay or deny plaintiff's claim was reduced to 28 days.

The decision indicates that New York Central received the requested additional verification on May 16, 2001. Adding 28 and subtracting 31 made June 13, 2001 the 30-day deadline to pay or deny the plaintiff's bill. New York Central denied plaintiff's bill (or it appears a portion of it) on June 14, 2001.

In REVERSING Nassau District Court's order denying summary judgment to plaintiff, the Appellate Term held that "[a]s defendant did not deny plaintiff's claim until June 14, 2001, defendant's denial of plaintiff's claim was untimely and defendant is precluded from raising its proffered defense of lack of medical necessity[.]"

That's a Long Commute -- Bronx Accident With South Carolina Uninsured

Matter of Esurance Co. v. Birikorang
(Sup. Ct., Bronx Co., decided 7/18/2008)

So here's what happens when someone with three Zabasearch addresses in the Bronx apparently buys a personal auto policy in South Carolina.

On February 18, 2006, a Dodge van owned and operated by Christopher Gay of 317 Alexander Avenue, Spartanburg, S.C., struck a Honda vehicle owned and operated by Eva Birikorang. According to the police report, Gay produced an insurance card for his van with an Allstate policy number.

The Allstate policy was a renewal policy, effective February 12, 2006. Apparently Mr. Gay did not pay his renewal premium on time, and there was a policy reinstatement after a 9-day lapse of coverage from February 12-21, 2006, a period enveloping the accident date. Allstate denied liability coverage to Gay based on that lapse. Birikorang filed a UM claim with Esurance, her auto insurer, and demanded arbitration.

Esurance commenced this special proceeding to stay that UM arbitration, arguing that Allstate was required but had failed under applicable South Carolina law properly to cancel the policy. Allstate counter-argued that South Carolina is a "self-terminating state" and that in instances of unaccepted renewal policy offers (i.e., non-payment of the renewal premium), South Carolina law does not require prospective cancellation notices. Allstate's renewal policy bill had stated, "This notice reflects your renewal offer premium. If you want your insurance coverage to continue and do not want it to end, please make sure we receive the Minimum Amount Due by the end of the day (midnight) on February 11, 2006 or your policy will end at 12:01 a.m. Standard Time on February 12, 2006." Additionally, the policy endorsement page of the renewal policy had further stated, "If we offer to renew your policy and your required premium payment isn't received when due you will have rejected our renewal offer. This means that the insurance coverage described in the renewal offer and any endorsements to the renewal offer will not become effective." Allstate received Mr. Gay's renewal premium on February 22, 2006, hence the 9-day lapse in coverage.

Applying South Carolina law, Bronx County Supreme Court Justice Alexander Hunter agreed with Allstate's position and dismissed Esurance's petition to stay the UM arbitration as to Allstate. Finding that there was a lapse in Gay's coverage at the time of the accident, the Court rejected Esurance's argument that South Carolina law required both a manifestation by Allstate of its willingness to renew the policy, as well as a demonstration by some overt act that Mr. Gay intended to cancel the policy.

July's Coverage Counsel Poll

July's Coverage Counsel poll will end on the 31st. If you haven't cast your vote yet, you've got a week left to do so. Scroll down, right side of this page.

Wednesday, July 23, 2008

Direct DJ/Late Notice/Prejudice Bill Signed by Governor Paterson

Earlier today (July 23, 2008), Governor Paterson signed the Direct DJ/Late Notice/Prejudice bill (S.8610/A.11541). Its provisions will take effect 180 days from today or on January 17, 2009. Mark your calendars. Policies issued, renewed or modified on and after that date must contain the new provisions, and the new rules regarding direct DJ actions, the prejudice requirement, and disclosing liability coverage policy limits will take effect on that date.

For a discussion of the various provisions of that bill, see my Direct DJ/Late Notice Bill label.

Today's press release on the bills signed is here. No mention of the Intoxication Exclusion Cut Back bill (A10000/S8294-A) being signed. In fact, there's no mention on either the Senate's or Assembly's websites of that bill having even been delivered to the Governor for signature.

The 25 Greatest Legal Movies

Earlier this year, the ABA Journal asked 12 lawyers who teach film or are con­nected to the business to choose what they regard as the best movies ever made about lawyers and the law. Their nominations were collated into a top 25 list, which you can review here.

I was glad to see that not only did My Cousin Vinny make the list, but it ranked as #3 behind To Kill A Mockingbird and 12 Angry Men. I show My Cousin Vinny each year at the end-of-the-season wrap-up/party for the high school mock trial team that I coach. Briefest and best opening statement ever. And I can't decide whether DA Trotter's voir "dye-er" of general automotive knowledge expert Miss Mona Lisa Vito or Vinny Gambini's "Are we to believe that boiling water soaks into a grit faster in your kitchen than anywhere else on the face of the earth?" cross-examination of Sam Tipton is better.

Guess I'm not alone in using My Cousin Vinny as a pedagogical tool.

Tuesday, July 22, 2008

NYS Insurance Department Office of General Counsel June 2008 Opinions

Just posted to the NYS Insurance Department's website are the Office of General Counsel opinions from June. There is only one opinion of relevance and interest to P&C insurers from last month.

