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NY high court rejects long-arm jurisdiction in case based upon Internet advertisement:

We have a very significant new, and pro-defendant decision from the high court in NY regarding long-arm jurisdiction based primarily Internet advertising. For context, in New York, CPLR 302(a)(1) authorizes jurisdiction over a non-domiciliary that "transacts any business" within the state. The test, however, can be difficult to apply when a commercial entity uses technology to project itself into New York to conduct business transactions but otherwise lacks an in-state physical presence. Now, the Court of Appeals again has interpreted §302(a)(1) in a non "bricks and mortar" context — that is, in a case in which the defendants were not physically present in New York and the Internet was involved. This time, in late November, in Paterno v. Laser Spine Inst., 2014 N.Y. Slip Op. 08054 (Nov. 20, 2014), the court determined that the defendants' contacts with New York were insufficient to confer long-arm jurisdiction under §302(a)(1). The decision by Associate Judge Jenny Rivera, writing for a unanimous court, undoubtedly will help clarify the long-arm jurisdiction rules in New York.

The case arose in May 2008 when Frank Paterno, a New York state resident suffering from severe back pain, went on the Internet and asserted that he discovered an advertisement for Laser Spine Institute (LSI), a surgical facility specializing in spine surgery based in Tampa, Fla. As he alleged in the lawsuit he later filed against LSI and various LSI professionals, Paterno clicked on the LSI advertisement and viewed a five minute video presentation of a testimonial from a former LSI patient and professional golfer, extolling LSI's medical services. The advertisement appeared to hold out the promise of relief for Paterno's back problems and, he alleged, he communicated with LSI by telephone and over the Internet to inquire about possible surgical procedures to alleviate his pain. After his initial inquiries in May 2008, Paterno sought a medical assessment of his condition by LSI, and sent certain magnetic resonance imaging (MRI) films of his back to LSI's Florida facility. LSI sent Paterno an email letter, describing preliminary surgical treatment recommendations and orders, based on its doctors' professional evaluation of the MRI. The letter indicated that the recommendations and suggested procedures were not final, and that Paterno would be "evaluated by [LSI] surgeons upon arrival so therefore these orders will be subject to change by the surgeon while in consultation."

Paterno contended that, in preparation for his surgery, he had several additional email contacts with LSI from June 2 through June 6, 2008 to address registration and payment issues and generally to facilitate his arrival at LSI's Florida facility. For example, Paterno asserted that he sent his completed registration and private insurance forms and engaged in correspondence with LSI related to payment arrangements to be made upon his arrival in Florida, and Paterno forwarded his blood work, which had been completed in New York, to LSI. He also said that an LSI doctor called his own New York physician and briefly discussed his scheduled surgery.

Paterno traveled from New York to Tampa on June 6 and underwent surgery at the LSI facility on June 9. Paterno alleged that he experienced extreme pain following the surgery and complained to LSI staff, who advised him that this was due to the procedure and could last for two weeks. Paterno underwent a second surgical procedure at LSI on June 11 and asserted that he again experienced severe pain afterwards. Paterno said that for two weeks following his return to New York on June 12, he contacted LSI physicians on a daily basis to discuss his medical status and to complain about his post-operative pain. Paterno asserted that LSI doctors and staff addressed his request for pain medication by calling prescriptions into local pharmacies in his home city, which he then filled. In mid-July, Paterno alleged that he still was in severe pain and that he went to New York-based physicians to discuss his medical status and the results of the out-of-state surgeries. He underwent an MRI that, according to one of his New York-based doctors, revealed the same disc herniations the doctor had observed prior to the surgery. Paterno said that, in response to his request for consultation with LSI, LSI physicians held a conference call with this New York-based doctor to discuss his condition.

According to Paterno, after further telephone and email communications with LSI, and after Paterno demanded that LSI address his condition, he returned to Florida on August 6, where he underwent a third surgery. Paterno contended that, as before, he was in severe pain following the surgery and, as before, he returned to his home in New York state days after the procedure. For approximately the next three months, until Oct. 31, 2008, Paterno claimed, he communicated daily with LSI staff via text messages, emails, and telephone calls. He also said that he spoke directly by telephone with one LSI physician regarding his back pain and headaches; that the physician discussed ways to alleviate the pain; and that the physician ordered an MRI that was performed in New York. Paterno contended that the LSI doctor also spoke by telephone with another of Paterno's New York-based doctors concerning his condition, and that when his condition did not improve, the LSI doctor told him he could return to LSI for another surgical procedure to address what appeared to be fluid accumulation from a spinal dura leak. After several consultations with New York-based doctors, Paterno said, he underwent another surgery, but this time in New York, performed by a New York-based doctor not connected with LSI.

Paterno subsequently commenced a medical malpractice action in New York against LSI and several LSI doctors. The defendants moved to dismiss for lack of personal jurisdiction. The New York Supreme Court, Westchester County, granted the motion. The Second Department affirmed in a split decision. The majority concluded that the trial court lacked personal jurisdiction over LSI and the doctors because they had not transacted business in New York within the meaning of §302(a)(1); two dissenting justices concluded that the contacts demonstrated the "purposeful creation of a continuing relationship" sufficient to establish jurisdiction under §302 (a)(1). The dispute reached the Court of Appeals.

The Court of Appeals' Decision

The court affirmed.

In its decision, the court explained that whether a non-domiciliary was transacting business within the meaning of §302(a)(1) was a fact-based determination and required a finding that the non-domiciliary's activities were purposeful and established "a substantial relationship between the transaction and the claim asserted." The court continued by observing that purposeful activities were "volitional acts" by which the non-domiciliary availed itself "of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." More than "limited contacts" were required for purposeful activities sufficient to establish that the non-domiciliary transacted business in New York, the court added. The court then explained that a non-domiciliary transacted business when, on its own initiative, the non-domiciliary projected itself into New York to engage in a "sustained and substantial transaction of business." Thus, according to the court, where a non-domiciliary sought out and initiated contact with New York, solicited business in New York, and established a continuing relationship, the non-domiciliary could be said to transact business within the meaning of §302(a)(1).

With that said, the court rejected Paterno's contention that the totality of the defendants' contacts established that LSI had conducted business in New York through its solicitation and communications related to LSI's medical treatment of Paterno. According to the court, to satisfy the "overriding criterion" necessary to establish a transaction of business within the meaning of §302(a)(1), a non-domiciliary had to commit an act by which it "purposefully" availed itself of "the privilege of conducting activities within [New York]." The court pointed out that Paterno had admitted that he was the party who had sought out and initiated contact with the defendants after viewing LSI's website. The court said that although Paterno asserted that the website informed viewers about LSI's medical services and its professional staff, he had not asserted that it "permitted direct interaction for online registration, or that it allowed for online purchase of LSI services." Rather, the court declared, the LSI website was a "[p]assive website" that merely imparted information without permitting a business transaction, which generally was "insufficient to establish personal jurisdiction." Thus, the court decided, the mere fact that Paterno viewed LSI's website in New York was "insufficient" to establish CPLR 302(a)(1) personal jurisdiction over the LSI defendants.

The court also was not persuaded by Paterno's argument that LSI was subject to the jurisdiction of New York courts because it did more than just post an online advertisement. Declaring that it was not the quantity but the quality of the contacts that mattered, the court found that LSI's contacts with Paterno were "responsive in nature, and not the type of interactions that demonstrate the purposeful availment necessary to confer personal jurisdiction over these out-of-state defendants." According to the court, after Paterno initially sought out LSI, LSI merely responded with information designed to assist Paterno in deciding whether to arrange for LSI medical services in Florida. Then, once Paterno confirmed his interest, and the initial surgery date was set, he "fully engaged with defendants" to ensure that all pre-surgical matters were completed, the court noted. Paterno's communications with LSI served his convenience, the court ruled, and failed to establish that the defendants had "avail[ed] [themselves] of the privilege of conducting activities" within New York.

The court similarly was not persuaded that the contacts between Paterno and LSI after he returned to New York following the first two Florida surgeries were sufficient to establish personal jurisdiction over the defendants, explaining that §302(a)(1) required that the cause of action arise from the non-domiciliary's actions that constituted its transaction of business. In other words, post-surgery contacts could not serve as the basis to establish the defendants' relationship with New York where Paterno was asserting a medical malpractice claim stemming from the surgeries. Moreover, the court found, the defendants' contacts with New York "at the behest of" Paterno after the first two Florida surgeries but before the third also could not be used to demonstrate that the defendants actively had projected themselves into New York.

Conclusion

For purposes of New York's long-arm jurisprudence, the court's decision in Paterno is a welcome reiteration that CPLR 302(a)(1) is not unlimited. Indeed, the court's decision should help to re-balance the jurisdictional scale for Internet-related cases, which is rather important since there are few, if any, manufacturers or other types of corporations, that do not have a website spanning essentially all states and even internationally.

 

NY high court rejects long-arm jurisdiction in a case where it was based upon Internet advertising:

There is a very significant new, and pro-defendant decision from the high court in NY regarding long-arm jurisdiction based primarily Internet advertising. For context, in New York, CPLR 302(a)(1) authorizes jurisdiction over a non-domiciliary that "transacts any business" within the state. The test, however, can be difficult to apply when a commercial entity uses technology to project itself into New York to conduct business transactions but otherwise lacks an in-state physical presence. Now, the Court of Appeals again has interpreted §302(a)(1) in a non "bricks and mortar" context — that is, in a case in which the defendants were not physically present in New York and the Internet was involved. This time, in late November, in Paterno v. Laser Spine Inst., 2014 N.Y. Slip Op. 08054 (Nov. 20, 2014), the court determined that the defendants' contacts with New York were insufficient to confer long-arm jurisdiction under §302(a)(1). The decision by Associate Judge Jenny Rivera, writing for a unanimous court, undoubtedly will help clarify the long-arm jurisdiction rules in New York.

The case arose in May 2008 when Frank Paterno, a New York state resident suffering from severe back pain, went on the Internet and asserted that he discovered an advertisement for Laser Spine Institute (LSI), a surgical facility specializing in spine surgery based in Tampa, Fla. As he alleged in the lawsuit he later filed against LSI and various LSI professionals, Paterno clicked on the LSI advertisement and viewed a five minute video presentation of a testimonial from a former LSI patient and professional golfer, extolling LSI's medical services. The advertisement appeared to hold out the promise of relief for Paterno's back problems and, he alleged, he communicated with LSI by telephone and over the Internet to inquire about possible surgical procedures to alleviate his pain. After his initial inquiries in May 2008, Paterno sought a medical assessment of his condition by LSI, and sent certain magnetic resonance imaging (MRI) films of his back to LSI's Florida facility. LSI sent Paterno an email letter, describing preliminary surgical treatment recommendations and orders, based on its doctors' professional evaluation of the MRI. The letter indicated that the recommendations and suggested procedures were not final, and that Paterno would be "evaluated by [LSI] surgeons upon arrival so therefore these orders will be subject to change by the surgeon while in consultation."

Paterno contended that, in preparation for his surgery, he had several additional email contacts with LSI from June 2 through June 6, 2008 to address registration and payment issues and generally to facilitate his arrival at LSI's Florida facility. For example, Paterno asserted that he sent his completed registration and private insurance forms and engaged in correspondence with LSI related to payment arrangements to be made upon his arrival in Florida, and Paterno forwarded his blood work, which had been completed in New York, to LSI. He also said that an LSI doctor called his own New York physician and briefly discussed his scheduled surgery.

Paterno traveled from New York to Tampa on June 6 and underwent surgery at the LSI facility on June 9. Paterno alleged that he experienced extreme pain following the surgery and complained to LSI staff, who advised him that this was due to the procedure and could last for two weeks. Paterno underwent a second surgical procedure at LSI on June 11 and asserted that he again experienced severe pain afterwards. Paterno said that for two weeks following his return to New York on June 12, he contacted LSI physicians on a daily basis to discuss his medical status and to complain about his post-operative pain. Paterno asserted that LSI doctors and staff addressed his request for pain medication by calling prescriptions into local pharmacies in his home city, which he then filled. In mid-July, Paterno alleged that he still was in severe pain and that he went to New York-based physicians to discuss his medical status and the results of the out-of-state surgeries. He underwent an MRI that, according to one of his New York-based doctors, revealed the same disc herniations the doctor had observed prior to the surgery. Paterno said that, in response to his request for consultation with LSI, LSI physicians held a conference call with this New York-based doctor to discuss his condition.

