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A CLAUSE IN AN EMPLOYMENT CONTRACT PURPORTING TO WAIVE THE RIGHT TO BRING A CLASS ACTION SUIT AND SUBMIT COLLECTIVE CLAIMS TO ARBITRATION VIOLATED THE NATIONAL LABOR RELATIONS ACT AND IS UNENFORCEABLE 1ST DEPT.

The First Department, modifying Supreme Court, in a full-fledged opinion by Justice Moskowitz, over a two-justice dissenting opinion, determined an arbitration provision in plaintiff insurance agent’s employment contract was unenforceable with respect to collective actions, here a class action concerning wage and hour claims:

… [W]e conclude … that arbitration provisions such as the one in [plaintiff’s] contract, which prohibit class, collective, or representative claims, violate the National Labor Relations Act (NLRA) and thus, that those provisions are unenforceable.

In reaching this conclusion, we agree with the reasoning in Lewis v Epic Sys. Corp. (823 F3d 1147 [7th Cir 2016], cert granted __ US __, 137 S Ct 809 [2017]), the recent case from the United States Court of Appeals for the Seventh Circuit, which addressed the enforceability of arbitration agreements prohibiting collective actions. In Lewis, the plaintiff employee agreed to an arbitration agreement mandating that wage and hour claims could be brought only through]individual arbitration and requiring employees to waive “the right to participate in or receive money or any other relief from any class, collective, or representative proceeding” … . The arbitration agreement also included a clause stating that if the waiver were unenforceable, “any claim brought on a class, collective, or representative action basis must be filed in a court of competent jurisdiction” … .

… The plaintiff [in Lewis] argued that the arbitration clause violated the NLRA because it interfered with employees’ right to engage in concerted activities for mutual aid and protection, and was therefore unenforceable … .

The Seventh Circuit denied the employer’s motion to proceed under the arbitration clause, declining to enforce a clause that precluded employees from “seeking any class, collective, or representative remedies to wage-and-hour disputes” because the clause “violate[d] Sections 7 and 8 of the NLRA” (id. at 1161). According to the Court, section 7 of the NLRA provided that employees have the right to engage in concerted activities, and concerted activities “have long been held to include resort to . . . judicial forums” (id. at 1152) [internal quotation marks omitted]. The Seventh Circuit also found that a lawsuit filed “by a group of employees to achieve more favorable terms or conditions of employment” is considered to constitute “concerted activity” under section 7 of the NLRA (id.) [internal quotation marks omitted). Accordingly, the Court held, contracts such as the one at issue were unenforceable under the NLRA because they “stipulate away employees’ [s]ection 7 rights or otherwise require actions unlawful under the NRLA” (id. at 1155). Gold v New York Life Ins. Co., 2017 NY Slip Op 05695, 1st Dept 7-18-17

