Insurance Law Archives - New York Appellate Digest

THE AMBIGUITY IN THE HOME INSURANCE POLICY WAS NOT CLEARED UP BY EXTRINSIC EVIDENCE AND MUST BE RESOLVED AGAINST THE INSURER; THE INSURER SHOULD NOT HAVE DISCLAIMED COVERAGE FOR WATER DAMAGE CAUSED BY FROZEN PIPES (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the insurer should not have disclaimed coverage for water damage caused by frozen pipes in plaintiffs’ seasonal home. The case turned on the whether the plaintiffs took “reasonable care” (within the meaning of the policy) to maintain the heat in the house:

… [P]laintiffs established as follows: the home’s heating system was recently installed, was regularly maintained, and had never required repairs; Robert P. McAleavey (plaintiff) winterized the property by setting the internal temperature to approximately 50 degrees in the late fall of 2017; plaintiff checked on the home approximately 15 times during the winter of 2017-2018; during those visits, plaintiff ensured that the temperature was appropriate, that no windows were broken, that the toilets flushed, and that the water ran; and plaintiff last visited the house on January 11 or 12, 2018, at which point the interior temperature was “comfortable.” Although plaintiff was unable to visit the property between mid-January and late February 2018 due to a broken leg and his resulting hospitalization, plaintiffs’ submissions established that, during such period, they had no notice or reason to suspect that anything was wrong with the premises or the heating system. Moreover, plaintiffs’ neighbors and realtor periodically checked on the property’s exterior.

In our view, the term “reasonable care” as used in the policy is ambiguous inasmuch as it is susceptible of at least two reasonable interpretations, at least one of which supports plaintiffs’ contention that they exercised reasonable care, and this ambiguity was not resolved by extrinsic evidence … .

” ‘[U]nder [these] circumstances, the ambiguity must be resolved against the insurer which drafted the contract’ ” … . We thus conclude that plaintiff’s loss is specifically covered under the policy and that the exclusion relied on by defendant does not unambiguously apply in this case … . McAleavey v Chautauqua Patrons Ins. Co., 2021 NY Slip Op 03954, Fourth Dept 6-17-21

June 17, 2021/by Bruce Freeman

THE EXAMINATION UNDER OATH (EUO) WAS SCHEDULED BEFORE THE INSURER RECEIVED A CLAIM FORM; THEREFORE THE INSURER DID NOT HAVE TO DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF 11 NYCRR 65-3.5 TO BE ENTITLED TO A DEFAULT DECLARATORY JUDGMENT; THE UNDERLYING TRAFFIC ACCIDENT WAS FOUND TO HAVE BEEN STAGED AND CLAIMANT FAILED TO APPEAR AT SCHEDULED EOU’S (FIRST DEPT).

The First Department noted that where an examination under oath (EUO) is scheduled before the insurance company’s of a claim form, the insurer need not submit the proof of mailing in compliance with 11 NYCRR 65-3.5 to obtain a default declaratory judgment. It was determined the underlying traffic accident was staged and claimant did not appear at scheduled EOU’s:

As to claimant Ronald Marcellus, plaintiff additionally provided sufficient proof that he failed to appear for an examination under oath (EUO) despite receiving proper notice, which vitiates the policy … . Generally, an insurer must provide proof that the EUO requests were timely mailed, within 15 business days of receipt of the prescribed verification forms, in compliance with 11 NYCRR 65-3.5 in order to obtain a default declaratory judgment … . However, that requirement does not apply where, as here, the EUOs are scheduled prior to the insurance company’s receipt of a claim form … . Since Marcellus failed to appear on two or more occasions and the EUO requests were sent prior to plaintiff’s receipt of a claim form, plaintiff did not need to demonstrate compliance for the verification requests under 11 NYCRR 65-3.5. State Farm Mut. Auto. Ins. Co. v Surgicore of Jersey City, LLC, 2021 NY Slip Op 03536, First Dept 6-3-21

June 3, 2021/by Bruce Freeman

Contract Law, Insurance Law

DEFENDANT DOCTOR’S FAILURE TO APPEAR FOR THE NO-FAULT EXAMINATION UNDER OATH (EUO) REQUESTED BY THE INSURER JUSTIFIED THE DENIAL OF DEFENDANT’S CLAIMS FOR BENEFITS (FIRST DEPT).

The First Department, reversing Supreme Court, determined the surgeon’s failure to appear for the no-fault examination under oath (EUO) requested by the insurer voided the insurance policy:

Plaintiff sent defendant a timely request for an examination under oath (EUO) with respect to a claim for benefits in the amount of $6,106.56, for shoulder surgery performed by defendant on an individual that was a passenger in a vehicle involved in an accident, covered by a no-fault insurance policy issued by plaintiff. Defendant failed to appear and plaintiff denied all claims for benefits made by defendant.

