Monday, November 30, 2009

New York Insurance Department Releases Proposed Revised Regulation 68


Last week, the New York State Insurance Department released its working draft of a revised Regulation 68, a document that "follows an intensive review of Regulation 68 by the Department’s Office of General Counsel and its Property Bureau, including meetings with representatives of insurers, health professionals, trial lawyers, health service providers and other stakeholders."  The last significant revision to New York's no-fault regulation was implemented in 2002.  According to the Insurance Superintendent James Wrynn's press release,  the revised rules covering no-fault automobile insurance "aim to help reduce fraud and abuse associated with no-fault claims, while making the no-fault system more user-friendly."

The 152-page "working document" can be found here or by clicking on the image to the left.

The Department has announced that the release of this draft is the first step of the regulatory process. Modifications to this draft may be made based on the feedback received before the proposed revisions enter the formal regulatory approval process, which will also include a statutorily-prescribed comment period.

Comments on the draft are due on or before January 8, 2010 and may be sent to the Department either by completing a webform created specifically for commenting (http://www.ins.state.ny.us/r68/r68_draft_form.htm) or by emailing the Department at NoFaultDraftReg@ins.state.ny.us.

I'll be posting my thoughts on the proposed changes first on this blog and then submitting them to the Department.  If you would like me to include your thoughts and comments with mine, please post them here or email them to me.  At rough count, this proposed revised regulation imposes 74 new "shalls" or requirements on no-fault insurers not found in the current regulation.  That's 74 more chances per claim of having a New York court find something wrong with the insurer's claim handling, and 74 more chances per claim of having a denial invalidated on technical non-compliance grounds.

The Department's press release notes that "[o]ne of the most significant forces increasing automobile insurance claim costs has been the explosion of filings in the court system of disputed no-fault claims by providers of health services. This has overwhelmed the courts and led to long delays in the resolution of these disputes and to the payment of unnecessary claims, undermining the very purpose of the no-fault system."

Does anyone actually think adding 74 new "shalls" directed at no-fault insurers will reduce provider litigation?  Really? 

I'll have more on the proposed revisions soon, including a key for decoding the red, blue and green underscoring and strikeouts.  Meanwhile, get busy scribbling your thoughts and comments in the margins of the working draft and send them through to the Department.  The more input the Department receives from interested parties, the better.

Tuesday, November 24, 2009

Uninsured Motorist Arbitrator Did Not Exceed His Authority by Placing Monetary Value on Claimant's Injuries in Excess of Policy Limit

UM – SERIOUS INJURY – CPLR 7511 PROCEEDING TO VACATE ARBITRATION AWARD – GROUNDS TO VACATE AWARD
Safeco Prop. & Cas. Ins. Cos. v. Dye
(Sup. Ct., Queens Co., decided 11/18/2009)

On August 27, 2006, a vehicle owned and operated by Safeco's insured, Roshaun Dye, was struck by a hit-and-run motor vehicle. By demand dated December 3, 2007, Dye sought arbitration of his claim for uninsured motorist (UM) benefits from Safeco on the basis that the accident involved a hit-and-run vehicle.

The arbitration was held on April 20, 2009. Upon completion of the arbitration of this matter, the arbitrator, in his award dated May 15, 2009 determined that "the compensatory value of the injuries sustained by the Claimant RD to be $100,000.00. However, I also find that the Claimant RD was 75% comparatively negligent in causing this accident and therefore his award is reduced and he is entitled to $25,000.00".

Safeco commenced this special proceeding pursuant to CPLR § 7511 to vacate the arbitration award, contending that: (1) the arbitrator exceeded his authority by awarding benefits in excess of applicable policy limits; (2) there was no evidence in the record to support that the claimant sustained a serious injury; and (3) the arbitrator's exclusion of pertinent evidence constituted misconduct.

In denying Safeco's petition and confirming the award, Queens County Supreme Court Justice Jaime Rios noted that judicial review of compulsory arbitration, such as UM arbitration, is more limited than for voluntary arbitration, and that to be upheld, the arbitrator's award must only have evidentiary support and not be arbitrary and capricious.  Justice Rios then held:
An arbitrator is not required to justify his award, it must merely be evident that there exists a rational basis for it upon a reading of the record (see Block v St. Paul Fire & Marine Ins. Co., 137 AD2d 475 [1988]; Dahn v Luchs, 92 AD2d 537 [1983]).

Here, the arbitrator's decision was based upon Dye's testimony, police report, photos of the accident scene and Dye's vehicle, MRI reports of Dr. Shapiro and Dr. Rothpearl; hospital and medical records submitted by Dye and Safeco; a copy of Safeco's insurance policy, and examination under oath of Dye. The MRI report of the right knee by Dr. Shapiro revealed "abnormal signal in the posterior horn of the medial meniscus without articular extension" and "joint effusion"; the MRI of the right knee by Dr. Rothpearl revealed "medial, supra patellar plicai", "thickening and increased signal associated with the medial collateral ligament, consistent with a low-grade partial tear", "lateral patellar tilt", "suboptimal visualization of the anterior cruciate ligament. A tear of this ligament cannot be excluded and clinical correlation is recommended", and the MRI report of the lumbar spine revealed "right foraminal herniation at L5-S1. According to the records of Lutheran Medical Center, on November 29, 2007, Dye underwent arthroscopic surgery to the right knee, which revealed "medial meniscal tear of the medial and lateral side", "synovitis of the medial compartment" and "cartilage abrasion on the medial femoral condyle".

Judicial review of an arbitrator's award is very limited (see Pearlman v Pearlman, 169 AD2d 825 [1990]) and the fact findings of the arbitrator may not be second guessed by a reviewing court (see Liberty Mut. Ins. Co. v Sedgewick of New York, 2007 NY Slip Op 6882). The question of whether a claimant has sustained a serious injury is a matter within the province of the arbitrator not the courts (see Aetna Cas. & Sur. Co. v Cochrane, 64 NY2d 796 [1985]). Based upon the present record, the arbitrator's award has ample evidentiary support and is thus, rationally based. Additionally, even if the arbitrator failed to consider certain evidence, vacatur of the award would not be warranted (see American Express Prop. & Cas. Co. v Vinci, 63 AD3d 1055 [20009]).

Moreover, while an arbitration award may be vacated upon the ground that the arbitrator exceeded his authority by making an award in excess of the policy limits, here, the arbitrator made an award within the policy limits. 
The decision does not reveal what the UM policy limit was, but presumably it was at least $25,000.  As reduced by the claimant's percentage of comparative negligence or culpable conduct, the arbitration award did not exceed the policy's UM coverage limit.

Monday, November 23, 2009

Homeowners Insurer Ordered to Defend Teenager Who Allegedly Injured Another Teenager at a Party

HOMEOWNERS – EXPECTED OR INTENDED INJURY EXCLUSION – DUTY TO DEFEND
Rhodes v. Liberty Mut. Ins. Co.
(2d Dept., decided 11/17/2009)

The standard homeowners policy excludes liability coverage for bodily injury or property damage which is expected or intended by an insured.  With a liability insurer's duty to defend being broader that its duty to indemnify, the allegations of a complaint are what, in most cases, dictate whether the insurer must defend its insured notwithstanding facts that may indicate an intentionally caused harm.  It is only in cases where the insurer can establish that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision that it can disregard complaint allegations and deny both the duty to defend and the duty to indemnify.

Although the facts underlying this decision are scant, it appears Devon Rhodes and Alava David were at a teenage party at which alcohol was being served.  Rhodes reportedly caused injury to David, and David brought a personal injury action against her.  Although the personal injury complaint alleged that Rhodes' "recklessness, carelessness, and negligence" caused serious personal injuries to David, Liberty Mutual Insurance Company apparently declined to defend or indemnify Rhodes under her parents' homeowners policy with Liberty, citing the policy's intended or expected harm exclusion.  Rhodes then commenced this declaratory judgment action for liability coverage in relation to the underlying personal injury action.

Suffolk Supreme denied Liberty's motion and granted plaintiff's cross motion for summary judgment on the issue of defense coverage owed with respect to the underlying personal injury action.  In AFFIRMING that order, the Second Department agreed that the underlying complaint's allegations triggered defense coverage and held:
Generally, it is the insured's burden to establish coverage and the insurer's burden to prove the applicability of an exclusion (see Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 218-220; Barkan v New York Schools Ins. Reciprocal, 65 AD3d 1061). Moreover, an insurer's duty to defend is broader than its duty to indemnify, and arises whenever the allegations in the complaint in the underlying action, construed liberally, suggest a reasonable possibility of coverage, or where the insurer has actual knowledge of facts establishing such a reasonable possibility (see Frontier Insulation Contrs., v Merchants Mut. Ins. Co., 91 NY2d 169, 175; Burlington Ins. Corp. v Guma Constr. Corp.,AD3d, 2009 NY Slip Op. 07216 [2d Dept 2009]; City of New York v Insurance Corp. of N.Y., 305 AD2d 443). As such, the duty to defend arises if the claims against the insured arguably arise from a covered event, even if the claims may be meritless or not covered, either because the insured is not liable or because the event is later determined outside the policy's scope of coverage (see Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137; Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 65-66; Physicians' Reciprocal Insurers v Loeb, 291 AD2d 541, 542). An insurer can be relieved of its duty to defend only "if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision" (Allstate Ins. Co. v Zuk, 78 NY2d 41, 45; see Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 652; Physicians' Reciprocal Insurers v Giugliano, 37 AD3d 442, 444).

