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INSURERS MAY PROPERLY REFUSE NO-FAULT INSURANCE PAYMENTS TO A PROFESSIONAL MEDICAL SERVICE CORPORATION WHICH IS EFFECTIVELY OWNED AND CONTROLLED BY NONPHYSICIANS, THERE IS NO NEED TO DEMONSTRATE FRAUDULENT INTENT OR CONDUCT TANTAMOUNT TO FRAUD ON THE PART OF THE PROFESSIONAL CORPORATION; ANY ERROR IN ALLOWING THE JURY TO HEAR NONPARTY DEPOSITION TESTIMONY IN WHICH THE NONPARTIES REPEATEDLY ASSERTED THE FIFTH AMENDMENT PRIVILEGE AGAINST SELF-INCRIMINATION WAS HARMLESS (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Fahey, determined that the defendant insurers properly refused to make no-fault insurance payments to plaintiff professional corporation because the corporation was owned and controlled by nonphysicians. The court specifically held that fraudulent intent or conduct “tantamount to fraud” need not be demonstrated. The court noted that allowing in evidence the deposition testimony of two nonparties (nonphysicians who allegedly controlled the professional corporation), in which the Fifth Amendment privilege against self-incrimination was repeatedly asserted, if it was error (not determined), was harmless:

… [A]n insurance carrier, seeking to demonstrate that a professional service corporation engaged in corporate practices that violate Business Corporation Law § 1507, Business Corporation Law § 1508, or Education Law § 6507 (4) (c), [need not] show that the professional service corporation or its managers engaged in common-law fraud. … A corporate practice that shows “willful and material failure to abide by” licensing and incorporation statutes … may support a finding that the provider is not an eligible recipient of reimbursement under 11 NYCRR 65-3.16 (a) (12) without meeting the traditional elements of common-law fraud. * * *

While the Fifth Amendment accords an individual the privilege not to answer questions in a civil proceeding if the answers might incriminate the person in future criminal proceedings … , a witness who asserts this Fifth Amendment privilege in a civil trial is not necessarily protected from consequences in the same manner as in a criminal trial. This Court has held that, in a civil case, failure to answer questions by a witness who is a party “may be considered by a jury in assessing the strength of evidence offered by the opposite party on the issue which the witness was in a position to controvert” … . In a civil trial, “an unfavorable inference may be drawn against a party from the exercise of the privilege against self-incrimination” … . We have not previously decided whether a nonparty’s invocation of the Fifth Amendment may trigger an adverse inference instruction against a party in a civil case, and we have no occasion to do so here because any error by the trial court was harmless … . Andrew Carothers, M.D., P.C. v Progressive Ins. Co., 2019 NY Slip Op 04643, CtApp 6-11-19

 

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ANY BRADY VIOLATIONS WERE NOT “MATERIAL” IN THAT THERE WAS NO REASONABLE POSSIBILITY THE EVIDENCE WOULD HAVE CHANGED THE JURY’S VERDICT, DEFENDANT’S MOTION TO VACATE HIS CONVICTION SHOULD NOT HAVE BEEN GRANTED (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, over a dissent, reversing the Appellate Division, determined defendant’s motion to vacate his conviction based upon the People’s failure to turn over Brady material relevant to the impeachment of a key prosecution witness (JA), and the prosecutor’s failure to correct that witness’s testimony, should not have been granted. The opinion includes a detailed recitation of the evidence which can not be fairly summarized here. In a nutshell, the Court of Appeals held that any Brady violation that might have occurred, in light of the extensive impeachment evidence forcefully used by defense counsel, the violation was not “material” in that it could not have affected the verdict:

… [D]efendant brought [a] CPL 440.10 motion to vacate his conviction … . … [D]efendant asserted that the People had violated their Brady obligation by failing to turn over evidence that there was an agreement to confer a benefit on JA in exchange for his testimony at defendant’s murder trial. In addition, defendant asserted that the trial prosecutor personally intervened in JA’s burglary case by procuring his release without bail during the June 13th drug court appearance, failed to correct JA’s trial testimony to specify that she was the “DA” who participated on June 13th, and failed to correct his characterization of his performance as ‘good’ in the drug treatment program … . * * *

