Friday, October 31, 2008

Single-Family Home + One Mailbox + One Meter + One Gas Bill + One Policy = One Household

HOMEOWNERS – BODILY INJURY TO INSURED EXCLUSION – "HOUSEHOLD" – LEAD POISONING CLAIM
Korson v. Preferred Mut. Ins. Co.

(2nd Dept., decided 10/28/2008)


Homeowners insurance policies exclude liability coverage for "bodily injury to you [the named insured(s)], and if residents of your household, your relatives, and persons under the age of 21 in your care or in the care of your resident relatives."  I've never seen a definition of the term "household" in a homeowners policy.  The purpose of this "BI to insured" exclusion is to disincentivize collusive lawsuits that target the HO policy and its indemnification dollars.

Plaintiff Steven Korson and his brother, Dean, resided in a single-family house located in Warwick, New York. Dean, his wife Brenda, his stepdaughter Crystal Wise, and Crystal's daughter, Dean's step-granddaughter, Aaliyah Powell lived on the second floor, while Steven resided on the first floor and in the basement.  In 2005, Crystal brought an action against Steven and Dean to recover damages for injuries allegedly sustained by Aaliyah as a result of lead poisoning while Aaliyah and Crystal resided in the house.

Both Steven and Dean were named insureds under a homeowners policy issued by Preferred Mutual for the residence.  Preferred Mutual denied liability coverage for the underlying lead poisoning claim based on the policy's exclusion of coverage for "bodily injury to you, and if residents of your household, your relatives, and persons under the age of 21 in your care or in the care of your resident relatives."  The policy did not define "household".

Steven commenced this declaratory judgment (DJ) action for coverage and moved for summary judgment.  Affirming the Orange County Supreme Court's denial of that motion with leave to renew upon the completion of discovery, the Second Department previously held that in order to prevail on the motion, Steven was required to "establish either that Aaliyah was not in Dean's care" or "that Dean did not reside with the plaintiff," and that Steven's moving papers established neither. After completion of discovery, which included the parties' depositions and a full inspection of the premises by Preferred Mutual, Steven renewed his summary judgment motion, seeking, in addition to a declaration of coverage in the underlying action, attorney's fees incurred in both that action and this one.  Orange Supreme denied the renewed motion and Steven appealed.  Again.

On this second appeal, the Second Department MODIFIED the order appealed from by affirming the denial of summary judgment to Steven, but granting reverse summary judgment (when the record shows that any party other than movant is entitled to summary judgment, the nisi prius judge or an appellate court may "search the record" and grant such judgment without the necessity of a cross-motion, even to a nonappealing party, pursuant to CPLR 3212[b]) to Preferred Mutual, holding:
The issue presented is whether or not Dean resided with the plaintiff in the latter's household. The term "household," as used in insurance policies, has been characterized as ambiguous and devoid of any fixed meaning. Its interpretation requires an inquiry into the intent of the parties (see Auerbach v Otsego Mut. Fire Ins. Co., 36 AD3d 840, 841; Matter of Hartford Ins. Co. of Midwest v Casella, 278 AD2d 417, 418; General Assur. Co. v Schmitt, 265 AD2d 299, 300; Schaut v Fireman's Ins. Co. of Newark, 130 AD2d 477, 478-479). The interpretation must reflect the reasonable expectation of the ordinary business person and the circumstances particular to each case must be considered (see Auerbach v Ostego Mut. Fire Ins. Co., 36 AD3d at 841; Matter of Hartford Ins. Co. of Midwest v Casella, 278 AD2d at 418; General Assur. Co. v Schmitt, 265 AD2d at 300; Schaut v Fireman's Ins. Co. of Newark, 130 AD2d at 479).

In this case, it was incumbent upon the plaintiff to make a prima facie showing that he maintained a separate household from his brother Dean; he failed to do so. For example, the plaintiff's papers revealed that at the relevant time, the subject house was a single-family home, with a single mailbox, and one electric meter. There was one gas bill for the subject address. There was unrestricted access between the areas of the home in which the plaintiff lived, and in which Dean and his family lived. Furthermore, the homeowner's policy indicates that both the plaintiff and Dean are named insureds with respect to "12 Orchard Street" in Warwick, New York. There is no indication in that document that their reasonable expectation was to insure anything other than one household. Accordingly, the Supreme Court correctly denied the plaintiff's motion for summary judgment.

Furthermore, under the circumstances, the record warrants granting the defendant's request, which it made in the Supreme Court and makes again in this Court, that summary judgment be awarded in its favor, upon searching the record (see CPLR 3212[b]). Since the plaintiff is not entitled to the subject coverage, his claims for attorney's fees incurred in the underlying personal injury action and in this action likewise fail.
Ordinarily it is the insurer's burden to prove the applicability of an exclusion but in this case, the named insured was moving for summary judgment, which explains the Second Department's statement that "[i]t was incumbent upon the plaintiff to make a prima facie showing that he maintained a separate household from his brother Dean [but] he failed to do so."

Thursday, October 30, 2008

Operation Direct Hit -- Indictments & Arrests Announced in Major No-Fault Insurance Fraud Scheme

Earlier today the Queens County District Attorney's Office announced that 61 individuals and 2 corporations have been charged with engaging in a widespread, multimillion-dollar no-fault automobile insurance fraud scheme that sought to defraud insurance companies by intentionally staging accidents, submitting false medical and bodily injury claims and arranging for unneeded treatment and costly and unwarranted medical tests. Fifty-four of the individuals are in custody and seven are presently being sought.

District Attorney Richard Brown said, “The defendants – among whom are the operators of a Manhattan medical clinic – are accused of deliberately causing or staging more than 40 automobile accidents with unsuspecting drivers – particularly targeting Asian drivers in the Flushing area of Queens – over the last three years in order to capitalize on New York’s no-fault insurance law. * * * The defendants in this case are charged with bilking insurance carriers out of more than $1.6 million they submitted for allegedly unnecessary medical services for exaggerated or fabricated injuries.”

The charges are the result of a 19-month investigation by the Queens District Attorney’s Organized Crime and Rackets Bureau and the New York Health Care Fraud Task Force – which is composed of agents and detectives from the FBI, the NYPD, and other federal, state and local law enforcement entities, as well as investigators from the insurance industry. The investigation included physical and video surveillance, intelligence information, court-authorized electronic eavesdropping and the interception of hundreds of conversations – some of which occurred as the defendants were allegedly crashing into innocent drivers.

The investigation – dubbed Operation Direct Hit – began in March 2007 when the NYPD uncovered evidence of a specific accident pattern occurring within the confines of the 109th Precinct in Queens County that dated back to 2005. Typically, the “victim” vehicle – often driven by an Asian individual – was intentionally struck while backing out of a driveway or pulling out of a parking lot. The investigation later revealed that Tomas Aquiles, who allegedly coordinated these accidents, specifically targeted Asian American drivers due to his belief that they were bad drivers and that they would be blamed by the police and insurers for the accidents instead of the actual culprits. Some of the Asian American drivers were injured as a result of these accidents and many suffered significant damage to their vehicles. As a result, Aquiles has been charged with multiple violations of New York’s Hate Crime Statute, which enhances an offender’s sentence if convicted.

While most of the accidents were relatively minor, the investigation revealed that the occupants of the cars that caused the accidents all purportedly received extensive medical treatment at the same medical clinic – Bronx Park Medical (also known as Health Bay Medical), located at 100 Dyckman Street in Manhattan.

According to the indictments filed today, Bronx Park Medical was at the epicenter of an insurance fraud ring that operated from about July 23, 2005, to the present. It is alleged that the clinic operators – Inessa Drabkin and Michael Mazur – paid runners – such as Aquiles – up to $2,500 for each person whom they recruited to pose as an injured accident victim. Fake patients, it is alleged, received payment from either a runner or a clinic employee of up to $1,000 for their participation in the scheme.

It is alleged that in order to receive payment, a fake patient had to assign their no-fault benefits to the clinic and undergo a prescribed course of treatment at the clinic – dictated and controlled by non-medical personnel Drabkin and Mazur – in order to ensure that each insurance carrier was billed the maximum amount possible under the no-fault system. The prescribed treatment was also allegedly designed to generate lucrative lawsuits for others who worked with clinic management – such as Yevgeniy Rivkin, who allegedly oversaw the operations of the clinic by determining which medical providers would work at the clinic and deciding which staged and caused accident participants should receive medical treatment, so as to enhance the value of lawsuits. On average, insurance carriers paid up to several thousand dollars for each bodily injury claim.

In addition to the criminal charges, the District Attorney’s Office has filed a civil forfeiture action against six of the main defendants – Yevgeniy Ryvkin, Inessa Drabkin, Michael Mazur, Tomas Aquiles, and corporate defendants Integra CBA Company, Inc., and PKH Corp. – seeking the forfeiture of $1.6 million in illegally obtained proceeds. Approximately $900,000 has been seized to date.

