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

NO-FAULT – EXAMINATION UNDER OATH – VERIFICATION REQUESTS – PROOF OF MAILING – PRESUMPTION OF RECEIPT FROM CERTIFIED 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.

Insurer's Mere Denial of Receipt of Default Judgment Against Its Insured Held Not to Rebut Presumption of Its Receipt

AUTO – LATE NOTICE OF SUIT – INSURANCE LAW § 3420(A)(2) ACTION – PRESUMPTION OF RECEIPT – UNTIMELY DISCLAIMER
Maldonado v. State Farm Mut. Auto. Ins. Co.
(NYC Civil, Queens Co., decided 1/15/2009)

It has long been held in New York -- usually in the context of a notice of cancellation of an insurance policy -- that a person's mere denial of receipt, without more, is insufficient to rebut the presumption of receipt that arises from evidence of proper mailing.  See this blog's Presumption of Receipt label.  It is usually the insurer who benefits from that rule.  In this case, however, it worked against State Farm. 

Sometimes called New York's "direct action statute", New York Insurance Law § 3420(a)(2) provides:

§ 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) hereof, 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 which are equally or more favorable to the insured and to judgment creditors so far as such provisions relate to judgment creditors:

(2) A provision that in case judgment against the insured or his personal representative in an action brought to recover damages for injury sustained or loss or damage occasioned during the life of the policy or contract shall remain unsatisfied at the expiration of thirty days from the serving of notice of entry of judgment upon the attorney for the insured, or upon the insured, and upon the insurer, then an action may, except during a stay or limited stay of execution against the insured on such judgment, be maintained against the insurer under the terms of the policy or contract for the amount of such judgment not exceeding the amount of the applicable limit of coverage under such policy or contract.

The New York Court of Appeals has held that since this particular section does not specifically provide a method for giving notice of entry of judgment to the insurer, any method of service which is reasonably calculated to do so ought to be sufficient to comply with the statutory requirement.  Thrasher v United States Liability Ins. Co., 19 NY2d 159 (1967).  Under New York CPLR Rule 2103, service of papers on a party who has not appeared may be made by regular mail.

In this case plaintiffs brought a personal injury action and obtained a $25,000 default judgment against State Farm's insured.  The personal injury action stemmed from a November 21, 2003 automobile accident, but this decision does not indicate when plaintiffs sued State Farm's insured or whether plaintiffs took proceedings for the entry of the judgment within one year after the default, as required by CPLR § 3215(c).

According to the decision, plaintiffs served State Farm with the underlying judgment and notice of entry by mailing those items to State Farm's office on March 7, 2008, and produced an affidavit of service by mail to this effect.  When the judgment remained unpaid for 30 days, plaintiffs then commenced this action against State Farm pursuant to Insurance Law § 3420(a)(2) to recover the $25,000 default judgment obtained against State Farm's insured.

In an affidavit submitted in opposition to plaintiffs' motion for summary judgment, State Farm claimed that although it had been aware of the underlying 2004 accident, it did not receive the judgment and notice of entry in March, 2008.  State Farm's affidavit also asserted that its first notice of the underlying action and judgment against its insured was its receipt of the plaintiffs' summons and complaint in this action in late June, 2008, after which it promptly disclaimed coverage on July 9, 2008, presumably based on its insured's failure to forward the underlying suit papers.  Plaintiffs argued that State Farm's July disclaimer was untimely under Insurance Law § 3420(d) because State Farm was presumed to have received the underlying judgment and notice of entry four months earlier in March and had all the information it needed to disclaim at that time.  

