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COMPLEX DECISION EXPLAINING BLACK LETTER LAW ON LABOR LAW 240(1), 241(6) AND 200 CAUSES OF ACTION, CONTRACTUAL AND IMPLIED INDEMNIFICATION, AND INSURANCE COVERAGE ISSUES (SECOND DEPT).

The Second Department reversed Supreme Court in a complex action involving Labor Law 240(1), 241(6), 200 and common law negligence causes of action, as well as several contractual and implied indemnification issues, and insurance coverage and duty to defend and indemnify issues. The decision lays out the black letter law on all the issues, illustrates how the appellate courts analyze summary judgment motions, and is well worth reading for an overview of the complexity of a construction accident case involving property owners, several insurance policies, and layers of contractors. Plaintiff fell off a ladder that had been placed on an uneven floor. There are too many substantive issues to fairly summarize them here. With respect to the Labor Law issues, the court wrote:

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The plaintiff established his prima facie entitlement to judgment as a matter of law on the issue of the defendants’ liability on the Labor Law § 240(1) cause of action. … The plaintiff used the last available ladder in his work area. According to the plaintiff, this ladder was missing two of its rubber feet, and was missing the lowest rung. The plaintiff testified that the floor was “not finished” and that it was partially covered in concrete and partially covered in rubble. The plaintiff indicated that there were “all types of things” strewn on the ground and that the floor “was not level.” The plaintiff stated that, as he was standing on the ladder to perform his work, the ladder “shook,” and he “lost [his] balance” and fell.

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The … defendants failed to establish their prima facie entitlement to judgment as a matter of law dismissing the Labor Law § 241(6) cause of action insofar as it was based on Industrial Code … . Contrary to their contention, the …defendants did not make a prima facie showing that the plaintiff’s conduct was the sole proximate cause of the accident … . …

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“Cases involving Labor Law § 200 fall into two broad categories: namely, those where workers are injured as a result of dangerous or defective premises conditions at a work site, and those involving the manner in which the work is performed” … . “These two categories should be viewed in the disjunctive” … . Where, as here, “an accident is alleged to involve both a dangerous condition on the premises and the means and methods’ of the work, a defendant moving for summary judgment with respect to causes of action alleging a violation of Labor Law § 200 is obligated to address the proof applicable to both liability standards” … .

Here, in moving for summary judgment, the defendants failed to address the allegation in the complaint that the plaintiff was injured due to the dangerous or defective premises conditions at the work site. Furthermore, contrary to the Supreme Court’s conclusion, the plaintiff was not ultimately required to demonstrate that the Mall defendants actually exercised supervisory control.

“[W]hen the manner and method of work is at issue in a Labor Law § 200 analysis” the issue is “whether the defendant had the authority to supervise or control the work” … . “A defendant has the authority to supervise or control the work for purposes of Labor Law § 200 when that defendant bears the responsibility for the manner in which the work is performed” … .

Here, the defendants failed to establish that they did not have the authority to supervise or control the means and methods of the work performed by the plaintiff. Poalacin v Mall Props., Inc., 2017 NY Slip Op 08027, Second Dept 11-15-17

 

LABOR LAW-CONSTRUCTION LAW (COMPLEX DECISION EXPLAINING BLACK LETTER LAW ON LABOR LAW 240(1), 241(6) AND 200 CAUSES OF ACTION, CONTRACTUAL AND IMPLIED INDEMNIFICATION, AND INSURANCE COVERAGE ISSUES (SECOND DEPT))/INSURANCE LAW (LABOR LAW-CONSTRUCTION LAW, COMPLEX DECISION EXPLAINING BLACK LETTER LAW ON LABOR LAW 240(1), 241(6) AND 200 CAUSES OF ACTION, CONTRACTUAL AND IMPLIED INDEMNIFICATION, AND INSURANCE COVERAGE ISSUES (SECOND DEPT))/CONTRACT LAW (LABOR LAW-CONSTRUCTION LAW, COMPLEX DECISION EXPLAINING BLACK LETTER LAW ON LABOR LAW 240(1), 241(6) AND 200 CAUSES OF ACTION, CONTRACTUAL AND IMPLIED INDEMNIFICATION, AND INSURANCE COVERAGE ISSUES (SECOND DEPT))/LADDERS (LABOR LAW-CONSTRUCTION LAW, COMPLEX DECISION EXPLAINING BLACK LETTER LAW ON LABOR LAW 240(1), 241(6) AND 200 CAUSES OF ACTION, CONTRACTUAL AND IMPLIED INDEMNIFICATION, AND INSURANCE COVERAGE ISSUES (SECOND DEPT))

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SUPREME COURT ERRED IN ORDERING DISCLOSURE OF SOME OF THE INSURER’S RECORDS AND MATERIALS, INCLUDING LEGAL OPINION OF OUTSIDE COUNSEL (FOURTH DEPT).

