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OFFICE-BASED SURGERY CENTERS, UNLIKE HOSPITALS AND AMBULATORY SURGERY CENTERS, ARE NOT ENTITLED TO REIMBURSEMENT FOR FACILITY FEES UNDER THE NO-FAULT LAW.

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined an office-based surgery (OBS) center, unlike hospitals and ambulatory surgery centers (ASC), are not entitled to reimbursement for “facility fees” under the no-fault insurance law and the related regulations. The fees at issue in this case amounted to $1.3 million:

As the statutory language illustrates, the legislature capped total payments for basic economic loss, and delegated the determination of fee rates to the Chair and the Superintendent. Neither administrator has chosen to include OBS facility fees in the regulatory schedules. It is not for this Court to decide, contrary to [the OBS's] contention, whether this is a “good idea” or if it would be better for patients covered by no-fault insurance, and for the efficient management of our health care system, to require reimbursement of OBS facility fees as a means to ensure that OBS facilities continue to be viable options for patients. “These policy determinations are beyond our authority and instead best left for the legislature” … . Government Empls. Ins. Co. v Avanguard Med. Group, PLLC, 2016 NY Slip Op 02473, CtApp 3-31-16

INSURANCE LAW (OFFICE-BASED SURGERY CENTERS, UNLIKE HOSPITALS AND AMBULATORY SURGERY CENTERS, ARE NOT ENTITLED TO REIMBURSEMENT FOR FACILITY FEES UNDER THE NO-FAULT LAW)/NO-FAULT INSURANCE (OFFICE-BASED SURGERY CENTERS, UNLIKE HOSPITALS AND AMBULATORY SURGERY CENTERS, ARE NOT ENTITLED TO REIMBURSEMENT FOR FACILITY FEES UNDER THE NO-FAULT LAW)/OFFICE-BASED SURGERY CENTERS (NO-FAULT INSURANCE, OFFICE-BASED SURGERY CENTERS, UNLIKE HOSPITALS AND AMBULATORY SURGERY CENTERS, ARE NOT ENTITLED TO REIMBURSEMENT FOR FACILITY FEES UNDER THE NO-FAULT LAW)

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SUPPLEMENTAL UNINSURED/UNDERINSURED MOTORIST PROVISIONS WERE UNAMBIGUOUS, RECOVERY LIMITED TO THE DIFFERENCE BETWEEN THE AMOUNT RECOVERED UNDER THE TORTFEASOR’S POLICY AND $50,000, HERE THE DIFFERENCE WAS ZERO.

The Second Department determined the relevant supplemental uninsured/underinsured motorist (SUM) provisions of appellant's policy were unambiguous and limited recovery for the death of appellant's daughter to a total of $50,000. Appellant argued the policy allowed recovery of the $50,000 limit, despite recovery of $50,000 under the tortfeasor's policy:

Based upon the … provisions of the policy, the Supreme Court properly found that the $50,000 recovered by the appellant from the tortfeasor was equivalent to the maximum SUM limit provided for in the policy. Therefore, the appellant had no possibility of an additional recovery, which rendered her SUM claim academic … . The language of the SUM endorsement was not ambiguous and must be enforced … . Matter of Ameriprise Auto & Home Ins. Co. v Savio, 2016 NY Slip Op 02358, 2nd Dept 3-30-16

INSURANCE LAW (SUPPLEMENTAL UNINSURED/UNDERINSURED MOTORIST PROVISIONS WERE UNAMBIGUOUS, RECOVERY LIMITED TO THE DIFFERENCE BETWEEN THE AMOUNT RECOVERED UNDER THE TORTFEASOR'S POLICY AND $50,000, HERE THE DIFFERENCE WAS ZERO)/SUPPLEMENATAL UNINSURED/UNDERINSURED MOTORIST (SUM) COVERAGE (SUPPLEMENTAL UNINSURED/UNDERINSURED MOTORIST PROVISIONS WERE UNAMBIGUOUS, RECOVERY LIMITED TO THE DIFFERENCE BETWEEN THE AMOUNT RECOVERED UNDER THE TORTFEASOR'S POLICY AND $50,000, HERE THE DIFFERENCE WAS ZERO)/CONTRACT LAW (INSURANCE POLICY, SUPPLEMENTAL UNINSURED/UNDERINSURED MOTORIST PROVISIONS WERE UNAMBIGUOUS, RECOVERY LIMITED TO THE DIFFERENCE BETWEEN THE AMOUNT RECOVERED UNDER THE TORTFEASOR'S POLICY AND $50,000, HERE THE DIFFERENCE WAS ZERO)

BECAUSE PLAINTIFF RECOVERED FROM THE OTHER DRIVER AN AMOUNT EQUAL TO THE LIMIT OF PLAINTIFF’S SUPPLEMENTARY UNINSURED/UNDERINSURED MOTORISTS (SUM) COVERAGE, PLAINTIFF WAS NOT ENTITLED TO ANY FURTHER RECOVERY.