Here, the plaintiffs established that Devon Rhodes (hereinafter Rhodes) was entitled to coverage under the homeowner's insurance policy issued to her parents (see Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d at 218, 220; Barkan v New York Schools Ins. Reciprocal, 65 AD3d 1061). In contrast, the defendant Liberty Mutual Insurance Co. (hereinafter Liberty) failed to establish that "there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision" (Allstate Ins. Co. v Zuk, 78 NY2d at 45). The complaint in the underlying action alleges, inter alia, that while attending a teenage party at which alcohol was served, Rhodes' "recklessness, carelessness, and negligence" caused serious personal injuries to Alava David, the plaintiff in the underlying action. Construing the complaint liberally, a possible legal or factual basis exists by which Rhodes's conduct may be deemed accidental and, therefore, a covered "occurrence" under the subject Liberty policy, and not excluded from coverage on the ground that the personal injuries allegedly sustained by David were expected or intended by Rhodes (see Frontier Insulation Contrs., v Merchants Mut. Ins. Co., 91 NY2d 169, 175; City of New York v Insurance Corp. of N.Y., 305 AD2d 443; see also Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137-138; Merchants Ins. of N.H., Inc. v Weaver, 31 AD3d 945).
In New York and other jurisdictions there are a number of a "harm inherent in the nature of the act" cases in which liability insurers have successfully argued that the nature of the intentional act itself is such that the insured must have expected or intended the harm, negating liability coverage.  See, e.g., Allstate Ins. Co. v. Mugavero, 79 NY2d 153 (1992).  This apparently was not such a case.

Sunday, November 22, 2009

Question of Fact Found on Whether Insurer's Disclaimer Was Unreasonably Delayed

LIABILITY – TIMELINESS OF INSURER'S DISCLAIMER – INSURANCE LAW § 3420(D)
Felice v. Chubb & Son, Inc.
(2d Dept., decided 11/17/2009)

In this declaratory judgment action for liability coverage in relation to an underlying wrongful death action, Kings Supreme denied Chubb's motion and plaintiff's cross motion for summary judgment.

In AFFIRMING the lower court's denial of both motions, the Second Department reiterated some well-established rules regarding the timeliness of a liability insurer's disclaimer:
An insurance carrier must give timely notice of a disclaimer "as soon as is reasonably possible" after it first learns of the accident or grounds for disclaimer of liability (Insurance Law § 3420[d][2]; see Pawley Interior Contr., Inc. v Harleysville Ins. Cos., 11 AD3d 595, 595; Mount Vernon Hous. Auth. v Public Serv. Mut. Ins. Co., 267 AD2d 285, 285-286). It is the insurance carrier's burden to explain the delay in notifying the insured or injured party of its disclaimer, and the reasonableness of any such delay must be determined from the time the insurance carrier was aware of sufficient facts to disclaim coverage (see Pawley Interior Contr., Inc. v Harleysville Ins. Cos., 11 AD3d at 595; Prudential Prop. & Cas. Ins. v Persaud, 256 AD2d 502, 504). Further, the issue of whether a disclaimer was unreasonably delayed is generally a question of fact, requiring an assessment of all relevant circumstances surrounding a particular disclaimer (see Continental Cas. Co. v Stradford, 11 NY3d 443, 449; First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 69; Mount Vernon Hous. Auth. v Public Serv. Mut. Ins. Co., 267 AD2d at 286). Cases in which the reasonableness of an insurer's delay may be decided as a matter of law are exceptional and present extreme circumstances (see Continental Cas. Co. v Stradford, 11 NY3d at 449; Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1030; Allstate Ins. Co. v Gross, 27 NY2d 263, 270). We agree with the Supreme Court that there is a question of fact as to whether the defendants' disclaimer was unreasonably delayed (see Pawley Interior Contr., Inc. v Harleysville Ins. Cos., 11 AD3d at 596; Mount Vernon Hous. Auth. v Public Serv. Mut. Ins. Co., 267 AD2d at 286).

Appellate Term Again Holds that Licensed Acupuncturists Properly Reimbursed Under Workers' Compensation Fee Schedule for Acupuncture Performed by Chiropractors

NO-FAULT – REIMBURSEMENT RATE FOR ACUPUNCTURE SERVICES – WORKERS' COMPENSATION FEE SCHEDULE
Great Wall Acupuncture, P.C. a/a/o Maria Gonzalez v. Geico Ins. Co.
(App. Term, 2d Dept., 2d, 11th & 13th Dists., decided 11/17/2009)

Geico paid plaintiff acupuncture PC for acupuncture services using the the workers' compensation fee schedule for acupuncture services performed by chiropractors.  Plaintiff claimed that its licensed acupuncturists were not limited to the fee schedule for acupuncture services performed by chiropractors -- there being no separate fee schedule for for acupuncture services performed by licensed acupuncturists -- and commenced this action to recover additional payment.  The parties stipulated to all but the propriety of the fees charged.  Following a non-jury trial on that issue, Civil Queens granted judgment to Geico, dismissing the complaint.  Plaintiff appealed. 

In AFFIRMING the judgment dismissing the complaint, the Appellate Term held:
A person who seeks to practice acupuncture must be either licensed (Education Law § 8214) or certified (Education Law § 8216) to do so (see Education Law § 8212). The training to obtain a license remains the same even if the person seeking to practice acupuncture has a license in a different profession, such as a chiropractic license (see 8 NYCRR 52.16[b]; cf. 8 NYCRR 52.16[a]). Indeed, at trial, plaintiff's witness, who was both a licensed acupuncturist and a licensed chiropractor, so testified. Accordingly, in light of the licensure requirements, we hold, as a matter of law, that an insurer may use the workers' compensation fee schedule for acupuncture services performed by chiropractors to determine the amount which a licensed acupuncturist is entitled to receive for such acupuncture services (see Great Wall Acupuncture v GEICO Gen. Ins. Co., 16 Misc 3d 23 [App Term, 2d & 11th Jud Dists 2007]; see also AVA Acupuncture, P.C. v GEICO Gen. Ins. Co., 23 Misc 3d 140[A], 2009 NY Slip Op 51017[U] [App Term, 2d, 11th & 13th Jud Dists 2009]; AVA Acupuncture, P.C. v GEICO Gen. Ins. Co., 17 Misc 3d 41 [App Term, 2d & 11th Jud Dists 2007]; 2004 Ops Gen Counsel NY Ins Dept No. 04-10-03 [Oct 2004] [http://www.ins.state.ny.us/ogco2004/rg041003.htm]). Consequently, since it is undisputed that the instant defendant reimbursed plaintiff pursuant to the workers' compensation fee schedule for acupuncture services rendered by a chiropractor, plaintiff is not entitled to any additional reimbursement.

Saturday, November 21, 2009

Google Scholar -- Legal Opinions & Journals

Hat tip to Dave Gottlieb over at No-Fault Paradise for first bringing this to my attention. 

It appears that court decisions are now available, free of charge, on Google.  Actually, on Google Scholar, to be more precise.

I haven't figured out how far back Google's coverage goes, but for New York cases, it's farther than the coverage of the New York Official Reports or Cornell's Legal Infomation Institute, and I was impressed to be able to find the Court of Appeal's 1979 decision in Mighty Midgets v. Centennial Ins. Co. via Google Scholar when no other free caselaw databases had it available.  Coverage of lower court decisions appears to be excellent.  Federal court cases are also accessible through Google Scholar.

To open and bookmark the Google Scholar search engine for all federal and state legal opinions and journals, click here.

To open and bookmark the Google Scholar search engine for just New York federal and state legal opinions and journals, click here.  You can change the jurisdiction(s) you want to search by clicking the "Advanced Scholar Search" link to the right of the search box. 

Firefox users can set up and use a keyboard shortcut to search Google Scholar legal opinions.  Here's all you need to do:
  1. Open the Google Scholar search engine for all federal and state legal opinions and journals by clicking  here (a new window will open; you'll need to come back to this page for the instructions).   If you prefer to restrict your Google Scholar legal opinions and journals searches to New York materials, click here instead.  
  2. Right click within the search box and select (left click) "Add a Keyword for this Search".
  3. Name the search bookmark what you want.  I used "Google Scholar Legal Opinions & Journals".
  4. Assign a memorable keyword and click "Save". I used "gs" to stand for Google Scholar.
  5. From any webpage, open a new page or tab by pressing Ctrl+N or Ctrl+T. 
  6. If you opened a new tab (Ctrl+T), your cursor should already be in the Firefox Location Bar (the URL for the webpage you are viewing).  If not, press Ctrl+L.
  7. Type "[your keyword and your search terms]" (without the quotation marks and brackets) in the Firefox Location Bar and hit enter.  You should be taken right to your search results.  Try "[your keyword] Jerge v. Buettner" and see what case comes up first.
  8. Once you set up this search bookmark shortcut, you should be able to execute the search even without opening a new page by pressing Ctrl+L and repeating Step #7.  I prefer to run searches in a new tab or page.   
Firefox users can use this same method for creating search shortcuts for any website that contains a search bar.  Pretty cool.  I've created shortcuts for this blog's search engine (using "cc" as the bookmark's keyword) and my other favorite blogs.  Internet Explorer users, Dave Gottlieb thinks you're stupid and he hates you.  I don't hate you, but I, too, once was IE and now am Firefox.  There probably are ways of creating similar shortcuts in IE, but you IE users will need to look those up.  Or switch to Firefox.