“To make out a successful Brady claim, a defendant must show that (1) the evidence is favorable to the defendant because it is either exculpatory or impeaching in nature; (2) the evidence was suppressed by the prosecution; and (3) prejudice arose because the suppressed evidence was material” … . In New York, where a defendant made a specific discovery request for a document, and the information was not disclosed, we measure the third prong of the materiality of the suppressed Brady material by considering whether there is a reasonable possibility that disclosure of the evidence would have changed the result of the proceedings … . In the absence of a specific request by defendant, materiality is established if there is a “reasonable probability” that the result would have been different if the evidence had been disclosed — meaning ” a probability sufficient to undermine the court’s confidence in the outcome of the trial’ ” … . * * *

In determining that a Brady violation occurred, the Appellate Division failed to do the required materiality analysis as to the suppressed information. * * *

… [T]o say that there was ample impeachment evidence at trial against the witness on multiple levels is an understatement. … [T]here is no reasonable possibility that the knowledge that the trial prosecutor was the specific ADA who stood up for the People at the June 13th appearance and that JA was still in a drug program despite additional program violations — leaving treatment and bringing cigarettes into a facility — would have changed the jury’s verdict. People v Giuca, 2019 NY Slip Op 04642, CtApp 6-11-19

 

THE STATUTORY TIMELY-DISCLAIMER REQUIREMENT OF INSURANCE LAW 3420(d)(2) DOES NOT APPLY TO OUT-OF-STATE RISK RETENTION GROUPS (RRG’S), DEFENDANT RRG, WHICH DID NOT ISSUE A TIMELY DISCLAIMER OF COVERAGE IN THE UNDERLYING PERSONAL INJURY ACTION, IS NOT BARRED FROM PRESENTING DEFENSES TO COVERAGE (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Rivera, over an extensive dissenting opinion by Judge Wilson, determined that the statutory timely disclaimer requirement of Insurance Law  3420 (d) (2) does not apply to defendant PCIC, an out-of-state risk retention group (RRG). Therefore PCIC’s failure to make a timely disclaimer of coverage in the underlying personal injury action did not bar PCIC’s coverage defenses. The central issue was one of statutory interpretation. The Court of Appeals rejected the argument that Insurance Law 2601 (a) (6), which applies to RRG’s and requires prompt “disclosure” of coverage, also requires timely “disclaimer” of coverage:

Whether PCIC’s disclaimer is regulated by the Insurance Law turns on whether the reference to an insurer’s failure “to promptly disclose coverage” in section 2601 (a) (6) includes the timely disclaimer requirement of section 3420 (d) (2). Nadkos [plaintiff] argues that section 2601 (a) (6) cites to section 3420 (d) without limitation, and thus encompasses both paragraphs (d) (1) and (d) (2). According to Nadkos, if the Legislature intended to limit section 2601 (a) (6) to a specific subparagraph of section 3420 (d), it knew how to do so … .

We reject the interpretation advocated by Nadkos, and adopted by the dissent, because the prohibition on an unfair claim settlement practice based on a failure to promptly disclose coverage encompasses the mandates of section 3420 (d) (1), not (d) (2). Nadkos, Inc. v Preferred Contrs. Ins. Co. Risk Retention Group LLC, 2019 NY Slip Op 04641, CtApp 6-11-18

 

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DEFENDANT DID NOT DEMONSTRATE AS A MATTER OF LAW THAT COKE OVENS USED IN THE MANUFACTURE OF STEEL WERE NOT PRODUCTS TRIGGERING THE DUTY TO WARN OF THE HAZARDS OF BREATHING EMISSIONS FROM THE OVENS, DEFENDANT’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Stein, over a two-judge dissent, reversing the Appellate Division, determined the defendant (Wilputte), which sold coke ovens for steel production, did not demonstrate, as a matter of law, the ovens were not “products” triggering the duty to warn. Therefore defendant’s motion for summary judgment should not have been granted (by the Appellate Division). Plaintiff’s decedent worked on top of the coke ovens and alleged breathing the toxic substances caused lung cancer. Plaintiffs alleged defendant had a duty to warn plaintiff’s decedent to use a respirator when working on the ovens. The Appellate Division had determined the coke ovens, housed in so-called “batteries,” were akin to buildings and construction of the buildings was a service, not a product:

… [D]efendant has not met its burden in showing that the coke ovens at issue are not products as a matter of law. Regardless of the alterations Bethlehem [the steel manufacturer] may have made to the scale and specifications of the battery at large, the ovens themselves served one function: the production of coke. This process was standard across all variations of coke ovens that Wilputte sold, ultimately placing the hazardous thing at issue squarely within the category of products to which liability has attached in the failure-to-warn context. …

… Wilputte was responsible for placing the ovens into the stream of commerce and that it derived financial benefit from its role in the production process. Indeed, by the time decedent began working for Bethlehem, Wilputte had sold hundreds of coke ovens to plants … . Wilputte also marketed its ovens with informational brochures showing the completed ovens and their functionality, indicating that Wilputte, not Bethlehem, was the commercial source of the product. … Although the ovens were largely assembled and completed on-site, that merely speaks to the logistical realties of the market of which Wilputte had a considerable share. …

… [T]he record supports Supreme Court’s conclusion that Wilputte was in the best position to assess the safety of the coke ovens because of its superior knowledge regarding the ovens’ intended functionality … . “A major determinant of the existence of a duty to warn” is an assessment of “whether the manufacturer is in a superior position to know of and warn against those hazards” inherent to its product … . Matter of Eighth Jud. Dist. Asbestos Litig., 2019 NY Slip Op 04640, CtApp 6-11-19

 

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DEFENDANT’S REQUEST TO REPRESENT HIMSELF WAS PROPERLY DENIED AND THERE WAS SUPPORT IN THE RECORD FOR THE EXISTENCE OF PROBABLE CAUSE TO ARREST (CT APP).

The Court of Appeals, affirming defendant’s conviction, determined the defendant’s request to proceed pro se was properly denied and there was support in the record for the existence of probable cause to arrest. The Court of Appeals did not discuss the facts. The link to the 2nd Department decision is here:

The trial court concluded—based upon, among other things, its own observations of defendant’s conduct throughout these lengthy proceedings and the testimony of defendant’s attending physician—that defendant engaged in malingering insofar as he was competent to proceed but persisted in his efforts to avoid trial. Inasmuch as defendant “engaged in conduct which would prevent the fair and orderly exposition of the issues,” we conclude that the trial court did not abuse its discretion in denying defendant’s request to proceed pro se …. Moreover, the existence of record support for the determination of the courts below that the pursuit of defendant by the police was justified by a “reasonable suspicion” of criminal activity forecloses our further review of that issue … . People v Gregory, 2019 NY Slip Op 04450, CtApp 6-6-19

 

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IN THIS COLLEGE DISCIPLINARY ACTION, THE COLLEGE’S REFUSAL OF THE STUDENT’S REQUEST FOR A THREE-HOUR ADJOURNMENT TO ALLOW HIS ATTORNEY TO ATTEND WAS AN ABUSE OF DISCRETION, NEW HEARING ORDERED (CT APP).

The Court of Appeals, reversing the Appellate Division in this college disciplinary action, determined the student’s request for a three-hour adjournment to allow his attorney to attend should have been granted. The link to the reversed 2nd Department decision is here:

… [T]he petition insofar as it sought to annul respondents’ disciplinary determination [is] granted and the matter remitted to the Appellate Division with directions remand to respondents for a new disciplinary hearing. Petitioner, a student enrolled at respondent Purchase College of the State University of New York, was accused of multiple disciplinary violations including sexual assault of another student. Petitioner requested a three-hour adjournment of his scheduled administrative hearing so that his attorney could attend the proceeding. Respondents denied this request. Under the particular circumstances of this case, we find respondents abused their discretion as a matter of law by failing to grant the requested adjournment … . Matter of Bursch v Purchase Coll. of the State Univ. of N.Y., 2019 NY Slip Op 04449, CtApp 6-6-19

 

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THE FACTUAL ALLEGATIONS IN THIS COMMON LAW DRIVING WHILE INTOXICATED CASE WERE SUFFICIENT TO ALLEGE DEFENDANT WAS THE OPERATOR OF THE VEHICLE, APPELLATE TERM REVERSED (CT APP).

