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INSURANCE LAW 3105 DOES NOT DISPENSE WITH THE COMMON-LAW PROOF REQUIREMENTS FOR FRAUDULENT INDUCEMENT IN THIS ACTION BY AN INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES.

The First Department, in a full-fledged opinion by Justice Richter, determined that plaintiff Ambac, which insured residential mortgage-backed securities issued by defendant Countrywide, was required to prove all the elements of common-law fraudulent inducement and Insurance Law 3105 did not dispense with those proof requirements:

We agree with Countrywide that Ambac is required to prove all of the elements of its fraudulent inducement claim, including justifiable reliance and loss causation. The elements of a fraud cause of action are long-settled. To establish fraud, a plaintiff must show “a misrepresentation or a material omission of fact which was false and known to be false by [the] defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury” … . * * *

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There is no merit to Ambac’s contention that Insurance Law § 3105 dispenses with the common-law requirement of proving justifiable reliance and loss causation. Nor can that statute be used affirmatively as a basis to recover monetary damages. Insurance Law § 3105 provides that a material misrepresentation “shall avoid [a] contract of insurance” and “defeat recovery thereunder” (Insurance Law § 3105[b][1]).* * *

Cases applying Insurance Law § 3105 arise in the context of either a declaratory judgment action by an insurer seeking rescission of an insurance policy or an insurer asserting a defense to an insured’s claim for payment under the policy … . Here, Ambac seeks neither to rescind the policies, which are unconditional and irrevocable, nor to defeat a claim by an insured for payment. Instead, Ambac seeks to assert Insurance Law § 3105 as an affirmative claim seeking monetary damages. Under these circumstances, Insurance Law § 3105 is not applicable. Ambac Assur. Corp. v Countrywide Home Loans, Inc., 2017 NY Slip Op 03919, 1st Dept 5-16-17

 

FRAUD (INSURANCE LAW 3105 DOES NOT DISPENSE WITH THE COMMON-LAW PROOF REQUIREMENTS FOR FRAUDULENT INDUCEMENT IN THIS ACTION BY AN INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES)/INSURANCE LAW (RESIDENTIAL MORTGAGE-BACKED SECURITIES, INSURANCE LAW 3105 DOES NOT DISPENSE WITH THE COMMON-LAW PROOF REQUIREMENTS FOR FRAUDULENT INDUCEMENT IN THIS ACTION BY AN INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES)/SECURITIES  (RESIDENTIAL MORTGAGE-BACKED SECURITIES, INSURANCE LAW 3105 DOES NOT DISPENSE WITH THE COMMON-LAW PROOF REQUIREMENTS FOR FRAUDULENT INDUCEMENT IN THIS ACTION BY AN INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES)/RESIDENTIAL MORTGAGE-BACKED SECURITIES (INSURANCE LAW 3105 DOES NOT DISPENSE WITH THE COMMON-LAW PROOF REQUIREMENTS FOR FRAUDULENT INDUCEMENT IN THIS ACTION BY AN INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES)

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QUESTION OF FACT WHETHER BANK OF AMERICA’S PURCHASE OF THE ASSETS OF COUNTRYWIDE WAS A DE FACTO MERGER ALLOWING THE INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES ISSUED BY COUNTRYWIDE TO SUE BANK OF AMERICA.

The First Department determined questions of fact precluded summary judgment in this action by Ambac, an insurer of residential mortgage-backed securities issued by defendant Countrywide, against defendants Countrywide and Bank of America (BAC). BAC purchased the assets of Countrywide. Ambac argued there was a de facto merger of Countrywide and Bank of America such that Countrywide shareholders became shareholders of BAC, allowing Ambac to sue BAC:

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“[C]ontinuity of ownership is the touchstone of the [de facto merger] concept and thus a necessary predicate to a finding of a de facto merger” … . Continuity of ownership “exists where the shareholders of the predecessor corporation become direct or indirect shareholders of the successor corporation as the result of the successor’s purchase of the predecessor’s assets, as occurs in a stock-for-assets transaction” … . “Stated otherwise, continuity of ownership describes a situation where the parties to the transaction become owners together of what formerly belonged to each” … . * * *