The Second Department, reversing Supreme Court, determined plaintiff was not entitled to payment under his supplementary uninsured/underinsured motorists (SUM) coverage. The SUM covered loss up to $100,000. The plaintiff recovered $100,000 from the other driver's insurance. Therefore nothing was due under the SUM provision of plaintiff's policy:

The SUM endorsement contained in the plaintiff's automobile insurance policy contained coverage limits of $100,000 per person, and further provided, in pertinent part, that “[t]he maximum amount payable under SUM coverage shall be the policy's SUM limits, reduced and thus offset by motor vehicle bodily injury liability insurance policy or bond payments received from, or on behalf of, any negligent party involved in the accident.” Although the plaintiff's SUM coverage was triggered … , the plaintiff received $100,000 from the tortfeasor, which is equal to the limit of the SUM coverage that he purchased. Consequently, the amount that he was entitled to recover under the automobile insurance policy's SUM coverage was reduced to zero … . Nafash v Allstate Ins. Co., 2016 NY Slip Op 02061, 2nd Dept 3-23-16

INSURANCE LAW (BECAUSE PLAINTIFF RECOVERED FROM THE OTHER DRIVER AN AMOUNT EQUAL TO THE LIMIT OF PLAINTIFF'S SUPPLEMENTARY UNINSURED/UNDERINSURED MOTORISTS (SUM) COVERAGE, PLAINTIFF WAS NOT ENTITLED TO ANY FURTHER RECOVERY)/SUPPLEMENTARY UNINSURED/UNDERINSURED MOTORISTS (SUM) COVERAGE (BECAUSE PLAINTIFF RECOVERED FROM THE OTHER DRIVER AN AMOUNT EQUAL TO THE LIMIT OF PLAINTIFF'S SUPPLEMENTARY UNINSURED/UNDERINSURED MOTORISTS (SUM) COVERAGE, PLAINTIFF WAS NOT ENTITLED TO ANY FURTHER RECOVERY)

LESSOR ENTITLED TO SUMMARY JUDGMENT DECLARING LESSEE’S INSURANCE CARRIER WAS OBLIGATED TO DEFEND LESSOR IN SLIP AND FALL CASE.

The Second Department determined the complaint raised the reasonable possibility that plaintiff Cumberland Farms would be liable in a slip and fall case, even though the subject property had been leased to another. Therefore, Cumberland was entitled to summary judgment declaring the lessee's insurance carrier was obligated to defend Cumberland:

“A duty to defend is triggered by the allegations contained in the underlying complaint” … . “An insurer's duty to defend is broader than the duty to indemnify and arises whenever the allegations of the complaint against the insured, liberally construed, potentially fall within the scope of the risks undertaken by the insurer” … . The duty remains “even though facts outside the four corners of [the] pleadings indicate that the claim may be meritless or not covered” … . Nonetheless, “an insurer can be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision” … .

… [T]he complaint in the underlying action alleged that Cumberland was negligent in its ownership, operation, control, and maintenance of the subject gas station. However, the defendants' submissions in support of their motion included evidence that Cumberland leased the gas station to Noori as a franchisee. Since Cumberland's liability, if any, may hinge on the scope of its obligations under the agreements entered into with Noori that established their franchisor/franchisee relationship, the allegations of the complaint in the underlying action suggest a reasonable possibility of coverage for Cumberland in the underlying action … . Cumberland Farms, Inc. v Tower Group, Inc., 2016 NY Slip Op 02048, 2nd Dept 3-23-16

INSURANCE LAW (LESSOR ENTITLED TO SUMMARY JUDGMENT DECLARING LESSEE'S INSURANCE CARRIER WAS OBLIGATED TO DEFEND LESSOR IN SLIP AND FALL CASE)/DUTY TO DEFEND (INSURANCE LAW, LESSOR ENTITLED TO SUMMARY JUDGMENT DECLARING LESSEE'S INSURANCE CARRIER WAS OBLIGATED TO DEFEND LESSOR IN SLIP AND FALL CASE)

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OMISSIONS FROM COMPLAINT SUPPLIED BY AFFIDAVIT IN OPPOSITION TO MOTION TO DISMISS, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED.