The Fourth Department, reversing (modifying Supreme Court) determined plaintiff was not entitled to disclosure of the pre-disclaimer opinion of outside counsel for the insurer, and was not entitled to the insurer’s manual without an in camera review of the manual for relevance. Supreme Court properly ordered disclosure of the pre-disclaimer claim notes which included statements made by the insured (father of the injured infant):

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… [T]he court properly ordered disclosure of pre-disclaimer claim notes containing statements made by the father. It is well settled that “there must be full disclosure of accident reports prepared in the ordinary course of business that were motivated at least in part by a business concern other than preparation for litigation” … . Here, the father made his statements to defendant’s investigators before defendant made the decision to disclaim, and there is no dispute that defendant’s employees relied on those statements in making that decision.

… [T]he court abused its discretion in granting that part of plaintiff’s motion seeking disclosure of the legal opinion of outside counsel and pre-disclaimer claim notes related thereto and denying that part of defendant’s cross motion seeking a protective order with respect to those items, and we therefore modify the order accordingly. Although reports prepared in the regular course of business are discoverable … , documents prepared by an attorney that are “primarily and predominantly of a legal character,” and made to furnish legal services, are absolutely privileged and not discoverable, regardless of whether there was pending litigation at the time they were prepared … .

[T]he court abused its discretion in granting that part of plaintiff’s motion seeking disclosure of defendant’s reserve information and denying that part of defendant’s cross motion with respect thereto inasmuch as that information is not “material and necessary” to the action (CPLR 3101 [a]…).

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… [T]he court abused its discretion in granting that part of plaintiff’s motion seeking disclosure of defendant’s claim investigation manual and denying that part of defendant’s cross motion with respect thereto without first conducting an in camera review. As the moving party, plaintiff had the burden of demonstrating that “the method of discovery sought will result in the disclosure of relevant evidence or is reasonably calculated to lead to the discovery of information bearing on the claims” … . …[T]he court should have reviewed the manual in camera to determine whether it contained information material and relevant to the issues to be decided in the action … . Celani v Allstate Indem. Co., 2017 NY Slip Op 07799, Fourth Dept 11-9-17

 

INSURANCE LAW (SUPREME COURT ERRED IN ORDERING DISCLOSURE OF SOME OF THE INSURER’S RECORDS AND MATERIALS, INCLUDING LEGAL OPINION OF OUTSIDE COUNSEL (FOURTH DEPT))/CIVIL PROCEDURE (INSURANCE LAW, SUPREME COURT ERRED IN ORDERING DISCLOSURE OF SOME OF THE INSURER’S RECORDS AND MATERIALS, INCLUDING LEGAL OPINION OF OUTSIDE COUNSEL (FOURTH DEPT))/ATTORNEYS (INSURANCE LAW, (SUPREME COURT ERRED IN ORDERING DISCLOSURE OF SOME OF THE INSURER’S RECORDS AND MATERIALS, INCLUDING LEGAL OPINION OF OUTSIDE COUNSEL (FOURTH DEPT))/PRIVILEGE (ATTORNEY-CLIENT, INSURANCE LAW, DISCLOSURE, (SUPREME COURT ERRED IN ORDERING DISCLOSURE OF SOME OF THE INSURER’S RECORDS AND MATERIALS, INCLUDING LEGAL OPINION OF OUTSIDE COUNSEL (FOURTH DEPT))/DISCLOSURE (INSURANCE LAW, SUPREME COURT ERRED IN ORDERING DISCLOSURE OF SOME OF THE INSURER’S RECORDS AND MATERIALS, INCLUDING LEGAL OPINION OF OUTSIDE COUNSEL (FOURTH DEPT))/CPLR 3101 (a) (INSURANCE LAW, SUPREME COURT ERRED IN ORDERING DISCLOSURE OF SOME OF THE INSURER’S RECORDS AND MATERIALS, INCLUDING LEGAL OPINION OF OUTSIDE COUNSEL (FOURTH DEPT))

INSURED SETTLED THE MATTER WITHOUT INSURER’S CONSENT, INSURER NOT OBLIGATED TO DEFEND OR INDEMNIFY INSURED (SECOND DEPT).