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We agree with BAC that there can be no continuity of ownership where the asset seller receives fair value consideration for its assets… . Although BAC maintains that it paid fair value for Countrywide’s assets, Ambac points to evidence showing that large amounts of money Countrywide received in the asset sale were then cycled back to BAC and its subsidiaries. Thus, issues of fact exist as to whether the transactions were coordinated with the goal of combining BAC’s and Countrywide’s mortgage businesses while avoiding Countrywide’s liabilities so as to benefit Countrywide’s former shareholders at the expense of its creditors. Ambac Assur. Corp. v Countrywide Home Loans, Inc., 2017 NY Slip Op 03886, 1st Dept 5-16-17

 

CORPORATION LAW (DE FACTO MERGER, QUESTION OF FACT WHETHER BANK OF AMERICA’S PURCHASE OF THE ASSETS OF COUNTRYWIDE WAS A DE FACTO MERGER ALLOWING THE INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES ISSUED BY COUNTRYWIDE TO SUE BANK OF AMERICA)/SECURITIES (RESIDENTIAL MORTGAGE-BACKED SECURITIES, QUESTION OF FACT WHETHER BANK OF AMERICA’S PURCHASE OF THE ASSETS OF COUNTRYWIDE WAS A DE FACTO MERGER ALLOWING THE INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES ISSUED BY COUNTRYWIDE TO SUE BANK OF AMERICA)/INSURANCE LAW (RESIDENTIAL MORTGAGE-BACKED SECURITIES, QUESTION OF FACT WHETHER BANK OF AMERICA’S PURCHASE OF THE ASSETS OF COUNTRYWIDE WAS A DE FACTO MERGER ALLOWING THE INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES ISSUED BY COUNTRYWIDE TO SUE BANK OF AMERICA)/RESIDENTIAL MORTGAGE-BACKED SECURITIES  (DE FACTO MERGER, QUESTION OF FACT WHETHER BANK OF AMERICA’S PURCHASE OF THE ASSETS OF COUNTRYWIDE WAS A DE FACTO MERGER ALLOWING THE INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES ISSUED BY COUNTRYWIDE TO SUE BANK OF AMERICA)/DE FACTO MERGER (CORPORATION LAW, QUESTION OF FACT WHETHER BANK OF AMERICA’S PURCHASE OF THE ASSETS OF COUNTRYWIDE WAS A DE FACTO MERGER ALLOWING THE INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES ISSUED BY COUNTRYWIDE TO SUE BANK OF AMERICA)/DEBTOR-CREDITOR (DE FACTO MERGER, QUESTION OF FACT WHETHER BANK OF AMERICA’S PURCHASE OF THE ASSETS OF COUNTRYWIDE WAS A DE FACTO MERGER ALLOWING THE INSURER OF RESIDENTIAL MORTGAGE-BACKED SECURITIES ISSUED BY COUNTRYWIDE TO SUE BANK OF AMERICA)

INSURED’S REFUSAL TO COOPERATE WITH INSURER RELIEVED INSURER OF LIABILITY FOR DEFAULT JUDGMENT AGAINST THE INSURED.

The Second Department, reversing Supreme Court’s judgment after a bench trial, determined defendant insurer demonstrated the insured refused to cooperate with the insurer’s defense in this oil-spill case, relieving the insurer of liability for the default judgment against the insured:

An insurer that seeks to disclaim coverage based on its insured’s alleged noncooperation is required to demonstrate that “it acted diligently in seeking to bring about its insured’s cooperation, that its efforts were reasonably calculated to obtain its insured’s cooperation, and that the attitude of its insured, after the cooperation of its insured was sought, was one of willful and avowed obstruction'” … . The insurer has a “heavy” burden of proving lack of cooperation … . The inference of noncooperation must be “practically compelling” … .

Based on the evidence adduced at trial, we find that American States met its heavy burden of proving that its insured breached the subject policy by failing to cooperate in the defense of the underlying action. American States made diligent efforts, through written correspondence, numerous telephone calls, and a visit to the insured’s home, that were reasonably calculated to bring about the insured’s cooperation. Further, its insured’s attitude, after his cooperation was sought, was one of willful and avowed obstruction. Among other trial evidence, there was testimony from an investigator who met with the insured at the insured’s home. The investigator testified that the investigator told the insured that the insured risked losing coverage under the policy if the insured refused to cooperate. The insured, while acknowledging that he knew that he had attorneys defending him and that a default judgment could be entered against him if he failed to appear at a deposition, made statements to the effect that he would cooperate only if he were paid for certain work he claimed to have performed, and that the plaintiff could “just get in line” were it to obtain a judgment against him. West St. Props., LLC v American States Ins. Co., 2017 NY Slip Op 03555, 2nd Dept 5-3-17

