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QUESTION OF FACT WHETHER THE TERM “INSURANCE” IN A NONCOMPETE AGREEMENT ENCOMPASSES SURETY BONDS.

The First Department, over an extensive dissent, determined the word “insurance” in a noncompete agreement was susceptible of two meanings, thereby precluding summary judgment. Defendant signed a noncompete agreement which prohibited the “brokering or placement of insurance.” After plaintiff started a new job during the time-period covered by the noncompete agreement with his previous employer, he brokered two “surety bonds” for two companies which had been clients of his former employer. Plaintiff argued the term “insurance” encompassed “surety bonds.” Defendants argued the term “insurance” did not encompass “surety bonds:”

… [T]the evidence produced by each side does not show that the interpretation urged by each is inevitable; rather, it shows that the language of the letter agreement is “on its face . . . reasonably susceptible of more than one interpretation” … . Accordingly, the motion court properly denied the motions for summary judgment. Frenkel Benefits, LLC v Mallory, 2016 NY Slip Op 06109, 1st Dept 9-21-16

 

INSURANCE LAW (QUESTION OF FACT WHETHER THE TERM INSURANCE IN A NONCOMPETE AGREEMENT ENCOMPASSES SURETY BONDS)/CONTRACT LAW (QUESTION OF FACT WHETHER THE TERM INSURANCE IN A NONCOMPETE AGREEMENT ENCOMPASSES SURETY BONDS)/NONCOMPETE AGREEMENTS (QUESTION OF FACT WHETHER THE TERM INSURANCE IN A NONCOMPETE AGREEMENT ENCOMPASSES SURETY BONDS)/SURETY BONDS (QUESTION OF FACT WHETHER THE TERM INSURANCE IN A NONCOMPETE AGREEMENT ENCOMPASSES SURETY BONDS)/EMPLOYMENT LAW (QUESTION OF FACT WHETHER THE TERM INSURANCE IN A NONCOMPETE AGREEMENT ENCOMPASSES SURETY BONDS)

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AMENDMENT TO STATUTE CHANGING THE LIMITATIONS PERIOD FOR ACTION ON A PAYMENT BOND DID NOT APPLY RETROACTIVELY, CRITERIA EXPLAINED.

The Second Department determined an action by a subcontractor seeking payment under a payment bond for environmental clean-up work was time-barred. Plaintiff subcontractor had submitted invoices to the contractor which were not paid. Whether the action on the payment bond was time-barred depended upon whether an amendment to State Finance Law 137 applied retroactively. The court found the amendment did not apply retroactively and explained the analytical criteria:

” In determining whether statutory enactments should be given retroactive effect, there are two axioms of statutory interpretation'”  … . ” Amendments are presumed to have prospective application unless the Legislature’s preference for retroactivity is explicitly stated or clearly indicated. However, remedial legislation should be given retroactive effect in order to effectuate its beneficial purpose'” … . ” These axioms are helpful guideposts, but the reach of the statute ultimately becomes a matter of judgment made upon review of the legislative goal'” … .

Here, the Legislature did not explicitly state or clearly indicate, either in the amendment itself or in the legislative materials, that the 2011 amendment should be applied retroactively … . Thus, “we presume at the outset that the amendment was to have prospective application” … . Additionally, the 2011 amendment did not create a new right or a new class of individuals who could assert a cause of action under a payment bond. Instead, the amendment was simply intended to clarify the limitations period for bringing a payment bond claim. Given these circumstances, the amendment cannot be characterized as remedial, and need not be applied retroactively to achieve its purpose … . Clean Earth of N. Jersey, Inc. v Northcoast Maintenance Corp., 2016 NY Slip Op 06056, 2nd Dept 9-21-16

 

