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INSURER OF NEW YORK DRIVER INVOLVED IN AN ACCIDENT WHILE DRIVING A U-HAUL VEHICLE IN NORTH CAROLINA DID NOT HAVE SUFFICIENT CONTACTS WITH NORTH CAROLINA TO WARRANT THE IMPOSITION OF LONG-ARM JURISDICTION IN A NORTH CAROLINA ACTION, THE NEW YORK ACTION SEEKING DOMESTICATION OF A NORTH CAROLINA DEFAULT JUDGMENT SHOULD HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-fledged opinion by Justice Singh, in a matter of first impression, determined that the insurer of a New York State driver (Country-Wide) did not have sufficient contacts with North Carolina, where a U-Haul vehicle driven by the New York driver rear-ended the injured parties, to provide New York with jurisdiction. The insurer of the U-Haul vehicle (Repwest) sought to recover, in New York, the amount of the settlement after Country-Wide failed to appear in North Carolina:

On this appeal we are asked to consider an issue that we have never directly addressed: whether an automobile liability policy's territory of coverage clause that covers any accident within the United States and the occurrence of the accident in the forum state are sufficient to confer personal jurisdiction over the primary insurer of the offending vehicle. We find that the connection is not sufficient to comport with federal due process, and that this renders the foreign judgment unenforceable. * * *

We find that minimum contacts has not been established on this record. Countrywide did not purposefully avail itself of conducting activities within North Carolina. It is undisputed that Countrywide has never been licensed or authorized to do business in any capacity in North Carolina. At all times relevant to this suit, Countrywide has only been licensed to issue insurance policies within New York State. Countrywide has never maintained an office or employees in North Carolina. It is a company incorporated under the laws of Delaware, with its principal place of business in New York. Countrywide has never conducted or solicited business in or from North Carolina. There is a qualitative distinction between contracting to cover an insured under a territory of coverage clause and the insurer of the policy being amenable to being haled into court anywhere in the United States in a dispute with another insurer. Countrywide cannot reasonably foresee being haled into court in a state where it did not purposefully direct its activities … . Repwest Ins. Co. v Country-Wide Ins. Co., 2018 NY Slip Op 06505, First Dept 10-2-18

INSURANCE LAW (INSURER OF NEW YORK DRIVER INVOLVED IN AN ACCIDENT WHILE DRIVING A U-HAUL VEHICLE IN NORTH CAROLINA DID NOT HAVE SUFFICIENT CONTACTS WITH NORTH CAROLINA TO WARRANT THE IMPOSITION OF LONG-ARM JURISDICTION IN A NORTH CAROLINA ACTION, THE NEW YORK ACTION SEEKING DOMESTICATION OF A NORTH CAROLINA DEFAULT JUDGMENT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/CIVIL PROCEDURE (INSURANCE LAW, LONG-ARM JURISDICTION, INSURER OF NEW YORK DRIVER INVOLVED IN AN ACCIDENT WHILE DRIVING A U-HAUL VEHICLE IN NORTH CAROLINA DID NOT HAVE SUFFICIENT CONTACTS WITH NORTH CAROLINA TO WARRANT THE IMPOSITION OF LONG-ARM JURISDICTION IN A NORTH CAROLINA ACTION, THE NEW YORK ACTION SEEKING DOMESTICATION OF A NORTH CAROLINA DEFAULT JUDGMENT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/LONG-ARM JURISDICTION (INSURER OF NEW YORK DRIVER INVOLVED IN AN ACCIDENT WHILE DRIVING A U-HAUL VEHICLE IN NORTH CAROLINA DID NOT HAVE SUFFICIENT CONTACTS WITH NORTH CAROLINA TO WARRANT THE IMPOSITION OF LONG-ARM JURISDICTION IN A NORTH CAROLINA ACTION, THE NEW YORK ACTION SEEKING DOMESTICATION OF A NORTH CAROLINA DEFAULT JUDGMENT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/CONSTITUTIONAL LAW (CIVIL PROCEDURE, LONG-ARM JURISDICTION, INSURANCE LAW, (INSURER OF NEW YORK DRIVER INVOLVED IN AN ACCIDENT WHILE DRIVING A U-HAUL VEHICLE IN NORTH CAROLINA DID NOT HAVE SUFFICIENT CONTACTS WITH NORTH CAROLINA TO WARRANT THE IMPOSITION OF LONG-ARM JURISDICTION IN A NORTH CAROLINA ACTION, THE NEW YORK ACTION SEEKING DOMESTICATION OF A NORTH CAROLINA DEFAULT JUDGMENT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/TERRITORY OF COVERAGE CLAUSE (INSURER OF NEW YORK DRIVER INVOLVED IN AN ACCIDENT WHILE DRIVING A U-HAUL VEHICLE IN NORTH CAROLINA DID NOT HAVE SUFFICIENT CONTACTS WITH NORTH CAROLINA TO WARRANT THE IMPOSITION OF LONG-ARM JURISDICTION IN A NORTH CAROLINA ACTION, THE NEW YORK ACTION SEEKING DOMESTICATION OF A NORTH CAROLINA DEFAULT JUDGMENT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/TRAFFIC ACCIDENTS (INSURER OF NEW YORK DRIVER INVOLVED IN AN ACCIDENT WHILE DRIVING A U-HAUL VEHICLE IN NORTH CAROLINA DID NOT HAVE SUFFICIENT CONTACTS WITH NORTH CAROLINA TO WARRANT THE IMPOSITION OF LONG-ARM JURISDICTION IN A NORTH CAROLINA ACTION, THE NEW YORK ACTION SEEKING DOMESTICATION OF A NORTH CAROLINA DEFAULT JUDGMENT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))