The First Department, reversing Supreme Court, determined the omissions from the complaint against defendant insurance company were remedied by an affidavit submitted in opposition to the motion to dismiss:

A complaint must “be sufficiently particular to give the court and parties notice of the transactions, occurrences, or series of transactions” that form the basis of the complaint and “the material elements of each cause of action” (CPLR 3013). The factual allegations of the complaint are accepted as true, and afforded “every possible favorable inference” … . “[A] court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint and the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one … . When such affidavits are considered, dismissal should not result unless “a material fact as claimed by the pleader to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it” … .

Here, the complaint standing alone failed to apprise defendant insurance companies of basic pertinent information to put them on notice of the claims against them, such as the patients treated and the insurance policies issued by defendant, under which plaintiff submitted claims for treatment rendered. However, in opposition to defendant insurance companies' motion to dismiss, plaintiff submitted an affidavit from its principal with an exhibit attached providing such information. Thus, the complaint and affidavit submitted in opposition sufficiently apprise defendant insurance companies of the “transactions, occurrences, or series of transactions” that form the basis of the complaint (CPLR 3013). High Definition MRI, P.C. v Travelers Cos., Inc., 2016 NY Slip Op 02027, 1st Dept 3-22-16

CIVIL PROCEDURE (OMISSIONS FROM COMPLAINT SUPPLIED BY AFFIDAVIT IN OPPOSITION TO MOTION TO DISMISS, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED)/COMPLAINTS (OMISSIONS FROM COMPLAINT SUPPLIED BY AFFIDAVIT IN OPPOSITION TO MOTION TO DISMISS, COMPLAINT SHOULD NOT HAVE BEEN DISMISSED)

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BAILEE CANNOT, PURSUANT TO THE UCC, CONTRACT AWAY LIABILITY FOR LACK OF CARE IN STORING GOODS, PURPORTED WAIVER OF SUBROGATION UNENFORCEABLE.

The First Department determined the relationship between the fine art dealer (Chowalski) and the defendant warehouse was that of bailor/bailee with respect to stored artworks.  Under the UCC the bailee (warehouse) cannot contract away liability for damage caused by lack of due care. Therefore, the waiver of subrogation in the bailment agreement was not enforceable. There was a question of fact whether the failure to move the stored artworks as Hurricane Sandy approached constituted a failure to exercise the level of care mandated by the UCC:

UCC 7-204(a) provides that a “warehouse is liable for damages for loss of or injury to the goods caused by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances” and “is not liable for damages that could not have been avoided by the exercise of that care.” UCC 7-204(b) provides that “[d]amages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage beyond which the warehouse is not liable.” However, such limitations on liability are limited by UCC 7-202(c), which provides that such terms must not “impair its . . . duty of care under Section 7-204. Any contrary provision is ineffective.”

Here there is a question of fact concerning whether defendant, in failing to move Chowaiki's goods to either another floor, or to a location above ground level on the floor they were on, was reasonable under the circumstances. If the trier of fact finds that defendant did not act reasonably, then defendant may be liable for damages to Chowaiki's goods .

… [T]he court erred in finding that the waiver of subrogation contained in the agreement's loss/damage waiver is enforceable and bars this action.

Provisions purporting to exempt the bailee from liability for damage to stored goods from perils against which the bailor had secured insurance, even when caused by the bailee's negligence have been held to run afoul of the statutory scheme of UCC Article 7. XL Specialty Ins. Co. v Christie's Fine Art Stor. Servs., Inc., 2016 NY Slip Op 01901, 1st Dept 3-17-16