INSURANCE LAW (PAYMENT BOND,AMENDMENT TO STATUTE CHANGING THE LIMITATIONS PERIOD FOR ACTION ON A PAYMENT BOND DID NOT APPLY RETROACTIVELY, CRITERIA EXPLAINED)/CONTRACT LAW (PAYMENT BOND, AMENDMENT TO STATUTE CHANGING THE LIMITATIONS PERIOD FOR ACTION ON A PAYMENT BOND DID NOT APPLY RETROACTIVELY, CRITERIA EXPLAINED)/PAYMENT BOND (STATE FINANCE LAW, AMENDMENT TO STATUTE CHANGING THE LIMITATIONS PERIOD FOR ACTION ON A PAYMENT BOND DID NOT APPLY RETROACTIVELY, CRITERIA EXPLAINED)/STATE FINANCE LAW (PAYMENT BOND, AMENDMENT TO STATUTE CHANGING THE LIMITATIONS PERIOD FOR ACTION ON A PAYMENT BOND DID NOT APPLY RETROACTIVELY, CRITERIA EXPLAINED)/STATUTES (STATE FINANCE LAW, AMENDMENT TO STATUTE CHANGING THE LIMITATIONS PERIOD FOR ACTION ON A PAYMENT BOND DID NOT APPLY RETROACTIVELY, CRITERIA EXPLAINED

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UNAMBIGUOUS TERMS OF POLICY REQUIRED A WRITTEN CONTRACT WITH ANY ADDITIONAL INSURED; THE ABSENCE OF A WRITTEN CONTRACT DIRECTLY WITH THE ADDITIONAL INSURED PRECLUDED COVERAGE, DESPITE A WRITTEN AGREEMENT WITH A THIRD PARTY TO PROVIDE COVERAGE FOR THE ADDITIONAL INSURED.

The First Department, in a full-fledged opinion by Justice Renwick, over an extensive dissenting opinion by Justice Kahn, determined that, under the unambiguous terms of the policy, the absence of a written contract directly with the additional insured precluded coverage for the additional insured, despite a written agreement with a third party to provide coverage for the additional insured. The lawsuit stemmed from damage to surrounding buildings during construction:

The principal issue in this appeal is the interpretation of the additional insurance endorsement in the policy which provides that an additional insured is “any person or organization with whom you [the insured] have agreed to add as an additional insured by written contract.” Trial courts have arrived at conflicting interpretations of a similarly worded additional insured clause as to whether coverage is extended not only to those “with whom” the insured agreed, but also to those “for whom” the insured agreed to provide coverage … . We hold that the subject additional insured clause covers only those that have a written contracts directly with the named insured. * * *

… [W]e find that the language in the “Additional Insured-By Written Contract” clause of the … policy clearly and unambiguously requires that the named insured execute a contract with the party seeking coverage as an additional insured. Since there is no dispute that [the insured] did not enter into a written contract with the JV (joint venture), [the insured’s] agreement in its contract with DASNY (Dormitory Authority of the City of New York) to procure coverage for the JV is insufficient to afford the JV coverage as an additional insured under the … policy. Gilbane Bldg. Co./TDX Constr. Corp. v St. Paul Fire & Mar. Ins. Co., 2016 NY Slip Op 06052, 1st Dept 9-15-16

 

INSURANCE LAW (UNAMBIGUOUS TERMS OF POLICY REQUIRED A WRITTEN CONTRACT WITH ANY ADDITIONAL INSURED; THE ABSENCE OF A WRITTEN CONTRACT DIRECTLY WITH THE ADDITIONAL INSURED PRECLUDED COVERAGE, DESPITE A WRITTEN AGREEMENT WITH A THIRD PARTY TO PROVIDE COVERAGE FOR THE ADDITIONAL INSURED)/CONTRACT LAW (UNAMBIGUOUS TERMS OF POLICY REQUIRED A WRITTEN CONTRACT WITH ANY ADDITIONAL INSURED; THE ABSENCE OF A WRITTEN CONTRACT DIRECTLY WITH THE ADDITIONAL INSURED PRECLUDED COVERAGE, DESPITE A WRITTEN AGREEMENT WITH A THIRD PARTY TO PROVIDE COVERAGE FOR THE ADDITIONAL INSURED)/ADDITIONAL INSURED (UNAMBIGUOUS TERMS OF POLICY REQUIRED A WRITTEN CONTRACT WITH ANY ADDITIONAL INSURED; THE ABSENCE OF A WRITTEN CONTRACT DIRECTLY WITH THE ADDITIONAL INSURED PRECLUDED COVERAGE, DESPITE A WRITTEN AGREEMENT WITH A THIRD PARTY TO PROVIDE COVERAGE FOR THE ADDITIONAL INSURED)

