Monday, August 31, 2009

New York State Insurance Department Office of General Counsel Opinions for May, June, July & August 2009

Got some catching up to do.  From the NYS Insurance Department's website come these eight Office of General Counsel Opinions from May, June, July and August 2009 relevant to property and casualty insurers doing business in New York.  See each opinion letter for its analysis.  

Limit on Charges by Providers of Health Services Under the No-Fault Law 
OGC Op. No. 09-05-01 (May 15, 2009)

Questions Presented:

1.  May a provider of health services bill a patient and/or the patient’s health insurer for treatment of injuries arising out of the use of a motor vehicle at the provider’s standard rates when the patient’s no-fault insurer has denied the medical provider’s claim because available coverage for basic economic loss has been exhausted?

2.  May a provider of health services bill a patient and/or the patient’s health insurer for treatment of injuries arising out of the use of a motor vehicle at the provider’s standard rates when the patient’s no-fault insurer has denied the medical provider’s claim because of a policy exclusion, including driving while intoxicated?


1.  No.  Pursuant to N.Y. Insurance Law § 5108(a) (McKinney 2000), a provider of health services may not bill a patient and/or the patient’s health insurer for treatment of injuries arising out of the use of a motor vehicle at the provider’s standard rates when the patient’s no-fault insurer has denied the medical provider’s claim because available coverage for basic economic loss has been exhausted.

2.  No.  A medical provider may not bill a patient and/or the patient’s health insurer treatment of injuries arising out of the use of a motor vehicle at the provider’s standard rates when the patient’s no-fault insurer has denied the medical provider’s claim because of a policy exclusion, such as driving while intoxicated. The provider of health services is limited to billing at the no-fault rates established pursuant to Insurance Law § 5108 for any treatment of injuries arising out of the automobile accident which are covered under the no-fault law.

No-Fault Lost Wage Claim  
OGC Op. No. 09-05-04 (May 14, 2009)

Question Presented:

Is an insured person entitled to reimbursement for no-fault lost wage claims after being medically cleared to return to work when such person was employed at the time of the accident giving rise to the claim, was unable to return to work due to her injuries, and her vacant position was subsequently filled due to her inability to return to work, so that she could not resume her employment at such time when she was medically cleared to return to work?


Yes.  Pursuant to N.Y. Ins. Law § 5102(a)(2), an eligible injured person is entitled to lost earnings from “work which the person would have performed had he not been injured.” When an injured insured is unable to return to work due to injuries arising from an automobile accident and the insured’s employer hires another person to fill the insured’s vacant position during the insured’s period of disability, so that the insured cannot immediately resume her employment when she is medically cleared to return to work, the insured may recover lost wages for the period after she is medically cleared but before she actually resumes work.

Fire Insurance Fee and Businessowners Policies 
OGC Op. No. 09-06-06 (June 15, 2009)

Questions Presented:

1.  What is the method for calculating the fire insurance fee for a businessowners policy that has separate, divisible premiums for property and liability coverages?

2.  Should the fire insurance fee be levied on the whole property premium, when there are portions of the premium that do not include the peril of fire?

3.  If inland marine coverage is included in a businessowners policy, is it subject to the fire insurance fee?


1.  The method for calculating the fire insurance fee for a businessowners policy that has separate, divisible premiums for the property and liability coverages, as set forth in N.Y. Ins. Law § 9101(b) (McKinney 2000), is to multiply 100% of the property premium by 1.25%, subject to the exceptions discussed below.

2.  It depends. If the premium property is divisible and there are portions that do not include the peril of fire, then the fire insurance fee is not levied on that portion of the property premium. However, if the property premium is not divisible, then the fire insurance fee is levied on the whole property premium.

3.  No, if inland marine coverage is included in a businessowners policy and the premium is divisible, it is not subject to the fire insurance fee.

Interpreting the Amendments to Insurance Law § 3420 
OGC Op. No. 09-06-08 (June 23, 2009)

Questions Presented:

1.  Do the Chapter 388 amendments to Insurance Law § 3420, which apply to any “liability policy issued or delivered in this state,” include policies issued in New York but delivered outside of the state?

2.  Does the prejudice rule set forth in Insurance Law § 3420 only apply to liability policies?

3.  Does Insurance Law § 3420 apply to claims-made policies?

4.  May a third party bring a direct cause of action against a New York insurer in a foreign jurisdiction subsequent to a denial for late notice if the policy was delivered in a foreign jurisdiction that requires a judgment against, or settlement with, the insured prior to the initiation of such cause of action?


1.  Yes.  The term “issued or delivered in this state” includes policies issued in New York but delivered outside of the state.

2.  Insurance Law § 3420 sets forth minimum requirements for liability policies, which includes the prejudice rule. However, insurers may provide more liberal provisions in their policies to benefit their insureds, and thus may include a prejudice rule in other kinds of policies, too.

3.  Yes, Insurance Law § 3420 applies to claims-made policies. However, Chapter 388 recognizes the distinctive nature of claims-made policies and does not allow for duplicate claims under multiple policy periods, or a late claim under a prior policy period. 

4.  No.  Insurance Law § 3104(b) allows a New York insurer to include in any policy of insurance issued for delivery in another jurisdiction any provision required by the laws of such other jurisdiction applicable to such policy.

Examinations Under Oath of Assignees 
OGC Op. No. 09-06-10 (June 24, 2009)

Question Presented:

May an insurer, when requesting verification in the form of an examination under oath of an assignee of no-fault personal injury protection (“PIP”) benefits, require a corporate assignee to designate a specific person to be examined?


No.  Neither the Insurance Law nor the regulations promulgated thereunder permit an insurer to require that a corporate assignee of no-fault benefits designate a specific person of the insurer’s choice to submit to an examination under oath.

Insurer In-House Counsel 
OGC Op. No. 09-08-01 (August 4, 2009)

Question Presented:

Do the New York Insurance Law and regulations promulgated thereunder require Insurance Department approval for the creation of an insurer in-house law firm?


No.  Neither the Insurance Law nor the regulations promulgated thereunder require Insurance Department approval for the creation of an insurer in-house law firm.

Acceptance of Third-Party Subpoena by the Superintendent 
OGC Op No 09-08-02 (August 5, 2009)

Question Presented:

May the Superintendent accept service of a subpoena on an authorized insurer when the insurer is not a defendant in the underlying legal action (“a third-party subpoena”)?


No.  The Superintendent is not authorized to accept such a subpoena, because N.Y. Ins. Law § 1212 only requires an insurer to appoint the Superintendent to accept lawful process on its behalf when such process is associated with an action against the insurer.

Electronic Delivery of Insurance Policies 
OGC Op No 09-08-04 (August 7, 2009)

Questions Presented:

1.  Does Office of General Counsel (“OGC”) Opinion 09-01-01 (January 6, 2009) apply to commercial lines insurance policies?

2.  May an insurer electronically send an insurance policy to an insured without first obtaining the insured’s consent to engage in an electronic transaction, if the insurer also offers the insured the option to insist upon being sent a paper copy of the policy?

3.  Is the insurer or the insurance producer responsible for delivery of the insurance policy to the insured?

4.  If an insurance policy is issued electronically by an insurer to an insurance producer, may the producer electronically send the policy to the insured without first obtaining the insured’s consent to electronically receive the insurance policy?


1.  Yes. OGC Opinion 09-01-01 (January 6, 2009) applies to commercial lines insurance policies.

2.  No. An insurer may not electronically send an insurance policy to an insured unless the insured has first consented to engage in an electronic transaction, even if the insurer provides the insured with an option to insist upon receiving a paper copy of the policy.

3.  Yes. An insurer is responsible for delivery of the insurance policy to the insured or such person that the insured designates, but the insurer may delegate such task to either its insurance agent or the insurance broker.

4.  No. Even if the insurer electronically sends the insurance policy to the insurance producer, the insurance producer may not electronically forward the policy to the insured unless the insured has consented to engage in an electronic transaction.

