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Whether the Insurer Is Obligated to Indemnify the Driver Turns on Whether the Driver Acted Intentionally When His Vehicle Struck the Rear of Decedent’s Vehicle—-There Was a Question of Fact Whether the Incident Was an Accident or the Result of Intentional Conduct

The Fourth Department determined there was a question of fact whether the striking of decedent’s car from behind was intentional or accidental.  If the rear driver acted intentionally, his insurer had no duty to indemnify the rear driver. The court explained the terms “accidental” and “intentional” in this context:

“In deciding whether a loss is the result of an accident, it must be determined, from the point of view of the insured, whether the loss was unexpected, unusual and unforeseen” … . We must look to the allegations of the complaint in the underlying action, but may also consider extrinsic facts … .

Insurable ” [a]ccidental results can flow from intentional acts’ ” … . On the other hand, “when the damages alleged in the [underlying] complaint are the intended result which flows directly and immediately from [the insured’s] intentional act, . . . there is no accident, and therefore, no coverage” … . “[M]ore than a causal connection between the intentional act and the resultant harm is required to prove that the harm was intended” … . The exclusion for an intentional injury, however, will apply where the injuries are ” inherent in the nature’ of the wrongful act”… . Kemper Independence Ins. Co. v Ellis, 2015 NY Slip Op 04011, 4th Dept 5-8-15

 

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Fraud Upon the Court Must Be Demonstrated by Clear and Convincing Evidence/Striking of Pleadings and Entering Default Judgment Against Offending Party Appropriate Under the Facts

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined the standard for demonstrating a party has committed fraud upon the court is “clear and convincing.”  Under the facts, the court determined that defendants' fraud upon the court had been demonstrated and that striking the pleadings and entering a default judgment against the defendants was appropriate:

We …conclude that in order to demonstrate fraud on the court, the non-offending party must establish by clear and convincing evidence that the offending “party has acted knowingly in an attempt to hinder the fact finder's fair adjudication of the case and his adversary's defense of the action” … . A court must be persuaded that the fraudulent conduct, which may include proof of fabrication of evidence, perjury, and falsification of documents concerns “issues that are central to the truth-finding process” … . Essentially, fraud upon the court requires a showing that a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system's ability impartially to adjudicate a matter by improperly influencing the trier or unfairly hampering the presentation of the opposing party's claim or defense … . A finding of fraud on the court may warrant termination of the proceedings in the non-offending party's favor … . For “when a party lies to the court and [its] adversary intentionally, repeatedly, and about issues central to the truth-finding process, it can fairly be said that [the party] has forfeited [the] right to have [the] claim decided on the merits” … . Therefore, once a court concludes that clear and convincing evidence establishes fraud on the court, it may strike a pleading and enter a default judgment.

We caution that dismissal is an extreme remedy that “must be exercised with restraint and discretion” … . Dismissal is most appropriate in cases like this one, where the conduct is particularly egregious, characterized by lies and fabrications in furtherance of a scheme designed to conceal critical matters from the court and the nonoffending party; where the conduct is perpetrated repeatedly and wilfully, and established by clear and convincing evidence, such as the documentary and testimonial evidence found here. Dismissal is inappropriate where the fraud is not “central to the substantive issues in the case” …, or where the court is presented with “an isolated instance of perjury, standing alone, [which fails to] constitute a fraud upon the court” … . In such instances, the court may impose other remedies including awarding attorney fees …, awarding other reasonable costs incurred … , or precluding testimony … . In the rare case where a court finds that a party has committed fraud on the court warranting dismissal, the court should note why lesser sanctions would not suffice to correct the offending behavior … . CDR Creances SAS v Cohen, 2014 NY Slip Op 03294, CtApp 5-8-14

 

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Person Injured After Being Thrown from a Motorcycle Is an “Occupant” of the Motorcycle Within the Meaning of the Insurance Law and Is Therefore Not Eligible for First-Party No-Fault Benefits

The Fourth Department, in a full-fledged opinion by Justice Sconiers, determined a person injured after being thrown from a motorcycle was an “occupant” of the motorcycle within the meaning of the Insurance Law and therefore ineligible for first-party no-fault benefits:

Previously, motorcycle operators and passengers injured in motor vehicle accidents were generally entitled to first-party benefits under the no-fault law. Former section 672 (1) (a) of the Insurance Law provided that those entitled to first-party benefits under the no-fault scheme encompassed “persons, other than occupants of another motor vehicle.” That category included motorcyclists on a par with pedestrians … . The statute was amended in 1977 to exclude occupants of motorcycles from such benefits (see L 1977, ch 892, § 9), thereby terminating the treatment of motorcycle occupants “as pedestrians rather than motorists [who] enjoy the benefits of no-fault at no cost” … . The successor of the amended statute, Insurance Law § 5103 (a) (1), currently provides that, under a policy of insurance issued on an automobile, first-party benefits are available to “[p]ersons, other than occupants of another motor vehicle or a motorcycle” … . The exclusions in the Kemper and Farm and Family insurance policies of “any person while occupying a motorcycle” are consistent with Insurance Law § 5103 (a) (1) and the regulations promulgated thereunder (see 11 NYCRR 65-1.1 [d]). Boyson v Kwasowsky, 2015 NY Slip Op 03964, 4th Dept 5-8-15