NF-2 Submission Timeframe (June 2, 2008)

This question comes up from time to time, and we now have the NYS Insurance Department's written "position" on it. It's important not to mix up the notice of claim with the proof of claim requirements of Regulation 68.

Question Presented: May a No-Fault insurer deny a claim on the basis that an “Application for motor vehicle no-fault benefits” (NYS form NF-2) has not been submitted by a claimant?

Conclusion: No. Section 65-1.1 of NYCRR Title 11, Part 65 (Regulation 68-A) requires the submission of written notice of claim of a motor vehicle accident to an insurer within 30 days of the accident. Although timely submission of an NF-2 satisfies the written notice requirement, the notice need not be provided by way of a prescribed NF-2 form. See 11 NYCRR § 65-3.3(d). 11 NYCRR § 65-3.3(e) permits an insurer to issue a denial for failure to provide timely written notice of claim within 30 days of the accident.

Facts: It was reported that XYZ Insurance Company denied the inquirer’s client’s No-Fault benefits on the basis that the NF-2 was submitted more than 45 days after the accident and therefore constituted late proof of claim. It was further reported that the insurer was provided with written notice, other than the NF-2, which was sufficient to meet the 30-day written notice of claim provision. The inquirer asks whether the insurer’s denial was lawful under the circumstances.

Analysis: 11 NYCRR § 65-3.3(d) allows for satisfaction of the written notice requirement through the insurer’s receipt of an NF-2 or completed hospital facility form (NYS form NF-5). Alternatively, 11 NYCRR § 65-3.3(c) contemplates that a “Department of Motor Vehicles Accident Report 104” (“MV-104), or other accident report indicating injuries to an injured person may satisfy the written notice requirement.

Pursuant to 11 NYCRR § 65-3.4(b), within five business days after notice (whether written or otherwise) is received by an insurer, the insurer shall forward the NF-2 to the claimant. If the insurer does not receive a response within 30 days of the original mailing, the insurer shall mail a second NF-2 within ten calendar days pursuant to 11 NYCRR §65-3.6(a).

11 NYCRR § 65-3.3(e) permits an insurer to issue a denial for failure to provide timely written notice of claim within 30 days of the accident. However, neither the Insurance Law nor the regulations promulgated thereunder authorize an insurer to issue a denial on the ground that the claimant failed to return a completed NF-2 to the insurer when the claimant has otherwise submitted timely written notice in accordance with 11 NYCRR § 65-1.1.

The notice of claim provision is different from the proof of claim provision in 11 NYCRR § 65-1.1, which provides that “the eligible injured person or that person’s assignee or representative shall submit written proof of claim to the Company, including full particulars of the nature and extent of the injuries and treatment received and contemplated, as soon as reasonably practicable but, in no event later than 45 days after the date services are rendered. The eligible injured person or that person’s representative shall submit written proof of claim for work loss benefits and for other necessary expenses to the Company as soon as reasonably practicable, but, in no event, later than 90 days after the work loss is incurred or other necessary expenses are rendered.”

Under the facts presented here, the insurer had no lawful basis to apply the 45-day proof of claim submission limit to the written notice provisions under 11 NYCRR § 65-1.1.

New No-Fault Pharmacy Fee Schedule Effective July 7, 2008

The New York State Insurance Department today announced that the NYS Workers' Compensation Board has adopted a new Pharmacy Fee Schedule applicable to all prescription drugs dispensed on or after July 7, 2008. This fee schedule is also applicable to prescription drugs dispensed on or after July 7, 2008 to all No-Fault eligible injured parties.

The new fee is computed by using the Average Wholesale Price (AWP) minus 12% for brand plus the dispensing fee and the AWP minus 20% for generic plus the dispensing fee. The AWP means the average wholesale price of a prescription provided in the Red Book, Medi-Span Master Drug Database, Blue Book or other nationally recognized drug pricing index adopted by the Chair or Chair's designee.

To search the allowable reimbursement amounts for drugs prescribed in relation to either New York Workers' Compensation or No-Fault claims, go here.

Direct DJ/Late Notice/Prejudice Bill Delivered to Governor Paterson for Signature

We're watching. The Direct DJ/Late Notice/Prejudice bill passed by the NYS Legislature last month was delivered to Governor Paterson for signing on July 11, 2008. If/when he signs that bill (which is a certainty), the new provisions will take effect in 180 days from that date. For a discussion of the various provisions of that bill, see my Direct DJ/Late Notice label.

STATUS: S8610 DEFRANCISCO Same as A11541 Rules (Weinstein)
Civil Practice Law and Rules
TITLE....Provides for a declaratory judgment action against an insurer directly where a claim is brought for personal injury or wrongful death against another
06/23/08 referred to codes
06/23/08 substituted for a11541
06/23/08 ordered to third reading rules cal.676
06/23/08 passed assembly
06/23/08 returned to senate

Intriguing -- Today Governor Paterson signed 38 bills that were delivered to him on the same day as the direct DJ/late notice bill -- July 11th. Bill A11541/S8610 is not listed in the press release as one of those he signed. Program Bill # 65, which became this bill, was conceived under former Governor Spitzer's administration. Could there be any chance that Governor Paterson won't sign this bill? Stay tuned.