CIVIL PROCEDURE (CLASS ACTIONS, EMPLOYMENT LAW, A CLAUSE IN AN EMPLOYMENT CONTRACT PURPORTING TO WAIVE THE RIGHT TO BRING A CLASS ACTION SUIT AND SUBMIT COLLECTIVE CLAIMS TO ARBITRATION VIOLATED THE NATIONAL LABOR RELATIONS ACT AND IS UNENFORCEABLE 1ST DEPT)/CLASS ACTIONS (EMPLOYMENT LAW,  A CLAUSE IN AN EMPLOYMENT CONTRACT PURPORTING TO WAIVE THE RIGHT TO BRING A CLASS ACTION SUIT AND SUBMIT COLLECTIVE CLAIMS TO ARBITRATION VIOLATED THE NATIONAL LABOR RELATIONS ACT AND IS UNENFORCEABLE 1ST DEPT)/EMPLOYMENT LAW (CLASS ACTIONS, ARBITRATION,  A CLAUSE IN AN EMPLOYMENT CONTRACT PURPORTING TO WAIVE THE RIGHT TO BRING A CLASS ACTION SUIT AND SUBMIT COLLECTIVE CLAIMS TO ARBITRATION VIOLATED THE NATIONAL LABOR RELATIONS ACT AND IS UNENFORCEABLE 1ST DEPT)/ARBITRATION (EMPLOYMENT LAW, CLASS ACTIONS,  A CLAUSE IN AN EMPLOYMENT CONTRACT PURPORTING TO WAIVE THE RIGHT TO BRING A CLASS ACTION SUIT AND SUBMIT COLLECTIVE CLAIMS TO ARBITRATION VIOLATED THE NATIONAL LABOR RELATIONS ACT AND IS UNENFORCEABLE 1ST DEPT)/CONTRACT LAW (EMPLOYMENT LAW, ARBITRATION,  A CLAUSE IN AN EMPLOYMENT CONTRACT PURPORTING TO WAIVE THE RIGHT TO BRING A CLASS ACTION SUIT AND SUBMIT COLLECTIVE CLAIMS TO ARBITRATION VIOLATED THE NATIONAL LABOR RELATIONS ACT AND IS UNENFORCEABLE 1ST DEPT)/INSURANCE LAW (EMPLOYMENT LAW, ARBITRATION, A CLAUSE IN AN EMPLOYMENT CONTRACT PURPORTING TO WAIVE THE RIGHT TO BRING A CLASS ACTION SUIT AND SUBMIT COLLECTIVE CLAIMS TO ARBITRATION VIOLATED THE NATIONAL LABOR RELATIONS ACT AND IS UNENFORCEABLE 1ST DEPT)

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QUESTION OF FACT WHETHER PLAINTIFF WAS A RESIDENT OF THE HOME WHICH WAS DAMAGED BY FIRE WITHIN THE MEANING OF THE POLICY LANGUAGE, DESPITE PLAINTIFF’S ADMISSION SHE PRIMARILY RESIDED IN ANOTHER HOME TEN MINUTES AWAY 3RD DEPT.

The Third Department, reversing Supreme Court, determined there were questions of fact whether plaintiff was a resident of the home where the fire occurred within the meaning of the policy language. Although plaintiff had moved to a house 10 minutes away and plaintiff’s daughter lived in the damaged house, there was evidence that plaintiff never completely moved and frequented the house to care for her grandchildren:

The policy at issue defines the “insured location” as the “resident premises.” Relevant here, the term “resident premises” is defined as “[t]he one family dwelling where [the insured] reside[s].” As the party seeking to disclaim coverage, defendant bore the burden of “establishing that the exclusions or exemptions apply . . . and that they are subject to no other reasonable interpretation”… . If a term is ambiguous, it should be construed against the insurer … . * * *

In our view, it is “arguable that the reasonable expectation of the average insured” is that plaintiff’s occupancy of the premises, coupled with her claim that she never fully left the premises, was enough to permit coverage pursuant to the terms of the policy … . We do not agree that plaintiff’s evidence constituted a feigned attempt to create a question of fact … . We are mindful that she signed a statement prepared by the adjuster on the morning of the fire that destroyed the home she had built with her husband for their family. That statement confirmed that she resided [in another home], but did not deny that she also resided at the premises for purposes of insurance coverage. Craft v New York Cent. Mut. Fire Ins. Co., 2017 NY Slip Op 05655, 3rd Dept 7-13-17

INSURANCE LAW (QUESTION OF FACT WHETHER PLAINTIFF WAS A RESIDENT OF THE HOME WHICH WAS DAMAGED BY FIRE WITHIN THE MEANING OF THE POLICY LANGUAGE, DESPITE PLAINTIFF’S ADMISSION SHE PRIMARILY RESIDED IN ANOTHER HOME TEN MINUTES AWAY 3RD DEPT)/CONTRACT LAW (INSURANCE POLICY, QUESTION OF FACT WHETHER PLAINTIFF WAS A RESIDENT OF THE HOME WHICH WAS DAMAGED BY FIRE WITHIN THE MEANING OF THE POLICY LANGUAGE, DESPITE PLAINTIFF’S ADMISSION SHE PRIMARILY RESIDED IN ANOTHER HOME TEN MINUTES AWAY 3RD DEPT)

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DATE OF LOSS MEANS THE DATE OF THE DENIAL OF THE CLAIM, NOT THE DATE OF THE EVENT TRIGGERING THE CLAIM, CAUSE OF ACTION NOT BARRED BY TWO YEAR STATUTE OF LIMITATIONS 4TH DEPT.