Those indicted and charged are:
Medical Clinic Employees (4)

Inessa “Ina” Drabkin, 53, of 300 East 77th Street in Manhattan
Michael “Mikhail” Mazur, 42, of 66 Willow Lane in Staten Island
Yevgeniy “Gene”Rivkin, 38 , of 3429 Guilder Avenue in Brooklyn
Lucy “Luz” Rodriguez, 39, of 2150 Creston Avenue in the Bronx

Medical Management Companies (2)

Integra CBA Company Inc., is located at 100 Dyckman Street in Manhattan
PKH, Corp., Is located at 300 East 77th Street in Manhattan

Alleged Super Runner (1)
Tomas “Junior” Aquiles, 40, of 137 Vance Street in New Britain, Connecticut (not in custody)

Alleged Sub Runners (7)


Maura Resto-Abad, 48, of 1715 Walton Avenue in the Bronx
Francisco Capellan Amado, 33, of 2663 Heath Avenue in the Bronx
Vicentina Hernandez, 35, of 2065 Davidson Avenue in the Bronx
Lidiana Jones, 40, of 2816 Jerome Avenue in the Bronx
Magnolia Lajara, 30, of 1398 Grand Concourse in the Bronx (not in custody)
Ann Soto, 37, of 2145 Mapes Avenue in the Bronx
Jeremias Vargas (not in custody)

Alleged Accident Participants (45)

(4 other defendants are being sought)

Carmen Acevedo, 50, of 4231 Ely Avenue in the Bronx
Yanina Baez, 28, of 3155 Grand Concourse in the Bronx
Wendy Bonilla, 23, of 2851 Webb Avenue in the Bronx
Yokasta Caba, 36, of 2702 Bainbridge Avenue in the Bronx
Grace Calderon, 19, of 2145 Mapes Avenue in the Bronx
Solange Cheij, 45, of 2786 Jerome Avenue in the Bronx
Carlos Carasquillo, 21, of 2 Arden Street in Manhattan
Diana Castillo, 26, of 2274 Grand Concourse in the Bronx
Carlos Collado, 39, of 1236 Virginia Avenue in the Bronx
Tomas Cueto, 44, of 2120 A Grand Avenue in the Bronx
Denise Espinal, 26, of 275 West 238th Street in the Bronx
Luis Espinal, 28, of 40 Richmond Plaza in the Bronx
Carmen “Flores” DeJesus, 38, of 551 W. 185th Street in Manhattan
Francisco DeJesus, 28, of 110 Post Avenue in Manhattan
Angela Gomez, 53, of 510 West 146th Street in Manhattan
Darleivys Gonzalez, 21, of 15 Featherbed Lane in the Bronx
Diostone Gonzalez, 29, of 2146 Amsterdam Avenue in Manhattan
Fanny Gonzalez, 21, of 2065 Davison Avenue in the Bronx
Nancy Gonzalez, 33, of 1749 Grand Concourse in the Bronx
Odlie Gonzalez, 24, of 2786 Jerome Avenue in the Bronx
Joel E. Guerrero, 18, of 785 East 151st Street in the Bronx
Daisy Guzman, 26, of 570 West 182nd Street in Manhattan
Tinmarsan “Tin” Lantiquadelacruz, of 11 West 172nd Street in the Bronx
Alexis Martinez, 31 or 29, of 3333 West 136th Street in Manhattan
Annie Martinez, 31, of 1545 Rhinelander Avenue in the Bronx
Pablo Martinez, 21, of 1929 Andrews Avenue in Manhattan
Yanehsya Mejia, 22, of 355 East 187th Street in the Bronx
Christina Mendez, 40, of 2326 Loring Place in the Bronx
Carlos Morena, 33, of 129 East 123rd Street in Manhattan
Emmanuel Nueces, 30, of 111 Wadsworth Avenue in Manhattan
Gladys Ortiz, 38,of 1309 Washington Avenue in the Bronx
Carlos Peguero, 29 of 30, of 2789 Kingsbridge Terrace in the Bronx
Yoanny Peralta, 31, of 1365 St. Nicholas Avenue in Manhattan
Joyce Perez, 19, of 860 Riverside Drive in Manhattan
Karen Quinones, 43, of 54 Post Street in Yonkers, NY
Eva Rodriguez,( aka Eva Jazmin), 34, of 327 East 112th Street in Manhattan
Jose Luis Rodrguez (aka Jose Luis Pichardo), 35, of 649 Lenonx Avenue in Manhattan
Luis Rosa, 21, of 2825 Cafin Avenue in the Bronx
Anna Rosario, 23, of 24 Valentine Avenue in the Bronx
Juana Santana, 36, of 611 Academy Street in Manhattan
Kira Santiago, 24, of 229 W. 97th Street in Manhattan
Miguelina Silva, 32, of 90 Caryl Avenue in Yonkers, NY
Maria Soto, 46, of 470-71 Ash Avenue in Queens
Jesus Capellan Ulloa, 41, of 1256 Walton Avenue in the Bronx
Trinidad Valdez, 56, of 15 Featherbed Lane in the Bronx
The Queens DA's press release, which contains more details regarding the investigation, reminds that "[i]t should be noted that an indictment is merely an accusation and that defendants are presumed innocent until proven guilty."

New York State Insurance Department Office of General Counsel Opinions for October 2008 -- Part I



Just posted to the NYS Insurance Department's website are the Office of General Counsel Opinions from the first half of October. Only 1 of the 5 opinions posted merits mention this time as being relevant to P&C insurers.

Down Payment for Personal Automobile Insurance (October 10, 2008)

Questions presented:
  1. May an insurer require an applicant for personal automobile insurance, who has been uninsured in the thirty days immediately preceding the making of the insurance application, to pay a portion of the premium as a down payment to bind the insurance?
  2. If permitted, what requirements must an insurer fulfill or what restrictions must it put in place to require these applicants to pay a portion of the premium as a down payment?
  3. If permitted, how does requiring these applicants to pay a portion of the premium as a down payment affect guidelines, billing plans, and agency contracts?
Answers:
  1. Yes. New York Vehicle and Traffic Law § 311(5)(c) requires an insurer to collect at least ten percent of the annual premium due for all new policies.
  2. An insurer must apply Vehicle and Traffic Law § 311(5)(c) in a fair and non-discriminatory manner to all new automobile insurance applicants. Specifically, an insurer may not require applicants to pay different down payments unless the underwriting criteria used to determine the down payments relate to the risks being insured. If use of the underwriting criteria results in discrimination in benefits under Article 23 of the Insurance Law or is otherwise expressly prohibited by law, then the insurer may not use the criteria to determine the down payments.
  3. The question the inquirer presents is too broad and general in nature. Without more specific facts, the New York State Insurance Department is unable to answer it at this time.

Insured's Failure to Cooperate with Insurers' Investigation of Reported Jewelry Robbery Voids Coverage

JEWELER'S BLOCK INSURANCE – BROKER'S CANCELLATION CLAUSE – PREMIUM FINANCE AGREEMENT – NEW YORK BANKING LAW § 576 – NON-COOPERATION
D&R Plaza Jewelry v. Those Lead Underwriters at Bellmarine, S.A.

(Sup. Ct., Kings Co., decided 10/16/2008)


There's a lot in here, so be sure to read this decision if you're on the property side of the P&C equation.

Jeweler's (or "jeweller's" if you're across the pond) block insurance is all-risk specialized insurance coverage for jewelers. There are usually certain preconditions or requirements that must be met, such as safes, alarms, surveillance systems, and regular inventories, for the coverage to be available in case of a loss.

D&R Plaza Jewelry in Brooklyn had a jeweler's block insurance policy with the defendants. The policy limit was $500,000, which increased pursuant to policy terms to $1,000,000 for the months November, December and January. Plaintiff used a premium finance company, Standard Funding Corporation, to make the annual premium payment, and the finance agreement listed SJ International Brokers as the insured's agent. The finance agreement also appointed Standard as D&R's attorney-in-fact and authorized Standard to cancel the policy if D&R failed to make the $963.53 monthly payments to Standard as agreed.

Standard did not received D&R's fourth monthly payment and issued a cancellation notice dated December 2, 2005 to D&R but addressed to SJ. The effective date of the cancellation was December 3, 2005. Standard apparently did not send a copy of the cancellation notice to defendants, and D&R alleged that it did not receive the cancellation notice until after its effective date. D&R also alleged that it had issued a check to its broker, SJ, on December 1, 2005, which was sent to Standard and posted to its account on December 9, 2005.

On December 11, 2005, D&R reported to the NYPD's 63rd Precinct that $400,000 to $500,000 of jewelry had been stolen from its store. D&R reported the theft to SJ on December 12. Defendants immediately retained an insurance adjuster, Donald Yick, who contacted David Shimunov, D&R's one-half owner, on December 12 and instructed him to close the store to business and activate the alarm until December 15, 2005, when Yick was to interview Simunov and conduct a post-loss inventory. Yick met with Shimunov and Roman Khaimov, D&R's other one-half owner of plaintiff, on December 15.

According to Yick, during his investigation of the insurance claim he learned that the alarm system had not been activated on December 12, contrary to Yick's instructions. Yick was advised that an employee, Nathan Kataev, was also in the store the evening of the alleged robbery, but was unable to appear at the December 15 meeting because he was preparing for a trip to Russia through the end of January 2006. Yick claimed he requested that he be contacted upon Kataev's return to schedule an interview, but was never contacted by the insured regarding Kataev's return. Khaimov also informed Yick that, along with his father, Ilya Khaimov, he had entered the store between December 12 and 15, worked on the inventory, and Ilya Khaimov had removed merchandise from the premises that was allegedly on consignment from Ilya Khaimov's own jewelry manufacturing company. While Yick viewed a video of the alleged robbery that was recorded on the store's surveillance system and requested a copy of the video from Shimunov, the plaintiff never provided Yick with a copy of the video. At the December 15 meeting, Yick presented Shimunov with a statement regarding the loss for his review and signature and, despite numerous requests for the signed document, Shimunov did not sign the statement until May 29, 2008, for inclusion in plaintiff's opposition to defendants' motion for summary judgment. Yick also requested a formal written claim detailing the alleged loss along with a copy of the physical inventory per the Policy.