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ALTHOUGH DISCLOSURE OF INSURER’S SUPPLEMENTAL UNDERINSURED MOTORIST (SUM) FILE IS NOT LIMITED TO THE TIME BEFORE THE COMMENCEMENT OF THE ACTION, THE ORDER TO DISCLOSE THE WHOLE FILE WAS IMPROPER, A PRIVILEGE LOG SHOULD BE CREATED FOLLOWED BY AN IN CAMERA REVIEW (FIRST DEPT).

The Fourth Department, reversing Supreme Court, determined that complete disclosure of a supplemental underinsured motorist (SUM) file should not have been ordered in this traffic accident case. The court noted that Lalka v ACA Ins.Co., 128 AD3d 1508 (4th Dept 2015), to the extent that it held that disclosure is allowed only up to the date of commencement of an action, should no longer be followed. However, the proper procedure is the creation of a privilege log followed by in camera review:

… [D]efendant's motion for a protective order was based upon the assertion that any documents contained in the claim file after the date of commencement were materials protected from discovery. Thus, the sole issue on appeal is whether defendant met its burden of establishing that those parts of the claim file withheld from discovery contain material that is protected from discovery. We conclude that defendant did not meet that burden.

To the extent that Lalka … holds that any documents in a claim file created after commencement of an action in a SUM case in which there has been no denial or disclaimer of coverage are per se protected from discovery, it should not be followed. Rather, a party seeking a protective order under any of the categories of protected materials in CPLR 3101 bears “the burden of establishing any right to protection” … . ” [A] court is not required to accept a party's characterization of material as privileged or confidential' “… . Ultimately, “resolution of the issue whether a particular document is . . . protected is necessarily a fact-specific determination . . . , most often requiring in camera review' ” … .

Here, we conclude that defendant failed to meet its burden inasmuch as it relied solely upon the conclusory characterizations of its counsel that those parts of the claim file withheld from discovery contain protected material. We nonetheless further conclude that, under the circumstances of this case, the court abused its discretion by ordering the production of allegedly protected documents and instead should have granted the alternative relief requested by defendant, i.e., allowing it to create a privilege log pursuant to CPLR 3122 (b) followed by an in camera review of the subject documents by the court … . Rickard v New York Cent. Mut. Fire Ins. Co., 2018 NY Slip Op 06333, Fourth Dept 9-27-18