According to Paterno, after further telephone and email communications with LSI, and after Paterno demanded that LSI address his condition, he returned to Florida on August 6, where he underwent a third surgery. Paterno contended that, as before, he was in severe pain following the surgery and, as before, he returned to his home in New York state days after the procedure. For approximately the next three months, until Oct. 31, 2008, Paterno claimed, he communicated daily with LSI staff via text messages, emails, and telephone calls. He also said that he spoke directly by telephone with one LSI physician regarding his back pain and headaches; that the physician discussed ways to alleviate the pain; and that the physician ordered an MRI that was performed in New York. Paterno contended that the LSI doctor also spoke by telephone with another of Paterno's New York-based doctors concerning his condition, and that when his condition did not improve, the LSI doctor told him he could return to LSI for another surgical procedure to address what appeared to be fluid accumulation from a spinal dura leak. After several consultations with New York-based doctors, Paterno said, he underwent another surgery, but this time in New York, performed by a New York-based doctor not connected with LSI.

Paterno subsequently commenced a medical malpractice action in New York against LSI and several LSI doctors. The defendants moved to dismiss for lack of personal jurisdiction. The New York Supreme Court, Westchester County, granted the motion. The Second Department affirmed in a split decision. The majority concluded that the trial court lacked personal jurisdiction over LSI and the doctors because they had not transacted business in New York within the meaning of §302(a)(1); two dissenting justices concluded that the contacts demonstrated the "purposeful creation of a continuing relationship" sufficient to establish jurisdiction under §302 (a)(1). The dispute reached the Court of Appeals.

The Court of Appeals' Decision

The court affirmed.

In its decision, the court explained that whether a non-domiciliary was transacting business within the meaning of §302(a)(1) was a fact-based determination and required a finding that the non-domiciliary's activities were purposeful and established "a substantial relationship between the transaction and the claim asserted." The court continued by observing that purposeful activities were "volitional acts" by which the non-domiciliary availed itself "of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." More than "limited contacts" were required for purposeful activities sufficient to establish that the non-domiciliary transacted business in New York, the court added. The court then explained that a non-domiciliary transacted business when, on its own initiative, the non-domiciliary projected itself into New York to engage in a "sustained and substantial transaction of business." Thus, according to the court, where a non-domiciliary sought out and initiated contact with New York, solicited business in New York, and established a continuing relationship, the non-domiciliary could be said to transact business within the meaning of §302(a)(1).

With that said, the court rejected Paterno's contention that the totality of the defendants' contacts established that LSI had conducted business in New York through its solicitation and communications related to LSI's medical treatment of Paterno. According to the court, to satisfy the "overriding criterion" necessary to establish a transaction of business within the meaning of §302(a)(1), a non-domiciliary had to commit an act by which it "purposefully" availed itself of "the privilege of conducting activities within [New York]." The court pointed out that Paterno had admitted that he was the party who had sought out and initiated contact with the defendants after viewing LSI's website. The court said that although Paterno asserted that the website informed viewers about LSI's medical services and its professional staff, he had not asserted that it "permitted direct interaction for online registration, or that it allowed for online purchase of LSI services." Rather, the court declared, the LSI website was a "[p]assive website" that merely imparted information without permitting a business transaction, which generally was "insufficient to establish personal jurisdiction." Thus, the court decided, the mere fact that Paterno viewed LSI's website in New York was "insufficient" to establish CPLR 302(a)(1) personal jurisdiction over the LSI defendants.

The court also was not persuaded by Paterno's argument that LSI was subject to the jurisdiction of New York courts because it did more than just post an online advertisement. Declaring that it was not the quantity but the quality of the contacts that mattered, the court found that LSI's contacts with Paterno were "responsive in nature, and not the type of interactions that demonstrate the purposeful availment necessary to confer personal jurisdiction over these out-of-state defendants." According to the court, after Paterno initially sought out LSI, LSI merely responded with information designed to assist Paterno in deciding whether to arrange for LSI medical services in Florida. Then, once Paterno confirmed his interest, and the initial surgery date was set, he "fully engaged with defendants" to ensure that all pre-surgical matters were completed, the court noted. Paterno's communications with LSI served his convenience, the court ruled, and failed to establish that the defendants had "avail[ed] [themselves] of the privilege of conducting activities" within New York.

The court similarly was not persuaded that the contacts between Paterno and LSI after he returned to New York following the first two Florida surgeries were sufficient to establish personal jurisdiction over the defendants, explaining that §302(a)(1) required that the cause of action arise from the non-domiciliary's actions that constituted its transaction of business. In other words, post-surgery contacts could not serve as the basis to establish the defendants' relationship with New York where Paterno was asserting a medical malpractice claim stemming from the surgeries. Moreover, the court found, the defendants' contacts with New York "at the behest of" Paterno after the first two Florida surgeries but before the third also could not be used to demonstrate that the defendants actively had projected themselves into New York.

Conclusion

For purposes of New York's long-arm jurisprudence, the court's decision in Paterno is a welcome reiteration that CPLR 302(a)(1) is not unlimited. Indeed, the court's decision should help to re-balance the jurisdictional scale for Internet-related cases, which is rather important since there are few, if any, manufacturers or other types of corporations, that do not have a website spanning essentially all states and even internationally.

 

Florida Appellate Court says ROR Equates to Breach of Duty to Defend:

A potentially troubling new decision from the Third District Court of Appeals in Florida which facially holds that the insured has no duty to cooperate when the carrier defends under a unilateral reservation of rights. See GEICO v. Rodriguez, 39 Fla. Law Weekly D1937 (3d DCA, Sept10, 2014). In this case, the insured conditioned its acceptance of appointed counsel upon GEICO's withdrawal of its ROR. GEICO asserted that this was a breach of the insured's duty to cooperate. The court disagreed, and said some scary things in the process, such as: "[a] carrier's unilateral defense under a reservation of rights is similar to provide any defense at all in its effect on the insured. . . ." Id. at D1939. This has not been the law in Florida.

Note that this case did involve a rather protracted coverage battle between GEICO and the insured, including GEICO having filed a federal declaratory judgment action. So, these facts can be used to distinguish this case from the run-of-the-mill situation where you may find an insured trying to use this new decision to its advantage, and belligerently refusing appointed counsel for no reason at all -- and wanting his/her own counsel (at a much higher hourly rate). Nevertheless, with this decision, I would say that it is best practice by far, going forward, is to try to avoid what can be a rote and unilateral nature of the process of reserving rights -- that is, don't just shoot off an ROR which also appoints counsel, but, rather, to try to get insured's acquiescence to appointed counsel during the process. Normally, the insured will be happy that counsel is being appointed, and it doesn't have to spend its own money; so, use that motivation to get acquiescence from the insured to the appointment of your defense counsel, and have the insured counter-sign the ROR and return so that the insured's agreement is memorialized.

 

New York High Court Holds That "Differential Diagnosis" Insufficient to Pass Frye Test in Long-Term Mold Exposure Case:

We have a very new case from the Court of Appeals in NY holding that the old plaintiff treating doctor trick of basing his opinion upon a "differential diagnosis" is not sufficiently scientifically reliable to pass the Frye test in a case where the plaintiff claims respiratory injuries from long term mold exposure.

Cornell v. 360 W. 51st St. Realty, LLC.
3/27/2014
Court of Appeals
PERSONAL INJURY. TOXIC MOLD. EVIDENCE. EXPERTS. FRYE. Plaintiff, who was a tenant in the defendant's apartment building for many years, brought an action to recover damages for respiratory injuries allegedly sustained as a result of toxic mold in the basement of the building which eventually spread to her apartment one floor above. Both parties moved for summary judgment, with the key issues being whether the medical evidence established that the types of molds in the premises were associated with the types of respiratory ailments suffered by the plaintiff (general causation), and whether the plaintiff's exposure was sufficient to cause her injuries (specific causation). In moving for summary judgment, plaintiff submitted expert evidence and an affidavit from her treating physician, who relied upon a number of peer-reviewed studies and opined that the conditions in the plaintiff's apartment caused her respiratory injuries. In opposition and in support of its own cross-motion for summary judgment, the defendant contended that the opinions of the plaintiff's treating physician were inadmissible under Frye. The Supreme Court granted the defendant's motion on the ground that it was constrained by the First Department's prior holding in Fraser v. 301-52 Townhouse Corp., 57 AD3d 416 (2008), where the limited studies submitted by plaintiff's experts in that case did not establish that the types of respiratory injuries suffered by the plaintiff resulted from toxic mold. The Appellate Division reversed (4-1), holding that the opinions of plaintiff's treating physician satisfied Frye because: (1) the scientific studies he relied upon demonstrated with statistically significant results that exposure to toxic mold can cause the types of respiratory symptoms claimed by the plaintiff (general causation); and (2) he reached his conclusion on causation after completing a differential diagnosis and ruling out causes other than the toxic mold (specific causation). The Court of Appeals reverses (4-2) and grants the defendant landlord's motion for summary judgment dismissing the complaint as against it. The performance of a differential diagnosis is not, alone, a means by which "specific causation" can be established. Rather, "where an expert employs a differential diagnosis to rule out other potential causes for the injury at issue, he must also rule in the suspected cause, and do so using scientifically valid methodology." Cornell v. 360 W. 51st St. Realty, LLC. Decided 3/27/14.

 

Telephone Consumer Protection Act -- Revocation of Debtor's Consent-to-Call:

We have a brand new, and very significant, decision from the 11th Circuit Court of Appeals (federal) under the Telephone Consumer Protection Act (TCPA) which holds, among other things, that the debtor's revocation of consent-to-call, which was previously given (usually given in the credit application or retail installment contract itself) can be effective revoked orally. The creditor in this case claimed that since the consent was given in writing, it could only be revoked in writing. The debtor claimed that he verbally told the creditor's collection to stop calling at that number. Obviously, this is something that is claimed by a debtor very frequently in these cases – if not always. The district court ruled for the creditor and granted its summary judgment, but the appellate court reversed. The court said that common law principles would govern the concept of whether express consent was given and whether it was revoked. However, on the positive side, the court said that a creditor could contractually require that the consent could be revoked only in writing. See Osorio v. State Farm et. al., 24 Fla. L. Weekly Fed. C1153 (11th Cir. March 28, 2014). So, you might want to re-visit those credit app's and see of you have such a writing requirement regarding revocation of consent-to-call.

 

NY Bad Faith -- Gross Disregard Standard:

There is a new bad faith decision from the appellate division, First Department in New York (Manhattan and Bronx), re-affirming that the standard in a failure to offer policy limits-type case is "gross disregard" for the insured's interests and that simple mistake in judgment, or negligence, on the part of the insurer will not suffice.

In this case, the Plaintiffs (underlying insured and excess carrier) brought an action for bad faith against the underlying defendant's (insured's) primary auto liability carrier for failing to offer its policy, which resulted in a judgment in excess of the primary policy's limits. In moving for summary judgment, the defendant contended that: (1) the underlying plaintiff's loss of smell from a head injury as a result of the subject automobile accident was primarily due to preexisting soft tissue injuries that were unrelated to the auto trauma, as reflected in the opinions of four retained medical experts; and, (2) the proof at trial included contradictory evaluations by the underlying plaintiff's treating physicians. The trial court's order denying defendant's motion for summary judgment is reversed, and the motion granted was granted by the appellate court. The court stated that bad faith is only actionable where there is a "gross disregard" of the insured's interests. Thus, an insurer does not breach its duty of good faith when it makes a mistake in judgment or evaluates a case negligently. Here, at most, the defendant's evaluation of the underlying plaintiff's case and its insured's exposure constituted a non-actionable mistake in judgment. See GMAC v. NY Central Mutual, 2014 N.Y. Slip Op 02384 (1st Dep't, decided 4/8/14).

Bad faith continues to mean actual bad faith in New York, thankfully – quite unlike the situation in Florida

 

First Department finds no permissive use for leaving key in "hide-a-key" inside wheel frame:

We have a recent case from the First Department (New York and Bronx counties), where the defendant (owner) parked and locked his car, and then hid his spare key in a "hide-a-key" box hidden inside a rear wheel frame. When he returned to his car, the vehicle was gone, and the defendant reported it stolen. Three (3) days later, the police found the car, which had the spare key, but the "hide-a-key" box was still missing. As you may expect, before the police retrieved the vehicle, it was involved in an accident with plaintiff (pedestrian).

