Friday, November 11, 2011

PerSONa Non Grata Not a Household Resident and Therefore Not an Insured Under the Father's Farmowners Policy

FARMOWNERS – "HOUSEHOLD" – RESIDENT RELATIVE – INSURED STATUS
Farm Family Cas. Ins. Co. v Nason

(4th Dept., decided 11/10/2011) 

If your adult son stayed sometimes on your property in a separate but uninsured trailer and sometimes off premises with his girlfriend, did not reside with other members of your family, and was not welcome in your home, could he be considered a member of your household for purposes of qualifying as an insured under your homeowners or farmowners insurance policy?  No, says the Appellate Division, Fourth Department.

Farm Family insured property on which Gerald Nason, Sr., had his home and a dairy business.  Under the terms of that policy, Nason's relatives were insureds only if they were residents of his "household."  Eric Pommerenck died as the result of injuries that he sustained on farm property owned by Nason while examining a hay elevator that had been offered for sale by Nason's son, Gerald R. Nason, Jr., the defendant in this declaratory judgment.  Nason Jr. did not reside exclusively on his father's residence property but also resided at times with his girlfriend at another location.  Pommerenck's estate commenced a wrongful death action against, among others, Nason Sr. and Nason Jr., and Farm Family commenced this action seeking a declaration that it owed no duty to defend or indemnify Nason Jr. in the underlying action on the ground that he was not an insured under its policy. Supreme Court, Erie County (Sedita, J.) denied Farm Family's motion for summary judgment and it appealed.

In REVERSING the lower court's order and declaring that Farm Family was not obligated to defend or indemnify Nason Jr. in the underlying wrongful death action, the Appellate Division, Fourth Department, while noting that the undefined term "household" has been characterized as being ambiguous, found that Farm Family has submitted sufficient evidence to support the conclusion that Nason Jr. was not a member of his father's household, and thus did not qualify as an "insured" under his policy with Farm Family at the time of the underlying accident:
"The term household has been characterized as ambiguous or devoid of any fixed meaning in similar contexts . . . and, as such, its interpretation requires an inquiry into the intent of the parties . . . The interpretation must reflect the reasonable expectation and purpose of the ordinary business [person] when making an insurance contract . . . and the meaning which would be given it by the average [person] . . . Moreover, the circumstances particular to each case must be considered in construing the meaning of the term" (General Assur. Co. v Schmitt, 265 AD2d 299, 300 [internal quotation marks omitted]). In addition, "the term should . . . be interpreted in a manner favoring coverage, as should any ambiguous language in an insurance policy" (Rohlin v Nationwide Mut. Ins. Co., 26 AD3d 749, 750). 

Here, plaintiff established that Nason did not consider defendant to be a member of his household, nor would he have anticipated that defendant would be afforded coverage under his insurance policy inasmuch as defendant lived separately from Nason, either in a trailer on the subject property or with a girlfriend. The trailer was not listed in the policy as an alternate residence. Furthermore, members of the Nason family testified at their respective depositions that defendant did not reside with the other members of the family and, indeed, was not welcome in the family home. Consequently, plaintiff established as a matter of law that defendant was not a member of Nason's household within the meaning of the policy (see Matter of Hartford Ins. Co. of Midwest v Casella, 278 AD2d 417, 418, lv denied 96 NY2d 710; Walburn v State Farm Fire & Cas. Co., 215 AD2d 837; cf. Korson v Preferred Mut. Ins. Co., 55 AD3d 879, 880-881), and defendants failed to raise a triable issue of fact (see generally Zuckerman v City of New York, 49 NY2d 557, 562).

Thursday, November 10, 2011

What Consitutes Prejudice to a Liability Insurer? A Default Judgment Taken Against its Insured Does.

AUTO – LATE NOTICE OF SUIT – DEFAULT JUDGMENT AGAINST INSURED – PREJUDICE
Vernet v Eveready Ins. Co.

(2nd Dept., decided 11/1/2011) 

Under certain types of New York liability insurance policies issued, renewed or modified on and after January 17, 2009, an insured's late notice of an accident or occurrence or of a related lawsuit must prejudice the insurer before it may decline coverage based on the late notice.  New York Insurance Law § 3420(a)(5) now provides that qualifying liability policies issued or delivered in New York State on or after January 17, 2009 must contain a provision
that failure to give any notice required to be given by such policy within the time prescribed therein shall not invalidate any claim made by the insured, injured person or any other claimant, unless the failure to provide timely notice has prejudiced the insurer, except as provided in paragraph four of this subsection. 
Although the policy at issue in this case was issued prior to January 17, 2009, its notice of suit condition adopted a prejudice requirement by specifying that the Eveready had no duty to provide coverage "if the failure to comply [with the policy] is prejudicial to [Eveready]."