CIVIL PROCEDURE (ALTHOUGH DISCLOSURE OF INSURER'S SUPPLEMENTAL UNDERINSURED MOTORIST (SUM) FILE IS NOT LIMITED TO THE TIME BEFORE THE COMMENCEMENT OF THE ACTION, THE ORDER TO DISCLOSE THE WHOLE FILE WAS IMPROPER, A PRIVILEGE LOG SHOULD BE CREATED FOLLOWED BY AN IN CAMERA REVIEW (FIRST DEPT))/CPLR 3101, 3122  (ALTHOUGH DISCLOSURE OF INSURER'S SUPPLEMENTAL UNDERINSURED MOTORIST (SUM) FILE IS NOT LIMITED TO THE TIME BEFORE THE COMMENCEMENT OF THE ACTION, THE ORDER TO DISCLOSE THE WHOLE FILE WAS IMPROPER, A PRIVILEGE LOG SHOULD BE CREATED FOLLOWED BY AN IN CAMERA REVIEW (FIRST DEPT))/INSURANCE LAW (CIVIL PROCEDURE, ALTHOUGH DISCLOSURE OF INSURER'S SUPPLEMENTAL UNDERINSURED MOTORIST (SUM) FILE IS NOT LIMITED TO THE TIME BEFORE THE COMMENCEMENT OF THE ACTION, THE ORDER TO DISCLOSE THE WHOLE FILE WAS IMPROPER, A PRIVILEGE LOG SHOULD BE CREATED FOLLOWED BY AN IN CAMERA REVIEW (FIRST DEPT))/SUPPLEMENTAL UNDERINSURED MOTORIST (SUM)  (CIVIL PROCEDURE, ALTHOUGH DISCLOSURE OF INSURER'S SUPPLEMENTAL UNDERINSURED MOTORIST (SUM) FILE IS NOT LIMITED TO THE TIME BEFORE THE COMMENCEMENT OF THE ACTION, THE ORDER TO DISCLOSE THE WHOLE FILE WAS IMPROPER, A PRIVILEGE LOG SHOULD BE CREATED FOLLOWED BY AN IN CAMERA REVIEW (FIRST DEPT))/TRAFFIC ACCIDENTS (CIVIL PROCEDURE, INSURANCE LAW, ALTHOUGH DISCLOSURE OF INSURER'S SUPPLEMENTAL UNDERINSURED MOTORIST (SUM) FILE IS NOT LIMITED TO THE TIME BEFORE THE COMMENCEMENT OF THE ACTION, THE ORDER TO DISCLOSE THE WHOLE FILE WAS IMPROPER, A PRIVILEGE LOG SHOULD BE CREATED FOLLOWED BY AN IN CAMERA REVIEW (FIRST DEPT))/PRIVILEGE (CIVIL PROCEDURE, INSURANCE LAW, ALTHOUGH DISCLOSURE OF INSURER'S SUPPLEMENTAL UNDERINSURED MOTORIST (SUM) FILE IS NOT LIMITED TO THE TIME BEFORE THE COMMENCEMENT OF THE ACTION, THE ORDER TO DISCLOSE THE WHOLE FILE WAS IMPROPER, A PRIVILEGE LOG SHOULD BE CREATED FOLLOWED BY AN IN CAMERA REVIEW (FIRST DEPT))/EVIDENCE (CIVIL PROCEDURE, INSURANCE LAW, ALTHOUGH DISCLOSURE OF INSURER'S SUPPLEMENTAL UNDERINSURED MOTORIST (SUM) FILE IS NOT LIMITED TO THE TIME BEFORE THE COMMENCEMENT OF THE ACTION, THE ORDER TO DISCLOSE THE WHOLE FILE WAS IMPROPER, A PRIVILEGE LOG SHOULD BE CREATED FOLLOWED BY AN IN CAMERA REVIEW (FIRST DEPT))/IMMUNITY  (CIVIL PROCEDURE, INSURANCE LAW, ALTHOUGH DISCLOSURE OF INSURER'S SUPPLEMENTAL UNDERINSURED MOTORIST (SUM) FILE IS NOT LIMITED TO THE TIME BEFORE THE COMMENCEMENT OF THE ACTION, THE ORDER TO DISCLOSE THE WHOLE FILE WAS IMPROPER, A PRIVILEGE LOG SHOULD BE CREATED FOLLOWED BY AN IN CAMERA REVIEW (FIRST DEPT))

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PROPERTY OWNER’S MOTION FOR SUMMARY JUDGMENT DECLARING THAT THE INSURER WAS OBLIGATED TO REIMBURSE THE PROPERTY OWNER FOR COSTS AND ATTORNEY’S FEES INCURRED IN DEFENDING THIS SLIP AND FALL CASE SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court in this slip and fall case, determined the defendant property owner's (Medford's) motion for summary judgment declaring that the insurer (NGM) was obligated to reimburse the property owner's costs incurred in defending the action should have been granted:

… [T]he plaintiff allegedly was injured when she slipped and fell on ice in a parking lot on property owned by Medford Landing, L.P. (hereinafter Medford). The plaintiff commenced this action against Medford to recover damages for personal injuries. Thereafter, Medford commenced a third-party action against the third-party defendants, which provided snow removal services at the premises pursuant to a contract with Medford. The third-party complaint asserted, inter alia, causes of action based on contractual and common-law indemnification, as well as a cause of action sounding in breach of contract for failure to procure insurance naming Medford as an additional insured. Medford also commenced a second third-party action against NGM Insurance Company (hereinafter NGM), which issued a general liability insurance policy to the third-party defendants. Medford moved for summary judgment on the third-party causes of action for contractual indemnification, for common-law indemnification, and alleging breach of contract, and separately moved for summary judgment dismissing the complaint. Medford also separately moved for summary judgment declaring that it is an additional insured under the NGM policy, and that NGM is obligated to defend and indemnify it in the main action and to reimburse it for costs, disbursements, and attorneys' fees incurred in defending the main action. * * *

… [T]he Supreme Court should have granted that branch of Medford's motion which was for summary judgment declaring that NGM is obligated to reimburse Medford for costs, disbursements, and attorneys' fees incurred in defending the main action.  “An insurer's duty to defend is broader than the duty to indemnify and arises whenever the allegations of the complaint against the insured, liberally construed, potentially fall within the scope of the risks undertaken by the insurer” … . “If any of the claims against an insured arguably arise from covered events, the insurer is required to defend the entire action”… . “An additional insured is entitled to the same coverage as if it were a named insured” … . Here, Medford established, prima facie, that the allegations in the complaint suggested a reasonable possibility of coverage … . In opposition, NGM failed to raise a triable issue of fact as to whether the accident arose from Medford's independent acts so as to preclude coverage under the NGM policy, since there is no requirement that liability must be determined before an additional insured is entitled to a defense … . Further, there is no merit to NGM's contention that the subject policy provided only excess insurance coverage to Medford. The NGM policy was written as primary coverage for the third-party defendants and added Medford as an additional insured, which entitles Medford to the same coverage rights as the primary insured … . McCoy v Medford Landing, L.P., 2018 NY Slip Op 06236, Second Dept 9-26-18