In May of 2006, Yick contacted Shimunov and Khaimov through the cell phone numbers provided at the December 15, 2005 meeting and indicated that specific documents were still needed to substantiate plaintiff's claims. Both agreed to appear for an interview. However, neither appeared at the scheduled place and time. Yick claimed in his affidavit in support of the motion that he had made several subsequent attempts to interview Shimunov and Khaimov, left three messages on the voicemail of Shimunov's cell phone, and never received a response from either individual. Yick sent plaintiff's broker, SJ, a written request for a formal claim and documents, including the most recent inventory conducted, on January 16, 2006. When the plaintiff did not respond to Yick's requests, Yick followed up with interviews of SJ's employees and three visit's to SJ's offices to obtain the file on the claim. SJ did not provide Yick with the file and was unwilling to cooperate in the investigation.

John Kim ("Kim") was the certified public accountant hired to assist in the post-loss inventory. According to Kim's affidavit in support of the motion, he sent a letter to D&R and SJ on January 16, 2006 that included a copy of the count sheets from the physical inventory. The letter requested a number of inventory documents, bank statements, invoices and tax returns from the plaintiff. A follow up letter from Kim was addressed to Shimunov at his personal address on February 17, 2006. Kim wrote to SJ on February 28, 2006, March 1, 2006, and May 4, 2006 indicating that he had been unable to reach Shimunov and requested that the letter be forwarded to Shimunov. On May 8, 2006, Lenny Madowicz of SJ wrote to Kim indicating that D&R was gathering the requested documents and they would be provided within 30 days. Kim never received the documents requested from either the plaintiff or SJ.

Plaintiff commenced this action on December 7, 2006, just before the one-year limit to file suit on the policy expired (under New York law, property policies covering other than fire and lightning losses are not required to provide a two-year suit limitations period and may provide for a shorter period). Plaintiff's complaint alleged that it had sustained a theft loss of jewelry in the amount of $1,000,000, the policy limit. Defendants answered and asserted various affirmative defenses, including that the policy had been cancelled before the loss, the insured's breach of the policy's cooperate requirement, its failure to submit a sworn proof of loss, and its misrepresentation and concealment of material facts. Defendants eventually moved for summary judgment on the cancellation, proof of loss, and non-cooperation grounds.

In denying defendants' motion based on their pre-loss policy cancellation ground, Kings County Supreme Court Justice Carolyn Demarest found that defendants had not established that the policy was properly cancelled before December 11, 2005 because: (1) Standard had not sent a copy of its cancellation notice to defendants, as required by the policy's "Broker's Cancellation Clause"; and (2) Standard had not complied with the cancellation notice requirements of New York Banking Law §576, which requires a premium finance agency to provide not less then ten days written notice (13 days if mailed) to an insured of the intent to cancel the policy.

On defendants' proof of loss defense, Justice Demarest held:
Although defendants' agent, Yick, provided an affidavit averring that he personally gave Shimunov a copy of a printed statement regarding the loss and requested that Shimunov complete and return the document, defendants have not demonstrated that they provided blank proof of loss forms as required under Insurance Law § 3407 [a] (Ingarra v General Accident/PG Ins. Co., 273 AD2d 766, 767 [3d Dept 2000]; Medical Facilities, Inc. v Pryke, 172 AD2d 338 [1st Dept 1991] (holding that insurer failed to meet the requirement of Insurance Law § 172 (now § 3407) by providing insured with proof of loss forms filled in with amounts instead of blank forms as required by statute)). Plaintiff's failure to provide a proof of loss statement within 60 days of the alleged loss does not, therefore, require dismissal of plaintiff's action.
The court did, however, grant summary judgment to the defendant insurers based on their non-cooperation defense:
Paragraph A, E and J of the conditions precedent of the Policy required the plaintiff to provide the defendants with records and various documentation as well as to submit to an examination under oath in the event of a loss as follows: A. The Assured shall keep detailed records of all sales, purchases and other transaction, and that such records shall be available for inspection by the Underwriters or their representative in case of a claim being made under this Policy. (Emphasis added) E. The Assured shall in case of loss or damage and as a condition precedent to any right of indemnification in respect thereof give to the Underwriters, via the negotiating brokers, such information and evidence as to the property lost or damaged and the circumstances of the loss or damage as the Underwriters may reasonably require and as may be in the Assured's power. (Emphasis added) J. The Assured shall in the event of loss or damage and as per Underwriters' request submit to an examination under oath by any persons authorized by the Underwriters relative to any and all matters concerning the claim and subscribe to the same; and shall produce for examination all books of accounts, bills, invoices and other vouchers or certified copies thereof if originals be lost, at such reasonable time and place as may be designated by Underwriters or its representatives and shall permit extracts and copies thereof to be made. (Emphasis added) The defendants undertook diligent efforts that were reasonably calculated to bring about plaintiff's cooperation with regard to Paragraphs A, E and J by sending letters to the plaintiff at the personal address of Shimunov, sending letters and faxes to the plaintiff's broker, setting up interviews with Shimunov and Khaimov, leaving phone messages on the personal phone number of Shimunov, and making multiple appearances at the office of the plaintiff's broker to review the claim file. As noted above, defendants' attempts were futile. The pattern of noncooperation and unexplained delay, which continued for over two years, was clearly persistent and unreasonable.

Although Shimunov states in his amended affidavit that he was at all times willing to appear for an examination under oath, he did not dispute Yick's statement that he did not appear for an interview as scheduled in May 2006 or deny receiving Kim's February 17, 2006 letter request for documentation. The only explanation offered for the delay is David Shimunov's reference to his prior attorney's suspension on October 10, 2006, prior to commencement of suit, and his "ex-partner[ s]" attempt to intervene in this action by separate counsel, neither of which would have logically influenced his ability to co-operate with defendants' investigation prior thereto. Mr. Shimunov also makes reference to his conviction for possession of counterfeit funds as having created a depression for which he has been taking medication. This court does not find such excuses sufficient to justify plaintiff's failure to provide defendants with the documentation as required under the Policy. Despite defendants' numerous attempts addressed to both Mr. Shimunov and Mr. Khaimov, to obtain documentation regarding the inventory at the time of the alleged robbery, the documentation was still not provided as of March 26, 2008, the day this motion was filed. It is noted that neither Mr. Khaimov, a fifty percent owner of plaintiff, nor the broker S.J., has provided any explanation for their failure to co-operate with the investigation. It was plaintiff's burden under the Policy to support its claim in a timely fashion so as to afford defendants the opportunity to verify both the fact of the loss and its value. It did not meet such burden.

At times, insureds are given a second chance, but "[t]he delay and avoidance here has precluded any possibility of obtaining anything but stale information" (Levy v Chubb Ins., 240 AD2d 336, 338 [1st Dept 1997]). Plaintiff's non-co-operation is held to be wilful as the defendant demonstrated that the plaintiff's failure to co-operate was persistent (see Levy v Chubb Ins., 240 AD2d at 337). Plaintiff's continued failure to provide the defendants with the requested inventory records, purchase records, list of the property allegedly lost, information as to Kataev's availability for an interview, and Shimunov and Khaimov's failure to appear for an interview without a valid explanation or excuse constituted a material breach of the Policy which precludes plaintiff's recovery (see Cabe, 153 AD2d at 653; Pizzirusso, 143 AD2d at 340; Bulzomi, 92 AD2d at 878; 232 B'way Corp., 206 AD2d at 419). The belated attempt by Shimunov to provide the requested documentation cannot cure the actual prejudice to defendants caused by the extended delay and the ultimate failure to co-operate by providing access to witnesses with relevant knowledge.

Tuesday, October 28, 2008

Question of Fact Found on Whether Assignor Was a "Qualified Person" Entitled to No-Fault Benefits from MVAIC

NO-FAULT – MVAIC – "QUALIFIED PERSON" – TIMELY DISCLAIMER
Howard M. Rombon, Ph.D, P.C. a/a/o Francisca Ruiz-Diaz v. MVAIC

(App. Term, 2nd Dept., decided 10/27/2008)


The New York Motor Vehicle Accident Indemnification Corporation (MVAIC) was established to pay bodily injury damages and no-fault benefits to “qualified” victims of motor vehicle accidents caused by uninsured motorists.

New York Insurance Law § 5221 provides:   
No-fault" benefits to qualified persons.  (a) The terms "basic economic loss", "first party benefits", non-economic loss", "serious injury", "motor vehicle", "insurer", "uninsured motor vehicle" and "covered person", as used in this section, shall have the same meaning given them in section five thousand one hundred two of this chapter.
(b) (1) Notwithstanding the provisions of this article, the corporation shall also provide for the payment of first party benefits to a qualified person for basic economic loss arising out of the use or operation in this state of an uninsured motor vehicle.
(2) A qualified person who has complied with all the applicable requirements of this article shall be deemed to be a covered person and shall have only such rights as a covered person may have under article fifty-one of this chapter.
Insurance Law § 5202(b) defines a "qualified person", in part as, as:
(i) a resident of this state, other than an insured or the owner of an uninsured motor vehicle and his spouse when a passenger in such vehicle, or his legal representative, or (ii) a resident of another state, territory or federal district of the United States or province of the Dominion of Canada, or foreign country, in which recourse is afforded, to residents of this state, of substantially similar character to that provided for by this article, or his legal representative.
In less legalistic, more straightforward terms,  MVAIC's website gives this explanation of what a "qualified person" is:
QUALIFIED PERSON is a resident of New York State or a resident of another state or country having a substantially similar program available to New York State residents injured in that state or country. A QUALIFIED PERSON is someone other than (1) an insured, or (2) the owner of an uninsured motor vehicle and his/her spouse when a passenger in such vehicle. An example of a QUALIFIED PERSON is a pedestrian residing in New York State who does not own a motor vehicle and does not qualify as an insured person under any automobile liability insurance policy, who is struck by an uninsured motor vehicle in New York State.
Plaintiff medical provider brought this action to recover assigned no-fault benefits and moved for summary judgment.  Defendant Motor Vehicle Accident Indemnification Corporation (MVAIC) cross-moved for summary judgment, arguing, that plaintiff's assignor was not a qualified person because she did not provide MVAIC with proof that she was a resident of the State of New York.  Queens Civil granted plaintiff's motion for summary judgment and denied MVAIC's cross motion. MVAIC appealed.