Don't Rush By the Shiny Pebbles -- The Importance of Curiosity

From Minor Wisdom via Eric Turkewitz' New York Personal Injury Law Blog comes this excellent reminder about walking slowly and observing curiously:

Is your office or company in the business of brain development?  Designed with the brain in mind?  Check out Dr. John Medina's 12 Brain Rules.  Medina's blog is here. Worth checking out.

August 2009 Posts

For those of you who don't like to scroll, here's a list of Coverage Counsel's posts for August 2009:

August 17
August 18
August 19
August 20
August 24
August 25
August 26
August 27
August 28
August 31

Friday, August 28, 2009

Renovating a Kitchen is Not Inherently Dangerous Work -- Subrogation Claim Dismissed

Liberty Mut. Fire Ins. Co. v. Akindele
(2nd Dept., decided 8/25/2009)

Something for the subro folks.

The general rule in New York is that one cannot be held liable for the ordinary negligence of one's retained independent contractors.  See, Brothers v New York State Elec. & Gas Corp., 11 NY3d 251 (NY Ct. Apps. 2008).  There are three exceptions to that general rule, however:
1.  Negligence of the employer in selecting, instructing, or supervising the contractor.
2.  Non-delegable duties of the employer, arising out of some relation toward the public or the particular plaintiff. 
3.  Work which is specially, peculiarly, or inherently dangerous.
Liberty Mutual brought this fire subrogation action against the homeowner defendant, seeking to hold her liable for her independent contractor's negligence in renovating her kitchen (and presumably causing a fire that damaged the property of Liberty's insured).  Defendant moved for summary judgment and Liberty opposed, arguing that exceptions 1. (negligent selection or hiring) and 3. (inherently dangerous work) to the general rule against liability for negligence of one's independent contractors applied to require a trial against defendant.  Queens Supreme granted defendant's motion, and Liberty appealed.

In AFFIRMING the judgment in favor of defendant, with costs, the Second Department held:
Contrary to the plaintiff's contention, the defendant homeowner demonstrated her prima facie entitlement to judgment as a matter of law by establishing that the subject fire was caused by the negligence of an independent contractor, for which she was not liable (see Chainani v Board of Educ. of City of N.Y., 87 NY2d 370, 380-381; Kleeman v Rheingold, 81 NY2d 270, 274; Chorostecka v Kaczor, 6 AD3d 643, 644). In opposition to the motion, the plaintiff failed to raise a triable issue of fact as to whether the defendant was negligent in hiring the independent contractor, who had been recommended to her by a trusted friend based upon his prior satisfactory work (see generally Farnsworth v Brookside Constr. Co., Inc., 31 AD3d 1149, 1151; Bellere v Gerics, 304 AD2d 687, 688; Sanchez v United Rental Equip. Co., 246 AD2d 524, 525; Dube v Kaufman, 145 AD2d 595, 596).

Similarly, the plaintiff failed to raise a triable issue of fact as to its claim that the defendant assigned the performance of inherently dangerous work to the independent contractor by hiring him to renovate her kitchen, and that she was aware or reasonably should have been aware of the alleged inherently dangerous nature of that work (see generally Chainani v Board of Educ. of City of N.Y., 87 NY2d at 381; Rosenberg v Equitable Life Assur. Socy. of U.S., 79 NY2d 663, 670; Farnsworth v Brookside Constr. Co., Inc., 31 AD3d at 1150). Rather, the record supports the conclusion that the fire occurred as the result of ordinary negligence by the independent contractor in performing work which was not inherently dangerous (see Saini v Tonju Assoc., 299 AD2d 244; MacDonald v Heuer, 253 AD2d 795). Accordingly, summary judgment was properly awarded in favor of the defendant. 
Inherently dangerous kitchen remodeling or renovation work?  Heh.

Thursday, August 27, 2009

Bronx Civil Holds that No-Fault Insurer Is Not Obligated to Offer Policy On Motion to Prove EUO Requirement & Certified Mail Creates Same Presumption of Receipt as Regular Mail

Hastava & Aleman Assoc., P.C. v. State Farm Mut. Auto Ins. Co.
(NYC Civil Ct., Bronx Co., decided 7/2/2009)

State Farm moved in lieu of answering to dismiss the plaintiff health care provider's action on the ground that plaintiff had violated policy conditions by failing to appear for a twice-scheduled examination under oath (EUO).   Plaintiff opposed State Farm's motion, asserting that State Farm had failed to submit a copy of the subject insurance policy in its motion papers, and had failed to demonstrate that EUO letters were sent.

New York City Civil Court Judge Fernando Tapia granted State Farm's motion and dismissed the complaint. On the question of whether State Farm was required to submit a copy of the policy in its motion papers to prove that plaintiff was subject to an EUO requirement, Judge Tapia held:
Revisiting 11 NYCRR § 65-1.1, that section is part of the revised no-fault regulations which took effect on April 5, 2002, and adopted the mandatory Personal Injury Protection ["PIP"] endorsement authorizing EUOs to be incorporated into insurance policies. In other words, compliance to a scheduled EUO is read into the written policy, and the insurer is not required to offer it as evidence to prove its claim.[FN1] Likewise, in the case at hand, Defendant is not required to include its written policy as part of the record because its defense [of the EUO "no-show"] is found in the Endorsement. Thus, the mandatory Endorsement applies whether or not the written insurance policy actually contains it. Based on the moving papers, the date of accident was on August 27, 2008. According to NY Insurance Law § 3425 (a)(8), "With respect to auto insurance, 'required policy period' means a period of one year from the date as of which a covered policy becomes effective after first issuance or voluntary renewal." Furthermore, under SZ Medical P.C. v. State Farm Mutual Auto Ins. Co., 9 Misc 3d 139(A) (App Term 1st Dept 2005), the date of the written policy's issuance determines if the Endorsement is applicable, and not the date when the plaintiff submits a claim. Applying the above to the instant action, the subject insurance policy contract could be deemed to have been issued/renewed well after April 5, 2002, given that the date of accident occurred well over six years after the effective Endorsement date. It would therefore be duplicative to submit a copy of the policy because its legislative intent was to read the Endorsement into all policies [post-April 5, 2002].[FN2] As such, Defendant does not need to submit the policy contract because the insurance contact in effect incorporates the Endorsement that authorizes EUOs under 11 NYCRR § 65-1.1.

Plaintiff in the case at bar is therefore in violation of the policy condition requiring submission of EUOs for verification purposes in order to make a determination of first-party benefits because Plaintiff did not appear at the two scheduled EUOs as required by the Endorsement. Accordingly, Plaintiff failed to submit valid proof of claim.
Although it did not "explicitly or implicitly deny [in its pleadings] that it never received the EUO letters", plaintiff also argued that State Farm's motion should be denied because it had not proven in evidentiary form that the two EUO scheduling letters were actually mailed.  On its motion, State Farm submitted affidavits from the calendar clerk of the law firm of State Farm's attorneys and  a State Farm claim representative, who attested her personal knowledge of State Farm's mailing procedures of EUO letters via certified mail.  Plaintiff Plaintiff countered that State Farm had failed to meet its prima facie burden of proving that the two EUO letters were actually mailed because the submitted affidavits were not from individuals who had personally mailed the EUO letters.

In finding that State Farm had sufficiently proven mailing, Judge Tapia found that mailing a certified letter with a return receipt was entitled to the same presumption of receipt as regular first-class mail, even in the absence of the signed returned receipt:
Mailing procedures' technological developments, today, ensure that items are mailed and received so that presumptions can be eliminated. In fact, the USPS has the capacity to reproduce the image of the green return receipt card as a PDF attachment when certified mail is procured via the internet, or else when the sender did not receive the green card back and instead goes to the USPS to follow up on the status of the card. See FN. 9.

As footnoted earlier, the regulation is not specific about the means in which to send substantially equivalent written notices to the required parties; it merely instructs the insurer to "forward" them. See NYCRR § 65-3.5 (a).  In fact, it may very well have been the legislative intent of the NY Insurance Department to be vague in order to avoid enforcement of a particular form of mailing in the event it becomes outdated, which would breed any problems regarding receipt. Until the no-fault regulations streamline its mailing requirement, it is presumed that a properly addressed letter that was mailed was duly delivered to the intended individual when using any method of mailing that the USPS offers, however basic or sophisticated that form of mailing is.