Fitts and Starts -- GEICO Found to Owe Liability Coverage to Parking Garage Employee Due to Untimely Disclaimer

Government Employees Ins. Co. v. Liberty Mut. Ins. Co.
(Sup. Ct., New York Co., decided 7/11/2008)

When the allegations of a personal injury complaint make it clear that a policy exclusion applies, further investigation may be deemed unnecessary and the insurer will be found to owe coverage if it has not issued a timely declination of coverage based on that exclusion.

Fitts had Smellie, an employee of Edison Parking Corporation, park her car. While doing so, Smellie struck a pedestrian in the parking garage with Fitts's car, injuring him. GEICO insured Fitts under her personal auto policy, and Liberty insured the parking garage and its employees. The pedestrian commenced a personal injury action against Fitts, Smellie and Edison.

The decision indicates that "shortly after the lawsuit began, GEICO received notification and was requested to defend all defendants." Three and a half months later, GEICO's staff defense counsel sent a letter to Smellie (the parking garage employee) indicating that “[als your attorneys, our professional obligation is to you, and we will be defending your interests in this case. We are committed to providing you with excellent service as well as excellent representation.” No letter was sent to Edison, the parking garage.

Approximately two weeks later, or a total of approximately four months from when the underlying personal injury action was filed, GEICO commenced this DJ action seeking a declaration that it was not obligated to defend or indemnify Smellie or Edison because Liberty's policy afforded primary liability coverage to them. Alternatively, GEICO argued that its coverage for Smellie and Edison was excess to the coverage available to them under Liberty's commercial liability policy.

In support of its argument that it owed no coverage to Smellie and Edison, GEICO pointed an exclusion within its policy that negated coverage for any "'insured' * * * while employed or otherwise engaged in the 'business' of * * * [p]arking vehicles designed for use mainly on public highways." Liberty argued that GEICO's failure to timely disclaim coverage to Smellie and Edison based on this exclusion violated Insurance Law § 3420(d) and precluded it from doing so.

New York Supreme Court Justice Louis York agreed, holding:
Here, neither party sets forth the specific date on which GEICO received notice of the claim - although, based on GEICO's assertions, it appears that it received the complaint in the underlying action shortly after the November 24, 2006 date on the complaint. Indeed, GEICO asserts that it took approximately 4 months - or, approximately 120 days - for it to disclaim coverage. The complaint in question, Tamarit v. Edison Parking Corp., Index 117850/2006, explains that Ms. Smellie was an employee of Edison, that she was the operator of the vehicle when it struck Mr. Tamarit, that the car belonged to Ms. Fitts - GEICO’s insured - and that the incident took place in Edison’s garage while Ms. Fitts left the car in the care of the garage. Based on GEICO’s repeated assertions that the applicability of the exclusion is clear on its face and readily ascertainable, and that this type of exclusion commonly applies to parking garages, GEICO should have realized from a quick glance at the complaint that the exclusion applied here. Where the disclaimer’s basis “was or should have been readily apparent before the onset of the delay, any explanation by the insurer . . . will be insufficient as a matter of law . . . .” Bovis Lend Lease LMB, Inc., v. Royal Surplus Lines Ins. Co., 27 A.D.3d 84, 88, 806 N.Y.S.2d 53, 56(1st Dept. 2005).
The court rejected GEICO's "conclusory statement" that “the complexities of the circumstances surrounding the underlying incident" required it to investigate further, finding that GEICO had not elaborated on a single one of the purported complexities surrounding the case and had not set forth any of the details of the alleged investigation.

The court did not reach the issues of whether Liberty’s policy excluded coverage or whether GEICO would be liable for excess coverage. Based on the lack of a counterclaim by Liberty for declaratory relief, the court also denied Liberty's cross motion for a declaration that it was not liable for excess coverage to Ms. Fitts, the vehicle's owner. Finally, the court also did not reach the issue of whether estoppel applied to preclude GEICO from denying coverage to Smellie and Edison, noting that Liberty had not adequately address all the elements necessary to show or refute an estoppel argument, and that GEICO’s argument that the letter of its staff defense counsel “merely indicated that the firm would be defending Ms. Smellie, not indemnifying him [sic],” "is, at best, strained."

Although it is not clear from the decision, in granting Liberty's cross motion for summary judgment, in part, and declaring that GEICO "must indemnify the insured parties at issue", Edison (the parking garage) presumably was found to be entitled to defense and indemnification coverage from GEICO, as well.

As one who regularly litigates insurance coverage disputes, I had to smile at footnote # 2 of the court's decision: "Liberty quotes some or all of the provisions, but does not indicate where they are located in the myriad forms and hundreds of pages that comprise its policy." Practice Pointer: Include the entire policy but be sure either the excerpt the relevant provisions in separate exhibits, identify the form/endorsement number and page of the provision, or re-paginate the entire policy and give the court a page reference. Courts like to confirm that a policy provision upon which a movant is relying is actually in the policy, but generally don't like to flip through hundreds of pages of policy forms to find it.

Sunday, July 20, 2008

Unresponded Verfication Requests -- Provider's Action Dismissed as Premature

Beta Supply, Inc. v. Government Empls. Ins. Co.
(App. Term, 1st Dept., decided 7/16/2008)

GEICO established that it had timely requested verification from plaintiff, and that plaintiff had not responded to such requests. In REVERSING New York Civil's award of summary judgment to plaintiff and "searching the record" (what a court does before it grants relief to a non-moving party), the Appellate Term, First Department, awarded summary judgment to GEICO, dismissing the action. "Inasmuch as an insurer is not required to pay or deny a claim until it receives verification of all relevant requested information (see 11 NYCRR 65-3.8[b][3]; Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 19 AD3d 569 [2005]), and it being undisputed on this record that plaintiff did not respond to defendant's verification requests, plaintiff's claim for payment was premature."