The Second Department determined the insurer (Southwest) was entitled to summary judgment declaring it was not obligated to defend or indemnify the insured (Ralex). Ralex had settled the matter without Southwest’s consent:

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Here, the subject insurance policy Southwest issued to Ralex provided that “[n]o insured will, except at that insured’s own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without [Southwest’s] consent.” Contrary to Ralex’s contention, this provision is not ambiguous. “Contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties have used, and if they are clear and unambiguous the terms are to be taken and understood in their plain, ordinary and proper sense” … .

Moreover, “New York law views an insurer’s right to consent to any settlement as a condition precedent to coverage” … . Here, the Supreme Court properly granted that branch of Southwest’s motion which was pursuant to CPLR 3211(a)(1), since the documentary evidence it submitted showed that Ralex undertook its own defense in the underlying action, agreed to settle the underlying action, and incurred defense costs without first obtaining Southwest’s consent. By doing so, Ralex breached the insurance contract and is not entitled to coverage … . Ralex Servs., Inc. v Southwest Mar. & Gen. Ins. Co., 2017 NY Slip Op 07763, Second Dept 11-8-17

 

INSURANCE LAW (INSURED SETTLED THE MATTER WITHOUT INSURER’S CONSENT, INSURER NOT OBLIGATED TO DEFEND OR INDEMNIFY INSURED (SECOND DEPT))

COMMERCIAL LIABILITY CARRIER NOT OBLIGATED TO DEFEND ACTION FOR BREACH OF CONTRACT, UNJUST ENRICHMENT AND FORECLOSURE OF MECHANIC’S LIENS, POLICY ONLY COVERS PERSONAL INJURY, PROPERTY DAMAGE AND ADVERTISING INJURY (SECOND DEPT).

The Second Department determined the insurer was not obligated to defend an action alleging breach of contract and unjust enrichment and foreclosure of mechanic’s liens. The commercial liability policy covered only personal injury, property damage and advertising injury:

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“The general rule is that a commercial general liability insurance policy does not afford coverage for breach of contract, but rather for bodily injury and property damage”… . To hold otherwise would render an insurance carrier a surety for the performance of its insured’s work … . The determination of an insurer’s duty to defend must be drawn from allegations of the underlying complaint … . Here, the complaint in the Owens action sounds exclusively in breach of contract and unjust enrichment, and seeks to foreclose on mechanic’s liens. There is no claim for bodily injury, property damage, or personal and advertising injury as is required to trigger coverage under the policies herein. J.W. Mays, Inc. v Liberty Mut. Ins. Co., 2017 NY Slip Op 06639, Second Dept 9-27-17

INSURANCE LAW (COMMERCIAL LIABILITY CARRIER NOT OBLIGATED TO DEFEND ACTION FOR BREACH OF CONTRACT, UNJUST ENRICHMENT AND SEEKING FORECLOSURE OF MECHANIC’S LIENS, POLICY ONLY COVERS PERSONAL INJURY, PROPERTY DAMAGE AND ADVERTISING INJURY (SECOND DEPT))/COMMERCIAL LIABILITY INSURANCE (COMMERCIAL LIABILITY CARRIER NOT OBLIGATED TO DEFEND ACTION FOR BREACH OF CONTRACT, UNJUST ENRICHMENT AND SEEKING FORECLOSURE OF MECHANIC’S LIENS, POLICY ONLY COVERS PERSONAL INJURY, PROPERTY DAMAGE AND ADVERTISING INJURY (SECOND DEPT))

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INSURER’S ATTORNEY MUST BE DEPOSED TO DETERMINE HIS ROLE IN THE INVESTIGATION OF A FIRE ON PLAINTIFFS’ PROPERTY AND THE DENIAL OF COVERAGE, THE INFORMATION PROVIDED BY THE DEPOSITION WILL DETERMINE WHETHER THE ATTORNEY’S FILES ARE DISCOVERABLE BY THE PLAINTIFFS (FIRST DEPT).