Satisfying no-fault policy conditions does not have to be compromised at the expense of challenging mailing procedures because proof of mailing of verification letters via regular USPS is enough to create a presumption of receipt. In addition, use of certified mail does not create a more demanding presumption of mailing and receipt beyond that of a letter that was properly mailed. The regulations make no distinction between sending a letter via regular mail or via certified mail. 
I get the whole presumption of receipt from a sufficiently proven mailing thing, but using certified mail requires a recipient's signature for delivery, regardless of whether the sender requests a return receipt.  I just learned that this week, after having tried regular, certified return receipt, certified no return receipt, overnight and handwritten envelope with no return address mailing methods to ensure that an insured received my insurer client's EUO letter and notice. All but the handwritten envelope with no return address had been rejected and returned, even the UPS mailing (which required the insured to go to the effort of driving the unopened mailer back to UPS's nearest shipping depot for returning to me).

I don't take issue with the court's ruling in this case, especially since plaintiff apparently did not deny having received the EUO letters (although there is also no mention of State Farm having received the signed return receipts, in which case presumably those would have been submitted on its motion, as well), but when a party uses certified mail with or without return receipt, tracking and confirming delivery is as easy sitting down as a computer with Internet access.  Sending something via certified mail return receipt guarantees either: (1) delivery to the letter's address, as confirmed by the signed return receipt; or (2) non-delivery, as confirmed by the envelope eventually coming back marked either "unclaimed" or "rejected".  A certified envelope coming back is a pretty good clue that there was no receipt, if the letter or item was not also sent or mailed by some other method.

Is there a USPS mailing method in which delivery can be confirmed without requiring the recipient's signature?  Yes, Delivery Confirmation™. I'll be using that method now for sending EUO letters/notices to recalcitrant recipients.  Presumption of receipt is good.  Confirmation of receipt is better.  Acknowledgment of receipt (via a signed receipt) is best.

Wednesday, August 26, 2009

28-Day Delay in Disclaiming Found to Excuse Insured's Nearly 3-Year Delay in Providing Notice of Occurrence

Able Health Care Serv. Inc. v ACE Am. Ins. Co.
(Sup. Ct., Queens Co., decided 7/8/2009)

It's getting crazy out there.  I know that New York liability insurers are now obligated to show prejudice from an insured's late notice of two years or less under a policy issued on or after January 17, 2009, but this is a new low.

In this blog I've reported New York case decisions in which courts have found unexcused delays as short as 30 days (late notice)45 days (exclusion), 45 days (late notice), 55 days (exclusion), and 62 days (exclusion) in disclaiming coverage to be unreasonable as a matter of law.  But 28 days?

Plaintiff provided home health care and aide services.  On September 13, 2004, plaintiff received a letter from an attorney of one of its customers, advising plaintiff that a personal injury claim was being asserted against it as a result of an incident of July 28, 2004 in which the customer allegedly had been burned when hot soup prepared by plaintiff's employee spilled on her lap.  Plaintiff claimed to have forwarded that letter to its agent on September 30, 2004, but the agent denied having received that letter.  It was not until April 3, 2007, when defendant ACE American Insurance Company received a copy of the customer's summons and complaint via fax from plaintiff's agent that ACE first learned of the incident. Twenty-eight days later, by letter dated May 1, 2007, ACE disclaimed liability coverage to plaintiff  based on late notice.  Plaintiff subsequently commenced this declaratory judgment action for coverage with respect to the underlying personal injury action, and the parties moved and cross-moved for summary judgment.

In granting the plaintiff's cross motion and declaring that ACE was obligated to defend and indemnify plaintiff in the underlying personal injury action Queens County Supreme Court Justice Orin Kitzes held that ACE did not issue its disclaimer "as soon as [] reasonably possible", in violation of then New York Insurance Law § 3420(d):
An insurer’s failure to provide notice of disclaimer as soon as is reasonably possible precludes effective disclaimer, even where the insured’s notice of the incident is untimely (see Tex Dev. Co. v Greenwich Ins. Co., 51 AD3d 775 [2008]). Timeliness of an insurer’s disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer (see id. at 778). An insurer who delays in giving written notice of disclaimer bears the burden of justifying the delay (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 68-69 [2003]). When, as here, the explanation offered for the delay in disclaiming is an assertion that there was a need to investigate issues that will affect the decision on whether to disclaim, the burden is on the insurance company to establish that the delay was reasonably related to the completion of a necessary, thorough, and diligent investigation (see Quincy Mut. Fire Ins. Co. v Uribe, 45 AD3d 661 [2007]).  Moreover, an insurer’s explanation is insufficient as a matter of law where the basis for denying coverage was or should have been readily apparent before the onset of the delay (see First Fin. Ins. Co., 1 NY3d at 68-69).

Based on the record, ACE failed to establish that its 28-day delay in disclaiming coverage was occasioned by the need to conduct a thorough and diligent investigation of the reasons behind Able’s failure to provide timely notice of the accident (see Schulman v Indian Harbor Ins. Co., 40 AD3d 957 [2007]). In her affidavit, Mary Jo Quatrone, the claims analyst who was assigned the within claim, stated that she received the case file on April 6, 2007, three days after Berger forwarded the notice of claim to ACE on April 3, 2007. The claims documents included the summons and complaint, Able’s incident reports dated July 29, 2004 and July 30, 2004, and the September 10, 2004 letter from Dominique Owens’ attorney advising Able of the potential claim, which was stamped received by Able on September 13, 2004. Before ACE conducted any investigation, an initial review of these documents clearly showed that the accident occurred on July 28, 2004, that Able first learned of the accident the day after it occurred, and that Able had notice of a potential claim since September 2004. Unlike in Ace Packing Co., Inc. v Campbell Solberg Assoc., Inc., 41 AD3d 12 [2007], upon which ACE primarily relies, the first claims materials provided to ACE, on their face, contained sufficient facts to allow the claims analyst to conclude that the insured breached the notice provisions of the insurance policy by reporting the accident to ACE almost three years after learning of the accident and receiving notice of the claim from the claimant’s counsel. For similar reasons, the facts of the instant case can also be distinguished from those in Steinberg v Hermitage Ins. Co., 26 AD3d 426 [2006]. In Steinberg, there was a need for the insurer to investigate into when the insured first received notice of the accident because the insurer initially received from the broker insufficient information from which to make that determination, namely an Accord [sic] Form Notice of Occurrence with an attached summons and complaint (see Steinberg v Hermitage Ins. Co., Sup Ct, Queens County, Oct. 14, 2003, Hart, J., Index No. 27355/98). Only after conducting an investigation did the insurer then discover that the insured first received notice of the accident and claim one month after it occurred via letter from the claimant’s attorney, but failed to forward that letter to its insurer (see id.). In contrast, the primary reason for ACE’s disclaimer was readily apparent upon receipt of notice of the loss and, thus, the 28-day delay in disclaiming coverage was unreasonable as a matter of law (see Allstate Ins. Co. v Cruz, 30 AD3d 511 [2006]; Allstate Ins. Co v Swinton, 27 AD3d 462 [2006]; Gregorio v J.M. Dennis Constr. Co. Corp., 21 AD3d 1056 [2005]; Transcontinental Ins. Co. v Gold, 18 Misc 3d 1135A [Sup Ct, Nassau County 2008]). Under these circumstances, any purported failure on the part of Able to provide ACE with timely notice of the underlying claim did not excuse ACE’s unreasonable delay in disclaiming coverage (see New York City Hous. Auth. v Underwriters at Lloyd’s, London, 61 AD3d 726 [2009]).
Can this decision withstand appellate scrutiny under Appellate Division decisions such as Matter of GMAC Ins. Co. v. Jones, 61 AD3d 1358 (4th Dept., decided 4/24/2009)?  Questionable.  Don't we want liability insurers conducting some investigation into an insured's reason or excuse, if any, for what may appear to be late notice of an occurrence?  Or do we want, as this court apparently does, insurers to make coverage decisions based only on paperwork they receive?  As the Fourth Department said in Matter of GMAC Ins. Co. v. Jones, "[o]nly an investigation of the type ordered by [the insurer] would yield [information that it] needed in order to make a good faith decision regarding disclaimer[.]"  At bare minimum, shouldn't an insurer's 28-day delay in issuing a late notice disclaimer in order to conduct some investigation into the reasons for the insured's delayed reporting present a question of fact?