SUM of the Parts Not Needed to Pursue a Whole SUM Claim

Matter of Hertz Claim Mgt. Corp. v. Kulakowich
(2nd Dept., decided 7/15/2008)

Two-car accident. Driver of Car 2, the tortfeasor, was not its owner (owner's auto policy would afford primary BI liability coverage; driver's policy would afford excess coverage).

Question: Must plaintiff in Car 1 exhaust the BI liability coverage limits of both the owner and the driver of Car 2 to pursue SUM coverage under his own policy or just the owner's limits? Answer: Just the owner's.

In REVERSING Westchester Supreme's granting of petitioner's application for a permanent stay of that SUM arbitration, the Second Department held that the insured must exhaust only the owner's limits:

It is undisputed that the petitioner's insured exhausted, through settlement, the bodily injury policy limits under the policy of the owner of the offending vehicle, which was less than the liability coverage provided under the petitioner's policy. The petitioner's insured was not required to exhaust the liability coverage limits under a separate insurance policy of the operator of the offending vehicle prior to pursuing a claim for underinsured motorist benefits from the petitioner (see Matter of Liberty Mut. Ins. Co. v Doherty, 13 AD3d 629).

Hertz Claim Management apparently also denied SUM coverage based on the insured claimant's alleged failure to notify it of the underlying settlement. In rejecting that defense, the Second Department ruled that "the petitioner's failure to respond to a letter notifying it of an offer to settle for the policy limits of the owner of the offending vehicle and affording it the opportunity to consent to or reject such offer may be deemed an acquiescence to the offer to settle[.]"

Thursday, July 17, 2008

Two Strikes and You're Out -- Invasion of Privacy Claim Against Allstate Dismissed

Farrow v. Allstate Ins. Co.
(2nd Dept., decided 7/15/2008)

What do no-fault and invasion of privacy claims have to do with one another? I wondered that myself.

In AFFIRMING Suffolk Supreme's dismissal of plaintiff's complaint for invasion of privacy against Allstate (with costs), the Second Department held:

New York State does not recognize the common-law tort of invasion of privacy except to the extent it comes within Civil Rights Law §§ 50 and 51 (see Ram v Moritt, 205 AD2d 516, 517; see also Cohen v Herbal Concepts, 63 NY2d 379). Although the tort has assumed various forms in other jurisdictions (see Restatement, Torts, Second, § 652A), in New York privacy claims are founded solely upon Civil Rights Law §§ 50 and 51. These statutes protect against the appropriation of a plaintiff's name or likeness for a defendant's benefit and create a cause of action in favor of any person whose name, portrait, or picture is used for advertising purposes or for trade without the plaintiff's consent (see Cohen v Herbal Concepts, 63 NY2d at 383).

Here, the factual allegations in the complaint are not embraced by Civil Rights Law §§ 50 and 51. Thus, the complaint does not state a cognizable cause of action to recover damages for invasion of privacy. Accordingly, the Supreme Court properly granted the defendants' motion pursuant to CPLR 3211(a)(7) to dismiss the complaint.
True to form, the Second Department's decision gives little or no underlying facts. So why is there a no-fault headnote on this post? For those not blessed with perfect recall, the answer lies where all answers lie, at least for me, with Google.

Clues to the genesis of this action lie in the Second Department's April 8, 2008 decision in Cathleen Farrow v. O'Connor, Redd, Gollihue & Sklarin. In that case, Ms. Farrow had sued her former employer, the law firm of O'Connor, Redd, Gollihue & Sklarin, and that firm's office manager, for defamation based on the defendants having allegedly sent a letter containing defamatory statements to Allstate, her no-fault insurer, which was processing her claim for no-fault benefits in connection with a car accident. In affirming the dismissal of plaintiff's complaint in that action (with costs), as well, the Second Department held that "here, the defendants demonstrated their entitlement to summary judgment by establishing that the communication at issue, which amounted to a subjective characterization of the plaintiff's behavior and an evaluation of her job performance, constituted a nonactionable form of opinion[.]" Must have been the enhanced NF-6+ form that the law firm used.

Are the two actions related? Unclear, but probably. It would not be the first time and won't be last that a claimant complains of some type of privacy right invasion in relation to an insurer's investigation of her claim. This case makes it clear that for a common-law invasion of privacy cause of action against an insurer to exist, however, there had to have been an appropriation of a claimant's or insured's name or likeness for the insurer's benefit, creating a cause of action in favor of any person whose name, portrait, or picture is used for advertising purposes or for trade without the claimant's or insured's consent.

Questions of Fact Preclude Summary Judgment on Additional Insured Claim

Larry E. Knight, Inc. v. QBE Ins. Corp.
(Sup. Ct., New York Co., decided 6/30/2008)

Steel subcontractor's employee trips over some plywood debris on a construction site and sues general contractor (GC). Graphic Arts Mutual (Utica National) insured the GC. QBE insured the subcontractor.