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QUESTION OF FACT WHETHER LATE NOTICE DEFENSE WAIVED BY FAILURE TO RAISE THE DEFENSE IN DISCLAIMER LETTERS; MOTION TO ADD DEFENSE TO ANSWER PROPERLY GRANTED.

The Court of Appeals, in a brief memorandum decision, determined there was a question of fact whether defendant insurance company waived the late-notice defense by not mentioning the defense in the disclaimer letters. The defense had been raised in earlier communications. Therefore defendants’ motion to add the defense in an amended answer was properly granted:

Analyzing the circumstances under the common-law waiver standard, which requires an examination of all factors, defendants cannot be said to have waived their right to assert the late-notice defense as a matter of law by failing to specifically identify late notice in their disclaimer letters. Defendants identified the late-notice defense in early communications with plaintiff before relying on a reservation of rights in two disclaimer letters. “[U]nder common-law principles, triable issues of fact exist whether defendants clearly manifested an intent to abandon their late-notice defense” (Keyspan Gas E. Corp. v Munich Reins. Am., Inc., 23 NY3d 583, 591 [2014]). Accordingly, Supreme Court properly granted defendants’ motion for leave to amend their answer to reassert the affirmative defense of late notice. Estee Lauder Inc. v OneBeacon Ins. Group, LLC, 2016 NY Slip Op 06012, CtApp 9-15-16

INSURANCE LAW (QUESTION OF FACT WHETHER LATE NOTICE DEFENSE WAIVED BY FAILURE TO RAISE THE DEFENSE IN DISCLAIMER LETTERS; MOTION TO ADD DEFENSE TO ANSWER PROPERLY GRANTED)/CIVIL PROCEDURE (INSURANCE LAW, WAIVER, QUESTION OF FACT WHETHER LATE NOTICE DEFENSE WAIVED BY FAILURE TO RAISE THE DEFENSE IN DISCLAIMER LETTERS; MOTION TO ADD DEFENSE TO ANSWER PROPERLY GRANTED)/WAIVER (QUESTION OF FACT WHETHER LATE NOTICE DEFENSE WAIVED BY FAILURE TO RAISE THE DEFENSE IN DISCLAIMER LETTERS; MOTION TO ADD DEFENSE TO ANSWER PROPERLY GRANTED)

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INSURER NOT LIABLE FOR POLLUTION DAMAGE DURING PERIODS WHEN POLLUTION INSURANCE WAS PROHIBITED BY LAW.

The First Department, in a full-fledged opinion by Justice Gische, reversing Supreme Court, determined the insurer (Century) of plaintiff gas company (Keyspan) was not liable for pollution damage for periods of time which preceded the 16 years the policy was in place and during which pollution insurance was prohibited by law:

New York appellate courts … have not expressly ruled on the question presented here, which is: When the reason for the period of no insurance is that the insured could not have obtained insurance even if it had wanted to, is the risk attendant to the unavailability of insurance in the marketplace allocable to the existing, triggered insurance policies or to the insured? * * *

… [T]he order of the Supreme Court … which … denied defendant Century Indemnity Company’s motion for partial summary judgment declaring that Century is not responsible for any part of the costs of cleanup for periods of time when insurance was unavailable before 1953 and after 1986, should be unanimously reversed, on the law, without costs, and the motion granted, and it should be so declared. Keyspan Gas E. Corp. v Munich Reins. Am., Inc., 2016 NY Slip Op 05945, 1st Dept 9-1-16