INSURANCE LAW (PROPERTY OWNER'S MOTION FOR SUMMARY JUDGMENT DECLARING THAT THE INSURER WAS OBLIGATED TO REIMBURSE THE PROPERTY OWNER FOR COSTS AND ATTORNEY'S FEES INCURRED IN DEFENDING THIS SLIP AND FALL CASE SHOULD HAVE BEEN GRANTED (SECOND DEPT))/ATTORNEYS (FEES, INSURANCE LAW, PROPERTY OWNER'S MOTION FOR SUMMARY JUDGMENT DECLARING THAT THE INSURER WAS OBLIGATED TO REIMBURSE THE PROPERTY OWNER FOR COSTS AND ATTORNEY'S FEES INCURRED IN DEFENDING THIS SLIP AND FALL CASE SHOULD HAVE BEEN GRANTED (SECOND DEPT))/NEGLIGENCE (SLIP AND FALL, INSURANCE LAW, (PROPERTY OWNER'S MOTION FOR SUMMARY JUDGMENT DECLARING THAT THE INSURER WAS OBLIGATED TO REIMBURSE THE PROPERTY OWNER FOR COSTS AND ATTORNEY'S FEES INCURRED IN DEFENDING THIS SLIP AND FALL CASE SHOULD HAVE BEEN GRANTED (SECOND DEPT))/SLIP AND FALL (INSURANCE LAW, ATTORNEY'S FEES, PROPERTY OWNER'S MOTION FOR SUMMARY JUDGMENT DECLARING THAT THE INSURER WAS OBLIGATED TO REIMBURSE THE PROPERTY OWNER FOR COSTS AND ATTORNEY'S FEES INCURRED IN DEFENDING THIS SLIP AND FALL CASE SHOULD HAVE BEEN GRANTED (SECOND DEPT))

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MEDICAL MALPRACTICE ACTION SHOULD NOT HAVE BEEN CONSOLIDATED WITH AN ACTION TO DETERMINE WHETHER THE MALPRACTICE WAS COVERED BY INSURANCE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the medical malpractice action should not have been consolidated with an contract action to determine an insurance-coverage obligation in the malpractice action:

… Salvatore Leone and Santa Leone (hereinafter together the Leones) commenced an action to recover damages for medical malpractice against Alvin Hershfeld and Medical Office of Howard Beach, P.C. (hereinafter together Hershfeld; hereinafter the malpractice action). … Hershfeld commenced the instant action against JM Woodworth Risk Retention Group, Inc. (hereinafter JM Woodworth), seeking a declaration that JM Woodworth was obligated to defend and/or indemnify Hershfeld in the malpractice action, and to recover damages for breach of contract, and also named the Leones as defendants. * * *

The Supreme Court improvidently exercised its discretion in consolidating the two actions for the purpose of a joint trial and in amending the caption accordingly. In the malpractice action, the issues involve, inter alia, the alleged negligence of Hershfeld and the alleged damages suffered by the Leones. In the instant action, the issue to be resolved is JM Woodworth's alleged contractual obligation to provide insurance coverage to Hershfeld in the malpractice action. The two actions do not involve common questions of law or fact (see CPLR 602[a]…). Moreover, a joint trial of the two actions could result in substantial prejudice to JM Woodworth. Indeed, it has long been recognized that it is inherently prejudicial to insurers to have the issue of insurance coverage tried before the jury that considers the underlying liability claims, even where common questions of law and fact exist … . Hershfeld v JM Woodworth Risk Retention Group, Inc., 2018 NY Slip Op 06229, Second Dept 9-26-18

CIVIL PROCEDURE (MEDICAL MALPRACTICE ACTION SHOULD NOT HAVE BEEN CONSOLIDATED WITH AN ACTION TO DETERMINE WHETHER THE MALPRACTICE WAS COVERED BY INSURANCE (SECOND DEPT))/MEDICAL MALPRACTICE (CIVIL PROCEDURE, MEDICAL MALPRACTICE ACTION SHOULD NOT HAVE BEEN CONSOLIDATED WITH AN ACTION TO DETERMINE WHETHER THE MALPRACTICE WAS COVERED BY INSURANCE (SECOND DEPT))/CPLR 602  (MEDICAL MALPRACTICE ACTION SHOULD NOT HAVE BEEN CONSOLIDATED WITH AN ACTION TO DETERMINE WHETHER THE MALPRACTICE WAS COVERED BY INSURANCE (SECOND DEPT))/NEGLIGENCE (CIVIL PROCEDURE, MEDICAL MALPRACTICE ACTION SHOULD NOT HAVE BEEN CONSOLIDATED WITH AN ACTION TO DETERMINE WHETHER THE MALPRACTICE WAS COVERED BY INSURANCE (SECOND DEPT))/INSURANCE LAW (CIVIL PROCEDURE, MEDICAL MALPRACTICE ACTION SHOULD NOT HAVE BEEN CONSOLIDATED WITH AN ACTION TO DETERMINE WHETHER THE MALPRACTICE WAS COVERED BY INSURANCE (SECOND DEPT))