GC and GAMIC brought this DJ action seeking defense and indemnification coverage under the subcontractor's policy with QBE. Among other things, plaintiffs contended that the GC was or should have been an additional insured under QBE's policy. Plaintiffs also argued that the plywood debris was the subcontractor's responsibility because it was responsible for clean-up and there were no other subcontractors working on the day of the trip and fall. Everyone moved for summary judgment.

In denying all motions, New York County Supreme Court Justice Martin Shulman ruled that there were issues of fact concerning the exact cause of the underlying trip and fall, precluding summary judgment in either the parties' favor on the claims for either common-law or contractual indemnification. The court also found that contrary to the defendants’ assertion, the subcontract required indemnification. Justice Shulman further ruled that the additional insured endorsement of QBE's policy provided additional insured status to an entity “[als required by written contract”, and there was some evidence that the policy issued by QBE to the subcontractor named the GC as an additional insured.

Plaintiffs had also argued that QBE did not timely disclaim coverage to the GC as required by Insurance Law § 3420(d). In rejecting that argument, the court held that "if the claim falls outside the policy coverage, the insurer is not required to disclaim (National Abatement Corp. v National Union Fire Ins. Co. of Pittsburgh, PA, 33 AD3d 570 [1st Dept 2006])."

Finally, the court declined to dismiss the DJ action based on defendants' argument that some of the claims, such as the duty to defend any claims arising out of the subcontract, and whether the subcontractor procured insurance coverage required thereunder, were pending in the personal injury action.

Tuesday, July 15, 2008

Negligence Allegations in Bouncer Assault Claim Held to Trigger Duty to Defend

WSTC Corp. v. National Specialty Ins. Co.
(Sup. Ct., Nassau Co., decided 6/19/2008)

We all know that the duty to defend is broader than the duty to indemnify, and that exclusions don't apply to negate the duty to defend unless they are unambiguous and the allegations of a complaint "cast that pleading solely and entirely within the policy exclusions, and further, that the allegations, in toto, are subject to no other interpretation." Automobile Ins. Co. of Hartford v. Cook, 7 NY3d 131, 137 (2006).

Transparent attempts to trasmogrify non-covered facts into covered ones are sometimes referred to as "pleading into coverage". Most courts see through such attempts, identifying instead the "operative act", core claim or "gravamen" of an action. See, e.g., Desir v. Nationwide Mut. Fire Ins. Co., 2008 NY Slip Op 3578, 1 (2nd Dept. decided 4/22/2008)("the inclusion in the underlying complaint of causes of action sounding in negligence and alleging carelessness does not alter the fact that 'the operative act giving rise to any recovery is the assault'"). Not this court.

National Specialty insures bars and clubs and issues a policy that, by endorsement, adds an Assault and Battery Exclusion, which provides:

[T]his insurance does not apply to " bodily injury" or "property damage" arising out of any assault, battery, fight, altercation, misconduct or similar incident or act of violence.

The exclusion applies whether the violence was: (a) caused by; (b) at the instigation of; or (c) at the direction of you, your "employee", your customers, patrons, guests or any other person or cause whatsoever. This exclusion also applies whether the insured may be liable as an employer or in any other capacity.

No coverage is provided under this policy if the underlying operative facts constitute an assault and/or battery irrespective of whether the claim alleges negligent hiring, training, supervision and/or retention against the insured, or for any other negligent actions of the insured.

Mr. Mello (real name) went to the insured's bar, VIBE, and, according to his own complaint in an underlying personal injury action, was "negligently" served several alcoholic beverages at VIBE while in an "obvious," "apparent," or "actual" (or maybe all three) state of intoxication and that after placing him in a "further state of intoxication" VIBE failed to protect him from the two bouncers who assaulted him. His complaint further alleged that VIBE "negligently and recklessly failed to supervise, manage and operate its premises in a safe and prudent manner" and "failed to afford (him) protection from the unlawful acts of other patrons or to stop or otherwise control the offensive and illegal conduct of other patrons and/or their own agents and/or employees including (their) own bartender and two unknown male bouncers."

National Specialty denied both defense and indemnification coverage based on the assault and battery exclusion, and WSTC commenced this DJ action. Notwithstanding the broad language of the exclusion, Nassau County Supreme Court Justice Joseph Spinola ruled that "in light of plaintiff Mello's first cause of action in which he advances a claim sounding in straightforward negligence which is covered by the policy, NSIC must defend VIBE in the Mello action. * * * Any further determination at this juncture as to whether the Assault and Battery Exclusion endorsement applies here would be premature."

Huh? What happened to the "irrespective of whether the claim alleges negligent hiring, training, supervision and/or retention against the insured, or for any other negligent actions of the insured" language of the exclusion? Drunk patron. No-neck bouncers. Physical escort/removal from the premises. Injuries to patron. Sounds exactly like the scenario to which the exclusion was intended to apply.

In light of the Second Department's decision in Desir, expect an appeal. And probably a reversal.

Hospital's Action Dismissed as Premature -- Incomplete Verification

Westchester Medical Center a/a/o Mitchell Fuchs v. Mercury Cas. Co.
(Sup. Ct., Nassau Co., decided 6/27/2008)

WMC sued for payment of a $42,024.64 hospital bill. The assignor was injured in a November 10, 2007 MVA, and Mercury received the billing on January 10, 2008. On January 22, 2008, Mercury sent an additional verification request to WMC and the assignor requesting receipt of the insured' s blood alcohol level and a copy of the police report. Having received neither within 30 days, Mercury sent a timely follow-up additional verification request, which also went unanswered.