 

INSURANCE LAW (INSURER NOT LIABLE FOR POLLUTION DAMAGE DURING PERIODS WHEN POLLUTION INSURANCE WAS PROHIBITED BY LAW)/ENVIRONMENTAL LAW (POLLUTION INSURANCE, INSURER NOT LIABLE FOR POLLUTION DAMAGE DURING PERIODS WHEN POLLUTION INSURANCE WAS PROHIBITED BY LAW)/POLLUTION INSURANCE (INSURER NOT LIABLE FOR POLLUTION DAMAGE DURING PERIODS WHEN POLLUTION INSURANCE WAS PROHIBITED BY LAW)

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CONSTRUCTIVE TRUST PROPERLY IMPOSED UPON THE PROCEEDS OF LIFE INSURANCE TO COVER CHILD SUPPORT AND EDUCATION COSTS.

The Second Department determined, where father was ordered to procure life insurance to cover the children’s support and education costs, and where father died without complying with the order, a constructive trust on the proceeds of other life insurance policies was properly imposed in an amount sufficient to cover father’s support and education-expense obligations:

… [T]he Legislature has provided that a court may require a payor spouse to maintain life insurance to prevent that financial injury: “The court may also order a party to purchase, maintain or assign a policy of accident insurance or insurance on the life of either spouse, and to designate in the case of life insurance, either spouse or children of the marriage, or in the case of accident insurance, the insured spouse as irrevocable beneficiaries during a period of time fixed by the court. The obligation to provide such insurance shall cease upon the termination of the spouse’s duty to provide maintenance, child support or a distributive award” (Domestic Relations Law § 236[B][8][a]). The purpose of this provision is not to provide an alternative award of maintenance or child support, but solely to ensure that the spouse or children will receive the economic support for payments that would have been due had the payor spouse survived … . Accordingly, where life insurance is appropriate, it should be set in an amount sufficient to achieve that purpose … . It should not be in an amount that would provide a windfall … . Mayer v Mayer, 2016 NY Slip Op 05911, 2nd Dept 8-31-16

FAMILY LAW (CONSTRUCTIVE TRUST PROPERLY IMPOSED UPON THE PROCEEDS OF LIFE INSURANCE TO COVER CHILD SUPPORT AND EDUCATION COSTS)/INSURANCE LAW (CONSTRUCTIVE TRUST PROPERLY IMPOSED UPON THE PROCEEDS OF LIFE INSURANCE TO COVER CHILD SUPPORT AND EDUCATION COSTS)/CHILD SUPPORT (CONSTRUCTIVE TRUST PROPERLY IMPOSED UPON THE PROCEEDS OF LIFE INSURANCE TO COVER CHILD SUPPORT AND EDUCATION COSTS)/TRUSTS AND ESTATES (CONSTRUCTIVE TRUST PROPERLY IMPOSED UPON THE PROCEEDS OF LIFE INSURANCE TO COVER CHILD SUPPORT AND EDUCATION COSTS)

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INSURER FAILED TO GIVE ADEQUATE NOTICE OF A CHANGE IN THE COVERAGE OF THE UNDERLYING AUTO LIABILITY POLICY REQUIRED BY ITS UMBRELLA POLICY, UMBRELLA POLICY REFORMED TO RESTORE THE RESULTING GAP IN COVERAGE.