The Court of Appeals, reversing the Appellate Term, determined the “factual allegations in the accusatory instrument were sufficient to support the inference that defendant was the operator of the vehicle involved in the accident and, thus, Appellate Term erroneously dismissed the accusatory instrument on that ground.” The facts of the case were not described. The Appellate Term decision is: People v Esposito (Monique) 2018 NY Slip Op 28245 Decided on August 3, 2018 Appellate Term, 2nd Department. People v Esposito, 2019 NY Slip Op 04448, CtApp 6-6-19

 

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THE DEFENSE MADE A PRIMA FACIE SHOWING THAT THE MISSING WITNESS JURY INSTRUCTION WAS APPROPRIATE, THE TRIAL COURT IMPROPERLY PLACED THE BURDEN TO DEMONSTRATE THE WITNESS’S TESTIMONY WOULD NOT BE CUMULATIVE ON THE DEFENDANT, THE PEOPLE DID NOT MEET THEIR BURDEN TO DEMONSTRATE THE TESTIMONY WOULD BE CUMULATIVE (CT APP).

The Court of Appeals, reversing defendant’s conviction, reversing the Appellate Division, in a full-fledged opinion by Judge Feinman, determined that the trial court’s analysis of the defense request for a missing witness jury instruction improperly shifted the burden to the defendant to show that the testimony would not be cumulative. The witness, Dees, was with the shooting victim and was shot himself. The witness was the first to see the shooter in a car that passed by and tried to push the shooter away when the shooter approached:

In Gonzalez [68 NY2d 424], we established the analytical framework for deciding a request for a missing witness instruction. The proponent initially must demonstrate only three things via a prompt request for the charge: (1) “that there is an uncalled witness believed to be knowledgeable about a material issue pending in the case,” (2) “that such witness can be expected to testify favorably to the opposing party,” and (3) “that such party has failed to call” the witness to testify … . The party opposing the charge can defeat the initial showing by accounting for the witness’s absence or demonstrating that the charge would not be appropriate … . “This burden can be met by demonstrating,” among other things, that “the testimony would be cumulative to other evidence” … . If the party opposing the charge meets its burden by rebutting the prima facie showing, the proponent retains the ultimate burden to show that the charge would be appropriate … . We have repeatedly reiterated Gonzalez’s specific burden-shifting analysis … , but we have never required the proponent of a missing witness charge to negate cumulativeness to meet the prima facie burden … . * * *

Given that defendant, as the proponent of the missing witness charge, met his initial burden, the People were required to rebut that showing by establishing why the charge was inappropriate. They failed to do so. The People simply asserted, without explanation, that Dees’s testimony on the issue of identification would be cumulative because “there is absolutely no indication that [Dees] would be able to provide anything that wasn’t provided by [the victim].” This conclusory argument was insufficient to satisfy the People’s burden in response to defendant’s prima facie showing … . … Dees’s testimony would not have been “trivial or cumulative”; due to inconsistencies in the victim’s descriptions of the incident and what the shooter was wearing, the issue of identification was “in sharp dispute . . . and the testimony of the only additional person who was present [during the shooting] might have made the difference” … . People v Smith, 2019 NY Slip Op 04447, CtApp 6-6-19

 

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JURY NOTE FOUND IN THE COURT FILE BY APPELLATE COUNSEL WAS, AFTER A RECONSTRUCTION HEARING, DETERMINED TO HAVE BEEN A DRAFT WHICH WAS DISCARDED BY THE JURY, AS OPPOSED TO A NOTE OF WHICH COUNSEL SHOULD HAVE BEEN NOTIFIED, THEREFORE THE PROHIBITION OF RECONSTRUCTION HEARINGS WITH RESPECT TO THE HANDLING OF JURY NOTES DID NOT APPLY (CT APP).