 

INSURANCE LAW (INSURED’S REFUSAL TO COOPERATE WITH INSURER RELIEVED INSURER OF LIABILITY FOR DEFAULT JUDGMENT AGAINST THE INSURED)/DISCLAIMER (INSURANCE LAW, REFUSAL TO COOPERATE IN DEFENSE, INSURED’S REFUSAL TO COOPERATE WITH INSURER RELIEVED INSURER OF LIABILITY FOR DEFAULT JUDGMENT AGAINST THE INSURED)

INJURED PARTY DID NOT TIMELY NOTIFY INSURER OF HIS CLAIM, INSURER NOT OBLIGATED TO SATISFY DEFAULT JUDGMENT AGAINST THE INSURED.

The Second Department determined the injured party (Glanz) did not timely notify the insurer (New York Marine) of the claim against the insured. Therefore, the insurer was not obligated to satisfy the default judgment entered against the insured:

“Insurance Law § 3420(a)(2) expressly permits an injured party to recover any unsatisfied judgment against an insured, directly from the insurer” … . Insurance Law § 3420(a)(3) requires the injured party to demonstrate that he or she acted diligently in attempting to ascertain the identity of the insurer, and thereafter expeditiously notified the insurer … . “In determining the reasonableness of an injured party’s notice, the notice required is measured less rigidly than that required of the insureds” … . “The injured person’s rights must be judged by the prospects for giving notice that were afforded him [or her], not by those available to the insured” …  “What is reasonably possible for the insured may not be reasonably possible for the person he [or she] has injured. The passage of time does not of itself make delay unreasonable” … .

Here, New York Marine made a prima facie showing that Glanz failed to act diligently in attempting to ascertain New York Marine’s identity and in expeditiously notifying it of his claim … . In opposition, Glanz failed to raise a triable issue of fact … . Glanz v New York Mar. & Gen. Ins. Co., 2017 NY Slip Op 03494, 2nd Dept 5-3-17

 

INSURANCE LAW (INJURED PARTY DID NOT TIMELY NOTIFY INSURER OF HIS CLAIM, INSURER NOT OBLIGATED TO SATISFY DEFAULT JUDGMENT AGAINST THE INSURED)

LATE NOTIFICATION OF THE INSURER BY THE INSURED ABOUT AN ACTION AGAINST THE INSURED DOES NOT EXCUSE A LATE DISCLAIMER, TIMELINESS OF A DISCLAIMER DEPENDS ON WHEN THE INSURER FIRST LEARNED OF THE ACTION.

The Second Department noted that an insured’s failure to timely notify the insurer of an action does not relieve the insurer of the obligation to timely disclaim. Whether a disclaimer is timely is determined by when the insurer first learned of the action, not when the insured notified it of the action:

… [The] “failure of an insured to timely notify the insurer of a claim does not excuse the insurer’s failure to timely disclaim coverage” … . “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” … . In opposition to the cross motion, [the insured] raised triable issues of fact as to whether the plaintiff acquired knowledge of the commencement of the underlying action in April 2012, or, at the latest, October 2012, and thus, whether it timely disclaimed coverage in March 2013, on the basis of, inter alia, late receipt of a copy of the summons and complaint. Evanston Ins. Co. v P.S. Bruckel, Inc., 2017 NY Slip Op 03489, 2nd Dept 5-3-17

INSURANCE LAW (LATE NOTIFICATION OF THE INSURER BY THE INSURED ABOUT AN ACTION AGAINST THE INSURED DOES NOT EXCUSE A LATE DISCLAIMER, TIMELINESS OF A DISCLAIMER DEPENDS ON WHEN THE INSURER FIRST LEARNED OF THE ACTION)/DISCLAIMER (INSURANCE LAW, LATE NOTIFICATION OF THE INSURER BY THE INSURED ABOUT AN ACTION AGAINST THE INSURED DOES NOT EXCUSE A LATE DISCLAIMER, TIMELINESS OF A DISCLAIMER DEPENDS ON WHEN THE INSURER FIRST LEARNED OF THE ACTION)

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EXCLUSION OF INJURY FROM ASSAULT CONTROLLED, NEGLIGENCE CAUSES OF ACTION STEMMING FROM ASSAULT NOT COVERED.