WMC argued that Mercury's additional verification requests were defective because it only drew but did not test the assignor's blood and did not have possession of the police report. In addition to establishing that it sent the additional verification and follow-up requests, Mercury claimed that it had yet to receive the consent to obtain the assignor's blood sample, or an application for no-fault benefits.

In denying WMC's motion for summary judgment and granting Mercury's motion, dismissing the complaint as premature, Nassau County Supreme County Justice Kenneth Davis held:

Here, Mercury Casualty requested its initial verification form requesting a consent to obtain the blood sample, the actual blood sample and an application for benefits, to both the insured and Westchester Medical on January 22, 2008 , twelve days after receipt of the application. Although the verification request was sent 2 days after the statutory prescribed 10 business days, the insurer was not prevented from requiring proof of claim. 11 NYCRR 65.15(g)(6).

When both the insured and Westchester Medical failed to respond, a second request was made on February 22, 2008. The Court finds that the information was timely requested from the appropriate parties, the insured and the health care provider, along with the third party police department. In order for the insurer to have properly and timely requested the blood alcohol test results, it had to forward prescribed verification forms to the appropriate parties within 10 days after receipt of the completed application. 11 NYCRR 65.15(d)(1); Presbyterian Hosp. the City of New York v. Maryland Cas. Co. , 90 N.Y.2d 274 (1997). The Courts finds that Mercury took the appropriate action, and properly sought to extend the time frame by requesting verification. Therefore Westchester Medical' s motion for summary judgment is denied.

The defendant demonstrated its entitlement to summary judgment by proving that it timely requested additional verification from the plaintiff, regarding the issue of the driver's alleged intoxication at the time of the accident, within the requisite periods, and that such information was never received. In opposition, Westchester Medical Center failed to demonstrate the existence of a triable issue of fact. Moreover, pursuant to § 5103(b)(2), and 11 NYCCRR § 65-8 the defendant was acting within its rights to request the verification.

Regarding Westchester Medical's claim that the additional information requested was not in its custody or control, the Court finds this argument is without merit. 11 NYCRR 65-3.8(g) provides that proof of claim is not complete until the insurer is furnished with "all available information" relating to the insured's condition at the time of the accident. However, "available information" includes only information within the control of the health care provider or the insured, or information obtainable by those parties through reasonable effort.

Westchester Medical claims that they merely drew the plaintiff's blood and did not actually test it, however with reasonable efforts Westchester could have provided Mercury with the information requested as the insured's medical information (i.e. blood alcohol level) was available to the treating hospital. Moreover, the insured could reasonably have provided consent to release the information requested, even if in the custody and control of the police department. The insurer is entitled to receive all items necessary to verify the claim "directly from the parties from whom such verification is requested." 11 65-3.5(c). Mercury took timely action to attain the requested information from the appropriate party. Mercury also took action to attain the information requested from the appropriate third party police department. The Court finds that the plaintiff' failure to provide the information requested rendered the claims incomplete.

Monday, July 14, 2008

Delinquent Attorneys Suspended By Fourth Department

We are currently handing a no-fault EUO matter in my office in which it came to our attention that the representing counsel shows as being "delinquent" on the New York State Unified Court System's Attorney Search website. Not wanting to promote or faciliate the unlicensed practice of any profession, much less our own, we contacted the local Grievance Committee and were informed that a lawyer delinquent in his or her registration requirements or fees is still technically admitted and may practice law. That is, of course, until he or she is formally suspended for such delinquency.

Last Friday the Fourth Department took action on attorney registration delinquencies and formally suspended 138 lawyers registered or previously registered within that department, publishing their names in Matter of Attorneys In Violation of Judiciary Law § 468-a (4th Dept., decided 7/11/2008). The First Department had taken similar action late last year against 732 lawyers.

Representing counsel in our EUO matter is not on the list. Must have responded to one of the "numerous written notices" or order to show cause mentioned in the Fourth Department's decision.

Idea for next month's poll: Are "delinquent attorney" and "criminal attorney" really oxymorons?

Umbrella Carrier's Application Misrepresentation Defense Rejected

Alcon Bldrs. Group, Inc. v. U.S. Underwriters Ins. Co.
(Sup. Ct., New York Co., decided 7/1/2008)

Alcon Builders Group brought this DJ action to require its primary (US Underwriters Insurance Company) and umbrella (National Union Fire Insurance Company) CGL insurers to defend and indemnify it in relation to an underlying construction accident/personal injury action stemming from a subcontractor's employee's worksite injury. New York County Supreme Court Justice Helen Freeman granted Underwriters' motion for summary judgment with respect to the primary policy, but denied the cross motions of plaintiff and National Union with respect to the umbrella policy.

The primary CGL policy issued by Underwriters contained an "Exclusion of Injury to Employees, Contractors and Employees of Contractors" which provided, in pertinent part:

This policy does not apply to:

* * * (ii) "Bodily injury" to any contractor or any "employee" of any contractor arising out of or in the course of the rendering or performing services of any kind or nature whatsoever by such contractor or "employee"of such contractor for which any insured may become liable in any capacity[.]