I've written before on the question of whether liability insurers should investigate coverage issues in New York.  This decision underscores the importance of both doing so as quickly as possible and documenting the reasons for conducting such investigation.

Motion Court Holds That No-Fault Insurer Had No Right to Demand EUOs of Medical Providers' Purported Owner Prior to April 5, 2002

Brentwood Pain & Rehabilitation Servs., P.C. v. Progressive Ins. Co.
(Sup. Ct., New York Co., decided 8/19/2009)

Plaintiff medical providers, Brentwood Pain & Rehabilitation Services, P.C. and Hempstead Pain and Medical Services, P.C., sued various Progressive Insurance companies to recover approximately $7 million in no-fault claims for services they allegedly provided to their assignors for injuries sustained in automobile accidents. Plaintiffs claimed that since 1996, they treated Progressive claimants and timely submitted bills for services, and that Progressive refused to pay almost all of the submitted claims from 1996 to April 4, 2002.

It was undisputed that following receipt of the claims from Brentwood or Hempstead, Progressive made various verification requests of the plaintiffs. Included in the requests were demands for examinations under oath (EUOs) of Dr. Brutus for each claim submitted, the names and license numbers of the medical providers providing each service, and handwritten and signed notes by the providers. Brentwood and Hempstead claimed that they complied with essentially all of the requests, except those for Dr. Brutus' EUO. Plaintiffs argued that Progressive had no legal right to request EUOs of plaintiffs as a form of verification prior to April 5, 2002, when revised Regulation 68 went into effect.

Progressive argued that it was entitled to demand EUOs of medical providers prior to the effective date of revised Regulation 68 pursuant to case law and arbitration rulings, which rulings should be given collateral estoppel effect. It also pointed to a statement published by the New York State Insurance Department in the State Register dated May 9,2001, at 23, item 16, which opined that the provision providing for an examination under oath in revised Regulation 68 “clarifies existing authority to require such examination.”

Plaintiffs moved pursuant to CPLR 3212 for an order granting partial summary judgment determining that, as a matter of law, prior to April 5,2002 no-fault insurance carriers had no right to demand EUOs of medical providers. The Progressive defendants opposed and cross-moved for partial summary judgment on various grounds.

After reviewing the court and arbitration decisional law cited by the parties, New York Supreme Court Justice Edward Lehner held that Progressive had no right to demand EUOs of plaintiffs prior to April 5, 2002:
While the court is not bound by the above decisions of the Appellate Term [cited by the plaintiffs in support of their motion], this court believes them to have been correctly decided. Accordingly, plaintiffs’ motion for partial summary judgment is granted to the extent that this court declares that, under the applicable prior regulations (11 NYCRR 65.12 [e]), Progressive had no right to demand EUOs of plaintiffs prior to April 5, 2002.
In rejecting Progressive's argument that collateral estoppel effect should be given to various arbitration decisions that were decided against the plaintiffs, Justice Lehner held:
A review of the issues litigated in the prior arbitration proceedings fails to demonstrate that the issue of whether Progressive was legally entitled to EUOs of plaintiffs as part of its verification requests under the administrative regulation then in effect was raised by the parties or actually or necessarily determined by the arbitrators. Thus, there is no basis to apply collateral estoppel against plaintiffs.
With respect to Progressive's other grounds for partial summary judgment, the court:
► GRANTED that branch of Progressive’s cross motion which sought partial summary judgment dismissing plaintiffs’ duplicate claims, the claims previously denied in arbitration, and the claims that plaintiffs elected to arbitrate and then withdrew;

► GRANTED Progressive's cross motion to the extent that it sought dismissal on statute of limitation grounds any claims with a date prior to June 2, 1998;

► DENIED Progressive’s cross motion for partial summary judgment on plaintiffs’ claims based upon their alleged failure to comply with Progressive's verification requests, finding that issues of fact existed regarding whether plaintiffs reasonably and substantially complied with those requests;

► GRANTED Progressive’s cross motion to dismiss plaintiffs' unjust enrichment claim as unopposed; and

► DEFERRED decision on Progressive's argument that plaintiffs were involved in a myriad of wrongdoing, including illegal fee splitting in violation of New York Public Health Law §§ 238 and 238-a, and thus are not eligible for reimbursement by insurance carriers, reserving such questions to the court's determination of a subsequent motion which was argued on April 20, 2009.

Tuesday, August 25, 2009

A Disclaimer for a Blawg About Disclaimers

After 50,000+ visits to this law blog since late April 2008, it's probably time to include a disclaimer on this blawg about disclaimers, yes?

Ample examples and advice on writing a blog disclaimer were but two taps of my Ctrl button away,and in a jiff, Coverage Counsel had its disclaimer. I feel so much better.

To save you the trouble of scrolling down to the very bottom of this page (who ever does that?), here's tonight's creation for your information and my insulation:
(c) 2009. First, let me congratulate you on finding this disclaimer, all the way down here at the bottom of this page. You're either very thorough, or very bored. Or both.

Either way, this is where I tell you that what I post on this blog or blawg is not intended and should not be considered to be legal advice. No attorney-client relationship is formed either from your finding your way to these pages, posting comments, or receiving comments in reply. If you need or want legal advice, you're welcome to contact and retain me, especially if your question is one relating to insurance coverage. If quality and correctness are optional to you, however, just turn on a TV, open a newspaper, or take a drive along a nearby highway and jot the numbers down of lawyers who probably don't blawg but spend gobs and gobs more on advertising than I do.

Although I try my best to keep the material on these pages current, I cannot promise that all case decisions, statutes and hyperlinks will always be up-to-date. Same goes for content accuracy. I'm nearly, but not always, perfect. Please report dead links or overruled or superseded case decisions to me by clicking here.

Although comments are moderated, I take no responsibility for and do not endorse the viewpoints expressed by this blawg's commenters. The viewpoints and opinions I may myself express in this blawg from time to time are my own and do not necessarily reflect more than one-half of the official position of the law firm of Mura & Storm, PLLC. For the record, I respect all judges, named or unnamed in these post, though not always their judicial acumen or composition. I reserve the right to revise my thinking and recant my occasional disagreement with the logic or language of a court's decision, especially if IAS matches me with any of the mildly maligned magistrates in one of my clients' litigated matters.

Thanks for stopping by.

Monday, August 24, 2009

Legal Malpractice Policy Found to Constitute Insurance Against Liability for "Injury to Person(s)" Under New York Insurance Law § 3420(A)

McCabe v. St. Paul Fire & Mar. Ins. Co.
(Sup. Ct., Erie Co., decided 8/19/2009)

New York Insurance Law § 3420(a) mandates that certain provisions be included in all policies issued or delivered in New York State that insure against liability for "injury to person . . . or . . . injury to, or destruction of, property[.]"  One such required provision allows injured persons to satisfy an insured's contractual obligation to give timely notice of an occurrence (accident) and/or claim:
§ 3420. Liability insurance; standard provisions; right of injured person

(a) No policy or contract insuring against liability for injury to person, except as provided in subsection (g) of this section, or against liability for injury to, or destruction of, property shall be issued or delivered in this state, unless it contains in substance the following provisions or provisions that are equally or more favorable to the insured and to judgment creditors so far as such provisions relate to judgment creditors:

*  *  *  *  *

(3) A provision that notice given by or on behalf of the insured, or written notice by or on behalf of the injured person or any other claimant, to any licensed agent of the insurer in this state, with particulars sufficient to identify the insured, shall be deemed notice to the insurer.