The Fourth Department, reversing Supreme Court, overruling Fourth Department precedent, determined causes of action stemming from a 2009 home burglary should not have been dismissed as barred by the two year statute of limitation. The term “date of loss” in the policy was interpreted to mean the date of the claim denial, not the date of the burglary:

Plaintiff commenced this action more than two years after the 2009 theft. Interpreting the phrase “date of loss” as the date on which the theft occurred, defendant contends that the action is time-barred under the terms of the policy. Plaintiff, on the other hand, interprets the phrase “date of loss” as the date on which the claim was denied and, as a result, contends that the action was timely commenced. We agree with plaintiff. Despite cases holding that “date of loss” means the date of the underlying catastrophe, including cases from this Department (see Baluk v New York Cent. Mut. Fire Ins. Co., 114 AD3d 1151; Klawiter v CGU/OneBeacon Ins. Group, 27 AD3d 1155), the Court of Appeals has found a distinction between the generic phrase “date of loss,” and the term of art “inception of loss” (see Medical Facilities v Pryke, 95 AD2d 692, 693, affd 62 NY2d 716; Proc v Home Ins. Co., 17 NY2d 239, 243-244, rearg denied 18 NY2d 751; Steen v Niagara Fire Ins. Co., 89 NY 315, 322-325). As the Second Circuit noted in Fabozzi v Lexington Ins. Co. (601 F3d 88, 91), those cases have not been overruled or disavowed in any way.

Indeed, as the 1st Department recognized in Medical Facilities, “nothing in [Proc] suggests an intention to alter [the] general rule” … , which is “that an action for breach of contract commences running at the time the breach takes place” … . Thus, only the very specific “inception of loss” or other similarly “distinct language” permits using the catastrophe date as the limitations date … . Here, the policy did not contain the specific “inception of loss” or other similarly distinct language, and we thus disavow our decisions in Baluk and Klawiter to the extent that they hold otherwise.

Inasmuch as ” [a]mbiguities in an insurance policy are to be construed against the insurer’ ” … , we conclude that the two-year limitations period contained in the policy did not begin to run until “the loss [became] due and payable” … . Lobello v New York Cent. Mut. Fire Ins. Co., 2017 NY Slip Op 05543, 4th Dept 7-7-17

INSURANCE LAW (DATE OF LOSS MEANS THE DATE OF THE DENIAL OF THE CLAIM, NOT THE DATE OF THE EVENT TRIGGERING THE CLAIM, CAUSE OF ACTION NOT BARRED BY TWO YEAR STATUTE OF LIMITATIONS 4TH DEPT)/CIVIL PROCEDURE (INSURANCE LAW, STATUTE OF LIMITATIONS, DATE OF LOSS MEANS THE DATE OF THE DENIAL OF THE CLAIM, NOT THE DATE OF THE EVENT TRIGGERING THE CLAIM, CAUSE OF ACTION NOT BARRED BY TWO YEAR STATUTE OF LIMITATIONS 4TH DEPT)/STATUTE OF LIMITATIONS (INSURANCE LAW, DATE OF LOSS MEANS THE DATE OF THE DENIAL OF THE CLAIM, NOT THE DATE OF THE EVENT TRIGGERING THE CLAIM, CAUSE OF ACTION NOT BARRED BY TWO YEAR STATUTE OF LIMITATIONS 4TH DEPT)

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INSURER’S DISCLAIMER OF COVERAGE IN THIS SLIP AND FALL CASE IS NOT SUFFICIENT PROOF THE TENANT FAILED TO PROCURE THE INSURANCE REQUIRED BY THE LEASE, SUMMARY JUDGMENT ON THE BREACH OF CONTRACT CAUSE OF ACTION SHOULD NOT HAVE BEEN GRANTED.

