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WHERE THERE ARE UNRESOLVED QUESTIONS OF FACT CONCERNING ELIGIBILITY FOR WORKERS’ COMPENSATION BENEFITS THE WORKERS’ COMPENSATION BOARD HAS PRIMARY JURISDICTION AND MUST RULE BEFORE ANY RELATED ACTION CAN BE BROUGHT IN SUPREME COURT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the Workers’ Compensation Board had primary jurisdiction and must rule on defendant’s eligibility for benefits before Supreme Court can hear an action by the insurer for reimbursement of no-fault payments made to defendant:

In July 2018, the subrogors of the plaintiff no-fault insurer, State Farm Mutual Automobile Insurance Company, allegedly were injured in a motor vehicle accident while traveling in a vehicle insured by the plaintiff. After the plaintiff provided payments for medical services on behalf of the subrogors, it learned that the subrogors had applied for workers’ compensation benefits and that the Workers’ Compensation Board had directed the defendant workers’ compensation insurer, Amtrust North America, Inc., to pay for necessary medical treatments for the subrogors. Thereafter, the plaintiff demanded that the defendant reimburse it for the full amount of no-fault benefits the plaintiff had provided on behalf of its subrogors. * * *

“[W]here the availability of workmen’s compensation hinges upon the resolution of questions of fact or upon mixed questions of fact and law, the plaintiff may not choose the courts as the forum for the resolution of such questions” … . “Since ‘primary jurisdiction with respect to determinations as to the applicability of the Workers’ Compensation Law has been vested in the Workers’ Compensation Board,’ it is ‘inappropriate for the courts to express views with respect thereto pending determination by the board'” … . State Farm Mut. Auto. Ins. Co. v Amtrust N. Am., Inc., 2024 NY Slip Op 00646, Second Dept 2-7-24

Practice Point: Where there are unresolved questions of fact about a party’s eligibility for Workers’ Compensation benefits, any action in Supreme Court should be transferred to the Workers’ Compensation Board, which is vested with primary jurisdiction.

 

DEFENDANT INSURER DID NOT TIMELY DISCLAIM COVERAGE AND IS THEREFORE OBLIGATED TO DEFEND THE INSURED; A DISCLAIMER-NOTIFICATION MUST BE SPECIFIC AND UNAMBIGUOUS (FIRST DEPT).

The First Department, reversing Supreme Court, determined that defendant Navigators Insurance Company, did not timely notify plaintiff Titan that Navigators was disclaiming coverage. Therefore Navigators was required to defend Titan:

Because Navigators sought to deny coverage based on that policy exclusion, it was required under Insurance Law § 3420(d)(2) to provide written notice of the disclaimer as soon as reasonably possible after receiving Titan’s tender in which it sought coverage under as an additional insured … . Furthermore, the application of this exclusion was obvious and did not require an investigation … . We therefore find that Navigators’ unexplained delay in disclaiming coverage – seven months after the first tender and almost three months after the second was unreasonable as a matter of law … .

We reject Navigators’ contention that it did, in fact, disclaim coverage in an email to Titan’s insurance broker. Although the email mentioned the exclusion, it did not unequivocally state that Navigators was disclaiming coverage (Insurance Law § 3420[d][2] …). Nor did the email apprise Titan, with the high degree of specificity required, of the ground or grounds on which the disclaimer was predicated … . Titan Indus. Servs. Corp. v Navigators Ins. Co., 2024 NY Slip Op 00041, First Dept 1-4-24

Practice Point: An insurer must notify the insured it is disclaiming coverage as soon as possible and in specific, unambiguous language.