The defendant moved for summary judgment on the ground that he was not a "permissive user" and therefore not liable under VTL 388[1], since he established by the evidence that his car was stolen at the time of the accident. However, the issue before the First Department centered on VTL 1210(a), which provides that "[n]o person driving or in charge of a motor vehicle shall permit it to stand unattended without first stopping the engine, locking the ignition, removing the key from the vehicle."

The First Department, in reversing the lower trial court and granting defendant's summary judgment motion, noted that 1210(a) also provides that "the provision for removing the key from the vehicle shall not require the removal of keys hidden from sight about the vehicle for convenience or emergency," which prior case law had interpreted as being "not readily discoverable by a prospective car thief without extreme difficulty."

The appellate court noted that the defendant's testimony, that someone could "probably" see the hide-a-key box if they looked for it, and that "you would have a very small window as you are walking past" the car, did not raise an issue of fact as to whether it was "hidden from sight." The defendant had also testified that someone "would have to kind of be peeking around a bit" to find the key.

Here's the blurb from the advance sheets, along with a link to the decision:

Alvarez v. Bivens
2/18/2014
First Department
PERSONAL INJURY. AUTO. THEFT OF UNATTENDED VEHICLE. PERMISSIVE USE. PRESUMPTION. REBUTTAL. USE OF "HIDE-A-KEY." In this pedestrian knockdown case, the defendant owner of the vehicle moved for summary judgment on the ground that he had reported his vehicle as stolen and, thus, overcame the presumption of permissive use [V&T §388]. In opposition, plaintiff contended that the defendant (owner) did not overcome the presumption of permissive use because he violated V&T §1210(a) [unattended motor vehicle] by placing a hide-a-key inside a rear wheel frame of his car, which was found by the thief. Order denying defendant's motion for summary judgment is reversed, and motion granted. The unattended motor vehicle statute provides that "the provision for removing the key from the vehicle shall not require the removal of keys hidden from sight about the vehicle for convenience or emergency." Here, the owner established by his testimony and other evidence that the key was not in plain view and that one had to actively look for it to find it. Alvarez v. Bivens. Decided 2/18/14.

 

NY -- coverage -- no estoppel created by reason of defense without an ROR, absent actual prejudice to insured:

In this very recent decision from the First Department Appellate Division (Manhattan and the Bronx), the Plaintiff (property owner) brought an action for a judgment declaring that the defendant CGL carrier had a duty to defend and indemnify the co-defendant, a general contractor (GC), in an underlying personal injury construction accident case. In moving for summary judgment, the carrier contended that it defended the GC for two years in the still pending underlying action before it issued its disclaimer, which it based upon an exclusion, because of the GC's misleading characterization of the scope of its work. In opposition and in support of their own cross motions for summary judgment, the plaintiff (property owner) and co-defendant (GC) contended that the carrier was equitably estopped from disclaiming coverage because it provided a defense without having issued a "reservation of rights" letter. The trial court's order granting the carrier's motion for summary judgment, and denying the plaintiff's and co-defendant's cross motion, is affirmed. The court held that equitable estoppel may not be invoked simply on the basis that a carrier provided a defense without having issued a "reservation of rights" letter unless there was actual prejudice. Here, the property owner and GC will not be prejudiced in defending the underlying action because it is not close to trial. Tarry Realty LLC v. Utica First Insurance Co., (1st Dep't., decided 2/18/14).

 

Florida subrogation -- Priority of Coverage:

We have a new Supreme Court case in Florida having to do with the priority of the payments recovered from a third party, as among an insured with a large SIR and the insurer (with a CGL policy). As you probably know, some states hold, with respect to subrogation recoveries, "reverse priority" – i.e., that an excess carrier gets paid back first, then the primary carrier, and last, the insured for the deductible, because this reflects the priority risk taken on by each since the excess carrier bargained for the least risk, and the premium structure reflects that. Some states, on the other hand, have some version of a "made whole" doctrine by which the insured must be made whole before any carrier gets anything. Florida has very little case law on the matter, but, to the extent it does, it would best be characterized as adopting the made whole doctrine. In this new case, insurer argued that the subrogation (transfer of recovery rights) provisions in the policy trumped the common law made whole rule, but the court did not agree because these provisions only addressed the transfer of the cause of action against third parties not the priority of any recovery. The court clearly held that if the policy set forth the priority structure then that would be enforced and would take precedence over the common law rule. The carrier in this case also argued that the SIR was not really a deductible; that it (the insurer) was more akin to an excess carrier because the large SIR made the insured, in effect, a self-insured primary carrier. The court's decision on this issue resulted in a tortuous discussion of various out-of-state cases and various self-insured workers comp cases, buts it ultimate ruling was that the terms of the policy as it pertained to the SIR and "ultimate net loss" was too ambiguous to take precedence over the common law made whole doctrine, and, hence the insured was to be paid back first before any carrier received anything. I think the lesson from this case is that we can conclude that Florida is now, unquestionable, a "made whole" state, but that the easiest way to change that would be to amend the subrogation provisions in the policy via an endorsement that also sets for the priority of payments from any third party recovery. See Intervest Construction of Jax., Inc. v. General Fidelity Ins. Co., 39 Fla L. Weekly 75a (S. Ct., Feb. 6, 2014).

 

Florida coverage -- multiple bites from same dog = multiple occurrences:

With regard to your premises liability and/or homeowners' risk, see attached case. 'Lest there be any remaining doubt about it: one dog attack results in multiple occurrences where there are multiple bites to separate people. See attached decision, decided on Jan. 17th in Maddox v. Fla. Farm Bureau.

 

First Department reinstates Labor Law/negligence claims against some defendants, upholds dismissal against others:

We have a new decision from the First Department (New York, Bronx, and Westchester counties) dealing with Labor Law Sec. 241(6) (excavation site),Labor Law Sec. 200, and common-law negligence claims In this case, the plaintiff was electrocuted and sustained injuries when his power saw struck a cable while he was excavating a roadway to install telecom equipment.  The cable was owned by Con Ed, one of the named defendants, and was encased in a concrete conduit, but did not have a protective plate above it.  The trial court dismissed the Labor Law 241(6) claim (“construction, demolition, or excavation work”), specifically on Industrial Code 23-1.13(b)(4) (“electrical hazards, protection of employees”) against Verizon NY, the City of New York, and Con Ed; dismissed the Labor Law 200 and common-law negligence claims against Con Ed; and dismissed the common-law negligence claims against defendants NYC & LI One Call/Dig Safely and One Call Concepts.

On appeal, the First Department held that the defendants could not prove that plaintiff’s conduct was reckless and/or the superseding cause of his injuries, which would have rendered them immune from liability.  The Court stated that “[t]he risk that a worker would perform such an act was ‘the very reason’ that defendants owed the worker a duty to comply with any safety standards applicable to the cable.”  The Court was not persuaded by plaintiff’s supervisor, who testified that plaintiff had been warned of the live cable underground, and stated that defendants “failed to establish that plaintiff had actual knowledge of the hazard, rendering his conduct so reckless that it was the superseding or sole proximate cause of his accident.”

The evidence also showed that there was an issue of fact as to whether Con Ed created a dangerous condition, because it admitted that it installed the cable, the cable was installed without a protective plate, and its accident report partially attributed the accident to the lack of the plate. Thus, the Court vacated the dismissal of the Labor Law 200 and common-law negligence claims against Con Ed.

The appellate court also vacated the dismissal of the 241(6) claim against the City, because it failed to show that Industrial Code 23-1.13(b)(4) was inapplicable to plaintiff’s cause of action.  Furthermore, plaintiff was able to raise triable issues of fact from two expert affidavits, both of whom “explained that the cable was not de-energized, grounded, or effectively insulated, and that plaintiff was not provided with insulated protective gloves, body aprons and footwear” while using his power saw.

However, the First Department affirmed the dismissal of the 241(6) claim against Con Ed and Verizon, and the common-law negligence claim against NYC & LI One Call/Dig Safely, Inc. and One Call Concepts.  Regarding the 241(6) claim, both these defendants established that they were not an owner, contractor, or statutory agent.  Despite plaintiff’s argument to the contrary, the Court noted that there was no evidence that they had a right to control the work site.  For the common-law negligence claim, the evidence showed that One Call followed the instructions from plaintiff’s employer as to how to mark the points of the telephone conduit where plaintiff was injured, thereby precluding liability against it.

Here’s the summary from the advance sheets:

Addonisio v. City of New York
12/31/2013
First Department PERSONAL INJURY. LABOR LAW. STREET CUT. POWER SAW. ELECTRICAL CABLE. ELECTROCUTION. Plaintiff, an employee of Empire Subway, was electrocuted while making a street cut as part of the installation of telecommunications equipment for Verizon. The incident occurred when the power saw he was using struck a live Con Ed cable. Plaintiff claimed liability under §241(6), predicated upon a violation of 12 NYCRR 23-1.13(b)(4) [electrical hazards; protection of employees], against the City of New York (property owner), Con Ed, Verizon and several “One Call” companies that are used to arrange for the marking of utility lines. In moving for summary judgment, the defendants contended that the sole proximate cause of the accident was the plaintiff’s superseding negligence in failing to follow his supervisor’s warning that there was a nearby live cable underground and that he cut further below ground than the maximum permissible depth. Con Ed also contended that it was not an owner, contractor or statutory agent because it did not contract to have the work performed and had no authority to control it. Verizon also contended that the plaintiff’s employer was issued the excavation permit and that it, too, did not have the right to control the work site. Order granting defendants’ respective motions for summary judgment dismissing plaintiff §241(6) cause of action is modified by reinstating it against the City of New York. Plaintiff’s conduct did not constitute a superseding cause of the accident because: (1) the Industrial Code safety standard exists to protect a worker from the very risk the plaintiff encountered; and (2) there was no evidence that the plaintiff had actual knowledge of the hazard. Further, plaintiff raised issues of fact as to whether the cited Industrial Code provision was violated based upon the affidavits of two experts, who explained that the cable was not de-energized, grounded, or effectively insulated, and that the plaintiff was not provided with insulated protective gloves, body aprons and footwear while using a power saw that might make contact with underground electric power lines. Of note, also, is that the Appellate Division reinstated plaintiff’s claim under §200 and for common law negligence against Con Ed, whose representative admitted that it installed the cable originally, did not install a protective plate above it, and that Con Ed’s accident report attributed the incident, in part, to the lack of such a plate and the shallow depth of the cable.  A ddonisio v. City of New York
Decided 12/31/13.

 

Commercial premises liability update -- NY app. ct. holds no duty to maintain adjacent sidewalk:

This very new decision from the First Department (Manhattan and the Bronx) holding no duty on the part of a commercial lessee to maintain the adjacent sidewalk where it is not within the demised premises of the lease and the lease does not otherwise put the duty to maintain or repair on the lessee. That may seem obvious, but a plaintiff always tries to get around this by arguing common law duty where there is a potentially dangerous condition of which the lessee had or should have had knowledge, and many state court judges will go along with that. So, this case should prove helpful in such situations:

Vivas v. VNO Bruckner Plaza LLC
1/7/2014
First Department

PERSONAL INJURY. FALL. CONDOMINIUM. PRIVATE SIDEWALK. COMMERCIAL LESSEE. DUTY. Plaintiff, who was injured when she fell on a private sidewalk at a condominium, brought suit against the building owner and a commercial lessee whose unit abutted the sidewalk. In moving for summary judgment, the defendant tenant contended that it had no duty to maintain the private sidewalk pursuant to the terms of its lease. Order denying the commercial tenant's motion for summary judgment is reversed, and motion granted. The lessee of a commercial unit in a condominium has no duty to maintain common areas that are not part of the leased premises. Here, the lease provided that the sidewalk was part of the landlord's common facilities that were subject to its "exclusive control and management." Further, the tenant was not under any statutory or common law duty to maintain the sidewalk. Vivas v. VNO Bruckner Plaza LLC, 2014 Slip Op. 00077 (Decided 1/7/14).

 

Coverage Update -- Florida -- Failure of E&S Carrier to File and Obtain Approval of Exclusionary Endorsement Does Not Render it Unenforceable:

Should there still be any issue on the matter, the Second District Court of Appeal in Florida has rather unequivocally held that the failure of an excess & surplus lines carrier to have filed and obtained approval as to an endorsement did not render the endorsement unenforceable; that an E&S carrier was exempt from the filing and approval requirements of Fla. Stat. §627.410.  See Essex Ins. Co. v. Integrated Drainage Solutions, Inc., 38 Fla. L. Weekly D2093 (Fla. 2nd DCA Oct. 4, 2013).   Interestingly, the court also stated that even if the carrier had been required to file and present the subject exclusions for review by the Office of Insurance Regulation, failure to do so would still not be cause for voiding them.