The Third Department determined the policy exclusion for injury stemming from an assault controlled and defendant insurer was not required to defend the action by defendant bar patron, Christian, who alleged-plaintiff bar’s employee injured him when ejecting him from the bar. The language of the exclusion took precedence over the general liability provisions. Any negligence causes of action were not covered because the negligence claims stemmed from the assault:

The exclusion, which states that it “is subject to the terms contained in the General Liability Coverage,” provides that “[n]otwithstanding anything contained herein to the contrary, . . . this policy excludes any and all claims arising out of any assault, battery, fight, altercation, misconduct or other similar incident,” including claims of negligent hiring and supervision. * * *

Here … Supreme Court properly found that the terms of the exclusion controlled over those in the general liability coverage, as “language such as a ‘notwithstanding’ provision ‘controls over any contrary language’ in a contract” … .

Christian asserts that the assault and battery exclusion does not apply because the underlying action alleges acts of negligence. We disagree. “[I]f no cause of action would exist but for the assault, the claim is based on assault and the exclusion applies” and the fact that an insured might be liable under a theory of negligence does not change this … . Graytwig Inc. v Dryden Mut. Ins. Co., 2017 NY Slip Op 03229, 3rd Dept 4-27-17

INSURANCE LAW (EXCLUSION OF INJURY FROM ASSAULT CONTROLLED, NEGLIGENCE CAUSES OF ACTION STEMMING FROM ASSAULT NOT COVERED)/CONTRACT LAW (INSURANCE LAW, EXCLUSION OF INJURY FROM ASSAULT CONTROLLED, NEGLIGENCE CAUSES OF ACTION STEMMING FROM ASSAULT NOT COVERED)/ASSAULT (INSURANCE LAW, EXCLUSION OF INJURY FROM ASSAULT CONTROLLED, NEGLIGENCE CAUSES OF ACTION STEMMING FROM ASSAULT NOT COVERED)/EXCLUSIONS  (INSURANCE LAW, EXCLUSION OF INJURY FROM ASSAULT CONTROLLED, NEGLIGENCE CAUSES OF ACTION STEMMING FROM ASSAULT NOT COVERED)/THIRD PARTY ASSAULT

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FAILURE TO APPLY FOR A STAY OF ARBITRATION WAIVES ANY CLAIM THE ARBITRATOR HAS EXCEEDED HIS/HER POWERS.

The Second Department, in a loss-transfer action between two insurers, noted that the failure to apply for a stay of arbitration waives any claim that the arbitrator has exceeded his/her powers:

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The petitioner’s contention that, pursuant to 11 NYCRR 65-4.11(6), its “good faith” retroactive denial of insurance coverage divested the arbitrator of jurisdiction is without merit (see State Farm Mut. Auto. Ins. Co. v Nationwide Mut. Ins. Co., 150 AD2d 976, 977-978). Insurance Law § 5105(b) provides that arbitration is the only forum in which a loss-transfer claim may be litigated … . Moreover, “the contention that a claim proposed to be submitted to arbitration is in excess of the arbitrator’s power is waived unless raised by an application for a stay” … . By failing to apply for a stay of arbitration before arbitration, the petitioner waived its contention that the claim is not arbitrable under Insurance Law § 5105 … . Matter of Infinity Indem. Ins. Co. v Hereford Ins. Co., 2017 NY Slip Op 03177, 2nd Dept 4-26-17

ARBITRATION (FAILURE TO APPLY FOR A STAY OF ARBITRATION WAIVES ANY CLAIM THE ARBITRATOR HAS EXCEEDED HIS/HER POWERS)/INSURANCE (ARBITRATION OF LOSS-TRANSFER CLAIM BETWEEN TWO INSURERS, FAILURE TO APPLY FOR A STAY OF ARBITRATION WAIVES ANY CLAIM THE ARBITRATOR HAS EXCEEDED HIS/HER POWERS)/LOSS-TRANSFER CLAIMS (INSURANCE LAW, ARBITRATION, FAILURE TO APPLY FOR A STAY OF ARBITRATION WAIVES ANY CLAIM THE ARBITRATOR HAS EXCEEDED HIS/HER POWERS)

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FAILURE TO APPLY FOR A STAY OF ARBITRATION WAIVES ANY CLAIM THE ARBITRATOR HAS EXCEEDED HIS/HER POWERS.

