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THE UNAMBIGUOUS INSURANCE POLICY DID NOT INCLUDE COVERAGE FOR LOSS OF BUSINESS INCOME AND THE POLICY MUST BE ENFORCED AS WRITTEN (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the coverage unambiguously described in an insurance policy must be enforced as written and there is no coverage for anything, here loss of business income, which is not explicitly described in the contract:

… [T]he insurance contract unambiguously does not include coverage for actual loss of business income. The contract provides coverage “as described and limited” for certain categories of loss “for which a Limit Of Insurance is shown in the Declarations.” Actual loss of business income, however, is neither described nor limited by the declarations. Thus, there is no actual loss of business income coverage “by reason of ‘lack of inclusion’ “… , and “the policy as written could not have covered the liability in question under any circumstances” … . Downstairs Cabaret, Inc. v Wesco Ins. Co., 2020 NY Slip Op 05637, Fourth Dept 10-9-20

 

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SUPREME COURT SHOULD NOT HAVE HELD AS A MATTER OF LAW THAT THE TRIGGERING EVENT FOR INSURANCE COVERAGE FOR ASBESTOS-INJURY IS THE FIRST EXPOSURE TO ASBESTOS AS OPPOSED TO EXPOSURE TO A CERTAIN LEVEL OF ASBESTOS (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court in this asbestos exposure case, held it should not have been determined as a matter of law that insurance coverage is triggered by the first exposure to asbestos, as opposed after exposure to a certain level of asbestos:

The parties do not dispute that the applicable test in determining what event constitutes personal injury sufficient to trigger coverage is injury-in-fact, “which rests on when the injury, sickness, disease or disability actually began” … . Rather, the parties dispute when an asbestos-related injury actually begins: plaintiffs assert that injury-in-fact occurs upon first exposure to asbestos, while defendant denies that assertion and instead maintains that injury-in-fact occurs only when a threshold level of asbestos fiber or particle burden is reached that overtakes the body’s defense mechanisms. The court concluded, as a matter of law, that injury-in-fact occurs upon first exposure to asbestos. … [T]he court erred in that regard, and we therefore modify the judgment by denying the subject motion for partial summary judgment and vacating the declaration with respect to that motion. Carrier Corp. v Allstate Ins. Co., 2020 NY Slip Op 05620, Fourth Dept 10-9-20

 

DEFENDANT INSURER’S MOTION FOR SUMMARY JUDGMENT DISMISSING THE “BAD FAITH” COMPLAINT–ALLEGING A BAD FAITH FAILURE TO SETTLE PLAINTIFF’S PERSONAL INJURY ACTION STEMMING FROM A TRAFFIC ACCIDENT–SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant insurer demonstrated it did not act in bad faith when it refused to settle a personal injury action. Plaintiff VanNostrand sued Froelich in an action stemming from a traffic accident and recovered a $300,000 verdict. Froelich’s insurer, defendant New York Central Mutual Fire Insurance Company, had refused to settle. Froelich assigned his rights in the policy to VanNostrand and they sued the insurer alleging a bad faith failure to settle. The Second Department held the insurer’s motion for summary judgment should have been granted:

” … [A] bad-faith plaintiff must establish that the defendant insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted” … . …

… [T]he evidence submitted by the defendant in support of its motion for summary judgment established … the defendant had a rational basis for concluding that a jury in the underlying action could find that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident, which would preclude her from recovery in the underlying action (see Insurance Law § 5104[a]). Specifically, the defendant monitored the plaintiff’s claim in the underlying action and, among other things, retained expert physicians to examine the plaintiff and review the MRI films of her spine. One of the defendant’s experts concluded, inter alia, that the alleged disc herniation at L5-S1 did not involve any root impingement. As far as the alleged disc herniation at C3-C4 was concerned, the defendant’s expert found no herniation and, at most, a bulge. Moreover, it was undisputed that the plaintiff returned to work within one month of the accident and did not seek recovery for lost wages. It was further undisputed that as of November 2001, two years after the accident, and at the time of trial in April 2013, the plaintiff was not taking any medication or undergoing any further treatment. In opposition, the plaintiff failed to raise a triable issue of fact. VanNostrand v New York Cent. Mut. Fire Ins. Co., 2020 NY Slip Op 05550, Second Dept 10-7-20

 

AFTER OBTAINING AN UNPAID JUDGMENT AGAINST THE INSURED, PLAINTIFF PROPERLY SUED THE INSURER WHICH HAD DISCLAIMED COVERAGE ALLEGING THE INSURED HAD REFUSED TO COOPERATE; THE PROOF OF THE INSURED’S ALLEGED FAILURE TO COOPERATE WAS NOT SUFFICIENT TO RAISE A QUESTION OF FACT; PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AGAINST THE INSURER WAS PROPERLY GRANTED (SECOND DEPT).