In REVERSING the order appealed from and denying summary judgment to plaintiff, the Appellate Term, Second Department, held:
 Pursuant to Insurance Law § 5221 (b) (2), to be "deemed a covered person" and thereby "have such rights as a covered person may have under [Insurance Law article 51]," an injured person must be a "qualified person," as that term is defined in Insurance Law § 5202 (b), and must have complied with all of the applicable requirements of Insurance Law article 52 (e.g. Insurance Law § 5208). Based upon a review of the moving and cross-moving papers, we find an issue of fact exists as to whether plaintiff's assignor is a "qualified person" and, thus, whether she is a "covered" person entitled to rights under Insurance Law article 51 (see Insurance Law § 5221 [b] [2]; Zuckerman v City of New York, 49 NY2d 557 [1980]). 
Plaintiff provider argued that MVAIC's disclaimer of no-fault benefits was untimely.  In rejecting that argument, the Appellate Term ruled:
We note that MVAIC's failure to establish that it timely denied plaintiff's claims is of no consequence since an assertion that there is a lack of coverage may always be raised (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199-200 [1997]; Zappone v Home Ins. Co., 55 NY2d 131 [1982]; A.B. Med. Servs. PLLC v Motor Veh. Acc. Indem. Corp., 10 Misc 3d 145[A], 2006 NY Slip Op 50139[U] [App Term, 2d & 11th Jud Dists 2006]), and the holding in New York Hosp. Med. Ctr. of Queens v Motor Veh. Acc. Indem. Corp. (12 AD3d 429 [2004]) is not to the contrary.  

What's In an Affirmation? -- Appellate Term Confirms Master Arbitration Award Due to Legally Insufficient Attorney's Affirmation

NO-FAULT – FORM OF ATTORNEY'S AFFIRMATION – CPLR ARTICLE 75 SPECIAL PROCEEDING TO VACATE MASTER ARBITRATION AWARD
Valentin Avanessov, Physician, PC a/a/o Azra Sabovic v. State-Wide Ins. Co.

(App. Term, 2nd Dept., decided 10/27/2008)


The no-fault litigation arena is littered with dismissals and defeats that have little or nothing to do with substance and everything to do with form, or defective form, as the case may be. Here lies another carcass.

CPLR Rule 2106, entitled, "Affirmation of truth of statement by attorney, physician, osteopath or dentist", provides:
The statement of an attorney admitted to practice in the courts of the state, or of a physician, osteopath or dentist, authorized by law to practice in the state, who is not a party to an action, when subscribed and affirmed by him to be true under the penalties of perjury, may be served or filed in the action in lieu of and with the same force and effect as an affidavit.
Because affirmations do not need to be notarized, some litigation counsel, such as myself, prefer affirmations to affidavits. If an attorney's affirmation does not state that it is "affirmed to be true under the penalties of perjury", but only "states as follows", it is legally insufficient, so reminds the Appellate Term, Second Department, in this case.

Petitioner medical provider commenced a special proceeding pursuant to CPLR § 7511 to vacate a master arbitration award that had upheld State-Wide's denial of the provider's assigned no-fault benefits. Kings Civil granted the petition and State-Wide appealed.

In REVERSING the civil court's order and instead confirming the master arbitration award, the Appellate Term held:
The papers submitted by petitioner to the Civil Court were insufficient on their face to warrant the granting of any relief (see SP Medical, P.C. v Country-Wide Ins. Co., 20 Misc 3d 126[A], 2008 NY Slip Op 51230[U] [App Term, 2d & 11th Jud Dists 2008]). Petitioner submitted a document that was denominated an "Affirmation in Support." The only document submitted in support of the petition was one which was not affirmed "to be true under the penalties of perjury" (CPLR 2106). Indeed, the attorney who signed the document merely indicates that he "states as follows," which is insufficient under the law (see Puntino v Chin, 288 AD2d 202 [2001]; Jones v Schmitt, 7 Misc 3d 47 [App Term, 2d & 11th Jud Dists 2005]; see also A.B. Med. Servs. PLLC v Prudential Prop. & Cas. Ins. Co., 11 Misc 3d 137[A], 2006 NY Slip Op 50504[U] [App Term, 2d & 11th Jud Dists 2006]). Accordingly, the document is insufficient as an affirmation (see SP Medical, P.C., 20 Misc 3d 126[A], 2008 NY Slip Op 51230[U]).

In view of the foregoing, the petition to vacate the master arbitrator's award should have been denied. Furthermore, upon denying the petition, the court is required, pursuant to CPLR 7511 (e), to confirm the award (see Matter of Exclusive Med. & Diagnostic v Government Empls. Ins. Co., 306 AD2d 476 [2003]). While we do not reach the remaining contentions, we note that a special proceeding should terminate in a judgment, not an order (see CPLR 411).

Monday, October 27, 2008

Defense Owed to Additional Insured; Indemnification Dependent on Liability Outcome

CGL – ADDITIONAL INSURED – LATE NOTICE – SEVERANCE
Chunn v. New York City Hous. Auth.

(1st Dept., decided 10/23/2008)


Typical of a First Department memorandum decision, this case doesn't give much in the way of background facts.  It appears, however, that plaintiff alleged that he was assaulted while visiting his sister, a tenant in a New York City Housing Authority building.  The sister alleged in an affidavit that the intercom had been broken for several months before her brother was assaulted.  American Security Systems, Inc., presumably was responsible for installing and/or maintaining the intercom system and, by contract, agreed to hold harmless and indemnify NYCHA.

Three insurance policies were at issue:
  1. a CGL policy issued by National Casualty Company to ASSI, which afforded coverage to NYCHA as an additional insured with respect to liability for, among other things, bodily injury caused in whole or in part by ASSI's "acts or omissions"; 
  2. a following form  "excess policy" issued by Scottsdale Insurance Company to ASSI; and 
  3. an owners and contractors protective (OCP) policy issued by Scottsdale to ASSI. 
Chunn commenced a personal injury action against NYCHA and ASSI and, for reasons not evident from the  decision, NYCHA commenced a first third-party action against ASSI for contractual indemnification (rather than cross-claiming).  Presumably because National Casualty and Scottsdale had denied additional insured coverage to NYCHA, NYCHA commenced a second third-party action for declaratory relief against those insurers. 

In MODIFYING the lower court's order, the First Department held:
  • because the complaint alleged that plaintiff's injury was caused, in whole or in part, by ASSI's acts or omissions with respect to the NYCHA building's systems, NYCHA was entitled to a defense under ASSI's CGL policy with National Casualty;
  • contrary to the insurers' contention that they demonstrated as a matter of law that "there [wa]s no possible factual or legal basis on which [they] might eventually" be obligated to indemnify NYCHA, the sister's affidavit presented an issue of credibility that precluded summary judgment; 
  • NYCHA was also entitled to a defense under the excess policy issued by Scottsdale to ASSI because that policy followed the form of National Casualty's CGL policy, under which NYCHA was an additional insured (I don't get this part of the court's ruling; mutual defense obligation of both the primary and excess insurers?);
  • the insurers' ground for disclaiming coverage under the OCP policy, i.e., late notice, was belied by the record, as was their contention that notice to National Casualty did not constitute notice to Scottsdale,  as well; in any event, however, any delay in notice was due to misleading statements by the National Casualty claims department concealing the existence of the OCP policy; 
  • although the insurers' duty to defend was clear, issues of fact as to liability in the underlying personal injury action rendered premature the conclusion that the insurers had a duty to indemnify NYCHA; 
  • the second third-party action should be severed to avoid the prejudice to the second third-party defendants that would result from the jury's awareness of the existence of liability insurance; and 
  • it would be premature to declare that the indemnification provisions of the contract between NYCHA and ASSI were void and unenforceable under General Obligations Law § 5-322.1.
Observation:  this is the second time in under three months that the First Department has excused an insured's late notice based on its finding that the insured had been misled about the insurer's identity or policy's existence.  See, Cicero v. Great American Ins. Co., (1st Dept., decided 7/29/2008).

Action Against Broker for False Certificate of Insurance Dismissed

CGL – CERTIFICATE OF INSURANCE – BROKER LIABILITY
Tishman Constr. Corp. v. American Safety Indem. Co.

(Sup. Ct., New York Co., decided 10/16/2008)


An employee of one of Tishman's subcontractors, Manhattan Concrete Structures, was injured while working at a construction site.  The subcontract required required Manhattan to indemnify Tishman and its parent and subsidiary companies, and to procure insurance naming them as additional insureds.

When American Safety denied additional insured coverage to Tishman for that construction-site accident and related personal injury action, Tishman commenced this action against Manhattan's broker, John Joseph Insurance Brokerage, Inc., alleging causes of action for fraud and misrepresentation for the broker's alleged issuance of a false certificate of insurance (COI).  Tishman also sued American Safety, which successfully moved for summary judgment.