The First Department, reversing Supreme Court, determined an attorney who worked for defendant insurer must be deposed to ascertain his role in an investigation of a fire at plaintiffs’ property and the denial of coverage. Based on the deposition, Supreme Court will address what portions of the insurer’s files, including the attorney’s, are discoverable by plaintiffs:

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“[T]he CPLR establishes three categories of protected materials, also supported by policy considerations: privileged matter, absolutely immune from discovery (CPLR 3101[b]); attorney’s work product, also absolutely immune (CPLR 3101[c]); and trial preparation materials, which are subject to disclosure only on a showing of substantial need and undue hardship in obtaining the substantial equivalent of the materials by other means CPLR 3101 [d][2]” … . “[I]n order for attorney-client communications to be privileged, the document must be primarily or predominantly a communication of a legal character” … . …

“Reports of insurance investigators or adjusters, prepared during the processing of a claim, are discoverable as made in the regular course of the insurance company’s business” … . “Furthermore, attorney work product applies only to documents prepared by counsel acting as such, and to materials uniquely the product of a lawyer’s learning and professional skills, such as those reflecting an attorney’s legal research, analysis, conclusions, legal theory or strategy” … . “Documents prepared in the ordinary course of an insurance company’s investigation to determine whether to accept or reject coverage and to evaluate the extent of a claimant’s loss are not privileged and are, therefore, discoverable. In addition, such documents do not become privileged merely because an investigation was conducted by an attorney” … . Venture v Preferred Mut. Ins. Co., 2017 NY Slip Op 06594, First Dept 9-26-17

 

INSURANCE LAW (INSURER’S ATTORNEY MUST BE DEPOSED TO DETERMINE HIS ROLE IN THE INVESTIGATION OF A FIRE ON PLAINTIFFS’ PROPERTY AND THE DENIAL OF COVERAGE, THE INFORMATION PROVIDED BY THE DEPOSITION WILL INFORM WHETHER THE ATTORNEY’S FILES ARE DISCOVERABLE BY THE PLAINTIFFS (FIRST DEPT))/ATTORNEYS  (INSURER’S ATTORNEY MUST BE DEPOSED TO DETERMINE HIS ROLE IN THE INVESTIGATION OF A FIRE ON PLAINTIFFS’ PROPERTY AND THE DENIAL OF COVERAGE, THE INFORMATION PROVIDED BY THE DEPOSITION WILL INFORM WHETHER THE ATTORNEY’S FILES ARE DISCOVERABLE BY THE PLAINTIFFS (FIRST DEPT))/CIVIL PROCEDURE (DISCOVERY, ATTORNEYS, INSURER’S ATTORNEY MUST BE DEPOSED TO DETERMINE HIS ROLE IN THE INVESTIGATION OF A FIRE ON PLAINTIFFS’ PROPERTY AND THE DENIAL OF COVERAGE, THE INFORMATION PROVIDED BY THE DEPOSITION WILL INFORM WHETHER THE ATTORNEY’S FILES ARE DISCOVERABLE BY THE PLAINTIFFS (FIRST DEPT))/DISCOVERY (INSURANCE LAW, ATTORNEYS, (INSURER’S ATTORNEY MUST BE DEPOSED TO DETERMINE HIS ROLE IN THE INVESTIGATION OF A FIRE ON PLAINTIFFS’ PROPERTY AND THE DENIAL OF COVERAGE, THE INFORMATION PROVIDED BY THE DEPOSITION WILL INFORM WHETHER THE ATTORNEY’S FILES ARE DISCOVERABLE BY THE PLAINTIFFS (FIRST DEPT))

OPERATIVE DATE FOR POLICY COVERAGE WAS THE DATE THE POWER GENERATING TURBINE WAS TAKEN OUT OF SERVICE, EVEN THOUGH THE DAMAGE WHICH ULTIMATELY LED TO THE SHUT DOWN HAPPENED BEFORE THE POLICY PERIOD (FIRST DEPT).