 

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THE COMPLAINT IN THIS TRAFFIC ACCIDENT CASE STATED CAUSES OF ACTION (1) FOR FRAUDULENT INDUCEMENT TO SIGN A RELEASE AND (2) FOR RESCISSION OF THE RELEASE BASED UPON UNILATERAL MISTAKE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s complaint stated causes of action for fraudulent inducement (to sign a release) and for recsission of the release based on a unilateral mistake. Plaintiff in this traffic accident case alleged the defendant insurer fraudulently induced him to sign the release by telling him the release applied only to property damage, not to personal injury. Plaintiff alleged English was his second language, he did not have his reading glasses, and he relied on the insurance agent’s representations:

“To state a [cause of action to recover damages] for fraudulent inducement, there must be a knowing misrepresentation of material present fact, which is intended to deceive another party and induce that party to act on it, resulting in injury'” … . “The plaintiff must also establish that he or she reasonably relied upon the alleged misrepresentation” … . “A party is under an obligation to read a document before signing it, and cannot generally avoid the effect of the document on the ground that he or she did not read it or know its contents” … . However, “there are situations where an instrument will be deemed void because the signer was unaware of the nature of the instrument he or she was signing, such as where the signer is illiterate, or blind, or ignorant of the alien language of the writing, and the contents thereof are misread or misrepresented to him [or her] by the other party, or even by a stranger” … .

Here, the complaint stated a cause of action by Israel to recover damages for fraudulent inducement against Progressive and Roberts by alleging, inter alia, that English is Israel’s second language, his ability to read English is limited, and he justifiably relied on the misrepresentations made by Progressive’s agent, Roberts, as to the effect of the release, which has resulted in financial damages to him … .

Moreover, the complaint stated a cause of action by Israel, in effect, to rescind the release based on a unilateral mistake against Progressive and Roberts, as the complaint alleged that Israel’s mistake was induced by fraudulent misrepresentation … . Israel v Progressive Cas. Ins. Co., 2023 NY Slip Op 06357, Second Dept 12-13-24

Practice Point: Plaintiff alleged English was his second language, he didn’t have his reading glasses, he was told the release pertained only to property damage, not personal injury, and he relied on that representation. The complaint stated causes of action for fraudulent inducement and rescission of the release based on unilateral mistake.

 

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THE UNDERWRITING GUIDELINES DID NOT SUPPORT THE UNDERWRITER’S CLAIM THAT THE LIFE INSURANCE POLICY WOULD NOT HAVE BEEN ISSUED IF THE COMPANY HAD BEEN AWARE OF PLAINTIFF’S DECEDENT’S HEART CONDITION; THEREFORE THE INSURANCE COMPANY DID NOT DEMONSTRATE, AS A MATTER OF LAW, THAT PLAINTIFF’S DECEDENT MADE A MATERIAL MISREPRESENTATION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant insurance company’s motion for summary judgment in this breach of contract action should not have been granted. The insurance company alleged plaintiff’s decedent misrepresented his medical condition when applying for the term life insurance policy eight months before his death. The insurance company failed to demonstrate, as a matter of law, that plaintiff’s decedent made a material misrepresentation:

“To establish materiality as a matter of law, an insurer must present clear and substantially uncontradicted documentation concerning its underwriting practice, such as underwriting manuals, bulletins, or rules pertaining to similar risks, which show that it would not have issued the same policy if the correct information had been disclosed in the application … . …

Although the defendant’s chief underwriter testified at his deposition that the defendant would not have issued the subject policy to the decedent at the same premium rate had he disclosed the extent of his heart conditions, the underwriting guidelines submitted by the defendant do not state that the heart conditions which the decedent failed to disclose must be assessed at a higher premium … . Ruiz v First Invs. Life Ins. Co., 2023 NY Slip Op 06269, Second Dept 12-6-23

Practice Point: Here the underwriting guidelines did not support the insurance company’s claim that it would not have issued plaintiff’s decedent’s life insurance policy had it been aware of his heart condition. Therefore the company did not demonstrate, as a matter of law, that plaintiff’s decedent made a material misrepresentation when applying for the policy.

