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INSURER FAILED TO GIVE ADEQUATE NOTICE OF A CHANGE IN THE COVERAGE OF THE UNDERLYING AUTO LIABILITY POLICY REQUIRED BY ITS UMBRELLA POLICY, UMBRELLA POLICY REFORMED TO RESTORE THE RESULTING GAP IN COVERAGE.

The Second Department, in a full-fledged opinion by Justice Cohen, determined defendant insurer failed to notify plaintiff of an elimination of coverage as required by Insurance Law 3425. The insurance contract was reformed to include the eliminated coverage. Plaintiff had a $1,000,000 umbrella auto insurance policy with the defendant insurer (Allstate). When plaintiff purchased the umbrella policy it required $100,000/$300,000 coverage in the underlying policy. Although the limit of the umbrella policy did not change, the requirements for the underlying policy were increased to $250,000/$500,000. After an accident, Allstate paid the excess over $250,000, but refused to pay the difference between the $100,000 actual coverage of the underlying policy and the $250,000 required coverage:

Insurance Law § 3425 imposes restrictions on a liability insurer’s right to cancel, refuse to renew, or condition renewal of a policy, and requires the insurer to provide notice to the policyholder before any cancellation, nonrenewal, or conditional renewal occurs. At issue on this appeal is Insurance Law § 3425(d)(1), which requires an insurer to notify a policyholder, at least 45 days before the end of the coverage period, of its intention to condition renewal “upon change of limits or elimination of any coverages,” and to provide a specific reason for so conditioning renewal. … [W]e find that the notice requirement of Insurance Law § 3425(d)(1) applies where, as here, an insurer issues an umbrella policy providing the policyholder with additional coverage above the limits of his or her automobile coverage, and then increases the amount of underlying automobile liability insurance the policyholder must maintain before the additional coverage provided by the umbrella policy becomes available. We further find that an insurer’s failure to comply with Insurance Law § 3425(d)(1) provides a basis for reformation of the subject policy. Gotkin v Allstate Ins. Co., 2016 NY Slip Op 05359, 2nd Dept 7-6-16

INSURANCE LAW (INSURER FAILED TO GIVE ADEQUATE NOTICE OF A CHANGE IN THE COVERAGE OF THE UNDERLYING AUTO LIABILITY POLICY REQUIRED BY ITS UMBRELLA POLICY, UMBRELLA POLICY REFORMED TO RESTORE THE RESULTING GAP IN COVERAGE)/CONTRACT LAW (INSURANCE POLICY, INSURER FAILED TO GIVE ADEQUATE NOTICE OF A CHANGE IN THE COVERAGE OF THE UNDERLYING AUTO LIABILITY POLICY REQUIRED BY ITS UMBRELLA POLICY, UMBRELLA POLICY REFORMED TO RESTORE THE RESULTING GAP IN COVERAGE)/REFORMATION (INSURANCE POLICY, INSURER FAILED TO GIVE ADEQUATE NOTICE OF A CHANGE IN THE COVERAGE OF THE UNDERLYING AUTO LIABILITY POLICY REQUIRED BY ITS UMBRELLA POLICY, UMBRELLA POLICY REFORMED TO RESTORE THE RESULTING GAP IN COVERAGE)

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CONTRACTOR WHICH REPAIRED EXTERIOR STAIRS DID NOT OWE A DUTY OF CARE TO PLAINTIFF IN THIS SLIP AND FALL CASE.

The Second Department determined a slip and fall complaint against a contractor which repaired exterior stairs was properly dismissed. The court explained the three theories under which a contract can result in a duty of care owed to a third party and the requirements of a defendant-contractor’s motion for summary judgment in this context:

“Generally, a contractual obligation, standing alone, will not give rise to tort liability in favor of a third party” … . However, there are three exceptions to that general rule: “(1) where the contracting party, in failing to exercise reasonable care in the performance of his [or her] duties, launches a force or instrument of harm, (2) where the plaintiff detrimentally relies on the continued performance of the contracting party’s duties, and (3) where the contracting party has entirely displaced the other party’s duty to maintain the premises safely” … . ” As part of its prima facie showing, a contracting defendant is only required to negate the applicability of those Espinal exceptions that were expressly pleaded by the plaintiff or expressly set forth in the plaintiff’s bill of particulars'” … .