Postscript (Sun., 22 November 2009) ~  Just checked my Google Analytics and found that 75% of this blog's visitors use IE as their browser.  For you IE users, I did the research and here's how you can set up a shortcut to the Google Scholar search engine for legal opinions and journals:
  1. Open the Google Scholar search engine for all federal and state legal opinions and journals by clicking  here or for Google Scholar legal opinions and journals searches to just New York materials by clicking here.  
  2. Bookmark the page you chose to open by saving to your Favorites list.  
  3. Find the bookmark in your Favorites list and right click on it.
  4. Select (left click) "Properties".
  5. Assign a keystroke combination in the "Shortcut key" box.  I used Ctrl+Alt+S.  
  6. Select (left click) "Apply" and then "OK".  The keystroke shortcut should open your preferred Google Search engine page in IE (or Firefox if that is your default browser) from any window.  
If you're a mouse person and prefer shortcut buttons on your IE toolbar instead of keyboard shortcuts, open your preferred Google Scholar legal opinions and journals page (all or just New York) and right click within the search box.  Select (left click) "Generate Custom Search" and click "Add".  You should now have a Google Scholar button on your toolbar.

Provider that Ignored Verification Requests Estopped from Arguing that Insurer's Premature Follow-Up Verification Request Precludes Any Defenses

NO-FAULT – TIMING OF FOLLOW-UP VERIFICATION – INSURANCE LAW § 5106(A) – 11 NYCRR § 65-3.6(B)
Infinity Health Prods., Ltd. v. Eveready Ins. Co.
(2nd Dept., decided 11/17/2009)

This is for you half-a-loaf folks.

The first sentence of 11 NYCRR § 65-3.6(b) provides:
At a minimum, if any requested verifications has not been supplied to the insurer 30 calendar days after the original request, the insurer shall, within 10 calendar days, follow up with the party from whom the verification was requested, either by telephone call, properly documented in the file, or by mail. (Bold added.)
If a no-fault insurer does not wait the entire 30-day period to issue a follow-up verification request pursuant to § 65-3.6(b), does it "lose" the tolling effect of such verification requests and is it precluded from relying on defenses related to those requests?  Prior to the Second Department's decision in this case, this was the box score on this question:


5 Misc3d 723 (NYC Civil, Queens Co., decided 11/4/2004)
No preclusion.
12 Misc3d 1127 (NYC Civil, Richmond Co., 2006)
Yes, preclusion.
19 Misc 3d 1138(A)(NYC Civil, Richmond Co., decided 5/27/2008)
No preclusion.
21 Misc3d 1 (App. Term, 2nd Dept., decided 7/10/2008)
Yes, preclusion.
2008 NY Slip Op 32365(U) (Sup.Ct., New York Co., decided 8/22/2008)
No preclusion.
23 Misc 3d 130(A) (App. Term, 2nd Dept., decided 4/7//2009)
Yes, preclusion.


In REVERSING the Appellate Term's finding of defense preclusion in this case, the Appellate Division, Second Department, has narrowly ruled that a provider which ignores the no-fault insurer's verification requests altogether is estopped from claiming that the insurer's early or premature follow-up verification request -- sent on Day 27 in this case -- precludes any defenses from being asserted, including the defense that the provider's action is premature because it did not respond to the insurer's verification requests.

It is important to note, as Jason Tenenbaum does over at No Fault Defender, that the Second Department has not ruled that all early or premature follow-up verification requests are okay and inconsequential to the insurer's claim defenses.  That broader question may be answered when the Second Department decides Progressive's appeal in Alur Medical, which does not appear to involve a situation in which the provider completely ignore the insurer's allegedly premature follow-up verification request (sent on Day 30 in that case).

Instead, the Second Department reversed and granted Eveready's cross motion for summary judgment, "on the facts and in the exercise of discretion", dismissing plaintiff's action as premature, "without prejudice to commencement of a new action."  The Second Department held:
There is no dispute here that the defendant timely requested initial verification by sending out its verification request within seven days (on March 21, 2001) after receipt of the plaintiff's claim (on March 14, 2001). There also is no dispute that the plaintiff did not respond to the defendant's timely initial verification request. An insurer does not have to pay or deny a claim until it has received verification of all of the relevant information requested (see 11 NYCRR former 65.15[g][1][i], [2][iii]). The issue in this case is whether an insurer loses the toll of the 30-day rule to pay or deny the claim, which is afforded by an initial timely request for verification, simply because its follow-up verification request is sent 3 days before the expiration of a full 30 days after a plaintiff fails to respond to the initial request. The Insurance regulations stated, in pertinent part, that "if any requested verification has not been supplied to the insurer 30 calendar days after the original request, the insurer shall, within 10 calendar days, follow up with the party from whom the verification was originally requested" (11 NYCRR former 65.15[e][2]).

Although the defendant in this case did not strictly comply with the time limitation set forth in the rule regarding the submission of a second verification request, under the circumstances of this case, the plaintiff is estopped from claiming that the defendant is precluded from asserting any defense to the claim. It would be inequitable to award summary judgment to the plaintiff, which ignored two verification requests, merely because the defendant, slightly prematurely, sent its second verification request a mere 3 days before the expiration of a full 30 days after the first verification request had been sent (see New York & Presbyt. Hosp. v American Tr. Ins. Co., 287 AD2d 699; see generally Chemical Bank v City of Jamestown, 122 AD2d 530; Guberman v William Penn Life Ins. Co. of N.Y., 146 AD2d 8). Indeed, in light of the particular factual circumstances herein, it would be incongruous to conclude that the Insurance regulation regarding follow-up verification, or any other statute or rule, warrants a result which would, in effect, penalize an insurer who diligently attempts to obtain the information necessary to make a determination of a claim, and concomitantly, rewards a plaintiff who makes no attempt to even comply with the insurer's requests. Such a result is not contemplated by the "no-fault law" or its regulations, which should be interpreted to promote the expeditious handling of verification requests and prompt claim resolution.

Furthermore, inasmuch as the plaintiff did not respond to either of the verification requests, the 30-day period within which the defendant was required to pay or deny the claim did not commence to run (see 11 NYCRR former 65.15[g][1][i], [2][iii]; Westchester County Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 262 AD2d 553). Thus, the plaintiff's action is premature (see Hospital for Joint Diseases v New York Cent. Mut. Fire Ins. Co., 44 AD3d 903; Hospital for Joint Diseases v ELRAC, Inc., 11 AD3d 432).
The court could have disposed of this appeal simply by ruling that an early or premature follow-up verification request is of no legal consequence.  It did not do so, however, perhaps suggesting to some that had plaintiff responded to Eveready's verification requests, the result in this case would have been  an affirmance.

I'm not going to speculate on that possibility, but instead await the outcome of Progressive's Alur Medical appeal.   I will say, however, that I believe the Second Department is already incorrect in viewing the 30-day period of 65-3.6(b) as a "time limitation".  If that period truly were a time limitation, such as a statute of limitations period, the early issuance of a follow-up verification request could not be deemed to violate it, since time limitations necessarily connote an outside limit for doing something, rather than proscribe certain conduct during the limitations period. The 30-day period of 65-3.6(b) should properly be viewed as a minimum prescription, rather than an absolute proscription.  

New York statutes contain numerous examples of actual proscriptive waiting periods.  For instance, Insurance Law § 3420(a)(2) effectively requires a judgment creditor to wait at least 30 days after serving an insured and its insurer with notice of entry of a money judgment before suing that insurer to enforce the judgment.  Similarly, General Municipal Law § 50-i requires a party claiming personal injury, wrongful death or property damage due to the negligence of a municipality to wait at least 30 days after serving a notice of claim before commencing suit against the municipality. Legislators and regulators know how to draft proscriptive waiting periods.  The 30-day period of 65-3.6(b) is not such a period. 

When the Second Department revisits the 30-day period of 65-3.6(b), I hope it doesn't overlook the first three words of that section.  "At a minimum" must mean something.  To me, those words must mean that "at a minimum", no-fault insurers must send follow-up verification requests within 30+10 days after their initial additional verification requests.  The "minimum" is the insurer's minimum handling requirement.  Substitute "at the very least" into the first sentence of 65-3.6(b) and the incongruity and inequity of penalizing a no-fault insurer for sending a follow-up verification request sooner than 31 days after the initial additional verification request becomes obvious.  At least to me.  At a minimum.