The Second Department, in a full-fledged opinion by Justice Cohen, determined defendant insurer failed to notify plaintiff of an elimination of coverage as required by Insurance Law 3425. The insurance contract was reformed to include the eliminated coverage. Plaintiff had a $1,000,000 umbrella auto insurance policy with the defendant insurer (Allstate). When plaintiff purchased the umbrella policy it required $100,000/$300,000 coverage in the underlying policy. Although the limit of the umbrella policy did not change, the requirements for the underlying policy were increased to $250,000/$500,000. After an accident, Allstate paid the excess over $250,000, but refused to pay the difference between the $100,000 actual coverage of the underlying policy and the $250,000 required coverage:

Insurance Law § 3425 imposes restrictions on a liability insurer’s right to cancel, refuse to renew, or condition renewal of a policy, and requires the insurer to provide notice to the policyholder before any cancellation, nonrenewal, or conditional renewal occurs. At issue on this appeal is Insurance Law § 3425(d)(1), which requires an insurer to notify a policyholder, at least 45 days before the end of the coverage period, of its intention to condition renewal “upon change of limits or elimination of any coverages,” and to provide a specific reason for so conditioning renewal. … [W]e find that the notice requirement of Insurance Law § 3425(d)(1) applies where, as here, an insurer issues an umbrella policy providing the policyholder with additional coverage above the limits of his or her automobile coverage, and then increases the amount of underlying automobile liability insurance the policyholder must maintain before the additional coverage provided by the umbrella policy becomes available. We further find that an insurer’s failure to comply with Insurance Law § 3425(d)(1) provides a basis for reformation of the subject policy. Gotkin v Allstate Ins. Co., 2016 NY Slip Op 05359, 2nd Dept 7-6-16

INSURANCE LAW (INSURER FAILED TO GIVE ADEQUATE NOTICE OF A CHANGE IN THE COVERAGE OF THE UNDERLYING AUTO LIABILITY POLICY REQUIRED BY ITS UMBRELLA POLICY, UMBRELLA POLICY REFORMED TO RESTORE THE RESULTING GAP IN COVERAGE)/CONTRACT LAW (INSURANCE POLICY, INSURER FAILED TO GIVE ADEQUATE NOTICE OF A CHANGE IN THE COVERAGE OF THE UNDERLYING AUTO LIABILITY POLICY REQUIRED BY ITS UMBRELLA POLICY, UMBRELLA POLICY REFORMED TO RESTORE THE RESULTING GAP IN COVERAGE)/REFORMATION (INSURANCE POLICY, INSURER FAILED TO GIVE ADEQUATE NOTICE OF A CHANGE IN THE COVERAGE OF THE UNDERLYING AUTO LIABILITY POLICY REQUIRED BY ITS UMBRELLA POLICY, UMBRELLA POLICY REFORMED TO RESTORE THE RESULTING GAP IN COVERAGE)

POLICY EXCLUSION WAS AMBIGUOUS, INSURER HAD A DUTY TO DEFEND.

The Second Department determined the “insured versus insured” policy exclusion was ambiguous and therefore could not be the basis for declaring the insurer, Princeton, did not have a duty to defend in this slip and fall case. Here an employee of one insured sued the company which owned the land, which was also insured by Princeton. The Second Department held it was not clear whether the plaintiff employee was an “insured” within the meaning of the exclusion:

“To be relieved of its duty to defend on the basis of a policy exclusion, the insurer bears the heavy burden of demonstrating that the allegations of the complaint [in the underlying action] cast the pleadings wholly within that exclusion, that the exclusion is subject to no other reasonable interpretation, and that there is no possible factual or legal basis upon which the insurer may eventually be held obligated to indemnify the insured under any policy provision” … . “[I]f the language is doubtful or uncertain in its meaning, any ambiguity will be construed in favor of the insured and against the insurer”… .

Here, Princeton disclaimed coverage based upon the “Insured Versus Insured” exclusion, which excluded “[a]ny claim’ made by or for the benefit of, or in the name or right of, one current or former insured against another current or former insured.” As it is not clear from the language of the exclusion at issue whether [plaintiff], as an employee, was an “insured” as that term was defined in the policy … , the provisions are ambiguous and subject to more than one interpretation … . Boro Park Land Co., LLC v Princeton Excess Surplus Lines Ins. Co., 2016 NY Slip Op 04684, 2nd Dept 6-15-16

 

INSURANCE LAW (POLICY EXCLUSION WAS AMBIGUOUS, INSURER HAD A DUTY TO DEFEND)/EXCLUSION, POLICY (INSURANCE LAW, POLICY EXCLUSION WAS AMBIGUOUS, INSURER HAD A DUTY TO DEFEND)/DUTY TO DEFEND (INSURANCE LAW, POLICY EXCLUSION WAS AMBIGUOUS, INSURER HAD A DUTY TO DEFEND)

HEALTH INSURANCE CARRIER WHICH ERRONEOUSLY PAID INJURED PARTY’S NO-FAULT BENEFITS CAN NOT RECOVER FROM THE NO-FAULT CARRIER.

