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IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Manzanet-Daniels, determined a qui tam (whistleblower) action alleging a captive insurance company (Moody's) violated the New York False Claims Act (NYFCA) by filing false tax returns properly survived the motion to dismiss. The court further held that the relator's retaliation claim, alleging unlawful termination of employment for raising questions about Moody's taxes, also properly survived the motion to dismiss. Captive insurance company's receive favorable tax treatment only if they meet certain criteria:

While the typical NYFCA claim involves the State paying out money on account of a false claim, a “reverse false claim” occurs when someone uses a false record to conceal or avoid an obligation to pay the government … . A defendant knowingly makes a false claim under the NYFCA if the defendant had “actual knowledge” of the falsity of the claim or acted “in deliberate ignorance” or “reckless disregard” of its truth or falsity (State Finance Law § 188[3][a]).

The motion court correctly found that the complaint sufficiently alleges that Moody's “tax treatment of MAC was aggressive, risky, and/or abusive due to its sham nature,” and that Moody's knowingly submitted false claims. * * *

The complaint sufficiently alleges that defendants had knowledge of relator's protected activity and that they retaliated against him because of his protected activity. Relator alleges that he repeatedly complained about MAC's noncompliance with the tax laws to Moody's tax department as well as to his superiors … . Anonymous v Anonymous, 2018 NY Slip Op 05963, First Dept 8-30-18

INSURANCE LAW (IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/CAPTIVE INSURANCE COMPANIES (IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/TAX LAW (INSURANCE LAW, IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/FRAUD (INSURANCE LAW, TAX LAW, IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/EMPLOYMENT LAW (IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/QUI TAM (IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))/WHISTLEBLOWER  (IN THIS QUI TAM (WHISTLEBLOWER) ACTION THE COMPLAINT SUFFICIENTLY ALLEGED DEFENDANT CAPTIVE INSURANCE COMPANY FILED FALSE TAX RETURNS AND TERMINATED THE WHISTLEBLOWER FOR RAISING HIS CONCERNS WITH HIS SUPERIORS (FIRST DEPT))

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BUSINESS PURSUITS EXCLUSION IN THE HOMEOWNER’S INSURANCE POLICY DID NOT APPLY BECAUSE THE FIRE WOULD HAVE OCCURRED IRRESPECTIVE OF THE OPERATION OF THE BUSINESS, A RESPITE HOME FOR ELDERLY AND SPECIAL NEEDS ADULTS, THREE OF THE RESIDENTS DIED IN THE FIRE STARTED BY CHILDREN PLAYING IN THE GARAGE (THIRD DEPT)

The Third Department determined that an exclusion in defendant-insurer's policy applied and coverage for the death's of three residents of a respite home for the elderly and special needs adults should not have been disclaimed. The respite home was a private residence. The homeowners' son, who was 11, and other children, were playing with a gas grill in the garage and a fire started, killing the three residents. Although the policy excluded coverage for business-related injuries, incidents that would have occurred irrespective of the presence of the business were covered:

It is undisputed that the act of the insureds' son and the other children in playing with the gas grill lighter and accelerants was the impetus for the fire. Although the insureds' negligence in operating their business — i.e., the failure to have an adequate fire evacuation plan — may have been a contributing cause of decedents' deaths, it cannot be said as matter of law that the fire also was not a contributing cause. In other words, the fire would have occurred regardless of the insureds' business operations, thereby rendering the exception to the business pursuits exclusion applicable. Because the record discloses that decedents' deaths were not caused solely by acts that fell wholly within the business pursuits exclusion, defendant cannot escape its indemnity obligations with respect to decedents' deaths … . Waddy v Genessee Patrons Coop. Ins. Co., 2018 NY Slip Op 05794, Third Dept 8-15-18

INSURANCE LAW (BUSINESS PURSUITS EXCLUSION IN THE INSURANCE POLICY DID NOT APPLY BECAUSE THE FIRE WOULD HAVE OCCURRED IRRESPECTIVE OF THE OPERATION OF THE BUSINESS, A RESPITE HOME FOR ELDERLY AND SPECIAL NEEDS ADULTS, THREE OF THE RESIDENTS DIED IN THE FIRE STARTED BY CHILDREN PLAYING IN THE GARAGE (THIRD DEPT))/BUSINESS PURSUITS EXCLUSION (INSURANCE LAW, BUSINESS PURSUITS EXCLUSION IN THE INSURANCE POLICY DID NOT APPLY BECAUSE THE FIRE WOULD HAVE OCCURRED IRRESPECTIVE OF THE OPERATION OF THE BUSINESS, A RESPITE HOME FOR ELDERLY AND SPECIAL NEEDS ADULTS, THREE OF THE RESIDENTS DIED IN THE FIRE STARTED BY CHILDREN PLAYING IN THE GARAGE (THIRD DEPT))/CONTRACT LAW  (INSURANCE LAW, BUSINESS PURSUITS EXCLUSION IN THE INSURANCE POLICY DID NOT APPLY BECAUSE THE FIRE WOULD HAVE OCCURRED IRRESPECTIVE OF THE OPERATION OF THE BUSINESS, A RESPITE HOME FOR ELDERLY AND SPECIAL NEEDS ADULTS, THREE OF THE RESIDENTS DIED IN THE FIRE STARTED BY CHILDREN PLAYING IN THE GARAGE (THIRD DEPT))