 

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Cell Phone In Possession of Inmate Met the Definition of “Dangerous Contraband” in the Context of a “Promoting Prison Contraband” Charge

The Third Department, in a full-fledged opinion by Justice Egan, determined that a cell phone constituted “dangerous contraband” within the meaning of “promoting prison contraband in the first degree.”  The testimony of the supervising superintendent about the protections put in place concerning the recording and restrictions on inmate phone calls were sufficient to demonstrate the cell phone met the definition of “dangerous contraband:”

In this regard, the Court of Appeals has instructed that “the test for determining whether an item is dangerous contraband is whether its particular characteristics are such that there is a substantial probability that the item will be used in a manner that is likely to cause death or other serious injury, to facilitate an escape, or to bring about other major threats to a detention facility’s institutional safety or security” … . Notably, “the distinction between contraband and dangerous contraband” does not turn upon “whether an item is legal or illegal outside of prison . . . [as] [i]t is obvious that an item, such as a razor, may be perfectly legal outside prison and yet constitute dangerous contraband when introduced into that unpredictable environment” … . Similarly, as our case law makes clear, the item in question need not be inherently dangerous in order to qualify as dangerous contraband. Indeed, although weapons are perhaps the most commonly recognized source of dangerous contraband in a prison setting … , courts have — applying the Finley test — reached the very same conclusion with respect to other items made, obtained or possessed by prison inmates, including illegal quantities of drugs …, a disposable Bic lighter …  and hand-drawn maps or knotted links of wire that could be used to facilitate an escape …. Although the majority in Finley did not expressly address this issue, Judge Pigott opined in his concurrence/dissent that, “[i]f the contraband at issue is not inherently dangerous . . . , the People must present specific, competent proof from which the trier of fact may infer that use of the contraband could potentially create a dangerous situation inside the facility” … . As a cell phone admittedly is not an inherently dangerous item, the question is whether the People adduced sufficient proof to establish the cell phone’s potential to be used in such a pernicious manner as to elevate it to the level of dangerous contraband. People v Green, 2014 NY Slip Op 03303, 3rd Dept 5-8-14

 

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Re: False Arrest and False Imprisonment—Allegations Sufficient to Survive Motion to Dismiss for Failure to State a Cause Action

The Fourth Department determined plaintiff’s causes of action for false arrest and false imprisonment properly survived a motion to dismiss for failure to state a cause of action: “

Although liability for false arrest and false imprisonment generally will not be imposed where a civilian complainant merely furnishes information to law enforcement authorities rather than taking ” an active role in the [arrest] of the plaintiff, such as giving advice and encouragement or importuning the authorities to act’ . . . with the intent that [the] plaintiff be confined” …, we conclude that the complaint and plaintiff’s submissions in opposition to defendant’s motion here sufficiently allege that defendant’s employees made false statements to investigators with the intent of having plaintiff be arrested and confined … . Harrison v Samaritan Med. Ctr., 2015 NY Slip Op 03971, 4th Dept 5-8-15

 

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Fraud Cause of Action Against Merrill Lynch Re: Credit Default Obligations Sufficiently Pled/Disclaimers and Disclosures Did Not Preclude Claim of Fraud

The First Department determined a cause of action for fraud against Merrill Lynch had been sufficiently pled.  The underlying agreement related to credit default obligations (CDO’s).  The court noted that an unjust enrichment cause of action is not viable when the lawsuit is based on a written agreement:

…[The] factual allegations provide sufficient details to inform the …defendants … of the alleged fraudulent conduct, namely that the CDO was secretly designed by an undisclosed hedge fund, Magnetar, which was secretly placing massive short bets against the very same deals it was sponsoring. Defendants, however, argue that plaintiff cannot establish the element of reasonable reliance (an element of both affirmative misrepresentation and concealment) as a result of the disclosures and disclaimers for the Auriga CDO. We cannot agree.

The offering circular states, “All or most of the Collateral Debt Securities Acquired by the Issuer . . . will be Acquired from a portfolio of Collateral Debt Securities selected by the Collateral Manager . . . .” If Magnetar rather than 250 Capital was doing the selecting, the statement in the offering circular was misleading. The identity of the person selecting the collateral was material: The offering circular says, “The performance of the portfolio of Collateral Debt Securities depends heavily on the skills of the Collateral Manager in analyzing and selecting the Collateral Debt Securities.” * * *

Under the circumstances, it cannot be said that the disclaimers and disclosures in the offering circulars preclude a claim of fraud on the ground of a prior misrepresentation as to the specific matter, namely that the CDO’s collateral had been carefully selected by an independent collateral manager, in the interests of the success of the deal and for the benefit of Auriga’s long investors. Loreley Fin (Jersey) No 38 Ltd v Merrill Lynch …, 2014 NY Slip Op 03326, 1st Dept 5-8-14