Plaintiffs were passengers in a livery cab and allegedly sustained personal injuries when the cab was involved in an automobile accident with an individual insured by Eveready.  The accident occurred on October 15, 2000, in Brooklyn. On or about October 25, 2000, Eveready learned of the accident and opened a claims file. Thereafter, on May 29, 2001, and September 26, 2001, Eveready received letters from the plaintiffs' counsel informing it of counsel's representation of the plaintiffs. The next correspondence from the plaintiffs' counsel regarding the insured was received by Eveready on August 15, 2005, nearly five years after the accident date.  In this correspondence, counsel for plaintiffs informed Eveready that an action had been commenced against, among others, Eveready's insured, on July 9, 2003, and that a default judgment dated November 19, 2004, had been entered in that action in favor of the plaintiffs and against, among others, Eveready's insured.  Eveready disclaimed coverage on the ground that its insured had breached the insurance policy by failing to timely notify it of the commencement of an action regarding the accident.

Plaintiffs then commenced this action against Eveready pursuant to New York Insurance Law § 3420(b)(2) to obtain payment of their default judgment against Eveready's insured from Eveready.  Supreme Court, Kings County (Bunyan, J.), denied Eveready's original and renewed motions for summary judgment, and Eveready appealed.

In REVERSING the lower court's order and granting summary judgment to Eveready, the Appellate Division, Second Department, held that Eveready's support on its renewed motion for summary judgment demonstrated, as a matter of law, that notice of suit was late and that it had been prejudiced by the insured's (and the injured parties') late notice:
Here, in support of its renewed motion for summary judgment, the defendant presented prima facie proof of untimely notice via the deposition testimony and affidavit of its claims manager. The manager stated that it was not until August 15, 2005, that the defendant first learned that an action had been commenced and a default judgment entered against the insured. Additionally, as to prejudice, the defendant established that, since it was first informed of the commencement of an action against the insured more than two years after the commencement of the action, the delay constituted "late notice as a matter of law" (1700 Broadway Co. v Greater N.Y. Mut. Ins. Co., 54 AD3d 593, 593).  The defendant further demonstrated that the failure of the insured to provide notice until after a default judgment had been entered prejudiced it because it lost its right to appear and interpose an answer, thus requiring it to shoulder the burden of moving to vacate the default judgment (see American Tr. Ins. Co. v Rechev of Brooklyn, Inc., 57 AD3d 257, 259).

In opposition, the plaintiffs failed to raise a triable issue of fact. The plaintiffs' contentions amounted to unsupported, speculative, and conclusory allegations, and lacked any probative value in determining whether the defendant received timely notification of the underlying action and default judgment (see generally Paladino v Time Warner Cable of N.Y. City, 16 AD3d 646). Further, no excuse or explanation was ever posited as to the late notice.
What was plaintiffs' counsel thinking?  Or not thinking?  Having written not once, but twice, to Eveready in 2001 about the accident and plaintiffs' injuries, why didn't counsel provide a copy of the 2003 suit papers to Eveready and make sure it received timely notice of that suit?  Did counsel mistakenly believe and decide that it would be better not to tell Eveready of the lawsuit and instead obtain a default judgment against its insured before notifying Eveready of the suit?  If that was counsel's strategy, it wasn't a very good one.  Unless counsel knew that the insured had passed along copies of the suit papers to Eveready, the better course of handling would have been to provide notice of the suit directly to Eveready and give it an opportunity to defend its insured.

Wednesday, November 9, 2011

Not a Named Insured? Not Entitled to Coverage.

CGL – NAMED INSURED STATUS – REFORMATION – MUTUAL MISTAKE
South Hylan, LLC v CNA Ins. Co.

(2nd Dept., decided 11/1/2011) 

A person or entity can be entitled to coverage under a liability policy in one of three ways: (1) as a named insured; (2) as an additional insured; or (3) as an omnibus insured, qualifying as an insured by virtue of a provision in the "Who is an Insured" or other omnibus insured clause of the policy.