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RELEASE ENTERED WITH THE INSURER OF THE OTHER CAR INVOLVED IN THE ACCIDENT PRECLUDED CLAIM FOR SUPPLEMENTARY UNDERINSURED MOTORIST (SUM) BENEFITS AGAINST INSURER OF THE CAR IN WHICH APPELLANT WAS A PASSENGER (SECOND DEPT).

The Second Department determined a release entered after settlement with the insurer of the other car involved in the accident precluded appellant’s attempt to claim supplementary underinsured motorist (SUM) benefits from the insurer of the car in which appellant was a passenger:

“A release is a contract, and its construction is governed by contract law” … . A valid general release will apply not only to known claims, but “may encompass unknown claims, . . . if the parties so intend and the agreement is fairly and knowingly made'” … . “Where a release is unambiguous, the intent of the parties must be ascertained from the plain language of the agreement” … . Here, the general release, in clear and unambiguous terms, releases all claims and future claims the appellant had or may have against the petitioner by reason of the subject accident. The plain language of the release thus precludes the appellant’s SUM claim against the petitioner. Matter of Travelers Home & Mar. Ins. Co. v Fiumara, 2018 NY Slip Op 05681, Second Dept 8-8-18

INSURANCE LAW (RELEASE ENTERED WITH THE INSURER OF THE OTHER CAR INVOLVED IN THE ACCIDENT PRECLUDED CLAIM FOR SUPPLEMENTARY UNDERINSURED MOTORIST (SUM) BENEFITS AGAINST INSURER OF THE CAR IN WHICH APPELLANT WAS A PASSENGER (SECOND DEPT))/TRAFFIC ACCIDENTS (INSURANCE LAW, RELEASE ENTERED WITH THE INSURER OF THE OTHER CAR INVOLVED IN THE ACCIDENT PRECLUDED CLAIM FOR SUPPLEMENTARY UNDERINSURED MOTORIST (SUM) BENEFITS AGAINST INSURER OF THE CAR IN WHICH APPELLANT WAS A PASSENGER (SECOND DEPT))/RELEASE (INSURANCE LAW, RELEASE ENTERED WITH THE INSURER OF THE OTHER CAR INVOLVED IN THE ACCIDENT PRECLUDED CLAIM FOR SUPPLEMENTARY UNDERINSURED MOTORIST (SUM) BENEFITS AGAINST INSURER OF THE CAR IN WHICH APPELLANT WAS A PASSENGER (SECOND DEPT))/CONTRACT LAW (RELEASE, INSURANCE LAW, RELEASE ENTERED WITH THE INSURER OF THE OTHER CAR INVOLVED IN THE ACCIDENT PRECLUDED CLAIM FOR SUPPLEMENTARY UNDERINSURED MOTORIST (SUM) BENEFITS AGAINST INSURER OF THE CAR IN WHICH APPELLANT WAS A PASSENGER (SECOND DEPT))/SUPPLEMENTARY UNDERINSURED MOTORIST (SUM) BENEFITS (RELEASE ENTERED WITH THE INSURER OF THE OTHER CAR INVOLVED IN THE ACCIDENT PRECLUDED CLAIM FOR SUPPLEMENTARY UNDERINSURED MOTORIST (SUM) BENEFITS AGAINST INSURER OF THE CAR IN WHICH APPELLANT WAS A PASSENGER (SECOND DEPT))

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ALTHOUGH THE CONDOMINIUM WAS OCCUPIED BY PLAINTIFFS’ DAUGHTER WHEN THE PIPE BROKE, THE INSURER WAS ENTITLED TO RESCIND THE POLICY BECAUSE THE PLAINTIFFS REPRESENTED THE CONDOMINIUM WOULD BE OCCUPIED BY THEM (SECOND DEPT).