Here, the plaintiff alleged facts in his complaint and bills of particulars in support of his assertion that the defendants created or exacerbated the alleged dangerous conditions and, thus, launched a force or instrument of harm. Therefore, in support of their motion for summary judgment dismissing the complaint insofar as asserted against them, the defendants were required to establish, prima facie, that they did not create or exacerbate the alleged dangerous conditions … . The defendants met this burden and established their prima facie entitlement to judgment as a matter of law by demonstrating that they neither created nor exacerbated the dangerous conditions that allegedly caused the plaintiff to sustain injuries. The parties’ deposition testimony established, prima facie, that the defendants did not leave the subject step or the handrail in a condition more dangerous than they had found them … . Barone v Nickerson, 2016 NY Slip Op 05107, 2nd Dept 6-29-16

 

NEGLIGENCE (CONTRACTOR WHICH REPAIRED EXTERIOR STAIRS DID NOT OWE A DUTY OF CARE TO PLAINTIFF IN THIS SLIP AND FALL CASE)/CONTRACT LAW (CONTRACTOR WHICH REPAIRED EXTERIOR STAIRS DID NOT OWE A DUTY OF CARE TO PLAINTIFF IN THIS SLIP AND FALL CASE)/TORT LIABILITY ARISING FROM CONTRACT (CONTRACTOR WHICH REPAIRED EXTERIOR STAIRS DID NOT OWE A DUTY OF CARE TO PLAINTIFF IN THIS SLIP AND FALL CASE)/SLIP AND FALL (CONTRACTOR WHICH REPAIRED EXTERIOR STAIRS DID NOT OWE A DUTY OF CARE TO PLAINTIFF IN THIS SLIP AND FALL CASE)

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CITY’S ALLEGED VIOLATION OF AN EASEMENT SOUNDS IN CONTRACT, NOT TORT, NOTICE OF CLAIM NOT REQUIRED.

The Third Department, reversing County Court, determined plaintiff was not required to file a notice of claim because the action against the city sounded in contract, not tort. Plaintiff alleged the city violated an easement when work was done on plaintiff’s property:

General Municipal Law § 50-e (1) (a) provides that a party seeking to bring a tort action against a municipality must file a notice of claim within 90 days of the date that the claim arises … . A similar provision is contained in Charter of the City of Glens Falls § 10.14.5. The notice of claim provisions of General Municipal Law § 50-e, however, apply only to actions sounding in tort, not to those premised upon breach of contract … . The same is true of City of Glens Falls City Charter § 10.14.5, as its terms make clear. Here, plaintiff’s small claims action is premised upon defendant’s alleged failure to comply with the provisions of the easement agreement resulting in damage to his property in the amount of $5,000. Inasmuch as plaintiff’s action sounds in breach of contract, not tort, the notice of claim provisions of General Municipal Law § 50-e and Charter of the City of Glens Falls § 10.14.5 are inapplicable. Strauss v City of Glens Falls, 2016 NY Slip Op 04750, 3rd Dept 6-16-16

 

MUNICPAL LAW (CITY’S ALLEGED VIOLATION OF AN EASEMENT SOUNDS IN CONTRACT, NOT TORT, NOTICE OF CLAIM NOT REQUIRED)/REAL PROPERTY (CITY’S ALLEGED VIOLATION OF AN EASEMENT SOUNDS IN CONTRACT, NOT TORT, NOTICE OF CLAIM NOT REQUIRED)/CONTRACT LAW (CITY’S ALLEGED VIOLATION OF AN EASEMENT SOUNDS IN CONTRACT, NOT TORT, NOTICE OF CLAIM NOT REQUIRED)/EASEMENTS (CITY’S ALLEGED VIOLATION OF AN EASEMENT SOUNDS IN CONTRACT, NOT TORT, NOTICE OF CLAIM NOT REQUIRED)/NOTICE OF CLAIM (CITY’S ALLEGED VIOLATION OF AN EASEMENT SOUNDS IN CONTRACT, NOT TORT, NOTICE OF CLAIM NOT REQUIRED)

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LIQUIDATED DAMAGES CLAUSE IN SEPARATION AGREEMENT CONSTITUTED AN UNENFORCEABLE PENALTY.

The Second Department determined the liquidated damages clause in a separation agreement constituted an unenforceable penalty. The clause provided that, upon a breach of any of the terms, child support would increase from $1500 per month to over $5000:

“[P]arties to an agreement may provide for the payment of liquidated damages upon its breach, and such damages will be upheld if (1) the amount fixed is a reasonable measure of the probable actual loss in the event of breach, and (2) the actual loss suffered is difficult to determine precisely. However, if the liquidated damages do not bear a reasonable proportion to the loss actually sustained by a breach, they will constitute an unenforceable penalty” … .