Plaintiffs sought defense and indemnification coverage from National Fire Insurance Company of Hartford (NFICH) for an underlying personal injury action.  NFICH declined based on the fact that plaintiffs were not named insureds on the policy under which they sought coverage (and presumably were not additional insureds or omnibus insureds either).  Plaintiffs commenced this declaratory judgment action and, among other things, sought to reform (re-write) the policy to add themselves as named insureds based on the parties' alleged mutual mistake in procuring and issuing the policy.  Supreme Court, Richmond County (Ajello, J.H.O.), denied NFICH's motion and granted plaintiffs' cross motion for summary judgment and NFICH appealed.

In REVERSING the lower court's order, the Appellate Division, Second Department, found that NFICH had demonstrated its prima facie entitlement to summary judgment by establishing that plaintiffs were not named insureds in the subject insurance policy.  The appellate court also found that plaintiffs had failed in opposition to NFICH's motion to raise a triable issue of fact as to whether reformation of the subject insurance policy was appropriate because a mutual mistake had been made as to the identity of the actual insureds.

You know what a claim like this one means, don't you?  A companion agent E&O claim.  Looks like that action is heading to trial next month. 

Tuesday, November 8, 2011

"Pending Adjuster's Review" Doesn't Toll 30-Day Pay or Deny Period for No-Fault Billing

NO-FAULT – VERIFICATION – DELAY LETTER – INSURANCE LAW § 5106(A) – 30-DAY PAY OR DENY RULE
NYU-Hospital for Joint Diseases v American Intl. Group, Inc.

(2nd Dept., decided 11/1/2011) 

You knew this already.  A delay letter stating that payment of the provider's bill was being delayed "pending adjuster's review" and "investigation" does not serve to toll the 30-day pay or deny period of New York Insurance Law § 5106(a) and 11 NYCRR § 65-3.8.  Without a timely denial of PIP benefits, the insurer was precluded from asserting that intoxication of the insured was a contributing cause of the accident and injuries.  Summary judgment for the plaintiff hospital. 

Monday, November 7, 2011

Insured's 6-Month Delay in Notifying His Insurer of Dog-Bite Incident Found Unreasonable as a Matter of Law

HOMEOWNERS – LATE NOTICE – DOG-BITE INCIDENT – NO-PREJUDICE RULE – GOOD-FAITH BELIEF IN NONLIABILITY
Zimmerman v Peerless Ins. Co.

(2nd Dept., decided 6/21/2011) 

I knew that into an 8-month hole in blogging there would be some back filling.   Here's some late notice fill. 

On October 31, 2006, while jogging in Eaton's Neck, New York, Arthur Angst allegedly was bitten by Erwin Zimmerman's unleashed dog.  Angst and Zimmerman had a brief verbal confrontation, during which Zimmerman saw blood on Angst's hand.  Zimmerman offered to pay Angst's medical expenses, but Angst declined, and the two men did not exchange contact information.  Zimmerman was aware of an incident several years before, in which his dog had "nipped" a neighbor. Within 48 hours of the incident involving Zimmerman's dog and Angst, the Suffolk County Department of Health requested the dog's vaccination records and informed Zimmerman that the dog would be restricted to Zimmerman's property.

Just over six months later, on May 8, 2008, Zimmerman was served with the summons and complaint in the underlying personal injury action. The next day, for the first time, he notified his insurer, Peerless Insurance Company, of the incident.  Zimmerman's insurance policy required that 
in case of an ... "occurrence," the "insured" will perform the following duties that apply:
Give written notice to us or our agent as soon as is practical, which sets forth: 
(1) The identity of the policy and "insured"; 
(2) Reasonably available information on the time, place and circumstances of the ... "occurrence"; and 
(3) Names and addresses of any claimants or witnesses.  
The policy defined an "occurrence" as "an accident ... which results, during the policy period, in: ... 'Bodily injury'" and "bodily injury" was defined, in relevant part, as "bodily harm."

By letter dated May 11, 2008, Peerless disclaimed coverage on the ground that Zimmerman had not complied with the notice provisions of the policy.  Zimmerman commenced this action seeking a judgment declaring that Peerless was required to defend and indemnify him in the underlying action. Following discovery, Peerless moved, and Zimmerman cross-moved, for summary judgment. Supreme Court, Suffolk County (Rebolini, J.), denied the motion and cross motion, and both parties appealed.

