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Damages for “Loss of Fetus” Under Insurance Law 5102 Are Not Available When the Baby Is Born Alive

The Second Department determined that the “loss of fetus” provision of Insurance Law 5102 did not apply to the birth of a live child allegedly induced by a car accident:

[Plaintiff] was pregnant at the time of the accident, and she alleges that she suffered a placental abruption which caused her son, the infant plaintiff, to be born prematurely and delivered by caesarean section. * * *

The defendants subsequently moved, inter alia, for summary judgment dismissing so much of the complaint as alleged that [plaintiff], individually, sustained a serious injury under the “loss of a fetus” category of Insurance Law § 5102(d) as a result of the subject accident * * *. …[T]he Supreme Court concluded, in essence, that the phrase “loss of a fetus” encompassed any termination of a pregnancy caused by an accident, regardless of whether the fetus was born alive.

In cases involving statutory construction, legislative intent is the controlling principle … . “The Court’s threshold inquiry in this regard is how to discern the legislative intent. When an enactment displays a plain meaning, the courts construe the legislatively chosen words so as to give effect to that Branch’s utterance” … . Contrary to the Supreme Court’s determination, the plain meaning of the term “loss of a fetus” does not include the premature birth of a living child. Rather, this category of damages is applicable where, as a result of an automobile accident, a viable pregnancy terminates with loss of the fetus … .

We note that this determination is consistent with legislative history, which reveals that the “loss of a fetus” category was added to Insurance Law § 5102(d) in 1984 in response to Raymond v Bartsch (84 AD2d 60). In that case, the Appellate Division, [3rd] Department, held that Insurance Law § 5102(d), as then constituted, did not permit a woman, who was nine months pregnant at the time of her accident, to recover damages resulting from her delivery of a stillborn baby. The “loss of a fetus” category was added to the statute in recognition that “[a] woman who is involved in an automobile accident that results in the termination of her pregnancy has suffered a serious injury and should have the right to recover from a negligent operator for her non-economic loss” (Sponsor’s Mem, Bill Jacket, L 1984, ch 143). The policy considerations underlying the 1984 amendment of Insurance Law § 5102(d) are not implicated when a child is born alive. Leach v Ocean Black Car Corp, 2014 NY Slip Op 07477, 2nd Dept 11-5-14

 

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Purchase of Property Encumbered by an Unsatisfied Mortgage Gave Rise to Negligence, Negligent Misrepresentation, Fraud, and Civil Conspiracy Causes of Action Against Title Insurance Company

Third-party plaintiff, Drummond, purchased property that was encumbered by an unsatisfied mortgage held by plaintiff bank. Drummond sued the title company, third-party defendant New York Land, as well as the company from which she procured her mortgage, Residential, and the bank to which the mortgage was transferred, Wells Fargo.  The third-party defendants brought CPLR 3211 motions to dismiss. The Second Department determined the causes of action against New York Land for negligence and negligent misrepresentation properly survived a motion to dismiss because the relationship between Drummond and New York Title was “so close as to approach privity,” but no such relationship was demonstrated with Residential and Wells Fargo.  The Second Department further determined the fraud and civil conspiracy causes of action against New York Land should not have been dismissed, explaining the pleading requirements. In addition, the Second Department determined that the suit was not “consumer-related” and therefore the General Business Law 349 cause of action was properly dismissed:

Although there was no contract between Drummond and New York Land, affording the pleadings a liberal construction and accepting all facts alleged as true …, the third-party complaint supports Drummond’s contention that the relationship between these two parties was so close as to approach privity .. . Indeed, the pleading alleges that New York Land was aware that the abstract and title report that it prepared were to be used for the specific purpose of facilitating a sale or mortgage of the property, that New York Land knew that Drummond was a member of a definable class who would rely on the certification in furtherance of that purpose, and that there was conduct between New York Land and Drummond evincing New York Land’s understanding of Drummond’s reliance … . Accordingly, the Supreme Court properly denied those branches of New York Land’s motion which were to dismiss, for failure to state a cause of action, the third-party causes of action alleging negligence and negligent misrepresentation insofar as asserted against it. * * *

“The elements of a cause of action sounding in fraud are a material misrepresentation of an existing fact, made with knowledge of the falsity, an intent to induce reliance thereon, justifiable reliance upon the misrepresentation, and damages” … . “All of the elements of a fraud claim must be supported by factual allegations containing the details constituting the wrong’ in order to satisfy the pleading requirements of CPLR 3016(b)” … . In certain circumstances, however, it may be “almost impossible to state in detail the circumstances constituting a fraud where those circumstances are peculiarly within the knowledge of [an adverse] party” … . “Under such circumstances, the heightened pleading requirements of CPLR 3016(b) may be met when the material facts alleged in the complaint, in light of the surrounding circumstances, are sufficient to permit a reasonable inference of the alleged conduct’ including the adverse party’s knowledge of, or participation in, the fraudulent scheme” … . Here, accepting all facts alleged as true … , the third-party complaint contains sufficient allegations of fact from which it can be inferred that New York Land was aware of the alleged fraudulent scheme and intended to aid in the commission thereof … . * * *