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LEGAL DOCUMENTS, BILLS FOR LEGAL SERVICES AND AN INSURER’S FILE PROTECTED BY ATTORNEY-CLIENT PRIVILEGE OR CONDITIONAL IMMUNITY, SUPREME COURT SHOULD NOT HAVE ORDERED DISCLOSURE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that legal documents, bills for legal services, and an insurance carrier's file were not subject to disclosure. All the documents were protected by attorney-client privilege or conditional immunity. The underlying medical malpractice action was against defendant Louis Lasky Memorial Medical and Dental Center and defendant Frederick Ast. The documents were requested by Ast in a proceeding to determine the amount of the settlement to be attributed to Louis Lasky and Ast:

With respect to the files maintained by Louis Lasky's attorneys, the only documents contained therein that have not already been disclosed are absolutely protected by CPLR 3101(b) and (c), as they are “primarily and predominately legal in nature and, in their full content and context, were made to render legal advice or services” to Louis Lasky … . Regarding the legal bills, it was improper for the court to order Louis Lasky to produce unredacted copies because such disclosure would reveal factual investigation and legal work done by counsel, which is privileged material … . As for the insurance carrier's file, the court correctly concluded that this file is protected by a conditional immunity, as it contained material prepared for litigation … . However, the court erred in finding that Ast met his burden of demonstrating that he had a “substantial need” for the materials in the carrier's file, and that he could not obtain their “substantial equivalent” by other means “without undue hardship” (CPLR 3101[d] …). Teran v Ast, 2018 NY Slip Op 06288, Second Dept 9-26-18

CIVIL PROCEDURE (DISCLOSURE, ATTORNEYS, LEGAL DOCUMENTS, BILLS FOR LEGAL SERVICES AND AN INSURER'S FILE PROTECTED BY ATTORNEY-CLIENT PRIVILEGE OR CONDITIONAL IMMUNITY, SUPREME COURT SHOULD NOT HAVE ORDERED DISCLOSURE (SECOND DEPT))/ATTORNEYS (PRIVILEGE, IMMUNITY, DISCLOSURE, ATTORNEYS, LEGAL DOCUMENTS, BILLS FOR LEGAL SERVICES AND AN INSURER'S FILE PROTECTED BY ATTORNEY-CLIENT PRIVILEGE OR CONDITIONAL IMMUNITY, SUPREME COURT SHOULD NOT HAVE ORDERED DISCLOSURE (SECOND DEPT))/PRIVILEGE (ATTORNEY-CLIENT, DOCUMENTS, BILLS FOR LEGAL SERVICES AND AN INSURER'S FILE PROTECTED BY ATTORNEY-CLIENT PRIVILEGE OR CONDITIONAL IMMUNITY, SUPREME COURT SHOULD NOT HAVE ORDERED DISCLOSURE (SECOND DEPT))/CPLR 3101  (DISCLOSURE, ATTORNEYS, LEGAL DOCUMENTS, BILLS FOR LEGAL SERVICES AND AN INSURER'S FILE PROTECTED BY ATTORNEY-CLIENT PRIVILEGE OR CONDITIONAL IMMUNITY, SUPREME COURT SHOULD NOT HAVE ORDERED DISCLOSURE (SECOND DEPT))/IMMUNITY (INSURER'S FILE, ATTORNEYS, LEGAL DOCUMENTS, BILLS FOR LEGAL SERVICES AND AN INSURER'S FILE PROTECTED BY ATTORNEY-CLIENT PRIVILEGE OR CONDITIONAL IMMUNITY, SUPREME COURT SHOULD NOT HAVE ORDERED DISCLOSURE (SECOND DEPT))/INSURANCE LAW (DISCLOSURE, INSURER'S FILE, ATTORNEYS, LEGAL DOCUMENTS, BILLS FOR LEGAL SERVICES AND AN INSURER'S FILE PROTECTED BY ATTORNEY-CLIENT PRIVILEGE OR CONDITIONAL IMMUNITY, SUPREME COURT SHOULD NOT HAVE ORDERED DISCLOSURE (SECOND DEPT))

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A PENALTY OR DISGORGEMENT STEMMING FROM IMPROPER PROFIT-TAKING BY BEAR STEARNS IS NOT AN INSURABLE LOSS, EVEN IF THE BENEFITS OF THE PROFIT-TAKING WENT TO OTHERS AND NOT TO BEAR STEARNS (SECOND DEPT).

