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DRIVER STRUCK AS HE WAS ABOUT TO ENTER HIS PARKED CAR WAS NOT AN OCCUPANT OF THE CAR WITHIN THE MEANING OF THE INSURANCE POLICY.

The Second Department determined summary judgment was properly granted to the defendant insurer. The insurer, Republic, issued an uninsured-underinsured motorist policy to plaintiff’s employer. The policy applied to anyone who was an occupant of the vehicle at the time of injury. Here plaintiff (Bosco) had parked the car and gone across the street. As Bosco crossed the street to return he was struck by a car:

A person remains an occupant of a vehicle, even if that person is not in physical contact with the vehicle, “provided there has been no severance of connection with it, his [or her] departure is brief and he [or she] is still vehicle-oriented with the same vehicle” … . A connection to a vehicle will be severed “upon alighting therefrom to perform a chore which was not vehicle-oriented” … .

Moreover, there has to be “[m]ore than a mere intent to occupy a vehicle . . . to alter the status of pedestrian to one of occupying’ it” … . “[O]ne is [not] considered to be occupying a car if he is merely approaching it with intent to enter” … .

Here, Republic met its prima facie burden of establishing, as a matter of law, that Bosco was not occupying the insured vehicle at the time of the accident … . The evidence Republic submitted demonstrated that Bosco left the insured vehicle and walked across the street to go to his office on the second floor of the building, to retrieve documents. Thus, Bosco’s leaving the insured vehicle was not a temporary break in his journey such that he remained in the immediate vicinity of the insured vehicle … . Moreover, the evidence demonstrated that the accident occurred as Bosco was walking back across the street, and that he had yet to reach the insured vehicle. The evidence therefore showed that Bosco had a mere intent to enter the insured vehicle and was not an occupant of the insured vehicle at the time of the accident … . J. Lawrence Constr. Corp. v Republic Franklin Ins. Co., 2016 NY Slip Op 08349. 2nd Dept 12-14-16

 

INSURANCE LAW (DRIVER STRUCK AS HE WAS ABOUT TO ENTER HIS PARKED CAR WAS NOT AN OCCUPANT OF THE CAR WITHIN THE MEANING OF THE INSURANCE POLICY)/CONTRACT LAW (INSURANCE POLICY, DRIVER STRUCK AS HE WAS ABOUT TO ENTER HIS PARKED CAR WAS NOT AN OCCUPANT OF THE CAR WITHIN THE MEANING OF THE INSURANCE POLICY)/PEDESTRIANS (DRIVER STRUCK AS HE WAS ABOUT TO ENTER HIS PARKED CAR WAS NOT AN OCCUPANT OF THE CAR WITHIN THE MEANING OF THE INSURANCE POLICY)/TRAFFIC ACCIDENTS (PEDESTRIANS, (DRIVER STRUCK AS HE WAS ABOUT TO ENTER HIS PARKED CAR WAS NOT AN OCCUPANT OF THE CAR WITHIN THE MEANING OF THE INSURANCE POLICY)

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WRITTEN AGREEMENT REQUIREMENT IN POLICY FOR ADDITIONAL INSUREDS DID NOT REQUIRE AN EXECUTED AGREEMENT.

The First Department determined the “written agreement” requirement in an insurance policy did not mean a “signed agreement.” Here a purchase order required that the owner’s property manager, Newmark, be named as an additional insured. The purchase order did not have signature lines and was not signed. The court held the unsigned purchase order was a “written agreement” within the meaning of the policy language:

Defendant contends that Newmark and the owner are not additional insureds because the purchase order/agreement was unsigned. However, defendant’s policy merely requires a “written” contract, not a “signed” one. By contrast, in Cusumano v Extell Rock, LLC (86 AD3d 448 [1st Dept 2011]), the policy said, “The following are also an insured when you … have agreed, in writing, in a contract or agreement that another person or organization be added as an additional insured on your policy, provided the injury or damage occurs subsequent to the execution of the contract or agreement” … . As the motion court in Cusumano found, the insurer analogous to defendant in the case at bar “expressly included the word executed’ in[] its Policy, thereby requiring that any agreement by Regions to add a person/organization as an additional insured be memorialized in a signed contract” … . * * *