The First Department determined the loss of a power-generating turbine was covered by the insurance policy even though the damage preceded the policy period. The turbine was taken out of service when a crack triggered a shut-down. Even though the crack occurred prior to the shut-down and lengthened over time, the operative date was when the turbine was taken out of service:

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[The power company] makes a claim under the subject insurance policy for coverage of losses that resulted when a power-generating turbine (Unit 30) … was taken out of operation on September 12, 2008 (during the policy period), due to excessive vibrations. The vibrations were found to have been caused by a nine-inch crack in Unit 30’s rotor. Unit 30 functioned according to an alarm and trip system, with protocols established when the policy was underwritten. According to these protocols, Unit 30 was functioning properly until September 12, 2008, notwithstanding that the crack had begun to form before the inception of the policy period; moreover, it is undisputed that the crack had continued to lengthen during the policy period. Therefore, the loss occurred on September 12, 2008 – the discrete event of physical loss or damage triggering the time element coverage – when the unit was taken out of operation due to the excessive vibrations, and [the power company’s] property sustained a physical loss or damage during the policy period. Since there is no provision in the policy that excludes physical loss or damage originating prior to the commencement of the policy period, the policy covers the loss … . National Union Fire Ins. Co. of Pittsburgh, Pa. v TransCanada Energy USA, Inc., 2017 NY Slip Op 06513, 1st Dept 9-19-17

INSURANCE LAW (OPERATIVE DATE FOR POLICY COVERAGE WAS THE DATE THE POWER GENERATING TURBINE WAS TAKEN OUT OF SERVICE, EVEN THOUGH THE DAMAGE WHICH ULTIMATELY LED TO THE SHUT DOWN HAPPENED BEFORE THE POLICY PERIOD (FIRST DEPT))

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ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT).

The Second Department determined attorney letters did not constitute documentary evidence which would support a motion to dismiss in this insurance-coverage dispute:

A motion to dismiss a complaint pursuant to CPLR 3211(a)(1) may be granted only if the documentary evidence submitted utterly refutes the factual allegations of the complaint and conclusively establishes a defense to the claims as a matter of law … . In order for evidence to qualify as documentary, it must be unambiguous, authentic, and undeniable … . Neither affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211(a)(1) … . Accordingly, the letters from the attorney and claims services relied upon by [the insurer] do not constitute documentary evidence for the purposes of CPLR 3211(a)(1). Additionally, the insurance policy, which does constitute documentary evidence, did not utterly refute the factual allegations of the complaint and did not conclusively establish a defense to the claims as a matter of law. Fox Paine & Co., LLC v Houston Cas. Co., 2017 NY Slip Op 06162, Second Dept 8-16-17

CIVIL PROCEDURE (MOTION TO DISMISS, DOCUMENTARY EVIDENCE, ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT))/DISMISS, MOTION TO (EVIDENCE, ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT))/EVIDENCE (MOTION TO DISMISS, DOCUMENTARY EVIDENCE, ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT))/DOCUMENTARY EVIDENCE (MOTION TO DISMISS, ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT))/INSURANCE LAW (CIVIL PROCEDURE, MOTION TO DISMISS, ATTORNEY LETTERS DID NOT CONSTITUTE DOCUMENTARY EVIDENCE WHICH WOULD SUPPORT A MOTION TO DISMISS (SECOND DEPT))

PLAINTIFF, AFTER A SUBSTANTIAL VERDICT IN A TRAFFIC ACCIDENT CASE, WAS ASSIGNED DEFENDANT’S RIGHT TO SUE DEFENDANT’S INSURER ALLEGING A BAD FAITH FAILURE TO SETTLE, THE INSURER’S MOTION TO DISMISS WAS PROPERLY DENIED (SECOND DEPT).

The Second Department determined there was no basis for the dismissal of Rios’s complaint alleging defendant insurer’s (Tri State’s) bad faith refusal to settle the underlying traffic-accident action for the policy limit of $100,000. Rios had collided with Weathers, who sued Rios. Weathers won a substantial verdict which was reduced by the Second Department. The Second Department ordered a new trial unless Weathers stipulated to the reduced award (which remained substantial and well above the policy limit). Weathers stipulated to most of the reduced award, but not the award for future physical therapy and medical costs. Rios then assigned his “bad faith” action against defendant insurer (Tri State) to Weathers. In moving to dismiss the Rios complaint, the insurer argued that because Weathers did not stipulate to all of the reduced award, his only remedy was a new trial:

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Weathers, as assignee of Rios’s rights, … commenced this action alleging that Tri State acted in bad faith by refusing to settle this case before the trial for the policy limit of $100,000 and breached the implied covenant of good faith and fair dealing in handling the defense of the personal injury action on behalf of Rios. Tri State moved, in effect, pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against it. Tri State argued that this Court’s decision and order in the personal injury action did not permit Weathers, the personal injury plaintiff, to pick and choose which modified awards he would accept and which awards he would reject. Tri State contended that, because Weathers did not “unconditionally accept” the reduced awards set forth in this Court’s decision and order within 30 days, he “has the right to a new trial, nothing else.” Tri State argued that the instant “bad faith” action is premature “because there is no jury verdict on damages at this stage,” and therefore, it cannot be said “that Tri State acted in bad faith for refusing to settle [the personal injury] case.” The Supreme Court denied the motion.