(4) A provision that failure to give any notice required to be given by such policy within the time prescribed therein shall not invalidate any claim made by the insured, an injured person or any other claimant if it shall be shown not to have been reasonably possible to give such notice within the prescribed time and that notice was given as soon as was reasonably possible thereafter.
There's no question that  § 3420(a) applies to auto, homeowners and commercial general liability policies, but does it apply to a legal malpractice policy issued or delivered in New York?  Yes it does, says this court. 

St. Paul Fire and Marine Insurance Company insured attorney David Fretz under a $1 million claims-made professional liability policy effective from January 14, 2006 and January 14, 2007.  Coverage under that policy depended on two preconditions:  (1) that a claim for legal malpractice was made against Fretz during the policy period; and (2) that such claim was reported to St. Paul within the policy's period or 60-day extended reporting period of January 14, 2006 through March 14, 2007.

Fretz represented the plaintiffs on their insurance claim for the December 2003 fire loss of their home.  As a consequence of Fretz' neglect of their insurance claim, plaintiffs lost their ability to recover on that claim.  After sending several letters to Fretz, including one dated January 2, 2007, plaintiffs commenced an action for malpractice against Fretz in late March 2007.  Fretz failed to notify St. Paul of plaintiffs' malpractice claim against him in time for St. Paul to submit an answer on his behalf in the action, and Fretz eventually was determined to be in default.  In December 2007, following an inquest on damages, plaintiffs were awarded compensatory damages of $226,000, and those damages were ordered trebled pursuant to Judiciary Law § 487. Accordingly, by judgment entered January 2, 2008, Fretz was directed to pay plaintiffs just over $700,000, inclusive of costs, disbursements, and interest to the date of entry of the judgment.

By letter to plaintiffs' attorney dated July 17, 2007, St. Paul disclaimed coverage under Fretz' legal malpractice policy on the ground that, although plaintiffs' claim against Fretz may have been made (as claimed in their attorneys' letter) within the policy period, such claim had not been reported to St. Paul within the policy period or the 60-day Extended Reported Period, as required by the policy.

After obtaining a money judgment against Fretz, plaintiffs commenced this action against St. Paul in June 2008 pursuant to Insurance Law §§ 3420(a)(2) and (b)(1). St. Paul interposed an answer and counterclaim, asserting only that the plaintiffs' malpractice claim had not been timely reported.  Subsequently, by letter dated October 7, 2008 letter, St. Paul attempted to add a new and additional basis for disclaiming coverage, i.e., that plaintiffs' letter to Fretz of January 2, 2008 did not in fact constitute the making of a claim by plaintiffs against Fretz within the policy period, as required in order to give rise to coverage under the policy.  Plaintiffs moved and St. Paul cross-moved for summary judgment.

In granting plaintiffs' motion for summary judgment, Erie County Supreme Court Justice Patrick Nemoyer held that St. Paul's professional liability policy fell constituted a policy insuring against liability for "injury to person" within the meaning of Insurance Law § 3420(a).  Thus, in the opinion of the court, "plaintiffs acted diligently in an attempt to garner the relevant insurance information from Fretz [and], as a matter of law, plaintiffs did not unduly or unreasonably delay in reporting the claim to St. Paul":
Plaintiffs reported the making of the claim to St. Paul on June 22, 2007, the very day on which they were informed of St. Paul's identity as Fretz's malpractice insurer. The period of delay to be examined with reference to plaintiffs' asserted diligent efforts is the period from March 14, 2007, the end of the 60-day extension period, until June 22, 2007, when notice was given to St. Paul. During that period alone, more particularly on March 26, April 9, April 24, and May 8, 2007, plaintiffs' then attorney Doyle sent four certified letters to Fretz, repeatedly emphasizing the importance of notice being given immediately to his malpractice insurance carrier and pleading with Fretz to reveal the name of such carrier so that plaintiffs could exercise their independent right to give such notice. Those letters were in addition to an unspecified number of telephone calls made for the same purpose. In each instance, the mentally incapacitated Fretz failed to respond to the letter or telephone call. Doyle was reduced to asking this Court for an order compelling Fretz to disclose the identity of his carrier, and only then were plaintiffs made aware of that identity. Those various attempts by Doyle were a follow up to his earliest certified letter of March 2, 2007, in which Doyle likewise sought to have Fretz provide him with the identity of his carrier and place that carrier on notice of the malpractice claim. That plaintiff first undertook and were thwarted in those efforts to discover the identity of the insurer before March 14, 2007, at a time when it would have been possible for them to comply with the requirements of the policy, demonstrates their due diligence as a matter of law. 
 Justice Neymoyer also rejected as untimely St. Paul's second ground for disclaiming coverage -- that no malpractice claim had actually been made against Fretz within the policy period:
Having determined the applicability of Insurance Law § 3420(a)(2), it remains for this Court to determine the validity of St. Paul's disclaimer under the policy. St. Paul now contends that it validly disclaimed coverage under the policy on two grounds: first, that no claim was made during the policy period; and second, that no claim was reported to St. Paul during the policy period or the 60-day extension period. The problem for St. Paul is that only the second of those disclaimer grounds was articulated in St. Paul's July 17, 2007 disclaimer letter to Fretz. The pertinent paragraph of the letter stated that St. Paul was denying Fretz any defense and indemnity in the malpractice action on the ground that "this Claim' was neither reported to St. Paul during the Policy Period,' nor was the Claim' or your disability reported within the 60 days following the date of the St. Paul Policy's" lapse. It is of course a fundamental principle of the law in this realm that an insurer's attempt at disclaimer is strictly limited to those grounds articulated in the notice of disclaimer, and that a ground not raised in a disclaimer letter may not be later asserted by the insurer (see General Accident Ins. Co v Cirucci, 46 NY2d 862, 864 [1979]; City of Kingston v Harco Nat. Ins. Co., 46 AD3d 1320, 1321 [3d Dept 2007]; Benjamin Shapiro Realty Co. v Agric. Ins. Co., 287 AD2d 389 [1st Dept 2001]; see also Wraight v Exchange Ins. Co., 234 AD2d 916, 917-918 [4th Dept 1996] [held: where insurer disclaimed coverage based solely upon its insured's failure to provide timely notice, insurer is subsequently estopped from raising the injured party's allegedly untimely notice as a defense in the declaratory judgment action]). Indeed, St. Paul's July 17, 2007 letter explicitly assumed, based on Doyle's representations, that the claim was first made against the insured on January 2, 2007, within the policy period. The Court understands that St. Paul entertained that assumption without having seen the January 2, 2000 letter, but St. Paul's own lack of reasonable investigation into the circumstances is not a ground for departing from the aforementioned principle that the insurer is strictly limited to those disclaimer grounds articulated in the letter of disclaimer (see 2540 Associates, Inc. v Assicurazioni Generali, S.p.A., 271 AD2d 282, 284 [1st Dept 2000] [held: "as a matter of policy, reasonable investigation is preferable to piecemeal disclaimers"]; see also DiGuglielmo v Travelers Property Cas., 6 AD3d 344, 346 [1st Dept 2004], lv denied 3 NY3d 608 [2004]). Contrary to St. Paul's contention, enforcement of the rule that an insurer's attempt at disclaimer is strictly limited to those grounds articulated in the notice of disclaimer does not involve the creation of coverage where none would otherwise exist. St. Paul's belated attempt to supplement its disclaimer letter to Fretz by adding or resurrecting the "claim not timely made" disclaimer ground — an attempt not made until October 7, 2008, after the commencement of this declaratory judgment action by plaintiffs and indeed following the interposition of St. Paul's answer and counterclaim asserting only that the malpractice claim had not been timely reported — cannot avail for obvious reasons, both procedural and substantive. 
It remains to be seen, on what undoubtedly will be St. Paul's appeal to the Fourth Department, whether the court's preclusion of St. Paul's no-claim-within-policy-period defense will withstand appellate scrutiny.  New York case law is legion that coverage may not be created by either waiver or estoppel.  Three of the four cases cited by the court -- Cirucci, City of Kingston and Wraigth -- involved bodily injury claims and, as such, implicated then Insurance Law § 3420(d) (now [d][1]), which explains those courts' preclusion of coverage defenses not initially raised in a timely disclaimer or denial.  Although this court concluded that the Fretz malpractice policy insured against liability for "injury to person", the plaintiffs' claims clearly did not fall within the purview of § 3420(d)(1) because they were not ones for "bodily injury" or death.