The Fourth Department, reversing Supreme Court, determined summary judgment on the breach of contract cause of action should not have been granted. The property owner (the church) in this parking lot slip and fall case alleged that the lessee (Stepping Stones) failed to procure the insurance required by the lease. That allegation was based on the insurer’s disclaimer of coverage. The Fourth Department noted that the disclaimer could be erroneous and was therefore not proof of a breach of the lease:

In denying Stepping Stones’s motion in part and sua sponte granting summary judgment to the Church defendants on the breach of contract claims, the court reasoned that the Church defendants were entitled to judgment on the ground that, “[i]f the insurance carrier provided by Stepping Stones fails to cover the broad coverage demanded by the Lease, then Stepping Stones has breached the Lease agreement.”

On appeal, Stepping Stones addresses only the court’s determination with respect to the breach of contract claims. We agree with Stepping Stones that the court erred in granting summary judgment to the Church defendants on those claims, and we therefore modify the order accordingly. The mere fact that the insurance carrier disclaimed coverage for the accident does not establish as a matter of law that Stepping Stones failed to obtain the necessary coverage. It is possible that the insurance carrier’s disclaimer was improper, and that possibility may be explored by way of a declaratory judgment action … . Strong v St. Thomas Church of Irondequoit, 2017 NY Slip Op 05333, 4th Dept 6-30-17

 

ALTHOUGH NO SPECIAL RELATIONSHIP EXISTED BETWEEN BROKER AND PLAINTIFF, CAUSE OF ACTION BASED UPON PLAINTIFF’S SPECIFIC REQUEST FOR FLOOD INSURANCE (WHICH WAS NOT INCLUDED IN THE POLICY) SURVIVED SUMMARY JUDGMENT.

The Fourth Department determined summary judgment was properly awarded to the insurance broker (First Niagara) because no special relationship existed with plaintiff. Plaintiff specifically asked defendant whether plaintiff had flood insurance and further stated plaintiff wanted flood insurance. Defendant never responded. After flood damage occurred plaintiff learned the policy did not include flood insurance. Although no special relationship existed, plaintiff’s cause of action based upon the specific request for flood insurance survived summary judgment:

“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” … . “Absent a specific request for coverage not already in a client’s policy or the existence of a special relationship with the client, an insurance agent or broker has no continuing duty to advise, guide[ ] or direct a client to obtain additional coverage” … . “[A] special relationship may arise where (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’ “… .

Here, First Niagara met its initial burden of establishing that no special relationship existed, and plaintiff failed to raise a triable issue of fact  … . Specifically, First Niagara submitted evidence that it received no compensation from plaintiff over and above the commissions it received for the insurance policies it had procured, that plaintiff did not use First Niagara as its exclusive agent, and that plaintiff retained final decision-making authority over what coverage to obtain … . Thus, even accepting plaintiff’s allegations as true, we conclude that “the record in the instant case presents only the standard consumer-agent insurance placement relationship” … .

We further conclude, however, that First Niagara failed to tender “sufficient evidence to eliminate any material issues of fact from the case” relating to plaintiff’s specific request for flood insurance coverage … . … [T]here are triable issues of fact concerning whether plaintiff made a specific request for flood insurance coverage prior to the flood event … . Petri Baking Prods., Inc. v Hatch Leonard Naples, Inc., 2017 NY Slip Op 05338, 4th Dept 6-30-17

 

THE $2,000,000 REPLACEMENT INSURANCE POLICY WAS CANCELLED FOR NON-PAYMENT JUST HOURS BEFORE PLAINTIFF WAS STRUCK BY THE INSURED’S CAR, THE FACT THAT A PREMIUM SUFFICIENT FOR THE PRIOR $1,000,000 POLICY HAD BEEN PAID WAS OF NO CONSEQUENCE.