In REVERSING the order appealed from insofar as Peerless' motion was concerned, the Appellate Division, Second Department, held that while Peerless had established its prima facie entitlement to summary judgment on the issue of the insured's late notice, the insured had not carried his opposing burden of raising a triable issue of fact as to whether there existed a reasonable excuse for his delay in notifying Peerless of the dog-bite incident:
Here, Peerless established its prima facie entitlement to judgment as a matter of law that Zimmerman's failure to notify Peerless for six months was not based on a reasonable or good faith belief in nonliability by demonstrating that Zimmerman knew immediately that his dog allegedly bit Angst and that Angst may have been injured by the bite. Indeed, Zimmerman knew within 48 hours that a complaint had been made about the incident, even if he did not know Angst's identity. In addition, Zimmerman knew of at least one substantiated incident involving his dog prior to the incident with Angst (see Steinberg v Hermitage Ins. Co., 26 AD3d 426, 427 [2006]; C.C.R. Realty of Dutchess v New York Cent. Mut. Fire Ins. Co., 1 AD3d 304, 305 [2003]; 120 Whitehall Realty Assoc., LLC v Hermitage Ins. Corp., 40 AD3d at 721; cf. Courduff's Oakwood Rd. Gardens & Landscaping Co., Inc. v Merchants Mut. Ins. Co., 84 AD3d 717 [2011]; Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d at 597; Sputnik Rest. Corp. v United Natl. Ins. Co., 62 AD3d at 689). Consequently, the burden shifted to Zimmerman to raise a triable issue of fact as to whether there existed a reasonable excuse for his delay in notifying Peerless (see Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d at 597; Sputnik Rest. Corp. v United Natl. Ins. Co., 62 AD3d at 689). Even construing all inferences in favor of Zimmerman, he failed to raise a triable issue of fact (see Hanson v Turner Constr. Co., 70 AD3d 641, 643 [2010]; 120 Whitehall Realty Assoc., LLC v Hermitage Ins. Corp., 40 AD3d at 721; Steinberg v Hermitage Ins. Inc., 26 AD3d at 427; C.C.R. Realty of Dutchess v New York Cent. Mut. Fire Ins. Co., 1 AD3d at 305). We reject Zimmerman's argument that the policy was ambiguous as to whether he was obligated to give notice of the occurrence before learning of the possible claimant's identity (see Magistro v Buttered Bagel, Inc., 79 AD3d 822 [2010]). Accordingly, the Supreme Court erred in denying Peerless' motion for summary judgment declaring that it is not obligated to defend or indemnify Zimmerman in the underlying action. In light of this determination, the Supreme Court properly denied Zimmerman's cross motion for summary judgment.  
Because Zimmerman's policy was issued before January 17, 2009 (see Insurance Law § 3420 [c] [2] [A]), Peerless was not required to demonstrate prejudice from Zimmerman's six-month delay in notification. 

Question of Fact on Insured's Good-Faith Belief in Nonliability Staves Off Summary Judgment to Insurer on Insured's 8-Month Delayed Notice of Underlying Incident

CGL – LATE NOTICE – GOOD-FAITH BELIEF OF NONLIABILITY
Columbia Univ. Press, Inc. v Travelers Indem. Co. of Am.

(2nd Dept., decided 11/1/2011) 

Plaintiff insured's notice of a potentially covered incident was eight months delayed to its commercial liability insurer, Travelers.  Travelers disclaimed liability coverage based on the insured's late notice, and the insured commenced this declaratory judgment action.  Travelers moved for summary judgment and Supreme Court, New York County (Lefkowitz, J.), denied that motion.  Travelers appealed.

In AFFIRMING the order appealed from, the Appellate Division, Second Department, held that although Travelers had made a prima facie showing of its entitlement to summary judgment based on the insured's approximately eight-month delay in notifying Travelers of the underlying incident, in opposition to Travelers' motion, the insured raised a triable issue of fact as to whether its delay was reasonably based on a good-faith belief of nonliability, one of the judicially recognized excuses to late notice.  The appellate court's decision reads like a law digest compilation of seminal principles and case law citations on the issue of late notice to a liability insurer and who has to establish what in demonstrating such a coverage defense.

The appellate court also noted that because that policy in question was issued before January 17, 2009, Travelers could disclaim coverage when the insured failed to satisfy the notice condition, without regard to whether Travelers was prejudiced by the insured's failure to satisfy such condition.  