Under the circumstances, the court did not err by finding that the unsigned purchase order constituted a written contract for purposes of the additional insured endorsement … . Zurich Am. Ins. Co. v Endurance Am. Speciality Ins. Co., 2016 NY Slip Op 08313, 1st Dept 12-8-16

 

CONTRACT LAW (INSURANCE POLICY, WRITTEN AGREEMENT REQUIRED BY POLICY FOR ADDITIONAL INSUREDS DID NOT REQUIRE AN EXECUTED AGREEMENT)/INSURANCE LAW (WRITTEN AGREEMENT REQUIRED BY POLICY FOR ADDITIONAL INSUREDS DID NOT REQUIRE AN EXECUTED AGREEMENT)/ADDITIONAL INSUREDS (WRITTEN AGREEMENT REQUIRED BY POLICY FOR ADDITIONAL INSUREDS DID NOT REQUIRE AN EXECUTED AGREEMENT)

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EVEN IF THE MISREPRESENTATION THE HOME WAS TO BE OWNER-OCCUPIED WAS INNOCENTLY MADE, RESCISSION OF THE FIRE INSURANCE POLICY WAS JUSTIFIED.

The Second Department determined defendant insurer properly rescinded the plaintiffs’ fire insurance policy based upon the plaintiffs’ misrepresentation the residence would be owner-occupied. The court noted that a misrepresentation can be innocently made and still trigger rescission. The court also found that the broker had no obligation to make sure the insurance application was properly filled out by the plaintiffs:

Here, [the insurer] established its prima facie entitlement to judgment as a matter of law by submitting evidence demonstrating that the plaintiffs’ application for insurance contained a misrepresentation regarding whether the premises would be owner occupied and that it would not have issued the subject policy if the application had disclosed that the subject premises would not be owner occupied … .

In opposition, the plaintiffs failed to raise a triable issue of fact. The plaintiffs admit that, at the time the application was completed, they did not intend to occupy the premises. Thus, contrary to the plaintiffs’ contentions, although the application was completed prior to closing and prior to the inception of the policy, the representation therein that the premises was an owner-occupied primary residence established, in effect, a material misrepresentation of a then existing fact that the premises would be owner occupied, which was sufficient for rescission under Insurance Law § 3105 … . Joseph v Interboro Ins. Co., 2016 NY Slip Op 08050, 2nd Dept 11-30-16

 

INSURANCE LAW (EVEN IF THE MISREPRESENTATION THE HOME WAS TO BE OWNER-OCCUPIED WAS INNOCENTLY MADE, RESCISSION OF THE FIRE INSURANCE POLICY WAS JUSTIFIED)/CONTRACT LAW (INSURANCE POLICY, EVEN IF THE MISREPRESENTATION THE HOME WAS TO BE OWNER-OCCUPIED WAS INNOCENTLY MADE, RESCISSION OF THE FIRE INSURANCE POLICY WAS JUSTIFIED)/MATERIAL MISREPRESENTATION (INSURANCE POLICY, EVEN IF THE MISREPRESENTATION THE HOME WAS TO BE OWNER-OCCUPIED WAS INNOCENTLY MADE, RESCISSION OF THE FIRE INSURANCE POLICY WAS JUSTIFIED)

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MISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE.

The First Department, in a full-fledged opinion by Justice Richter, determined (1) plaintiff’s misrepresentation cause of action was properly dismissed because of a lack of specificity in the allegations, (2) the cause of action should not have been dismissed with prejudice, (3) and the specificity provided in the appellate briefs may support an amended complaint. Plaintiff, a stock insurance company, alleged it was induced to insure collateralized debt obligations (CDO’s) by misrepresentations made by Bear Stearns:

[P]laintiff CIFG Assurance North America, Inc., a stock insurance company, alleges that Bear Stearns & Co. Inc., a predecessor of defendant J.P. Morgan Securities LLC, made material misrepresentations that induced CIFG to provide financial guaranty insurance in connection with two collateralized debt obligations (CDOs). According to CIFG, Bear Stearns had on its books a large number of high-risk residential mortgage-backed securities (RMBSs), and embarked on a scheme to rid itself of these toxic assets by offloading them into the two CDOs, and marketing the CDOs’ securities to investors. * * *

