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NONPARTY SUBPOENA SHOULD NOT HAVE BEEN QUASHED IN THIS OUT-OF-STATE ASBESTOS-RELATED INSURANCE ACTION, THE NONPARTY HAD BEEN EMPLOYED BY THE INSURER AND MAY POSSESS RELEVANT KNOWLEDGE ABOUT HOW THE INSURANCE POLICIES WERE INTERPRETED AND ENFORCED (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the petition to quash a nonparty subpoena in this out-of-state asbestos-related insurance action should not have been granted:

“CPLR 3101 (a) (4) allows a party to obtain discovery from a nonparty, and provides that [t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof’ ” … . The phrase “material and necessary” in CPLR 3101 “must be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity’ ” …

“An application to quash a subpoena should be granted [o]nly where the futility of the process to uncover anything legitimate is inevitable or obvious . . . or where the information sought is utterly irrelevant to any proper inquiry” … , and the burden is on the party seeking to quash a subpoena to make such a showing … . …

“[A] witness’s sworn denial of any relevant knowledge …” … is insufficient, standing alone, to establish that the discovery sought is utterly irrelevant to the action or that the subpoena, if honored, will obviously and inevitably fail to turn up relevant evidence  … . … [The nonparty’s] deposition testimony is … potentially relevant because she has personal knowledge of how [the insurer] interpreted and enforced similar “consent” provisions of other excess policies while she was employed by [the insurer]. Matter of Barber v Borgwarner, Inc., 2019 NY Slip Op 05850, Fourth Dept 7-31-19

 

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INSURER DID NOT TIMELY NOTIFY THE ADDITIONAL INSUREDS OF THE DISCLAIMER OF COVERAGE, INSURER MUST DEFEND AND INDEMNIFY THE ADDITIONAL INSUREDS IN THIS CONSTRUCTION ACCIDENT CASE (SECOND DEPT).

The Second Department determined defendant insurer (Utica) failed to timely disclaim coverage of the additional insureds and was therefore obligated to defend and indemnify the additional insureds in this construction accident case:

… [T]he plaintiff AVR-Powell C Development Corp. (hereinafter AVR-Powell), the owner of and general contractor at a construction site located on Lax Avenue in College Point, entered into a written agreement with nonparty Vinny Construction Corp. (hereinafter Vinny Construction), which was to perform masonry work in connection with the construction project. Pursuant to the agreement, Vinny Construction was required to procure and maintain a commercial general liability insurance policy naming AVR-Powell and the plaintiff Powell Cove Associates, LLC (hereinafter Powell Cove), as additional insureds. The defendant, Utica First Insurance Company (hereinafter Utica), issued a policy to Vinny Construction which included a “Blanket Additional Insured” endorsement specifying that an “[i]nsured also includes . . . [a]ny person or organization whom you are required to name as an additional insured on this policy under a written contract or written agreement.” …

Pursuant to Insurance Law § 3420 (d), an insurer is required to provide its insured and any other claimant with timely written notice of its disclaimer or denial of coverage on the basis of a policy exclusion, and will be estopped from disclaiming liability or denying coverage if it fails to do so … . Furthermore, where, as here, “a primary insurer . . . tenders a claim for a defense and indemnification to an insurer . . . which issued a certificate of insurance to the parties, indicating that they are additional insureds, that insurer must comply with the disclaimer requirements of Insurance Law § 3420(d)(2) by providing written notice of disclaimer of coverage to the additional insureds” … . …

The plaintiffs’ submissions showed that Utica did not provide a disclaimer of coverage directly to its additional insureds until March 20, 2015, approximately six years after the first demand for coverage from Utica. AVR-Powell C Dev. Corp. v Utica First Ins. Co., 2019 NY Slip Op 05758, Second Dept 7-24-19

 

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CLAIMANT PROPERLY DENIED WORKERS’ COMPENSATION BENEFITS BECAUSE CLAIMANT DID NOT OBTAIN THE WORKERS’ COMPENSATION CARRIER’S CONSENT BEFORE SETTLING WITH A THIRD-PARTY (THIRD DEPT).