INSURANCE LAW (BAILEE CANNOT, UNDER THE UCC, CONTRACT AWAY LIABILITY FOR LACK OF CARE IN STORING GOODS, WAIVER OF SUBROGATION UNENFORCEABLE)/UCC (BAILEE CANNOT, UNDER THE UCC, CONTRACT AWAY LIABILITY FOR LACK OF CARE IN STORING GOODS, WAIVER OF SUBROGATION UNENFORCEABLE)/CONTRACT LAW (BAILEE CANNOT, UNDER THE UCC, CONTRACT AWAY LIABILITY FOR LACK OF CARE IN STORING GOODS, WAIVER OF SUBROGATION UNENFORCEABLE)/BAILMENT   (BAILEE CANNOT, UNDER THE UCC, CONTRACT AWAY LIABILITY FOR LACK OF CARE IN STORING GOODS, WAIVER OF SUBROGATION UNENFORCEABLE)/SUBROGATION  (BAILEE CANNOT, UNDER THE UCC, CONTRACT AWAY LIABILITY FOR LACK OF CARE IN STORING GOODS, WAIVER OF SUBROGATION UNENFORCEABLE)

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ATTORNEYS’ FEES NOT AVAILABLE TO INSURED WHO BRINGS AFFIRMATIVE ACTION TO SETTLE RIGHTS UNDER A POLICY; CAUSE OF ACTION FOR BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING NOT DUPLICATIVE OF CAUSE OF ACTION FOR BREACH OF CONTRACT.

The Second Department, reversing Supreme Court, determined the insured's motion for summary judgment dismissing the demand for an attorney's fee should have been granted. When an insured brings an affirmative action to settle rights under an insurance policy, the insured cannot recover attorneys' fees. The court further held the action for breach of the covenant of good faith and fair dealing was not duplicative of the breach of contract cause of action and the insurer's motion for summary judgment on that ground was properly denied:

Implicit in every contract is a covenant of good faith and fair dealing which encompasses any promise that a reasonable promisee would understand to be included … . In the context of an insurance contract, “a reasonable insured would understand that the insurer promises to investigate in good faith and pay covered claims” … . Here, the defendant failed to eliminate all triable issues as to whether it investigated the loss in good faith and timely paid covered claims … . Further, contrary to the defendant's contention, the cause of action alleging breach of the covenant of good faith and fair dealing is not wholly duplicative of the cause of action alleging breach of contract … .

“[A]n insured may not recover the expenses incurred in bringing an affirmative action against an insurer to settle its rights under the policy” … . The defendant established its prima facie entitlement to judgment as a matter of law dismissing so much of the complaint as sought an award of an attorney's fee by demonstrating that the plaintiffs were insureds under the policy and that they commenced this action to settle their rights under the policy … . Doody v Liberty Mut. Group, Inc., 2016 NY Slip Op 01798, 2nd Dept 3-16-16

INSURANCE LAW (ATTORNEYS FEES, INSURED CANNOT RECOVER ATTORNEYS FEES IN AFFIRMATIVE ACTION TO SETTLE RIGHTS UNDER A POLICY)/ATTORNEYS FEES (INSURANCE LAW, INSURED CANNOT RECOVER ATTORNEYS FEES IN AFFIRMATIVE ACTION TO SETTLE RIGHTS UNDER A POLICY)/INSURANCE LAW (CAUSE OF ACTION FOR BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING NOT DUPLICATIVE OF CAUSE OF ACTION FOR BREACH OF CONTRACT)/CONTRACT LAW (INSURANCE LAW, CAUSE OF ACTION FOR BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING NOT DUPLICATIVE OF CAUSE OF ACTION FOR BREACH OF CONTRACT)/COVENANT OF GOOD FAITH AND FAIR DEALING (INSURANCE LAW, CAUSE OF ACTION FOR BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING NOT DUPLICATIVE OF CAUSE OF ACTION FOR BREACH OF CONTRACT)

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PRINCIPLES OF CONTRACT INTERPRETATION APPLIED TO DETERMINE THE DEDUCTIBLE AMOUNT; SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED TO THE INSURER.

The Second Department, reversing Supreme Court, determined the defendant insurer’s interpretation of the policy language was correct and plaintiff’s damages claim was below the deductible. Plaintiff’s facility was damaged during Hurricane Sandy. The damage claim was approximately $2.3 million. The question on appeal was whether the policy language supported the insurer’s position that the applicable deductible was 2% of the total value of the property, which amounted to more than $2.3 million. Or whether the policy language supported the insured’s position that the deductible was 2% of the $2.5 million sublimit for flood damage. The court concluded the insured’s interpretation was not viable because it rendered several other policy provisions superfluous: “In sum, there is only one reasonable interpretation of the relevant deductible provision of the policy. That interpretation supports [the insurer’s] contention that the applicable deductible was $2,494,020, and that the claim submitted by [the insured] did not meet the deductible.” Castle Oil Corp. v ACE Am. Ins. Co., 2016 NY Slip Op 01632, 2nd Dept 3-9-16

 

NSURANCE LAW (PRINCIPLES OF CONTRACT INTERPRETATION APPLIED TO DETERMINE DEDUCTIBLE)/CONTRACT LAW (INSURANCE LAW, PRINCIPLES OF CONTRACT INTERPREATION APPLIED TO DETERMINE DEDUCTIBLE)

QUESTION OF FACT WHETHER INSURED’S 17-MONTH DELAY IN NOTIFYING INSURER OF THE OCCURRENCE WAS BASED UPON A GOOD FAITH BELIEF OF NONLIABILITY.