If the Fourth Department decides that St. Paul was not precluded from asserting its no-claim-within-policy-period defense, either it or the motion court will need to address whether the plaintiffs' January 2, 2007 letter constituted a "claim" against Fretz within the meaning of his malpractice policy with St. Paul:
"We [have] attempted to contact you for over six months, we also had another attorney attempt to contact you. We don't understand what is happening with our case. Upon our own research, we understand that our insurance lawsuit with Erie Insurance has been closed, due to negligence, on your part.
Please contact us immediately to rectify this. If we do not he[ar] from you, this letter, a letter explaining our hardships, and letter explaining the irresponsibility of our lawyer, will be sent to The Attorney Grievance Committee. With or without you we are going forward."
Compare that letter with what the First Department said about what constitutes a "claim" under a legal malpractice policy in it September 2008 decision in Yale Club of New York City, Inc. v. Reliance Ins. Co. in Liquidation:
In the context of ongoing attempts by the union representing the insured's employees to resolve the parties' dispute, the letter, which neither makes any demand for payment nor advises that legal action will be forthcoming, is insufficient to state a claim.

the CPLR blog

The newly overhauled the CPLR blog, written by no-faulter David Gottlieb, provides New York case law on procedural points and issues dating back to September 2008. The blog is "devoted to all things CPLR, including, but not limited to, changes, interpretation, caselaw, and various sundry other CPLR type things." And Gottlieb's not your friend. Never will be.

I've added a link to my blawgroll. And street or not, I agree that we all should aspire to legibility and correct punctuation.

1970s CGL Policies Deemed to Contain New York's Then Statutory Pollution Exclusion

Travelers Indem. Co. v. Orange & Rockland Util., Inc.
(Sup. Ct., New York Co., decided 8/18/2009)

In an effort to to make corporate polluters bear the costs of their own polluting activities, in 1971, the New York State Legislature amended then-New York Insurance Law § 46 (later recodified as § 1113) to exclude commercial liability coverage for liability arising out of intentional and gradual pollution:
Policies issued to commercial or industrial enterprises providing insurance against the legal liabilities specified in this subdivision shall expressly exclude therefrom liability arising out of pollution or contamination caused by the discharge, dispersal, release or escape of any pollutants, irritants or contaminants into or upon land, the atmosphere or any water course or body of water unless such discharge, dispersal, release or escape is sudden and accidental.
Eleven years later, in 1982, New York's legislature repealed the 1971 amendment to address a different public policy -- preventing corporate polluters from avoiding cleanup liability by filing for bankruptcy. 

From approximately 1852 until 1965, Orange & Rockland Utilities Company and its predecessor companies owned and operated eight MGPs -- manufactured gas plants -- located in Orange County and Rockland County, New York.  Travelers insured ORU under CGL policies issued between 1970 and 1978.  None of those Travelers policies contained a pollution exclusion that tracked the language of the statutory pollution exclusion.  Travelers brought this declaratory judgment action to determine its responsibility, if any, to pay ORU's costs of investigating and remediating pollution at the MGP sites.

Travelers contended that even though its 1970s policies did not contain a pollution exclusion, the statutory pollution exclusion must be deemed to be included in those policies.  ORU disagreed and also argued that questions of fact regarding whether the pollution was sudden and accidental -- an exception to the statutory pollution exclusion -- precluded summary judgment.

New York County Supreme Court Justice Eileen Bransten agreed with Travelers and granted summary judgment with respect to all eight ORU MPG sites under the 1970s Travelers policies:
New York courts have repeatedly recognized that the Statutory Pollution Exclusion, by operation of law, applies to all insurance policies issued during the period it was in effect (see e.g., Consolidated Edison of New York, Inc. v American Home Assur. Co., Supreme Ct, NY County, November 6,2003, Cahn, J., Index No. 600527/01; Consolidated Edison Co. of New York, Inc. v Allstate Ins. Co., Supreme Ct, NY County, December 4, 2002, Gammerman, J., Index No. 600142/98). Thus, although the 1970's Travelers Policies either do not contain pollution exclusion clauses or the pollution exclusion clauses fail to track the same language as the Statutory Pollution Exclusion, the statutory language nonetheless is deemed to be included in the policies.

The evidence shows that the contamination at the MGPs began at the outset of operations and spanned over a period of many decades. The Statutory Pollution Exclusion, in effect from 1971 through 1982, by its plain terns, provided that gradual pollution was uninsurable as a matter of public policy and excluded it from coverage during that period. ORU and its predecessors owned and operated the MGP sites from approximately 1858 to 1965. During that period, the MGPs used coal and related products to manufacture and produce gas for light and heat. As a byproduct of the process, quantities of tars, oils, waste water, and benzene were produced and were often dumped on-site, or were discharged into nearby water bodies, buried and/or otherwise discharged into the environment as part of normal operations. ORU’s expert submission fails to controvert that the pollution at the MGPs was the result of more than 100 years of continuous operations and the ongoing migration of that contamination. There is no set of facts under which such events can possibly be construed as “sudden and accidental” (see, Consolidated Edison of New York, Inc. v American Home Assur. Co., Supreme Ct, NY County, November 6, 2003, Cahn, J., Index No. 600527/01; Consolidated Edison Co. of New York, Inc. v Allstate Ins. Co., Supreme Ct, NY County, December 4, 2002, Gammerman, J., Index No. 600142/9S).  Accordingly, the Statutory Pollution Exclusion precludes coverage for ORU’s claims under the 1970’s Travelers Policies.

The Travelers 1970’s Policies each fall within the period during which, by statute, pollution, other than pollution resulting from “as sudden and accidental” event, was uninsurable. With respect to the one multi-year policy, which was in effect before the effective date of the Statutory Pollution Exclusion, the court concludes that, in light of the strong public policy, the Statutory Pollution Exclusion may be read into the policy (accord American Ins. Co. v Fairchild Indus., Inc., 852 F Supp 1173 [ED NY 1994], affd 56 F3d 435 [2d Cir 1995]).

Although ORU asks that this decision be limited to the Nyack MGP, the issue of whether the Statutory Pollution Exclusion applies to the policies is not site or policy specific.

Thursday, August 20, 2009

DWT -- Driving While Texting: Twice as Dangerous as DWI

Saw a post on this over at The Council of Insurance Brokers of Greater New York's blog this morning.  Every driver who drives with a cell phone in hand, especially those younger drivers who frequently text while driving, should watch these two videos.

The British Public Service Announcement video on Texting While Driving (Rated for 18+year-old viewers due to graphic content):

And from real life, comes this very powerful video from Utah:

CNN recently reported that at the end of July, four U.S. Senators introduced a federal bill that would ban truck and car drivers and operators of mass transit from texting while driving in all states.  CNN's video report is here.

New York's "A.J.'s Law", which would make texting while driving in New York State illegal, passed in the New York Assembly in June but stalled in the State Senate during the chaos of that body's most recent legislative term. 

According to several studies, a driver who is texting has twice a greater chance of causing a motor vehicle accident than someone who is driving drunk.   Is it any wonder, then, that some states have already banned driving while texting? 

If you know anyone who texts while driving, have them watch these videos to the end.  I'm sending these to my 20- and 21-year-olds to watch today.  If these don't get drivers to stop DWTing, nothing will. Click here to email this post to ones you care about.

The Elasticity of Timely Notice -- Insured's One-Year Delay in Providing Notice of SUM Claim Found Reasonable

Matter of Progressive Northeastern Ins. Co. v. McBride
(2nd Dept., decided 8/18/2009)

Claimant did not notify his auto insurer of his supplementary uninsured motorists (SUM) coverage claim until approximately one year after the accident in which he allegedly was injured.  Progressive denied SUM coverage based on the claimant's late notice, and the claimant demanded arbitration.  Progressive commenced this special proceeding to stay that arbitration, and Supreme Queens denied Progressive's petition.