The Second Department determined the defendant insurer was entitled to rescind the insurance policy because of a material misrepresentation, even if the misrepresentation was innocent or unintentional. Plaintiffs represented to the insurer that the condominium would be occupied by them and that they had no other residences. However, plaintiffs never lived in the condominium, which was occupied by plaintiffs’ daughter. The condominium was damaged when a water pipe broke:

“To establish the right to rescind an insurance policy, an insurer must show that its insured made a material misrepresentation of fact when he or she secured the policy” … . “A representation is a statement as to past or present fact, made to the insurer by, or by the authority of, the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof” … . “A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented”… . “To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application” … .

Otsego Mutual established its prima facie entitlement to judgment as a matter of law by submitting evidence demonstrating that the plaintiffs’ application for insurance contained a material misrepresentation regarding whether the townhouse would be owner-occupied and that it would not have issued the subject policy if the application had disclosed that the townhouse would not be owner-occupied … .

In opposition, the plaintiffs failed to raise a triable issue of fact. The plaintiffs’ contention that Otsego Mutual was required to establish that their misrepresentation was willful lacks merit. With limited exception not applicable here, “a material misrepresentation, even if innocent or unintentional, is sufficient to warrant rescission of an insurance policy” … . Piller v Otsego Mut. Fire Ins. Co., 2018 NY Slip Op 05615, Second Dept 8-1-18

INSURANCE LAW (ALTHOUGH THE CONDOMINIUM WAS OCCUPIED BY PLAINTIFFS’ DAUGHTER WHEN THE PIPE BROKE, THE INSURER WAS ENTITLED TO RESCIND THE POLICY BECAUSE THE PLAINTIFFS REPRESENTED THE CONDOMINIUM WOULD BE OCCUPIED BY THEM (SECOND DEPT))/CONTRACT LAW (INSURANCE LAW, ALTHOUGH THE CONDOMINIUM WAS OCCUPIED BY PLAINTIFFS’ DAUGHTER WHEN THE PIPE BROKE, THE INSURER WAS ENTITLED TO RESCIND THE POLICY BECAUSE THE PLAINTIFFS REPRESENTED THE CONDOMINIUM WOULD BE OCCUPIED BY THEM (SECOND DEPT))/MISREPRESENTATION (INSURANCE LAW, ALTHOUGH THE CONDOMINIUM WAS OCCUPIED BY PLAINTIFFS’ DAUGHTER WHEN THE PIPE BROKE, THE INSURER WAS ENTITLED TO RESCIND THE POLICY BECAUSE THE PLAINTIFFS REPRESENTED THE CONDOMINIUM WOULD BE OCCUPIED BY THEM (SECOND DEPT))

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NO AGREEMENT TO INCREASE INSURANCE COVERAGE OF HOME DESTROYED BY FIRE AFTER RENOVATIONS, NO SPECIAL RELATIONSHIP BETWEEN THE INSURANCE BROKERS AND THE INSUREDS (THIRD DEPT).

The Third Department determined defendant insurance brokers’ motion for summary judgment in this breach of contract-negligence action by the insureds was properly granted. The Insureds’ alleged there was an agreement to increase the insurance coverage on the insureds’ home which was destroyed by fire after renovations had been made and there was a special relationship between the brokers and the insureds. There evidence did not support either theory:

As a general principle, insurance brokers have a common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so; however, they have no continuing duty to advise, guide or direct a client to obtain additional coverage” … . Thus, “[t]o set forth a case for negligence or breach of contract against an insurance broker, a plaintiff must establish that a specific request was made to the broker for the coverage that was not provided in the policy” … . * * *

Stressing that “special relationships in the insurance brokerage context are the exception, not the norm” … , the Court of Appeals has identified three “exceptional situations” that may give rise to a special relationship: “(1) the agent receives compensation for consultation apart from payment of the premiums; (2) there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent; or (3) there is a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on” … . Hefty v Paul Seymour Ins. Agency, 2018 NY Slip Op 05547, Third Dept 7-26-18

INSURANCE LAW (NO AGREEMENT TO INCREASE INSURANCE COVERAGE OF HOME DESTROYED BY FIRE AFTER RENOVATIONS, NO SPECIAL RELATIONSHIP BETWEEN THE INSURANCE BROKERS AND THE INSUREDS (THIRD DEPT))/CONTRACT LAW (INSURANCE LAW, NO AGREEMENT TO INCREASE INSURANCE COVERAGE OF HOME DESTROYED BY FIRE AFTER RENOVATIONS, NO SPECIAL RELATIONSHIP BETWEEN THE INSURANCE BROKERS AND THE INSUREDS (THIRD DEPT))/NEGLIGENCE (INSURANCE LAW, NO AGREEMENT TO INCREASE INSURANCE COVERAGE OF HOME DESTROYED BY FIRE AFTER RENOVATIONS, NO SPECIAL RELATIONSHIP BETWEEN THE INSURANCE BROKERS AND THE INSUREDS (THIRD DEPT))/SPECIAL RELATIONSHIP (INSURANCE LAW, (NO AGREEMENT TO INCREASE INSURANCE COVERAGE OF HOME DESTROYED BY FIRE AFTER RENOVATIONS, NO SPECIAL RELATIONSHIP BETWEEN THE INSURANCE BROKERS AND THE INSUREDS (THIRD DEPT))

