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Cause of Action for Fraud Based Upon Alleged Misrepresentation of Insurance Coverage Not Stated

The First Department determined plaintiff had not stated a cause of action for fraud.  The fraud cause of action was based upon defendant’s alleged misrepresentation that it had procured insurance to protect plaintiff against default by the largest subcontractor on the construction project.  It was not disputed that no such insurance was procured:

…[P]laintiff’s fraud claim fails, because “merely alleging that the breach of a contract duty arose from a lack of due care will not transform a simple breach of contract into a tort”…. Plaintiff’s “subjective claims of reliance on defendants’ expertise” do not give rise to a “confidential relationship” whose “requisite high degree of dominance and reliance” existed prior to the alleged fraud…. Defendants had no advisory capacity as to plaintiff, and a special relationship of trust and confidence does not arise merely from an arm’s-length business transaction…. In any event, to maintain a claim for fraud, plaintiff must show that its reliance on an alleged misrepresentation was justifiable or reasonable…. Here, plaintiff neither inquired of the subcontractor nor of the subguard provider if the subcontractor was covered… .Moreover, “[a]n actionable fraud claim requires proof that defendant made a misrepresentation of fact which was false and known to be false”…. A defendant’s knowledge of an allegedly false representation ….must be established…, and plaintiff’s affidavit stating that “it is inconceivable that [defendants] were unaware …was insufficient to establish scienter in this case. Waterscape Resort LLC v McGovern, 2013 NY Slip Op 04709, 1st Dept, 6-20-13

 

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Significant Limitation Need Not Be Permanent to Constitute Serious Injury; Recent Physical Examination Is Not Prerequisite for Overcoming Summary Judgment

In reversing summary judgment granted to the defendant, the First Department noted that a significant limitation of use of a body function need not be permanent to constitute a serious injury within the meaning of Insurance Law 5102, and the First Department further explained that its precedent in this area should not be read to require a recent physical examination to overcome summary judgment:

…”[A] significant limitation [of use of a body function or system] need not be permanent in order to constitute a serious injury”…. Indeed, a ” permanent consequential limitation’ requires a greater degree of proof than a significant limitation’, as only the former requires proof of permanence”…. “Insurance Law § 5102(d) does not expressly set forth any temporal requirement,” although assessment of the limitation’s significance does require consideration of its duration in addition to its extent and degree…. Therefore, the lack of a recent examination, while sometimes relevant, is not dispositive by itself in determining whether a plaintiff has raised a triable issue of fact in opposing a defendant’s prima facie evidence under the “significant limitation” category.  Our decision in Townes v Harlem Group, Inc. (82 AD3d 583, 583-584 [1st Dept 2011]), should not be read to require a plaintiff to submit a recent examination as a necessary prerequisite to overcoming judgment as a matter of law in every instance of a claim under the “significant limitation” category. To the extent that the Townes Court did require a recent examination, it was due to the specific facts present in that case. Furthermore, the precedents that decision relied upon in requiring a recent examination do not specifically address the degree of proof necessary for a “significant limitation” claim as opposed to a “permanent consequential limitation” claim, instead conflating these two categories of serious injury…. Vasquez v Almanzar, 2013 NY Slip Op 04561, 1st Dept, 6-18-13

 

Excess Insurance Policies Re: Same Risk Cancel Out

In determining that two insurance policies insuring the same risk were both excess insurance policies (canceling each other out), the Fourth Department explained the relevant law as follows:

In resolving disputes between insurers, “we first look to the language of the applicable policies” …, and we note that New York law “recognize[s] the right of each insurer to rely upon the terms of its own contract with its insured”…. “[W]here there are multiple policies covering the same risk, and each generally purports to be excess to the other, the excess coverage clauses are held to cancel out each other and each insurer contributes in proportion to its [policy] limit,” unless to do so would distort the plain meaning of the policies…. By contrast, “if one party’s policy is primary with respect to the other policy, then the party issuing the primary policy must pay up to the limits of its policy before the excess coverage becomes effective”….  Utica Mutual Insurance Company…v Erie Insurance Company, 430, 4th Dept, 6-14-13

 

Breach of Duty to Defend Precludes Reliance on Policy Exclusions

In a full-fledged opinion by Judge Smith, the Court of Appeals held that “when a liability insurer has breached its duty to defend its insured, the insurer may not later rely on policy exclusions to escape its duty to indemnify the insured for a judgment against him.”  The Court wrote:

…”[A]n insurance company that has disclaimed its duty to defend “may litigate only the validity of its disclaimer.” If the disclaimer is found bad, the insurance company must indemnify its insured for the resulting judgment, even if policy exclusions would otherwise have negated the duty to indemnify. This rule will give insurers an incentive to defend the cases they are bound by law to defend, and thus to give insureds the full benefit of their bargain. It would be unfair to insureds, and would promote unnecessary and wasteful litigation, if an insurer, having wrongfully abandoned its insured’s defense, could then require the insured to litigate the effect of policy exclusions on the duty to indemnify.  K2 Investment Group, LLC v American Guarantee & Liability Insurance Company, No 106, CtApp, 6-11-13