The Third Department determined the denial of Workers’ Compensation benefits was proper because claimant did not obtain the Workers’ Compensation carriers consent before settling a third-party action arising from the traffic accident:

“Workers’ Compensation Law § 29 (5) requires either the carrier’s consent or a compromise order from the court in which a third-party action is pending for a claimant to settle a third-party action and continue receiving compensation benefits” … . The burden is on the claimant to establish that proper consent was obtained … . “The question of whether a settlement was procured with the proper consent of the carrier is a factual issue for the Board to determine” … . It is “well settled[] that neither [this Court] nor the Court of Appeals has power to upset the determination of an administrative tribunal on a question of fact . . . beyond seeing to it that there is substantial evidence” … .

In support of claimant’s contention that consent for the settlement was properly obtained, he relies on the final sentence in two correspondences sent by the carrier to his third-party counsel stating that the carrier “has no objection to a $50,000 policy limit settlement of the claimant’s bodily injury claim.” Both correspondences, however, also specifically advised that the carrier’s “consent is required prior to settlement or discontinuance of any third-party action” and to “please communicate with [the carrier]” before settlement to arrange for consent and satisfaction of the lien. A review of the entire correspondences and the plain language therein reflects that the carrier anticipated further communication with the third-party counsel prior to consenting to any settlement. Matter of Hisert v Ron Allen Trucking Inc., 2019 NY Slip Op 05735, Third Dept 7-18-19

 

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UNINSURED MOTORIST CARRIER (GEICO) WAS ENTITLED TO A FRAMED ISSUE HEARING TO RESOLVE CONFLICTING EVIDENCE WHETHER THE VEHICLE INVOLVED IN THE HIT AND RUN WAS INSURED (SECOND DEPT).

The Second Department determined there was conflicting evidence whether a particular vehicle (owned by McRae) was involved in a hit and run accident involving a parked car in which Williams and Shields were sitting. The alleged registration number matched that of the McRae vehicle which was insured by Liberty Mutual. However, there was evidence the McRae vehicle was being repaired on the day of the accident. A framed issue hearing was therefore required:

GEICO commenced this proceeding pursuant to CPLR article 75 to permanently stay arbitration of the claim for uninsured motorist benefits or, in the alternative, to temporarily stay arbitration pending a framed-issued hearing … . …

GEICO, as the party seeking a stay of arbitration, met its burden of showing the existence of sufficient evidentiary facts to establish a preliminary issue which would justify the stay … . GEICO met this burden by submitting evidence that on the date of the accident, the McRae vehicle was insured by Liberty Mutual.

The burden then shifted to Williams and Shields, as the parties opposing the stay, to rebut that prima facie showing … . Williams and Shields submitted evidence that the McRae vehicle was being repaired at the time of the accident, raising an issue of fact as to whether the McRae vehicle could have been involved in the accident. Since an issue of fact was raised, arbitration should be temporarily stayed, the putative hit-and-run parties joined as respondents, and a framed-issue hearing conducted, before a determination is made on that branch of the petition which was to permanently stay arbitration … . Matter of Government Empls. Ins. Co. v Williams, 2019 NY Slip Op 05660, Second Dept 7-17-19

 

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THE PURPORTED REFORMATION OF THE INSURANCE CONTRACT TO REDUCE COVERAGE AFTER THE TRAFFIC ACCIDENT OCCURRED IS UNENFORCEABLE, THE INSURER IS LIABLE FOR THE ORIGINAL COVERAGE AMOUNT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the reformation of the insurance contract to reduce the bodily injury coverage limits from $250,000 to $80,000 was unenforceable because the change was made after the traffic accident occurred:

In December 2011, the plaintiff allegedly was injured when a vehicle in which he was a passenger was involved in a collision. At the time of the collision, the vehicle was driven by nonparty Douglas Giambrone and owned by nonparty Carol Giambrone (hereinafter together the Giambrones), and was insured by the defendant under a liability policy providing for bodily injury coverage up to $250,000 per person/$500,000 per occurrence. In May 2012, the plaintiff commenced an action against the Giambrones to recover damages for personal injuries he sustained in the accident. In August 2012, the defendant entered into an agreement with the Giambrones to reform the policy to reduce the bodily injury coverage to a single $80,000 limit. Thereafter, the Giambrones notified the plaintiff that the coverage limit applicable to the accident was $80,000. The plaintiff subsequently obtained a judgment against the Giambrones in the amount of $300,000 in the underlying personal injury action. …

An insurer may not retroactively reform a policy to reduce the stated bodily injury coverage limits after a loss caused by its insured occurs, even if the reduced limits still meet or exceed the statutory minimum (see Olivio v Government Empls. Ins. Co. of Washington, D.C., 46 AD2d 437, 443-445; Reliance Ins. Cos. v Daly, 38 AD2d 715, 716). … The plaintiff … demonstrated his prima facie entitlement to judgment as a matter of law declaring that the defendant is obligated to satisfy the first $250,000 of the judgment he obtained against the Giambrones.  McGuckin v Privilege Underwriters Reciprocal Exch., 2019 NY Slip Op 05654, Second Dept 7-17-19

 

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NEGLIGENT HIRING AND SUPERVISION AND PRIMA FACIE TORT CAUSES OF ACTION SHOULD HAVE BEEN DISMISSED, NO ALLEGATION EMPLOYEES WERE ACTING OUTSIDE THE SCOPE OF EMPLOYMENT, NO ALLEGATION MALICE WAS DEFENDANT’S SOLE MOTIVATION (FOURTH DEPT).

The Fourth Department determined plaintiff’s negligent hiring and supervision and prima facie tort causes of action should have been dismissed. The lawsuit alleged defendant insurer failed to pay claims for medical care submitted by plaintiff:

“An employer may be liable for a claim of negligent hiring or supervision if an employee commits an independent act of negligence outside the scope of employment and the employer was aware of, or reasonably should have foreseen, the employee’s propensity to commit such an act” … . Here, plaintiff’s cause of action for negligent hiring, supervision or retention is based on the factual allegations that defendant’s employees denied or delayed the payment of claims to plaintiff and sent repetitive verification demands, and that defendant was aware of what its employees were doing and continued to employ them. Plaintiff, however, failed to allege that those acts were committed outside the scope of the employees’ employment. Plaintiff also failed to allege how the employees’ alleged acts of denying claims and sending verification demands constituted acts of negligence. …

“There can be no recovery [for prima facie tort] unless a disinterested malevolence’ to injure [the] plaintiff constitutes the sole motivation for defendant[‘s] otherwise lawful act” … . Here, plaintiff alleged that defendant acted in “bad faith” and intended harm by repeatedly sending plaintiff duplicitous requests for verification forms to be completed. Those conclusory statements in the amended complaint, however, fail to allege “a malicious [act] unmixed with any other and exclusively directed to [the] injury and damage of another” … . Furthermore, it is “[a] critical element of the cause of action . . . that plaintiff suffered specific and measurable loss” … , which “must be alleged with sufficient particularity to identify actual losses and be related causally to the alleged tortious acts” … , but the injuries alleged by plaintiff are “couched in broad and conclusory terms” … , and do not constitute “specific and measurable loss” stated with particularity … . Walden Bailey Chiropractic, P.C. v Geico Cas. Co., 2019 NY Slip Op 05267, Fourth Dept 6-28-19

 

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DOCUMENTARY EVIDENCE SUBMITTED IN SUPPORT OF THE MOTION TO DISMISS DID NOT MEET THE CRITERIA REQUIRED BY CPLR 3211(a)(1) (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant insurer’s (Reliastar’s) motion to dismiss based on documentary evidence should not have been granted. Plaintiffs sued for breach of contract when Reliastar canceled the life insurance policy:

“To succeed on a motion to dismiss based upon documentary evidence pursuant to CPLR 3211(a)(1), the documentary evidence must utterly refute the plaintiff’s factual allegations, conclusively establishing a defense as a matter of law”… . “In order for evidence to qualify as documentary,’ it must be unambiguous, authentic, and undeniable” … . “[J]udicial records, as well as documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable, would qualify as documentary evidence in the proper case” … . “Conversely, letters, emails, and affidavits fail to meet the requirements for documentary evidence” … . Here, in support of that branch of its motion which was pursuant to CPLR 3211(a)(1), Reliastar submitted the policy and certain policy notices, which, according to Reliastar, refuted the plaintiffs’ contention that the policy cancellation was the result of Reliastar’s breach of its obligations under the policy. The policy notices, however, were, in effect, letters, which fail to meet the requirements for documentary evidence within the meaning of CPLR 3211(a)(1) … . Magee-Boyle v Reliastar Life Ins. Co. of N.Y., 2019 NY Slip Op 05118, Second Dept 6-26-19

 

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PLAINTIFF SUED YANKEE TRAILS FIVE DAYS BEFORE THE STATUTE OF LIMITATIONS RAN IN THIS BUS TRAFFIC ACCIDENT CASE; THE OWNER OF THE BUS WAS ACTUALLY YANKEE TRAILS WORLD TOURS, A COMPANY WITH A DIFFERENT ADDRESS AND CEO; PLAINTIFF’S MOTIONS TO EXTEND THE TIME TO SERVE THE SUMMONS AND COMPLAINT AND TO AMEND THE COMPLAINT TO SUBSTITUTE THE CORRECT DEFENDANT, MADE AFTER THE STATUTE HAD RUN, SHOULD NOT HAVE BEEN GRANTED (THIRD DEPT).

The Third Department, reversing Supreme Court, over a dissent, determined plaintiff should not have been allowed to have more time to serve defendant and amend the complaint to substitute the correct defendant. The action stemmed from a traffic accident involving a bus owned by Yankee Trails. Five days before the statute of limitations ran, plaintiff commenced an action against Yankee Trails World Tours, a different corporation with different addresses and different chief executive officers:

… [W]hether relief pursuant to CPLR 306-b and 305 (c) is available is not merely a matter of discretion. Significantly, “CPLR 306-b cannot be used to extend the time for service against a defendant as to which the action was never validly commenced” … . Similarly, although a court may allow amendment of a summons to correct the name of a defendant pursuant to CPLR 305 (c), such remedy is not available where a plaintiff seeks to substitute a defendant who has not been properly served … .

The fact that defendant and Yankee Trails use the same insurance carrier is of no significance in the circumstances presented; notably, the record reflects that the insurance carrier did not contact Yankee Trails until after the statute of limitations had expired. Nor may we consider plaintiff’s error a mere misnomer that would allow relief to be granted pursuant to CPLR 305 (c) and CPLR 306-b … . Upon this record, plaintiff’s attempt to “proceed against [Yankee Trails as] an unserved and entirely new defendant” after the statute of limitations had run should have been denied, as he failed to obtain jurisdiction over Yankee Trails for relief pursuant CPLR 306-b and, thus, to later amend the complaint pursuant to CPLR 305 … . Fadlalla v Yankee Trails World Tours, Inc., 2019 NY Slip Op 05044, Third Dept 6-20-19

 

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THREE PRIOR INSURERS OF THE PROPERTY CONTAMINATED BY AN OIL SPILL, SUED BY THE CURRENT INSURER FOR INDEMNIFICATION, PROPERLY GRANTED SUMMARY JUDGMENT DISMISSING THE THIRD-PARTY COMPLAINT, ONE INSURER HAD SPECIFICALLY EXCLUDED COVERAGE FOR THE CONTAMINANT, THE OTHER TWO WERE NOT PROMPTLY NOTIFIED OF THE CLAIM AS REQUIRED BY THEIR POLICIES (THIRD DEPT).