On the parties' opposing motions for summary judgment, the court noted that "the only issues... to determine on the instant motion and cross-motion are when State Farm was put on notice of the underlying judgment against its insured, and whether it timely notified the plaintiffs that it was declining coverage due to its insured's violations of the policy agreement."  In accepting the plaintiffs' argument and granting summary judgment to them, Queens Civil Court Judge Diccia Pineda-Kirwan applied the presumption of receipt rule against State Farm:

First, the plaintiffs served the underlying judgment with notice of entry by mailing it to defendant's office on March 7, 2008, as evidenced in the affidavit of service of Wilfredo Bonilla. While defendant submits the affidavit of Justine Sinkler as proof that it did not receive the underlying judgment, "a properly executed affidavit of service raises a presumption that a proper mailing occurred, and a mere denial of receipt is not enough to rebut the presumption." (Kihl v Pfeffer, 94 NY2d 118 [1999].) Accordingly, the denial of receipt by Ms. Sinkler is not enough to create an issue of fact as to when the judgment with notice of entry was received by the defendant. (Kihl, 94 NY2d 118.) Thus, as a matter of law, the defendant was put on notice of the underlying judgment on March 7, 2009. 

Second, it must be determined whether State Farm's July 9, 2008 letter disclaiming coverage complies with the statutory requirement of disclaiming coverage "as soon as reasonably possible." (Insurance Law § 3420(d).) The Court of Appeals determined in First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64 [2003], that "once the insurer has sufficient knowledge of facts entitling it to disclaim, or knows that it will disclaim coverage," it must notify the party seeking the benefit of the policy coverage in writing as soon as reasonably possible. Timeliness of an insurers disclaimer is measured from the time when the insurer first learns of the grounds for denial of coverage. (First Fin. Ins. Co., 1 NY3d 64; Moore v Ewing, 9 AD3d 484 [2004].) Here, State Farm was aware that it was going to disclaim coverage once the underlying judgment was served upon it, as its reasons for disclaiming coverage were based on its insured's failure to forward suit papers in the underlying cause of action. Thus, State Farms unexplained delay in disclaiming coverage for over four months after it had "sufficient knowledge of facts entitling it to disclaim" is unreasonable as a matter of law. (First Fin. Ins. Co., 1 NY3d 64; Matter of Allstate Ins. Co. v Swinton, 27 AD3d 462 [2006]; Shell v Fireman's Fund Ins. Co., 17 AD3d 444 [2005]; Vacca v State Farm Ins. Co., 15 AD3d 473 [2005]; Moore, 9 AD3d 484.)

Questions occurring to me regarding the injured parties' notice of entry mailing to State Farm include:  When and how did the injured parties learn of State Farm's identity as the insurer?  Did they or their attorney communicate with State Farm before the underlying action was brought?  Were they given a policy number or a claim number?  Did they include such number(s) on their notice of entry mailing?  If not, why not?  How did they know which State Farm office to send the notice of entry to?  Did anyone call and get a claim number, representative's name or office location before sending the notice of entry to State Farm?  Was the notice of entry sent only by regular mail?  If so, why not send by certified mail to make sure State Farm received it?

So what's an insurer to do in the face of such an affidavit of mailing?  Perhaps depose the affiant, in an attempt to create a question on the mailing.  And certainly say more in opposition to a 3420(d)-based motion than merely denying receipt of the judgment and notice of entry.  That doesn't cut it for insureds, and it now has been held not to cut it for insurers.

Not Recalling Receiving Notice of Cancellation Does Not Rebut the Presumption of Its Receipt

AUTO – CANCELLATION NOTICE – VEHICLE & TRAFFICE LAW § 313(1)(A) – PRESUMPTION OF RECEIPT
Geico Indem. v. Roth
(4th Dept., decided 11/14/2008)

Based on a prior policy cancellation, Geico commenced this action for a declaration that it was not obligated to defend or indemnify defendant Scott Mayer in an underlying personal injury action.  In an attemp to create a question of fact to preclude summary judgment from being granted to Geico, Mayer claimed that he did not recall having received Geico's cancellation notice.