In AFFIRMING the lower court's judgment which denied that part of Progressive's petition that had sought a permanent stay of the SUM arbitration, the Second Department, Appellate Division, held:
In the context of supplemental uninsured/underinsured motorist (hereinafter SUM) claims, it is the claimant's burden to prove timeliness of notice, which is measured by the date the claimant knew or should have known that the tortfeasor was underinsured (see Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487, 495; Matter of Assurance Co. of Am. v Delgrosso, 38 AD3d 649; Matter of State Farm Mut. Auto. Ins. Co. v Linero, 13 AD3d 546; Matter of Continental Ins. Co. v Marshall, 12 AD3d 508; State Farm Mut. Auto. Ins. Co. v Sparacio, 297 AD2d 284, 285). Timeliness of notice is an elastic concept, the resolution of which is highly dependent on the particular circumstances (see Matter of Metropolitan Property & Cas. Ins. Co. v Mancuso, 93 NY2d at 494-495; Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 19; Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 441; Morris Park Contr. Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 33 AD3d 763, 764-765). In determining whether notice was timely, factors to consider include, inter alia, whether the claimant has offered a reasonable excuse for any delay, such as latency of his/her injuries, and evidence of the claimant's due diligence in attempting to establish the insurance status of the other vehicles involved in the accident (see Matter of Metropolitan Property & Cas. Ins. Co. v Mancuso, 93 NY2d at 492-493; Mighty Midgets v Centennial Ins. Co., 47 NY2d at 19-20; Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d at 441; Matter of Blue Ridge Ins. Co. v Cook, 301 AD2d 598, 599; Matter of Allstate Ins. Co. [White], 231 AD2d 950; cf. Matter of Nationwide Mut. Ins. Co. v Wexler, 276 AD2d 490, 491).

Here, the respondent Charles McBride established a reasonable excuse for his nearly one-year delay in notifying his insurer, the petitioner, Progressive Northeastern Insurance Company (hereinafter Progressive). McBride submitted evidence that his counsel sent several written requests to the insurers of the vehicle which struck the taxicab in which he had been a passenger at the time of the accident, and to the insurers of the taxicab, and that in the ensuing 12 months those insurers ignored his requests and/or provided erroneous information on the SUM limits of their respective policies (see Mighty Midgets v Centennial Ins. Co., 47 NY2d at 20-21; Matter of Allstate Ins. Co. [White], 231 AD2d 950; cf. Matter of Travelers Ins. Co. v Cohen, 61 AD3d 768; Matter of Continental Ins. Co. v Marshall, 12 AD3d 508; Matter of State Farm Mut. Auto. Ins. Co. v Bennett, 289 AD2d 496; Matter of Interboro Mut. Indem. Ins. Co. v Sarno, 277 AD2d 454; Matter of American Cas. Ins. Co. v Silverman, 271 AD2d 528; Matter of Nationwide Ins. Co. v Montopoli, 262 AD2d 647). Accordingly, we affirm so much of the judgment as denied that branch of the petition which was to permanently stay the arbitration. 
Several written requests to insurers of vehicles involved for coverage limits information either ignored or incorrectly answered = reasonable excuse for delayed notice of SUM claim. 

Remember that under Chapter 388 of the Laws of 2008, Insurance Law § 3420(d) was amended to add this new subparagraph (1):
(d)(1)(A) This paragraph applies with respect to a liability policy that provides coverage with respect to a claim arising out of the death or bodily injury of any person, where the policy is: (i) subject to section three thousand four hundred twenty-five of this article, other than an excess liability or umbrella policy; or (ii) used to satisfy a financial responsibility requirement imposed by law or regulation.

(B) Upon an insurer's receipt of a written request by an injured person who has filed a claim or by another claimant, an insurer shall, within sixty days of receipt of the written request: (i) confirm to the injured person or other claimant in writing whether the insured had a liability insurance policy of the type specified in subparagraph (A) of this paragraph in effect with the insurer on the date of the alleged occurrence; and (ii) specify the liability insurance limits of the coverage provided under the policy.
(C) If the injured person or other claimant fails to provide sufficient identifying information to allow the insurer, in the exercise of reasonable diligence, to identify a liability insurance policy that may be relevant to the claim, the insurer shall within forty-five days of receipt of the written request, so advise the injured person or other claimant in writing and identify for the injured person or other claimant the additional information needed. Within forty-five days of receipt of the additional information, the insurer shall provide the information required under subparagraph (B) of this paragraph.
 If a liability insurer is not complying with this statutory mandate to provide coverage limits information in a timely fashion, a claimant ostensibly could complain to the New York State Insurance Department and obtain that information.  This new statutory requirement should make it easier for claimants to obtain the necessary insurance information and put their SUM insurers on notice of a SUM claim in a timely fashion.

Same Counsel May Defend Insured in DJ Action and Underlying Personal Injury Action

Everest Natl. Ins. Co. v. Quest Bldr. Group, Inc.
(Sup. Ct., New York Co., decided 8/10/2009)

Interesting issue.

Liability insurer denies coverage and commences a declaratory judgment action against its insured to confirm its denial.  Pending the DJ action's outcome, it retains counsel to defend the insured in a related, underlying personal injury action.  The insured retains its own counsel to defend the DJ action and asks that the insurer allow that same counsel to defend the insured in the underlying action, given the conflict of interest retained counsel has in representing the insured in that action.  Insurer says no.

Court says yes.  In New York County Supreme Court  Justice Judith Gische's opinion:
It is well established that when there is a conflict of interest between an insurer and an insured regarding the defense of an action brought by a third party, the insured has the right to select defense counsel of its own choosing and the insurer is liable for the payment of the reasonable value of the services provided by such attorneys.  Public Service Mut. Ins, Co. v. Goldfarb, 53 NY2d 392, 401 (1981); Prashker v. U.S. Guarantee Co., 1 NY2d 584, 593 (1956). At bar, the conflict between Quest, as insured, and Everest, as insurer, is readily apparent and even conceded by Everest. Everest has not only denied coverage under the policy for the incident that is the subject of the personal injury action, but it has commenced the instant declaratory judgment action for a ruling upholding its denial of coverage.

Everest concedes that Quest has the right to retain counsel of its own choosing  to defend the personal injury action. It argues in this case, however, that the right to retain such counsel is not without restrictions and that the Lawrence law firm should not be able to defend Quest in this action and also the personal injury action at the same time.

The cases cited by plaintiff do not support its contention that there are restrictions on who Quest may hire to defend it, now that a conflict has arisen between it and Quest. The only limitation found in the case law is that the fees charged by the insured’s selected counsel must be reasonable.

*  *  *  *  *

Even apart from the lack of legal precedent, Everest has not presented any plausible argument why this “dual representation” of Quest by the Lawrence law firm creates any real or potential conflict of interest. Everest argues that if the Lawrence law firm is retained in the personal injury action, it will still have to “report” to Everest. It conjectures that if the Lawrence law firm learns something in the personal injury action that is injurious to Quest’s position in the declaratory judgment action, it would have trouble reporting this information to Everest. This may in turn, according to Everest, affect its "settlement position".

As Quest points out, the arguments of Everest are an outgrowth of the underlying conflict of interest between Quest and Everest. Everest is only identifying that upon the substitution of counsel of Quest's choosing in the personal injury action, it will lose the ability to control the defense of the underlying personal injury action. It will lose that control, however, regardless of any dual representation by the Lawrence law firm in the declaratory judgment and personal injury actions.

Wednesday, August 19, 2009

Parking Garage Found Not Liable for Injuries Caused by Stolen Vehicle

Baldwin v. Garage Mgt. Corp.
(Sup. Ct., Kings Co., decided 1/7/2008), 
aff'd 66 AD3d 818 (2d Dept., decided 5/19/2009)

Although a bit dated, this decision just posted to the New York Official Reports yesterday, so I'll throw it up here.  Not strictly an insurance coverage case, but it involves a statute New York auto insurers occasionally  encounter in injury claims -- Vehicle & Traffic Law § 1210(a), commonly referred to as the "key in the ignition law", a violation of which renders an owner or bailee of a vehicle that is stolen liable to third parties for damages occasioned by the stolen vehicle's use. 