The Second Department, in a comprehensive decision explaining the law, determined plaintiff properly sued the defendant’s insurer after obtaining an unpaid judgment against the insured. The insurer argued it had properly disclaimed coverage because the insured did not cooperate by answering questions. However, the insurer’s submissions did not demonstrate the insured’s failure to cooperate and plaintiff was entitled to summary judgment against the insurer:

[The] statutory right, presently codified at Insurance Law § 3420, among other things, “grants an injured party a right to sue the tortfeasor’s insurer, but only under limited circumstances—the injured party must first obtain a judgment against the tortfeasor, serve the insurance company with a copy of the judgment and await payment for 30 days” … . “Compliance with these requirements is a condition precedent to a direct action against the insurance company” … . * * *

Here, the insurer contended that [the insured’s] principal, Michael Stoicescu, refused to cooperate and thereby breached the subject policy. The insurer did not allege that any other individuals associated with [the insured]  failed to cooperate. Although the insurer claimed that Stoicescu refused to cooperate in the underlying action, it is undisputed that he appeared for an examination before trial where he testified at length … . The insurer failed to identify any information that Stoicescu refused to disclose, or any document that he refused to provide in connection with the underlying action … . The insurer’s contention that Stoicescu refused to respond to certain telephone calls and letters was insufficient to show “an attitude of willful and avowed obstruction” … . Furthermore, although the insurer submitted evidence to show that, after years of litigation, Stoicescu had stated during one or more telephone calls that he would not attend a trial in the underlying action, any such statements were made before a date for the trial had even been set … , and the insurer did not allege that Stoicescu actually failed to appear for any required court appearance … . DeLuca v RLI Ins. Co., 2020 NY Slip Op 05487, Second Dept 10-7-20

 

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EVIDENCE DID NOT ESTABLISH AS A MATTER OF LAW THAT THE INSURED’S WATER-DAMAGE CLAIM WAS FRAUDULENTLY INFLATED; INSURER WAS NOT ENTITLED TO SUMMARY JUDGMENT DISCLAIMING COVERAGE (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the defendant insurer (Allegany) did not present sufficient evidence an inflated water-damage claim to warrant disclaiming coverage. The insurer’s summary judgment motion should not have been granted:

Allegany failed to meet its initial burden on its motion of establishing as a matter of law that the claim was inflated … . A policy may be voided if the insured ” ‘willfully and fraudulently placed in the proofs of loss a statement of property lost which [the insured] did not possess, or has placed a false and fraudulent value upon the articles which [the insured] did own’ ” … . “Incorrect information is not necessarily tantamount to fraud or material misrepresentation as the insurer must tender ‘proof of intent to defraud—a necessary element to the defense’ ” … . ” ‘[U]nintentional fraud or false swearing or the statement of any opinion mistakenly held[, however,] are not grounds for vitiating a policy’ ” … .

… [A]lthough Allegany’s submissions in support of its motion demonstrate a disparity between the estimates of plaintiff’s contractor and Allegany’s assessor of the amount of damage and loss … , the submissions fail to establish fraudulent intent on the part of plaintiff … . Plaintiff’s proof of loss statement did not include duplicative items, unincurred expenses, or substantial sums of money that were unaccounted for … , and the disparity between the damage estimate of plaintiff’s contractor and the estimate of Allegany’s assessor is not “so grossly excessive as to constitute false swearing and misrepresentation” … . Magnano v Allegany Co-Op Ins. Co., 2020 NY Slip Op 05339, Fourth Dept 10-2-20

 

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THE MANAGER OF PLAINTIFF BAR PUSHED A MAN DOWN A SET OF STAIRS CAUSING FATAL INJURIES; THE ASSAULT AND BATTERY EXCLUSION IN DEFENDANT’S INSURANCE POLICY APPLIED AND THE INSURER WAS NOT OBLIGATED TO DEFEND THE BAR (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the assault and battery insurance policy exclusion applied and the insurer was not obligated to defend the plaintiff in the underlying personal injury action. The manager at plaintiff bar had pushed a man down a set of stairs, causing fatal injuries. The manager pled guilty to manslaughter:

Generally, an insurer is “required to provide a defense unless it can demonstrate that the allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation” … . …

… [A]ll of the claims against plaintiffs in the underlying action are ” ‘based on’ ” or arise out of the bar manager’s assault, “without which [the plaintiff in the underlying personal injury action] would have no cause of action” … . In other words, “no cause of action would exist but for the assault” and, therefore, the assault and battery exclusion is applicable and precludes coverage … . …

… [A] determination on this issue need not await discovery in the personal injury action. The analysis of whether an exclusion applies “depends on the facts which are pleaded, not the conclusory assertions” contained in the underlying complaint … . “[T]he allegations of the complaint [in the underlying personal injury action] cast that pleading solely and entirely within the policy exclusions, and . . . the allegations, in toto, are subject to no other interpretation” … . Even if it were learned during discovery that there was a defect with respect to the stairs, the fact remains that, but for the bar manager’s assault, decedent would not have fallen down the stairs. NHJB, Inc. v Utica First Ins. Co., 2020 NY Slip Op 05319, Fourth Dept 10-2-20

 

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THE EXCESS INSURANCE CARRIER WAS NOT BARRED FROM RECOVERY OF THE AMOUNT IT CONTRIBUTED TO THE SETTLEMENT OF A PERSONAL INJURY ACTION BY THE VOLUNTARY PAYMENT DOCTRINE; THE EXCESS INSURANCE CARRIER’S BREACH-OF-THE-COVENANT-OF-GOOD-FAITH ACTION AGAINST THE PRIMARY CARRIER PROPERLY SURVIVED SUMMARY JUDGMENT (SECOND DEPT).

The Second Department determined the excess insurance carrier, MetLife, could maintain an action against the primary liability carrier, GEICO, for breach of the implied covenant of good faith and fair dealing, alleging bad faith. GEICO  unsuccessfully argued the voluntary payment doctrine barred MetLife from recovering the amount it contributed to the settlement of the personal injury action stemming from an auto accident:

“The voluntary payment doctrine ‘bars recovery of payments voluntarily made with full knowledge of the facts, and in the absence of fraud or mistake of material fact or law'” … . However, the voluntary payment doctrine does not bar an excess insurance carrier, such as MetLife, that contributed to a settlement of an underlying action from seeking to recover its settlement contribution from a primary insurance carrier, such as GEICO, based on the primary carrier’s alleged bad faith. Despite an excess insurance carrier’s decision to contribute to a settlement, an excess insurance carrier may later maintain an action against a primary insurance carrier for breaching its duty of good faith in defending and settling claims over which it exercised exclusive control, provided that the excess insurance carrier reserved its rights against the primary insurance carrier at the time of the settlement … . An insurer may be held liable for breaching its duty of good faith … , and a primary liability insurer owes an excess insurance carrier the same duty of good faith as the primary liability insurer owes its insureds … . Metropolitan Prop. & Cas. Ins. Co. v GEICO Gen. Ins. Co., 2020 NY Slip Op 05045, Second Dept 9-23-20

 

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THE POLICE REPORT WHICH INCLUDED THE LICENSE PLATE NUMBER OF THE CAR ALLEGED TO HAVE FLED THE SCENE OF THE TRAFFIC ACCIDENT WAS INADMISSIBLE HEARSAY; HOWEVER, OTHER EVIDENCE, INCLUDING THE TESTIMONY OF THE DRIVER OF THE CAR WHICH WAS STRUCK, SUFFICIENTLY IDENTIFIED THE LICENSE PLATE NUMBER AND THE CAR (SECOND DEPT).

The Second Department determined the uninsured motorist carrier’s petitions to permanently stay arbitration in this car-accident case were properly granted because the identity of the owner of the car which fled the scene (Zeno) was adequately demonstrated. Although the police report which included the license plate number of the car alleged to have fled the scene was inadmissible hearsay, the eyewitness testimony at the framed issue hearing by the driver (Welder) of the car which was struck was sufficient:

Here, the information in the police report was not derived from the personal observations of the police officer, who did not observe the accident (see CPLR 4518[a] …). Because the source of the information in the police report regarding the license plate number of the Hyundai cannot be identified, the police report was inadmissible … . …