 

Florida Appellate Court Holds that Parking Stop is an Open and Obvious Condition:

We finally have a decision from a Florida appellate court holding that a parking stop – sometimes called a wheel stop – in a commercial parking lot is open and obvious as a matter of law.   And in this case, apparently, the stop was the same color as the surrounding lot and there was an affidavit of an expert for the plaintiff saying all sorts of conclusory of things about defendant’s negligence.   Yet, the appellate court said summary judgment for defendant was appropriate.  As  you can see this can be a very useful decision in any similar premises liability cases you may have in Florida.  The case is Ramsey v. Home Depot.  A copy is attached.   At this point, the mere existence of the stop would have to be coupled with other aspects of defendant’s potential negligence, such as it being partially hidden and bad lighting, for there to be a jury issue on trip-over-a-parking-stop-type liability case. 

click here to read more >>


 

Good Frye/Daubert-Type Decision in Mold-Related PI Case in N.Y.:

As you probably know, all too frequently, a plaintiff in a case where s/he claims injury related to mold simply puts on a doctor such as a pulmonologist to say that there is an injury “known to be caused by toxic molds” and some sort of an expert to say that they did an analysis of the molds sampled in the plaintiff’s apartment/unit/house and that the lab results showed “toxic mold.”  That’s usually enough for most state court judges to let it go to a jury even though such a case only shows an association or the mere possibility that the presence of the molds caused the plaintiff’s alleged illness.   Well, in the case below (I cut-and-pasted the blurb from the advance sheets), the First Department (Manhattan and the Bronx) finally granted a defendant’s motion in limine because of the plaintiff’s failure to properly prove-up causation by, not just showing these general possibilities, but by showing actual, specific causation – i.e., showing the levels (dose) of the alleged mold-generated toxins to which the plaintiff had been exposed.   The usual mold expert does not make such an analysis, and, in fact, it is often difficult if not impossible to show the quantity of CFU’s (Colony forming Units) of any particular species of mold, in terms of parts per million of a known quantity of background air, to which the plaintiff was exposed, when s/he claims to have been exposed. 

Lindkvist v. Travelers Ins.
11/12/2013
First Department

PERSONAL INJURY. TOXIC TORT. MOLD. EXPERTS. MOTION IN LIMINE. PRECLUSION. In this toxic mold personal injury and property damage case, the defendants’ moved in limine to preclude the plaintiff’s expert from testifying on the ground that his opinions were not probative. Order denying defendants’ motion is modified to the extent of precluding plaintiff’s expert from testifying and dismissing the complaint. The proposed testimony of plaintiff’s expert would have been inadmissible because it failed to set forth “plaintiff’s exposure to a toxin, that the toxin is capable of causing the particular illness (general causation) and that the plaintiff was exposed to sufficient levels of the toxin to cause the illness (specific causation).” Lindkvist v. Travelers Ins. Decided 11/12/13.



 

Florida Appellate Court Upholds Foreign Forum Selection Clause and Dismisses Florida DJA:

The attached decision gives effect to an out-of-state forum selection clause in a policy issued by an out of state carrier even though the loss occurred in Florida. The court ruled that the trial court erred in not granting the carrier's motion to dismiss the Florida declaratory action brought by the insured against the carrier. So, if you have a forum selection clause with respect to any suit by the insured, and you get sued by your insured in Florida, don't overlook that clause. This case can be very useful if you want to get the litigation out of Florida.

click here to read more >>



 

SUM/UM Coverage - Petition to Stay Arbitration:

In a recent appellate decision from the Second Department (Brooklyn, Queens and Long Island) they delt with SUM/UM coverage, regarding a SUM carrier's successful appeal of its Article 75 petition to permanently stay the arbitration demanded by the respondent.

Briefly, the respondent had a $100K BI policy. She also had a $100K SUM policy, which "ensured that she was protected for that same amount in the event that she was injured by an uninsured/underinsured person." Since she had received $400K from the various tortfeasors – i.e. $300K more than the coverage she provided to others -- the amount she could receive under her policy's SUM endorsement was zero. The Second Department reversed the lower court's decision, and granted the insurer's petition, stating that "arbitration would have been academic".

The Court reasoned that "SUM coverage is not a 'stand-alone policy to fully compensate the insureds for their injuries'"; rather, it is "insuring against the risk that a tortfeasor's underinsurance/lack of insurance will provide less protection for the policyholder than the policyholder provides to others when at fault" for causing personal injuries.

Below is the blurb from the advance sheets, as well as a link to the decision:

Matter of Unitrin Auto & Home Ins. Co v. Gelbstein
8/28/2013
Second Department
INSURANCE LAW. AUTO. SUM ENDORSEMENT. LIABILITY LIMITS LESS THAN TORTFEASOR'S COVERAGE. In this pedestrian knockdown case, petitioner (SUM carrier) brought a CPLR article 75 proceeding to permanently stay respondent's (UM/SUM insured's) demand for arbitration on the ground that her $100,000 UM/SUM endorsement was not triggered because her underlying claim was settled for $400,000. Order denying the petition is reversed, and petition granted. A SUM endorsement does not constitute a "stand-alone" provision, but is subject to a trigger requiring: (1) liability and SUM limits greater than the tortfeasor's; and (2) exhaustion of the tortfeasor's liability limits by way of settlement or judgment. Matter of Unitrin Auto & Home Ins. Co v. Gelbstein. Decided 8/28/13.
Go to Slip OpinionNew York Statutes

 

FIRE INSURANCE. HOMEOWNER'S POLICY. CUSTOM-BUILT HOME. TOTAL LOSS. "APPORTIONMENT-OF-LOSS" PROVISION. VALIDITY. PUBLIC POLICY:

For those who write first party fire risks, we have a very interesting new case from the federal appellate court in Manhattan, the Second Circuit, re: validity of apportionment-of-loss provisions, resulting in a certified question to the N.Y. high court.  In the case the plaintiff, an LLC whose principal built a custom home for himself, brought an action in the SDNY against his homeowner’s insurance carrier for a judgment declaring that he was entitled to the full $14.388,000 face amount of the policy for a total fire loss, plus an additional $12 million under the policy’s “extended coverage” provision.  Both sides moved for summary judgment, with the carrier contending that it was only liable for 38% of the face amount of the policy because the plaintiff, in order to reduce what would have been a yearly premium in excess of $50,000 for full coverage, agreed to a 38% “apportionment-of-loss” provision, and that the extended coverage provision did not apply on the ground that the plaintiff had not been able to rebuild the house because his mortgage had been recalled.  The SDNY granted plaintiff’s motion to the extent of voiding the “apportionment-of-loss” clause on the ground that it is against New York’s public policy and deviated from New York’s Standard Form – see Insurance Law §3404 -- but granted the carrier’s motion dismissing plaintiff’s claim for extended coverage.  The Second Circuit affirmed the dismissal of plaintiff’s claim for extended coverage, but certified the following questions to the New York Court of Appeals: “(1) In an insurance policy that provides a stated dollar amount of loss coverage in the event of a fire, does a policy clause that, in exchange for a reduction in the premium charged, limits the insurer’s liability to a percentage of any loss violate New York Insurance Law?; (a) If such a clause violates New York Insurance Law, is the clause void, or is it voidable or subject to principles of waiver or estoppel?; (2) If such a clause is in general permissible under New York Insurance Law, is it enforceable where there has been a total loss of the subject property?; and (3) If such a clause is in general permissible under New York Insurance Law, is there a limit on the percentage of liability that can be apportioned to the insured?”  See Quaker Hills, LLC v. Pacific Indemnity Co., Docket Nos. 11-3670 (Lead) 11-3780 (XAP) (2d Cir., decided 8/29/13).   If anyone would like a copy of the decision, let me know.


 

Coverage – CGL policy -- Exclusion for "Damage to Your Products":

We have a very new case in Florida interpreting the “damage to your product” exclusion in a CGL policy very favorably to the insurer.  The case is Liberty Mut. Fire Ins. Co. v. MI Windows, Inc., 38 Fla. L. Weekly D1890 (Fla. 2nd DCA Sept. 4, 2013).  In this case, the insured manufactured sliding glass doors.  They were “altered” by a subcontractor which manufactured and installed transoms along the top of the insured’s door, and then installed them with the transoms.  After Hurricane Ivan caused considerable damage to the various condominiums along the Gulf Coast in which they were installed, the insured paid approximately $3.4M to settle claims to repair the doors and also to repair consequential damages.  The association’s theory was that the alteration of the doors to include the transoms affected their structural integrity.  The carrier denied coverage based on the standard form exclusion (k) for “property damage to your product arising out of it or any part of it.”  The trial court found that there was coverage because of what it found to be a substantial alteration of the insured’s product.  Significantly, the Second District (central West Coast of Florida) disagreed, noting that “the alteration to the glass doors did not fundamentally change the nature and function of those doors.”  Id. at 1891.  The court went on to state that this is far different than stamping steel into a washer or baking paint onto a jalousie.  Common sense dictates that the doors were not “made into something else.”  . . .  The doors retained their identity after being hung on transoms.  They continued to operate as sliding glass doors.  Thus, the doors remained as MI’s product and the “your product” exclusion precludes all damages awarded to replace them. 

Id

 

New NY Appellate Decision Finally Holds That a Curb -- Even an Unpainted One -- is Open and Obvious:

Finally, we have an appellate decision that plain and simply holds that a curb – even an unpainted one – is open and obvious and grants the defendant's motion for summary judgment.

Philips v. Paco Lafayette LLC
5/28/2013
First Department
PERSONAL INJURY. TRIP AND FALL. GAS STATION. CURB ON PRIVATE PROPERTY ADJACENT TO SUBWAY ENTRANCE. Plaintiff was injured when he tripped and fell on an 8-inch high, 10-inch wide concrete curb which was adjacent to, and extended beyond, a subway entrance that was on the property of the defendants' gas station. In moving for summary judgment, the defendants, the owner and lessee of the gas station, contended that they never received any complaints about the curb, that the plaintiff fell on a sunny day, and that the curb was open and obvious. In opposition, plaintiff contended that the curb was not noticeable because it was unpainted, and that its placement made it likely to be overlooked. Order denying defendants' motion for summary judgment is reversed, and motion granted. The color photographs submitted by the defendants established that, as a matter of law, the curb was open and obvious, not inherently dangerous, and was readily observable by the use of one's senses. Philips v. Paco Lafayette LLC. Decided 5-28-13.

 

Coverage -- NY High Court Holds That Carrier May Not Rely on Even Applicable Exclusions Where it Had Breached its Duty to Defend:

This decision from the Court of Appeals (the highest court in New York) leaves no doubt that where there was a duty to defend based upon the allegations of the complaint, but the carrier breached that duty, it may not later fail to pay a judgment against the insured even in the face of applicable exclusions. In this action against a legal malpractice carrier, plaintiffs (insured’s assignees) sought to satisfy a default judgment they obtained against the insured in an underlying legal malpractice action, which arose from the failure of the insured to obtain title insurance and record mortgages that secured the repayment of certain loans made by the plaintiffs to a real estate company that was owned by the insured and another individual. The underlying legal malpractice default judgment was taken after the defendant (legal malpractice carrier) refused to defend its insured and disclaimed coverage under two exclusions: (1) a “Status Exclusion,” whereby coverage was excluded if the claim arose in the insured’s capacity as an officer, director, partner, shareholder, manager or employee of a business enterprise; and (2) a “Business Enterprise Exclusion,” whereby coverage was excluded if the claim arose out of alleged acts or omissions by the insured, with or without compensation, for any business enterprise in which the insured had a controlling interest. The trial court granted plaintiffs’ motion for summary judgment based upon the carrier’s breach of its duty to defend, and entered judgment for the $2 million limit of the policy, holding that the carrier was bound to pay the policy, despite the exclusions, because it breached its duty to defend. The Appellate Division affirmed (3-2). The Court of Appeals also affirms, holding that “when a liability insurer has breached its duty to defend its insured, the insurer may not later rely on policy exclusions to escape its duty to indemnify the insured. See K2 Investment Group, LLC v. American Guarantee & Liability Insurance Co., Ct. Appeals Docket No. 106, Decided 6/11/13.