The Second Department, reversing Supreme Court, over a two-justice dissent, determined the umbrella policy had been cancelled for non-payment just hours before plaintiff (Garcia) was struck by the car owned by the insured, Rakowski. The Second Department rejected the argument that the insurance contract was divisible. The GEICO policy in effect was a $2,000,000 umbrella policy which represented an increase from a prior $1,000,000 policy. The additional premium ($199) for the $2,000,000 policy had not been paid, but the premium in an amount equal to the premium for the prior $1,000,000 policy ($306) had been paid. The Second Department held that the $1,000,000 coverage was no longer available. Only the $2,000,000 policy was in effect, and that was cancelled for failure to pay the additional $199 premium:

Garcia argues, and our dissenting colleagues would conclude, that, because of how the premiums were set out in the Amended Declarations, there is an ambiguity as to whether Rakowski received a policy for $2,000,000 or $1,000,000, or as to whether the policy was divisible or severable as to the amount of coverage. We disagree. The fact that the premium was separately stated for the increase in the coverage limit is irrelevant here. The $1,000,000 renewal proposal of the policy from the previous year had already been sent out before Rakowski asked for an increase in the amount of coverage to $2,000,000. The “Amended Declarations,” which, by their terms, “SUPERSEDE[D] ANY PREVIOUS DECLARATION” for the policy period beginning October 10, 2005, were sent to Rakowski after she asked for the changes to her policy. Thus, the additional billing, which separated the original premium from the amount attributable to the increase, was unremarkable and did not give rise to an ambiguity in the policy that Rakowski had asked for and GEICO agreed to provide: a liability limit of $2,000,000 as of the beginning of the new policy period. Garcia is not seeking to divide Rakowski’s policy, but, in effect, to rewrite it to provide what Rakowski never asked for: a policy with coverage of only $1,000,000.

As Garcia points out, forfeiture is not favored in the law… , and, where cancellation of an entire policy would result in forfeiture, courts may be reluctant to hold that an insurance contract is not divisible … . There is, however, no forfeiture here. Rakowski asked for, and received, a $2,000,000 policy, and she had $2,000,000 in coverage from the outset of the policy period, October 10, 2005. Because she only paid part of the premium, her coverage was cancelled, upon notice, when the prorated premium for the coverage she contracted for was exhausted. In other words, Rakowski got everything she paid for, and she forfeited nothing. That Rakowski “just missed” being insured for the injuries caused to Garcia is unfortunate, but nonetheless irrelevant to this analysis. GEICO sent its cancellation notice more than six months before Rakowski’s vehicle struck Garcia. We are not free to alter the meaning of the policy to avoid the result caused by Rakowski’s nonpayment of the premium for her $2,000,000 policy … . Garcia v Government Empls. Ins. Co., 2017 NY Slip Op 05202, 2nd Dept 6-28-17

 

INSURERS’ RESPONSES TO INSUREDS’ CLAIMS UNDER THE INSURANCE CONTRACTS AMOUNTED TO A DENIAL OF LIABILITY, INSUREDS NOT OBLIGATED TO COOPERATE OR OBTAIN CONSENT TO SETTLE. ​

The First Department determined the insurer’s responses to the insureds’ claims amounted to a denial of coverage. Therefore the insureds were not obligated to cooperate with the insurers or obtain the insurers’ consent to settle:

Defendants’ [insurers’] unreasonable delay in dealing with plaintiffs’ claims under the insurance contracts, consistently stated position that the various regulatory investigations and civil actions concerning plaintiffs’ alleged late trading and marketing-timing transactions did not constitute claims under the contracts, and insistence that in any event disgorgement payments such as those demanded by the regulators were not insurable as a matter of law constitute a denial of liability under the contracts that justifies plaintiffs’ settlement of those claims without defendants’ consent… . The record does not support defendants’ contention that plaintiffs breached their obligation to cooperate, but in any event defendants’ repudiation of liability for plaintiffs’ claims also excuses plaintiffs from performance of that obligation … . The “reservation of rights” language in defendants’ letters to plaintiffs does not change this result … .  J.P. Morgan Sec. Inc. v Vigilant Ins. Co., 2017 NY Slip Op 05181, 1st Dept 6-27-17

 

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BAIL BONDSMAN IS NOT ENTITLED TO KEEP THE PREMIUM POSTED TO UNDERWRITE A BAIL BOND IF BAIL IS SUBSEQUENTLY DISAPPROVED AND THE ARRESTEE IS NOT RELEASED.