Food Odors from Delicatessen Do Not Constitute Pollutants Within the Meaning of the Absolute Pollution Exclusion

CGL – ABSOLUTE POLLUTION EXCLUSION – SMOKE, EXHAUST AND ODORS FROM INSURED RESTAURANT'S EXHAUST VENT – POLICY INTERPRETATION
Barney Greengrass, Inc. v. Lumbermens Mut. Cas. Co.

(2nd Cir., US Ct. Apps., decided 11/4/2011) 

Noisome odors emanating from an insured's delicatessen do not constitute "pollutants" within the meaning of the absolute pollution exclusion of a commercial general liability policy.  Affirming the District Court's order, so holds the United States Court of Appeals for the Second Circuit in this decision.

Plaintiff operated a century-old delicatessen, famously known as The Sturgeon King, on the Upper West Side of Manhattan.  A man who lived in an apartment upstairs from the restaurant sued the building owner, a co-op, which in turned impleaded the tenant that controlled the delicatessen, which in turn impleaded the deli, Lumbermens' insured.  The upstairs tenant claimed that overpowering food odors that emanated from a commercial kitchen exhaust vent underneath one his windows permeated his living room and rendered it uninhabitable.  Plaintiff tendered the fourth-party complaint to Lumbermens for defense and indemnification coverage, but Lumbermens denied coverage based on the policy's pollution exclusion, which negated coverage for
"property damage" ... arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time . . . [a]t or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured.
The policy defined “Pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapors, soot, fumes, acids, alkalis, chemicals and waste,” with “[w]aste includ[ing] materials to be recycled, reconditioned or reclaimed.

Plaintiff commenced this declaratory judgment action for coverage and moved for summary judgment.  In granting summary judgment to the insured plaintiff, the United States District Court for the Southern District of New York noted that "while the quality of plaintiff's restaurant smells may be in the nose of the beholder, defendant's 'pollution' argument -- as addressed to the odors here -- is malodorous to this Court."  Lumbermens appealed that decision to the United States Second Circuit Court of Appeals.

In AFFIRMING the judgment appealed from, the Second Circuit rejected Lumbermens' argument that the District Court judge misapplied the “common speech” and “reasonable expectations” doctrines in construing the pollution exclusion against Lumbermens:
As an initial matter, the complaint in the underlying action does not allege that the plaintiff, Theodore Bohn, was damaged by a “pollutant” or that the odors emitted from BG’s [Barney Greengrass'] exhaust vent constituted “pollution.” Instead, it alleges that Bohn “stopped using [his] living room because the odors permeating that room had become so overpowering as to make the room entirely unusable,” J.A. 135, and that he was damaged by the co-op board’s failure to address his complaints.

*  *  *  *  *

The district court reasoned that “[t]o read ‘pollution’ as encompassing ‘restaurant odors,’ as defendant urges here, would contradict ‘common speech’ and the ‘reasonable expectations of a businessperson,’ who has come to understand standard pollution exclusions as addressing environmental-type harms.” Barney Greengrass, Inc. v. Lumbermens Mut. Cas. Co., No. 09 Civ. 7697 (NRB), 2010 WL 3069560, at *7 (S.D.N.Y. July 27, 2010). On appeal, Lumbermens contends that district court misapplied the “common speech” and “reasonable expectations”doctrines on the ground that “the term ‘fumes’ contained in the Policy’s definition of ‘Pollutant’ is commonly defined as odorous.” Def. Br. 21. There is no dispute, however, that the term “odors” is not included in the policy’s definitions of “pollutants,” and the term “fumes” is undefined.  Moreover, the definitional list of “pollutants” set forth in the policy particularizes “irritant or contaminant” by reference to “smoke, vapors, soot, fumes, acids, alkalis, chemicals and waste,” App. 95, terms that connote traditional forms of environmental or industrial pollutants or contaminants. Cf. W. Alliance Ins. Co. v. Gill, 426 Mass. 115, 118 (1997) (“The exclusion should not reflexively be applied to accidents arising during the course of normal business activities simply because they involve a ‘discharge, dispersal, release or escape’ of an ‘irritant or contaminant.’”).