The Second Department, in a loss-transfer action between two insurers, noted that the failure to apply for a stay of arbitration waives any claim that the arbitrator has exceeded his/her powers:

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The petitioner’s contention that, pursuant to 11 NYCRR 65-4.11(6), its “good faith” retroactive denial of insurance coverage divested the arbitrator of jurisdiction is without merit (see State Farm Mut. Auto. Ins. Co. v Nationwide Mut. Ins. Co., 150 AD2d 976, 977-978). Insurance Law § 5105(b) provides that arbitration is the only forum in which a loss-transfer claim may be litigated … . Moreover, “the contention that a claim proposed to be submitted to arbitration is in excess of the arbitrator’s power is waived unless raised by an application for a stay” … . By failing to apply for a stay of arbitration before arbitration, the petitioner waived its contention that the claim is not arbitrable under Insurance Law § 5105 … . Matter of Infinity Indem. Ins. Co. v Hereford Ins. Co., 2017 NY Slip Op 03177, 2nd Dept 4-26-17

ARBITRATION (FAILURE TO APPLY FOR A STAY OF ARBITRATION WAIVES ANY CLAIM THE ARBITRATOR HAS EXCEEDED HIS/HER POWERS)/INSURANCE (ARBITRATION OF LOSS-TRANSFER CLAIM BETWEEN TWO INSURERS, FAILURE TO APPLY FOR A STAY OF ARBITRATION WAIVES ANY CLAIM THE ARBITRATOR HAS EXCEEDED HIS/HER POWERS)/LOSS-TRANSFER CLAIMS (INSURANCE LAW, ARBITRATION, FAILURE TO APPLY FOR A STAY OF ARBITRATION WAIVES ANY CLAIM THE ARBITRATOR HAS EXCEEDED HIS/HER POWERS)

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DEFENDANT’S RELIANCE ON ITS INSURANCE BROKER TO HANDLE A LABOR LAW PERSONAL INJURY CLAIM WAS NOT, UNDER THE FACTS, A SUFFICIENT EXCUSE, THE DEFAULT JUDGMENT SHOULD NOT HAVE BEEN VACATED.

The First Department, over a dissent, determined the $900,000 default judgment in this Labor Law action should not have been vacated. The court noted that it had the power to overrule Supreme Court, even in the absence of an abuse of discretion. It has been held that a defendant’s reliance on an insurance broker to handle a lawsuit, as argued here, is a valid excuse for a default. However defendant’s principal, Mr. Gjonaj, received, over the course of years, papers sent by plaintiff’s attorney which should have alerted him to fact that the lawsuit was progressing in defendant’s absence. The court further determined plaintiff’s installation of video cameras was a covered activity under the Labor Law and his falling from a ladder was therefore actionable:

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… [Mr.  Gjonaj’s.] assertion in this case that he believed his broker was forwarding the paperwork to the appropriate insurance carrier was unreasonable in light of his conceded receipt of the summons and complaint, two motions for a default judgment, a letter from the court and a court decision reflecting a $900,000 judgment against him. Surely Mr. Gjonaj knew that if his insurance company had retained a lawyer to appear for defendants, he and his corporations would not have continued to receive legal documents directly from plaintiff’s attorney and the court for over three years. The fact that [the broker] kept assuring Mr. Gjonaj “that everything in this matter was under control and that the claim was being handled by the proper insurance company,” does not help to establish reasonableness, objective or otherwise, on the part of Mr. Gjonaj, who should have known that everything was not under control after years of receiving so many legal documents from plaintiff’s counsel relating to the same lawsuit. Gecaj v Gjonaj Realty & Mgt. Corp., 2017 NY Slip Op 03109, 1st Dept 4-25-17