Thursday, November 19, 2009

Trial Court Did Not Abuse Its Discretion in Excluding Reference to Defendant's Expert's Stock Ownership in Defendant's Liability Insurer

EVIDENCE OF DEFENDANT'S LIABILITY INSURANCE – PROBATIVE VS. PREJUDICIAL VALUE
Salm v. Moses
(Ct. Apps., decided 10/22/2009)

Hat tip to Gregory McGoldrick over at McGoldrick's New York State Civil Evidence for spotting and blogging this decision. 

This is not an insurance coverage decision, but one about insurance coverage.  It has long been the rule in New York that evidence that a civil defendant carries liability insurance is generally inadmissible at trial.  In this dental malpractice action, moved in limine to preclude plaintiff from cross-examining defendant's expert regarding the fact that he and defendant were both shareholders of and insured by the same dental malpractice insurance company.  Plaintiff opposed the motion, but did not request a voir dire of the expert to inquire into his connection to the insurer.  After a colloquy with counsel, Supreme Court granted the motion, finding that the probative value of the inquiry would be outweighed by the prejudicial effect of having defendant's insurance coverage revealed to the jury. Upon plaintiff's appeal following a jury verdict in favor of defendant, the Appellate Division affirmed (57 AD3d 370 [1st Dept 2008]). The Court of Appeals granted plaintiff leave to appeal.

In AFFRIMING the Appellate Division's decision, the Court of Appeals held that the trial court did not abuse its discretion in granting the defendant's motion in limine:   
Evidence that a defendant carries liability insurance is generally inadmissible (see Leotta v Plessinger, 8 NY2d 449, 461 [1960], rearg denied 9 NY2d 688 [1961]; Simpson v Foundation Co., 201 NY 479, 490 [1911]). The rationale underlying this rule is twofold. First, "it might make it much easier to find an adverse verdict if the jury understood that an insurance company would be compelled to pay the verdict" (Loughlin v Brassil, 187 NY 128, 135 [1907]). Second, evidence of liability insurance injects a collateral issue into the trial that is not relevant as to whether the insured acted negligently. Although we have acknowledged that liability insurance has increasingly become more prevalent and that, consequently, jurors are now more likely to be aware of the possibility of insurance coverage, we have continued to recognize the potential for prejudice (see Oltarsh v Aetna Ins. Co., 15 NY2d 111, 118-119 [1965]; see also Barker and Alexander, Evidence in New York State and Federal Courts § 4:63, at 260-261 [5 West's NY Prac Series 2001] ["Because the prejudice quotient is obvious, the rule barring such evidence is one of the least controversial in the law of evidence"]).

The rule, however, is not absolute. If the evidence is relevant to a material issue in the trial, it may be admissible notwithstanding the resulting prejudice of divulging the existence of insurance to the jury. For example, we have held that evidence that a defendant insured a premises is relevant to demonstrate ownership or control over it (see Leotta, 8 NY2d at 462). Likewise, it was proper to allow cross-examination of a physician regarding the fact that the defendant's insurance company retained him to examine the plaintiff in order to show bias or interest on the part of the witness (see Di Tommaso v Syracuse Univ., 172 App Div 34, 37 [4th Dept 1916], affd without opn 218 NY 640 [1916]).

Here, we perceive no abuse of discretion in Supreme Court's evidentiary ruling. Such evidence may be excluded if the trial court finds that the risk of confusion or prejudice outweighs the advantage in receiving it (see Kish v Board of Educ. of City of N.Y., 76 NY2d 379, 384-385 [1990]). In this case, plaintiff speculated during the colloquy that a verdict in defendant's favor could result in a $100 benefit — at the time of the expert's death, disability or retirement — based on the expert's shareholder status in OMSNIC. The trial court's finding that any such financial interest was likely "illusory" and that the possibility of bias was attenuated was reasonable on this record. Absent a more substantial connection to the insurance company — or at least something greater than a de minimis monetary interest in the carrier's exposure — the court did not engage in an abuse of discretion in precluding the testimony. We note that a voir dire of an expert outside the presence of the jury can better aid the court in exploring the potential for bias.
Judge Piggott concurred in the majority's conclusion but wrote separately because, in his view, "courts should no longer treat insurance coverage as the third rail of trial practice such that it can neither be mentioned, even incidentally, nor be the basis of appropriate inquiry as to possible bias, as in the ruling here."

Monday, November 16, 2009

Live Tweeting of the NYACT Insurance Claims & SIU Personnel Conference on November 17th & 18th

For those of you who wanted but are unable to attend the NYACT 2-Day Education Conference for Insurance Claims and SIU Personnel in Smithtown, Long Island tomorrow and Wednesday, I'll be live microblogging the conference on Twitter.  If you don't follow @royamura or @CoverageCounsel but want to follow the live tweets, load http://search.twitter.com/search?q=NYACT into your Internet browser or click here on Tuesday morning and follow along by periodically refreshing your browser.  The program runs from 8:30 a.m. to 4:30 p.m. each day.  Perhaps I'll conscript someone into tweeting my Conducting Difficult EUOs presentation on Wednesday morning.

If there are other tweeple out there who will be attending the conference and would like to add to the microblog, use hashtag #NYACT.

If you have a Twitter account and have any questions for the presenters, you can tweet them to #NYACT and I'll do my best to ask them for you.

Fourth Department Rejects Attorneys' Fees Claim for Defending Insurer's Appeal -- Not So Mighty Midgets

EMPLOYER'S LIABILITY – RIGHT TO INDEPENDENT COUNSEL – ATTORNEYS' FEES
Thomas Johnson, Inc. v. State Ins. Fund
(4th Dept., decided 11/13/2009)

Since at least 1979, the New York rule regarding the recoverability of attorneys' fees in declaratory judgment actions has been that it is only when the insured is "cast in a defensive posture by the legal steps an insurer takes in an effort to free itself from its policy obligations" and wins the DJ action that the insured may recover its attorneys' fees.  The seminal case pronouncing that rule is the New York Court of Appeals' decision in Mighty Midgets v Centennial Ins. Co., 47 NY2d 12 (1979), and the rule has come to be known simply as the "Mighty Midgets rule".  Generally speaking, the recoverability of attorneys' fees depends on which of the two parties -- insured or insurer -- commences the DJ action:  if the insured commenced it, no attorneys' fees regardless of the outcome; if the insurer commenced it and loses, attorneys' fees can be awarded. 

Some inventive counsel, including the plaintiff's law firm in this DJ action, have argued that even in cases such as this where the insured was the one to initiate the DJ action, the insured should be able to recover its attorneys' fees for defending against the insurer's counterclaim (which is unnecessary in a DJ action since the court is obligated to declare the rights and responsibilities of all parties to the DJ action), motion for summary judgment, or appeal of an adverse order or judgment. In this case, the defendant State Insurance Fund unsuccessfully appealed from the lower court's judgment declaring that the insured was entitled to an attorney of its own choosing, at SIF's expense, in an underlying personal injury action.

Counsel for the plaintiff then sought to recover their fees for defending against the insurer's unsuccessful appeal and managed to convince Niagara Supreme that such fees were recoverable under the Midget Midgets rule because the insurer's appeal had cast plaintiff in a "defensive posture" vis-à-vis that appeal.  The SIF appealed the award of such attorneys' fees to the plaintiff insured, and the Fourth Department REVERSED, holding:
We agree with defendant that Supreme Court erred in granting judgment in plaintiff's favor declaring that defendant is obligated to pay all costs and fees incurred by plaintiff in the defense of an appeal taken by defendant from a prior judgment (Thomas Johnson, Inc. v State Ins. Fund, 50 AD3d 1544). The prior judgment, inter alia, granted that part of plaintiff's cross motion seeking summary judgment declaring that plaintiff is entitled to an attorney of its own choosing, at defendant's expense, in the underlying personal injury action. "[I]t is well settled that an insured may not be awarded attorney fees incurred in the prosecution of a declaratory [judgment] action against the insurer to determine coverage" (Penn Aluminum v Aetna Cas. & Sur. Co., 61 AD2d 1119, 1120), unless the insured was "cast in a defensive posture by the legal steps an insurer takes in an effort to free itself from its policy obligations" (Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 21), and that is not the case here. Moreover, the fact that defendant took an appeal in a declaratory judgment action commenced by plaintiff is of no moment (see generally Crouse W. Holding Corp. v Sphere Drake Ins. Co., 248 AD2d 932, affd 92 NY2d 1017). We therefore modify the judgment accordingly.
No moment.  Same holding ostensibly should apply to fees for defending against insurer's counterclaims or defensive motions or cross motions for summary judgment in DJ actions in which the insured occupies the plaintiff's position. I have an insured-initiated DJ action heading to a jury trial in January in which the same law firm has made the same argument.  Must add this decision to my motion in limine.  Grazie.