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RECORDS PERTAINING TO PLAINTIFF’S RECEIPT OF NO-FAULT BENEFITS ARE DISCOVERABLE AND MUST BE TURNED OVER TO THE DEFENDANT, EVEN IF PLAINTIFF IS NOT SEEKING RECOVERY OF UNREIMBURSED SPECIAL DAMAGES (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that plaintiff was required to turn over to defendant records pertaining to no-fault benefits in this car accident case. Plaintiff had argued the records were not discoverable because plaintiff was not seeking to recover unreimbursed special damages:

CPLR 3101(a) provides, in relevant part, 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 words, material and necessary,’ are . . . to 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”… .

In an action relating to a motor vehicle accident, a plaintiff’s medical records relating to treatment following the accident are material and necessary to the defense of a plaintiff’s claim to having sustained a serious injury within the meaning of Insurance Law § 5102, in addition to any claim to recover damages for loss of enjoyment of life … . Accordingly, since the plaintiff’s no-fault records are material and necessary to the defense of this action, the Supreme Court should have denied the plaintiff’s motion for a protective order … .

The plaintiff improperly relies upon CPLR 4545(a) to support his contention that collateral source records are not discoverable where a plaintiff is not seeking to recover unreimbursed special damages. CPLR 4545(a) governs the admissibilityof evidence to establish that damages have been or will be covered in whole or part by a collateral source. By contrast, in the context of discovery, “[a]ny matter which may lead to the discovery of admissible proof is discoverable, as is any matter which bears upon a defense, even if the facts themselves are not admissible” … . Moreover, whether any of the plaintiff’s no-fault records are admissible for purposes other than for showing collateral source payment is not before us at this stage of the action. Cajamarca v Osatuk, 2018 NY Slip Op 05133, Second Dept 7-11-18

CIVIL PROCEDURE (NEGLIGENCE, DISCOVERY, RECORDS PERTAINING TO PLAINTIFF’S RECEIPT OF NO-FAULT BENEFITS ARE DISCOVERABLE AND MUST BE TURNED OVER TO THE DEFENDANT, EVEN IF PLAINTIFF IS NOT SEEKING REIMBURSEMENT FOR UNREIMBURSED SPECIAL DAMAGES (SECOND DEPT))/NEGLIGENCE (CIVIL PROCEDURE, DISCOVERY, RECORDS PERTAINING TO PLAINTIFF’S RECEIPT OF NO-FAULT BENEFITS ARE DISCOVERABLE AND MUST BE TURNED OVER TO THE DEFENDANT, EVEN IF PLAINTIFF IS NOT SEEKING REIMBURSEMENT FOR UNREIMBURSED SPECIAL DAMAGES (SECOND DEPT))/INSURANCE LAW (NO-FAULT, NEGLIGENCE, DISCOVERY, RECORDS PERTAINING TO PLAINTIFF’S RECEIPT OF NO-FAULT BENEFITS ARE DISCOVERABLE AND MUST BE TURNED OVER TO THE DEFENDANT, EVEN IF PLAINTIFF IS NOT SEEKING REIMBURSEMENT FOR UNREIMBURSED SPECIAL DAMAGES (SECOND DEPT))/NO-FAULT BENEFITS (NEGLIGENCE, DISCOVERY, RECORDS PERTAINING TO PLAINTIFF’S RECEIPT OF NO-FAULT BENEFITS ARE DISCOVERABLE AND MUST BE TURNED OVER TO THE DEFENDANT, EVEN IF PLAINTIFF IS NOT SEEKING REIMBURSEMENT FOR UNREIMBURSED SPECIAL DAMAGES (SECOND DEPT))/DISCOVERY (NO-FAULT BENEFITS,  RECORDS PERTAINING TO PLAINTIFF’S RECEIPT OF NO-FAULT BENEFITS ARE DISCOVERABLE AND MUST BE TURNED OVER TO THE DEFENDANT, EVEN IF PLAINTIFF IS NOT SEEKING REIMBURSEMENT FOR UNREIMBURSED SPECIAL DAMAGES (SECOND DEPT))/TRAFFIC ACCIDENTS (DISCOVERY, RECORDS PERTAINING TO PLAINTIFF’S RECEIPT OF NO-FAULT BENEFITS ARE DISCOVERABLE AND MUST BE TURNED OVER TO THE DEFENDANT, EVEN IF PLAINTIFF IS NOT SEEKING REIMBURSEMENT FOR UNREIMBURSED SPECIAL DAMAGES (SECOND DEPT))

