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THE MAJORITY DETERMINED PLAINTIFF DID NOT TIE HIS DIMINISHED RANGE OF MOTION TO THE TRAFFIC ACCIDENT, AS OPPOSED TO HIS PRE-EXISTING CONDITIONS, AND THEREFORE PLAINTIFF DID NOT DEMONSTRATE “SERIOUS INJURY;” THE DISSENT ARGUED THE NATURE OF THE ACCIDENT (DEFENDANTS’ TRUCK REAR-ENDED PLAINTIFF’S CAR AT 45 MILES PER HOUR) SHOULD BE CONSIDERED AND DEFENDANT MUST TAKE THE PLAINTIFF AS HE OR SHE FINDS HIM (THIRD DEPT). ​

The Third Department, over a two-justice dissent, determined plaintiff did not raise a question of fact about whether he suffered serious injury within the meaning of Insurance Law 5102 in this rear-end traffic accident case. [Editor’s Note: Decisions determining whether plaintiff suffered “serious injury” within the meaning of the No-Fault Law are not covered in the New York Appellate Digest because each analysis is necessarily unique and fact-specific. This “serious injury” decision has been summarized because there is a two-justice dissent arguing (1) the nature of the accident, defendants’ truck rear-ending plaintiff’s car at 45 miles per hour, should have been considered, (2) the defendant must take the plaintiff as he or she finds him, and (3) there are questions of fact whether plaintiff’s pre-existing conditions were aggravated by the accident.]:

… [P]laintiff did not provide … objective medical evidence distinguishing his preexisting back condition from its purported exacerbation in the November 2016 accident — such as, for example, proof tying the diminished ranges of motion observed by [plaintiff’s expert] in March 2021 to the November 2016 accident rather than plaintiff’s prior degenerative back problems — or demonstrating a causal link between any exacerbation and the self-reported limitations on plaintiff’s activities for purposes of his 90/180-day claim … .

From the dissent:

The facts regarding the accident are not in dispute. Defendant Alton E. Horn was driving a 1998 Kenworth tractor trailer at a speed of 45 miles per hour when he rear-ended plaintiff. While we could find no postaccident photographs of the vehicles in the record, Horn stated that the impact bent his bumper and pushed the hood up on his tractor trailer, and plaintiff referred to his vehicle as “totaled.” Plaintiff was removed from the scene by ambulance and was administered morphine en route to the hospital. Although plaintiff was released from the hospital that night, he reported that he was bedridden for the next 10 days. During oral argument, defendants’ counsel urged us to ignore these facts attendant to the actual accident, however we could find no case law that mandates that the Court leave its common sense at the door. Simply put, the facts do matter. Finally, it is undisputed that, although plaintiff had not undergone surgery to alleviate the discomfort in his lower back before the accident, he has since.

… [E]very first-year law student is aware of the eggshell plaintiff axiom, namely that the defendant must take the plaintiff as he or she finds him, i.e., the plaintiff may recover to the extent that the accident aggravated his or her preexisting conditions … . Lemieux v Horn, 2022 NY Slip Op 05739, Second Dept 10-13-22

Practice Point: The majority concluded the plaintiff’s evidence did not link his current range of motion limitations to the traffic accident, as opposed to his pre-existing conditions. Therefore plaintiff did not demonstrate “serious injury” within the meaning of the Insurance Law. The two-justice dissent argued the nature of the accident–defendants’ truck rear-ended plaintiff’s car at 45 miles per hour–and plaintiff’s medical evidence raised a question of fact about whether plaintiff’s pre-existing conditions were aggravated by the accident.

 

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THE COMPLAINT STATED CAUSES OF ACTION FOR BREACH OF FIDUCIARY DUTY, FRAUD, CONSTRUCTIVE FRAUD AND MUTUAL MISTAKE; PLAINTIFFS-PHYSICIANS ALLEGED THE FORMS THE EMPLOYER REQUIRED THEM TO SIGN CONSENTING TO THE DISTRIBUTION (TO THE EMPLOYER) OF THE PROCEEDS OF THE DEMUTUALIZATION OF THE MEDICAL MALPRACTICE INSURER WERE INVALID (FIRST DEPT).