 

New Florida Decision Holding No Waiver of Coverage, Notwithstanding the Failure to Timely Reserve Rights:

There is a new case out of the First District Appellate Division in Florida that very squarely holds that the that the failure of a CGL carrier to give a timely Reservation of Rights letter does not result in a waiver where there is no coverage in the first instance under the insuring agreement or where there is an on-point exclusion. This is so notwithstanding the fact that in Florida we have something called the Claims Administration Statute that requires the insurer to stake-out coverage defenses in writing within 30 days. This statute has been rendered almost meaningless; it essentially only applies to late notice at this point in time. This case makes it very at that Florida jurisprudence will continue to adhere to the old common law rule that coverage cannot be created by waiver or estoppel where it does not exist in the first instance under the basic insuring agreement, and this case expands that rule to the situation where there is an on-point exclusion. See Danny's Backhoe Service LLC v. Auto Owners Insurance Company, 38 Fla. L. Weekly D1185 (1st DCA M1y 30, 20130).

 

New NY Decision Holding Subcontractor's Policy Primary to that of he GC, Notwithstanding Canceling "Other Insurance" Clauses:

In this new decision from the Second Department (Brooklyn, Queens and Long Island matter, the plaintiff (GC) brought an action against the defendant, its subcontractor’s CGL carrier, for a judgment declaring that it had a duty to defend and indemnify plaintiff on a primary and noncontributory basis in an underlying personal injury action because it, the plaintiff/GC, qualified as an additional insured in defendant’s policy. In opposition, the defendant carrier contended that it was not primary because of identical insurance provided by the GC’s carrier and a third-party defendant carrier. The trial court’s order denying plaintiff’s motion is reversed, and the appellate court said the motion should be granted. The court noted that “where there are multiple policies covering the same risk, and each generally purports to be excess to the other, the excess coverage clauses are held to cancel out each other and each insurer contributes in proportion to its limit amount of insurance.” Here, however, the court held that the defendant’s policy is primary, however, because plaintiff’s injury arose out of the named insured subcontractor’s work for the additional insured, GC, thus triggering the defendant’s obligation to defend and indemnify the GC as the primary carrier. See Murname Building Contractors, Inc. v. Zurich, 2013 NY Slip Op 03974 (2d Dep’t., Decided 6/5/13).

 

New Decision Regarding the Value of a Rotator Cuff Injury in the Bronx:

How many times have you had a partial thickness rotator cuff injury case in the Bronx? And, how many times have you heard the plaintiff lawyer say, in such a case, that the Bronx jury will hammer you with their pain-and-suffering verdict? At least in my practice, this scenario fits into a well-worn slot. Well, we have a very recent case from the first appellate department, which pertains to Manhattan and the Bronx, that pretty much sets the maximum for intangible damage awards in such a case. In this new case, the plaintiff, who was 24 years old at the time of her injury, suffered a partial thickness rotator cuff tear, which required surgery and post-op physical therapy, and a questionable low back injury. Permanent injuries included decreased ROM, pain and the probability of additional shoulder surgery. A Bronx County jury awarded $400,000 for past pain and suffering, and $300,000 for future pain and suffering (48.6 years). These damages were reduced on appeal to $300,000 for past pain and suffering, and $250,000 for future pain and suffering. See Morales v. MaBSTOA, 2013 NY Slip Op 03388 (First Department, 5/9/13).

 

Recent California Appellate Court Decision Holds that Medical Doctor's Testimony Not Necessary to Prove Causation in Asbestos Mesothelioma Cases:

In Hernandez v. Amcord, Inc., Case No. B238408 (Cal., 2nd Dist., April 18, 2013) Ca. Daily Op. Serv. 3837 (reprinted in The Recorder, Vol. 27, No. 75 April 19, 2013), it was held that proof of causation in asbestos mesothelioma cases does not require a medical doctor's testimony expressly linking together all evidence of substantial factor causation. The trial court granted a DV, making the rather sensible finding that "some kind of a doctor; someone with an MD after his name" must testify that the defendant's product caused the plaintiff's illness to a reasonable degree of medical certainty. The appellate court rejected this rationale. It stated that California law, taken as a whole, does not require that a medical doctor necessarily provide the medical causation testimony. The court held that the plaintiff had met its burden on causation where it presented, at trial, a medical doctor who testified that the plaintiff, in fact, had mesothelioma but offered no opinion on the cause of it; the plaintiff's brother who worked with the plaintiff at a facility where defendant's product was used and was cut and the dust swept up by other workers in close proximity; and an epidemiologist who testified that if the plaintiff worked in proximity to asbestos containing products he would have increased risk for asbestos-related disease including mesothelioma.

 

Coverage -- Late Notice -- NY Appellate Court Holds that Lack of Awareness of Policy Never an Excuse for Late Notice :

In this new decision, the Plaintiff (insured), a corporation, brought an action for a judgment declaring that the defendant insurer had a duty to defend and indemnify it in an underlying action. Undisputed is that the defendant was not tendered coverage until 2½ years after the accident occurred and 2 years after the underlying action was commenced. In moving for summary judgment, plaintiff contended that its counsel was unaware of the umbrella policy until 2 years after the underlying action was commenced, at which time it immediately tendered coverage to the defendant and advised the underlying plaintiff’s counsel of the coverage, who also placed the defendant on notice. The trial court’s order granting plaintiff’s motion is reversed, and the Second Department (Brooklyn, Queens and Long Island) held that the motion must be denied, further, upon a search of the record, the court ruled that summary judgment must be granted to the defendant. The appellate court held that there must be some type of reasonable excuse for late notice, and that lack of awareness of a policy is not a valid excuse for failing to provide the carrier timely notice in accordance with the policy’s terms. Ortiz v. Fage USA Corp., 2013 NY Slip Op 02229 (2nd Dep’t., Decided 4/3/13).

 

California Appellate Court Limits Amount Plaintiff Can Recover for Med's to Amount Paid by Medicare/Medi-Cal:

In this case, the California First District Court of Appeals unequivocally held that the amount that a plaintiff could recover was limited to the amount paid to his treating doctors by Medicare or Medi-Cal, not the total amount of their bills since the doctors accepted the third party payments in full payment pursuant to their contracts with these third party payors. There is discussion in the case that makes it evident that the rule would be no different where private health insurance is involved. This is very significant because plaintiffs have traditionally argued that they are entitled to, under the standard damage instruction, the reasonable value of the medical service provided, and that is represented by the larger amount – i.e., the total amount billed. And that is typically a considerably large sum. See Luttrell v. Island Pacific Supermarkets, Inc., Case No. A134089, 1st App. Dist., reprinted in Cal. Daily Op. Serv. Vol. 27., No. 68 at 3827, and in The Recorder, “Cases and Opinions,” April 10, 2013.

 

Rosado v. DaimlerChrysler Financial Services Trust

___ So.3d. ___, 2013 WL 1338047 (Fla., April 4, 2013)
http://www.floridasupremecourt.org/decisions/2013/sc09-390.pdf

Buckley Law Group is pleased to announce a significant victory in the Florida Supreme Court, whereby, in a 5-2 decision, the court held that the “Graves Amendment” (49 U.S.C. § 30106) preempts Florida’s vicarious liability statute (§ 324.021). Not only did the court adopt our preemption argument, but they also ruled that the Florida statute is not a financial responsibility law, which would have been within the Graves Amendment’s exception. This decision effectively puts the last nail in the coffin of motor vehicle vicarious liability for long-term automobile lessors. This decision is a total victory for the auto leasing industry in Florida.

In addition to serving as the lessor’s counsel in Rosado, the Buckley Law Group, has also been instrumental in using the Graves Amendment in New York. In Pedroli v. Mercedes-Benz USA, LLC, et al. 94 A.D.3d 842, 944 N.Y.S.2d 150 (2nd Dept. 2012), our office successfully argued that the Graves Amendment preempted NY’s infamous vicarious liability statute (VTL § 388). More importantly, Pedroli was the first published decision in New York which held that long-term motor vehicle lessors are not obligated by VTL § 370 to provide Minimum Financial Responsibility liability insurance limits to leased vehicles.

Although the Graves Amendment has decimated the vicarious liability doctrine, motor vehicle lessors still face potential liability from the Minimum Financial Responsibility statutes in each of the 50 states. In the post-Graves world, motor vehicle lessors and their insurance carriers do not have a more effective ally than the Buckley Law Group.

 

Bad Faith -- Florida Appellate Court Enforces Arbitration Clause; Dismisses Bad Faith Case:

In a very recent decision, the 4th District Court of Appeals (Broward and West Palm Beach areas) ruled, on a Petition for Writ of Certiorari, that a trial court erred in not dismissing a common law and statutory (Fla. Stat. 624.155) bad faith case because the policy contained an arbitration clause that would have covered the same issues as in the bad faith action. The clause required arbitration of disputes "arising with respect to the interpretation of this policy or in the event of disagreement whether or not a particular settlement should be made . . .." The court held that an arbitration of such a matter would include determination of the common law bad faith issues, and, thus, it should be enforced. See Truck Ins. Exchange v. Pediatrix Medical Group, Inc., 38 Fla. L. Weekly D619 (Fla. 4th DCA, March 13, 2013).

 

AI Coverage – New York Appellate Court Denies AI Status to NYC Because No Separate Written Agreement to Obtain Insurance -- Prime Contract Itself Doesn't Qualify:

The First Department (Manhattan) has again denied NYC additional insured status because there was no separate writing by which a subcontractor agreed to obtain liability insurance for the city. Here, in a personal injury action, the city sued, via third party complaint, the liability carrier for a subcontractor of one of the city’s contractors, claiming to be an additional insured. The AI endorsement, as is the standard form, required that a putative AI be an entity with regard to whom the insured subcontractor had agreed in writing to procure insurance. Here, as is also the norm, there was no separate agreement between the city and the subcontractor. Thus, the city sought to use the subcontract’s incorporation by reference of the prime contract between the GC and the city as the writing by which the subcontractor agreed to obtain an AI endorsement for the city. The court said that this did not qualify. There must a separate distinct writing between the insured subcontractor and the city. This is the second decision of the First Department in a fairly short period of time making this particular holding with respect to the city’s attempt to be defended in a PI case by a liability carrier of a subcontractor. See City of N.Y. v. Nova Casualty Co., 2013 NY Slip Op 01355, (1st Dep’t, March 5, 2013).

 

NYC Sidewalk Slip/Trip and Falls -- 1st Department Says 1/2 inch Difference in Elevation a "Substantial Defect":

Gomez v. Congregation K’Hal Adath Jeshurun, Inc
3/12/2013
First Department

PERSONAL INJURY. TRIP AND FALL. NYC SIDEWALK. ONE-HALF INCH DIFFERENTIAL BETWEEN FLAGS. Plaintiff brought an action against the abutting owner of a NYC sidewalk after she was injured when she tripped and fell on a ½-inch differential between flags. In moving for summary judgment, the defendant contended that the defect appeared to be “trivial” and that it otherwise lacked notice of the condition. In opposition, plaintiff contended that the condition was not trivial because it violated NYC law [34 RCNY 2-09(f)(5)(iv); NYC Admin. Code §19-152(a)(4)], and that the defendant had constructive notice. Order denying defendant’s motion for summary judgment is affirmed. A ½-inch differential between sidewalk flags in the City of New York is considered a “substantial defect.” Gomez v. Congregation K’Hal Adath Jeshurun, Inc. 2013 NY Slip Op 01490 (1st Dep’t, decided 3/12/13).