The First Department, in a full-fledged opinion by Justice Andrias, determined that the requirement that Bear Stearns repay $160,000,000 constituted a penalty (disgorgement) for improper profit-taking, even where the benefits went to others and not Bear Stearns,  and therefore was not a “loss” for which Bear Stearns' insurer was liable:

The law of the case is applicable to “legal determinations that were necessarily resolved on the merits in a prior decision” … . On the prior appeal, the Court of Appeals stated that “the Insurers do not earnestly dispute that the claims fall within the policy's definition of Loss” … , but did not rely on the policy language in denying defendants' motions. Instead it focused on the public policy issue. Furthermore, the doctrine does not apply where a motion for summary judgment follows a motion to dismiss that was not converted to a motion for summary judgment pursuant to CPLR 3212(c)… .

Even if the Court of Appeals' prior determination is viewed as addressing the contractual issue, “while the law of the case doctrine is intended to foster orderly convenience' . . ., it is not an absolute mandate which limits an appellate court's power to reconsider issues where there are extraordinary circumstances, such as subsequent evidence affecting the prior determination or a change of law'” … . Here, the United States Supreme Court's decision in [Kokesh v Securities and Exchange Commission (_ US_, 137 S Ct 1635 [2017])], characterizing SEC disgorgement as a penalty, represents such a change of law. * * *… Kokesh has now provided the missing precedent, establishing that disgorgement is a penalty, whether it is linked to the wrongdoer's gains or gains that went to others. In Kokesh, the Supreme Court, emphasizing that when a sanction “can only be explained as . . . serving either retributive or deterrent purposes,” it is a “punishment,” rejected the SEC's argument that disgorgement is remedial because it simply puts the defendant back in the position “he would have occupied had he not broken the law.” J.P. Morgan Sec., Inc. v Vigilant Ins. Co., 2018 NY Slip Op 06146, First Dept 9-19-18

INSURANCE LAW (SECURITIES, A PENALTY OR DISGORGEMENT STEMMING FROM IMPROPER PROFIT-TAKING BY BEAR STEARNS IS NOT AN INSURABLE LOSS, EVEN IF THE BENEFITS OF THE PROFIT-TAKING WENT TO OTHERS AND NOT TO BEAR STEARNS (FIRST DEPT))/SECURITIES (INSURANCE LAW, A PENALTY OR DISGORGEMENT STEMMING FROM IMPROPER PROFIT-TAKING BY BEAR STEARNS IS NOT AN INSURABLE LOSS, EVEN IF THE BENEFITS OF THE PROFIT-TAKING WENT TO OTHERS AND NOT TO BEAR STEARNS (FIRST DEPT))/DISGORGEMENT (INSURANCE LAW, SECURITIES, A PENALTY OR DISGORGEMENT STEMMING FROM IMPROPER PROFIT-TAKING BY BEAR STEARNS IS NOT AN INSURABLE LOSS, EVEN IF THE BENEFITS OF THE PROFIT-TAKING WENT TO OTHERS AND NOT TO BEAR STEARNS (FIRST DEPT))

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CONSTRUCTION CONTRACT REQUIRING INSURANCE WILL NOT BE INTERPRETED TO REQUIRE ADDITIONAL INSURED COVERAGE ABSENT A SPECIFIC PROVISION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the causes of action alleging that parties should have been named as additional insureds in this Labor Law 200 and 241 (6) action should have been dismissed. Contracts which call for the procurement of insurance do not, without specific provisions, require parties to be named as additional insureds:

“A provision in a construction contract cannot be interpreted as requiring the procurement of additional insured coverage unless such a requirement is expressly and specifically stated. In addition, contract language that merely requires the purchase of insurance will not be read as also requiring that a contracting party be named as an additional insured” … . Uddin v A.T.A. Constr. Corp., 2018 NY Slip Op 06136, Second Dept 9-19-18

INSURANCE LAW (CONSTRUCTION CONTRACT REQUIRING INSURANCE WILL NOT BE INTERPRETED TO REQUIRE ADDITIONAL INSURED COVERAGE ABSENT A SPECIFIC PROVISION (SECOND DEPT))/CONTRACT LAW (INSURANCE, CONSTRUCTION CONTRACT REQUIRING INSURANCE WILL NOT BE INTERPRETED TO REQUIRE ADDITIONAL INSURED COVERAGE ABSENT A SPECIFIC PROVISION (SECOND DEPT))/ADDITIONAL INSURED COVERAGE (CONSTRUCTION CONTRACT REQUIRING INSURANCE WILL NOT BE INTERPRETED TO REQUIRE ADDITIONAL INSURED COVERAGE ABSENT A SPECIFIC PROVISION (SECOND DEPT))/CONSTRUCTION CONTRACTS (ADDITIONAL INSURED COVERAGE, CONSTRUCTION CONTRACT REQUIRING INSURANCE WILL NOT BE INTERPRETED TO REQUIRE ADDITIONAL INSURED COVERAGE ABSENT A SPECIFIC PROVISION (SECOND DEPT))