… [T]he claim should not have been dismissed with prejudice, but rather, CIFG should be given the opportunity to replead. A request for leave to amend a complaint should be “freely given, and denied only if there is prejudice or surprise resulting directly from the delay, or if the proposed amendment is palpably improper or insufficient as a matter of law” … . CIFG Assur. N. Am., Inc. v J.P. Morgan Sec. LLC, 2016 NY Slip Op 08029, 1st Dept 11-29-16

 

INSURANCE LAW (STOCK INSURANCE, MISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE)/SECURITIESMISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE/FRAUD (MISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE)/COLLATERALIZED DEBT OBLIGATIONS (MISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE)/RESIDENTIAL MORTGAGE-BACKED SECURITIES  (MISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE)

COURT ERRED IN REFUSING TO APPLY THE “MADE WHOLE” RULE IN THIS SUBROGATION ACTION.

The Fourth Department determined Supreme Court erred when it refused to apply the “made whole” rule in this subrogation action. After settling for the full amount of the policy, respondent insurer sought the full amount paid to plaintiff by another insurer. The matter was sent back because it was unclear whether the settlement made plaintiff whole:

Plaintiff contends that, under the “made whole” rule, respondent has no right of subrogation because plaintiff’s damages exceed the amount of the settlement. By way of background, the “made whole” rule provides that, if “the sources of recovery ultimately available are inadequate to fully compensate the insured for its losses, then the insurer—who has been paid by the insured to assume the risk of loss—has no right to share in the proceeds of the insured’s recovery from the tortfeasor” … . “In other words, the insurer may seek subrogation against only those funds and assets that remain after the insured has been compensated. This designation of priority interests . . . assures that the injured party’s claim against the tortfeasor takes precedence over the subrogation rights of the insurer” … . Although we agree with plaintiff that the court erred in refusing to apply that rule, on this record, it is unclear whether the settlement made plaintiff whole. Grinage v Durawa, 2016 NY Slip Op 07429, 4th Dept 11-10-16

INSURANCE LAW (COURT ERRED IN REFUSING TO APPLY THE “MADE WHOLE” RULE IN THIS SUBROGATION ACTION)/MADE WHOLE RULE (INSURANCE LAW, COURT ERRED IN REFUSING TO APPLY THE “MADE WHOLE” RULE IN THIS SUBROGATION ACTION)/SUBROGATION (INSURANCE LAW, COURT ERRED IN REFUSING TO APPLY THE “MADE WHOLE” RULE IN THIS SUBROGATION ACTION)

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COMPLAINT STATED A CAUSE OF ACTION AGAINST BROKER INDIVIDUALLY FOR NEGLIGENT MISREPRESENTATION AND FOR BREACH OF A FIDUCIARY DUTY AGAINST THE BROKER’S CORPORATION.

The Second Department, reversing (modifying), Supreme Court determined the complaint stated a cause of against for negligent misrepresentation against an insurance broker (Weiss) individually and for breach of fiduciary duty against the broker’s corporation (JDW). It was alleged that the defendants failed to add plaintiff’s landlord as an additional insured and the broker signed a certificate which falsely indicated the landlord had been added to the policy:

Here, the Supreme Court erred in determining, upon reargument, that the complaint failed to state a cause of action sounding in negligent misrepresentation against Weiss individually. … [W]e note that the complaint, as amplified by the evidentiary materials submitted by the plaintiffs, alleged that Weiss personally signed a certificate of insurance falsely stating that the plaintiffs’ landlord had been added as an additional insured on a certain commercial general liability insurance policy, and forwarded this certificate to the plaintiffs, knowing that it was required by the plaintiffs’ landlord. This is sufficient, for purposes of CPLR 3211(a)(7), to state a cause of action against Weiss, based on his personal participation in the commission of a tort … . * * *

The common-law rule is that “an insurance broker acting as an agent of its customer has a duty of reasonable care to the customer to obtain [specifically] requested coverage within a reasonable time after the request, or to inform the customer of the agent’s inability to do so, [but] the agent owes no continuing duty to advise, guide or direct the customer insured to obtain additional coverage” … . However “[w]here a special relationship develops between the broker and client, . . . [the] broker may be liable, even in the absence of a specific request, for failing to advise or direct the client to obtain additional coverage” … . The Court of Appeals has identified three “exceptional situations” which may give rise to such 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'” … .