Under the particular circumstances of this case, Tri State has failed to establish any ground to dismiss the complaint insofar as asserted against it. Although there are outstanding questions as to the total award of damages in the personal injury action, Tri State has failed to demonstrate why that prevents Weathers from maintaining an action against Tri State alleging bad faith refusal to settle and breach of the implied covenant of good faith and fair dealing … . Weathers v Tri State Consumer Ins. Co., 2017 NY Slip Op 06099, Second Dept 8-9-17

 

INSURANCE LAW (BAD FAITH, PLAINTIFF, AFTER A SUBSTANTIAL VERDICT IN A TRAFFIC ACCIDENT CASE, WAS ASSIGNED DEFENDANT’S RIGHT TO SUE DEFENDANT’S INSURER ALLEGING A BAD FAITH FAILURE TO SETTLE, THE INSURER’S MOTION TO DISMISS WAS PROPERLY DENIED (SECOND DEPT))/TRAFFIC ACCIDENTS (INSURANCE LAW, BAD FAITH,  PLAINTIFF, AFTER A SUBSTANTIAL VERDICT IN A TRAFFIC ACCIDENT CASE, WAS ASSIGNED DEFENDANT’S RIGHT TO SUE DEFENDANT’S INSURER ALLEGING A BAD FAITH FAILURE TO SETTLE, THE INSURER’S MOTION TO DISMISS WAS PROPERLY DENIED (SECOND DEPT))/BAD FAITH (INSURANCE LAW, TRAFFIC ACCIDENTS,  PLAINTIFF, AFTER A SUBSTANTIAL VERDICT IN A TRAFFIC ACCIDENT CASE, WAS ASSIGNED DEFENDANT’S RIGHT TO SUE DEFENDANT’S INSURER ALLEGING A BAD FAITH FAILURE TO SETTLE, THE INSURER’S MOTION TO DISMISS WAS PROPERLY DENIED (SECOND DEPT))

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PRE-LITIGATION INVESTIGATION BY THE INSURER’S LAW FIRM INTO WHETHER TO REJECT OR PAY AN INSURANCE CLAIM IS NOT PRIVILEGED AND IS DISCOVERABLE, THE ATTORNEY WHO CONDUCTED THE INVESTIGATION WAS PROPERLY DISQUALIFIED FROM THE UNDERLYING LITIGATION, BUT HER LAW FIRM SHOULD NOT HAVE BEEN DISQUALIFIED (SECOND DEPT).

The Second Department determined the file for a pre-litigation investigation of a fire insurance claim done by a law firm hired by the insurer was discoverable.  The court further found the attorney who conducted the investigation was properly disqualified because she may be a fact witness in the underlying litigation, but her law firm should not have been disqualified because her testimony would not be prejudicial to the client’s case:

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CPLR 3101(a) entitles parties to “full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof.” Discovery determinations should be evaluated on a case-by-case basis “with due regard for the strong policy supporting open disclosure” … .

“[T]he payment or rejection of claims is a part of the regular business of an insurance company. Consequently, reports which aid it in the process of deciding [whether to pay or reject a claim] are made in the regular course of its business” … . Reports prepared by insurance investigators, adjusters, or attorneys before the decision is made to pay or reject a claim are not privileged and are discoverable, even when those reports are mixed/multi-purpose reports, motivated in part by the potential for litigation with the insured … .

