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THE BREACH OF CONTRACT (FIRE INSURANCE POLICY) CAUSE OF ACTION ALLEGED IN THE COMPLAINT DID NOT GIVE NOTICE OF THE CLAIM THE CONTRACT SHOULD BE REFORMED BASED UPON MUTUAL MISTAKE; THEREFORE THE PLAINTIFF SHOULD NOT HAVE BEEN ALLOWED TO CONFORM THE PLEADINGS TO THE PROOF AND THE JURY SHOULD NOT HAVE BEEN ALLOWED TO CONSIDER WHETHER THE ENDORSEMENT REQUIRING A SPRINKLER SYSTEM ON THE INSURED PREMISES WAS INCLUDED IN THE POLICY BY MUTUAL MISTAKE (CT APP).

The Court of Appeals, reversing the Appellate Division, in a full-fledged opinion by Judge Rivera, determined plaintiff should not have been allowed to conform the pleadings to the proof and the jury should not have considered whether the contract, an insurance policy, should be reformed based upon mutual mistake. The complaint alleged defendant insurer breached the contract (the policy) by refusing to pay for fire damage. The insurance policy included a Protective Safeguards Endorsement (PSE) which required plaintiff to have a sprinkler system in good working order. The buildings apparently were vacant and did not have sprinkler systems. Based on testimony given at trial, plaintiff argued inclusion of the PSE was a mutual mistake and the contract (policy) should be reformed to exclude it. The jury and the appellate division so found. But the Court of Appeals held the courts should not have looked beyond the four corners of the pleadings, and the pleadings did not give notice of the reformation action:

[CPLR] Section 203 (f) requires the court to determine solely whether a plaintiff’s or a defendant’s original pleading gives notice of the transactions or occurrences underlying the proposed amendment …

To plead reformation, a plaintiff must allege sufficient facts supporting a claim of mutual mistake, meaning that “the parties have reached an oral agreement and, unknown to either, the signed writing does not express that agreement” … . Given the “heavy presumption that a deliberately prepared and executed written instrument manifests the true intention of the parties, . . . [t]he proponent of reformation must show in no uncertain terms, not only that mistake or fraud exists, but exactly what was really agreed upon between the parties” … .

In contrast, to plead a cause of action for breach of contract, a plaintiff usually must allege that: (1) a contract exists … ; (2) plaintiff performed in accordance with the contract … ; (3) defendant breached its contractual obligations … ; and (4) defendant’s breach resulted in damages … . …

The complaint … alleges that plaintiffs complied “with all of the conditions precedent and subsequent pursuant to the terms of the subject policy.” This … allegation is fatal to plaintiffs’ assertion that the complaint provides notice of the transactions or occurrences to be proved in support of a reformation claim. In fact, if anything, it suggests the opposite because, by asserting total compliance, plaintiffs necessarily disclaimed any challenge to the policy’s terms, specifically the PSE. 34-06 73, LLC v Seneca Ins. Co., 2022 NY Slip Op 06029, CtApp 10-27-22

Practice Point: Here the complaint alleged defendant insurer breached the policy by refusing to pay for fire damage. The insured buildings were vacant and did not have sprinkler systems. The policy included an endorsement requiring sprinkler systems. The insurer refused payment citing plaintiff’s failure to comply with the “sprinkler” endorsement. Based on trial evidence, plaintiff moved to conform the pleadings to the proof to include a cause of action for reformation of the contract alleging that the endorsement requiring sprinkler systems was included by mutual mistake and should be excluded from the policy. The Court of Appeals ruled the complaint did not give notice of the reformation cause of action. Therefore the jury should have been allowed to consider it. The trial verdict, reforming the contract to exclude the “sprinkler” endorsement, and the affirmance by the appellate division were reversed.

 

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A NONSCHEDULE AWARD AND A SCHEDULE AWARD ARE CALCULATED DIFFERENTLY; A NONSCHEDULE AWARD IS CALCULATED BASED UPON EARNING CAPACITY, WHICH OBVIOUSLY CEASES UPON DEATH; HERE, WHERE THE INJURED WORKER DIED FROM A CAUSE UNRELATED TO THE INJURY, THE BENEFICIARY IS THEREFORE NOT ENTITLED TO THE UNACCRUED PORTION OF THE NONSCHEDULE AWARD (CT APP).