Friday, November 13, 2009

First Department Upholds Primary Insurer's Coverage Denial Based on Designated Ongoing Operations/Construction Exclusion

CGL – COINSURANCE – EXCESS VS. PRIMARY – CONSTRUCTION EXCLUSION – INSURANCE LAW § 3420(D)
American Guar. & Liab. Ins. Co. v. State Natl. Ins. Co., Inc.
(1st Dept., decided 11/12/2009)

State National Insurance Company insured S&W Realty, LLC, under a $1 million per occurrence CGL policy, which contained this Designated Ongoing Operations/Construction Exclusion:
Description of Designated Ongoing Operation(s):

Construction Exclusion:  Construction of buildings or structures including, but not limited to, erection ... painting, leaning or pointing, and all work or activity in connection with the foregoing.  This exclusion does not apply to incidental repair and maintenance performed by the named insured on buildings owned and operated by the named insured.

This insurance does not apply to “bodily injury” or “property damage” arising out of the ongoing operations described in the Schedule of this endorsement, regardless of whether such operations are conducted by you or on your behalf or wliether the operations are conducted for yourself or for others.
S&W was also insured under a $50 million purchasing group commercial umbrella liability policy issued by American Guarantee & Liability Insurance Company. 

On March 30, 2004, a contractor's employee fell from a scaffold and was injured while doing pointing work on an apartment building owned by S&W.  Within days of the accident, both State and American were notified of the employee's fall and injuries.  Weeks later, the employee commenced a personal injury action against S&W, alleging causes of action sounding in common law negligence and violations of New York Law Law §§ 200, 240(1) and 241(6).

Presumably based on the possibility that the employee's injuries had arisen from incidental repair and maintenance of the insured's building, defendant Tower Risk Management Company, acting as State's general managing agent, issued a reservation of rights letter and retained defense counsel to defend S&W in early May.  On May 21, 2004, Tower received a letter from S&W's managing agent which indicated that S&W and the injured party's employer did not have a written contract for the job “as it was a minor building repair, a leak into two apartments[.]"

In a November 2004 bill of particulars report letter, S&W's retained defense counsel advised Tower that it appeared "likely" that the injured employee would be able to sustain a Labor Law § 240(1) cause of action.  By letter dated November 6, 2006, defense counsel advised Tower that the court had granted partial summary judgment to the underlying plaintiff on his Labor Law § 240(1) claim, and that it had been determined "that the job was much larger and [they] did 'pointing work' on the entire front facade of the building."

By letter dated January 30, 2007, Tower disclaimed coverage on State’s behalf to S&W based on the policy's construction exclusion.  American subsequently sent a letter to Tower on behalf of S&W, requesting that State withdraw its coverage disclaimer based on what American asserted was the inapplicability of the construction exclusion and untimeliness of State's coverage denial in violation of Insurance Law § 3420(d).

In May 2007, the matter went to mediation and settled, without State's participation,  for $2.1 million.  American funded the entire settlement and commenced this action to recover State's $1 million in primary coverage, plus interest.

On the parties' motion and cross motion, New York County Supreme Court Justice Michael Stallman granted summary judgment to State and Tower, dismissing the complaint.  Justice Stallman rejected American's arguments that the construction exclusion was ambiguous, and that State had failed to issue a disclaimer in a timely fashion, in violation of Insurance Law § 3420(d).  American appealed.

In AFFIRMING the award of summary judgment to State and Tower, the First Department  held:
Plaintiff, the excess insurance carrier, sought a declaration that the coverage disclaimer by defendant State National, the primary insurer, for reimbursement of funds advanced by the excess insurer on the insured's behalf to settle the underlying personal injury action, was untimely as a matter of law, and that the primary insurer's policy exclusion was inapplicable and ambiguous. The court properly found that the primary insurer's "construction" exclusion was unambiguous and applied to the activities being performed by the injured party at the time of his accident. The exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case (see Continental Cas. Co. v Rapid-Am. Corp., 80 NY2d 640, 652 [1993]). The court also properly found that the protections of Insurance Law § 3420[d] were inapplicable to one insurer's claim for reimbursement from another insurer (see Bovis Lend Lease LMB, Inc. v Royal Surplus Lines Ins. Co., 27 AD3d 84, 91-92 [2005]).
It apparently did not matter to either the motion court or the First Department that, unlike in Bovis Lend Lease LMB, the mutual insured was a nominal party in this coinsurance recovery action, settlement monies had already been paid on behalf of the mutual insured, and American was proceeding against State, in part, as the mutual insured's subrogee.  Thus, the Insurance Law § 3420(d) argument of untimeliness American was making against State was being made as much on behalf of S&W as for itself.

Contrast this decision with the First Department's ruling in JT Magen v. Hartford Fire Ins. Co., 64 AD3d 266 (1st Dept., 5/14/2009), in which the court clarified its holding in Bovis Lend Lease LMB and held that a tender letter which one insurer sends to another insurer — asking that their mutual insureds be provided with a defense and indemnity as additional insureds under the latter insurer's policy — fulfills that policy's notice-of-claim requirements so as to trigger that insurer's obligation to issue a timely disclaimer pursuant to Insurance Law § 3420(d).  The First Department made no mention of its JT Magen decision in this case presumably because both State and American became aware of the underlying accident and injuries at the same time, there was no tender from American to State (American being the excess/umbrella rather than a co-primary insurer), and State assumed S&W's defense in the underlying personal injury action.

Thursday, November 12, 2009

New York State Legislature Passes New Anti-Subrogation Law -- Effective November 12, 2009

On November 10, 2009, both the New York State Senate and Assembly passed Senate Bill S66002, as substituted for Assembly Bill A40002.  The bill was delivered to Governor Paterson, who signed it today, November 12, 2009.

Comprising six separate parts, A through F, the bill is self-described as:
AN ACT to amend the insurance law, in relation to municipal cooperative health benefit plans, a study of community rating and the provision of claims experience to a municipality (Part A); to amend the general municipal law and the highway law, in relation to mutual aid (Part B); to amend the public health law, in relation to the composition of county and part-county boards of health (Part C); to amend the general municipal law, in relation to purchasing requirements (Part D); to amend the public authorities law and the local finance law, in relation to authorizing certain bonds to be issued or purchased by the municipal bond bank agency (Part E); and to amend the civil practice law and rules, in relation to treating public and private defendants equally when considering the impact of collateral source payments in tort claims for personal injury, property damage or wrongful death; to amend the general obligations law, in relation to protecting parties to the settlement of a tort claim from certain unwarranted lien, reimbursement and subrogation claims; and to repeal certain provisions of the civil practice law and rules relating to collateral source payments (Part F)
It is Part F that will affect the prospective handling of tort claims in New York State.  The nine sections of Part F of the bill are:
  • § 1 -- repeals subdivisions (a) and (b)of CPLR § 4545
  • § 2 -- amends subdivision (c) and reletters it as subdivision (a) of CPLR § 4545
  • § 3 -- reletters subdivision (d) and as subdivision (b) of CPLR § 4545
  • § 4 -- repeals subdivision (e) of CPLR Rule 4111
  • § 5 -- amends subdivision (f) and reletters it subdivision (e) of CPLR Rule 4111
  • § 6 -- amends subdivision (b) of CPLR § 4213
  • § 7 -- adds a new subdivision 4 to General Obligations Law § 5-101
  • § 8 -- adds new section 5-335 to General Obligations Law 
  • § 9 -- provides for the effective dates of these amended and new statutes
The complete text of the entire bill is here.  The text of Part F, with stricken statutory language language bracketed and struckthrough and new provisions capitalized and underlined, is as follows:

PART F

19  Section 1. Subdivisions (a) and (b) of section 4545 of the civil prac-
   20  tice law and rules are REPEALED.
   21    § 2. Subdivision (c) of section 4545 of the  civil  practice  law  and
   22  rules,  as  added by chapter 220 of the laws of 1986, is amended to read
   23  as follows:
   24    [(c)] (a) Actions for personal injury, injury to property or  wrongful
   25  death.    In  any action brought to recover damages for personal injury,
   26  injury to property or wrongful  death,  where  the  plaintiff  seeks  to
   27  recover  for  the  cost  of medical care, dental care, custodial care or
   28  rehabilitation services,  loss  of  earnings  or  other  economic  loss,
   29  evidence shall be admissible for consideration by the court to establish
   30  that  any  such past or future cost or expense was or will, with reason-
   31  able certainty, be replaced or indemnified, in whole or  in  part,  from
   32  any  collateral  source  [such  as  insurance (], except for life insur-
   33  ance[), social security (except  those  benefits  provided  under  title
   34  XVIII  of  the  social  security act), workers' compensation or employee
   35  benefit programs (except such collateral  sources  entitled  by  law  to
   36  liens  against any recovery of the plaintiff)]  AND THOSE PAYMENTS AS TO
   37  WHICH THERE IS A STATUTORY RIGHT OF REIMBURSEMENT.  If the  court  finds
   38  that any such cost or expense was or will, with reasonable certainty, be
   39  replaced or indemnified from any SUCH collateral source, it shall reduce
   40  the  amount  of  the award by such finding, minus an amount equal to the
   41  premiums paid by the plaintiff for such benefits for the two-year period
   42  immediately preceding the accrual of such action  and  minus  an  amount
   43  equal  to the projected future cost to the plaintiff of maintaining such
   44  benefits. In order to find that any future cost or  expense  will,  with
   45  reasonable  certainty,  be  replaced  or  indemnified  by the collateral
   46  source, the court must find that the plaintiff is  legally  entitled  to
   47  the  continued receipt of such collateral source, pursuant to a contract
   48  or otherwise  enforceable  agreement,  subject  only  to  the  continued
   49  payment  of  a  premium  and  such other financial obligations as may be
   50  required by such agreement.  ANY COLLATERAL SOURCE DEDUCTION REQUIRED BY
   51  THIS SUBDIVISION SHALL BE MADE BY THE TRIAL COURT AFTER THE RENDERING OF
   52  THE JURY'S VERDICT.   THE PLAINTIFF MAY PROVE  HIS  OR  HER  LOSSES  AND
   53  EXPENSES  AT THE TRIAL IRRESPECTIVE OF WHETHER SUCH SUMS WILL LATER HAVE
   54  TO BE DEDUCTED FROM THE PLAINTIFF'S RECOVERY.
       S. 2                               19                               A. 2