 

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Bear Stearns Complaint Stated a Cause of Action for Indemnification and Should Not Have Been Dismissed

In a full-fledged opinion by Judge Graffeo, the Court of Appeals reversed the Appellate Division and allowed a suit by Bear Stearns against its insurers (which had denied coverage) to go forward.  In response to a Security and Exchange Commission (SEC) investigation into late trading and market timing activities, Bear Stearns agreed to pay a 160-million-dollar disgorgement fee.  Bear Stearns then sought indemnification from the defendant insurance companies.  The complaint, which had been dismissed, alleged that 140 of the 160 million constituted profits that flowed to Bear Stearns’ customers, not funds improperly acquired by Bear Stearns. The Court of Appeals determined that it could not be discerned from the SEC order alone whether or not the funds were deemed improperly acquired by Bear Stearns.  Therefore the complaint stated a cause of action:

In the context of these dismissal motions, we must assume Bear Stearns’ allegations to be true unless conclusively refuted by the relevant documentary evidence, in this case, the SEC order. Contrary to the Insurers’ position, the SEC order does not establish that the $160 million disgorgement payment was predicated on moneys that Bear Stearns itself improperly earned as a result of its securities violations. Rather, the SEC order recites that Bear Stearns’ misconduct enabled its “customers to generate hundreds of millions of dollars in profits.” Hence, at this CPLR 3211 stage, the documentary evidence does not decisively repudiate Bear Stearns’ allegation that the SEC disgorgement payment amount was calculated in large measure on the profits of others.  JP Morgan Securities, Inc v Vigilant Insurance Company, No 113, CtApp 6-11-13

 

Analysis Where Two or More Insurance Companies Insure the Same Risk and Insured

The Second Department explained the legal analysis when two or more insurance companies cover the same risk for the same insured:

“In insurance contracts the term other insurance’ describes a situation where two or more insurance policies cover the same risk in the name of, or for the benefit of, the same person”… .. “[W]here there are multiple policies covering the same risk, and each generally purports to be excess to the other, the excess coverage clauses are held to cancel out each other and each insurer contributes in proportion to its limit amount of insurance”… . This rule is inapplicable where it “clearly distort[s] the plain meaning of the terms of the policies of insurance”…. “In contrast, however, if one party’s policy is primary with respect to the other policy, then the party issuing the primary policy must pay up to the limits of its policy before the excess coverage becomes effective” … .  Murname Bldg Contrs Inc v Zurich Am Ins Co, 2013 NY Slip Op 03874, 2nd Dept, 6-5-13

 

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Erroneous Boundary Line Agreement Presents Triable Issue of Fact Re: Liability of Title Insurance Company

In reversing Supreme Court, the Second Department determined there was a triable issue of fact about whether the defendant title insurance company was liable for a defect in title (boundary line agreement) which resulted in plaintiffs owning half the property they thought they were purchasing:

…Chicago Title established, prima facie, that the defect in title fell within exclusion 3(c) of the policy, which excludes from coverage defects “resulting in no loss or damage to the insured claimant.” Chicago Title presented an affidavit from a certified real estate appraiser opining that the plaintiffs have not sustained any loss in property value as a result of the boundary line agreement. Indeed, Chicago Title’s appraiser opined that the boundary line agreement resulted in a benefit to the plaintiffs and added significant value to their property due to the government’s maintenance and nourishment of the beach. In opposition, however, the plaintiffs raised a triable issue of fact as to whether they suffered a loss or damages as a result of the defect in title. The plaintiffs submitted an affidavit of their certified real estate appraiser, who opined that the total loss to the plaintiffs of all title to the portion of their purchased premises lying to the south of the 188-foot line constituted a measurable diminution in the value of the plaintiffs’ purchase. In light of these conflicting expert opinions, there is a triable issue of fact as to whether the plaintiffs sustained a loss or damages as a result of the defect in title …. Nastasi v County of Suffolk, 2013 NY Slip Op 03824, 2nd Dept, 5-29-13

 

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Trial Court Should Have Stayed Arbitration and Held Framed-Issue Hearing to Determine Whether Another Driver Involved in Collision​

There was a collision involving a car self-insured by Hertz, the petitioner.  The respondent driver of the Hertz car alleged she collided with another car which left the scene.  Based on a description of the other vehicle and the last four digits of the license number. Hertz determined the owner, Morrison, and insurer, Travelers, of the other car.  Morrison denied involvement in the accident and Travelers denied the respondent’s property damage claim on that basis. The respondent sought supplementary uninsured motorist arbitration with Hertz.  Hertz then commenced a proceeding to temporarily stay arbitration pending a framed-issue hearing to determine if Morrison was involved in the collision.  In determining Hertz petition should have been granted, the Second Department wrote:

“The party seeking a stay of arbitration has the burden of showing the existence of sufficient evidentiary facts to establish a preliminary issue which would justify the stay”…. Thereafter, the burden is on the party opposing the stay to rebut the prima facie showing…. Where a triable issue of fact is raised, the Supreme Court, not the arbitrator, must determine it in a framed-issue hearing, and the appropriate procedure under such circumstances is to temporarily stay arbitration pending a determination of the issue …. Here, the documents submitted by Hertz in support of the petition demonstrated the existence of sufficient evidentiary facts to establish a preliminary issue justifying a temporary stay. In opposition to the petition, Morrison denied any involvement in the accident. As the evidence submitted by the parties raised a triable issue of fact as to whether Morrison’s vehicle was involved in the subject accident, the Supreme Court should have conducted a framed-issue hearing on that issue before rendering a determination on the petition … .  Matter of Hertz Corp v Holmes, 2013 NY Slip Op 03674, 2nd Dept, 5-22-13

TRAFFIC ACCIDENTS

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Whether the “Assault and Battery” Exclusion from Coverage Pertained to an Arson Is a Question of Fact Which Depends Upon the Motives of the Arsonist

A fire in plaintiff’s building left several people dead or injured.  A person was arrested and charged with arson in connection with the fire. The plaintiff brought a declaratory judgment action to determine whether the defendant insurance company was required to defend and indemnify plaintiff.  The main issue was whether the policy exclusion of damages caused by assault and battery applied. The First Department affirmed the trial court’s denial of plaintiff’s motion to dismiss the insurance company’s affirmative defenses, i.e., the assault and battery exclusion and the lack of bodily injury caused by accident or occurrence.  The First Department wrote:

Civil assault and battery are intentional acts, and the assault offenses with which the accused arsonist is charged do not include the intent to harm a specific individual (compare PJI 2d 3:2 [assault]; 3:3 [battery], with Penal Law 120.10[4] [assault in the first degree]; 120.05[6] [assault in the second degree]). Thus, assuming that the insurance policy exclusion is triggered by civil, rather than criminal, assault or battery, the critical inquiry is whether the accused arsonist, in allegedly causing the fire, intended to harm any occupant of the building. Although the determination of the criminal action is therefore not necessary to a determination of the application of the exclusion, the criminal trial may shed light on the accused arsonist’s motives, including whether he intended to harm anyone inside the building. In any event, the criminal trial may enable defendant to obtain access to evidence and witnesses that will assist in determining whether the exclusion applies. Based on representations made at oral argument, the criminal trial has been concluded and, thus, the stay should be lifted. In light of the foregoing, the motion court correctly denied plaintiff’s motion to dismiss the affirmative defenses based on the assault and battery exclusion and the lack of bodily injury caused by an accident or occurrence.  20-35 86th St Realty, LLC v Tower Ins Co of NY, 2013 NY Slip Op 03413, 1st Dept, 5-14-13

 

 

Question of Fact Raised About Whether Injury Incurred by State Trooper; Paramedic when Removing Injured Person from Crashed Car Was Covered “Occurrence” Under Trooper; Paramedic’s Supplementary Uninsured-Underinsured Motorist Policy

Plaintiff, a state trooper, licensed registered nurse and paramedic, was injured helping to remove an injured person (Williams) from a car struck by Prindle’s car. Plaintiff sued Prindle and the action was settled for the policy limit. Then plaintiff sought to recover under his own supplementary uninsured-underinsured motorist policy (hereinafter SUM) (the defendant in this case).  The defendant insurance company denied coverage, claiming plaintiff was not injured in an automobile accident.  In affirming Supreme Court’s finding that the insurance company was not entitled to summary judgment dismissing the action because the policy language allowed the interpretation plaintiff’s injury was related to the “use” of Pringle’s vehicle, the Third Department wrote:

“[SUM] coverage policies, such as the one at issue herein, apply only when an insured’s injuries are [proximately] ’caused by an accident arising out of [the underinsured] motor vehicle’s ownership, maintenance or use'”….  Under the circumstances here, Supreme Court properly concluded that defendant failed to meet  its threshold burden of demonstrating  that plaintiff’s injury was not caused by the use of Prindle’s underinsured vehicle. We reject defendant’s narrow interpretation of the SUM policy’s provision requiring  that  the  insured’s  injuries be directly caused by an accident that arose out of the use of a vehicle and defendant’s related assertion that the accident complained of here occurred only at the time of plaintiff’s injury. Construing the language of the policy liberally and resolving any ambiguity in favor of the insured …, defendant’s interpretation is contrary to the plain meaning thereof.  Kesnick v New York Central Mutual Fire Insurance Company, 514901, 3rd Dept, 5-9-13

TRAFFIC ACCIDENTS

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