After discovery, the broker moved for summary judgment based on its arguments that: (1) it had not issued the COI in question; and (2) it had no legal relationship with Tishman sufficient to support any cause of action against it. Through an affidavit of its vice-president, the broker established:
  • Manhattan never requested that the broker issue a COI to Tishman;
  • it procured from American Safety a policy of insurance for Manhattan bearing policy number 10 AP-GL-00383;
  • the COI listed an incorrect policy number -- 10APGL000;
  • the fax number on the COI was not the broker's;
  • the signature on the COI -- "John Joseph" was not the broker's; when the broker issues a COI, it is signed with the name of the individual broker, not the company; 
  • no one by the name "John Joseph" has ever been associated with the broker; John and Joseph are the first names of the husbands of the broker's co-owners. 
In opposition to the broker's motion, Tishman pointed to the various references to "John Joseph" on the COI and to the fact that Manhattan's application for insurance from American Safety was signed by "John Joseph" as the producer.  Tishman did not, however, come forward with any proof that it had any relationship with the broker, that it received any verbal representation from the broker, or that the broker actually provided the COI to Tishman.

Based on this evidence, New York County Supreme Court Justice Shirley Werner Kornreich granted the broker's motion for summary judgment, holding:
An insurance broker cannot be held liable for a negligent misrepresentation in an insurance certificate to a party with whom the broker has no contractual relationship absent proof of a relationship approaching privity. Benjamin Shapiro Realty Co., LLC v. Kemper Nat’l Ins. Cos., 303 A.D.2d 245, 245-246 (1st Dep‘t 2003); Superior Ice Rink v. Nescon Contracting Corp., 40 A.D.3d 963 (2d Dep’t 2007). Moreover, a disclaimer stating that an insurance certificate is for information only bars a negligent misrepresentation claim. Benjamin Shapiro Realty Co., LLC v. Kemper Nat’l Ins. Cos., supra. In Benjamin Shapiro Realty and Superior Ice Rink, there was no dispute that the insurance broker had issued an incorrect certificate, and the Courts still held that a third party could not sue the broker for negligent misrepresentation based upon a certificate issued to its client, the insured.  Tishman has failed to come forward with evidence that the Broker was connected to Tishman by either word or deed.  See, Houbigant, Inc. v. Deloitte & Touche LLP, 303 A.D.2d 92,94 (1st Dep’t 2003) (before law permits negligence claim against professional by non-client third party, there must be “linking conduct” by word or action by professional to non-client).

The other basis of liability asserted by Tishman is intentional fraud or misrepresentation. There are cases which hold that a broker can be held liable for fraud, collusion or other special circumstances in the issuance of an insurance certificate. See, Griffin v. DaVinci Dev., LLC, 44 A.D.3d 1001 (2d Dep’t 2007); Binyan Shel Chessed, Inc. v. Goldberger Ins. Brokerage, Inc., 18 A.D.3d 590, 592 (2d Dep’t 2005)(summary judgment on fraud claim denied for need of discovery where broker allegedly made representations directly to plaintiff); Superior Ice Rink v. Nescon Contracling Corp., supra.  In order to recover for fraud, a plaintiff must prove the following elements: a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury. Global Mins. & Metals Corp. v. Holme, 35 A.D.3d 93, 98 (1st Dep‘t 2006). In this case, Tishman cannot prove the first element of fraud, a misrepresentation made to it by the Broker. Discovery is now complete. The Broker has come forward with evidence that it did not make a representation to Tishman. Tishman has failed to come forward with contrary evidence sufficient to raise an issue of fact. There is no proof that the Broker made a representation to Tishman or provided it with the Certificate. At most, an inference could be drawn that the Broker gave the Certificate to Manhattan. Hence, the Broker is entitled to dismissal of the complaint.
The court also declined to impose sanctions on Tishman for not voluntarily discontinuing this action against the broker and instead "requiring" it to move for summary judgment:
This is not a case where a party engaged in litigation misconduct or continued to press a claim after it had been rejected by the court (citations omitted).  Here, the court had denied the Broker’s first motion to dismiss and ordered discovery to proceed. While the Broker’s attorney did write to Tishman asking it to withdraw the complaint without the necessity of a summary judgment motion, in light of the unexplained etiology of the Certificate, the court does not consider Tishman’s conduct to be beyond the pale of legitimate advocacy.

Court Denies Joint Trial of Related DJ and Subrogation Actions

CGL – JOINT TRIAL OF DECLARATORY JUDGMENT & SUBROGATION ACTIONS DENIED – CPLR § 602
Leeco Construction Co. v. United States Liab. Ins. Co.

(Sup. Ct., New York Co., decided 10/17/2008)


Leeco Construction performed work for Roebling Court Condominiums that resulted in some water damage.  Harleysville paid for that property damage and brought a subrogation action against Leeco based on negligence.  Leeco commenced a declaratory judgment action against its own insurers, including United States Liability Insurance Company, for defense and indemnification coverage in relation to Harleysville's subrogation action, and then moved for a joint trial of both actions pursuant to CPLR § 602.

In denying Leeco's motion for a joint trial, New York County Supreme Court Justice Judith Gische reasoned:
When requested, this court may order either a consolidation or joint trial of actions, serving the goal of efficiency and economy. The actions being joined must have a common question of law or fact. CPLR § 602. The test to determine whether the actions have a common question of law or fact is usually met if evidence that would be admissible in one action would also be admissible in the other. Maigur v. Saratogian, Inc., 47 A.D.2d. 982 (3rd Dept. 1975). There are, however, countervailing considerations that may weigh against consolidation or joint trial. Some of these considerations may be jury confusion, or the prejudice of a substantial right.
*  *  *  *  *
Where one action for declaratory judgment relating to insurance coverage could possibly prejudice another action, the motion for joint trial must be denied. Orange v. Swiftway Supermarkets, 32 A.D.2d 631 (lst Dept. 1969). In the present case, whether or not the movants are covered by insurance could prejudice a jury in deciding whether or not they are also liable for the actions that occurred. When a jury has to decide whether there is insurance coverage, they may be persuaded to award or deny an award for damages based on the presence or absence of insurance. A jury may also be inclined to award damages based on the amount of insurance coverage there is.  Conversely, if no insurance is present, a jury may decide to not “punish” the person not covered by insurance, and, therefore, not award the plaintiff damages. This clearly creates prejudice that can be avoided by having separate juries deciding these issues.  By having the cases decided by separate juries, it gives each jury the opportunity to be fair to the parties involved and determine whether each plaintiff has meritorious claim, regardless of whether there is insurance coverage for the claim.
*  *  *  *  *
Although the first and second action have parties in common, the parties are wearing different hats in each action and have different claims with different burdens of proof. A jury may get confused as to which party has the burden to prove their claims in one case, but defend in another. By keeping the claims separate, this confusion is avoided. When litigants are adverse parties in different actions, "the preservation of separate actions and the pleadings therein will tend to a better understanding by a jury of the parties and the issues in each case." Padilla v. Greyhound Lines, Inc.,  29 A.D.2d 495 (1st Dept. 1968).
For related but separate DJ and subrogation actions, it would be better to try them separately than together, at least from the insurers' perspectives.

Friday, October 24, 2008

Waiver-of-Subrogation Clause Not Waived By Not Being Asserted as Affirmative Defense

COMMERCIAL PROPERTY – WAIVER-OF-SUBROGATION CLAUSE – AFFIRMATIVE DEFENSES
State Farm Ins. Co. v. J.P. Spano Constr., Inc.

(2nd Dept., decided 10/21/2008)


A waiver-of-subrogation clause is placed in a contract to minimize lawsuits and claims among the contracting parties. The result is that the risk of loss is agreed among the parties to lie with their insurers, and the cost of the insurance coverage is contractually allocated among the parties as they may agree. The risk, once allocated to the insurers by the parties, is intended to stop there, without allowing the insurer to seek redress via subrogation claims in the event of a loss from the "at fault" party. See, Kaf-Kaf, Inc. v. Rodless Decorations, Inc., 90 NY2d 654 (1997). Most insurance policies allow an insured to waive its insurer's subrogation rights provided the waiver was executed before a loss.

A typical waiver-of-subrogation clause provides:
The owner and Contractor waive all rights against (1) each other and any of the subcontractors, sub-subcontractors, agent and employees, each of the other, and (2) the architect, architect's consultants, . . . for damage caused by fire or other perils to the extent covered by property insurance obtained pursuant to this contract.
In a landlord-tenant context, a typical waiver-of-subrogation clause reads:
Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, each party shall look first to any insurance in its favor before making any claim against the other party for recovery of loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Landlord and Tenant each hereby releases and waives all right of recovery against the other or any one claiming through or under each of them by way of subrogation or otherwise.
Although the courts routinely uphold waiver-of-subrogation clauses to dismiss subrogation actions, for subrogating insurers there do exist a few ways around such clauses. State Farm must have thought it had such an argument in this case and brought a subrogation action against what the decision implies was the general contractor of State Farm's insureds.

Unfortunately for State Farm, the insureds had signed a contract with the defendant contractor in which they had waived
subrogation for all claims "for damages caused by fire or other causes of loss to the extent covered by property insurance obtained". State Farm argued, though, that the defendants had failed to assert the waiver-of-subrogation clause as an affirmative defense in their answer. In rejecting this argument and upholding the lower court's award of summary judgment to the defendants based on the clause, the Second Department held:
Contrary to the plaintiff's contention, the defendants were not required to plead the waiver-of-subrogation clause as an affirmative defense. The plaintiff's complaint was based, in part, on the very contract in which the waiver-of-subrogation clause appeared; the plaintiff cannot claim to be surprised that the defendants would use it as a defense (see CPLR 3018[b]; Bello v Transit Auth. of N.Y. City, 12 AD3d 58, 61; Carlson v Travelers Ins. Co., 35 AD2d 351, 353-354).
For more waiver of subrogation cases, click here or the waiver of subrogation label below.