    1    § 3. Subdivision (d) of section 4545 of the  civil  practice  law  and
    2  rules is relettered subdivision (b).
    3    §  4. Subdivision (e) of rule 4111 of the civil practice law and rules
    4  is REPEALED.
    5    § 5. Subdivision (f) of rule 4111 of the civil practice law and rules,
    6  as amended by chapter 100 of the laws of 1994, is relettered subdivision
    7  (e) and amended to read as follows:
    8    (e) Itemized verdict in certain  actions.  In  an  action  brought  to
    9  recover  damages  for  personal  injury,  injury to property or wrongful
   10  death, which is not subject to [subdivisions] SUBDIVISION (d) [and  (e)]
   11  of this rule, the court shall instruct the jury that if the jury finds a
   12  verdict awarding damages, it shall in its verdict specify the applicable
   13  elements  of  special  and general damages upon which the award is based
   14  and the amount assigned to each element including, but not  limited  to,
   15  medical expenses, dental expenses, loss of earnings, impairment of earn-
   16  ing ability, and pain and suffering. Each element shall be further item-
   17  ized  into  amounts  intended  to  compensate for damages that have been
   18  incurred prior to the verdict and amounts  intended  to  compensate  for
   19  damages  to  be incurred in the future. In itemizing amounts intended to
   20  compensate for future damages, the jury shall set forth  the  period  of
   21  years  over which such amounts are intended to provide compensation.  In
   22  actions in which article fifty-A or fifty-B of this chapter applies,  in
   23  computing  said  damages, the jury shall be instructed to award the full
   24  amount of future damages, as calculated, without  reduction  to  present
   25  value.
   26    §  6.  Subdivision  (b)  of section 4213 of the civil practice law and
   27  rules, as separately amended by chapters 485 and  682  of  the  laws  of
   28  1986, is amended to read as follows:
   29    (b)  Form  of  decision.  The  decision of the court may be oral or in
   30  writing and shall state the facts it deems  essential.  In  [a  medical,
   31  dental  or podiatric malpractice action or in an action against a public
   32  employer or a public employee who is subject  to  indemnification  by  a
   33  public  employer  with respect to such action or both, as such terms are
   34  defined in subdivision (b) of section forty-five hundred forty-five, for
   35  personal injury or wrongful death arising out of an injury sustained  by
   36  a public employee while acting within the scope of his public employment
   37  or  duties,  and  in]  any [other] action brought to recover damages for
   38  personal injury, injury to  property,  or  wrongful  death,  a  decision
   39  awarding  damages  shall  specify the applicable elements of special and
   40  general damages upon which the award is based and the amount assigned to
   41  each element, including but not  limited  to  medical  expenses,  dental
   42  expenses,  podiatric  expenses,  loss of earnings, impairment of earning
   43  ability, and pain and suffering. In a medical, dental or podiatric malp-
   44  ractice action, [and in any other action brought to recover damages  for
   45  personal  injury,  injury  to  property, or wrongful death, each element
   46  shall be further  itemized  into  amounts  intended  to  compensate  for
   47  damages  which  have  been  incurred  prior  to the decision and amounts
   48  intended to compensate for damages to be  incurred  in  the  future.  In
   49  itemizing  amounts  intended to compensate for future damages, the court
   50  shall set forth the period of years over which such amounts are intended
   51  to provide compensation. In computing  said  damages,  the  court  shall
   52  award  the  full  amount  of  future  damages,  as  calculated,  without
   53  reduction to present value] COMMENCED ON OR AFTER JULY TWENTY-SIXTH, TWO
   54  THOUSAND THREE, THE COURT'S DECISION AS TO FUTURE DAMAGES SHALL BE ITEM-
   55  IZED IN ACCORDANCE WITH SUBDIVISION (D) OF RULE FORTY-ONE HUNDRED ELEVEN
   56  OF THIS CHAPTER.  IN ANY ACTION BROUGHT TO RECOVER DAMAGES FOR  PERSONAL
       S. 2                               20                               A. 2

    1  INJURY,  INJURY  TO  PROPERTY  OR  WRONGFUL DEATH, OTHER THAN A MEDICAL,
    2  DENTAL OR PODIATRIC MALPRACTICE ACTION COMMENCED ON OR AFTER JULY  TWEN-
    3  TY-SIXTH,  TWO THOUSAND THREE, THE COURT'S DECISION AS TO FUTURE DAMAGES
    4  SHALL  BE  ITEMIZED IN ACCORDANCE WITH SUBDIVISION (E) OF RULE FORTY-ONE
    5  HUNDRED ELEVEN OF THIS CHAPTER.
    6    § 7. Section 5-101 of the general obligations law is amended by adding
    7  a new subdivision 4 to read as follows:
    8    4. AS USED IN SECTION 5-335 OF THIS ARTICLE, THE TERM "BENEFIT PROVID-
    9  ER" MEANS ANY INSURER, HEALTH MAINTENANCE ORGANIZATION,  HEALTH  BENEFIT
   10  PLAN,  PREFERRED  PROVIDER  ORGANIZATION, EMPLOYEE BENEFIT PLAN OR OTHER
   11  ENTITY WHICH PROVIDES  FOR  PAYMENT  OR  REIMBURSEMENT  OF  HEALTH  CARE
   12  EXPENSES,  HEALTH CARE SERVICES, DISABILITY PAYMENTS, LOST WAGE PAYMENTS
   13  OR ANY OTHER BENEFITS UNDER A POLICY OF INSURANCE OR  CONTRACT  WITH  AN
   14  INDIVIDUAL OR GROUP.
   15    §  8.  The  general obligations law is amended by adding a new section
   16  5-335 to read as follows:
   17    § 5-335. LIMITATION OF  NON-STATUTORY  REIMBURSEMENT  AND  SUBROGATION
   18  CLAIMS IN PERSONAL INJURY AND WRONGFUL DEATH ACTIONS.  (A) WHEN A PLAIN-
   19  TIFF SETTLES WITH ONE OR MORE DEFENDANTS IN AN ACTION FOR PERSONAL INJU-
   20  RIES,  MEDICAL,  DENTAL, OR PODIATRIC MALPRACTICE, OR WRONGFUL DEATH, IT
   21  SHALL BE CONCLUSIVELY PRESUMED THAT THE SETTLEMENT DOES NOT INCLUDE  ANY
   22  COMPENSATION  FOR  THE COST OF HEALTH CARE SERVICES, LOSS OF EARNINGS OR
   23  OTHER ECONOMIC LOSS TO THE EXTENT THOSE LOSSES OR EXPENSES HAVE BEEN  OR
   24  ARE OBLIGATED TO BE PAID OR REIMBURSED BY A BENEFIT PROVIDER, EXCEPT FOR
   25  THOSE  PAYMENTS AS TO WHICH THERE IS A STATUTORY RIGHT OF REIMBURSEMENT.
   26  BY ENTERING INTO ANY SUCH SETTLEMENT, A PLAINTIFF SHALL NOT BE DEEMED TO
   27  HAVE TAKEN AN ACTION IN DEROGATION OF  ANY  NONSTATUTORY  RIGHT  OF  ANY
   28  BENEFIT  PROVIDER  THAT  PAID  OR  IS  OBLIGATED  TO PAY THOSE LOSSES OR
   29  EXPENSES; NOR SHALL A PLAINTIFF'S ENTRY INTO SUCH SETTLEMENT  CONSTITUTE
   30  A  VIOLATION  OF  ANY  CONTRACT  BETWEEN  THE PLAINTIFF AND SUCH BENEFIT
   31  PROVIDER.
   32    EXCEPT WHERE THERE IS A STATUTORY RIGHT  OF  REIMBURSEMENT,  NO  PARTY
   33  ENTERING  INTO SUCH A SETTLEMENT SHALL BE SUBJECT TO A SUBROGATION CLAIM
   34  OR CLAIM FOR REIMBURSEMENT BY A BENEFIT PROVIDER AND A BENEFIT  PROVIDER
   35  SHALL  HAVE NO LIEN OR RIGHT OF SUBROGATION OR REIMBURSEMENT AGAINST ANY
   36  SUCH SETTLING PARTY, WITH RESPECT TO THOSE LOSSES OR EXPENSES THAT  HAVE
   37  BEEN OR ARE OBLIGATED TO BE PAID OR REIMBURSED BY SAID BENEFIT PROVIDER.
   38    (B)  THIS  SECTION SHALL NOT APPLY TO A SUBROGATION CLAIM FOR RECOVERY
   39  OF  ADDITIONAL  FIRST-PARTY  BENEFITS  PROVIDED  PURSUANT   TO   ARTICLE
   40  FIFTY-ONE  OF  THE INSURANCE LAW. THE TERM "ADDITIONAL FIRST-PARTY BENE-
   41  FITS", AS USED IN THIS SUBDIVISION, SHALL HAVE THE SAME MEANING GIVEN IT
   42  IN SECTION 65-1.3 OF TITLE 11 OF THE CODES, RULES AND REGULATIONS OF THE
   43  STATE OF NEW YORK AS OF THE EFFECTIVE DATE OF THIS STATUTE.
   44    § 9. This act shall take effect immediately and  shall  apply  to  all
   45  actions  and  proceedings  commenced  on  or  after such date; provided,
   46  however, that sections four through eight of this act shall  also  apply
   47  to  any action or proceeding which was commenced prior to such effective
   48  date where, as of such date, either (a) a trial of the  issues  has  not
   49  yet  commenced,  or  (b)  the parties have not yet entered into a stipu-
   50  lation of settlement.
Effective Dates:

Sections 1, 2 and 3 of Part F of this act (the changes to CPLR § 4545) will take effect "immediately" upon the Governor's signature of this bill (which occurred on November 12, 2009) and will apply to all actions commenced on and after that date.

Sections 4, 5 (changes to CPLR Rule 4111), 6 (change to CPLR § 4213),7 (addition of General Obligations Law § 5-101[4]), and 8 (addition of General Obligations Law § 5-335) will also apply to any applicable action or proceeding that was commenced prior to November 12, 2009, (Governor's signing date) if as of such date either the trial had not yet commenced or the parties had not "entered into" (settlement memorialized in writing or one "spread on the record") a stipulation of settlement. 

For medical, dental, or podiatric malpractice actions commenced on and after July 26, 2003, the court's decision on future damages must be itemized in accordance with CPLR Rule 4111(d).

For actions brought to recover damages for personal injury, injury to property or wrongful death commenced on and after July 26, 2003, that are not medical, dental or podiatric malpractice actions, the court's decision on future damages must be itemized in accordance with the relettered CPLR Rule 4111(e).

Purpose of Part F:

When predecessor Senate Bill S6068 was passed by just the Senate back in July, the New York State Trial Lawyers Association website pronounced it a legislative victory:
NYSTLA is proud to announce that the New York State Senate voted to pass a mandate relief bill, S.6068 (Sampson), on July 17th, 2009, which includes an anti-subrogation provision. This is a major victory for the civil justice system and injured New Yorkers. The anti-subrogation provision amends the general obligations law to protect all settling plaintiffs and defendants in a personal injury action from certain unwarranted reimbursement and subrogation claims.

This bill will remedy recent, ill-advised Court of Appeals decisions such as Teichman v. Community Hosp. of Western Suffolk , 87 N.Y.2d 514 (1996), and Fasso v. Doerr, 12 N.Y.3d 80 (Feb. 24, 2009). These decisions incorrectly opened the door to benefits providers, such as health insurers, "double-dipping" by seeking reimbursement from settling defendants who have caused personal injuries to a plaintiff who has health insurance.
APIP Subrogation Exempted:

Notice that the new GOL § 5-335 specifically exempts subrogation claims for recovery of "additional first-party benefits" as provided for in Insurance Law Article 51 and defined by the prescribed APIP endorsement found at 11 NYCRR § 65-1.3.  This means that APIP subrogation claims are still fully viable. 

Property Damage Subrogation Claims Unaffected:

On its face, the new GOL § 5-335 will apply only to and limit non-statutory reimbursement and subrogation claims in personal injury and wrongful death actions, and, as to such actions, only insurers or entities qualifying as a "benefit provider" will be affected.  GOL § 5-101(4) will define a "benefit provider" as "any insurer, health maintenance organization, health benefit plan, preferred provider organization, employee benefit plan or other entity which provides for payment or reimbursement of health care expenses, health care services, disability payments, lost wage payments or any other benefits under a policy of insurance or contract with an individual or group."

GOL § 5-335 should not apply to insurers that afford first-party property coverage benefits to their insureds and then seek to exercise their subrogation rights because those insurers should not fall within the definition of a "benefit provider" under that section. 

Common Law Anti-Subrogation Rule Unaffected:

The new law should not affect what has come to be known as New York's common law "antisubrogation rule".  The common law rule operates as a party's liability defense based on coverage principles, not a recovery right of subrogation.

Wednesday, November 11, 2009

Second Department Appellate Division Grants Progressive Insurance Company Leave to Appeal in Alur Medical Supply

Hat tip to Dave Gottlieb, hat tipping Damin Toell

On November 5, 2009, the Appellate Division, Second Department, granted the unopposed motion of Progressive Insurance Company for leave to appeal the Appellate Term, Second Department's April 7, 2009 decision in Alur Med. Supply, Inc. a/a/o Teresa Radriguez v. Progressive Ins. Co., 23 Misc 3d 130(A) (App. Term, 2d Dept., 2d, 11th & 13th Dists., decided 4/7/2009).

In Alur Medical, the Appellate Term held that a no-fault insurer can be penalized for doing something too quickly.  Yes, that's right.  Or wrong.  The court held for the second time that a follow-up verification request sent before the expiration of that initial 30-day period of 11 NYCRR § 65-3.6(b) is premature and a nullity, rendering the no-fault insurer's eventual denial untimely and precluding it from raising most defenses, including lack of medical necessity.  Progressive had sent its follow-up verification request on Day 30, instead of on Days 31 through 41. 

Assuming a standard briefing schedule, we should see a decision from the Second Department in mid-2010.

Permanent Stay of Uninsured Motorists Coverage Claim Arbitration Granted -- Liability Coverage for Leased Trailer Found to Apply to Tractor

UM – AUTO – GRAVES AMENDMENT – TRACTOR TRAILER LIABILITY – VEHICLE & TRAFFIC LAW § 388
Matter of State Farm Mut. Auto. Ins. Co. v. Morales
(Sup. Ct., Nassau Co., decided 10/22/2009)

State Farm's insured, Jose Morales, claimed injuries from an accident in which his vehicle was struck in the rear by a tractor trailer.  An accident report indicated that the offending vehicle was owned by Tuscan Lehigh Dairies and insured by Ace American Insurance Company.  Morales made a claim to State Farm for uninsured motorists (UM) coverage benefits after Ace presumably disclaimed or denied coverage. State Farm commenced this special proceeding pursuant to CPLR Article 75 for a permanent stay of the UM claim arbitration, contending that there was liability coverage for the tractor trailer, and naming both Tuscan and Ace as proposed additional respondents.

In an opposing attorney's affirmation, Tuscan alleged that it owned only the trailer, and not the tractor.  The tractor allegedly was owned by Action Transport and being driven by one of Action's employees at the time of the accident.  Tuscan also submitted an opposing affidavit of a Kathy Weaver, the human resources manager of Dean NE, LLC, which purportedly was associated with Tuscan.  Weaver's affidavit stated that Tuscan was in the business of renting or leasing trailers to haulers under hauling agreements for the purpose of moving its products from on point to another and, as such, was exempt from vicarious liability under New York's Vehicle & Traffic Law § 388 by operation of the Graves Amendment. Her affidavit also stated there was an agreement between Dean NE, LLC and Action Transport for the purpose of hauling products of Tuscan, and that agreement required Action Transport to assume full responsibility for the trailer including any claims by third parties.

A hearing was conducted at which the parties stipulated that: (1) the trailer owned by Tuscan was insured on the accident date; (2) State Farm could not prove any policy of insurance was issued to Action Transport for the operation of its tractor on the accident date; (3) the trailer itself did not come into contact with Morales' vehicle; and (4) the only issued to be determined in this proceeding was whether the insurance policy on Tuscan's trailer would provide coverage for and negligence on the part of the tractor pulling the trailer.

Although Suffolk Supreme had previously held in Zawatsky v Barker Materials, Ltd., that the Graves Amendment does apply to leased trailers, Nassau County Supreme Court Justice Antonio Brandveen rejected Tuscan's Graves Amendment argument and granted State Farm's petition to permanently stay Morales' UM coverage claim arbitration:
The affidavit of Kathy Weaver stating she is the Human Resources Manager of DEAN NE, LLC which is associated with TUSCAN and Garelick Farms was not notarized and can not be considered by this court. Further, the purported affidavit asserting that Dean NE, LLC is "associated" with TUSCAN is vague and imprecise, that standing alone, is insufficient to establish a connection between the two entities to give TUSCAN standing to assert the application of the Graves Amendment in this action.
*  *  *  *  *
It is clear that the provisions of VTL § 388(1) provide that when a tractor and trailer are being operated in combination the owners shall be jointly and severally liable.  VTL § 388(2) clearly defines a vehicle for purposes of this statute to include a semitrailer and a trailer.