 

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THE LIFE INSURANCE POLICY REQUIRED WRITTEN NOTICE OF ANY ASSIGNMENT OF THE POLICY; THE FAILURE TO PROVIDE WRITTEN NOTICE PRECLUDED THE ASSIGNEE FROM BRINGING A CLAIM UNDER THE POLICY AGAINST THE INSURER (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Halligan, answering a question from the Second Circuit, determined the failure to give notice of the assignment of the life insurance policy precluded the assignee from suing the insurer:

The United States Court of Appeals for the Second Circuit has asked us to determine whether, where a life insurance policy provides that “assignment will be effective upon Notice” in writing to the insurer, the failure to provide such written notice voids the assignment so that the purported assignee does not have contractual standing to bring a claim under the Policy … . … [W]e reformulate the question as follows:

Where a life insurance policy provides that ‘assignment will be effective upon notice’ in writing to the insurer, does the failure to provide such written notice deprive the purported assignee of contractual standing to bring a claim under the Policy against the insurer?

We answer the reformulated question in the affirmative. Brettler v Allianz Life Ins. Co. of N. Am.2023 NY Slip Op 05958, CtApp 11-20-23

Practice Point: Here the life insurance policy required written notice to the insurer of any assignment of the policy. The failure to provide notice precluded the assignee from bringing a claim under the policy against the insurer.

 

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HERE PETITIONERS’ HOUSE WAS DESTROYED BY FIRE AND THE COURT-ORDERED APPRAISAL OF THE AMOUNT OF THE LOSS WAS SET ASIDE THROUGH NO FAULT OF THE PETITIONERS; THE PETITIONERS WERE THEN ENTITLED TO SUE TO SEEK FULL RECOVERY UNDER THE INSURANCE POLICY; THE JUDGE SHOULD NOT HAVE ORDERED FURTHER APPRAISAL PROCEEDINGS (FOURTH DEPT). ​

The Fourth Department, reversing Supreme Court, determined that once the appraisal award was set aside through no fault of the petitioner-insureds further appraisal proceedings should not have been ordered by the judge. Petitioners’ home was destroyed by fire and the insurer valued the loss at $370,000. The petitioners then demanded an appraisal which was ordered by the court. Once the appraisal was set aside through no fault of the petitioners, the petitioners were free to bring a plenary action to sue on the insurance policy:

… [T]he court erred in remitting the appraisal to the umpire and appraisers for further deliberations. It is well settled that “after an appraisal proceeding has terminated in an award and the award has been set aside, without any fault on the part of the insured[s], [they] need not submit to any further appraisement but may sue on the policy” … . Here, it is undisputed that the court set aside the appraisal award due to errors made by the court-appointed umpire—i.e., not due to any fault of petitioners. Consequently, the court could not properly compel petitioners to participate in further appraisal proceedings … . Indeed, we note that petitioners are now entitled to pursue a plenary action in Supreme Court seeking full recovery on their insurance claim under the policy … . Matter of Stanz v New York Cent. Mut. Fire Ins. Co., 2023 NY Slip Op 05832, Fourth Dept 11-17-23

Practice Point: Here there was a court-ordered appraisal to determine the amount of the loss from the destruction of the insureds’ home by fire. The judge set aside the appraisal because of errors made by the umpire. At that point the insureds were entitled to bring a plenary action for full recovery under the fire insurance policy. The judge should not have ordered further appraisal proceedings.

 

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PLAINTIFF’S HUSBAND, THE INSURED, WAS DRIVING WHEN PLAINTIFF WAS SERIOUSLY INJURED IN A TRAFFIC ACCIDENT; PLAINTIFF MAY BE ABLE TO SHOW HER HUSBAND HAD REQUESTED COVERAGE ON HER BEHALF AND, BECAUSE THE INSURER (ALLEGEDLY) NEGLIGENTLY FAILED TO PROVIDE THE COVERAGE, THE INSURER IS OBLIGATED TO COVER HER LOSS, DESPITE HER STATUS AS A NONCLIENT (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined that the injured plaintiff might be able to show her husband (the insured) requested supplemental spousal liability (SSL) coverage on her behalf and that she was harmed by the insurer’s failure to provide it, despite her status as a nonclient. Plaintiff’s husband was driving and plaintiff was a passenger when she was seriously injured in a traffic accident:

“An insurance agent ordinarily does not owe a duty of care to a nonclient; however, where an agent’s negligence results in an insured being without coverage, the agent may be liable for damages sustained by an injured third party if the third party was the intended beneficiary of the insurance contract and ‘the bond between [the agent and the third party is] so close as to be the functional equivalent of contractual privity’ . . . The functional equivalent of privity may be found . . . where the defendants are aware that their representations are ‘to be used for a particular purpose,’ there was ‘reliance by a known party or parties in furtherance of that purpose’ and there is ‘some conduct by the defendants linking them to the party or parties and evincing [the] defendant[s’] understanding of their reliance’ ” … .