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QUESTIONS OF FACT ABOUT WHETHER THERE WAS A MISREPRESENTATION BY THE INSURED ABOUT A PRIOR BITE BY A DOG, AND WHETHER THERE ACTUALLY WAS A PRIOR BITE, PRECLUDED SUMMARY JUDGMENT ON WHETHER A CANINE POLICY EXCLUSION APPLIED AND WHETHER THERE WAS A TIMELY DISCLAIMER (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined there were questions of fact whether the insured made a misrepresentation to the insurer and whether the insurer timely disclaimed coverage for a dog bite. There were questions of fact whether the insured was asked about a prior bite by the dog and gave a false answer, and whether there had actually been a prior bite by the dog which would trigger a policy exclusion:

“When construing Insurance Law § 3420 (d), which requires an insurer to issue a written disclaimer of coverage for death or bodily injuries arising out of accidents ‘as soon as is reasonably possible,’ [the Court of Appeals has] made clear that timeliness almost always presents a factual question, requiring an assessment of all relevant circumstances surrounding a particular disclaimer[, and] cases in which the reasonableness of an insurer’s delay may be decided as a matter of law are exceptional and present extreme circumstances” … . “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” … . The insurer has an obligation not only to promptly provide notice of disclaimer once it has reached that decision, but to promptly investigate and reach a decision on whether to disclaim … . …

[The insurer] argues that it was entitled to rely on [the insured’s] statement that the dog had not previously bitten anyone. As noted above, there is a question of fact regarding whether [the insurer’s] claims manager actually asked [the insured] if she knew of any prior biting events. If the claims manager never asked that question, the record evidence presents a triable issue of fact as to whether [the insurer] failed to conduct a reasonable and prompt investigation into the potential applicability of the canine exclusion … . If the claims manager asked that question and received a negative answer, as she averred, then [the insurer] would be justified in relying on the representation by its insured … ; however, given that the [insured] had owned the dog for only approximately one month, there would still be a triable question of fact regarding the reasonableness of [the insured’s] investigation. As neither party established, as a matter of law, the reasonableness or unreasonableness of the delay in [the insured’s  disclaimer, neither party was entitled to summary judgment … . Battisti v Broome Coop. Ins. Co., 2018 NY Slip Op 04992, Third Dept 7-5-18

​INSURANCE LAW (DOG BITES, QUESTIONS OF FACT ABOUT WHETHER THERE WAS A MISREPRESENTATION BY THE INSURED ABOUT A PRIOR BITE BY A DOG, AND WHETHER THERE ACTUALLY WAS A PRIOR BITE, PRECLUDED SUMMARY JUDGMENT ON WHETHER A CANINE POLICY EXCLUSION APPLIED AND WHETHER THERE WAS A TIMELY DISCLAIMER (THIRD DEPT))/ANIMAL LAW (DOG BITES, INSURANCE LAW, QUESTIONS OF FACT ABOUT WHETHER THERE WAS A MISREPRESENTATION BY THE INSURED ABOUT A PRIOR BITE BY A DOG, AND WHETHER THERE ACTUALLY WAS A PRIOR BITE, PRECLUDED SUMMARY JUDGMENT ON WHETHER A CANINE POLICY EXCLUSION APPLIED AND WHETHER THERE WAS A TIMELY DISCLAIMER (THIRD DEPT))/DISCLAIMERS (INSURANCE LAW, DOG BITES, QUESTIONS OF FACT ABOUT WHETHER THERE WAS A MISREPRESENTATION BY THE INSURED ABOUT A PRIOR BITE BY A DOG, AND WHETHER THERE ACTUALLY WAS A PRIOR BITE, PRECLUDED SUMMARY JUDGMENT ON WHETHER A CANINE POLICY EXCLUSION APPLIED AND WHETHER THERE WAS A TIMELY DISCLAIMER (THIRD DEPT))

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IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Garcia, over a partial dissent, determined certain aspects of defendant Countrywide’s motion for summary judgment against plaintiff insurer, Ambac, stemming from residential mortgage backed securities issued by Countrywide, were properly granted. Ambac’s argument that it need not demonstrate justifiable reliance or loss causation in support of its fraudulent inducement cause of action was rejected, as was Ambac’s argument that it was entitled to relief over and above that specified in the sole remedy clause, as well as attorney’s fees:

Public policy reasons support the justifiable reliance requirement. Where a “sophisticated business person or entity . . . claims to have been taken in,” the justifiable reliance rule “serves to rid the court of cases in which the claim of reliance is likely to be hypocritical” … . Excusing a sophisticated party such as a monoline financial guaranty insurer from demonstrating justifiable reliance would not further the policy underlying this “venerable rule.”