Here, contrary to the defendants’ contention, the complaint sufficiently alleged that there was a course of dealing between JDW and the plaintiffs over an extended period of time, which may have given rise to a special relationship between them … . JT Queens Carwash, Inc. v JDW & Assoc., Inc., 2016 NY Slip Op 07295, 2nd Dept 11-9-16

 

INSURANCE LAW (COMPLAINT STATED A CAUSE OF ACTION AGAINST BROKER INDIVIDUALLY FOR NEGLIGENT MISREPRESENTATION AND FOR BREACH OF A FIDUCIARY DUTY AGAINST THE BROKER’S CORPORATION)/CORPORATION LAW (INSURANCE LAW, COMPLAINT STATED A CAUSE OF ACTION AGAINST BROKER INDIVIDUALLY FOR NEGLIGENT MISREPRESENTATION AND FOR BREACH OF A FIDUCIARY DUTY AGAINST THE BROKER’S CORPORATION)/NEGLIGENT MISREPRESENTATION (INSURANCE LAW, COMPLAINT STATED A CAUSE OF ACTION AGAINST BROKER INDIVIDUALLY FOR NEGLIGENT MISREPRESENTATION AND FOR BREACH OF A FIDUCIARY DUTY AGAINST THE BROKER’S CORPORATION)/FIDUCIARY DUTY (INSURANCE LAW, COMPLAINT STATED A CAUSE OF ACTION AGAINST BROKER INDIVIDUALLY FOR NEGLIGENT MISREPRESENTATION AND FOR BREACH OF A FIDUCIARY DUTY AGAINST THE BROKER’S CORPORATION)

DEPARTMENT OF FINANCE PROPERLY INCLUDED THE COSTS OF SUB-ALLOCATED PROGRAMS (ADMINISTERED BY OTHER DEPARTMENTS) IN ITS ASSESSMENTS OF OPERATING EXPENSES TO BE PAID BY INSURERS.

In an extensive, detailed opinion by Justice Clark (too detailed to be fairly summarized here), the Third Department determined statutes requiring insurers to pay pro rata shares of the annual operating expenses of the Department of Finance (formerly the Insurance Department), including expenses associated with certain programs administered by other departments (sub-allocated programs), are constitutional. The Third Department further found the assessments imposed on the insurers, which included the costs of the sub-allocated programs, were not arbitrary and capricious and were not imposed in excess of the authority of the Department of Finance. New York Ins. Assn., Inc. v State of New York, 2016 NY Slip Op 07076, 3rd Dept 10-27-16

 

INSURANCE LAW (DEPARTMENT OF FINANCE PROPERLY INCLUDED THE COSTS OF SUB-ALLOCATED PROGRAMS (ADMINISTERED BY OTHER DEPARTMENTS) IN ITS ASSESSMENTS OF THE DEPARTMENT’S OF OPERATING EXPENSES TO BE PAID BY INSURERS)/FINANCE, DEPARTMENT OF (DEPARTMENT OF FINANCE PROPERLY INCLUDED THE COSTS OF SUB-ALLOCATED PROGRAMS (ADMINISTERED BY OTHER DEPARTMENTS) IN ITS ASSESSMENTS OF THE DEPARTMENT’S OF OPERATING EXPENSES TO BE PAID BY INSURERS)

INSURER WAS NOTIFIED OF PLAINTIFFS’ LAWSUIT BY THE INJURED PLAINTIFFS NOT THE INSURED; DISCLAIMER ONLY ADDRESSED INSURED’S NOTIFICATION FAILURE AND WAS THEREFORE INEFFECTIVE AGAINST PLANTIFFS.

The Second Department determined the insurer’s disclaimer was ineffective against the injured plaintiffs. The policy required that the insured, here the snow removal contractor (Florite), notify the insurer of any lawsuit by an injured party. The insured did not notify the insurer of the plaintiffs’ suit. After the plaintiffs were awarded a judgment, the plaintiffs notified the insurer. The insurer disclaimed coverage based solely on the insured’s failure to notify it, but did not disclaim based upon any flaw in the plaintiffs’ notification. In this situation, a disclaimer must address any flaws in both the insured’s and the injured plaintiffs’ notification:

Provisions of an insurance policy requiring an insured to provide notice of an occurrence or suit as soon as practicable have been uniformly interpreted to require that notice be given within a reasonable time under all the circumstances … . Where the required notice of suit is not provided by the insured, but rather by the injured party, the insurer’s notice of disclaimer must address with specificity the grounds for disclaiming coverage applicable to the injured party as well as the insured, “because notice of an occurrence by the injured party constitutes prima facie compliance with the notice requirements of the policy and, if unchallenged, relieves the insured of its contractual duty to provide proper notice” … .