… [T]he Supreme Court’s determination that Zeno’s vehicle was involved in the subject accident is supported by the evidence presented at the hearing, excluding the police report … . Welker testified that he clearly observed the color, make, style, and license plate number of the offending vehicle, recorded the license plate number, and provided that information to the police officer who responded to the accident. Welker also testified that the license plate number that corresponded to Zeno’s vehicle was identical to the license plate number he provided to the police officer. Further, the police officer testified that he routinely takes a statement from the operator of a vehicle at the scene of an accident, and it is common practice for this information to be written in the police accident report. While Zeno stated that there was no pre-existing damage to his vehicle prior to the accident and that no repairs were made to the front of the vehicle, photographs of his vehicle that were admitted at the hearing show that, when compared to the front of the vehicle on the passenger’s side, the front of the vehicle on the driver’s side has different, replacement, or missing parts. Country-Wide Ins. Co. v Lobello, 2020 NY Slip Op 04836, Second Dept 9-2-20

 

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PLAINTIFF’S HOMEOWNER’S POLICY EXCLUDED COVERAGE FOR INTENTIONAL ACTS; THEREFORE THE INSURER WAS NOT OBLIGATED TO DEFEND PLAINTIFF IN A SUIT STEMMING FROM AN ALLEGED ASSAULT BY PLAINTIFF ON HIS NEIGHBOR (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined defendant insurer was not obligated to defend plaintiff (pursuant to plaintiff’s homeowner’s policy) because the injuries stemmed from an apparent assault by plaintiff on his neighbor (Salerno) and therefore involved intentional, not negligent, acts. The policy excluded coverage for injuries resulting from intentional acts. Salerno sued plaintiff in tort:

In assessing whether a policy exclusion for injuries ” intentionally caused’ ” by the insured applies, a court must look to the pleadings in the underlying action and “limit [its] examination to the nature of the conduct [of the insured] as it is there described” … . The “analysis depends on the facts which are pleaded, not conclusory assertions” … . When a complaint alleges in a conclusory manner that an assault was committed negligently, an insurer has no duty to defend where the insured does not provide “evidentiary support for the conclusory characterization of [the] conduct as negligent or provide an explanation of how the intrinsically intentional act[] of assault . . . could be negligently performed” … . An insured may not “exalt form over substance by labeling [an underlying tort] action as one to recover damages for negligence” where the conduct is inherently intentional … .

Here, the second cause of action in the Salerno complaint contains no more than a conclusory characterization of plaintiff’s conduct as negligent without any supporting factual allegations. Thus, the complaint in the underlying action does not contain sufficient allegations of negligence to avoid the policy exclusion … . Scalzo v Central Co-op. Ins. Co., 2020 NY Slip Op 04639, Fourth Dept 8-20-20

 

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BANKRUPTCY EXCEPTION TO THE INSURED VS INSURED EXCLUSION IN THIS DIRECTORS & OFFICERS LIABILITY INSURANCE POLICY APPLIED TO THE CREDITOR TRUST FORMED TO PURSUE THE BANKRUPTCY ESTATE’S LEGAL CLAIMS ON BEHALF OF UNSECURED CREDITORS (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Renwick, in a matter of first impression, determined the bankruptcy exception to the insured vs. insured exclusion applied to the Directors & Officers (D & O) liability insurance policy:

Plaintiff Westchester Fire Insurance Co. … commenced this action seeking a declaration that it has no coverage obligations to defendants insureds, arguing primarily that the “insured versus insured” exclusion of a Directors and Officers (D & O) liability insurance policy, procured by RCS Capital Corporation (RCAP), bars coverage of claims asserted against defendants, … RCAP’s former directors and officers. Defendants insureds contend, among other things, that coverage exists under the bankruptcy exception to the insured vs. insured exclusion. The claims, herein, arose after RCAP’s bankruptcy.

The Creditor Trust was formed, pursuant to the reorganization plan, to pursue the bankruptcy estate’s legal claims on behalf of the unsecured creditors … . …

This appeal raises an issue of apparent first impression of whether a D & O liability policy’s bankruptcy exception, which allows claims asserted by the “bankruptcy trustee” or “comparable authority,” applies to claims raised by a Creditor Trust, as a post-confirmation litigation trust, to restore D & O coverage removed by the insured vs. insured exclusion. For the reasons that follow, we find that the bankruptcy exception to the insured vs. insured exclusion, applies to restore coverage. Specifically, we interpret the broad language “comparable authority” to encompass a Creditor Trust that functions as a post-confirmation litigation trust, given that such a Creditor Trust is an authority comparable to a “bankruptcy trustee” or other bankruptcy-related or “comparable authority” listed in the bankruptcy exception. Westchester Fire Ins. Co. v Schorsch, 2020 NY Slip Op 04627, First Dept 8-20-20

 

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