Fifth Citing of Bi-Economy

HOMEOWNERS – CGL – PUNITIVE DAMAGES – REGULATION 64 CAUSE OF ACTION – CONSEQUENTIAL DAMAGES
Silverman v. State Farm Fire & Casualty Co.

(Sup. Ct., Nassau Co., decided 10/8/2008)


We now have our fifth citing of the Court of Appeals' February 2008 Bi-Economy Market v. Harleysville holding, this time in a New York state court homeowners and general liability coverage case.

Plaintiffs commenced this declaratory judgment (DJ) action for liability insurance coverage in relation to an underlying personal injury action brought against them for damages flowing from an alleged sexual assault committed by plaintiff Barry J. Silverman, DMD, on Elizabeth Ceparano. It was alleged that the incident took place on September 10, 2006 at the premises of defendants' dental practice in Bayside, New York. In an affirmation in opposition to the defendant insurers' motions to dismiss, plaintiffs' attorney contended that there was no assault, but only a consensual sexual encounter initiated by Ceparano when she was plaintiffs ' employee, the purpose of which was to later extort money from the plaintiffs.

Plaintiffs sought defense and indemnification coverage under: a homeowners policy issued by State Farm to Silverman and his wife for a premises located in Merrick, New York; a businessowners liability policy issued by Travelers/Charter Oak to University Dental, PC; and a CGL policy issued by Fireman's Fund/American to plaintiffs. In addition to seeking declaratory relief, plaintiffs' complaint also sought "punitive damages and statutorily mandated damages", based on defendants' alleged failure to settle the plaintiffs' insurance claims fairly and quickly, in violation of Insurance Law § 2601. State Farm, Charter Oak and American moved to dismiss the punitive damages and "statutorily mandated" damages claims, and State Farm also moved to dismiss the entire DJ complaint based on plaintiffs' alleged failure to name Ceprano and her husband as necessary and interested parties.

In granting the defendants' motions to dismiss the plaintiffs' claims for punitive damages and "statutorily mandated" damages, Nassau County Supreme Court Justice Daniel Palmieri held:
Under New York law, punitive damages would be available in this case only where the plaintiffs could demonstrate that they were victims of a tort independent of the insurance contract - even if denial of benefits under that contract could be deemed made in bad faith. New York University Continental Ins. Co., 87 NY2d 308 (1995); Rocanova Equitable Life Assurance Soc. of U.S., 83 NY2d 603 (1994). An independent tort is not alleged here. At best, the Court has before it a breach of contract that might be characterized as egregious, but that is not a tort. Moreover, punitive damages in the current context would require that the insurer's acts be those "evincing a high degree of moral turpitude and demonstrating such wanton dishonesty as to imply a criminal indifference to civil obligations." Rocanova, supra at 613. Again, the allegations, and even the statement of plaintiffs ' attorney, do not indicate behavior that rises to that level. See also, Fabiano v Philip Morris, Inc., __AD3d__, 862 NYS2d 487 (1 Dept. 2008) ("the courts of this State have been so adamant that punitive damages are ' a social exemplary remedy (and) not a private compensatory remedy ' that the imposition of such damages for private purposes has been held to violate public policy" [citation omitted]).

Plaintiffs do not dispute the foregoing law. Rather, citing recent decisions of the Court of Appeals, they contend that they may sue for consequential damages resulting from the failure to provide coverage. Such a failure may indeed support such a claim if it flows from a breach of the covenant of good faith and fair dealing, which the courts will read into all insurance contracts. Bi-Economy Mkt., Inc. v Harleysvile Ins. Co. of N.Y., 10 NY3d 187 (2008); Panasia Estates, Inc. v Hudson Ins. Co., 100 NY3d 200 (2008). However, as a claim for consequential damages is not the subject of the instant motions the Court need not address it as a basis for denying those motions, except to note that it does not serve to bolster a claim for punitive damages. Indeed, the Court of Appeals itself expressly distinguished the two and indicated no change to the law in that regard. Bi-Economy Mk., Inc., supra, at 193-194. "When an insured... suffers additional damages as a result of an insurer's excessive delay or improper denial, the insurance company should stand liable for those damages. This is not to punish the insurer but to give the insured its bargained-for benefit." Id., at 195 (emphasis added).

Accordingly, the Court agrees with the defendants that a claim for punitive damages does not lie and the same is dismissed as to all defendants.

Further, to the extent the "statutory" claim is premised on the alleged failure to settle fairly and quickly the insurance claims made, the reference is deemed to be to Insurance Law § 2601(c), which prohibits unfair claims settlement practices, but New York does not curently recognize a private right of action thereunder. Kantrowitz v Allstate Indem. Co., 48 AD3d 753 (2d Dept. 2008). Accordingly, it too is dismissed as to all defendants.
Without any analysis of whether consequential damages were within the contemplation of the parties when they entered into the particular insurance contracts at issue, Justice Palmieri ruled:
However, in view of the recent Court of Appeals [sic] decisions cited above, and the very early stage of the instant litigation, the plaintiffs may serve an amended complaint seeking consequential damages, as sought in counsel' s request to replead. * * * As noted, this case is in the very early stages, and the law on the subject has at least arguably been changed to allow for a consequential damages claim here.
In a footnote to that last statement, the court added:
This is not to say that the Court has determined that a claim for consequential damages is in fact viable in this case, and the defendants are not barred from moving to dismiss this claim after sufficient discovery has been had.
I'm not sure whether the court is inviting another CPLR 3211 motion to dismiss or a 3212 motion for summary judgment following discovery. Either way, the lack of any legal analysis of whether the homeowners and commercial liability policies contemplated consequential damages yet to be alleged in this case is both troubling and illustrative of what some feared would be New York courts' misapplication of the Bi-Economy ruling to any and all insurance coverage disputes. In decisions like this one, the courts are ignoring these words from Judge Piggott in Bi-Economy:
To determine whether consequential damages were reasonably contemplated by the parties, courts must look to "the nature, purpose and particular circumstances of the contract known by the parties . . . as well as 'what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made[.]'"

* * * * *

Thus, the very purpose of business interruption coverage would have made Harleysville aware that if it breached its obligations under the contract to investigate in good faith and pay covered claims it would have to respond in damages to Bi-Economy for the loss of its business as a result of the breach[.]

* * * * *

Therefore, in light of the nature and purpose of the insurance contract at issue, as well as Bi-Economy's allegations that Harleysville breached its duty to act in good faith, we hold that Bi-Economy's claim for consequential damages including the demise of its business, was reasonably foreseeable and contemplated by the parties, and thus cannot be dismissed on summary judgment.
What damages consequential to an alleged breach of a homeowners or general liability insurer's obligation to defend and indemnify an insured could there be other than defense and indemnification costs? Since the nature and purpose of a liability insurance contract is to provide defense and indemnification protection for covered losses and claims, what other damages consequential to an alleged breach of such a contract were reasonably foreseeable and contemplated by the parties at the policy's inception?

The Court of Appeals implicitly recognized in Bi-Economy that not every insurance contract can or will support a claim for consequential damages. If this weren't the case, there would have been no need for the court's analysis and determination of the "nature and purpose" of the commercial property policy at issue, with its business income loss coverage, in that case.

Thursday, October 23, 2008

The Danger of Um in UM Claims

AUTO – UM – STAY OF ARBITRATION DENIED – PROOF OF INSURANCE
Matter of Integon Natl. Ins. Co. v. Reiffert

(Sup. Ct., Suffolk Co., decided 10/22/2008)


An auto insurer seeking to stay the uninsured motorists (UM) arbitration of its insured based on the assertion that the tortfeasor was insured carries the burden of establishing the existence of that insurance. Relying on an insurance code in a police accident report and waiting 10 or more years to develop evidence of the tortfeasor's auto liability insurance proved to be Integon's undoing in this case.

When she was 11 years old in 1997, Crystal Reiffert was struck by a car owned and operated by Melissa Biondi. Ten years later, when she was 21, Reiffert demanded arbitration of her UM claim against Integon, presumably the auto insurer for her parent(s) in 1997. Integon then commenced this special proceeding against Reiffert, Biondi, Biondi's father, Biondi's unnamed uncle, and Allstate, Biondi's father's auto insurer, contending alternatively: (1) that the Biondi vehicle was insured under a policy issued to William Biondi, Melissa's father; or (2) that the Biondi vehicle was covered under an insurance policy issued to Melissa's uncle, respondent John Doe, with whom Biondi may have been residing at the time of the accident; or (3) that the Biondi vehicle was insured under a policy issued directly to Melissa Biondi.

The court conducted an evidentiary hearing in September 2008 at which Melissa Biondi and her father testified. At the hearing, Melissa testified that she was insured at the time of the accident under a policy issued to her. However, she could not recall the name of the insurer or the agency from which she purchased that policy. She further testified that she had no records which would establish any insurance coverage for her or vehicle at the time of the accident. Reiffert submitted evidence that no record of insurance coverage for the Biondi vehicle was available from the Department of Motor Vehicles due to the lapse of time.

Melissa's father's testimony, which was not controverted, was that Melissa was not a resident of his household on the accident date and that prior to that accident she had been removed as an additional insured from his auto policy with the Allstate.