After stealing a vehicle from defendant's parking garage, Walker collided with Baldwin, injuring her and her son.  Baldwin sued the parking garage for her and her son's injuries, alleging causes of action based on negligence, violation of V&T § 1210, and breach of bailment obligations.

New York Vehicle & Traffic Law § 1210(a) provides:
§ 1210. Unattended motor vehicle. (a) No person driving or in charge of a motor vehicle shall permit it to stand unattended without first stopping the engine, locking the ignition, removing the key from the vehicle, and effectively setting the brake thereon and, when standing upon any grade, turning the front wheels to the curb or side of the highway, provided, however, the provision for removing the key from the vehicle shall not require the removal of keys hidden from sight about the vehicle for convenience or emergency.
Vehicle & Traffic Law §1100(a) provides that §1210 applies "upon public highways, private roads open to public motor vehicle traffic and any other parking lot." V&T § 129-b defines a "parking lot" as:
any area or areas of private property near or contiguous to and provided in connection with premises having one or more stores or business establishments, and used by the public as a means of access to and egress from such stores and business establishments and for the parking of motor vehicles of customers and patrons of such stores and business establishments.
 In granting the garage defendants' motion and denying plaintiffs' cross motion for summary judgment, Kings County Supreme Court Justice Gloria Dabiri held:
  1. Negligence:  "The GMC defendants have demonstrated their entitlement to judgment on plaintiffs' common-law negligence claim in that it is undisputed that Walker operated the vehicle without the permission or consent of GMC (see Manning v Brown, 91 NY2d 116, 122 [1997]; Vehicle and Traffic Law §388[1]). Plaintiffs' injuries were the result of the intervening acts of the car thief and, therefore, GMC is not liable at common-law (Epstein v Mediterranean Motors, 109 AD2d 340, 344-345 [1985], affd 66 NY2d 1018 [1985]).
  2. Vehicle & Traffic Law § 1210(a):  "The statute is inapplicable in this instance, as the vehicle was not stolen from a 'parking lot' as defined by Vehicle and Traffic Law §129-b . . . GMC's garage was not an 'area . . . of private property . . . provided in connection with premises having one or more stores or businesses,' or used as a means of access to and from such businesses (VTL §129-b), as in the case of the parking lot of a strip mall or shopping center. To the contrary, the GMC garage is located in the lower level of a residential building, on a street consisting of residential buildings. Thus, plaintiffs fail to meet their prima facie burden of demonstrating that the location from which the vehicle was stolen falls within the statute's definition of 'parking lot' (see Albouyeh v County of Suffolk, 62 NY2d 681, 683 [1984]).  In addition, the vehicle was not left 'unattended' as required by section 1210[a]. Rather, the deposition testimony of GMC's witness is that the key to Dr. O'Cain's vehicle was removed from a keylock and given to Mr. Walker in the mistaken belief that Walker was the vehicle's owner (see Banellis v Yarkel, 49 NY2d 882 [1980]; Merchants Ins. Group v Haskins, 11 AD3d 694 [2004]; Poss v Feringa, 241 AD2d 877 [1997])."
  3. Breach of Bailment Obligation:  "[A] promisor under a contract is not liable in tort to non-contracting third-parties for negligent performance of its contractual duty (Church v Callanan Industries, Inc., 99 NY2d 104, 110-111 [2002], citing H.R. Moch Co. v Rensselaer Water Co., 247 NY 160 [1928])."
As a defense attorney, I had to smile at the decision's reference to plaintiffs' having included a request in their cross motion for sanctions against the garage defendants under 22 NYCRR § 130-1.1 for having made a frivolous motion for summary judgment.  So frivolous that the motion was granted in all respects and the complaint dismissed.  So frivolous that the Second Department unanimously affirmed the award of summary judgment to the garage defendants, with one bill of costs.  One of the reasons I like to litigate in federal court.  Rule 11 sanctions frivolous sanction requests.

Tuesday, August 18, 2009

Auto Body Shop's Failure to Send 5-Day Notice Precludes Recovery of Storage Charges

Matter of Vaul Trust v. Brothers II Auto Body Shop, Inc.
(Sup. Ct., Albany Co., decided 8/12/2009)

Practicing insurance coverage law can be fun for the new discoveries it occasions.  Like this morning.  I did not know there was an entire statutory article devoted to mold liens (the tool and die variety, not fungi) in New York's Lien Law. Or one for the "service" of stallions or bulls.

I headed over to the Lien Law this morning for a link to the garageman's lien section, Lien Law § 184, because, believe it or not, auto insurers and vehicle owners and lessors occasionally become embroiled in disputes with auto body shops over the amount and validity of their asserted liens on vehicles towed to and stored at their facilities.  Article 9 of the Lien Law provides for the enforcement of liens on personal property, or "chattel", and section 201-A enables a vehicle's owner or lienholder to commence a special proceeding to determine the validity and amount of the asserted garageman's lien. 

Petitioners in this case were the lienholders of a 2007 Cadillac that respondent Brothers II Auto Body Shop of South Fallsburg, New York (near Monticello) intended to sell to satisfy its claimed $3,602 garageman's lien. Brothers II had originally submitted an invoice to petitioners for $6,323.40, which included towing charges and storage fees at $75 per day.  On May 8, 2009, Brothers II served petitioners with a Notice of Lien and Sale pursuant to Lien Law § 201, and petitioners then commenced this special proceeding to determine the validity of the claimed garageman's lien. As is often the case, the petitioners did not dispute an obligation to pay the towing charges, but rather contested the amount of the claimed storage fees.  

Petitioners venued the special proceeding in Albany Supreme Court and had the good fortune of pulling Justice Joseph Teresi, who has previously decided garageman's lien issues and proceedings, as the assigned judge.  Judge Teresi began his decision with the fundamental principles governing this  type of special proceeding:
Lien Law §184, which authorizes a garageman's lien for the towing and storage of motor vehicles, "is in derogation of common law and thus is strictly construed." (Grant Street Const., Inc. v. Cortland Paving Co., Inc., 55 AD3d 1106, 1107 [3d Dept. 2008]; Slank v. Sam Dell's Dodge Corp., 46 AD2d 445 [3d Dept. 1975]). "In response to a challenge to [a garageman's) lien pursuant to Lien Law §201-a, the lienor must make a prima facie showing ofthe validity of the lien and entitlement to the amount claimed." (BMW Bank of North America v. G&B Collision Center, Inc., 46 AD3d 875, 876 [2d Dept. 2007]).
Lien Law § 184(2) provides that:
A person who tows and stores a motor vehicle at the request of a law enforcement officer authorized to remove such motor vehicle shall be entitled to a lien for the reasonable costs of such towing and storage, provided that such person, within five working days from the initial towing, mails to the owner of said motor vehicle a notice by certified mail return receipt requested that contains the name of the person who towed and is storing said motor vehicle, the amount that is being claimed for such towing and storage, and the address and times at which said motor vehicle may be recovered. Such notice shall further state that the person mailing said notice claims a lien on said motor vehicle and that said motor vehicle shall be released to the owner thereof or his or her lawfully designated representative upon full payment of all charges accrued to the date that said motor vehicle is released. A person who mails the foregoing notice within said five day period shall be entitled to a lien for storage from and after the date of initial towing, but a person who fails to mail such notice within said five day period shall only be entitled to a lien for storage from and after the date that the notice was mailed. A failure to mail such notice in a timely fashion shall not affect a lien for towing.  (Emphasis added.)
Because Brothers II had not mailed a Lien Law § 184(2) notice to the vehicle's owner and lienholder either within five days of the vehicle's initial towing or at all, the court held that it had no valid lien for and was not entitled to recover storage fees.  Nor did Brother II's May 8th notice of lien and sale constitute sufficient notice under § 184(2). 

On petitioners' concession that the proper towing charge was $232, the court held that Brothers II's valid lien on the vehicle was limited to that amount.