INSURER DID NOT DEMONSTRATE THE INSUREDS’ LACK OF COOPERATION WITH THE INVESTIGATION INTO THE TRAFFIC ACCIDENT AND DID NOT MAKE A TIMELY DISCLAIMER, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff's motion for summary judgment against the defendant insurer should have been granted. Plaintiff was involved in an automobile accident with the insureds [Onwuzurulke and Noel]. The defendant insurer disclaimed coverage on the basis of the insureds' alleged lack of cooperation with the investigation. The Second Department held that insurer did not demonstrate the lack of cooperation on the part of one of the insureds and did not make a timely disclaimer:

“To effectively deny coverage based upon lack of cooperation, an insurance carrier must demonstrate (1) that it acted diligently in seeking to bring about the insured's cooperation, (2) that the efforts employed by the insurer were reasonably calculated to obtain the insured's cooperation, and (3) that the attitude of the insured, after his or her cooperation was sought, was one of willful and avowed obstruction” … . ” [M]ere efforts by the insurer and mere inaction on the part of the insured, without more, are insufficient to establish non-cooperation'” … .

The defendant met these requirements with regard to Onwuzurulke. The defendant hired an investigator to locate Onwuzurulke, the investigator communicated with him, and Onwuzurulke refused to cooperate. However, with regard to Noel, the defendant failed to meet its “heavy” burden of “proving lack of cooperation”… . defendant repeatedly sent letters to an address where Noel did not reside. Further, the defendant's investigator searched for Noel under an incorrect name.

In any event, the defendant's disclaimer of coverage with regard to both Noel and Onwuzurulke was untimely. Insurance Law § 3420(d)(2) provides that, when an insurer disclaims liability or denies coverage for bodily injury arising out of a motor vehicle accident occurring within the state, “it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.” “The timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage” … . “[T]he issue of whether a disclaimer was unreasonably delayed is generally a question of fact, requiring an assessment of all relevant circumstances”… . However, “an insurer's explanation [for the delay in disclaiming] is insufficient as a matter of law where the basis for denying coverage was or should have been readily apparent before the onset of delay”… . Robinson v Global Liberty Ins. Co. of N.Y., 2018 NY Slip Op 06128, Second Dept 9-19-18

INSURANCE LAW (INSURER DID NOT DEMONSTRATE THE INSUREDS' LACK OF COOPERATION WITH THE INVESTIGATION INTO THE TRAFFIC ACCIDENT AND DID NOT MAKE A TIMELY DISCLAIMER, PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))/NONCOOPERATION (INSURANCE LAW, (INSURER DID NOT DEMONSTRATE THE INSUREDS' LACK OF COOPERATION WITH THE INVESTIGATION INTO THE TRAFFIC ACCIDENT AND DID NOT MAKE A TIMELY DISCLAIMER, PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))/DISCLAIMER (INSURANCE LAW, INSURER DID NOT DEMONSTRATE THE INSUREDS' LACK OF COOPERATION WITH THE INVESTIGATION INTO THE TRAFFIC ACCIDENT AND DID NOT MAKE A TIMELY DISCLAIMER, PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))/TRAFFIC ACCIDENTS (INSURANCE LAW, INSURER DID NOT DEMONSTRATE THE INSUREDS' LACK OF COOPERATION WITH THE INVESTIGATION INTO THE TRAFFIC ACCIDENT AND DID NOT MAKE A TIMELY DISCLAIMER, PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT))

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INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT).

The First Department, modifying Supreme Court, in a full-fledged opinion by Justice Manzanet-Daniels, determined plaintiff insurer's (MBAI's) motion for summary judgment should have been denied in its entirety in this action stemming from the insuring of residential mortgage-backed securities. MBAI sought to recover all the payments made after more than 50% of the mortgages underlying the securities went into default:

MBIA seeks “Claims Payment Damages” and “Repurchase Damages.” The “Claims Payment Damages” consist of “all claims payments that MBIA has made . . . [or] will likely incur,” and are designed to put MBIA in the same position it would have been in had the policy never been issued. As such, they constitute rescissory damages and are not recoverable by plaintiff monoline insurer seeking redress under an irrevocable policy. We have made clear that an insurer is “not entitled to damages amounting to all claims payments it made or will make under the policies,” inasmuch as such damages are “rescissory damages to which the insurer is not entitled” … .

“Repurchase Damages” represent the difference between the claims payments MBIA made or is projected to incur, and those MBIA would have made had [defendant] Credit Suisse repurchased nonconforming lines, i.e., those that breached the representations and warranties.