Based on this evidence, Suffolk County Supreme Court Justice Thomas Whelan dismissed Integon's petition against Melissa's father, her "John Doe" uncle, and Allstate, based on the court's finding that Melissa was not insured under her father's or uncle's policy at the time of the accident, and granted petitioner and respondent Reiffert an opportunity to submit further documentation in support of their respective positions.

On further submissions, Justice Whelan denied and dismissed Integon's petition for a permanent stay of Reiffert's UM arbitration, holding:
It is well established that a petitioner seeking to permanently stay the arbitration of an uninsured motorists' claim must make a prima facie showing that the offending party was insured on the date of the accident (see Matter of Eagle Ins. Co. v Tichman, 185 AD2d 884, 586 NYS2d 1010 [2d Dept 1992]). The petitioner's production of a police accident report containing an insurance code for the offending vehicle or documentation from the Department of Motor Vehicles is sufficient to satisfy a prima facie case for a stay of arbitration (see Matter of Continental Ins. Co. v Biondo, 50 AD3d 1034, 857 NYS2d 588 [2d Dept 2008]). Once the petitioner establishes its prima facie case of coverage, the burden shifts to the respondent to rebut same, which it may do by proof that the offending vehicle was uninsured or that all reasonable efforts to obtain evidence of insurance coverage were unsuccessful (see Matter of Lumbermans Mut. Cas. Ins. Co. v Quintero, 305 AD3d 684, 762 NYS2d 82 [2d Dept 2003]; Aetna Ins. Co. v Logue, 68 Misc 2d, 841, 328 NYS2d 569 [NY County Sup Ct 1972]; Merchants Mutual Ins. Co., v Schmid, 56 Misc 2d 360, 288 NYS2d 822 [Nassau Cty Sup Ct 1968]).
Here, the petitioner produced the police accident report which identified the Allstate Insurance Company as the insurer of the Biondi vehicle. However, this court previously determined that the Allstate Insurance Company was not the insurer of Melissa Biondi under the policy it had issued to her father, William Biondi. The court also found, based upon the evidence adduced at the September 24, 2008 framed issue hearing, that there was no coverage under any policy issued to Melissa Biondi's uncle.
The petitioner's remaining claims for a stay of arbitration thus rest upon allegations that the Biondi vehicle was insured under a policy issued to Melissa Biondi directly, rather than coverage afforded her under a policy issued to her parents or her uncle. Such claims are, however, without any evidentiary support in the record as the only support therefor is Biondi's vague recollection that she was insured at the time of the accident under a policy purchased by her. Neither the identity of the issuer nor the details of any such policy was established. The record is, however, replete with evidence that all reasonable efforts to substantiate this vague recollection of coverage through the discovery and production of documentation tending to establish its existence have been unsuccessful due to the duration of time that has elapsed since the occurrence of the accident and the circumstances of the parties. Under these circumstances, the court concludes that the petitioner has failed to establish its entitlement to a permanent stay of the arbitration at issue herein.
The decision does not indicate when Reiffert notified Integon of her UM claim, but presumably it was in a timely fashion. Nor does the court's decision indicate what information regarding Biondi's auto insurance Integon had available to it at the time of first notice. If the outcome of this case teaches anything, it's that it's better to investigate and document the tortfeasor's auto liability insurance as soon after first notice of the accident or UM claim as possible, rather than waiting for 10+ years to do so and risking the tortfeasor coming to the hearing without any corroborating documents and saying, "Um..., I know I was insured under my own policy, but I don't remember the company or the agent that issued that policy."

Wednesday, October 22, 2008

The Inverted Trajectory of a Provider's Late Proof of Claim

NO-FAULT – LATE PROOF OF CLAIM
Joseph Rockman LMT a/a/o Delilah Serrano v. Clarendon Natl. Ins. Co.

(NYC Civil Ct., Richmond Co., decided 10/17/2008)


Question: How often has a court, in any jurisdiction, invoked and followed an inverted trajectory to decide a case? Answer: Never. Before now. I checked LexisNexis. That term hasn't even appeared in a reported decision until this case.

Since I wasn't familiar with its use as a legal decision-making methodology, I looked up and Googled "inverted trajectory". Wasn't in any online dictionary or Wikipedia, so I looked for its meaning in contextual clues. Here's some of what I found:
We believe the inverted trajectories provide at least qualitative information on the subgrid convergence." -- Numerical Simulations of a Dilute Polymer Solution in Isotropic Turbulence, Dissertation Presented to the Faculty of the Graduate School of Cornell University in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy, by Shi Jin, January 2007, p. 80

Consider the point y as being the copy of point x .epsilon. S in F.sub.w at the initial configuration. Point y is fixed in F.sub.w and does not move with set S, but rather it moves relative to S. To an observer placed at the origin of F.sub.s the moving point x .epsilon. S will appear to be fixed while the fixed coordinate system F.sub.w, and the point y fixed in F.sub.w, will appear to be moving according to the inverted motion M(t). In other words, the moving observer will see the inverted trajectory ##EQU2##. -- Description the Background of the Invention Leading to U.S. Patent # 6044306, Methods and apparatus for shaping moving geometric shapes

The trajectories generated by TD group accounted for between 62% and 78% of the variance (featural-upright: R2 = .73, F(1,23) = 60.52, p < .001; featural-inverted: R2 = .62, F(1,23) = 37.53, p < .001; configural-upright: R2 = .79, F(1,23) = 87.41, p < .001), except for the configural inverted trajectory which appeared to be more variable (R2 =.23, F(1,23) = 6.82, p = .016). The control group therefore generated valid cross-sectional developmental trajectories on this task. -- The Development of Visuo-Spatial Processing in Children With Autism, Down Syndrome and Williams Syndrome, Thesis submitted for the degree of Doctor of Philosophy, by Dagmara Annaz, University of London, 2006, p. 167

It is interesting also to look at the Liapunov stability. If we invert the velocities at a certain time and also perturb randomly the positions (about 1%) we observe a substantial stability of the inverted trajectory at any energy density (Figs. (6a,6b)). This contrasts with the presence of exponentially divergent orbits in the large energy density region (positive Liapunov exponents); however this could be an effect of spacial localization oí chaotic regions, even if this behavior is far from being understood. -- Dynamics and Statistics in High Dimensional Hamiltonian Systems, Stefano Isola, Roberto Livi, Stefano Ruffo, Dipartimento di Fisica dell 'Universitá di Firenze and INFN Sezinone di Fi renze, Largo E. Fermi 2, 1-50125 Firenze Italy
Okay..., those didn't help much. It was a description of table tennis (ping pong) ball spins that finally did it for me -- a vigorous backspin apparently imparts an inverted trajectory to (and increases the distance traveled of) the ball.

Thus enlightened, I returned to study Richmond County NYC City Civil Court Judge Katherine Levine's decision in this case, which begins: "This case invokes the inverted trajectory that must be followed when an insurer raises the defense that a medical services provider has failed to timely submit its proof of claim. "

This claim involved a bill dated 4/17/07 for services rendered four and a half years earlier in October and November 2002. Clarendon asserted that the first time it learned about this claim was when plaintiff served Clarendon's law office with a summons and complaint dated August 16, 2007, which attached a chart referring to the 4/17/07 bill, but did not attach that bill. Clarendon claimed that its counsel received the actual bill when they received discovery in a related case involving the same medical provider on or about, October 10, 2007. Clarendon then issued a denial of that bill on November 7, 2007, within 30 days of its receipt of it.

Having been found to have timely denied the bill, Clarendon successfully argued on motion that plaintiff provider failed to submit its proof of claim (i.e., the bill) within 180 days (this case was decided under the "old" regulation) of the relevant dates of service. Judge Levine found that the "generic" affidavit of Dr. Rockman failed to state that he actually mailed the particular claims at issue on December 12, 2002, and his recital of his office practices did not establish, by admissible proof, that that procedure was in fact followed on that date. Moreover, "[f]atally missing from plaintiff's papers is a copy of the medical claim dated in 2002 that was purportedly mailed on December 13, 2002." Judge Levine reasoned:
Specifically, Dr. Rockman averred that it is his office's customary practice that after the envelope containing the bill is delivered to the U.S post office, a photocopy of the bill and supporting documents are then placed in the appropriate patient file and a notation is made on the file confirming the date and amount of the bill and the date the bill was mailed. He then alleged that the bills which are subject of this lawsuit were mailed on 12/13/02. However, as set forth above, plaintiff has failed to produce the bill that was purportedly mailed in December 2002 or even the notation that was made on the file concerning the mailing, and none of the documents that plaintiff did produce in support of its motion contain any reference to a mailing in December 2002. In fact, the only bill that plaintiff did produce for the dates of service in question is dated April 17, 2007, and plaintiff has offered no evidence concerning the mailing of the 2007 bill. As such, plaintiff has failed to produce any evidence that could be introduced at trial so as to defeat defendant's motion for summary judgment.
Given the aforementioned reasoning, plaintiff's cross-motion for summary judgment is denied. Along this line, it should be noted that plaintiff has failed to establish its prima facie right to judgment as it has failed to demonstrate its timely and proper submission of the claims in question See, Presbyterian Hospital, supra , 90 NY2d 274 (1997), Elmont Open MRI & Diagnostic Radiology v. Geico, 2008 NY Slip Op. 50113U, 18 Misc 3d 1117A (Dist. Ct., Nassau Co. 2008). As set forth above, plaintiff has failed to provide admissible proof of mailing of the purported bill dated December 2002. Furthermore, plaintiff has offered no evidence whatsoever to lay a foundation for the admission of the bill dated April 17, 2007. See, e.g. Complete Orthopedic Supplies v. State Farm Ins. Co., 16 Misc 3d 996 (Civil Ct. Queens Co. 2007). concerning the mailing of the bill dated April 17, 2007 that it has been able to produce.
End point of the inverted trajectory in this case: summary judgment for Clarendon, dismissing the complaint.