Similar issues and result re: Citigroup in a full-fledged opinion by Justice Renwick.  Loreley Fin (Jersey) No 3 Ltd v Citigroup Global Mkts Inc, 2014 NY Slip Op 03358, 1st Dept 5-8-14

 

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Reports by Attorneys Which Relate to an Insurer’s Decision to Accept or Reject a Claim Are Discoverable—Reports by Attorneys Made After the Claim Is Rejected Are Not Discoverable

The Fourth Department determined the records generated by attorneys which related to an insurer’s decision whether to accept or reject a claim were discoverable as records made in the regular course of business—even if the records relate in part to potential litigation.  Records generated by attorneys after the claim was denied are privileged and not discoverable:

“It is well settled that [t]he payment or rejection of claims is a part of the regular business of an insurance company. Consequently, reports which aid it in the process of deciding which of the two indicated actions to pursue are made in the regular course of its business’ ” … . “Reports prepared by . . . attorneys before the decision is made to pay or reject a claim are thus not privileged and are discoverable . . . , even when those reports are mixed/multi-purpose’ reports, motivated in part by the potential for litigation with the insured” … . Here, the documents submitted to the court for in camera review constitute multi-purpose reports motivated in part by the potential for litigation with plaintiff, but also prepared in the regular course of defendant’s business in deciding whether to pay or reject plaintiff’s claim, and thus plaintiff is entitled to disclosure of those documents.  Lalka v Aca Ins. Co., 2015 NY Slip Op 03995, 4th Dept 5-8-15

 

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Tenant’s Common Law Duty to Keep Sidewalk on the Premises Safe Applies Even Though Another Party Agreed to Maintain the Sidewalk in Its Lease

The First Department noted that a tenant has a common law duty to keep a sidewalk on the leased premises safe, even if another party is obligated to maintain the sidewalk in its lease. Plaintiff slipped and fell on ice on the sidewalk:

It is well established that a tenant owes a common-law duty of reasonable care to maintain the demised premises in a reasonably safe condition, independent of any obligation that might be imposed by the existence of a lease … . The fact that nonparty C.L.B. #6 Inc. (CLB#6) was required to maintain the sidewalk under its lease with the landlord is irrelevant to CLB’s common-law duty to maintain the demised premises … . Additionally, whether a gas station was also a tenant of the premises is also irrelevant to CLB’s duty … . Because CLB never produced the lease between itself and CLB#6, which might reflect whether the subject sidewalk was part of the demised premises, it failed to establish prima facie that it owed no duty to maintain the subject sidewalk … . Williams v Esor Realty Co, 2014 NY Slip Op 03343, 1st Dept 5-8-14

 

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Violation of an Industrial Code Provision Does Not Conclusively Establish Negligence in a Labor Law 241 (6) Action

The Fourth Department noted that the fact that an Industrial Code provision was violated does not establish negligence sufficient to support partial summary judgment: “Despite our conclusion that defendants violated 12 NYCRR 23-9.5 (c), we reject plaintiff’s contention that he is entitled to partial summary judgment on the issue of defendants’ liability with respect to the Labor Law § 241 (6) claim. A violation of an Industrial Code provision ‘does not establish negligence as a matter of law but is merely some evidence to be considered on the question of a defendant’s negligence’…”.   Whether there was a violation of 12 NYCRR 23-9.5 (c) turned on whether plaintiff was a member of an “excavation crew.” If he was not, then his proximity to the equipment which injured him violated the provision. If he was a member of an “excavation crew,” the provision was not violated.  The majority determined plaintiff was not a member of a “crew” because he was the only person there.  The two dissenting judges disagreed and argued plaintiff was a member of an “excavation crew” within the meaning of the provision. Vanderwall v 1255 Portland Ave. LLC, 2015 NY Slip Op 03959, 4th Dept 5-8-15

 

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Police Officer’s Convictions for “Criminal Diversion” (Obtaining Another’s Prescription Medication), and “Official Misconduct” Not Supported by Legally Sufficient Evidence

The Third Department reversed defendant’s convictions for criminal diversion and official misconduct because the offenses were not supported by legally sufficient evidence.  The defendant, a police officer, was accused of obtaining someone’s prescription drugs in exchange for something of pecuniary value (criminal diversion).  She was also accused of flashing her badge to a pharmacist and asking the pharmacist to hurry up with a prescription drug (official misconduct).  The Third Department determined the “criminal diversion” charge was not supported by evidence the drug involved (a muscle relaxant) was a “prescription medication.”  And, in the absence of evidence the defendant knew that flashing her badge constituted an unauthorized exercise of her official functions, there was not sufficient evidence to support the “official misconduct” charge. People v Barnes, 2014 NY Slip Op 03310, 3rd Dept 5-8-14

 

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