 

Florida Supreme Court Limits Application of the Economic Loss Rule to the Products Liability Context:

There is a very significant, new case from the Fla. Supreme Court holding that the Economic Loss Rule (ELR) is to be limited to product liability cases only. Basically, this case reduces the application of the ELR to cases where a product malfunctions and the only damage is to the product itself. In that situation, and only in that situation, the agreed-upon contract remedies prevail. It’s a very significant case. The ELR had been used to preclude tort remedies pretty much whenever there was a contract between the parties which contained damage provisions such as liquidated damages provisions and other damage limitations. Please see attached

for additional information click here >>

 

Aviation -- Florida Federal Court Says Flight Training Facility Cannot Use the Bar Against Educational Malpractice Claims as a Defense:

In a recent decision of the Middle District of Florida, the estates of a pilot who crashed a Socata TBM 700 on final approach and of the deceased passengers in the aircraft sued, among others, Simcom International, a training facility licensed by Socata for flight training in the TBM 700. They sued Simcom for negligence in failing to advise and train with respect to the TBM’s propensity to “torque roll” to the left upon an increase in power such as would occur on a missed approach and attempted to go around, which apparently was the cause of the crash. The defendant tried to utilize the Florida case-law-created prohibition against suits for “educational malpractice” as a defense and moved to dismiss based upon that theory. The court rejected the defense as a matter of law. It noted that “[t]he public policy considerations that are relied upon to bar traditional educational malpractice claims do not carry over to the flight training setting ....” See Newman v. Socata SAS, et. al., 23 Fla. L. Weekly D5, D7 (M.D. Fla., Feb. 13, 2013). The court also noted that “application of the educational bar in cases such as this amounts to a categorical grant of immunity to all entities engaged in instruction in the operation of dangerous equipment.” Id. at D8. The court said that such a grant of immunity would engender dangerous practices at, among other things, flight schools.

 

Coverage -- Priority of Coverage:

There is an interesting new case from the 4th District Appellate Court in California (Sand Diego to Santa Anna and Riverside Counties) in the substantive area of primary/excess issues as between carriers. See Guide One National Ins. Co. v. Utica National Ins. Co., Case No. D059833, reprinted in The Recorder, Cal. Daily Opinion Service, Vol. 27, No. 41 (March 1, 2013). The court held that the priority of coverage would track the active negligence. So, the carrier that covered the actively negligent employee was primary in this case, even though the “other insurance” clauses might have resulted in a different conclusion. And, moreover, California has a weird pro rata “allocation” of coverage rule that it applies to priority issues. This case supersedes that rule and holds that the priority of the applicable coverages tracks the active negligence.

 

Duty to Defend -- Recovery of Defense Costs from Other Carrier:

There is a very interesting new decision in Florida pertaining to recovery of defense costs by a CGL carrier against another CGL carrier. This issue arises frequently when two carriers insure the same person or entity due to the Additional Insured provisions and one carrier steps up and defends but not the other. If the defending carrier sought full or partial reimbursement of the defense costs from the other carrier, the Florida courts traditionally precluded that under what is called the Argonaut Rule – i.e., there is no right to reimbursement among primary carriers because each has a separate and personal duty to defend. Some states allow such recovery under an equitable subrogation theory, such as California. Some states don't allow such recovery because it is said to violate the anti-subrogation rule. But Florida hasn't allowed it under what it calls this Argonaut Rule. Well, the attached case, Progressive Express v. Fla. Dep't of Financial Services,(4th District Ct. App, Feb. 6, 2013), changes that by permitting the reimbursement if there was an indemnity contract as between the carriers respective named insureds. I've made this argument many times because it frequently arises in the construction context because the same contract that requires one to obtain an additional insured endorsement also usually contains an indemnity running to the benefit of the putative AI. This is, thus, a useful case. Keep in mind, of course, that often the carrier that didn't defend took that position due to some coverage issue, but it is only necessary to show that they had a duty to defend -- which is much broader and easier to establish -- to recover fees if there is an indemnity contract between the insured.

 

Bad Faith -- Florida Appelate Court Says Bad Faith Claim Cannot Be Brought By Insured's Post-Judgment Cross Claim in Underlying Action:

In this case the plaintiff obtained a verdict of many millions of dollars against a defendant who had only a $100,000 policy. So, after verdict, the plaintiff amended to name the defendant's insurance carrier as a direct defendant, which is permissible under the Florida non-joinder statute which allows the carrier to be named once a judgment is entered against the carrier's insured. The defendant, insured, then amended to plead a bad faith claim cross claim as against his carrier seeking to recover the excess portion of the judgment. (The case was still ongoing post-judgment due to post-trial motions such as motion for new trial). This bad faith cross claim was a move that was probably designed to try to prevent the carrier from removing to the federal court the bad faith action that it was sure to face if it were filed as a new, separate action. The trial court denied the insurer's motion to dismiss the bad faith cross claim, but the appellate court, thankfully, reversed and held that the trial court's ruling departed from the essential requirements of law and held that the bad faith action cannot be filed as part of the underlying tort action. The appellate court noted that a likely strategy was to defeat the carrier's ability to remove the bad faith claim to the federal court. See GEICO Gen. Ins. Co. v. Harvey, 38 Fla. L. Weekly D178 (4th DCA Jan 23, 2013).

 

Coverage -- Late Disclaimer -- NY Appellate Court Says 43 Days Too Long for Denial, Absent Excuse:

National Casualty v. American Home
1/22/2013
First Department
INSURANCE LAW. DISCLAIMERS. 43-DAY DELAY. Plaintiff (insured) brought an action for a judgment declaring that the defendant (carrier) had a duty to defend and indemnify it in an underlying lead paint personal injury action pursuant to a 1993-1994 policy. In moving for summary judgment, the defendant contended that its disclaimer was valid based upon plaintiff’s late tender. In opposition and in support of its own cross-motion for summary judgment, plaintiff contended that the defendant’s 43-day delay before issuing the disclaimer was untimely. Order granting plaintiff’s cross-motion is affirmed. The carrier’s 43-day delay was untimely because it had all of the information necessary to disclaim coverage based upon late notice shortly after receiving plaintiff’s tender. Further, the carrier failed to offer a satisfactory explanation for its delay. National Casualty v. American Home. Decided 1/22/13.

 

Coverage -- Additional Insured -- NY Appellate Court Says Written Agreement Requirement for AI Cannot Be Satisfied by Incorporated Other Documents:

In this case, the plaintiff (property owner) brought an action against the defendant (carrier) for a judgment declaring that it was an “additional insured” under a CGL policy it issued to a subcontractor on the plaintiff’s construction project. In moving for summary judgment, the carrier contended that there was no express written agreement between the plaintiff and the subcontractor naming it as an “additional insured” under the subject policy, which was specifically required by the policy’s terms. In opposition, plaintiff contended that the written purchase order between the insured subcontractor and another contractor, which incorporated the terms of the GC’s contract, was sufficient to comply with the policy provision. The trial court’s order denying the defendant’s motion is reversed, and the First Appellate Department (Manhattan and the Bronx) granted the motion. The court stated that where a policy specifically provides that there must be a written agreement between the insured and the organization seeking coverage to add the organization as an additional named insured, the incorporation by reference of other agreements does not satisfy the condition. See AB Green Gansevoort, LLC v. Peter Scalamandre & Sons, Inc., 2013 NY Slip Op 00031 (First Department, Decided 1/8/13).

 

Florida Supreme Court Says No Right to Fees Under a Proposal for Settlement ("OJ") Where Equitable Claim Was Involved:

The Florida Supreme Court has just ruled, in a January 10th decision, that you cannot assess fees based upon a Proposal for Settlement (used to be “Offer of Judgment”) if the plaintiff sought equitable relief as one of its claims. This will make it very difficult to shift fees back against a plaintiff in a DJA, or where plaintiff is suing for fraudulent inducement and seeking equitable remedy of rescission as one of his/her claims. See Diamond Aircraft Industries v. Horowitch, attached hereto, and in particular, the discussion of the certified question that starts at page S20.

for additional information click here >>

 

Insurance Law – New York Appellate Court Excuses Late Notice to Excess Carrier (On Eve of Trial):

In this case, the plaintiff, who was severely injured in a construction accident, brought an action against the defendant (excess carrier) to recover $4+ million representing the unsatisfied portion of a $6+ million judgment that was entered in the underlying case – a direct action pursuant to Insurance Law §3420(a). In moving for summary judgment, the defendant contended that its disclaimer was valid because the plaintiff did not notify it of the underlying action until the damages portion of the underlying trial was about to commence. In opposition and in support of his own cross-motion for summary judgment, plaintiff contended that his notice was timely because he was not informed by the attorney for the underlying defendant of the excess policy until the damages trial was about to commence. The appellate court modified the trial court’s order denying the parties’ respective motions for summary judgment by granting plaintiff’s motion. To recover under Insurance Law §3420(a), the plaintiff must show that he or she acted reasonably “diligently in attempting to ascertain the identity of the insurer [for the tortfeasor], and thereafter expeditiously notified the insurer” of the claim.” Here, the court held, the plaintiff demonstrated that defense counsel in the underlying action did not disclose the excess policy until the damages trial was about to commence, despite having an obligation to do so pursuant to CPLR 3101(f), and that he notified the defendant (excess carrier) of the underlying action on the same day that defense counsel provided the information. Thus, under the circumstances, plaintiff demonstrated that, as a matter of law, he acted diligently in attempting to identify the defendant, and that he provided notice expeditiously once he was informed of the excess coverage. See Golebiewski v. National Union Fire Ins. Co., 2012 NY Slip Op 09025 (2d Dep’t, decided 12/26/12).

 

Products Liability Update – New York Appellate Court Holds That Manufacturing Defect May Be Inferred From Facts of the Accident:

In this auto case, plaintiff sued the driver and the owner of the subject vehicle as well as the retail car dealership that sold and serviced it for strict products liability and breach of warranty. In moving for summary judgment, the dealership contended that the plaintiff could not establish her claim that the anti-lock braking system (ABS) was defective and that it sold the car in that condition to the co-defendant owner. In opposition, plaintiff submitted: (1) the affidavit of an expert who opined in very conclusory fashion that the accident was caused by a defective ABS system; and (2) the deposition testimony of the defendant’s former owner and employee, and the car’s service records, which stated that the ABS sensor activated at inappropriate times. The Fourth Department Appellate Division held that only the warranty claim should have been dismissed and the strict liability claim could proceed to trial. Here, plaintiff’s opposition papers, when combined with the accounts of the car’s performance from the date of purchase to the date of the accident, established a prima facie case that a defect in the ABS caused the accident. Worrisome, however, was the courts holding that: “A plaintiff in a products liability action need not establish the precise nature of the defect in order to make out a prima facie case . . . the existence of a defect may be inferred from the circumstances of the accident and from proof that the product did not perform as intended.” This certainly seems to give life to the pro-plaintiff consumer expectation test. Strzelczyk v. Palumbo, 2012 NY Slip Op 09252 (4th Dep’t, decided 12/28/12).

 

New York High Court Issues Significant Decision on Threshold "Serious Injury" in Aggravation of Pre-Existing Condition cases:

In this two car auto case, plaintiff alleged that she suffered an exacerbation of a pre-existing L5-S1 lumbar fusion and a new L4-L5 broad based herniation with foraminal encroachment, for which she underwent a discectomy and a fusion. In moving for summary judgment under the “serious injury” threshold, the defendant submitted affirmations from three physicians, each of whom stated that a comparison of the plaintiff’s radiological and MRI studies taken after a previous 2002 accident with those taken after the subject accident in 2008 were essentially the same, and that the plaintiff’s symptoms and disability, for which she was receiving Social Security Disability, were also essentially the same after the 2008 accident. In opposition, plaintiff submitted the affirmations of two of her treating physicians, both of whom opined that the L4-L5 broad based herniation with foraminal encroachment was new and caused by the trauma from the 2008 accident, and that it accounted for her worsening pain and symptoms. The trial court granted the defendant’s motion under the “serious injury” threshold. The Fourth Appellate Department affirmed (3-2), with the majority holding that the plaintiff’s treating physicians did not establish either quantitative or qualitative differences between the plaintiff’s pre-accident and post-accident conditions, and that her surgeon’s description of “persistent worsening” of symptoms was merely conclusory. In contrast, the two justices in dissent found that the plaintiff raised a question of fact under the “serious injury” threshold based upon her treating surgeon’s opinion that the MRI taken after the 2008 accident “revealed a significant disc herniation broad based with foraminal encroachment at L4-L5,” which did not appear on pre-accident MRIs, and that “to a reasonable degree of medical certainty, the 2008 accident caused the large lumbar disc herniation at L4-L5 and accounted for a persistent worsening of plaintiff’s pain symptoms . . . which were both permanent and the direct result of the 2008 accident . . . necessitating an acute discectomy at L4-L5 with posterior lumbar inter-body fusion.” The Court of Appeals – highest court in NY – held that there was a sufficient factual issue to let the matter of whether the plaintiff sustained a “serious injury” be decided by the jury. See Tyson v. Nazarian, 2012 NY Slip Op 08673 (Decided 12/18/12). In light of this decision, I think you will see plaintiff attorneys trying to obtain, from treating doctors, quantitative measurements of the plaintiff’s pre-and-post accident changes, such as the amount of decrease in ROM attributable to the additional trauma and how it compares with normal ROM.