While such repurchase damages are in theory recoverable, the fraud claim was nonetheless correctly dismissed. It has long been the rule that parties may not assert fraud claims seeking damages that are duplicative of those recoverable on a cause of action for breach of contract (see e.g. Manas v VMS Assoc., LLC, 53 AD3d 451, 454 [1st Dept 2008]). As we noted in Manas, fraud damages are meant to redress a different harm than damages on a cause of action for breach of contract. Contract damages are meant to restore the nonbreaching party to as good a position as it would have been in had the contract been performed; fraud damages are meant to indemnify losses suffered as a result of the fraudulent inducement … . Where all of the damages are remedied through the contract claim, the fraud claim is duplicative and must be dismissed … . * * *

… [T]he order of the Supreme Court … [which] granted defendants' motion for summary judgment dismissing the fraudulent inducement claim, denied so much of plaintiff's motion for summary judgment as sought a ruling that an insurer does not have to prove loss causation in connection with a fraudulent inducement claim, granted so much of plaintiff's motion as sought a ruling on the meaning of the “No Monetary Default” representation and the “Mortgage Loan Schedule” representation in the Pooling and Service Agreement for the subject residential mortgage-backed securitization transaction, and denied plaintiff's motion to supplement the record in opposition to defendants' motion, should be modified, on the law, to deny plaintiff's motion as to the meaning of the representations, and otherwise affirmed … . MBIA Ins. Corp. v Credit Suisse Sec. (USA) LLC, 2018 NY Slip Op 06060, First Dept 9-13-18

INSURANCE LAW (SECURITIES, INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT))/CONTRACT LAW (INSURANCE LAW, SECURITIES, INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT))/SECURITIES (INSURANCE LAW,  INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT))/FRAUD (INSURANCE LAW, SECURITIES, INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT))/RESIDENTIAL MORTGAGE BACKED SECURITIES (INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES NOT ENTITLED TO RECOVER ALL CLAIMS PAID OUT AS A RESULT OF 50% OF THE UNDERLYING MORTGAGES GOING INTO DEFAULT UNDER A FRAUD THEORY, ONLY A BREACH OF CONTRACT THEORY WAS AVAILABLE (FIRST DEPT))

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SUPREME COURT SHOULD NOT HAVE SEARCHED THE RECORD TO AWARD SUMMARY JUDGMENT ON A GROUND NOT RAISED BY THE PARTIES, HOWEVER, FAILURE TO TIMELY NOTIFY UMBRELLA INSURER OF THE CLAIM WARRANTED SUMMARY JUDGMENT (SECOND DEPT).

The Second Department determined Supreme Court should not have searched the record to award summary judgment on a ground not raised by the parties in this car accident case. However, the Second Department determined summary judgment was properly granted to the umbrella insurer (RLI) on the ground that the owner of the leased car (CFC) did not timely notify RLI of the claim:

The Supreme Court erred in essentially searching the record and granting relief based upon arguments that were not raised … . “A motion for summary judgment on one claim or defense does not provide a basis for searching the record and granting summary judgment on an unrelated claim or defense'” … . …

RLI established, prima facie, its entitlement to judgment as a matter of law dismissing the complaint insofar as asserted against it based upon CFC's failure to provide timely notice of the occurrence and suit. “The insured's failure to satisfy the notice requirement constitutes a failure to comply with a condition precedent which, as a matter of law, vitiates the contract'” … . This rule applies to excess carriers as well as primary carriers … . “[A] justifiable lack of knowledge of insurance coverage may excuse a delay in reporting an occurrence”… . To establish a valid excuse due to the insured's alleged ignorance of insurance coverage, the insured has the burden of proving “a justifiable lack of knowledge of insurance coverage” and “reasonably diligent efforts to ascertain whether coverage existed” upon receiving information “which would have prompted any person of ordinary prudence to consult either an attorney or an insurance broker” … . Here, in support of its motion, RLI submitted evidence that counsel for … CFC in the underlying action performed an investigation and learned the detailed information regarding the umbrella policy in March 2005. Such knowledge is imputed to CFC … . As such, RLI established that RLI was given no notice of the accident or lawsuit until August 2006, and CFC did not provide notice until … June 2010. Daimler Chrysler Ins. Co. v Keller, 2018 NY Slip Op 05999, Second Dept 9-12-18

INSURANCE LAW (SUPREME COURT SHOULD NOT HAVE SEARCHED THE RECORD TO AWARD SUMMARY JUDGMENT ON A GROUND NOT RAISED BY THE PARTIES, HOWEVER, FAILURE TO TIMELY NOTIFY UMBRELLA INSURER OF THE CLAIM WARRANTED SUMMARY JUDGMENT (SECOND DEPT))/CIVIL PROCEDURE (SUPREME COURT SHOULD NOT HAVE SEARCHED THE RECORD TO AWARD SUMMARY JUDGMENT ON A GROUND NOT RAISED BY THE PARTIES, HOWEVER, FAILURE TO TIMELY NOTIFY UMBRELLA INSURER OF THE CLAIM WARRANTED SUMMARY JUDGMENT (SECOND DEPT))/TRAFFIC ACCIDENTS (INSURANCE LAW, SUPREME COURT SHOULD NOT HAVE SEARCHED THE RECORD TO AWARD SUMMARY JUDGMENT ON A GROUND NOT RAISED BY THE PARTIES, HOWEVER, FAILURE TO TIMELY NOTIFY UMBRELLA INSURER OF THE CLAIM WARRANTED SUMMARY JUDGMENT (SECOND DEPT))

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