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, determined the defendant bail bondsman, Judelson, who agreed to underwrite a $2 million bail bond in return for a premium of $120,560, could not keep the premium when bail was disapproved and the arrestee, Bogoraz, was not released. The bond was posted, but bail was disapproved at the subsequent hearing:

The question before us ultimately turns on when a “premium” is earned. The use of the word “premium” in [Insurance Law] section 6804 (a) is significant because that term connotes a consideration paid to an insurer for assuming a risk … . Risk, when used “with reference to insurance, describes the liability assumed as specified on the face of the policy” … . Notably, in 1997, when the legislature amended section 6804 to increase premium rates to sureties, the sponsor justified the change as providing “an incentive to assume more risk by bonding agents” … .

When does a bail bond surety incur risk? In our view, the risk associated with the bail bond is that the principal admitted on bail will fail to appear and the bail bond will be forfeited … . If the posted collateral does not cover the bail bond, the surety may suffer a financial loss. The surety does not incur this risk when the principal is not released and so has no opportunity to jump bail … . While the surety assumes a binding obligation to pay the bail upon posting the bail bond, no risk attaches from this obligation alone. Risk is triggered only when the court takes additional steps following the posting — approving the bail bond and issuing a certificate authorizing the principal’s release … . When a hearing is ordered under CPL 520.30, the court approves or disapproves the bail bond after the hearing … . If the court disapproves the bail bond, the surety never runs the risk it contracted to insure. Gevorkyan v Judelson, 2017 NY Slip Op 05176, CtApp 6-27-17

 

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DAMAGE TO SOIL FROM LEAD EMISSIONS AND LEAD PAINT COULD NOT BE SEPARATED, ALTHOUGH LEAD PAINT DAMAGE WAS NOT SUBJECT TO THE POLICY EXCLUSION, THE EXCLUSION FOR LEAD EMISSIONS CONTROLLED.

The First Department, in an action seeking reimbursement for environmental cleanup costs, determined the policy exclusion from coverage of lead emissions controlled, even though the soil was also contaminated with lead paint, which was not excluded from coverage:

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In this case, not only did the damage result from different sources, i.e., lead emissions and lead paint, but, also, one source is excluded from coverage and the other is not. However, the damage resulting from either source is not readily divisible from the damage resulting from the other. The combined effect of the lead emissions and the lead paint was soil contamination – of the same soil. To the extent a particular area was contaminated solely by lead paint, it was not (and could not have been) included in the EPA’s remediation efforts (see 42 USC § 9604). Moreover, claimant would not have had to pay for any damage – including lead paint damage – if not for the accompanying pollution (see 42 USC § 9607). Thus, the entire claim is barred by the pollution exclusions. Matter of Midland Ins. Co., 2017 NY Slip Op 05171, 1st Dept 6-22-17

INSURANCE LAW (ENVIRONMENTAL CLEANUP, DAMAGE TO SOIL FROM LEAD EMISSIONS AND LEAD PAINT COULD NOT BE SEPARATED, ALTHOUGH LEAD PAINT DAMAGE WAS NOT SUBJECT TO THE POLICY EXCLUSION, THE EXCLUSION FOR LEAD EMISSIONS CONTROLLED)/ENVIRONMENTAL LAW (INSURANCE, DAMAGE TO SOIL FROM LEAD EMISSIONS AND LEAD PAINT COULD NOT BE SEPARATED, ALTHOUGH LEAD PAINT DAMAGE WAS NOT SUBJECT TO THE POLICY EXCLUSION, THE EXCLUSION FOR LEAD EMISSIONS CONTROLLED)POLLUTION EXCLUSIONS (INSURANCE, DAMAGE TO SOIL FROM LEAD EMISSIONS AND LEAD PAINT COULD NOT BE SEPARATED, ALTHOUGH LEAD PAINT DAMAGE WAS NOT SUBJECT TO THE POLICY EXCLUSION, THE EXCLUSION FOR LEAD EMISSIONS CONTROLLED)

POST-DEATH INTEREST ON AN ANNUITY SHOULD NOT BE CALCULATED BY APPLYING THE INTEREST RATE AT THE TIME OF PAYMENT TO THE ENTIRE PERIOD BETWEEN THE DEATH OF THE ANNUITANT (1998) AND THE DATE OF PAYMENT (2012).