The failure to appear for an EUO that was requested in a timely fashion by the insurer is a breach of a condition precedent to coverage and voids the policy ab initio … . The coverage defense applies to any claim and is not determined on a bill by bill basis … . The EUO was timely requested as to the second claim for benefits for the shoulder surgery, accordingly, defendant’s failure to appear at that EUO voided the policy ab initio as to all claims, and plaintiff’s cross motion for summary judgment should have been granted in its entirety. Unitrin Advantage Ins. Co. v Dowd, 2021 NY Slip Op 03012, First Dept 5-11-21

May 11, 2021/by Bruce Freeman

Employment Law, Insurance Law

THE GENERAL OBLIGATIONS LAW PROHIBITION OF SEEKING REIMBURSEMENT OF MEDICAL COSTS FROM A TORT ACTION SETTLEMENT DOES NOT APPLY TO SELF-FUNDED EMPLOYEE BENEFIT PLANS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the General Obligations Law prohibition of seeking reimbursement of medical costs out of an insured’s tort action settlement does not apply to self-funded employee benefit plans.

The infant plaintiff was injured in an automobile accident and, after this personal injury action was commenced, sought the Supreme Court’s approval to accept the defendants’ offer to settle his claim for the policy limit of the defendants’ insurance policy of $300,000. The appellant, which is the administrator of the employee benefit plan for the employer of the infant plaintiff’s mother, sought to enforce a subrogation lien in the sum of $108,008.10, for the sums the plan paid for medical bills for the infant plaintiff arising out of the accident, against the settlement proceeds. The appellant contended that New York’s anti-subrogation statute, General Obligations Law § 5-335, was preempted because the employee benefit plan at issue was a self-funded plan governed by the Employment Retirement Income Security Act of 1974 (29 USC § 1001 et seq. ; hereinafter ERISA). …

While General Obligations Law § 5-335 precludes health insurers from seeking reimbursement out of an insured’s tort action settlement, that statute is preempted by ERISA in the instance of self-funded plans, which are not deemed to be insurers or insurance companies … . Here, the appellant established that the employee benefit plan at issue was self-funded, in that it does not purchase an insurance policy from an insurance company in order to satisfy its obligations to plan participants. As such, it was error to hold that the subrogation lien was unenforceable against the infant plaintiff’s settlement proceeds. David v David, 2021 NY Slip Op 02784, Second Dept 5-5-21

May 5, 2021/by Bruce Freeman

Contract Law, Insurance Law

QUESTIONS OF FACT ABOUT WHETHER THE INSURER IS ESTOPPED FROM DENYING COVERAGE TO A PARTY LISTED AS AN ADDITIONAL INSURED IN A CERTIFICATE OF INSURANCE (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined there were questions of fact about plaintiff’s reliance on a certificate of insurance and whether the certificate was issued by the carrier or its agent. Although a certificate of insurance is not a contract, the carrier may be estopped from denying coverage if the party named as an additional insured in the certificate relied on the certificate and the certificate was issued by the insurer or its agent:

“It is well established that a certificate of insurance, by itself, does not confer insurance coverage, particularly [where, as here,] the certificate expressly provides that it is issued as a matter of information only and confers no rights upon the certificate holder [and] does not amend, extend or alter the coverage afforded by the policies” … . “A certificate of insurance is only evidence of a carrier’s intent to provide coverage but is not a contract to insure the designated party nor is it conclusive proof, standing alone, that such a contract exists” … .

” ‘Nevertheless, an insurance company that issues a certificate of insurance naming a particular party as an additional insured may be estopped from denying coverage to that party where the party reasonably relies on the certificate of insurance to its detriment’ ” … ” ‘For estoppel based upon the issuance of a certificate of insurance to apply, however, the certificate must have been issued by the insurer itself or by an agent of the insurer’ ” … . County of Erie v Gateway-Longview, Inc., 2021 NY Slip Op 02631, Fourth Dept 4-30-21

April 30, 2021/by Bruce Freeman

Administrative Law, Constitutional Law, Insurance Law

THE DEPARTMENT OF FINANCIAL SERVICES’ AMENDMENT TO AN INSURANCE REGULATION DESIGNED TO PROTECT CONSUMERS OF LIFE INSURANCE AND ANNUITY PRODUCTS IS VOID FOR VAGUENESS (THIRD DEPT).