The Frist Department, reversing (modifying) Supreme Court, determined the complaint by physicians against their employer/malpractice-insurance-policy-administrator stated causes of action for breach of fiduciary duty, fraud and mutual mistake. The dispute centers on whether the physicians or the employer which paid the malpractice insurance premiums are/is entitled to the proceeds when the insurer (MLMIC) demutualized. The employer had the physicians sign forms consenting to distributing the proceeds to the employer. The physicians allege the consent forms are invalid:

Plaintiffs allege that the forms by which they authorized MLMIC to distribute their demutualization proceeds to defendant are invalid because defendant obtained them in breach of its fiduciary duty, by fraud, or due to mutual mistake. If these forms are invalid, then the demutualization proceeds belong to plaintiffs … .

Transactions between a fiduciary and beneficiary are voidable if the fiduciary acts in its own interest and does not fully disclose all material facts … . Defendant is alleged not only to have withheld the policyholder information statement from plaintiffs, but to have significantly misrepresented their contents for its own gain. These allegations, which are not conclusively refuted by the documentary evidence, are sufficient to survive a motion to dismiss.

Fraud is another basis for rescinding the consent forms … . Plaintiffs also properly allege constructive fraud, because they were owed a fiduciary duty by defendant and so were “warranted to . . . relax the care and vigilance they would ordinarily exercise in the circumstances” … . …

Mutual mistake “may not be invoked by a party to avoid the consequences of its own negligence” … . For the purposes of this motion to dismiss, however, it cannot be said as a matter of law that plaintiffs were negligent … . Cordaro v AdvantageCare Physicians, P.C., 2022 NY Slip Op 05267, First Dept 9-27-22

Practice Point: The complaint adequately alleged the employer, which also served at the medical malpractice insurance policy administrator, breached a fiduciary duty owed to the plaintiffs-physicians by requiring them to consent to the distribution (to the employer) of the proceeds of the demutualization of the medical malpractice insurance carrier. The complaint also sufficiently alleged fraud, constructive fraud and mutual-mistake causes of action.

 

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THE INSURED MISREPRESENTED HER HOME ADDRESS AND THE INSURERS DISCLAIMED COVERAGE; THE CONCLUSORY AFFIDAVIT SUBMITTED BY THE INSURERS WAS NOT SUPPORTED BY DOCUMENTARY EVIDENCE (UNDERWRITING MANUALS, RULES, BULLETINS) AND THEREFORE DID NOT DEMONSTRATE THE MISREPRESENTATION WAS MATERIAL (FIRST DEPT).

The First Department, reversing Supreme Court, determined the insurers which disclaimed coverage did not demonstrate the insured’s misrepresentation of her address was material. The insurers’ motion for summary judgment should not have been granted:

… [T]he insurers filed this action for a declaration of no-coverage and an injunction barring defendant medical providers from seeking any no-fault reimbursement under the claimant’s automobile insurance policy. The insurers alleged that the claimant had intentionally and materially misrepresented her home address in procuring the policy, as the proper policy address was not the Wappingers Falls address she had stated, but rather, an address in the Bronx.

The insurers submitted undisputed evidence that the claimant misrepresented her address based on her testimony at the Examination Under Oath (EUO). However, the insurers failed to establish, as a matter of law, that the alleged misrepresentation as to the correct address was a material misrepresentation. The affidavit of the insurers’ underwriter is conclusory and not supported by relevant documentary evidence such as underwriting manuals, rules, or bulletins …  Liberty Mut. Ins. Co. v Valera, 2022 NY Slip Op 05277, First Dept 9-27-22

Practice Point: To disclaim insurance coverage based upon a misrepresentation by the insured, the insurer must demonstrate the misrepresentation was material. Here, at the summary judgment stage, the insurers’ conclusory affidavit, which was not supported by underwriting manuals, roles or bulletins, was not enough.

 

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INSURANCE COVERAGE DEPENDED UPON WHETHER THE INJURED RESPONDENT RESIDED WITH HIS SON IN MAINE; RESPONDENT ALLEGED HE SPLIT HIS TIME BETWEEN RESIDING IN NEW YORK AND RESIDING WITH HIS SON; A PERSON MAY HAVE MORE THAN ONE RESIDENCE; A FRAMED-ISSUE HEARING WAS REQUIRED (FIRST DEPT).