The Court of Appeals, reversing the Appellate Division, in a full-fledged opinion by Judge Garcia, determined the unaccrued portions of a nonschedule award under Workers’ Compensation Law (WCL) section 15 (3) do not pass to the beneficiary of an injured employee who died from causes unrelated to the work injury:

WCL § 15 (3), provides for two categories of awards for injuries resulting in permanent partial disability. A “schedule loss of use” (SLU) award, provided for in section 15 (3) (a)-(u), is designed to “compensate for loss of earning power, rather than the time that an employee actually loses from work or the injury itself” … . A nonschedule award, in contrast, seeks to reimburse a claimant for earnings lost due to injury … . …

The nature of nonschedule awards, dependent on an employee’s actual earnings and the continuance of the disability, is such that there is no remaining portion of the award that can pass through to a beneficiary. …

Schedule and nonschedule awards are calculated differently, reflecting the different purposes they serve. Nonschedule awards require fact-specific, individual calculations based on the impairment of wage-earning capacity. …

More than 100 years ago, this Court urged recognition of the difference between schedule and nonschedule awards, explaining that cases “where the award is to be measured by the difference between wages and capacity [nonschedule awards] are, of course, not to be confused with those where the act prescribes a fixed and certain limit [schedule awards]” … . Matter of Green v Dutchess County BOCES, 2022 NY Slip Op 06028, CtApp 10-27-22

Practice Point: Under Workers’ Compensation Law section 15, nonschedule awards are calculated differently from schedule awards. Nonschedule awards are measured by the difference between wages and earning capacity (which ceases upon death). Therefore, after a worker dies from a cause unrelated to the injury for which the worker was being compensated by a nonschedule award, any unaccrued portion will not pass to a beneficiary. Schedule awards, on the other hand, prescribe a fixed amount with a certain limit.

 

BECAUSE PETITIONER POLICE OFFICER WAS AWARE THE DOOR COULD SLAM SHUT, THE FACT THAT THE DOOR DID SLAM SHUT CRUSHING HER FINGER WAS NOT A COMPENSABLE “UNEXPECTED” “ACCIDENT” PURSUANT TO THE RETIREMENT AND SOCIAL SECURITY LAW; STRONG DISSENTING OPINION (CT APP).

The Court of Appeals affirmed the denial of disability benefits on the ground the heavy door blowing shut on petitioner’s finger was not an “accident” within the meaning of the Retirement and Social Security Law. The affirmance is a brief memorandum decision. The dissent by Judge Wilson is a full-fledged opinion. The majority noted that the petitioner was aware the door slammed shut. The event was not “unexpected” and therefore was not a compensable “accident:”

An ” ‘injury which occurs without an unexpected event as the result of activity undertaken in the performance of ordinary employment duties, considered in view of the particular employment in question, is not an accidental injury’ ” … .

Petitioner conceded that she knew that the heavy metal door slammed automatically and that on the day of the injury her movements were intended to avoid that quick and forceful closure. While the known condition may be a risk of the work site, it cannot be the cause of an accident compensable under Retirement and Social Security Law § 363. …​

From the dissent:

Rosa Rizzo worked for the Port Authority of New York and New Jersey as a police officer. On a cold February day, she trudged through the sleet and cold winds at the Lincoln Tunnel to tend to an ailing woman, staying with her until an ambulance arrived. Once it arrived, Officer Rizzo gathered the names of the parties and witness testimony and then headed towards the heated MTA booth so she could write her report. She had used the booth before and knew that its door could swing closed, but she had never heard of anyone being injured by it. As she squeezed into the booth, however, a violent gust of wind blew the 80 to 100 pound door shut, crushing her right index finger and permanently disabling her from returning to her to a full duty position. Matter of Rizzo v DiNapoli, 2022 NY Slip Op 06027, CtApp 10-27-22

Practice Point: In order for an injury to be compensable under the Retirement and Social Security Law it must be the result of an “unexpected” event. Here petitioner was aware the door could slam shut and took steps to avoid injury, but the door crushed her finger. That was not a compensable “accident.” There was a strong dissenting opinion.