The Third Department, in a full-fledged opinion by Justice Egan, reversing Supreme Court, determined the Department of Financial Services’ (DFS’s) amendment to an Insurance Regulation was void for vagueness:

The amendment was promulgated to address concerns with respect to the growing complexities involved with life insurance and annuity products, the corresponding need for consumers to increasingly rely on the advice of professionals in order to comprehend the widening market of products available and to mitigate abuses with respect to the compensation of agents and brokers (hereinafter collectively referred to as producers [see 11 NYCRR 224.3 (c)]) who have incentive to manipulate consumers into purchasing financial products that result in higher commissions but ultimately fail to meet their needs. * * *

… [W]hile the consumer protection goals underlying promulgation of the amendment are laudable, as written, the amendment fails to provide sufficient concrete, practical guidance for producers to know whether their conduct, on a day-to-day basis, comports with the amendment’s corresponding requirements for making recommendations and compiling and evaluating the relevant suitability information of the consumer … . Although the amendment provides certain examples of what a recommendation does not include (i.e., “general factual information to consumers, such as advertisements, marketing materials, general education information” and “use of . . . interactive tool[s]” (11 NYCRR 224.3 [e] [2]), the remaining definitional language is so broad that it is difficult to discern what statements producers could potentially make that would not be reasonably interpreted by the consumer to constitute advice regarding a potential sales transaction and therefore fall within the purview of the amendment (see 11 NYCRR 224.3 [e] [1], [2]). Matter of Independent Ins. Agents & Brokers of N.Y., Inc. v New York State Dept. of Fin. Servs., 2021 NY Slip Op 02574, Third Dept 4-29-21

April 29, 2021/by Bruce Freeman

Debtor-Creditor, Evidence, Insurance Law

THE MEDICAL CENTER WAS ENTITLED TO THE NO-FAULT INSURANCE BENEFITS ASSIGNED TO IT BY THE PEDESTRIAN INJURED BY PLAINTIFF’S TAXI; THE FACT THAT THE PEDESTRIAN HAD SETTLED HIS ACTION AGAINST THE PLAINTIFF TAXI COMPANY DID NOT HAVE ANY BEARING ON THE PLAINTIFF’S OBLIGATION TO PAY THE NO-FAULT BENEFITS TO THE MEDICAL CENTER (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant medical center was entitled to the no-fault benefits assigned to it by the pedestrian injured by plaintiff’s taxi in this traffic accident case. The fact that the pedestrian had settled his action against the plaintiff taxi company had no bearing on the assignment of the no-fault benefits to the medical center:

“[A]n account debtor is authorized to pay the assignor until the account debtor receives notification that the amount due or to become due has been assigned and that payment is to be made to the assignee ” … . To establish that it did not receive notice of the assignment, the plaintiff relies solely on an affidavit of an employee of the plaintiff’s claims administrator, who asserted that the claims administrator never received the faxed notice on July 11, 2011. The employee’s assertion, however, was belied by overwhelming documentary evidence. Indeed, a denial of claim form dated July 20, 2011, which was prepared by the plaintiff’s claims administrator and attached to the employee’s affidavit, designated the defendant as the assignee. In addition, the defendant submitted an arbitration decision dated January 3, 2012, in which [the pedestrian’s] arbitration claim against the plaintiff for no-fault benefits was dismissed on the ground that he lacked standing because he assigned the claims for no-fault benefits. Under these circumstances, the plaintiff failed to raise a triable issue of fact as to whether it received notice of the assignment. Murzik Taxi, Inc. v Lutheran Med. Ctr., 2021 NY Slip Op 02302, Second Dept 4-14-21

April 14, 2021/by Bruce Freeman

Civil Procedure, Insurance Law, Negligence

IN THIS COMPLEX EXCESS INSURANCE CASE, WHICH INCLUDED A REVERSAL BY THE COURT OF APPEALS, THE LAW-OF-THE-CASE AND RES-JUDICATA DOCTRINES DID NOT DICTATE THE OUTCOME AND THE EXCESS INSURANCE CARRIER WAS NOT OBLIGATED TO DEFEND OR INDEMNIFY IN THE UNDERLYING PERSONAL INJURY ACTION (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Renwick, reversing Supreme Court, determined that RLI, an excess insurance carrier, was not obligated to defend or indemnify in the underlying personal injury action. In the underlying action, plaintiff, an employee of Transel Elevator, was working on an elevator at a hotel and was injured descending stairs at the hotel. The complex relationships among the parties and several insurance carriers cannot be fairly summarized here. What follows in the First Department’s summary of the case. In essence the First Department held that prior rulings did not dictate the outcome here under law-of-the-case or res-judicata principles:

Plaintiff Aspen Specialty Insurance Company commenced this action seeking a declaration that the excess insurance policy issued by RLI Insurance Company, Inc. was next in order of coverage for a personal injury action, in which Aspen and RLI’s common insured, Alphonse Hotel Corporation, was a defendant. The issue in this case is whether RLI, an excess insurer with a follow form policy, is bound by a prior judicial determination of this Court that the primary policy issued by Ironshore Indemnity Inc., which underlies RLI’s excess policy, covers the defendant in the personal injury action, Alphone, as an additional insured. In the prior declaratory judgment action between Aspen and Ironshore, this Court declared that the language in the additional insured endorsement extends coverage broadly to any injury causally linked to the named insured, which was satisfied in this case because the loss involved an employee of the named insured who was injured while performing the named insured’s work under the contract with the additional insured. RLI argues that it is not bound by this Court’s prior determination because it was not part of the prior declaratory judgment action. In the present declaratory judgment action, RLI wishes to relitigate the issue of whether Ironshore’s policy covers Alphonse as an additional insured. RLI relies upon the 2017 Court of Appeals decision in Burlington Ins. Co. v NYC Tr. Auth. (29 NY3d 313 [2017]), which interpreted language in an additional insured endorsement similar to the language here as covering the additionally insured party, vicariously, only for negligent acts of the named insured. It is undisputed in the instant case that the named insured was not in control of the instrumentality of the accident that caused the underlying personal injuries. … RLI is not bound by our prior determination and that it is entitled to a declaration that it has no obligation to defend or indemnify in the underlying personal injury action. Aspen Specialty Ins. Co. v RLI Ins. Co., Inc., 2021 NY Slip Op 02092, First Dept 4-6-21

April 6, 2021/by Bruce Freeman

Civil Procedure, Contract Law, Insurance Law

THE DEFENDANTS SOUGHT REFORMATION OF AN INSURANCE POLICY ALLEGING THE FAILURE TO NAME THEM INDIVIDUALLY AS INSUREDS WAS DUE TO A MUTUAL MISTAKE; THE 3RD DEPARTMENT, OVER A TWO-JUSTICE DISSENT, REVERSED SUPREME COURT AND HELD THE COMPLAINT FAILED TO STATE A CAUSE OF ACTION (THIRD DEPT).

The Third Department, reversing Supreme Court, over a two-justice dissent, determined defendant property owners (Pollards) did not state a cause of action for reformation of an insurance policy based upon mutual mistake. Defendants’ tenant slipped and fell on a staircase outside his apartment at 192-198 Main Street and made a claim against defendants. Defendants’ business, Pollard Excavating, was insured. The insurer disclaimed coverage of the slip and fall at defendants’ apartment because the policy covered only defendants’ business:

The Pollards … allege that they believed that they were covered in their individual capacities and that the failure of [the insurer] to name them as such was the product of a mutual mistake. “It is well established that when interpreting an insurance contract, as with any written contract, the court must afford the unambiguous provisions of the policy their plain and ordinary meaning” … .

… [T]he … third-party complaint asserts that the Pollards own the buildings located at 192-198 Main Street and that they are shareholders of Pollard Excavating and Pollard Disposal. The coverage form contained in the policy issued to Pollard Excavating specifically identifies the insured under the policy as a “corporation in the business of excavating” and further identifies, as relevant here, that “your stockholders are also insureds, but only with respect to their liability as stockholders.” Inasmuch as the express provisions of the insurance policy contract do not include individual coverage for the Pollards, it was incumbent upon the Pollards to allege sufficient facts showing mutual mistake. To that end, the second amended third-party complaint fails to contain any factual allegations that [the insurer] agreed to provide coverage to the Pollards in their individual capacities or that any oral agreement was reached by which [the insurer] was obligated to do so. We therefore find that the … third-party complaint fails to allege with sufficient particularity that the parties “reached an oral agreement and, unknown to either [party], the signed writing does not express that agreement” … . Hilgreen v Pollard Excavating, Inc., 2021 NY Slip Op 02031, Third Dept 4-1-21

April 1, 2021/by Bruce Freeman

Attorneys, Insurance Law

FAILURE TO SHOW UP FOR AN INDEPENDENT MEDICAL EXAMINATION (IME) IS A “POLICY ISSUE” WARRANTING DENIAL OF NO-FAULT BENEFITS AND THE AWARD OF ATTORNEY’S FEES TO PLAINTIFF (FIRST DEPT).

The First Department, reversing the Appellate Term and disagreeing with other courts, determined the failure to show up for an independent medical exam (IME) is a “policy issue” warranting the denial of no-fault benefits and the award of attorney’s fees to plaintiff:

… [A]n insurer who denies a claim for first-party No-Fault benefits on the basis of the injured person’s failure to attend an IME properly does so by checking box 4 on the denial of claim form, and therefore an injured person’s failure to attend an IME is a “policy issue” both according to the denial of claim form and for purposes of awarding attorneys’ fees under 11 NYCRR 65-4.6(c). Kamara Supplies v GEICO Gen. Ins. Co., 2021 NY Slip Op 01848, First Dept 3-25-21

March 25, 2021/by Bruce Freeman