The First Department, reversing Supreme Court, determined a framed-issue hearing was required to determine whether respondent was entitled to coverage under the uninsured/underinsured motorist (SUM) provision of respondent’s son’s policy. Whether respondent is covered depends upon whether he resides with his son. Respondent alleged he splits his time between residing in New York and residing with his son in Maine. A person may have more than one residence:

The policy contained an uninsured/underinsured motorist endorsement (SUM coverage) which defined an insured as, among other things, “1. You or any family member.” The policy defined “family member” as “a person related to you by blood, marriage or adoption who is a resident of your household.” * * *

The policy conditions the status of an insured relative on whether the relative resides with the named insured. Residency is established by a degree of permanency and an intention to remain, and a person may have more than one residence … . Here, both parties have proposed that it would be reasonable to hold a framed issue hearing, and Elliott [respondent] has raised sufficient facts to warrant one, including that he splits his time between Maine and New York, spends a portion of each year at 22 Huntress Street [Maine] where he keeps personal items and has a bedroom, furnishes the house and landscapes the yard jointly with Zachary [respondent’s son], and holds the only mortgage on the property. Matter of Travelers Home & Mar. Ins. Co. v Barowitz, 2022 NY Slip Op 05131, First Dept 9-6-22

Practice Point: Here whether the injuries to respondent were covered by an uninsured/underinsured motorist provision depended upon whether respondent resided with his son in Maine. A person may have more than one residence. Respondent alleged he resided both in New York and in Maine with his son. A hearing to was ordered to determine whether respondent in fact “resided” in both Maine and New York.

 

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PASSING REFERENCES TO DEFENDANTS’ INSURANCE COVERAGE IN THE TRAFFIC ACCIDENT CASE DID NOT WARRANT SETTING ASIDE PLAINTIFF’S VERDICT (FIRST DEPT).

The Frist Department, reversing Supreme Court, determined the passing references to defendants’ insurance coverage in this traffic accident case did not warrant setting aside plaintiff’s verdict:

Plaintiff sustained injuries … , when a livery cab in which he was a passenger collided with an SUV driven by defendant Williams. During direct examination by plaintiff’s counsel and cross-examination by Williams’s counsel, no objection was raised when Williams testified that she spoke to her “insurance company” immediately after the accident. On cross-examination, when Williams stated that she “might have asked [codefendant Agyemang] for his insurance information,” Agyemang’s counsel moved to strike. The court did not respond, and counsel made no further objection. On redirect examination, when plaintiff’s counsel asked Williams what she had done with videos of the accident, Williams replied, “I thought I sent everything to Geico.”  …

Evidence that a defendant carries liability insurance is generally inadmissible due to its potential for prejudice, as a jury’s awareness of insurance coverage might make it easier for it to render an adverse verdict against the defendant … . A passing reference to insurance, however, does not necessarily warrant reversal … . Two of the insurance references at issue were elicited by defense counsel, from his own client, and counsel lodged no objection to the reference elicited by plaintiff’s counsel. The record indicates no intention on plaintiff’s part to prompt such information … .Gbadehan v Williams, 2022 NY Slip Op 04703, First Dept 7-26-22

Practice Point: Passing references to defendants’ insurance coverage in this traffic accident case did not warrant setting aside plaintiffs’ verdict.

 

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THE ALLEGED MISPRESENTATION IN PLAINTIFF’S APPLICATION FOR CAR INSURANCE, I.E., THAT SHE LIVED IN NEW ROCHELLE AND THE CAR WOULD BE GARAGED THERE WHEN IN FACT SHE LIVED IN BROOKLYN AND THE CAR WOULD BE GARAGED THERE, WAS NOT DEMONSTRATED TO HAVE BEEN “MATERIAL” AS A MATTER OF LAW; THE INSURER HAD DENIED COVERAGE BASED UPON THE ALLEGED MISREPRESENTATION; THE INSURER’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the alleged misrepresentation in plaintiff’s application for car insurance was not demonstrated to have been “material” as a matter of law. Therefore defendant-insurer’s motion for summary judgment in this hit-and-run accident case should not have been granted. Plaintiff was alleged to have stated in her application that she lived in New Rochelle and the car would be garaged there, when in fact she lived in Brooklyn and the care would be garaged there:

The plaintiff allegedly was injured in a hit-and-run motor vehicle accident … . At the time of the accident, the plaintiff’s vehicle was insured by the defendant, Mercury Casualty Company (hereinafter Mercury). The plaintiff commenced this action to recover damages for breach of the insurance policy, alleging that Mercury breached the policy by failing to make payment on her claim under an uninsured motorists endorsement to the policy in connection with the subject accident. …Mercury moved … for summary judgment dismissing the complaint on the ground that it had no obligation to provide the plaintiff with benefits under the “fraud or misrepresentation” provision of the insurance policy. …

Mercury failed to demonstrate the materiality of the misrepresentation complained of, as a matter of law. Although Mercury submitted an affidavit of an underwriting supervisor who stated that it would have issued the plaintiff a different policy with a higher premium had the plaintiff disclosed her Brooklyn address, the underwriting guidelines submitted by Mercury do not state that it does not insure vehicles kept in Brooklyn or that policies insuring vehicles kept in Brooklyn are assessed a higher premium than those garaged in New Rochelle … . Rodriguez v Mercury Cas. Co., 2022 NY Slip Op 04656, Second Dept 7-20-22

Practice Point: To warrant a denial of coverage based on a misrepresentation in an application for insurance, the misrepresentation must be “material.” Here there was a question of fact on that question and the insurer’s motion for summary judgment should have been denied. It was alleged plaintiff stated in her application she lived in New Rochelle and the car would be garaged there, when in fact she lived in Brooklyn and the car was garaged there. The underlying incident was a hit-and-run accident.

 

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WHERE THE EMPLOYER OF A PHYSICIAN HAS PAID THE PREMIUMS FOR MEDICAL MALPRACTICE INSURANCE AND THE INSURANCE COMPANY DEMUTUALIZES, ABSENT AN AGREEMENT TO THE CONTRARY, THE PROCEEDS GO TO THE PHYSICIAN, NOT THE EMPLOYER (FIRST DEPT). ​

The First Department, reversing Supreme Court based on a recent Court of Appeals ruling, determined the proceeds from the demutualization of a medical malpractice insurer belong to the physician, not to the physician’s employer (the plaintiff here):

The Court of Appeals has recently held that “when an employer pays premiums to a mutual insurance company to obtain a policy of which its employee is the policyholder, and the insurance company demutualizes, absent contrary terms in the contract of employment, insurance policy, or separate agreement, the policyholder is entitled to the proceeds from the demutualization” … .

… [D]efendant is entitled to the demutualization proceeds. There is no evidence of any contrary terms in the contract of employment, insurance policy, or separate agreement. In fact, defendant’s employment agreement provides that “[t]he Employer agrees that it will pay or reimburse the Employee for that portion of such insurance premiums that are attributable to the period coinciding with the Term [of employment].” Plaintiff … acknowledged … that it paid the insurance premiums “as a fringe benefit to the Physician employee.” … .

It is irrelevant that plaintiff, who is not listed as the policy administrator in the policy, paid the policy premiums during the relevant period and acted as the policy administrator … . Mid-Manhattan Physician Servs., P.C. v Dworkin, 2022 NY Slip Op 04523, First Dept 7-12-22

​Similar issues and result in Sullivan v Northwell Health, Inc., 2022 NY Slip Op 04525, First Dept 7-12-22

​Practice Point: Where the employer of a physician has paid the premiums for medical malpractice insurance and the insurance company demutualizes, absent an agreement to the contrary, the proceeds go to the physician, not the employer.

 

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PLAINTIFF ALLEGED DEFENDANT INSURER BREACHED THE INSURANCE CONTRACT BY FAILING TO PAY THE FULL AMOUNT OF THE COVERAGE; THAT ALLEGATION DOES NOT SUPPORT AN ADDITIONAL CAUSE OF ACTION FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the cause of action for breach of the implied covenant of good faith and fair dealing duplicated the breach of contract cause of action and should have been dismissed. Plaintiff alleged defendant insurer failed to pay her the full amount of the supplemental uninsured motorist (SUM) coverage:

In the context of insurance contracts specifically, the implied covenant of good faith and fair dealing includes a duty on the part of the insurer ” ‘to investigate in good faith and pay covered claims’ ” … “[I]n order to establish a prima facie case of bad faith, the plaintiff must establish that the insurer’s conduct constituted a ‘gross disregard’ of the insured’s interests—that is, a deliberate or reckless failure to place on equal footing the interests of [the] insured with [the] insurer’s own interests” … .