Here, the parties entered into a separation agreement … which was incorporated but not merged into the judgment of divorce. In relevant part, the agreement provided that … the defendant would pay $1,500 per month in child support until the date of the sale of the marital residence, and $5,076.29 per month thereafter. However, if at any time prior to the sale of the marital residence, the defendant was not in compliance with “all of the terms” of the agreement, then his child support obligation would be increased to $5,076.29 per month.

Contrary to the plaintiff's contention, the Supreme Court correctly determined that the subject provision, as drafted, constituted an unenforceable penalty clause … . Fitzpatrick v Fitzpatrick, 2016 NY Slip Op 04018, 2nd Dept 5-25-16

FAMILY LAW (LIQUIDATED DAMAGES CLAUSE IN SEPARATION AGREEMENT CONSTITUTED AN UNENFORCEABLE PENALTY)/CONTRACT LAW (LIQUIDATED DAMAGES CLAUSE IN SEPARATION AGREEMENT CONSTITUTED AN UNENFORCEABLE PENALTY)/DAMAGES  (LIQUIDATED DAMAGES CLAUSE IN SEPARATION AGREEMENT CONSTITUTED AN UNENFORCEABLE PENALTY)

ASSUMPTION OF RISK DOCTRINE NO LONGER APPLIES TO ANY ACTIONS OTHER THAN THOSE STEMMING FROM ATHLETIC AND RECREATIONAL ACTIVITIES.

The Second Department noted that the doctrine of assumption of the risk no longer applies in any context other than athletic or recreational activities. Defendant attempted to apply the doctrine to a breach of contract action:

The defendant moved for summary judgment dismissing the amended complaint insofar as asserted against her. Relying on Turcotte v Fell (68 NY2d 432), she contended that the plaintiff, by agreeing to enter into the joint annuity contract, necessarily assumed the risk of pecuniary injury. The Supreme Court denied the motion.

The defense of assumption of risk was abolished in 1975 with the adoption of CPLR 1411 … . Nevertheless, the Court of Appeals has explained “that a limited vestige of the assumption of the risk doctrine—referred to as primary’ assumption of the risk—survived the enactment of CPLR 1411 as a defense to tort recovery in cases involving certain types of athletic or recreational activities” … .

Here, as the allegations in the amended complaint have nothing to do with athletic or recreational activities contemplated by the primary assumption of risk doctrine … , it follows that the defendant’s reliance on Turcotte v Fell (68 NY2d 432) is misplaced, and her purported assumption of risk defense is barred by CPLR 1411. Ballow v Lincoln Fin. Corp., 2016 NY Slip Op 04009, 2nd Dept 5-25-16

 

CONTRACT LAW (ASSUMPTION OF RISK DOCTRINE NO LONGER APPLIES TO ANY ACTIONS OTHER THAN THOSE STEMMING FROM ATHLETIC AND RECREATIONAL ACTIVITIES)/ASSUMPTION OF THE RISK (ASSUMPTION OF RISK DOCTRINE NO LONGER APPLIES TO ANY ACTIONS OTHER THAN THOSE STEMMING FROM ATHLETIC AND RECREATIONAL ACTIVITIES)

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CORRESPONDENCE ESTABLISHED AN ENFORCEABLE SETTLEMENT AGREEMENT.

The Second Department determined a letter from counsel, together with other correspondence, established an enforceable settlement agreement of a real property dispute:

CPLR 2104 governs the enforceability of settlement agreements … . Pursuant to CPLR 2104, a settlement agreement is binding upon a party if it is in a writing subscribed either by the party or by his or her attorney. To be enforceable, a settlement agreement must set forth all material terms, and there must be clear mutual accord between the parties … .

Here, the material terms of the settlement agreement were set forth in a letter by the plaintiff's then attorney, who had apparent authority to settle the case on her behalf based on the plaintiff's actions … . The exchange of correspondence between the attorneys for the parties, in conjunction with the defendants' completion of the tasks demanded in the settlement without any objection by the plaintiff, was sufficient to constitute an enforceable settlement agreement between the parties … . Martin v Harrington, 2016 NY Slip Op 04027, 2nd Dept 5-25-16

CIVIL PROCEDURE (CORRESPONDENCE ESTABLISHED AN ENFORCEABLE SETTLEMENT AGREEMENT)/CONTRACT LAW (CORRESPONDENCE ESTABLISHED AN ENFORCEABLE SETTLEMENT AGREEMENT)

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RELEASE APPLICABLE TO INSTITUTION DID NOT APPLY TO A PRIVATE ATTENDING PHYSICIAN AT THE INSTITUTION.