 

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THE INTERSATE COMPACT ON THE PLACEMENT OF CHILDREN (ICPC) APPLIES ONLY TO PLACEMENT IN FOSTER CARE OR PLACEMENT RELATED TO ADOPTION; THEREFORE THE ICPC DID NOT APPLY HERE WHERE FATHER, A NORTH CAROLINA RESIDENT, SOUGHT CUSTODY OF THE CHILD; NORTH CAROLINA, APPLYING THE ICPC, DID NOT APPROVE PLACEMENT WITH FATHER; THE APPELLATE DIVISION’S DENIAL OF FATHER’S CUSTODY PETITION ON THAT GROUND WAS REVERSED (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Cannataro, resolving a conflict between Second and First Departments, determined the Interstate Compact on the Placement of Children (ICPC), which requires that a state approve the placement of a child from another sate, applies only to placement in foster care or adoption, and not, as here, placement with a parent. In this case, the child was in foster care in New York and father, a North Carolina resident, sought custody. Applying the ICPC, North Carolina did not approve placement with father in North Carolina, and the New York courts denied father’s custody petition on that ground. The Court of Appeals held placement with father did not trigger the application of the ICPC:

By its terms, the ICPC governs the out-of-state “placement” of children “in foster care or as a preliminary to possible adoption” (Social Services Law § 374-a [1] [art III] [a] & [b]). The language of the statute thus unambiguously limits its applicability to cases of placement for foster care or adoption—which are substitutes for parental care that are not implicated when custody of the child is granted to a noncustodial parent. * * *

Although the ICPC does not apply to placement with a parent, the Family Court Act contains other effective means to ensure the safety of a child before awarding custody to an out-of-state parent. Family Court retains jurisdiction over custody proceedings and has a broad array of powers under the Family Court Act to ensure a child’s safety. Matter of D.L. v S.B., 2022 NY Slip Op 05940, CtApp 10-25-22

Practice Point: The Interstate Compact on the Placement of Children (ICPC) applies only to foster-care placement and adoption-related placement in another state. The ICPC, therefore, did not apply here where father, a North Carolina resident, sought custody of the child, who was in foster care in New York. Applying the ICPC, North Carolina did not approve placement with father and father’s New York custody petition was improperly denied on that ground.

 

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CIVIL SERVICE LAW SECTION 71 ALLOWS THE CITY TO TERMINATE AN EMPLOYEE WHO WAS INJURED ON THE JOB AND IS UNABLE TO RETURN TO WORK AFTER A YEAR; THE PROCEDURE FOR TERMINATING SUCH AN EMPLOYEE IS SUBJECT TO THE COLLECTIVE BARGAINING REQUIREMENT OF THE TAYLOR LAW (CIVIL SERVICE LAW SECTION 200 ET SEQ) (CT APP).

The Court of Appeals, in a full-fledged opinion by Justice Troutman, reversing the Second Department, determined the city was required to engage in collective bargaining with the union to agree on the procedure for terminating an employee (here a firefighter) who was injured on the job and has not returned to work after a year:

Does the Taylor Law (Civil Service Law § 200 et seq.) require a municipality to engage in collective bargaining over the procedures for terminating municipal employees after they have been absent from work for more than a year due to an injury sustained in the line of duty? We hold that collective bargaining is required. * * *

“[W]here an employee has been separated from the service by reason of a disability resulting from occupational injury or disease as defined in the work[ers’] compensation law, [the employee] shall be entitled to a leave of absence for at least one year . . . ” (Civil Service Law § 71). * * *

Section 71 [grants] an employee with a work-related disability a leave of absence of up to one year and conditional reinstatement—even after that year has passed—while allowing the employer to fill the position if it chooses to terminate the employee.