In REVERSING Niagara County Supreme's denial of Geico's summary judgment motion, the Fourth Department held:

"It is well established that a notice of cancellation is ineffective unless in strict compliance with the requirements of Vehicle and Traffic Law § 313 (1) (a)" (Barile v Kavanaugh, 67 NY2d 392, 399), and plaintiff met its initial burden by demonstrating its strict compliance with the statute, i.e., plaintiff demonstrated that it timely and validly cancelled the policy issued to Mayer based on his nonpayment of premiums (see generally § 313 [1] [a]; Badio v Liberty Mut. Fire Ins. Co., 12 AD3d 229; Matter of State Farm Mut. Auto. Ins. Co. v Morales, 207 AD2d 546; Matter of State Farm Mut. Auto. Ins. Co. v Cherian, 202 AD2d 434, 435). The burden then shifted to defendants-respondents (defendants) "to establish noncompliance with [Vehicle and Traffic Law § 313 (1) (a)] as to form and procedure' " (Cherian, 202 AD2d at 435, quoting Berrios v Lumbermens Mut. Cas. Co., 162 AD2d 365), and defendants failed to meet that burden. Plaintiff submitted "evidence of its office mailing practice sufficient to establish that the notice of cancellation had been mailed and presumably received" (Badio, 12 AD3d at 230). The deposition testimony of Mayer that he did not recall receiving the notice is insufficient to rebut the presumption of receipt (see id. at 231).

Policy Cancellation Prior to Total Fire Loss Upheld

HOMEOWNERS – FIRE LOSS – CANCELLATION NOTICE SUFFICIENCY & PROOF OF MAILING – AGENT E&O
Kaufmann v. Leatherstocking Coop. Ins. Co.
(3rd Dept., decided 6/12/2008)

How many of you would pay $87.40 to receive $92,243? In this case, had the plaintiff-insured made a minimum payment of $87.40 against his overdue homeowners policy premium by September 26, 2004, the fire destruction of his home 10 days later on October 6, 2004 would have been inside, rather than outside, his policy period to the tune of $92,243 in damages. But could've, would've, and should've in this case meant a disclaimer by Leatherstocking based on the policy's pre-loss cancellation, and the insured sued both Leatherstocking and the producing agent.

In AFFIRMING the Otsego County Supreme's grant of summary judgment to both defendants, the Third Department ruled that the cancellation notice was not defective under Insurance Law § 3425(c)(1)(A) for failing to set forth the amount due because that statutory section applies to auto, not homeowners, policies. The appellate court found that, in any event, the cancellation notice had cleary stated the minimum amount due. Additionally, the court credited the affidavits and testimony of Leatherstocking's former president, which established that the installment payment schedule was altered as a result of plaintiff's initial late payment, a circumstance fully disclosed on the billing statements he received, and that he failed to remit the necessary amount to keep the payments current thereafter. The court held:

Leatherstocking clearly met its burden of proving that the final notice of cancellation was properly mailed to plaintiff by submitting proof of the standard operating procedure for mailing such notices, as well as by submitting proof of the actual mailing of such notice to plaintiff through the affidavit of an employee with personal knowledge (see Thibeault v Travelers Ins. Co., 37 AD3d 1000, 1001 [2007]; Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680 [2001]). Plaintiff's testimony that he never received the final notice is, without more, insufficient to rebut the presumption of receipt (see Badio v Liberty Mut. Fire Ins. Co., 12 AD3d 229, 230 [2004]). Consequently, Supreme Court properly granted summary judgment dismissing plaintiff's contract claims.

With respect to the insured's negligence or errors and omissions (E&O) claims against the producing agent based on the agent's alleged failure to notify the insured that his premium payments were past due, so as to avoid cancellation of the policy, the Third Department held:

Generally, insurance agents are not liable for actions other than obtaining insurance coverage for their insureds, unless a special relationship has been established between the parties (see Curanovic v New York Cent. Mut. Fire Ins. Co., 307 AD2d 435, 438 [2003]). Here, H & B and its principals submitted affidavits and deposition testimony establishing that no special arrangement was made with plaintiff through which they agreed to notify him of past due payments and plaintiff was specifically informed that he would be directly billed by Leatherstocking. Significantly, plaintiff did not submit proof sufficient to raise a question of fact on this issue as plaintiff's deposition testimony indicates that his claim is based upon conversations that he had with one of H & B's principals regarding an unrelated commercial policy. Consequently, Supreme Court properly granted summary judgment dismissing
plaintiff's negligence claim as well.