The Second Department determined the insured defendants had raised a question of fact whether a 17-month delay in notifying the plaintiff insurer of the “occurrence” was based upon a good-faith belief of nonliability. The court explained the relevant law:

Where, as here, an insurance policy requires that notice of an occurrence be given “as soon as practicable,” notice must be given within a reasonable time in view of all of the circumstances … . “However, circumstances may exist that will excuse or explain the insured's delay in giving notice, such as a reasonable belief in nonliability” … . It is the insured's burden to demonstrate the reasonableness of the excuse … .

In general, whether there existed a good faith belief that the injured party would not seek to hold the insured liable, and whether that belief was reasonable, are questions of fact for the fact-finder … . Summary judgment may be granted in favor of the insurer only if the evidence, construing all inferences in favor of the insured, establishes as a matter of law that the insured's belief in nonliability was unreasonable or in bad faith … .

… The plaintiff established its prima facie entitlement to judgment as a matter of law by demonstrating that the insured defendants were notified of the injured party's workers' compensation claim approximately 17 months before they notified the plaintiff of the occurrence … . Since the subject insurance policies were issued in 2008, prior to the amendment to Insurance Law § 3420 (for policies issued after January 17, 2009), the plaintiff did not have to show that it was prejudiced by the failure to provide timely notice in order to satisfy its prima facie burden … .

In opposition, however, the insured defendants raised a triable issue of fact as to whether the delay was reasonably based on a good-faith belief of nonliability … . Aspen Ins. UK Ltd. v Nieto, 2016 NY Slip Op 01449, 2nd Dept 3-2-16

INSURANCE LAW (QUESTION OF FACT WHETHER DELAY IN NOTIFIYING INSURER BASED UPON GOOD FAITH BELIEF OF NONLIABILITY)/NOTICE OF OCCURRENCE (INSURANCE LAW, QUESTION OF FACT WHETHER DELAY IN NOTIFIYING INSURER BASED UPON GOOD FAITH BELIEF OF NONLIABILITY)

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LANDSCAPER AND ITS INSURER STRICTLY LIABLE FOR OIL DISCHARGE ON PLAINTIFFS’ PROPERTY; OIL LINE SEVERED DURING SPRINKLER REPAIR.

The Second Department determined summary judgment was properly awarded to plaintiffs in an action under the Navigation Law based upon an oil spill. The defendant landscaping company acknowledged that its employee severed the underground oil line on plaintiffs’ property while repairing a sprinkler system. Navigation Law 181 (1) imposes strict liability upon a person responsible for the discharge of petroleum and any insurer:

Navigation Law § 181(1) provides that a person who has “discharged petroleum shall be strictly liable . . . for all cleanup and removal costs and all direct and indirect damages, no matter by whom sustained.” Article 12 of the Navigation Law defines a “discharge,” as relevant here, as “any intentional or unintentional action or omission resulting in the releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping of petroleum” (Navigation Law § 172[8]). The statute provides that any individual or entity “who is not responsible for the discharge” may maintain a claim thereunder (Navigation Law § 172[3]…). The statute also provides that under article 12, “[a]ny claims for costs of cleanup and removal, civil penalties or damages by the state and any claim for damages by any injured person, may be brought directly against the bond, the insurer, or any other person providing evidence of financial responsibility” (Navigation Law § 190). Bennett v State Farm Fire & Cas. Co., 2016 NY Slip Op 01452, 2nd Dept 3-2-16

ENVIRONMENTAL LAW (LANDSCAPER STRICTLY LIABLE OF OIL DISCHARGE)/NAVIGATION LAW (LANDSCAPER STRICTLY LIABLE FOR OIL DISCHARGE)/INSURANCE LAW (INSURER STRICTLY LIABLE FOR OIL DISCHARGE BY INSURED)

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