Likewise, there is no merit to Ambac’s argument that it need not show loss causation. Loss causation is a well-established requirement of a common law fraudulent inducement claim for damages. * * *

Ambac’s complaint fails to include breach of contract allegations beyond those that fall under the sole remedy provision … , and accordingly Ambac is limited to the repurchase protocol as the potential remedy for those claims. * * *

In New York, “the prevailing litigant ordinarily cannot collect . . . attorneys’ fees from its unsuccessful opponents. . . . Attorneys’ fees are treated as incidents of litigation, rather than damages. . . . The exception is when an award is authorized by agreement between the parties or by statute or court rule” … . … [T]his Court [has] held that a court “should not infer a party’s intention to waive the benefit of the rule unless the intention to do so is unmistakably clear from the language of the promise … . Ambac Assur. Corp. v Countrywide Home Loans, Inc., 2018 NY Slip Op 04686, CtApp 6-27-18

​INSURANCE LAW (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))/FRAUD  (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))/CONTRACT LAW  (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))/SECURITIES  (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))/RESIDENTIAL MORTGAGE BACKED SECURITIES  (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))/ATTORNEY’S FEES (IN THIS ACTION STEMMING FROM PLAINTIFF’S INSURING OF RESIDENTIAL MORTGAGE BACKED SECURITIES ISSUED BY DEFENDANT, PLAINTIFF WAS REQUIRED TO SHOW JUSTIFIABLE RELIANCE AND LOSS CAUSATION FOR ITS FRAUDULENT INDUCEMENT CAUSE OF ACTION, PLAINTIFF’S RECOVERY WAS LIMITED TO THAT DESCRIBED IN THE SOLE REMEDY PROVISION, AND PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES (CT APP))

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DEFENDANT’S SUMMARY JUDGMENT MOTION IN THIS VEHICLE-PEDESTRIAN ACCIDENT CASE SHOULD NOT HAVE BEEN GRANTED, DEFENDANT MAY HAVE VIOLATED THE DUTY TO SEE WHAT SHOULD HAVE BEEN SEEN, AND PLAINTIFF’S FRACTURED FOOT CONSTITUTED A SERIOUS INJURY AS A MATTER OF LAW (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined defendant’s motion for summary judgment in this vehicle-pedestrian traffic accident case should not have been granted. Plaintiff demonstrated she suffered a serious injury within the meaning of the Insurance Law (fractures in her foot). And defendant did not demonstrate plaintiff’s negligence was the sole proximate cause of the accident:

Plaintiff commenced this negligence action seeking damages for injuries that she sustained when a vehicle operated by defendant struck her foot while she was walking her bicycle on the street beneath an overpass. We agree with plaintiff, as limited by her brief, that Supreme Court erred in granting defendant’s motion for summary judgment dismissing the complaint and denying that part of plaintiff’s cross motion for partial summary judgment on the issue of serious injury.

Viewing the evidence in the light most favorable to plaintiff and affording her the benefit of every reasonable inference  … , we conclude that defendant failed to meet his initial burden on his motion of establishing as a matter of law that plaintiff’s negligence was the sole proximate cause of the accident … . Defendant’s own submissions raise triable issues of fact, including whether he violated his ” common-law duty to see that which he should have seen [as a driver] through the proper use of his senses’ ” … and his statutory duty to “exercise due care to avoid colliding with any bicyclist[ or] pedestrian” (Vehicle and Traffic Law § 1146 [a]).

Finally, it is uncontested that plaintiff established as a matter of law on her cross motion that she sustained fractures in her foot as a result of the accident and, therefore, she is entitled to partial summary judgment on the issue of serious injury (see Insurance Law § 5102 [d]). Luttrell v Vega, 2018 NY Slip Op 04468, Fourth Dept 6-15-18