The cases upon which Lumbermens relies are easily distinguishable because the “odors” there constitute traditional environmental pollution to which exclusion clauses typically apply.  See, e.g., Town of Harrison v. Nat’l Union Fire Ins. Co. of Pittsburgh, 89 N.Y.2d 308, 314, 316 (1996) (pollution exclusion applied to odors from “dumping of waste materials, contaminants or pollutants”); Tri-Mun. Sewer Comm’n v. Cont’l Ins. Co., 636 N.Y.S.2d 856, 857 (2d Dep’t 1996) (pollution exclusion applied to odors from “sewage treatment plant”). In these circumstances, we conclude that Lumbermens cannot meet its burden of showing that the restaurant odors constitute “pollution” within the meaning of the exclusion, as any ambiguities must be construed against the insurer. See, e.g., Stoney Run Co. v. Prudential-LMI Commercial Ins. Co., 47 F.3d
34, 37 (2d Cir. 1995).
Lumbermens also argued that since under the New York City Administrative Code, restaurant odors in sufficiently detectable quantities could constitute “air contaminants” subject to regulation, such odors could also constitute a "pollutant" within the meaning of the policy's pollution exclusion.  In rejecting that argument, the court ruled:  
The administrative regulations upon which Lumbermens relies, however, do not pertain in any way to insurance coverage disputes, much less pollution exclusion clauses. Nor does the parties’ dispute here concern administrative liability under the Code. Therefore, Lumbermens’s attempt to apply the principles underlying a New York administrative regulation to the insurance clause here at issue is unavailing.
This is yet another example in which a court has ruled that the so-called absolute pollution exclusion of a commercial general liability policy applies only to traditional forms of environmental or industrial pollutants or contaminants and instances of traditional environmental pollution.

A De Novo Action is Not the Same as a Special Proceeding to Vacate a Master Arbitration Award of New York No-Fault Benefits

NO-FAULT – DE NOVO ACTION – INSURANCE LAW § 5106(C)
Allstate Ins. Co. v Nalbandian

(2nd Dept., decided 11/1/2011) 

After receiving a no-fault master arbitration award for more than $5,000, Allstate commenced this action for a de novo determination of the defendant's PIP claim pursuant to New York Insurance Law § 5106(c), which provides in pertinent part:
where the amount of such master arbitrator's award is five thousand dollars or greater, exclusive of interest and attorney's fees, the insurer or the claimant may institute a court action to adjudicate the dispute de novo.
De novo means from the beginning, and a de novo action relitigates all issues relevant to the disputed no-fault claim.  Believing that Allstate was seeking instead to vacate the master arbitration award, defendant counterclaimed to confirm the award and cross-moved for summary judgment, contending that the master arbitrator's award was not arbitrary and capricious.  Supreme Court, Kings County (Schack, J.), granted defendant's cross motion and Allstate appealed.

In REVERSING the lower court's order, the Appellate Division, Second Department, noted the important difference between a special proceeding to vacate an arbitration award and a de novo action to determine one's entitlement to no-fault benefits, finding that the lower court erred in overlooking or misapprehending that difference:
The Supreme Court erred in denying the plaintiff's motion for summary judgment on the complaint solely on the basis that the award of the master arbitrator was not arbitrary and capricious. The plaintiff did not seek to vacate the award of the master arbitrator, and, once the plaintiff properly invoked its right to de novo review, the issue of whether the award was arbitrary and capricious was rendered academic. For the same reason, the Supreme Court also erred in granting the defendant's cross motion to confirm the award of the master arbitrator and for summary judgment dismissing the complaint and on his counterclaims, based on the conclusion that the award was not arbitrary and capricious (see Progressive Ins. Co. v Strough, 55 AD3d 1402; Matter of Capuano v Allstate Ins. Co., 122 AD2d 138; see also Matter of Gerstein v American Tr. Ins. Co., 161 Misc 2d 57).

Sunday, November 6, 2011

It's When the Alleged Harm, Not the Alleged Negligence, Occurs that Triggers Coverage Under an Occurrence-Based Business Liability Policy

CGL – TRIGGER OF COVERAGE – OCCURRENCE – EMOTIONAL DISTRESS CLAIMS
Empire State Shipping Serv., Ltd. v Hanover Ins. Co.

(1st Dept., decided 11/1/2011) 

Interesting trigger of coverage case. The insured plaintiff allegedly mishandled a corpse, but the deceased's mother did not learn of the mishandling of her son's remains until the fall of 2005, more than two years after the plaintiff had cancelled its businessowners insurance policies with Hanover.  The mother sued the plaintiff in an underlying action, alleging in several causes of action that plaintiff's negligence cause her to suffer "severe pain and suffering, severe emotional distress and harm, financial or economic loss, including but not limited to, present and future lost wages, and other damages."  The plaintiff tendered the complaint to Hanover for coverage presumably based on the fact that its alleged negligence occurred during the period of one or more of its business liability policies with Hanover.