The Third Department determined the summary judgment motions brought by three prior insurers of the property contaminated by oil were properly granted. The three insurers, Arch, AAIC and NSC, were third-party defendants in an action for indemnification brought by the current insurer of the property, Utica Mutual. The Arch policy had a specific exclusion of coverage for the contaminant. Arch’s failure to comply with the filing requirement of Insurance Law 2307 did not void the exclusion because there was no evidence Arch violated any regulations or statutes. The actions against AAIC and NSC were properly dismissed because notification of the potential contamination claim by Utica was not made for three years after Utica was aware of the contamination:

… [The] evidence established that the petroleum cleanup and removal costs sought to be recovered by plaintiff arose out of, or were the result of, MTBE contamination at both the spill site and the Honeoye Municipal District Well and, thus, satisfied Arch’s prima facie burden of demonstrating that the allegations of the complaint fell completely within the MTBE exclusion … . …

… Insurance Law § 2307 … states that “no policy form shall be delivered or issued for delivery unless it has been filed with the superintendent [of financial services] and either he [or she] has approved it, or [30] days have elapsed and he [or she] has not disapproved it as misleading or violative of public policy” … . However, as Supreme Court correctly noted, the failure to file under Insurance Law § 2307 “does not, by itself, void the policy clause . . .[; rather,] such clause is void only if the substantive provisions of the clause are inconsistent with other statutes or regulations” … . …

… Utica Mutual failed to tender sufficient proof to raise a question of fact as to whether it was justifiably ignorant of AAIC’s and NSC’s prior insurance coverage. Indeed, despite having access to Kirkwood and Kirkwood’s records immediately after learning of the contamination and its purported cause, Utica Mutual produced no evidence to show that it made any effort to discover AAIC’s and NSC’s existence before July 2010, when Utica Mutual’s counsel sent a letter to Kirkwood’s former insurance broker seeking information regarding Kirkwood’s prior insurers. Utica Mutual provided no explanation as to why it waited until July 2010 to inquire about prior insurers. State of New York v Flora, 2019 NY Slip Op 04801, Third Dept 6-13-19

 

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DEFENDANT SCHOOL DISTRICT WAS NOT A PARTY TO THE LONG-TERM DISABILITY INSURANCE CONTRACT WHICH COVERED PLAINTIFF, A SCHOOL DISTRICT EMPLOYEE WHO WAS INJURED ON THE JOB; THEREFORE THE SCHOOL DISTRICT COULD NOT BE SUED BY THE EMPLOYEE AFTER THE INSURER CUT OFF BENEFITS (SECOND DEPT).

The Second Department determined that plaintiff, a security guard for the School District who was injured on the job, did not have a cause of action against District based upon the long-term disability insurer’s (Sun Life’s) decision to terminate her disability benefits. The District was not a party to the contract between Sun Life and the policyholder. Although the Summary Plan Description issued by Sun Life’s predecessor mentioned the insured rights under the Employee Retirement Income Security Act (ERISA), the District was not obligated by the Summary-Plan language:

… [T]he plaintiff contends that, based on the language of portions of the Summary Plan Description, the District subjected itself to ERISA’s statutory scheme governing appeals from denials of claims. …

An insurance policy is a contract to which standard provisions of contract interpretation apply … . “Liability for breach of contract does not lie absent proof of a contractual relationship or privity between the parties”… . “One cannot be held liable under a contract to which he or she is not a party” … .

Here, the District was not a party to the long-term disability policy issued by Sun Life to a different named policyholder. Even assuming the authenticity of the Summary Plan Description excerpts relied upon by the plaintiff, nothing in the record reflects that the District authored, published, or agreed to be bound by the Summary Plan Description, which, by its terms, did not form part of the insurance policy. Nor do the terms of the insurance policy incorporate the provisions of ERISA … . Arroyo v Central Islip UFSD, 2019 NY Slip Op 04669, Second Dept 6-12-19

 

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