“Although New York does not recognize civil conspiracy to commit a tort . . . as an independent cause of action, a plaintiff may plead the existence of a conspiracy in order to connect the actions of the individual defendants with an actionable, underlying tort and establish that those actions were part of a common scheme” … . Again, affording the third-party complaint a liberal construction, Drummond alleged sufficient facts from which it may be inferred that New York Land knowingly participated, with certain other third-party defendants, in the alleged fraudulent scheme … . * * *

General Business Law § 349 is a broad consumer protection statute, which declares “deceptive acts or practices in the conduct of any business, trade or commerce” to be unlawful (General Business Law § 349[a]…). A party claiming the benefit of General Business Law § 349 must, as a threshold matter, ” charge conduct that is consumer oriented'” … . “The single shot transaction, which is tailored to meet the purchaser’s wishes and requirements, does not, without more, constitute consumer-oriented conduct for the purposes of this statute” … . Rather, the defendant’s acts or practices “must have a broad impact on consumers at large” … . Here, Drummond’s General Business Law § 349 cause of action is predicated upon allegations that the third-party defendants fraudulently induced her to purchase the subject property and finance it with a mortgage loan from [Residential]. As the Supreme Court properly concluded, these factual allegations do not amount to conduct that has an impact on the public at large and, as such, do not state a cause of action for violation of General Business Law § 349 … . JP Morgan Chase Bank NA v Hall, 2014 NY Slip Op 07475, 2nd Dept 11-5-14

 

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Choice of Law Analysis Re: Liability Insurance Contracts [Extraordinarily Complex Lawsuit Stemming from Mold Rendering a Newly-Constructed Apartment Complex Uninhabitable]

The Second Department sorted out an extraordinary number of coverage, defense and indemnification issues in declaratory judgment actions stemming from mold which made an apartment complex uninhabitable.  The decision deals with too many specific questions to allow summarization.  With respect to a choice of law issue, the court wrote:

Under Pennsylvania law, not only are damages to the work product itself not considered an occurrence, but “damages that are a reasonably foreseeable result of the faulty workmanship are also not covered under a commercial general liability policy” … . The Pennsylvania courts have emphasized fortuity in determining whether a claim constitutes an occurrence … . Mold growth and resulting sickness and property damage would likely be considered by the Pennsylvania courts not to be fortuitous, but, rather, to be, from an objective standpoint, a reasonably foreseeable, natural consequence of faulty workmanship which allowed water to infiltrate the buildings … . Accordingly, because a conflict exists between Pennsylvania and New York law, New York’s choice-of-law rules must be applied to determine which state’s law governs … .

“In the context of liability insurance contracts, the jurisdiction with the most significant relationship to the transaction and the parties’ will generally be the jurisdiction which the parties understood was to be the principal location of the insured risk'” … . However, ” where it is necessary to determine the law governing a liability insurance policy covering risks in multiple states, the state of the insured’s domicile should be regarded as a proxy for the principal location of the insured risk'” … . Because the subject policy covered risks in multiple states, and because Erie’s and Penn National’s named insured was domiciled in Pennsylvania, it is appropriate to apply that state’s law. QBE Ins Corp v Adjo Contr Corp, 2014 NY Slip Op 07342, 2nd Dept 10-29-14

 

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No Privity Between Insured and Reinsurers Which Contracted Solely with the Insurer—Counterclaims by Insured Against Reinsurers Should Have Been Dismissed

The First Department, in a full-fledged opinion by Justice Freedman, reversed Supreme Court and dismissed counterclaims against reinsurers (NICO and Resolute) by the insured (Colgate) because no contract existed between the reinsurers and the insured. The contractual relationship was solely between the insurer (OneBeacon) and the reinsurers.  Colgate alleged that the actions of NICO and Resolute prevented Colgate from exercising control over lawsuits, including whether to settle or litigate. The underlying lawsuits alleged that talc produced by Colgate contained asbestos:

Colgate’s claims raise the issue of whether an insurance policyholder has rights against its carrier’s reinsurer, if the reinsurer administers the insured’s claims under the policy. In a typical reinsurance arrangement, where the carrier administers claims and the reinsurer merely indemnifies it in accordance with the “follow the fortunes” doctrine (see United States Fid. & Guar. Co. v American Re-Ins. Co., 93 AD3d 14, 23 [1st Dept 2012], mod 20 NY3d 407 [2013]), the insured can only state viable claims against the reinsurer in specific circumstances that do not pertain here. In this case, Colgate only holds the Policies with OneBeacon. The carrier’s reinsurer, NICO, and its affiliate, Resolute, both adjust Colgate’s Policy claims and indemnify OneBeacon for claim payouts. NICO’s and Resolute’s dual role does not, however, give rise to any liability to Colgate because Colgate lacks contractual privity with NICO and Resolute. In the absence of privity, Colgate’s breach of contract claims against NICO and Resolute fail. OneBeacon Am Ins Co v Colgate-Palmolive Co, 2014 NY Slip Op 07315, 1st Dept 10-28-14

 

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Title Insurance Company Insures Only Whether a Property Has Legal Access to a Street, Not Whether Physical Access to the Street Is Possible

The Second Department determined that the action against a title insurance company was properly dismissed.  The insured property abutted a street.  However, a retaining wall on the property blocked access to the street.  When a problem developed with respect to removing the retaining wall, the property owners sued the title insurance company.  The Second Department held that the title insurance company was only obligated to determine whether the property had  “legal access” to a street, not “physical access:”

The title insurance policies … insure against “[l]ack of a right of access to and from the land.” “[S]uch a provision refers to the absence of a legal right to access and does not cover claims concerning lack of an existing means of physical access” … . On its motion for summary judgment, Stewart established that [plaintiffs] have a legal right of access because the subject property abuts a public street … . 43 Park Owners Group LLC v Commonwealth Land Tit Ins Co, 2014 NY Slip Op 07120, 2nd Dept 10-22-14

 

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Although Title Had Not Yet Formally Passed to the Driver/Owner, the Vehicle Was Covered as a “Newly Acquired” Vehicle Under the Terms of the Policy

The Third Department reversed Supreme Court and held that the insurer could not disclaim coverage of a 1987 Dodge driven by Porter under the terms of the policy.  Porter was driving the vehicle before receiving the title documents from the seller, Elmore:

We consider first whether coverage extended to the 1987 Dodge under the provision for “[a] private passenger auto newly acquired by you.” [The insurer] contended, and Supreme Court held, that this provision did not apply because Porter had not yet received title or registered the Dodge under the Uniform Vehicle Certificate of Title Act (see Vehicle and Traffic Law art 46). The term “newly acquired” is not defined in the policy and, importantly, it is not limited by the policy to completed transactions that were done in full compliance with the Certificate of Title Act. Ownership of a motor vehicle generally passes “when the parties intend that it pass” … .

Here, it is undisputed that, during the month before the accident, Porter had disposed of his 1994 Chevrolet truck and, shortly thereafter, replaced it by trading his ATV (which he had recently purchased for $1,000) to Elmore for the 1987 Dodge. Although Elmore apparently indicated to Porter after the accident that the Dodge was actually owned by his girlfriend’s father, there was no indication that Elmore did not have authority from the owner to make the transaction. At the time of the transaction, Elmore took possession of the ATV and likewise Porter took absolute possession and control of the Dodge, including all of the keys. According to Porter, the trade was final and permanent. Porter testified that Elmore was about to produce documents so he could register the Dodge, but the accident occurred the day before Elmore was going to give him the documents. Nonetheless, upon taking physical possession of the Dodge, Porter had placed the plates from his junked truck on the Dodge and began using it to drive to work. Under the circumstances and considering the pertinent policy language in light of “the reasonable expectations of the average insured” …, the 1987 Dodge fell within the meaning of replacement auto newly acquired by Porter at the time of the accident and, accordingly, was covered under plaintiff’s policy. Nationwide Ins Co of Am v Porter, 2014 NY Slip Op 07029, 3rd Dept 10-16-14

 

Deliberately-Caused Collision Was Not An Accident from the Standpoint of the Insurer of the Driver Who Caused the Collision—However the Collision Was an Accident from the Standpoint of the Insurer of the Victim of the Deliberate Act—Therefore the Uninsured Motorist Endorsement In the Victim’s Policy Kicked In

The Second Department determined a collision caused by the deliberate act of one driver, Demoliere, was an “accident” for purposes of uninsured motorist endorsement of the policy held by the driver killed by the Demoliere’s deliberate act. The incident was not an accident from the standpoint of Demoliere, and that Demoliere’s insurer was therefore off the hook.  However, from the standpoint of the victim of the deliberate act, the incident was an accident covered by the uninsured motorist endorsement in the victim’s policy:

In State Farm Mut. Auto. Ins. Co. v Langan (16 NY3d 349), the Court of Appeals held that, for the purposes of an uninsured motorist endorsement, when an occurrence is “unexpected, unusual and unforeseen,” from the insured’s perspective, it qualifies as an “accident” (id. at 355 [internal quotation marks omitted]). Here, from the decedent’s perspective, her collision with Demoliere’s vehicle was unexpected, unusual, and unforeseen. Therefore, the occurrence constituted an “accident” within the meaning of the uninsured motorist endorsement of the decedent’s policy … . Matter of Utica Mut Ins Co v Burrous, 2014 NY Slip Op 06986, 2nd Dept 10-15-14

 

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Five-Month Delay In Disclaiming Coverage—Insurer Estopped

The Second Department determined the insurer’s delay in disclaiming coverage in a legal malpractice action prejudiced the attorney.  The insurer was therefore estopped from disclaiming coverage:

Where, as here, the matter does not involve death or bodily injury, the untimely disclaimer by an insurer does not automatically estop the insurer from disclaiming on the basis of late notice unless there has been a showing of prejudice to the insured due to the delay … . Although the court did not make a determination that [the attorney] was prejudiced by the defendants’ approximate five-month delay in disclaiming coverage, based upon this record, [the party injured by the alleged malpractice] made a sufficient showing of prejudice to [the attorney]due to the [insurer’s] late disclaimer such that the defendants are estopped from disclaiming coverage … .Moreover, the purported reason for the disclaimer of coverage was evident on the face of the original complaint, and did not require any additional investigation by the insurer … . The [insurer] failed to rebut this showing. B & R Consol LLC v Zurich Am Ins Co, 2014 NY Slip Op 06287, 2nd Dept 9-24-14

 

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Petition to Commence Action Against the Motor Vehicle Accident Indemnification Corporation (MVAIC) Should Not Have Been Denied In the Absence of a Hearing

The Second Department determined Supreme Court should not have summarily determined a petition to bring an action against the Motor Vehicle Accident Insurance Corporation (MVAIC) and ordered a hearing.  Plaintiff alleged he was injured (while riding a scooter) by a driver who left the scene:

Here, while the petitioner sufficiently pleaded the prima facie elements necessary to commence an action against the MVAIC (see Insurance Law §§ 5217, 5218), the MVAIC raised questions of fact precluding summary determination of the petition. Based on the record before us, the issues of (1) whether the petitioner is an uninsured resident of New York, and, therefore, a “qualified person” pursuant to article 52 of the Insurance Law (see Insurance Law § 5202[b]), (2) whether the accident was reported to the police within 24 hours (see Insurance Law § 5218[b]; 5208[a][2][A]), and (3) whether the petitioner served a notice of claim upon the MVAIC within 90 days of the accident (see Insurance Law § 5208[a][2][A]), could not have been resolved without an evidentiary hearing … . Thus, the Supreme Court should not have summarily determined the petition (see CPLR 409, 410).  Matter of Hernandez v Motor Veh Acc Indem Corp, 2014 NY Slip Op 06203, 2nd Dept 9-17-14

 

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Failure to Comply with California Insurance Law Rendered Arbitration Clauses in Agreements Issued by a California Workers’ Compensation Insurance Carrier Unenforceable

The First Department, in a full-fledged opinion by Justice Moskowitz, over a dissent, determined that the arbitration clauses within payment agreements issued by the California workers’ compensation insurance carrier were not enforceable because the clauses had not been reviewed as required by California law.  The agreements provided that any arbitration be under the auspices of the Federal Arbitration Act (FAA).  But the court determined California’s insurance law was not preempted by the FAA (pursuant to the McCarran-Ferguson Act) and, therefore, the failure to comply with California law rendered the arbitration clauses void and unenforceable:

…”[T]he McCarran-Ferguson Act was an attempt to . . . assure that the activities of insurance companies in dealing with their policyholders would remain subject to state regulation” (…see 15 USC § 1011). Courts have established a four-part test to determine whether the McCarran-Ferguson Act precludes application of a federal statute (in this case, the FAA). Under this test, a federal statute is precluded if: (1) the statute does not “specifically relate” to the business of insurance; (2) the acts challenged under the statute constitute the “business of insurance”; (3) the state has enacted laws regulating the challenged acts; and (4) the state laws would be “invalidated, impaired, or superseded” by application of the federal statute ….

…[T]he FAA does not specifically regulate the business of insurance, and an act specifically relating to the business of insurance is the only type of federal legislation that can preempt state insurance law under McCarran-Ferguson. Furthermore, application of the FAA would modify California law because it would mandate arbitration even though [the insurer] did not, as required by California law, file the payment agreements, and the payment agreements, in turn, contained the arbitration clauses. Matter of Monarch Consulting Inc v National Union Fire Ins Co of Pittsburgh PA, 2014 NY Slip Op 06158, 1st Dept 9-11-14

 

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