In upholding the applicability of this exclusion to negate coverage under the Underwriters primary policy, Justice Freeman noted that "the relevant language of Underwriters' policy has repeatedly been held to be clear, unambiguous and enforceable (citations omitted). Plaintiff's argument that Konieczny does not fall within the exclusion because he was the employee of a 'subcontractor' rather than a 'contractor' has also been considered, and rejected, by the courts[.]" The court also rejected Alcon's attempt to distinguish this matter from the established case law upholding and applying the exclusion on the ground that the primary policy itself gave separate, independent meanings to the terms "contractor" and subcontractor", finding that the only example cited by Alcon weakened rather than strengthened its argument for coverage.

With respect to the umbrella policy, Justice Freeman rejected National Union's defense of application misrepresentation but held that the record was not sufficiently developed to determine whether Alcon provided timely notice of the occurrence to National Union.

National Union had argued that Alcon's "e-Excess application" incorrectly denied that the Underwriters policy was supplemented by manuscripted or exclusionary endorsements. National Union contended that had Alcon correctly reported the nature of the Underwriters policy, the umbrella policy would have been written to "match" all exclusions in the primary policy and would have contained identical ones, including the exclusion for bodily injury to contractors and employees.

Characterizing the affidavit submitted by National Union in support of its application misrepresentation defense as "problematic", Justice Freeman rejected that defense because: (1) the affidavit admitted that National Union did not maintain any written underwriting guidelines regarding the alleged practice of matching exclusions and endorsements; (2) National Union could not have relied on the alleged misrepresentation because the umbrella policy was issued several months before the Underwriters primary policy; (3) the Schedule of Underlying Insurance in the umbrella policy did not meaningfully identify any underlying policy, further confirming that National Union did not issue it in reliance upon the terms of any underlying policy; (4) a comparison of the primary umbrella policies refuted National Union's claim that it had a mandatory "matching" policy; and (5) the umbrella policy specifically anticipated that circumstances might exist where National Union's coverage obligations would be broader that the underlying insurer, National Union obligating itself to defend bodily injury claims which were "covered by this policy but not covered by any underlying insurance."

Although the court rejected National Union's application misrepresentation defense, it denied both Alcon's and National Union's cross motions for summary judgment or dismissal without prejudice, holding that discovery was needed to determine whether Alcon's nearly 18-month delay in providing notice of the accident to National Union breach the umbrella's policy's notice requirement. Alcon claimed that it was not aware of the accident until it was served with the complaint, an assertion Alcon supported with an affidavit from a corporate officer who stated that he questioned plaintiff's employees upon receipt of the pleadings and determined that no one was aware of the incident. Justice Feeeman ruled that National Union was entitled to investigate the lack of knowledge claim by deposing Alcon's officers, employees and the injured worker, and seeking whatever documentary or other evidence may exist regarding the accident and whether it was reported.

Sunday, July 13, 2008

Additional Proof Required in Challenge to Garageman's Lien

Matter of GMAC v. ACME Towing Inc.
(Sup. Ct., Albany Co., decided 7/2/2008)

This isn't really a coverage case, strictly speaking, but it relates to an issue that frequently arises in the payment of physical damage coverages, namely, how much auto towing and storage facilities are allowed to charge for their services.

Some municipalities in New York State have regulated towing and storage charges, but the majority have not. It is in those municaplities and counties in which there are no regulations that auto insurers are most challenged in dealing with and settling the charges of towing and storage facilities. This case represents one insurer's challenge to such charges.

GMAC commenced this CPLR article 4 special proceeding seeking a declaration of the validity and amount of the garageman's lien claimed by respondent ACME Towing, Inc., on a 2002 Cadillac. ACME answered, claiming its lien on the 2002 Cadillac was in all respects valid and totaled $14,395.22, as of January 12,2008, which continued to accrue storage charges at rate of $18.42 per day.

Albany County Surpeme Court Justice Joseph Teresi pointed out:

A garageman's lien accrues pursuant to Lien Law §184. The Court of Appeals stated: "[t]he statute clearly inures to the benefit of a garage owner who can establish the following elements: (1) the garage is the bailee of a motor vehicle, ... (2) it has performed garage services or stored the vehicle with the vehicle owner's consent, ...(3) there was an agreed-upon price or, if no agreement on price had been reached, the charges are reasonable for the services supplied, ... and (4) the garage is a duly registered motor vehicle repair shop as required under article 12-A of the Vehicle and Traffic Law".
Although ACME produced what it claimed was a signed "Authorization to Tow" which proved elements 1-3, there was insufficient proof to either confirm or refute that ACME was a "duly registered motor vehicle repair shop", and GMAC submitted proof that created questions of fact on whether ACME released possession of the vehicle back to the vehicle's owner or whether ACME and the owner were colluding in submitted a "bogus lien claim." On these issues, the court directed the parties to submit additional proof.

With respect to ACME's claim of "miscellaneous/processing" fees in its Notice of Lien and Sale, Justice Teresi held:
Lien Law §203 specifically authorizes such legitimate expenses of the lienor to be collected upon a "redemption before sale". As such, the "miscellaneous/processing" fees are not included in the lien amount, however, are legitimate charges to the person or entity redeeming the vehicle prior to sale.
That presumes, of course, that there was a legitmate sale and redemption prior to sale.