 

Products Liability Update -- Apportionment of Fault Against Dismissed Defendant -- Case of First Impression:

New decision – case of first impression -- from the Second Department (Brooklyn, Queens and Long Island) on non-party apportionment under Article 16 of the CPLR.

This new decision deals with apportionment as against defendants whose motions to dismiss were granted without any opposition from the plaintiff, who thereby obviously tried to cut-off the remaining defendant’s ability to apportion fault against the dismissed defendants by essentially letting them get dismissed and then arguing that they could not be deemed to be entitles that had contributing fault for the loss, and, thus, were outside the apportionment rules set forth in CPLR, Article 16

In these two related products liability actions where the driver of a car lost control when one of the tires sustained a tread separation, the car manufacturer and retail seller moved to dismiss for failure to state a cause of action, which went unopposed. The plaintiffs in both actions then moved for summary judgment to dismiss the remaining defendant’s (tire manufacturer) CPLR Article 16 apportionment defense. In opposition, the tire manufacturer contended that it was entitled to assert liability against the car manufacturer, even though it no longer was a party, because the dismissal of the actions against it was not on the merits. The trial court’s order granting the plaintiffs’ motions was reversed, and motions the motions were denied by the Second Department. In a case of first impression, the court held that where a defendant’s motion to dismiss on the pleadings is granted after going unopposed, any remaining defendant may still assert a Article 16 apportionment affirmative defense. See Hendrickson v. Philbor Motors, Inc., 2012 NY Slip Op 08489 (2nd Dep’t, decided 12/12/12). Note that this is in contrast to where a defendant obtains a dismissal of the complaint based upon the merits, or obtains a summary judgment, in which case any remaining defendant cannot then assert apportionment based upon the alleged negligence on the part of the successfully moving defendant. So, you’ll have to be on the lookout for collusive summary judgments and motions to dismiss where the real objective to for the plaintiff to preclude the target defendant’s ability to obtain apportionment.

 

Product Liability Update: California Court Holds Design Defect and Consumer Expectation Theories Inapplicable to Prescribed Medical Products:

See Garrett v. Howmedica Osteonics Corp., Case No. B234368 (Ct. App., 2nd Dist., Nov. 27, 2012, reprinted in Vol. 26 The Recorder, Cal. Daily Op. Serv., No. 260, Thursday, Nov. 29, 2012.

This was a products liability case against the manufacturer of an implanted orthopedic device which malfunctioned. The trial court granted the manufacturer's summary judgment on most causes of action except for the design defect claim. The appellate court held that the design defect claim should have been dismissed as well. The court held that the design defect theory simply did not apply to the case, concluding that the case was controlled by prior appellate decisions which have held that design defect theory is not applicable to prescription drugs where there is "learned intermediary." Further, the court held that the consumer expectation test was not applicable because in the case of prescribed drugs or devices, the consumer would have no safety expectation apart from that which was acquired by the plaintiff's discussions with the prescribing doctor.

 

New Form Interrogatories for Use in Construction Defect Cases in CA:

There is a new legal development in construction litigation that should be useful in the defense of these matters. Enclosed please find a copy of the recently court approved construction form interrogatories. The Judicial Council approved the Form Interrogatories – Construction Litigation. They will be able to be used beginning January 1, 2013. Note that they will apply to cases with five or fewer houses involved and not deemed complex. For complex cases they may be used with judicial approval on a showing of good cause.

for additional information click here >>

 

Florida Supreme Court Issues Final Word in Rear-End Collision Cases -- i.e., governed by principles of ordinary negligence:

In this very new case from the Supreme Court, the issue whether a rear-end automobile collision carries with it a rebuttable or an absolute presumption of negligence – a matter on which the intermediate appellate courts in Florida have been divided – has been resolved. The Court held that once the driver of the rear car comes forward with competent evidence from which a jury could conclude that the front driver was negligent, any presumption of negligence against the rear driver goes away and the case is then governed by ordinary principles of comparative fault for the jury to assess as against each party. This new decision involved an interesting fact pattern where the rear driver was the plaintiff and she alleged negligence as against the front driver because the front driver/defendant was speaking on her cell phone while driving at approximately 45 miles per hour and was caused to abruptly stop on the downside of the crest of a hill, due to her inattention, causing the plaintiff/rear driver to collide. The trial court granted the defendant’s motion for directed verdict stating that the presumption of negligence as against the rear driver/plaintiff could not be overcome as a matter of law. The intermediate appellate court affirmed, noting the conflicting decisions on the matter. The Supreme Court held that the admission of competent evidence from which the jury could conclude that the front driver was negligent dissolved any presumption and the case should be put to the jury on ordinary principles of negligence and comparative negligence, i.e., with no presumption instruction at all. See Cevallos v. Rideout, 37 Fla. L. Weekly S739 (S. Ct., Nov. 21, 2012).

 

NY Appellate Decision Dismisses Case Where Plaintiff has no Particular Theory of Defect:

In this wrongful death product liability action, plaintiff’s decedent was killed when an explosion occurred while he was lighting a pilot light in a fireplace that was manufactured by one of the defendants; had a valve manufactured by another defendant; and was sold by a third defendant. In moving for summary judgment, the valve manufacturer submitted evidence establishing that the pilot light valve in question, which was designed to stop the flow of gas if the pilot light went out, was inspected and tested by the parties in the litigation and it did not malfunction. In opposition, plaintiff decided to rely solely upon the happening of the explosion. Doubtless, the plaintiff’s counsel anticipated that the “consumer expectation test” liability standard would carry the day for him – at least to get around the valve manufacturer’s summary judgment motion. The trial court granted the summary judgment and the Fourth District Appellate Court (upstate NY) affirmed. The court noted that in the absence of demonstrating a specific defect, the plaintiff was then required to establish that the valve did not perform as intended and rule out all other causes for the explosion that were not attributable to the manufacturer. Here, the court held that the plaintiff failed to meet this burden by relying solely upon the happening of the occurrence. See Small v. Caprara, 2012 N.Y. Slip. Op. 07434 (Fourth Dep’t., Decided 11/19/12).

xxx

 

Chinese Drywall -- New Florida Decision Again Holds No Coverage for PD and Injury Claims Under Total Pollution Exclusion:

In this recent decision, First Specialty Insurance Corp. sought a declaration that it had no duty to defend or indemnify Milton Construction Company (“Milton”) under two insurance policies in a Chinese drywall class action lawsuit pending in Louisiana. Milton was sued by homeowners in a Louisiana action for property damage and personal injuries allegedly caused by Milton's construction of condominium units with defective Chinese drywall. First Specialty asserted that it had no duty to defend or indemnify Milton in the Louisiana action because the applicable policies contained a Total Pollution Exclusion endorsement. First Specialty successfully moved for summary judgment on the basis of the Total Pollution Exclusion.

The Louisiana class action plaintiffs alleged that they suffered damages and injuries caused by sulfur compounds that exited the defective Chinese drywall and entered the air. The parties disagreed over the main issue invoked by the exclusion – i.e., whether the plaintiffs in the Louisiana action suffered personal injuries and/or property damage caused by the “discharge, dispersal, seepage, migration, release, or escape of pollutants,” defined as “any solid, liquid, gaseous, or thermal irritant or contaminant.” The court held that the matter was controlled by Florida substantive law. Specifically, the court then noted that the sulfur compounds that exited the Chinese drywall allegedly caused “rapid sulfidation” to personal property, including home appliances, and “eye problems, sore throat, coughing, nausea, fatigue, shortness of breath, fluid in the lungs, and/or neurological harm” to the homeowners. Based on these particular allegations, the court concluded that the Total Pollution Exclusion endorsement applies. It held that “it is readily apparent that the drywall's release of sulfur compounds both contaminated and irritated people and things. Therefore, the sulfur compounds constitute ‘pollutants’ and the Total Pollution Exclusion applies.” Accordingly, First Specialty had no duty to indemnity or defend.

See First Specialty Ins. Corp. v. Milton Construction Co., 23 Fla. L. Weekly Fed. D367, Nov. 9, 2012 (S.D. Fla.).

 

Important Decision on Denying PIP/No-Fault Payments by Appellate Court in NY:

On October 17, 2012, New York’s Second Department issued a ruling on New York’s No-Fault law, indicating yet again how vital it is for an insurer to follow the statutory deadlines when it chooses to deny No-Fault claims. In A.M. Med. Servs., P.C. v. Progressive Cas. Ins. Co., 2012 NY Slip Op 06902, a case of first impression, the Court held: (1) where a medical facility is an assignee of someone covered under a no-fault insurance policy, it is not entitled to recover first-party no-fault benefits where the treating physician or doctor is an independent contractor, rather than an owner or employee; and (2) this defense is not protected from the “preclusion rule.”

In this case, the claimant’s treating medical facility listed both of the treating doctors as an “Ind. Contractor” in the medical bills submitted to the insurer. The insurer denied the claim brought by one doctor, and only partially paid the balance for the second doctor, based on the treating providers being listed as independent contractors. Critically, at no time did the insurer issue a written denial of the claims, providing the grounds of its denial. The insurer, in moving for summary judgment, asserted that the medical facility did not have standing to recover no-fault benefits because the doctors billed as “independent contractors,” rather than as owners/employees of the facility. The lower appellate court held that the insurer was entitled to summary judgment under the “independent contractor defense,” and is “not obliged to issue a denial” to assert this defense.

The decision regarding the “preclusion rule” was reversed by the Second Department. Regarding the first issue (the “independent contractor defense”), the Court affirmed the lower court’s decision, noting that when a medical facility seeks to recover no-fault benefits for services that were not rendered by it or its employees, the facility is not a “provider” within the meaning of the No-Fault law. In the second, more important ruling, the Second Department held that the “preclusion rule” required the insurer to pay or deny a claim within 30 days, which the insurer failed to do in this case. Therefore, the insurer was precluded from raising the “independent contractor defense.” The Court reasoned that the failure to promptly deny a claim was based on New York’s policy of “prompt uncontested, first-party insurance benefits” and “a tightly timed process of a claim, disputation and payment” in No-Fault cases. Thus, if an insurer asserts the “independent contractor defense,” it must first provide timely, written denial of the No-Fault claim.

This case serves as an important reminder to insurers regarding the potential pitfalls of failing to strictly adhere to New York’s Byzantine No-Fault procedures, most important among them being timely, written denial of first-party benefits.

 

NY Products Liability Update -- Risk/Utility Theory Adroitly Used by Plaintiff who Obviously Misused the Product:

There is a new and interesting decision from an intermediate appellate court in New York. In this case, the plaintiff was injured when the flammable floor sealant he was using ignited after coming into contact with an unidentified ignition source. In moving for summary judgment against plaintiff’s strict products liability design defect claim, the defendant manufacturer and the defendant distributors submitted the affidavits of experts who established that: (1) the volatile solvent was critical to the sealant’s ability to dry quickly; (2) the sealant was cost effective; and, (3) the product could be safely used when the warnings and instructions on the label were followed. In opposition, plaintiff submitted the affidavits of two experts who established that: (1) since 2003, non-flammable water-based sealants have improved dramatically and have been “commonly used and commercially accepted in the industry”; (2) they generally dried in less than 20 minutes, which is the same drying time as a solvent-based sealant; (3) the cost of either product is the same, with the water-based sealant somewhat more cost-effective because it covered a greater area; and (4) solvent-based sealants cannot be safely used because, even if the directions are followed, unavoidable ignition sources and lack of wind currents can frustrate a user’s ability to use the product in safety. The trial court entered an order granting the defendants’ respective motions. The Second Department reversed, and denied the motions. The court noted that although the same product was the subject of an unsuccessful products liability action in 1999, because water-based solvents were shown at that time not to have the same utility as solvent-based sealants, the plaintiff here raised issues of fact, pursuant to a risk/utility analysis, as to “whether the utility of solvent-based sealants does not now outweigh its inherent dangers.” See Andrade v. T.C. Dunham Paint Co., Inc., 2012 NY Slip Op 06905, (2nd Dep’t. 10/17/12).