The Second Department interpreted an ambiguous term in an Insurance Law statute to determine the appropriate post-death interest to be paid on an annuity. The interest rate at the time of payment should not be applied to entire period between the death of the annuitant (1998) and the date of payment (2012). Rather, the historical interest rates during that time should be applied:

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On or about November 8, 2012, TFLIC [defendant insurer] sent the plaintiff a check for $142,163.54, representing the value of Annuity #8231 on the date of … death ($132,071.06), plus $10,092.48 in interest, calculated at an annual rate of 0.5%. The estate accepted the payment “without waiving any rights that [the plaintiff] may have to interest since the date of death, costs and expenses resulting from your failure to provide this annuity upon the decedent’s death.” The estate later commenced this action against the defendants alleging, inter alia, breach of contract for the delay in paying the proceeds of Annuity #8231, and demanding, inter alia, prejudgment interest at the legal rate of 9% (see CPLR 5004). …

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… [T]he calculation of interest on the proceeds due under Annuity #8231 must be determined in accordance with the principles set forth in Insurance Law § 3214, which applies specifically to interest paid on the proceeds of an annuity following the death of the annuitant. …

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The Supreme Court erred … in determining that the rate of interest due on the proceeds of Annuity #8231 pursuant to Insurance Law § 3214(c) should be determined solely by reference to the rate in effect at the time of payment—in this case, 0.5%.

Insurance Law § 3214(c), entitled “Interest upon proceeds of life insurance policies and annuity contracts,” provides, in relevant part, that, “interest upon the principal sum paid to the beneficiary . . . shall be computed daily at the rate of interest currently paid by the insurer on proceeds left under the interest settlement option, from the date of the death of an . . . annuitant in connection with a death claim on such a . . . contract of annuity . . . to the date of payment and shall be added to and be a part of the total sum paid.” … [T]he word “currently” is ambiguous, as it could refer to the rate in effect on each date on which a daily computation must be made. Conversely, it could refer to the rate in effect on the date of payment.

” Where the language of a statute is susceptible of two constructions, the courts will adopt that which avoids injustice, hardship, constitutional doubts or other objectionable results'”… . Applying this principle here, the calculation of interest under section 3214(c) should reflect the rates applied by the insurer in the normal course of managing its funds held on deposit, rather than arbitrarily determining the entire interest payment based on the happenstance of the interest rate in effect on the date of payment … . …

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Accordingly, summary judgment should have been denied to both parties in this case, as the record presents unresolved issues of fact regarding the historical interest rates used by TFLIC and its predecessor, TLICNY, between 1998 (the year of …. death) and 2012 (the year on which the proceeds of Annuity #8231 were paid). Fleischman v Transamerica Corp., 2017 NY Slip Op 05068, 2nd Dept 6-21-17

 

INSURANCE LAW (ANNUITIES, INTEREST ON AN ANNUITY SHOULD NOT BE CALCULATED BY APPLYING THE INTEREST RATE AT THE TIME OF PAYMENT TO THE ENTIRE PERIOD BETWEEN THE DEATH OF THE ANNUITANT (1998) AND THE DATE OF PAYMENT (2012))/ANNUITIES (INSURANCE LAW, INTEREST, INTEREST ON AN ANNUITY SHOULD NOT BE CALCULATED BY APPLYING THE INTEREST RATE AT THE TIME OF PAYMENT TO THE LIFE OF THE ANNUITY)/INTEREST (ANNUITIES, INSURANCE LAW, INTEREST ON AN ANNUITY SHOULD NOT BE CALCULATED BY APPLYING THE INTEREST RATE AT THE TIME OF PAYMENT TO THE ENTIRE PERIOD BETWEEN THE DEATH OF THE ANNUITANT (1998) AND THE DATE OF PAYMENT (2012)))

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