If the outcome of GMAC's special proceeding is reported, I'll post a follow up.

Nigerian Commenters and Blog Spam

I learned something new this afternoon. Bloggers and their readers apparently are not immune from Nigerian Internet scam artists and spam.

Abouth two hours ago there appeared on one of my June 29th posts this comment from a "Richsides": "thanks for the info. we can also get more insurance educational articles here. [URL omitted]"

The listed URL (which I've omitted) was to a one-page blog entitled "Insurance and Peril Issues At Its (sic) Best", and linked to its author's profile, "Biglove", whose other blogs include "Your Job Employment Today", "Fashion Mix" and "Make Cool Money Online", most of which were created within the past week. (Note to blogspammers: it's always best to check the spelling and grammar of your bogus blogs before trolling for relevant blogs and posting comments to steer traffic.)

Richsides' blogger profile included more insurance relevant blogs, such as "Wealth Creation Portal", "Fish Farming Made Easy" and "Earn Income Your Own Way".

So I checked my blog site utilities to see what IP address may have posted that comment and found that it came from 196.29.217.# (V-Sat broadband Internet service, VPN and Dialup s) in Nigeria, Africa. Hmmmm.

Don't bother looking for Richsides' comment. I've deleted it. I don't moderate comments on the front end, but I will delete comments I believe are irrelevant, spam, or inappropriate after they're posted. Just FYI. My first hit of blog spam. Probably won't be the last.

Friday, July 11, 2008

Additional Insureds Did Not Show Unity of Interest With Named Insured Sufficient to Satisfy Their Independent Notice Obligation

23-08-18 Jackson Realty Assoc. v. Nationwide Mut. Ins. Co.
(2nd Dept., decided 7/8/2008)

It is nothing new that additional insureds have been held to have an independent duty to provide timely notice of an occurrence to their primary insurers, regardless of whether the named insured has already provided notice of that occurrence. In this case, the court pointed out that there are situations, however, in which timely notice by one insured may be deemed timely notice by another.

Plaintiffs-owners of certain premises in Queens hired non party Integrity Construction and Consulting Services to perform renovation work on the premises. Their agreement obligated Integrity to purchase liability insurance for the project and name the plaintiffs as additional insureds. Integrity obtained such coverage from Nationwide. The policy entitled Nationwide to notice "as soon as practicable" of both (1) an "occurrence" (i.e., an accident) which might result in a "claim," and (2) of a "claim" or "suit" brought against any insured.

During the renovation project, two workers allegedly were injured. Each commenced a personal injury action against both Integrity and the plaintiffs. Plaintiffs made a demand that Nationwide defend and indemnify them in the actions as additional insureds, but Nationwide disclaimed coverage, based on the plaintiffs' late notice of the occurrence. Plaintiffs then commenced this DJ action.

In AFFIRMING the Nassau Supreme's denial of summary judgment to plaintiffs, the Second Department opined:

The plaintiffs, as additional insureds, had an implied duty, independent of Integrity, to provide Nationwide with the notices required under the policy, i.e., notice "as soon as practicable" of both the "occurrence" and of any "claim" or "suit" arising therefrom (see City of New York v St. Paul Fire & Mar. Ins. Co., 21 AD3d 978, 981; Ambrosio v Newburgh Enlarged City School Dist., 5 AD3d 410, 412; Sayed v Macari, 296 AD2d 396, 397; City of New York v Certain Underwriters at Lloyd's of London, 294 AD2d 391, 391; Structure Tone v Burgess Steel Prods. Corp., 249 AD2d 144, 145; see also Ell Dee Clothing Co. v Marsh, 247 NY 392, 396). "The fact that an insurer may have received notice of the claim from the primary insured, or from another source, does not excuse an additional insured's failure to provide notice" (City of New York v St. Paul Fire & Mar. Ins. Co., 21 AD3d 978, 981).

However, there are situations in which timely notice furnished by one insured may be deemed timely notice by another. Where two or more insureds are defendants in the same action, notice of the occurrence or of the lawsuit provided by one insured will be deemed notice on behalf of both insureds only where the two parties are united in interest or where there is no adversity between them (see Ambrosio v Newburgh Enlarged City School Dist., 5 AD3d 410, 412 [occurrence]; Sayed v Macari, 296 AD2d 396, 397 [occurrence]; City of New York v Certain Underwriters at Lloyd's of London, 294 AD2d 391, 391 [lawsuit]; National Union Fire Ins. Co. of Pittsburgh, Pa. v State Ins. Fund, 266 AD2d 518, 519-520 [occurrence]; Structure Tone v Burgess Steel Prods. Corp., 249 AD2d 144, 145 [lawsuit]; Delco Steel Fabricators v American Home Assur. Co., 40 AD2d 647, 648, affd 31 NY2d 1014 [occurrence and lawsuit]).

In this case, the plaintiffs failed to make a prima facie showing that, in Sheehan's personal injury lawsuit, they are united in interest with Integrity (see generally Alvarez v Prospect Hosp., 68 NY2d 320). * * * * * On the current record, there remain questions of fact on this issue; accordingly, the Supreme Court should not have made a determination that the plaintiffs had a duty, as a matter of law, to furnish Nationwide with the required notices.