Hanover declined coverage because the complaint alleged harm that occurred well after the plaintiff's policies were cancelled, and the insured commenced this declaratory judgment action.  The Supreme Court, Bronx County (Edgar G. Walker, J.) granted Hanover's cross motion for summary judgment, dismissing the complaint.

In unanimously AFFIRMING the motion court's order, the Appellate Division, First Department, held:
The Businessowners Policy provides coverage for "bodily injury" but "only if" it is caused by an "occurrence" and the bodily injury "occurs during the policy period." Supreme Court properly determined that the first and second causes of action in the underlying action, which allege negligent and intentional infliction of emotional distress, do not fall within the scope of "bodily injury" because the earliest that harm is alleged to have occurred is in the fall of 2005, when the plaintiff in the underlying action learned of the alleged mishandling of her son's remains. This was over two years after plaintiff Empire cancelled its policies with defendant, effective June 20, 2003 (see Melfi v Mount Sinai Hosp., 64 AD3d 26 [2009]) .

While we agree with plaintiffs that Supreme Court should not have characterized the only damages alleged in the underlying action as emotional distress, this error was harmless because coverage would not have been triggered in any event. The only causes of action for which this error could have triggered coverage are the third and fifth causes of action for negligence and negligent misrepresentation. It is alleged that the plaintiff in the underlying action "was caused, and shall in the future be caused, to suffer severe pain and suffering, severe emotional distress and harm, financial or economic loss, including but not limited to, present and future lost wages, and other damages." While these causes of action may contain allegations that Empire was negligent during the policy period, there is no allegation that the plaintiff in the underlying action suffered "bodily injury" during the policy period.

Friday, November 4, 2011

A Provider's Timely Proof of Claim Does Not Satisfy the 30-Day Notice of Accident Requirement for New York No-Fault Benefits

NO-FAULT – 30-DAY NOTICE OF ACCIDENT REQUIREMENT – 45-DAY PROOF OF CLAIM REQUIREMENT
New York & Presbyt. Hosp. v Country Wide Ins. Co.

(Ct. Apps., decided 10/13/2011) 

Can a health care services provider, as assignee of a person injured in a motor vehicle accident, recover no-fault benefits by timely submitting the required proof of claim after the 30-day period for providing written notice of the accident has expired?  No, says the New York Court of Appeals.

Joaquin Benitez was injured in a traffic accident on July 19, 2008.  He at received medical treatment at New York and Presbyterian Hospital from that date through July 26, 2008.  On the date of his discharge, Benitez signed an Assignment of No-Fault Benefits form under which he assigned to Presbyterian "all rights, privileges and remedies to payment for health care services provided by [Presbyterian] to which [Benitez is] entitled under Article 51 (the No-Fault statute) of the Insurance Law."  Benitez and Presbyterian also executed a completed NYS Form NF-5 (i.e., a hospital facility form). Neither Benitez nor Presbyterian provided the required written notice of accident to his no-fault insurer, Country Wide Insurance Company, within 30 days of the accident as required by the New York insurance regulations (11 NYCRR 65-1.1).

On August 25, 2008, Presbyterian, as assignee of Benitez, billed Country Wide for the sum of $48,697.63. In billing Country Wide, Presbyterian submitted a number of documents, including the required proof of claim (the NF-5 form). Country Wide received the bill and other documents on August 28, 2008, 40 days after the accident. Country Wide denied Presbyterian's claim on the ground it had not received timely notice of the accident under 11 NYCRR 65-1.1, which requires an "eligible insured person" to give written notice to the insurer "in no event more than 30 days after the date of the accident."

Presbyterian brought this action against Country Wide to compel payment of no-fault benefits in the amount of its bill, plus statutory interest and attorney's fees, alleging it had provided timely notice and proof of claim under 11 NYCRR 65-1.1, which requires an insured person's assignee to submit written proof of claim no later than 45 days after the date health care services are rendered. Presbyterian and Country Wide each moved for summary judgment.

Supreme Court granted Presbyterian summary judgment, ruling that the hospital satisfied its notice obligation by timely submitting the proof of claim.  Citing 11 NYCRR 65-3.3 (d), the Appellate Division, Second Department, affirmed (71 AD3d 1009 [2d Dept 2010]), stating "[c]ontrary to the insurer's contention, the hospital's submission of a completed hospital facility form . . . within 45 days after services were rendered satisfied the written notice requirement set forth in 11 NYCRR 65-1.1."  The Court of Appeals granted Country Wide leave to appeal.