​NEGLIGENCE (DEFENDANT’S SUMMARY JUDGMENT MOTION IN THIS VEHICLE-PEDESTRIAN ACCIDENT CASE SHOULD NOT HAVE BEEN GRANTED, DEFENDANT MAY HAVE VIOLATED THE DUTY TO SEE WHAT SHOULD HAVE BEEN SEEN, AND PLAINTIFF’S FRACTURED FOOT CONSTITUTED A SERIOUS INJURY AS A MATTER OF LAW (FOURTH DEPT))/EVIDENCE (NEGLIGENCE, TRAFFIC ACCIDENTS, DEFENDANT’S SUMMARY JUDGMENT MOTION IN THIS VEHICLE-PEDESTRIAN ACCIDENT CASE SHOULD NOT HAVE BEEN GRANTED, DEFENDANT MAY HAVE VIOLATED THE DUTY TO SEE WHAT SHOULD HAVE BEEN SEEN, AND PLAINTIFF’S FRACTURED FOOT CONSTITUTED A SERIOUS INJURY AS A MATTER OF LAW (FOURTH DEPT))/TRAFFIC ACCIDENTS (DEFENDANT’S SUMMARY JUDGMENT MOTION IN THIS VEHICLE-PEDESTRIAN ACCIDENT CASE SHOULD NOT HAVE BEEN GRANTED, DEFENDANT MAY HAVE VIOLATED THE DUTY TO SEE WHAT SHOULD HAVE BEEN SEEN, AND PLAINTIFF’S FRACTURED FOOT CONSTITUTED A SERIOUS INJURY AS A MATTER OF LAW (FOURTH DEPT))/PEDESTRIANS (TRAFFIC ACCIDENTS, DEFENDANT’S SUMMARY JUDGMENT MOTION IN THIS VEHICLE-PEDESTRIAN ACCIDENT CASE SHOULD NOT HAVE BEEN GRANTED, DEFENDANT MAY HAVE VIOLATED THE DUTY TO SEE WHAT SHOULD HAVE BEEN SEEN, AND PLAINTIFF’S FRACTURED FOOT CONSTITUTED A SERIOUS INJURY AS A MATTER OF LAW (FOURTH DEPT))/INSURANCE LAW (TRAFFIC ACCIDENTS, SERIOUS INJURY, DEFENDANT’S SUMMARY JUDGMENT MOTION IN THIS VEHICLE-PEDESTRIAN ACCIDENT CASE SHOULD NOT HAVE BEEN GRANTED, DEFENDANT MAY HAVE VIOLATED THE DUTY TO SEE WHAT SHOULD HAVE BEEN SEEN, AND PLAINTIFF’S FRACTURED FOOT CONSTITUTED A SERIOUS INJURY AS A MATTER OF LAW (FOURTH DEPT))/SERIOUS INJURY (TRAFFIC ACCIDENTS, SERIOUS INJURY, DEFENDANT’S SUMMARY JUDGMENT MOTION IN THIS VEHICLE-PEDESTRIAN ACCIDENT CASE SHOULD NOT HAVE BEEN GRANTED, DEFENDANT MAY HAVE VIOLATED THE DUTY TO SEE WHAT SHOULD HAVE BEEN SEEN, AND PLAINTIFF’S FRACTURED FOOT CONSTITUTED A SERIOUS INJURY AS A MATTER OF LAW (FOURTH DEPT))/VEHICLE AND TRAFFIC LAW (TRAFFIC ACCIDENTS, (DEFENDANT’S SUMMARY JUDGMENT MOTION IN THIS VEHICLE-PEDESTRIAN ACCIDENT CASE SHOULD NOT HAVE BEEN GRANTED, DEFENDANT MAY HAVE VIOLATED THE DUTY TO SEE WHAT SHOULD HAVE BEEN SEEN, AND PLAINTIFF’S FRACTURED FOOT CONSTITUTED A SERIOUS INJURY AS A MATTER OF LAW (FOURTH DEPT))

, , ,

ALTHOUGH THE INSURER COULD DISCLAIM COVERAGE FOR ANY INJURIES CAUSED BY THE INSURED ASSAILANT’S INTENTIONAL CRIMINAL ACTS UNDER THE DOCTRINE OF COLLATERAL ESTOPPEL, THE INSURER COULD NOT DISCLAIM COVERAGE FOR ANY SUBSEQUENT INJURIES THAT MAY HAVE BEEN CAUSED BY THE ASSAILANT’S NEGLIGENCE (THIRD DEPT).