Tuesday, October 21, 2008

Notice Under the Workers' Compensation Policy Is Not Notice Under the Excess Liability Policy, Even If Both Policies Were Written By Same Carrier

COMMERCIAL LIABILITY – LATE NOTICE – NOTICE UNDER WORKERS' COMPENSATION POLICY ONLY
Sorbara Constr. Corp. v. AIU Ins. Co.

(Ct. Apps., decided 10/21/2008)


Is notice of an accident to an insurer under a workers' compensation policy also notice to that same insurer under a liability policy? No, says the New York Court of Appeals.

Although the insured provided prompt notice of a workplace accident to its workers' compensation carrier under its workers' compensation policy, it did not give notice of the accident to that same insurer under its excess liability policy until five and one-half years later, after it was sued in a third-party action.

In AFFIRMING the First Department's order, which had affirmed New York County Supreme's granting of AIU's cross motion for summary judgment, the Court of Appeals held:

It is well settled that when a policy of liability insurance requires that notice of an occurrence be given "as soon as practicable," such notice must be provided within a reasonable period of time; failure to give such notice relieves the insurer of its obligations under the contract, regardless of whether the insurer was prejudiced by the delay (Great Canal Realty Corp. v Seneca Insurance Company, Inc., 5 NY3d 742, 743 [2005]; Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339 [2005]).

Contrary to the insured's contention in this case, notice provided under the worker's compensation policy at the time of the incident did not constitute notice under the liability policy even though both policies were written by the same carrier (see generally Nationwide Ins. Co. v Empire Ins. Co, 294 AD2d 546, 548 [2d Dept 2002]; 57th Street Management Corp v Zurich Ins. Co., 208 AD2d 801, 802 [2d Dept 1994]). Each policy imposes upon the insured a separate, contractual duty to provide notice. Similarly, an additional insured's notice to the carrier under a different policy does not excuse the insured's obligation to provide timely notice under its policy (see Travelers Ins. Co. v Volmar Const. Co., Inc., 300 AD2d 40 [1st Dept 2002]).

Here, the insured did not give notice to the insurer until it was sued in a third party action—some five and one-half years after the accident. Under the circumstances of this case, such notice was unreasonable as a matter of law and relieved the insurer of its obligation to defend or indemnify the insured.

Graves Amendment Held Not to Apply to "Loaner" Vehicle

AUTO – GRAVES AMENDMENT – VICARIOUS LIABILITY – VEHICLE & TRAFFIC LAW § 388 – LOANER VEHICLE
Zizersky v. Life Quality Motor Sales, Inc.

(Sup. Ct., Kings Co., decided 10/14/2008)


Since August 10, 2005, the "Graves Amendment" has provided vehicle lessors and renters with a statutory basis for dismissing vicarious liability claims in motor vehicle accident lawsuits. In what may be another case of first impression, the court held that the Graves Amendment does not apply to a "loaner" vehicle.

While driving her 1998 Ford, plaintiff Haya Zizersky was involved in a collision with Symantha Mitchell, who was driving a 2008 BMW owned by either BMW of North America, LLC or BMW Financial Services NA, LLC. Defendant Life Quality Motor Sales had provided that vehicle to Mitchell for her use, free of charge, while her vehicle was being serviced by the dealer. Zizersky brought an action against the dealer, both BMW entities and Mitchell for damages relating to that accident.

New York Vehicle and Traffic Law § 388 provides that "[e]very owner of a vehicle . . . shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner." Vehicle and Traffic Law § 388 has been applied to "loaner" vehicles. Dunne v. Lloyd, 40 AD3d 685, 686 (2d Dept 2007); Fili v. Matson Motors, Inc., 183 AD2d 324, 328-29 (4th Dept 1992); Matter of Liberty Mut. Ins. Co. v Clench, 180 AD2d 684, 685 (2d Dept 1992).

In pertinent part, the Graves Amendment provides:
§ 30106. Rented or leased motor vehicle safety responsibility(a) In general. An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State or political subdivision thereof, by reason of being the owner of the vehicle (or an affiliate of the owner), for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if: (1) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and(2) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner).
The BMW entities and dealer moved for summary judgment based on what they contended was the applicability of the Graves Amendment to them, insulating them from V&T § 388's vicarious liability.

In denying that motion, Kings County Supreme Court Justice Jack Battaglia ruled that the Graves Amendment does not apply to a "loaner" vehicle that is provided to a customer free of charge. Finding that the affidavits submitted by the moving defendants were inconsistent and insufficient to warrant summary judgment, Justice Battaglia framed the disputed issue as follows:
The difference in the Affidavits is particularly important because the fundamental dispute between the parties here is the applicability of the Graves Amendment to "loaner" vehicles used, without charge, by persons whose own vehicles, previously purchased or leased, are being serviced. It is essentially Plaintiffs' contention that, no matter which Defendant or Defendants might be considered the "owner" of the subject vehicle or an "affiliate" of the "owner," and whether any or all Defendants might be engaged in the trade or business of renting or leasing motor vehicles, the Graves Amendment cannot apply where, as here, the subject vehicle is "loaned" without separate charge to the user. Under such circumstances, as Plaintiffs would have it, the vehicle has not been "rented" or "leased" as those terms are used in the Amendment. Defendants, of course, disagree.
Before being allowed to use the loaner vehicle, Mitchell had signed a "BMW Rental Agreement" and "Loaner Car Addendum". The heading "rental charges" on the Rental Agreement was blank and that section of the document was crossed-out. The Loaner Car Addendum stated the user's understanding that, if the vehicle was not returned within 24 hours after notification that the repairs to the user's own vehicle had been completed, the user would be charged $40.00 per day.

In support of their argument that the loaner vehicle was a "rental" within the meaning of the Graves Amendment, the moving defendants relied on language in the Rental Agreement that stated: "If Your vehicle is being serviced by Us under BMW warranty Our right, or the right of Our affiliate, to repair your vehicle during this rental is considered by Us as the rental fee. No additional consideration is necessary except for fuel You use and do not replace." Mitchell apparently had been given the loaner vehicle to use while her own car was at the dealer for a warranty repair.

In rejecting that argument, Justice Battaglia held:
Even assuming, however, that Ms. Mitchell's own vehicle was being serviced "under BMW warranty," rendering the quoted provision from the BMW Rental Agreement applicable, the Court concludes for reasons that will appear that any so-called "right . . . to repair [the] vehicle," characterized as a "rental fee," cannot constitute the subject vehicle as "rented" or "leased" for purposes of the Graves Amendment. However it might be characterized for other purposes, the loan of the subject vehicle to Ms. Mitchell was a simple bailment (see Fili v Matson Motors, Inc., 183 AD2d at 328-29.)

* * * * *

"The central distinguishing characteristics of a lease is the surrender of absolute possession and control of property for an agreed-upon rent." (First Franklin Square Assocs., LLC v Franklin Square Prop. Account, 15 AD3d 529, 532 [2d Dept 2005] [quoting Matter of Dodgertown Homeowners Assn. v City of New York, 235 AD2d 538, 539 (2d Dept 1997)].) "When referring to tangible personal property, the word lease' means a contract granting the right to possess property for a specified period of time in exchange for periodic payment of a stipulated rent." (In Re: ICS Cybernetics, Inc., 123 BR 467, 475-76 [Bktcy Ct, NDNY 1989], aff'd 123 BR 480 [NDNY 1990].)
"In the context of lease agreements, rent' is the amount paid for use and occupation of land or other property." (Matter of Daben Corp., 469 F Supp 135, 141 [DPR 1979]; see also Stecher v 85th Estates Co., 43 AD3d 732, 743 [1st Dept 2007] [McGuire, J., dissenting]; 2657 East 68th Street Corp. v Bergen Beach Yacht Club, 161 Misc 2d 1031, 1033 [Civ Ct, Kings County 1994].) When used as verbs, the words "lease" and "rent" are synonymous. (See Richards v Princeton Ins. Co., 178 F Supp 2d 386, 395 [SDNY 2001].)
Giving the words their plain meaning, therefore, to "lease" or "rent" property requires payment for its use. If the words carry any shade of difference in common parlance when applied to personal property, a "lease" might be understood as allowing use for a longer term than a "rental." But, again, giving the words their plain meaning, bailment of a "loaner" vehicle without charge is neither a "lease" nor a "rental."
As the moving defendants would have it, their "right" to service Ms. Mitchell's own vehicle, presumably purchased or leased from one of them, is sufficient "consideration" to constitute the "loaner" arrangement a "rental" for purposes of the Graves Amendment. (Reply Affirmation, ¶ 6.) It may be that the bailment of a "loaner" vehicle without charge, but with other legal consideration, and considering the totality of the contract and relationship between the parties, would be sufficient to constitute a "lease" or "rental" for some purposes. (See Matter of West-Herr Ford, Inc. v Tax Appeals Tribunal, 16 AD3d 727 [3d Dept 2005]; Associated Groups Services, Inc. v Grow, 258 AD2d 716 [3d Dept 1999].) On the evidence of the arrangement presented here, however, there is no "lease" or "rental" for purposes of the Graves Amendment.
To read most posts about New York cases involving the Graves Amendment, click here.