… [T]he allegations in plaintiff’s complaint that defendant violated its duty of good faith and fair dealing are predicated solely upon the claim that defendant failed or refused to pay her the full amount of SUM coverage under the insurance policy, i.e., that defendant had breached the terms of the policy. Consequently, plaintiff failed to state a cause of action for breach of the implied duty of good faith and fair dealing … , and the court should have granted defendant’s motion insofar as it sought to dismiss that cause of action as duplicative of the breach of contract cause of action … . Brown v Erie Ins. Co., 2022 NY Slip Op 04459, Fourth Dept 7-8-22

Practice Point: In the context of an insurance policy, a cause of action for breach of the implied covenant of good faith and fair dealing must be supported by allegations of the insurer’s gross disregard of the insured’s interests, which is not demonstrated by the alleged failure to pay the full amount of the coverage (a simple breach of contract).

 

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IN THIS VEHICLE ACCIDENT CASE, PLAINTIFF ENTERED AN ARBITRATION AGREEMENT WHICH INDICATED THE AWARD WOULD BE BETWEEN $0 AND $50,000, BUT THE POLICY LIMITS WERE $100,000/300,000; THE UNILATERAL MISTAKE BY PLAINTIFF’S ATTORNEY RE: THE POLICY LIMITS WAS NOT INDUCED BY DEFENDANT OR DEFENDANT’S CARRIER, THEREFORE RESCISSION OF THE AGREEMENT WAS NOT AN AVAILABLE REMEDY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant’s motion to compel arbitration in this vehicle-accident case should have been granted. Plaintiff wanted the agreement to arbitrate rescinded because it did not reflect the actual policy limits. But the unilateral mistake by plaintiff’s attorney was not induced by the defendant because defendant’s insurance carrier had twice notified plaintiff’s attorney of the policy limits. The agreement to arbitrate set the award at between $0 and $50,000, but the policy limits were $100,000/300,000:

“Generally, a party’s unilateral mistake is a ground for rescission of a contract only where it was induced by fraud or other wrongful conduct by the other party” … . Moreover, “the equitable remedy of rescission is not available to relieve an allegedly mistaken party of the consequences of their failure to exercise ordinary care” … .

Contrary to the plaintiff’s contention, he failed to establish that the arbitration agreement was subject to the equitable remedy of rescission on the ground of unilateral mistake by his attorney regarding the policy limits … . The purported mistake in the high-low agreement at issue arose not from any fraudulent inducement by the defendant, but from the failure of the plaintiff’s attorney to exercise ordinary care under the circumstances … . Maynard v Smith, 2022 NY Slip Op 04017, Second Dept 6-22-22

Practice Point: A unilateral mistake by one party which was not induced by the other party is not a ground for rescission of a contract.

 

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THE PROPERTY-INSURANCE EXCLUSION FOR “DETERIORATION” APPLIED TO THE BULGING WALL CAUSED BY THE DETERIORATION OF BRICKS, PRECLUDING COVERAGE (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined the “deterioration” exclusion in the property insurance policy applied to a bulging wall, precluding coverage:

Defendant met its initial burden on its motion by establishing as a matter of law that plaintiff’s loss is not covered under the policy because it resulted from “deterioration,” which condition was specifically excluded from coverage, and plaintiff failed to raise an issue of fact in opposition … . Unambiguous policy provisions are to be given their plain and ordinary meaning … , and the plain meaning of the exclusion in question “was to relieve the insurer of liability when its insured sought reimbursement for costs incurred in correcting . . . deterioration of the subject [premises]” … . Here, both defendant’s expert and plaintiff’s expert opined that the wall bulged due to deterioration of the bricks from exposure to moisture and freeze-thaw cycles. The only difference was that defendant’s expert opined that the wall had been deteriorating over an extended period of time, whereas plaintiff’s expert opined that the deterioration occurred over two months. Either way, the damage was the result of deterioration, and thus the policy exclusion applies and defendant is entitled to summary judgment … . S & J Props. of Watertown, LLC v Main St. Am. Group, 2022 NY Slip Op 03837, Fourth Dept 6-9-22

Practice Point: Here the bulging wall was caused by the deterioration of bricks. The “deterioration” exclusion in the policy applied and precluded coverage.

 

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