The First Department, applying contract interpretation principles to a release, determined the release, narrowly interpreted by its precise terms, applied to the Cabrini Center for Nursing and Rehabilitation, but did not apply to a private attending physician (Nicolescu) at Cabrini:

Assuming arguendo that defendant Nicolescu, a private attending physician at Cabrini, could be considered a “staff” member of Cabrini, the release is unambiguously limited only to “causes of action” that plaintiffs had against Cabrini, and does not release any other tortfeasors not expressly named therein from liability for causes of action asserted against them (General Obligations Law § 15-108[a]…). Interpreting the release as urged by defendant Nicolescu to release him from liability for causes of action asserted against him individually would return to the common law rule in effect before enactment of General Obligations Law § 15-108(a), when general releases were “a trap for the average man who quite reasonably assumes that settling his claim with one person does not have any effect on his rights against others with whom he did not deal” … . Linn v New York Downtown Hosp., 2016 NY Slip Op 03992, 1st Dept 5-24-16

NEGLIGENCE (RELEASE APPLICABLE TO INSTITUTION DID NOT APPLY TO A PRIVATE ATTENDING PHYSICIAN AT THE INSTITUTION)/GENERAL OBLIGATIONS LAW (RELEASE APPLICABLE TO INSTITUTION DID NOT APPLY TO A PRIVATE ATTENDING PHYSICIAN AT THE INSTITUTION)/CONTRACT LAW (RELEASE APPLICABLE TO INSTITUTION DID NOT APPLY TO A PRIVATE ATTENDING PHYSICIAN AT THE INSTITUTION) RELEASES (RELEASE APPLICABLE TO INSTITUTION DID NOT APPLY TO A PRIVATE ATTENDING PHYSICIAN AT THE INSTITUTION)

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PURCHASER OF UNSOLD SHARES IN A COOPERATIVE BOUND BY A STIPULATION TO WHICH PURCHASER WAS NOT A PARTY; STIPULATION RESTRICTED THE NUMBER OF BOARD MEMBERS WHO COULD BE ELECTED BY HOLDERS OF UNSOLD SHARES.

The First Department, in a full-fledged opinion by Justice Acosta, determined a purchaser of a cooperative apartment, Johnson, was bound by a pre-existing stipulation to which Johnson was not a party. The stipulation required that the holders of unsold shares in the cooperative (HUS) could elect no more than two of the five directors. Unsold shares are held by investors who do not live in the apartments:

The [relevant] documents, including Johnson’s express agreement to take subject to the provisions of the proprietary lease, which incorporated the stipulation, make clear that he was an HUS and was bound by the stipulation’s provisions, including the election restriction … .

[The holder of the unsold shares] should not be permitted to frustrate its obligations under the offering plan or stipulation by transferring its shares to puppet entities to syphon votes away from resident shareholder candidates in order to control the board well beyond the period contemplated by the Attorney General … . Indeed, there is no question that the sole purpose of [the] assign[ment of] 600 shares to Johnson just four days before the … board election was to avoid the provision that prohibited holders of unsold shares from electing more than two directors. Matter of Tiemann Place Realty, LLC v 55 Tiemann Owners Corp., 2016 NY Slip Op 04007, 1st Dept 5-24-16

CONTRACT LAW (COOPERATIVE APARTMENTS, PURCHASER OF UNSOLD SHARES IN A COOPERATIVE BOUND BY A STIPULATION TO WHICH PURCHASER WAS NOT A PARTY; STIPULATION RESTRICTED THE NUMBER OF BOARD MEMBERS WHO COULD BE ELECTED BY HOLDERS OF UNSOLD SHARES)/CORPORATION LAW (COOPERATIVE APARTMENTS, PURCHASER OF UNSOLD SHARES IN A COOPERATIVE BOUND BY A STIPULATION TO WHICH PURCHASER WAS NOT A PARTY; STIPULATION RESTRICTED THE NUMBER OF BOARD MEMBERS WHO COULD BE ELECTED BY HOLDERS OF UNSOLD SHARES)/COOPERATIVES (COOPERATIVE APARTMENTS, PURCHASER OF UNSOLD SHARES IN A COOPERATIVE BOUND BY A STIPULATION TO WHICH PURCHASER WAS NOT A PARTY; STIPULATION RESTRICTED THE NUMBER OF BOARD MEMBERS WHO COULD BE ELECTED BY HOLDERS OF UNSOLD SHARES)

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ERROR TO IMPOSE PRE-JUDGMENT INTEREST AT THE STATUTORY RATE WHEN CONTRACT PROVIDED THAT THE INTEREST-BEARING DOWNPAYMENT WAS THE EXCLUSIVE REMEDY FOR BREACH.