In REVERSING the Appellate Division's order, the Court of Appeals agreed with Country Wide's argument that the Appellate Division decision eviscerates the 30-day written notice of accident requirement and that the New York no-fault regulations do not contain any language which provides that submission of a proof of claim for health care services within 45 days excuses the failure to give the threshold notice of accident within 30 days of the accident. The Court rejected Presbyterian's argument that its filing of the hospital facility form within 45 days of the date services were rendered constituted both "proof of claim" and timely "notice of accident".
The "notice of accident" and "proof of claim" under 11 NYCRR 65-1.1 are independent conditions precedent to a no-fault insurer's liability (see Hospital for Joint Diseases, 9 NY3d at 317 ["These regulations require an accident victim to submit a notice of claim to the insurer as soon as practicable and no later than 30 days after an accident. Next, the injured party or the assignee (typically a hospital . . .) must submit proof of claim for medical treatment no later than 45 days after services are rendered" (9 NY3d at 317 [emphasis added] [internal citations omitted])]). By ruling that the notice of accident condition was satisfied based on the plain language of 11 NYCRR 65-3.3 (d), the Appellate Division disregarded the separate and distinct nature and purpose of these requirements. Even more troubling, such a construction effectively reads the 30-day written notice of accident requirement out of the no-fault regulations. But nothing in 11 NYCRR 65-3.3 (d) explicitly dispenses with the 30-day notice of accident requirement. Rather, 11 NYCRR 65-3.3 (d) merely provides that a NF-5 form may constitute the written notice required under the notice of accident provision.

In other words, these regulations (read alone or in tandem) cannot be interpreted to mean that a hospital/assignee's timely submission of a proof of claim for health services within 45 days of discharge of the injured person excuses the insured/assignor's failure to give the threshold notice of accident within 30 days of the accident, or that health care service providers are exempt from the written 30-day notice of accident requirement. Neither 11 NYCRR 65-1.1 nor 11 NYCRR 65-3.3 (d) contains such language. That is, while 11 NYCRR 65-3.3 (d) allows a completed hospital facility form to satisfy the written notice of accident requirement, the regulation does not provide (or suggest) that a "proof of claim" in that form filed within 45 days of treatment satisfies the 30-day notice of accident requirement where, as here, the form was submitted to Country Wide after the 30-day period has expired.

Tuesday, November 1, 2011

New York Insurance Regulation 64 (11 NYCRR Part 216) -- Updated Link


Editor's Note (02.06.14) ~~  I've updated and re-posted the document again to bring it current through January 29, 2014.  The updated version is here
 
Editor's Note (11.30.12) ~~ If you are looking for the Twelfth Amendment to Regulation 64, issued by the New York State Department of Financial Services as an emergency regulation on November 29, 2012, click HERE.

Editor's Note (10.03.12) ~~  I've updated the document to bring it current through September 21, 2012.  There may be some amendments to it soon, in which case I'll re-post the revised version.  Those who would rely on the provisions of Regulation 64 are always best to check the official version, which is available via this link.

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Back in March 2010 I posted a link to a single electronic copy of New York's Insurance Regulation 64 (11 NYCRR Part 216), which had resided on the then New York State Insurance Department's website.  That link was very, very popular ever since, generating a good deal of hits to this blog.  

Unfortunately, the recent transmogrification of the New York State Insurance and Banking Departments into the New York State Department of Financial Services has shattered all of this blog's NYS Insurance Department website links.  One would think some money could have been found even in New York's austerity budget for someone to point all old NYSID links to their new NYSDFS counterparts.  Would that have been so hard?

I'm working on restoring all broken links to Insurance Department Department of Financial Services web resources and citations on this blog.  For starters, I've created and uploaded to the filing cabinet of my own Google Site another single electronic copy of the very popular New York's Insurance Regulation 64 (11 NYCRR Part 216). You can find that electronic copy here or by clicking on its link in the New York Insurance Resources widget a bit down on the right side of this page.  I looked everywhere on the Department of Financial Services' new website for the Insurance Department's copy of Regulation 64 but alas, it wasn't there.  Imagine that -- no copy of the very regulation that proscribes unfair claims and settlement practices by insurers.  Some conspiracy theorists will likely posit that this was deliberate. 

In any event, this document now resides on a site that I control, and it claims to be current through October 21, 2011.