Here, the Supreme Court properly compelled disclosure, as the material … was prepared by [the law firm] as part of [the insurer’s] investigation into the claim, and was not primarily and predominantly of a legal character … . …

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The Supreme Court providently exercised its discretion in disqualifying … the attorney who conducted the investigation … since she was likely to be a witness on a significant issue of fact … . However, it improvidently exercised its discretion in disqualifying [the law firm] itself …. Pursuant to Rule 3.7(b)(1) of the Rules of Professional Conduct, “[a] lawyer may not act as [an] advocate before a tribunal in a matter if . . . another lawyer in the lawyer’s firm is likely to be called as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony may be prejudicial to the client”… . Here, there was no showing that [the attorney’s] testimony may be prejudicial to [the client’s] case … . Advanced Chimney, Inc. v Graziano, 2017 NY Slip Op 05927, Second Dept 8-2-17

 

INSURANCE LAW (DISCOVERY, ATTORNEYS, PRE-LITIGATION INVESTIGATION BY THE INSURER’S LAW FIRM INTO WHETHER TO REJECT OR PAY AN INSURANCE CLAIM IS NOT PRIVILEGED AND IS DISCOVERABLE, THE ATTORNEY WHO CONDUCTED THE INVESTIGATION WAS PROPERLY DISQUALIFIED FROM THE UNDERLYING LITIGATION, BUT HER LAW FIRM SHOULD NOT HAVE BEEN DISQUALIFIED (SECOND DEPT))/CIVIL PROCEDURE (INSURANCE LAW, ATTORNEYS, PRE-LITIGATION INVESTIGATION BY THE INSURER’S LAW FIRM INTO WHETHER TO REJECT OR PAY AN INSURANCE CLAIM IS NOT PRIVILEGED AND IS DISCOVERABLE, THE ATTORNEY WHO CONDUCTED THE INVESTIGATION WAS PROPERLY DISQUALIFIED FROM THE UNDERLYING LITIGATION, BUT HER LAW FIRM SHOULD NOT HAVE BEEN DISQUALIFIED (SECOND DEPT))/ATTORNEYS (INSURANCE LAW, PRE-LITIGATION INVESTIGATION BY THE INSURER’S LAW FIRM INTO WHETHER TO REJECT OR PAY AN INSURANCE CLAIM IS NOT PRIVILEGED AND IS DISCOVERABLE, THE ATTORNEY WHO CONDUCTED THE INVESTIGATION WAS PROPERLY DISQUALIFIED FROM THE UNDERLYING LITIGATION, BUT HER LAW FIRM SHOULD NOT HAVE BEEN DISQUALIFIED (SECOND DEPT))

THE PROOF OF PLAINTIFF’S CLAIM FOR LOST EARNINGS WAS INSUFFICIENT AS A MATTER OF LAW, DEFENDANT INSURER’S MOTION FOR SUMMARY JUDGMENT IN THIS NO-FAULT CASE SHOULD HAVE BEEN GRANTED 3RD DEPT.

The Third Department, reversing Supreme Court, over a two-justice dissent, determined plaintiff’s evidence of lost earnings was insufficient to support his claim for no-fault benefits. The insurer’s motion for summary judgment should, therefore, have been granted. The dissenters argued that there was enough evidence of lost earnings to raise a question of fact:

… {The potential employer’s and] plaintiff’s subjective beliefs about the financial health of the parts business and/or their subjective beliefs about plaintiff’s skills are immaterial to the resolution of whether it is reasonable to project that the parts business would have employed plaintiff at a salary of $2,000 a week. In contrast, the uncontradicted evidence that the parts business was failing, that it had not made any efforts to acquire or open an automobile repair shop, and that, even if it had, plaintiff had a demonstrated history of being unable to run a profitable automobile repair shop all bear on the reasonableness of such a projection. That material evidence established as a matter of law that the projection that plaintiff would have received $2,000 a week from the parts business is unreasonable … . Freligh v Government Empls. Ins. Co., 2017 NY Slip Op 05911, 3rd Dept 7-27-17

INSURANCE LAW (NO-FAULT, LOST EARNINGS, THE PROOF OF PLAINTIFF’S CLAIM FOR LOST EARNINGS WAS INSUFFICIENT AS A MATTER OF LAW, DEFENDANT INSURER’S MOTION FOR SUMMARY JUDGMENT IN THIS NO-FAULT CASE SHOULD HAVE BEEN GRANTED 3RD DEPT)/NO-FAULT BENEFITS (LOST EARNINGS,  THE PROOF OF PLAINTIFF’S CLAIM FOR LOST EARNINGS WAS INSUFFICIENT AS A MATTER OF LAW, DEFENDANT INSURER’S MOTION FOR SUMMARY JUDGMENT IN THIS NO-FAULT CASE SHOULD HAVE BEEN GRANTED 3RD DEPT)

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