The First Department determined the down payment bearing interest at the rate agreed to in the (real estate) contract was the exclusive remedy. The court should not have awarded interest at the statutory rate:

The contract's terms, requiring that the down payment be placed in an interest-bearing account, so that the party entitled to the down payment would receive compensation for the deprivation of its use of the money in the form of accrued interest, were sufficiently clear to establish that interest paid at the statutory rate was not contemplated by the parties at the time the contract was formed and that the amount escrowed, including interest earned, should be the exclusive remedy to the wronged party … . Ithilien Realty Corp. v 176 Ludlow, LLC, 2016 NY Slip Op 04002, 1st Dept 5-24-16

CIVIL PROCEDURE (ERROR TO IMPOSE PRE-JUDGMENT INTEREST AT THE STATUTORY RATE WHEN CONTRACT PROVIDED THAT THE INTEREST-BEARING DOWNPAYMENT WAS THE EXCLUSIVE REMEDY FOR BREACH)/CONTRACT LAW (ERROR TO IMPOSE PRE-JUDGMENT INTEREST AT THE STATUTORY RATE WHEN CONTRACT PROVIDED THAT THE INTEREST-BEARING DOWNPAYMENT WAS THE EXCLUSIVE REMEDY FOR BREACH)/REAL ESTATE (ERROR TO IMPOSE PRE-JUDGMENT INTEREST AT THE STATUTORY RATE WHEN CONTRACT PROVIDED THAT THE INTEREST-BEARING DOWNPAYMENT WAS THE EXCLUSIVE REMEDY FOR BREACH)

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FAILURE TO STRICTLY COMPLY WITH CONDITION-PRECEDENT NOTICE PROVISIONS IN THE CONSTRUCTION CONTRACT PRECLUDED RECOVERY FOR DELAY DAMAGES.

The Second Department, reversing Supreme Court, determined plaintiff was not entitled to [construction] delay damages because plaintiff did not strictly comply with the delay-notice requirements spelled out in the contract as a condition precedent:

“Where a construction contract contains a condition precedent-type notice provision setting forth the consequences of a failure to strictly comply,' strict compliance will be required”… . Express conditions precedent “must be literally performed; substantial performance will not suffice,” and “[f]ailure to strictly comply with such provisions generally constitutes a waiver of a claim” … .

Here, article 11 of the primary contract between the defendant and the City, which is incorporated into the subcontract, contains such a condition-precedent type notice provision. Article 11.1.2 requires a contractor claiming to be sustaining delay damages to submit, “within forty-five (45) Days from the time such damages are first incurred, and every thirty (30) Days thereafter for as long as such damages are incurred, verified statements of the details and amounts of such damages, together with documentary evidence of such damages.” Moreover, pursuant to article 11.2, a failure “to strictly comply with the requirements of Article . . . 11.1.2 shall be deemed a conclusive waiver by the Contractor of any and all claims for damages for delay arising from such condition.”

The letters and emails relied upon by the Supreme Court and the plaintiff did not strictly comply with the contractual notice requirement, since they did not contain verified statements of the amount of delay damages allegedly sustained by the plaintiff and were unsupported by documentary evidence … . Schindler El. Corp. v Tully Constr. Co., Inc., 2016 NY Slip Op 03868, 2nd Dept 5-18-16

CONTRACT LAW (FAILURE TO STRICTLY COMPLY WITH CONDITION-PRECEDENT NOTICE PROVISIONS IN THE CONSTRUCTION CONTRACT PRECLUDED RECOVERY FOR DELAY DAMAGES)/LABOR-CONSTRUCTION LAW (FAILURE TO STRICTLY COMPLY WITH CONDITION-PRECEDENT NOTICE PROVISIONS IN THE CONSTRUCTION CONTRACT PRECLUDED RECOVERY FOR DELAY DAMAGES)/CONSTRUCTION CONTRACTS (DELAY DAMAGES, FAILURE TO STRICTLY COMPLY WITH CONDITION-PRECEDENT NOTICE PROVISIONS IN THE CONSTRUCTION CONTRACT PRECLUDED RECOVERY FOR DELAY DAMAGES)/DELAY DAMAGES (CONSTRUCTION CONTRACTS, FAILURE TO STRICTLY COMPLY WITH CONDITION-PRECEDENT NOTICE PROVISIONS IN THE CONSTRUCTION CONTRACT PRECLUDED RECOVERY FOR DELAY DAMAGES)/CONDITIONS PRECEDENT (CONSTRUCTION CONTRACTS, FAILURE TO STRICTLY COMPLY WITH CONDITION-PRECEDENT NOTICE PROVISIONS IN THE CONSTRUCTION CONTRACT PRECLUDED RECOVERY FOR DELAY DAMAGES)

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