CIVIL PROCEDURE (DEFENDANT’S RELIANCE ON ITS INSURANCE BROKER TO HANDLE A LABOR LAW PERSONAL INJURY CLAIM WAS NOT, UNDER THE FACTS, A SUFFICIENT EXCUSE, THE DEFAULT JUDGMENT SHOULD NOT HAVE BEEN VACATED)/LABOR LAW-CONSTRUCTION LAW (DEFENDANT’S RELIANCE ON ITS INSURANCE BROKER TO HANDLE A LABOR LAW PERSONAL INJURY CLAIM WAS NOT, UNDER THE FACTS, A SUFFICIENT EXCUSE, THE DEFAULT JUDGMENT SHOULD NOT HAVE BEEN VACATED. FALLING FROM A LADDER WHILE INSTALLING VIDEO CAMERAS WAS A COVERED ACTIVITY)/LADDERS (LABOR LAW-CONSTRUCTION LAW DEFENDANT’S RELIANCE ON ITS INSURANCE BROKER TO HANDLE A LABOR LAW PERSONAL INJURY CLAIM WAS NOT, UNDER THE FACTS, A SUFFICIENT EXCUSE, THE DEFAULT JUDGMENT SHOULD NOT HAVE BEEN VACATED. FALLING FROM A LADDER WHILE INSTALLING VIDEO CAMERAS WAS A COVERED ACTIVITY)/VIDEO CAMERAS (LABOR LAW-CONSTRUCTION LAW DEFENDANT’S RELIANCE ON ITS INSURANCE BROKER TO HANDLE A LABOR LAW PERSONAL INJURY CLAIM WAS NOT, UNDER THE FACTS, A SUFFICIENT EXCUSE, THE DEFAULT JUDGMENT SHOULD NOT HAVE BEEN VACATED. FALLING FROM A LADDER WHILE INSTALLING VIDEO CAMERAS WAS A COVERED ACTIVITY)/INSURANCE LAW (DEFENDANT’S RELIANCE ON ITS INSURANCE BROKER TO HANDLE A LABOR LAW PERSONAL INJURY CLAIM WAS NOT, UNDER THE FACTS, A SUFFICIENT EXCUSE, THE DEFAULT JUDGMENT SHOULD NOT HAVE BEEN VACATED)/DEFAULT JUDGMENTS (DEFENDANT’S RELIANCE ON ITS INSURANCE BROKER TO HANDLE A LABOR LAW PERSONAL INJURY CLAIM WAS NOT, UNDER THE FACTS, A SUFFICIENT EXCUSE, THE DEFAULT JUDGMENT SHOULD NOT HAVE BEEN VACATED)

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RECORDED PHONE CONVERSATION WITH INSURER PROTECTED AS A STATEMENT PREPARED FOR LITIGATION.

The Third Department, reversing Supreme Court, determined the audio recording of a conversation between defendant and his insurer was privileged as a statement prepared for litigation. Plaintiff was injured using a log splitter on defendant’s property. Defendant denied owning the log splitter and plaintiff alleged defendant admitted ownership in the statement:

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The statement was made during a phone conversation between Judy Gavin, the insurer’s claims representative, and defendant five days after the incident. At the start of the conversation, Gavin informed defendant that the conversation was being recorded and taken as part of the normal claims process. Gavin further agreed to provide defendant with a copy of the statement. We have long recognized that “[t]he purpose of liability insurance is the defense and settlement of claims and, once an accident has arisen, there is little or nothing that the insurer or its employees do with respect to accident reports except in preparation for eventual litigation or for a settlement which may avoid litigation” … . As such, an insurer’s file is generally protected by “a conditional immunity . . . as material prepared for litigation” … . This conditional privilege may have to yield to disclosure where the other party demonstrates a substantial need for the material and withholding same would result in undue hardship (see CPLR 3101 [d] [2]). Accident reports prepared with a mixed purpose, however, are not exempt from disclosure … .

Defendant’s burden was to demonstrate that his statement was obtained solely for litigation purposes … . To that end, defendant submitted the affidavit of Dennis Stauffer, who was Gavin’s supervisor at the time of the incident. Stauffer explained that Gavin was no longer employed by the insurer and that she procured the statement in accord with the insurer’s “normal practice in anticipation of future litigation.” In our view, Stauffer’s affidavit, coupled with Gavin’s own characterization of the interview as part of the normal claims process, satisfied defendant’s threshold burden of proof … . There is no dispute that ownership of the log splitter is a key issue, but plaintiffs have other means available to explore this issue, and they have not demonstrated any undue hardship if the statement is withheld. Nor is there any indication that the statement was taken for some purpose other than preparing for litigation. Curci v Foley, 2017 NY Slip Op 03100, 3rd Dept 4-20-17

 

INSURANCE LAW (RECORDED PHONE CONVERSATION WITH INSURER PROTECTED AS A STATEMENT PREPARED FOR LITIGATION)/PRIVILEGE (RECORDED PHONE CONVERSATION WITH INSURER PROTECTED AS A STATEMENT PREPARED FOR LITIGATION)/EVIDENCE (INSURANCE LAW, RECORDED PHONE CONVERSATION WITH INSURER PROTECTED AS A STATEMENT PREPARED FOR LITIGATION)

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