“[A] third party may sue as a beneficiary on a contract made for [its] benefit. However, an intent to benefit the third party must be shown, and, absent such intent, the third party is merely an incidental beneficiary with no right to enforce the particular contracts” … . Thus, “[p]arties asserting third-party beneficiary rights under a contract must establish (1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for [their] benefit and (3) that the benefit to [them] is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate [them] if the benefit is lost” … . Smith v NGM Ins. Co., 2023 NY Slip Op 05815, Fourth Dept 11-17-23

Practice Point: An insurer may be liable for negligently failing to provide requested coverage for a nonclient. Here, the insured, plaintiff’s husband, allegedly requested supplemental spousal liability (SSL) coverage on behalf of his wife, the injured plaintiff. The insurer, which allegedly failed to provide the requested coverage, may be liable for her loss.

 

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PURSUANT TO THE MANDATORY VICTIMS RESTITUTION ACT (MVRA), A LIEN BASED UPON A RESTITUTION ORDER IN A CRIMINAL CASE CAN BE ENFORCED BY THE PRIVATE CRIME VICTIM (SECOND DEPT).

The Second Department, reversing Supreme Court, in a comprehensive full-fledged opinion by Justice Christopher, determined that a lien based on a restitution order pursuant to the Mandatory Victims Restitution Act (MVRA) can be enforced by the crime victim. Here an insurance company (National Union), which presumably paid the restitution to the crime victim, was substituted for the victim:

This appeal provides an opportunity to examine 18 USC § 3664(m)(1)(B) of the Mandatory Victims Restitution Act of 1996 (hereinafter the MVRA), wherein we determine that a crime victim named in a restitution order who has obtained an abstract of judgment and, as in this case, has docketed and recorded that abstract in accordance with the rules of this state may enforce that lien pursuant to this state’s laws. For the reasons that follow, we hold that section 3664(m)(1)(B) provides a mechanism by which a private victim may enforce such a lien, and that the Supreme Court erred when it … determined that the victim was limited to only recording the abstract of judgment as a lien and dismissed the petition of National Union Fire Insurance Company … (hereinafter National Union) … pursuant to CPLR 404(a) and 3211(a)(7) for failure to state a cause of action. * * *

Our review of the legislative history of the MVRA … supports our conclusion that pursuant to 18 USC § 3664(m)(1)(B), once a victim named in a restitution order has obtained a lien on the property of the defendant, the victim may enforce that lien. * * *

The petition and documentary evidence demonstrated that in accordance with 18 USC § 3664(m)(1)(B), National Union obtained an abstract of judgment of the restitution order at issue from the Clerk of the United States District Court for the Southern District of New York, which was docketed with the Westchester County Clerk (see CPLR 5018[c]), and thus, had an enforceable lien on [the criminal defendant’s] property … . Therefore, the petition sufficiently alleges that National Union is a judgment creditor permitted to commence this proceeding pursuant to CPLR 5206(e). Matter of National Union Fire Ins. Co. of Pittsburgh, Pa, 2023 NY Slip Op 05503, Second Dept 11-1-23

Practice Point: A lien against a criminal defendant’s property based on a restitution order can, pursuant to the Mandatory Victims Restitution Act (MVRA), be enforced by the crime victim.