Here, notice of the underlying action was not provided by Florite, but was provided directly by the plaintiffs in September 2010. In its subsequent notice of disclaimer, however, the insurer addressed only Florite’s failure to provide notice of the underlying action, and did not directly address the notice provided by the plaintiffs.  Pollack v Scottsdale Ins. Co., 2016 NY Slip Op 06693, 2nd Dept 10-12-16

 

INSURANCE LAW (DISCLAIMER, INSURER WAS NOTIFIED OF PLAINTIFFS’ LAWSUIT BY THE INJURED PLAINTIFFS NOT THE INSURED; DISCLAIMER ONLY ADDRESSED INSURED’S NOTIFICATION FAILURE AND WAS THEREFORE INEFFECTIVE AGAINST PLANTIFFS)/DISCLAIMERS (INSURER WAS NOTIFIED OF PLAINTIFFS’ LAWSUIT BY THE INJURED PLAINTIFFS NOT THE INSURED; DISCLAIMER ONLY ADDRESSED INSURED’S NOTIFICATION FAILURE AND WAS THEREFORE INEFFECTIVE AGAINST PLANTIFFS)

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INSURED NOT ENTITLED TO ATTORNEY’S FEES IN AN AFFIRMATIVE ACTION TO SETTLE THE INSURED’S RIGHTS UNDER THE POLICY.

The Fourth Department, reversing Supreme Court, determined that the plaintiff (the insured) was not entitled to attorney’s fees in an action brought to settle its rights under a policy:

This case is governed by the general rule that attorneys’ fees and other litigation expenses are “incidents of litigation” that the prevailing party may not collect “from the loser unless an award is authorized by agreement between the parties or by statute or court rule” … . Indeed, it is well established that “an insured may not recover the expenses incurred in bringing an affirmative action against an insurer to settle its rights under the policy” … . Here, there is nothing in the insurance policy that obligates defendant to reimburse or indemnify plaintiff for attorneys’ fees incurred by it in prosecuting an action to enforce the property coverage provisions of the policy, nor does plaintiff refer to any statute or a court rule authorizing its recovery of attorneys’ fees from defendant. Zelasko Constr., Inc. v Merchants Mut. Ins. Co., 2016 NY Slip Op 06328, 4th Dept 9-30-16

 

ANTISUBROGATION RULE DID NOT PRECLUDE RECOVERY TO THE EXTENT RECOVERY EXCEEDED THE LIMITS OF THE RELEVANT POLICY.

The Fourth Department determined the antisubrogation rule prohibited the insurer from recovering under the relevant $1,000,000 policy. But there was no showing that recovery under a $25,000,000 umbrella policy was prohibited by the antisubrogation rule. Therefore recovery to the extent recovery exceeded $1,000,000 was not precluded by the rule:

… [U]nder the antisubrogation rule, “an insurer has no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered . . . even where the insured has expressly agreed to indemnify the party from whom the insurer’s rights are derived’ ” … . Conversely, where “the monetary limit of the insurance provided by the . . . policy is for a lesser sum than that sought by the plaintiff as damages, the motion [for summary judgment dismissing] the third-party complaint should have been granted only up to the applicable limits of that policy” … , because “[i]t is black letter law that New York law does not bar insurance companies from seeking indemnification for settlements or judgments that exceed the limits of an insurance policy” … . Mitchell v NRG Energy, Inc., 2016 NY Slip Op 06359, 4th Dept 9-30-16

INSURANCE LAW (ANTISUBROGATION RULE DID NOT PRECLUDE RECOVERY TO THE EXTENT RECOVERY EXCEEDED THE LIMITS OF THE RELEVANT POLICY)/ANTISUBROGATION RULE (INSURANCE LAW, ANTISUBROGATION RULE DID NOT PRECLUDE RECOVERY TO THE EXTENT RECOVERY EXCEEDED THE LIMITS OF THE RELEVANT POLICY)

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