The Court of Appeals, in a full-fledged opinion by Judge Pigott, over a two-judge dissenting opinion, determined Aetna, the health insurance carrier which erroneously paid the injured party's (Herrera's) no-fault benefits, could not recover from Hanover, the no-fault carrier:

The applicable regulation, 11 NYCRR 65.3.11 (a) provides, in relevant part, that “an insurer shall pay benefits for any loss, other than death benefits, directly to the applicant or, . . . upon assignment by the applicant . . .shall pay benefits directly to providers of health care services. . .” … . Aetna concedes that as a health insurer it is not a “provider of health care services” as contemplated by the language of this regulation … . Aetna argues, however, that it stands in Herrera's shoes because Herrera assigned her no-fault rights to it.

This argument fails for two reasons. First, since Herrera's health care providers were able to bill and recoup payment from Aetna, an assignment by Herrera of her no-fault rights had already been made, leaving her with no rights to assign to Aetna. Second, by its very language, the no-fault regulation permits only the insured — or providers of health care services by an assignment from the insured — to receive direct no-fault benefits. Because Aetna does not fall under the term “health care provider,” Herrera could not assign her rights to it.  Aetna Health Plans v Hanover Ins. Co., 2016 NY Slip Op 04658, CtApp 6-14-16

INSURANCE LAW (HEALTH INSURANCE CARRIER WHICH ERRONEOUSLY PAID INJURED PARTY'S NO-FAULT BENEFITS CAN NOT RECOVER FROM THE NO-FAULT CARRIER)/NO-FAULT INSURANCE (HEALTH INSURANCE CARRIER WHICH ERRONEOUSLY PAID INJURED PARTY'S NO-FAULT BENEFITS CAN NOT RECOVER FROM THE NO-FAULT CARRIER)

AN EXAMINATION UNDER OATH (EUO) CAN BE REQUESTED BY THE NO-FAULT INSURER BEFORE THE INSURER RECEIVES A CLAIM FORM FROM THE MEDICAL PROVIDER.

The First Department, over a dissent, in a no-fault insurance case, determined plaintiff insurer's motion for summary judgment (dismissing the provider's claim for first-party no-fault benefits) based upon plaintiff's insured's (Manoo's) failure to appear for three scheduled examinations under oath (EUO's) should have been granted. The court held that an EUO can be requested at any time, and the fact that the first EUO was requested before the insurer received a claim form from the provider was of no consequence:

The record establishes that plaintiff requested Manoo's initial EUO by letter dated February 3, 2012. Although [the provider's] NF-3 form is dated February 7, 2012, plaintiff was entitled to request the EUO prior to its receipt thereof … . The notification requirements for verification requests under 11 NYCRR 65-3.5 and 65-3.6 do not apply to EUOs that are scheduled prior to the insurance company's receipt of a claim form … . Mapfre Ins. Co. of N.Y. v Manoo, 2016 NY Slip Op 04446, 1st Dept 6-9-16

INSURANCE LAW (AN EXAMINATION UNDER OATH (EUO) CAN BE REQUESTED BY THE NO-FAULT INSURER BEFORE THE INSURER RECEIVES A CLAIM FORM)/NO-FAULT INSURANCE (AN EXAMINATION UNDER OATH (EUO) CAN BE REQUESTED BY THE NO-FAULT INSURER BEFORE THE INSURER RECEIVES A CLAIM FORM)

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