… “[T]here is no ‘plain’ and ‘clear’ evidence that the Legislature intended” to foreclose from mandatory bargaining the procedures for terminating employees covered by the statute … . Both the language and legislative history of the section are silent on the issue of collective bargaining … . …

… [I]nasmuch as section 71 does not reference pretermination procedures at all, the statute plainly leaves room for the City and the Union to negotiate those procedures. Matter of City of Long Beach v New York State Pub. Empl. Relations Bd., 2022 NY Slip Op 05939, CtApp 10-25-22

Practice Point: The procedure for terminating (pursuant to Civil Service Law 71) a firefighter who was injured on the job and was not able to return to work after a year is subject to the collective bargaining requirement of the Taylor Law (Civil Service Law Section 200 et seq).

 

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THE DEFENDANT WAS REPRESENTED AT TRIAL BUT REPRESENTED HIMSELF IN PRETRIAL PROCEEDINGS; THE JUDGE NEVER ADEQUATELY EXPLAINED THE RISKS OF REPRESENTING ONESELF OR THE DIFFERENCE BETWEEN AN ATTORNEY ACTING AS A “LEGAL ADVISOR” TO THE DEFENDANT AND AN ATTORNEY WHO “REPRESENTS” THE DEFENDANT; CONVICTION REVERSED AND MATTER REMITTED TO REPEAT PRETRIAL PROCEEDINGS (CT APP).

​The Court of Appeals, in a full-fledged opinion by Judge Troutman, reversing the appellate division, determined the judge never adequately explained to the defendant the risks associated with representing himself, and the judge did not explain the difference between an attorney who acts as a “legal advisor” to the defendant as opposed to an attorney who “represents” the defendant. Although the defendant was represented at trial, he was not represented during much of the pretrial proceedings. The matter was remitted to repeat the pretrial proceedings:

… [T]he court’s record exploration of the issue did not warn defendant of the risks of proceeding pro se or apprise him of the importance of a lawyer in the adversarial system, nor does the record as a whole demonstrate that defendant effectively waived his right to counsel. Initially, the court conducted no discussion whatsoever of these issues before stating that defendant was representing himself … . Although the court later told defendant that it was “not a great idea” to represent himself, that defendant was putting himself “in a very bad position,” and that a lawyer would have knowledge of criminal procedure that defendant did not, these brief, generalized warnings do not satisfy the requirement for a searching inquiry … . * * *

… [W]hen the court, in its discretion, permits standby counsel … , it should explain to the defendant the court’s rules regarding the role of a legal advisor or standby counsel and how that role differs from representation by an attorney. People v Baines, 2022 NY Slip Op 05919, CtApp 10-24-22

Practice Point: When a defendant seeks to represent himself, the judge must adequately explain the associated risks, as well as the difference between an attorney who acts as a “legal advisor” to the defendant and an attorney who “represents” the defendant. Here the defendant was represented at trial but not during some of the pretrial proceedings. The matter was remitted to repeat the pretrial proceedings.

 

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THE INDEMNIFICATION CLAUSE IN THE PARTNERSHIP AGREEMENT DID NOT INCLUDE “UNMISTAKABLY CLEAR” LANGUAGE INDICATING THE WAIVER OF THE “AMERICAN RULE” REQUIRING EACH PARTY TO PAY THAT PARTY’S OWN ATTORNEY’S FEES; PLAINTIFF WAS NOT ENTITLED TO ATTORNEY’S FEES ASSOCIATED WITH DEFENDANT’S UNSUCCESSFUL DISSOLUTION ACTION (CT APP).

​The Court of Appeals, in a full-fledged opinion by Judge Rivera, reversing the appellate division, determined the indemnification clause in the partnership agreement did not serve to waive the “American Rule” that each party is responsible for that party’s own attorney’s fees. The indemnification clause states: “The Partnership and the other Partners shall be indemnified and held harmless by each Partner from and against any and all claims, demands, liabilities, costs, damages, expenses and causes of action of any nature whatsoever arising out of or incidental to any act performed by a Partner which is not performed in good faith or is not reasonably believed by such Partner to be in the best interests of the Partnership and within the scope of authority conferred upon such Partner under this Agreement, or which arises out of the fraud, bad faith, willful misconduct or negligence of such Partner.” Here defendant had brought an unsuccessful dissolution action and plaintiff argued defendant was obligated to pay plaintiff’s attorney’s fees because the indemnification clause waived the American Rule:

Under the American Rule, “attorney’s fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule” … . The American Rule is intended to increase “free access to the courts” for those who would otherwise be discouraged from seeking “judicial redress of wrongs” for fear of having to pay a defendant’s attorney’s fees … . …

The Rule is straightforward enough, but in the context of private agreements to avoid the Rule, courts have had to determine the intent of vague fee-shifting language and broad indemnification provisions that do not explicitly allow for the prevailing party in an action between contracting parties to collect attorney’s fees … .. To the extent that some of these decisions presume that broadly worded indemnification provisions by their nature are intended to cover attorney’s fees in direct party actions, they deviate from this Court’s exacting standard that the agreement must contain “unmistakably clear” language of the parties’ intent to encompass such actions … . * * *

Here, the indemnification provision makes no explicit mention that partners may recoup attorney’s fees in an action on the contract. Nor is there any basis to infer the provision is limited to actions between the partners.  Sage Sys., Inc. v Liss, 2022 NY Slip Op 05918, CtApp 10-20-22

Practice Point: Unless “unmistakably clear” language in a contract indicates an one party’s agreement to pay another party’s attorney’s fees, the American Rule applies and each party pays that party’s own attorney’s fees.

 

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​ AN AMENDED REGULATION DESIGNED TO PROTECT THE INTERESTS OF LIFE-INSURANCE AND ANNUITY CONSUMERS IS NOT VOID FOR VAGUENESS AND WAS PROPERLY CRAFTED AND ISSUED BY THE NYS DEPARTMENT OF FINANCIAL SERVICES (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Singas, reversing the appellate division, determined an amended regulation designed to protect the interests of life-insurance and annuity consumers was not void for vagueness and was properly crafted and issued by the NYS Department of Financial Services (DFS):

The amendment addressed concerns that the purchase of annuities and life insurance had become increasingly complex with more products available to purchase. DFS reasoned that consumers, finding themselves more reliant on professional advice in order to understand the options available and to make purchasing decisions, had become more susceptible to producers and insurers recommending transactions that prioritized their own compensation over the consumer’s best interest … . The amendment … extended the scope of the regulation to cover both annuity and life insurance contracts, and created a new standard applicable when producers and insurers make “recommendations” to consumers. The amended regulation, which applies to both “sales transactions” and “in-force transactions” … , requires that producers, or insurers when no producer is involved, act in the “best interest of the consumer” when making a “recommendation” … .

The producer or insurer must, among other things: make “reasonable efforts” to obtain the consumer’s “suitability information”; base any recommendation “on an evaluation of the relevant suitability information” that “reflects the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use under the circumstances then prevailing”; “[o]nly [consider] the interests of the consumer . . . in making the recommendation” and not be influenced by compensation or other incentives; recommend only “suitable” transactions; and have a “reasonable basis” to believe that the consumer has been reasonably informed of the features of the policy, the potential consequences of the transactions, both favorable and unfavorable, and that the consumer would benefit from certain features of the policy and the particular policy as a whole … . Matter of Independent Ins. Agents & Brokers of N.Y., Inc. v New York State Dept. of Fin. Servs., 2022 NY Slip Op 05917, CtApp 10-20-22

Practice Point: An amended regulation designed to protect the interests of life-insurance and annuity consumers is not void for vagueness and was properly created and issued by the NYS Department of Financial Services. The amendment seeks to ensure the advice given to consumers does not place the financial compensation of the insurer ahead of the best interests of the consumer.

 

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THE ALTERNATE JURORS WERE DISCHARGED JUST PRIOR TO THE LUNCH BREAK; A PROBLEM WITH A SITTING JUROR AROSE DURING THE BREAK AND THE JUROR WAS REMOVED; DELIBERATIONS HAD NOT YET BEGUN BUT THE ALTERNATE JURORS WERE NO LONGER AVAILABLE FOR SERVICE; THE JUDGE THEREFORE SHOULD NOT HAVE RECALLED ONE OF THE ALTERNATE JURORS; NEW TRIAL ORDERED (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Garcia, reversing the appellate division and ordering a new trial, determined that once the alternate jurors were discharged they were not longer “available for service.” Therefore, the judge should not have seated one of the discharged alternate jurors after a trial juror was removed for alleged misconduct. The alternates were discharged just before the court broke for lunch. During the break, before deliberations had begun,  the problem with the sitting juror arose. The Court of Appeals noted that, had the judge waited to discharge the alternates until deliberations were about to begin, instead of before the lunch break, there would have been no need for a mistrial:

Prior to the start of deliberations in defendant’s trial, the court discharged the alternate jurors. A trial juror was subsequently challenged and ultimately removed for alleged misconduct, and the court recalled, questioned, and seated one of the discharged alternates. Seating of this discharged alternate juror was error. An alternate juror, once discharged, is no longer “available for service” as a replacement for a trial juror…. . * * *

… [W]hen the trial judge thanked the alternate jurors for their service and “excused [them] from this case,” the alternate jurors were discharged. At that point, the alternates “cease[d] to function” as jurors … and were no longer available for service under the statute. People v Murray, 2022 NY Slip Op 05916, CtApp 10-20-22

Practice Point: Once an alternate juror is discharged the alternate is no longer “available for service” and cannot be recalled even if deliberations have not yet begun.

 

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THE TWO-JUSTICE DISSENT DID NOT PRESENT A QUESTION OF LAW REVIEWABLE BY THE COURT OF APPEALS; THE ORDER DENYING SUMMARY JUDGMENT DID NOT NECESSARILY AFFECT THE FINAL JUDGMENT (CT APP).

The Court of Appeals, dismissing the appeal, in a brief memorandum decision, held that the two-justice dissent (which would normally require review by the Court of Appeals) did not present a reviewable question of law:

… [A]ppeal dismissed, with costs, upon the ground that the two-Justice dissent at the Appellate Division is not on a question of law which would be reviewable by the Court of Appeals (see CPLR 5601 [a]; 5501 [a] [1]). The dissent was predicated on an order denying partial summary judgment that did not necessarily affect the judgment from which the appeal was taken (see Bonczar v American Multi-Cinema, Inc., 38 NY3d 1023 [2022]). Shaw v City of Rochester, 2022 NY Slip Op 05197, Ct App  9-15-22

Below is the summary of Bonczar v American Multi-Cinema, Ins. (cited by the Court of Appeals in Shaw, supra):

The Court of Appeals determined the Appellate Division order denying summary judgment in this Labor Law 240(1) ladder-fall case did not “affect the final judgment” after trial. Therefore the order was not appealable to the Court of Appeals:

The 2018 Appellate Division order may be reviewed on appeal from a final paper only if, pursuant to CPLR 5501 (a), the nonfinal order “necessarily affects” the final judgment. “It is difficult to distill a rule of general applicability regarding the ‘necessarily affects’ requirement” … and “[w]e have never attempted, and we do not now attempt, a generally applicable definition” … . That said, to determine whether a nonfinal order “necessarily affects” the final judgment, in cases where the prior order “str[uck] at the foundation on which the final judgment was predicated” we have inquired whether “reversal would inescapably have led to a vacatur of the judgment” … . This is not such a case. In other cases, we have asked whether the nonfinal order “necessarily removed [a] legal issue from the case” so that “there was no further opportunity during the litigation to raise the question decided by the prior non-final order” … .

In resolving plaintiff’s summary judgment motion, the Appellate Division held that factual questions existed as to whether a statutory violation occurred and as to proximate cause, or more specifically as to whether plaintiff’s own acts or omissions were the sole proximate cause of the accident … . That nonfinal order did not remove any issues from the case. Rather, the question of proximate cause and liability was left undecided. The parties had further opportunity to litigate those issues and in fact did so during the jury trial. Bonczar v American Multi-Cinema, Inc., 2022 NY Slip Op 02835, CtApp 4-28-22

Practice Point: A nonfinal order is not appealable to the Court of Appeals unless it “affects the final judgment.” If questions of fact remain after the nonfinal order is issued, the order does not “affect the final judgment” and is not appealable. Here the nonfinal order was the Appellate Division’s denial of plaintiff’s summary judgment motion. The order left open factual questions resolved at trial. Therefore the order did not “affect the final judgment.”

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