The Third Department determined plaintiff insurer could not completely disclaim coverage of injuries suffered by the defendant at the insured home (owned by the McCabe’s). McCabe was convicted of assaulting and strangling the defendant. Defendant alleges that after McCabe assaulted her she fell over a tripping hazard in the McCabe home and was injured in the fall. Although the insurer can properly disclaim coverage for any injuries inflicted by McCabe’s intentional criminal conduct under the collateral estoppel doctrine, the insurer could not, at this early stage, disclaim coverage for any injuries that might have been caused by McCabe’s negligence (tripping hazard, failure to seek medical care, etc.):

Plaintiff asserts that, to convict McCabe, the criminal jury must have disbelieved his version of events. It is possible, however, that the jury disbelieved only some portions of his testimony … . The jury may have found it incredible that all of defendant’s facial and head injuries were caused when she tried to walk on her own, fell over a raised threshold in the doorway and hit her head on a cinder block wall during that fall. It is also possible that the jury believed that McCabe slammed defendant’s head into the ground or a wall, thereby causing some of her injuries, but the jury did not render any findings regarding what happened after the choking and slamming, such as whether defendant then got up, tried to walk and fell. To establish the convictions, it was unnecessary for the jury to have made findings regarding whether McCabe created a tripping hazard, allowed defendant to walk on her own after he had rendered her partially incapacitated or failed to seek medical help for her after the criminal assault. Hence, the issues as to insurance coverage and exclusions are not identical to the issues decided in McCabe’s criminal trial, and defendants here did not have a full and fair opportunity in the criminal trial to address some of the issues regarding McCabe’s negligence allegedly committed before and after the criminal assault. Plaintiff failed to demonstrate that there was no possible factual or legal basis to support a finding that some of defendant’s injuries were unintended by McCabe, so as to bar coverage under the policy exclusion … . Accordingly, collateral estoppel does not apply here, except as to the more narrow issues necessarily decided in the criminal trial, and plaintiff was not entitled to summary judgment or a declaratory judgment at this early stage of this coverage action … . State Farm Fire & Cas. Co. v Chauncey McCabe, 2018 NY Slip Op 04416, Third Dept 6-14-18

​INSURANCE LAW (ALTHOUGH THE INSURER COULD DISCLAIM COVERAGE FOR ANY INJURIES CAUSED BY THE INSURED ASSAILANT’S INTENTIONAL CRIMINAL ACTS UNDER THE DOCTRINE OF COLLATERAL ESTOPPEL, THE INSURER COULD NOT DISCLAIM COVERAGE FOR ANY SUBSEQUENT INJURIES THAT MAY HAVE BEEN CAUSED BY THE ASSAILANT’S NEGLIGENCE (THIRD DEPT))/CIVIL PROCEDURE (INSURANCE LAW, COLLATERAL ESTOPPEL, ALTHOUGH THE INSURER COULD DISCLAIM COVERAGE FOR ANY INJURIES CAUSED BY THE INSURED ASSAILANT’S INTENTIONAL CRIMINAL ACTS UNDER THE DOCTRINE OF COLLATERAL ESTOPPEL, THE INSURER COULD NOT DISCLAIM COVERAGE FOR ANY SUBSEQUENT INJURIES THAT MAY HAVE BEEN CAUSED BY THE ASSAILANT’S NEGLIGENCE (THIRD DEPT))/COLLATERAL ESTOPPEL (INSURANCE LAW, ALTHOUGH THE INSURER COULD DISCLAIM COVERAGE FOR ANY INJURIES CAUSED BY THE INSURED ASSAILANT’S INTENTIONAL CRIMINAL ACTS UNDER THE DOCTRINE OF COLLATERAL ESTOPPEL, THE INSURER COULD NOT DISCLAIM COVERAGE FOR ANY SUBSEQUENT INJURIES THAT MAY HAVE BEEN CAUSED BY THE ASSAILANT’S NEGLIGENCE (THIRD DEPT))/CRIMINAL LAW (INSURANCE LAW, COLLATERAL ESTOPPEL, ALTHOUGH THE INSURER COULD DISCLAIM COVERAGE FOR ANY INJURIES CAUSED BY THE INSURED ASSAILANT’S INTENTIONAL CRIMINAL ACTS UNDER THE DOCTRINE OF COLLATERAL ESTOPPEL, THE INSURER COULD NOT DISCLAIM COVERAGE FOR ANY SUBSEQUENT INJURIES THAT MAY HAVE BEEN CAUSED BY THE ASSAILANT’S NEGLIGENCE (THIRD DEPT))/NEGLIGENCE (INSURANCE LAW, CRIMINAL LAW, COLLATERAL ESTOPPEL, ALTHOUGH THE INSURER COULD DISCLAIM COVERAGE FOR ANY INJURIES CAUSED BY THE INSURED ASSAILANT’S INTENTIONAL CRIMINAL ACTS UNDER THE DOCTRINE OF COLLATERAL ESTOPPEL, THE INSURER COULD NOT DISCLAIM COVERAGE FOR ANY SUBSEQUENT INJURIES THAT MAY HAVE BEEN CAUSED BY THE ASSAILANT’S NEGLIGENCE (THIRD DEPT))

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