The Court of Appeals, over a substantive concurrence, determined, based upon a reconstruction hearing held by Supreme Court at the direction of the Appellate Division, a jury note found in the court file by appellate counsel was a draft that was discarded by the jury. Therefore the strict requirements surrounding notification of counsel of the contents of notes from the jury, and the prohibition of reconstruction hearings in that context, did not apply:

We recently held that where the record does not establish that counsel was provided meaningful notice of the contents of a substantive jury note, “the sole remedy is reversal and a new trial,” not a reconstruction hearing (People v Parker, 32 NY3d 49, 62 [2018]). However, the purpose of the reconstruction hearing at issue here was not to determine whether the court complied with the counsel notice requirements of CPL 310.30 and People v O’Rama (78 NY2d 270, 276 [1991]). Instead, the hearing was to determine whether, in the first instance, Exhibit XIV reflected a “jury . . . request [to] the court for further instruction or information” (CPL 310.30) such that those obligations were triggered. Moreover, the finding of the courts below, following the reconstruction hearing, that Exhibit XIV was a draft note that the jury discarded is supported by the record and, thus, beyond our further review. People v Meyers, 2019 NY Slip Op 03658, CtApp 5-9-19

 

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THE SCARANGELLA EXCEPTION TO STRICT PRODUCTS LIABILITY WHICH MAY APPLY WHEN A SAFETY FEATURE IS AVAILABLE BUT THE BUYER CHOOSES NOT TO PURCHASE IT, MAY BE APPLICABLE EVEN WHEN THE BUYER IS A RENTAL BUSINESS, SUPREME COURT’S AND THE APPELLATE DIVISION’S CONTRARY RULING REVERSED, NEW TRIAL ORDERED (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, over a dissenting opinion, reversing the Appellate Division and ordering a new trial, determined: (1) the so-called Scarangella exception may apply where the manufacturer sells its product to a rental business; and (2) the jury instruction misstated the law concerning a manufacturer’s liability where its product is sold to a rental business. The Scarangella case carved out an exception to strict products liability which may apply when the manufacturer has made a safety feature optional and the buyer chooses not to purchase it. Here the plaintiff was operating a Bodcat loader when he was crushed by a small tree which came into the cab. Bobcat sells a cab enclosure (“door kit”) which may have deflected the tree. The rental company, Taylor, which purchased the Bobcat and rented it to plaintiff, did not outfit the rented Bobcat with the door kit. The trial court held that the Scarangella exception is never available to a manufacturer where the product is sold to a rental company. The Court of Appeals disagreed and held the Scarangella exception can be available where a rental business is the purchaser, depending upon the evidence:

[In Scarangella] we held that a product is not defective — and a manufacturer or seller is not strictly liable for a design defect based upon a claim that optional safety equipment should have been a standard feature — when the following three conditions are met: “(1) the buyer is thoroughly knowledgeable regarding the product and its use and is actually aware that the safety feature is available; (2) there exist normal circumstances of use in which the product is not unreasonably dangerous without the optional equipment; and (3) the buyer is in a position, given the range of uses of the product, to balance the benefits and the risks of not having the safety device in the specifically contemplated circumstances of the buyer’s use of the product” … . When these elements are present, “the buyer, not the manufacturer, is in the superior position to make the risk-utility assessment, and a well-considered decision by the buyer to dispense with the optional safety equipment will excuse the manufacturer from liability” … . * * *

Having deemed Scarangella to be wholly inapplicable, neither the trial court nor the Appellate Division examined whether Bobcat raised a triable question of fact warranting a Scarangella charge. … For purposes of resolution of this appeal, it is sufficient to observe as a matter of law, based on the evidence presented at this trial, that Bobcat was not entitled to a directed verdict in its favor on the Scarangella exception. Whether a Scarangella instruction will be appropriate on retrial is a matter for the trial court to determine based on the evidence presented at that time.  Fasolas v Bobcat of N.Y., Inc., 2019 NY Slip Op 03657, CtApp 5-9-19

 

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