In MOUNT VERNON FIRE INSURANCE COMPANY v. THE TRAVELERS INDEMNITY COMPANY, 63 A.D.2d 254, 255 the court held:
Section 388 of the Vehicle and Traffic Law imposes joint and several liability on owners of tractors and trailers used in combination with one another, for injuries occasioned by such vehicles. Subdivision 4 thereof mandates "All... policies of insurance issued to the owners of any vehicle subject to the provisions of this section shall contain a provision for indemnity or security against the liability and responsibility provided in this section . This statute, which has as its objective the protection of injured plaintiffs, does not differentiate between primary and excess policies but directs that "All" policies of insurance are to provide the required coverage. (Emphasis added).  See, also (Employers Mut. Liability Ins. Co. Of Wis. v Indemnity Ins. Co. Of North America 37 Misc.2d 839)
Accordingly, the court finds that pursuant to VTL § 388 the insurance policy covering the trailer owned by TUSCAN is required to provide coverage for any negligence on the part of the tractor operated in combination with trailer. The petition by STATE FARM is granted.
Justice Brandveen was correct in rejecting the unnotarized affidavit submitted in support of Tuscan's Graves Amendment argument.  But even if that affidavit been notarized (and certificated pursuant to CPLR § 2309(c) if executed outside of New York State), would the result have been different?  A motor vehicle lessor's coverage responsibility is not always congruent with its liability exposure. 

In Antwi v. HVT, Inc., 24 Misc 3d 1250(A) (Sup. Ct., Bronx Co., decided 9/11/2009), the court allowed HVT to renew its Graves Amendment-based motion for summary jugdment with a new affidavit that could have been but was not submitted in support of HVT's original motion.  If Tuscan were to try the same thing here -- to move to renew based on a properly executed and notarized affidavit of Kathy Weaver -- would the result be any different?  Probably not.  A fair reading of the Graves Amendment is that while it exempts motor vehicle lessors from the vicarious liability imposed by subsection 1 of Vehicle & Traffic Law § 388, it does nothing to affect or excuse lessors from their coverage responsibilities under subsection 4 of that statute.  

In other words, the fact that Tuscan may not be held liable under VTL § 388(1) to Morales for his injuries by operation of the Graves Amendment does not necessarily mean its trailer's liability policy with Ace does not cover the tractor's operation.  Liability exposure?  No.  Coverage responsibility?  Yes.  New York personal auto insurers facing UM claims stemming from accidents with leased tractors or trailers should bear this in mind.

To read most posts about New York cases involving the Graves Amendment, click here.   

Tuesday, November 10, 2009

New York's Prescribed No-Fault Claim Forms

The New York State Insurance Department's website provides access to an electronic copy of Regulation 68 (11 NYCRR Part 65), and that page address includes a link to Reg 68's appendix, which is a complete set of all prescribed no-fault claim forms, but is there anywhere on the Internet one can find each of the 15 individual forms, linked to separate documents?  Not until today, and that anywhere is now here.

Bookmark this post if you would find it useful to have access to the 15 individual prescribed no-fault claim forms comprising the complete set.  Those forms are the:
Study up.  There's going to be a test.

Monday, November 9, 2009

Conducting Difficult EUOs


I'll be on Long Island next week Tuesday and Wednesday for NYACT's 2-Day Education Conference for Insurance Claims and SIU Personnel.  I'm speaking on Wednesday morning, November 18th, on Conducting Difficult EUOsMy three-hour presentation will include sample EUO written materials and 11 videotaped and open-captioned vignettes of situations that sometimes arise during EUOs of no-fault and property insureds and claimants.  The cast of the unscripted and one-take videos includes my partner, Scott Storm, playing various roles from the tape-recording and early-departing insured to the obstructionist attorney.  With my daughter playing the role of the court reporter, here's an example of one of the vignettes:



Whether you conduct EUOs yourself or do the work leading up to the EUO, this presentation is designed to present and discuss methods of dealing with common obstacles to successfully completing EUOs -- success being defined as obtaining the information being sought in the EUO.  It is also useful for insurance professionals who conduct recorded interviews. 

We'll also be discussing recent New York case law regarding no-fault EUOs and the New York State Insurance Department's Office of General Counsel Opinion Letter No. 09-06-10, entitled "Examinations Under Oath of Assignees".

If you're a regular reader of Coverage Counsel and are able to make the conference, be sure to stop up and introduce yourself.

Friday, November 6, 2009

Is New York’s No-Fault Auto Insurance Crisis Returning?

I.I.I. Analysis Finds Average Cost of No-Fault Claim Has Soared 56 Percent Since 2004

LATHAM, NEW YORK, November 5, 2009 — New York’s auto insurers saw their typical no-fault payment for the medical care of accident victims rise by 56 percent to $8,748 per claim in the second quarter of 2009. This represents a dramatic increase from late 2004, when the average no-fault payment stood at $5,615 per claim, according to an Insurance Information Institute (I.I.I.) analysis.

The insurance industry, the New York State Insurance Department’s (NYSID) Frauds Bureau, the National Insurance Crime Bureau and law enforcement agencies continue to investigate suspicious claims vigorously, according to Dr. Robert Hartwig, the I.I.I. president and an economist. Yet loopholes in the no-fault system make it particularly vulnerable to fraud and abuse by a “no-fault industry” of corrupt medical professionals, attorneys, and street-level criminals who work on their behalf.

“In less than five years, New York’s auto insurers have seen an extraordinary 56 percent increase in the average cost of no-fault claims, to a great extent the result of abuse and, sometimes, outright fraud in the system,” stated Dr. Hartwig, in remarks scheduled for delivery today to the New York Insurance Association’s (NYIA) annual meeting in Latham, NY. “The costs of fraud and abuse of the state’s no-fault system ultimately are borne by New York’s honest policyholders. New York’s no-fault claim costs are now the second highest in the country and are 111 percent higher than the U.S. average of $4,152.”

“State lawmakers need to make no-fault auto insurance reform a high priority when they reconvene in Albany for their 2010 session,” said Ellen Melchionni, president of the NYIA. “There are external forces which drive up the cost of auto insurance in this state which can and must be contained.”

The state Insurance Department’s Frauds Bureau, in its 2008 annual report, said that no-fault fraud reports to the NYSID had increased 22 percent since 2006, after the number of these same reports fell 35 percent between 2003 and 2006, Dr. Hartwig observed. Moreover, the Frauds Bureau has significantly expanded its number of no-fault investigations, its 2008 annual report stated.

The term "no-fault" auto insurance is often used to denote any auto insurance program that allows policyholders to recover financial losses, such as medical costs and lost wages, from their own insurance company, regardless of fault. The policyholder’s no-fault benefit coverage is listed under the personal injury protection (PIP) provision of their policy.

Dr. Hartwig said that several proposals have been advanced to combat New York’s growing no-fault crisis, including:

Institute Medical Protocols/Utilization Reviews: Implement medical treatment guidelines for specific auto accident-related injuries so as to reduce instances of over-treatment and/or unnecessary treatments. New York’s no-fault system is one of the few in the U.S. that allows for insurer payment of medical treatment providers while requiring neither mandatory protocols nor utilization reviews. This virtual blank check drives up system costs dramatically because the PIP payment ceiling is a very generous $50,000.

Require Disputes Be Resolved via Arbitration: Implement an arbitration system to eliminate trial costs for all parties while also expediting claims resolution. No-fault systems were created to avert courtroom battles. Yet, in New York, no-fault cases are clogging the judicial system’s calendar, especially in New York City. The city courts are so inundated with no-fault cases today that they are currently setting trial dates for 2011.

Streamline the Process for Adjudicating No-Fault Claims: Permit parties with no-fault disputes involving less than $5,000 to submit proof based on a sworn affidavit from doctors. Under today’s system, doctors must appear personally in court, time which could be better spent treating their patients.

Implement Fair Burden of Proof Requirements: Require that, in order to establish the plaintiff’s right to no-fault benefits, the plaintiff must produce a witness with personal knowledge of the facts alleged in the plaintiff’s complaint. Furthermore, there should be no presumption of medical necessity based on documents submitted by non-medical plaintiffs and/or witnesses who do not have personal knowledge of the facts of the case. New York’s medical treatment providers are required only to submit proof that a bill was received by the auto insurer to establish entitlement to receive amounts billed—irrespective of suspicions of fraud or abuse. The burden of the auto insurers is much higher. They are required to produce in court both a witness to testify under oath that the claim was handled in accordance with regulations and a medical expert to testify on the “lack of medical necessity.”

Strengthen anti-runner laws: “Runners” are those who receive a monetary benefit for facilitating a fraudulent insurance transaction, usually by acting as a go-between for dishonest policyholders and unscrupulous medical treatment providers and/or attorneys. The crime is currently a misdemeanor but, if upgraded to a felony, could provide an added deterrent.

For more information, see Dr. Hartwig’s PowerPoint presentation to the NYIA’s annual meeting:  New York PIP Insurance Update: Is New York’s No-Fault Crisis Returning?