 

THE UNIVERSAL LIFE INSURANCE POLICY AT ISSUE WAS NOT SUBJECT TO INSURANCE LAW 3203(A)(2) WHICH REQUIRES A PROPORTIONAL REFUND WHEN THE INSURED DIES DURING THE PREMIUM PERIOD (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Singas, answering a certified question from the Second Department, determined that the universal life policy at issue was not subject to Insurance Law 3203(a)(2) which requires a proportional refund of a paid life insurance premium when the insured dies during the period covered by the premium. Universal life policies are substantively different from term or whole life policies. The court explained the unique aspects of universal life insurance:

Universal life insurance is distinct from term and whole life insurance. To maintain coverage under a term or whole life policy, the policyholder must pay fixed, periodic premiums. A universal life insurance policy does not have a fixed premium—instead, the policyholder can make a payment in any amount, at any time, subject to certain conditions specified in the policy. These payments are deposited in a “cash value account,” also known as a “policy account,” an interest-earning account administered by the insurer. The insurer deducts from the policy account the cost of insurance (COI), which varies from month to month based on variables including the insurer’s total exposure, any administrative fees, and other required payments from the policy account. The remaining funds in the policy account can grow tax-free over time based on an interest rate set by the insurer and can fund future deductions. Universal life insurance policyholders can typically add funds to the policy account at any time and in any amount. Policyholders often choose—but are not required—to pay a “planned premium,” which is a periodic payment often designed, but not guaranteed, to keep the policy in force. A failure to pay a planned premium does not result in termination or lapse of the policy so long as the funds in the policy account are sufficient to cover the deductions. Depending on the terms of the specific policy, the policyholder may also be able to withdraw funds or take loans against the policy value as long as sufficient funds remain to cover the deductions. Nitkewicz v Lincoln Life & Annuity Co. of N.Y., 2023 NY Slip Op 05302, CtApp 10-19-23

Practice Point: Here the universal life insurance policy was not subject to Insurance Law 3202(a)(2) which requires a proportional refund of the premium when the insured dies during the premium period.

Practice Point: The unique aspects of a universal life insurance policy versus a term or whole life policy clearly explained.

 

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PETITIONER-PEDESTRIAN ESTABLISHED THE IDENTITY OF THE DRIVER WHO STRUCK HER COULD NOT BE ASCERTAINED THROUGH REASONABLE EFFORTS; THEREFORE SHE COULD SUE THE MOTOR VEHICLE ACCIDENT INDEMNIFICATION CORPORATION (MVAIC) (FIRST DEPT).

The First Department, reversing Supreme Court, determined petitioner-pedestrian demonstrated the driver who violated the Vehicle and Traffic Law, struck her and fled the scene could not be identified. Therefore she was entitled to sue the Motor Vehicle Accident Indemnification Corporation (MVAIC). The court noted that, although petitioner relied on a hearsay police report, the report could be considered because the MVAIC also relied on it:

Petitioner alleged that on March 4, 2021, she was injured as a pedestrian in the crosswalk after a two-motor-vehicle collision between a BMW and Cadillac. The police report stated that petitioner was struck by the Cadillac after its driver disobeyed a traffic light and collided with the BMW, and the driver of the Cadillac subsequently fled from the scene by foot. The police later discovered that the Cadillac’s license plate did not match the vehicle.

… [P]etitioner proffered … a police accident report pertaining to the incident, a letter from the BMW’s insurer disclaiming coverage on the ground that its insured driver did not disobey any traffic law, and a sworn Notice of Intention to Make a Claim (Notice of Intention) attesting that the Cadillac’s driver was unknown, and the vehicle had a fake license plate. … [T]hese documents were sufficient to satisfy the requirements of Insurance Law § 5218 to commence an action against MVAIC … . Petitioner met her burden of demonstrating that the subject accident was one in which the identity of the owner and operator of the Cadillac was not ascertainable through reasonable efforts … . Although a police report is generally inadmissible as hearsay, MVAIC also relied on it in opposing the petition, and thus it may be considered in support of the Notice of Intention .. . Matter of Richardson v Motor Veh. Acc. Indem. Corp., 2023 NY Slip Op 04950, Second Dept 10-3-23

Practice Point: This decision gives some insight into the proof required to demonstrate the identity of a driver involved in an accident cannot be ascertained, clearing the way for a suit against the MVAIC.

 

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