One would think that the appellate court would be more pro-active here in sticking its neck out and making this decision as a matter of law, as the trial court did, because otherwise the risk/utility test as implemented by this court would seem to almost always invoke fact questions and this is a difficult and complicated task for a jury. What is disturbing here is that this case involved a plaintiff who obviously didn’t follow instructions and warnings regarding obtaining proper ventilation. Otherwise, there would not have been ignition – from an unidentified source, no less. Yet, the jury has been left to potentially impugn the entire industry of solvent-based floor sealants as simply being too dangerous.

 

New Appellate Court Decision in NY re: Waiver of Contribution Claims by Reason of Settlement with the Plaintiff:

A new decision from an appellate court in NY regarding the pitfalls of General Obligations Law §15-108 which results in a waiver of a defendant's contribution claims against joint tortfeasors by reason of a pre-judgment settlement with the plaintiff.

In this medical malpractice action, plaintiff obtained a $2.4 million verdict, which she settled with the defendant before entering judgment. Left remaining, however, was the defendant's separate third-party action for contribution against two physicians. In moving to dismiss the third-party action, the third-party defendants contended that the defendant/third-party plaintiff waived any rights to contribution because she settled the primary action before a judgment was entered on the verdict, citing GOL §15-108(c). The trial court's order denying the third-party defendants' motion to dismiss was reversed, and the motion was granted by the Fourth Appellate Department. The court held that although a tortfeasor who settles with an injured party after the entry of a judgment retains the right to seek contribution from other tortfeasors under GOL §15-108(d)(3), a tortfeasor who settles with an injured party before judgment may not seek contribution from any other tortfeasor or potential tortfeasor, citing GOL §15-108(c). See Carlin v. Patel, 2012 NY Slip Op 06682 (4th Dep't, Decided 10/5/12).

Aside from noting that the defense counsel in this case might be subject to a legal malpractice action by the defendant and/or its carrier, it is important to note that, in N.Y., if you want to preserve the ability to seek contribution from jointfeasors – whether co-defendants or third party defendants – with respect to a prejudgment settlement, then it is crucial that you get their consent to the settlement which expressly preserves the ability to proceed with the contribution claims. This, of course, would normally also require that you are settling the entire liability with the plaintiff and include the joint tortfeasors in the release that the plaintiff executes such that the plaintiff is no longer free to pursue them.

 

Significant New, and Favorable, "Supplemental UM" Decision in N.Y.:

A new Second Department decision in NY, held that Supplemental UM limits are reduced not just by the auto liability limits of the other offending vehicle involved in the accident but also any other recoveries, in that case from Dram Shop Act defendants (who served the offending driver alcohol):

Weiss v. Tri-State Consumer Ins. Co.
9/26/2012
Second Department

INSURANCE LAW. SUM. SUPPLEMENTARY UNDERINSURED MOTORIST ENDORSEMENT. SETTLEMENTS FROM NON-MOTORIST TORTFEASORS. REDUCTION OF COVERAGE. Plaintiffs, as administrators of the estates of their mother and father who were killed in a two-car accident with a drunk driver, brought an action to recover $400,000 in SUM benefits. In moving for summary judgment, plaintiffs contended that the subject 250/500 SUM endorsement, which conformed to 11 NYCRR 60-2.3, was reduced to $400,000 based upon the payment by the defendant motorist's carrier of $100,000 out of its 50/100 policy. In opposition and in support of its cross-motion for summary judgment, the defendant (SUM carrier) contended that the available SUM benefits should be reduced to $145,000 because, in addition to the defendant driver's $100,000 settlement, two defendants who were sued under the Dram Shop Act settled for $255,000. Order granting plaintiffs' motion for summary judgment, and denying the carrier's motion, is reversed in its entirety. Contrary to the plaintiffs' contention that net SUM benefits are triggered and calculated based upon the exhaustion of the full liability limits of just one tortfeasor, any settlements obtained from additional tortfeasor(s) must be deducted pursuant to the non-duplication provisions of 11 NYCRR 60-2. Weiss v. Tri-State Consumer Ins. Co. Decided 9/26/12.

 

Significant New Bad Faith Law in California:

The federal appellate court for the Ninth Circuit (Northern California) has recently held that California law requires that an insurer must promptly undertake good faith settlement efforts where liability appears reasonably clear even in the absence of any settlement demand from the claimants counsel. The court recognized that the California state courts had not addressed this particular issue. This is very similar to the potentially dangerous law – for insurers – that has existed in Florida for quite some time. The court also held that the genuine dispute doctrine does not apply to the duty to settle third party liability claims. See Du v. Allstate Ins. Co., 681 F.3d 1118 (9th Cir. 2012). Quite succinctly, the court stated:

California courts have commonly applied the duty to settle to situations in which the insurer unreasonably rejects a settlement offer within policy limits. E.g., Kransco, 97 Cal.Rptr.2d 151, 2 P.3d 1; Crisci v. Sec. Ins. Co. of New Haven, Conn., 66 Cal.2d 425, 58 Cal.Rptr. 13, 426 P.2d 173, 176 (1967). See PPG Indus., Inc., 84 Cal.Rptr.2d 455, 975 P.2d at 655. At issue in this case is whether the duty more broadly requires an insurer to effectuate settlement when liability is reasonably clear, even in the absence of a settlement demand. For several reasons, we conclude that it does. Du, 681 F.3d at 1123.

NY Update: High Court Says Insurer May Rely on Exclusions Notwithstanding its Alleged Claims Settlement Practices Violations:

The Court of Appeals in N.Y. resolved an issue on which the intermediate appellate courts have sometimes differed – even within the same appellate departments -- to the effect that an allegation of an insurer’s violation of the statute which requires, essentially, prompt and fair settlement practices, does not preclude the insurer from relying on coverage defenses and exclusions in an ensuing coverage/breach of contract case.

In this case, the plaintiff, insured, brought an action to recover the proceeds of a fire insurance policy and moved to dismiss three of the defendant carrier’s affirmative defenses, each of which was based upon policy exclusions, on the ground that the defendant allegedly violated provisions of 11 NYCRR 216.6(c) – i.e., Standards for Prompt, Fair and Equitable Settlements. The Supreme Court (trial court) denied plaintiff’s motion. The Appellate Department affirmed, refusing to overrule its previous holdings that a failure to comply with the cited regulation does not preclude an insurance company from relying on a policy exclusion to disclaim coverage. Thankfully, the Court of Appeals also affirmed, putting an end to this issue. See Mallory v. Allstate Insurance Co., 2012 NY Slip Op 06045 (Ct. App., August 28, 2012).

 

Products Liability Update -- Florida Court Holds that Component Manufacturer's Duty to Warn Runs Primarily to Intermediary Manufacturer, Not End User:

A frequent issue that arises in products liability cases is whether the manufacturer of a component part – i.e., a designed component, not a raw material – must warn the end user or whether an adequate warning to the intermediary manufacturer of the final product discharges its duty. The Third District Court of Appeals (Miami and the Keys) recently held that a warning to the intermediary manufacturer is sufficient if it was itself an adequate warning of the potential dangers of the component and its was reasonable under the circumstances for the component manufacturer to rely on the final product manufacturer to effectively pass the warnings on to the consumer. In this regard, the court said that the standard is “overall reasonableness” and the factors to be considered are “the gravity of the risks posed by the [component], the likelihood that the intermediary will convey the information to the ultimate user, and the feasibility and effectiveness of giving a warning directly to the user.” In this regard, the court cited and adopted Restatement (Third) of Torts: Products Liability, §2 (1997)(comment i).

In this case, the product was Union Carbide’s “SG-210,” which contained a particular grade of chrysotile asbestos commonly used by intermediary manufacturers in joint compounds and in ceiling texture products. In this case, the court vacated a verdict because the jury instruction which pertained to the standards for the jury’s consideration of whether Union Carbide’s warnings were adequate failed to instruct the jury that Union Carbide could have discharged its warning duty by warning intermediary manufacturers and reasonably relying on them to warn end users. See Union Carbide Corp. v. Aubin, 37 Fla. L. Weekly D2018 (3d DCA, August 28, 2012).

 

FEATURED ARTICLE IN DEFENSE RESEARCH INSTITUTE:

Alan Levy, senior attorney in the New York office has published a featured article for the Defense Research Institute (DRI), on the recent Internet/Media reaction to the Progressive Insurance/Fisher claim controversy and how it was caused, in large part, by the specific insurance statutory/regulatory framework found only in Maryland, Virginia and D.C.

read full article >>

 

New York Court Works Coverage for Failing to File Termination Notice with the DMV:

In this case, the petitioner, a UM carrier, brought an action to permanently stay a UM arbitration filed by a passenger in the vehicle owned by its insured. At a single-issue evidentiary hearing, the Petitioner established that the offending vehicle was covered by liability insurance issued by the respondent carrier. In opposition, the respondent (i.e., the tortfeasor’s liability carrier) submitted evidence that it had, in fact, cancelled the policy before the date of the accident. The trial court denied the UM carrier’s petition but the appellate court reversed, and granted the petition. The court held that the Vehicle & Traffic Law §133 unequivocally requires a liability carrier to file with the DMV a notice of cancellation within 30 days after cancelling its insured’s auto liability policy, and that the failure to comply with the strict provisions of the statute invalidates the termination of coverage as to third parties. Since the respondent carrier did not demonstrate that it complied with the statute, even though it terminated with proper notice to its insured, it lost. See Matter of GEICO v. Phillip, 2012 NY Slip Op. 05966 (2nd Dep’t, August 15, 2012).

This case certainly underscores the importance of making the filing with the DMV within 30 days of termination of an auto liability policy.

 

Florida Federal Court Adopts Manufacturer's "Bare Metal" Defense:

The Southern District held that Florida substantive law would adopt the “bare metals” defense such that a manufacturer has no duty to warn of the known dangerous propensities of another company’s product which is foreseeable going to be used in conjunction with the defendant’s product as long as the dangerous product was not a component part of the defendant’s product and the defendant did not participate substantially in the design that called for the integration of the dangerous product. In this case, the issue was whether there was a duty to warn with respect to the known dangerous aspects of asbestos insulation and asbestos valve packing material that was to be used in conjunction with the defendant’s products – i.e., valves, pumps and turbines – in a Navy ship. Essentially, the court held that the defendant was not in the chain of manufacture or distribution of the dangerous asbestos products, and, hence, there was no duty to warn even though the defendant knew that asbestos insulation would be used in conjunction with its “bare metal” product. The court held as follows:

In this case, it is undisputed that defendants sold their product to Navy without insulation and did not manufacture sell or select the asbestos insulation ultimately used with their products on the Essex. Although there is evidence that the defendants valves, pumps and turbines contained internal asbestos containing gaskets and packing when the Essex was built, these original component had been replaced long before Faddish boarded the ship in 1958. There is no evidence that any of these replacement parts was made by any defendant or that defendants had any involvement with their installation. Accordingly, there is no evidence that any of the asbestos containing dust to which Faddish was exposed came from a product made by Crane, Warren or Westinghouse. On this predicate, where the source of asbestos specifications originated with the Navy, where defendants' own products were not inherently dangerous and did not contribute substantially to causing the harm, and where defendants did not participate substantially in integration of their “bare metal” products into the end design of systems aboard the Essex, the court finds no basis under Florida law for imposing a duty to warn of the risk of injury posed by the concededly foreseeable use of asbestos-containing materials in conjunction with defendants' products. See, e.g., In re Deep Vein Thrombosis, 356 F.Supp.2d 1055 (N.D.Cal.2005)(airplane manufacturer had no duty to warn airlines or passengers about risk of injury from unsafe seating designs where airlines purchases seating from separate manufacturing and installed seats without Boeing's involvement).
Faddish v. Buffalo Pumps, 23 Fla. L. Weekly Fed. D305, 2012 WL 3140200 (S.D. Fla., Aug 2, 2012).

 

43 Days Held too Long to Disclaim Coverage in New York:

Munoz v. City of New York
5/17/2012
First Department

INSURANCE LAW. LATE NOTICE. 43-DAY DELAY IN ISSUING DISCLAIMER. TIMELINESS. In this personal injury action, the defendants (a condominium and the Battery Park City Authority) impleaded their liability carrier seeking a judgment declaring that it had an obligation to defend and indemnify them in the primary action. In moving for summary judgment, the third-party plaintiffs contended that the carrier’s disclaimer was invalid because it was served 43 days after it was served with the third-party complaint. Order granting the third-party plaintiffs’ motion for summary judgment is affirmed. Grounds for disclaiming coverage were readily apparent on the face of the documents attached to the third-party complaint, which included an incident report about the accident signed one year before by the condominium’s property manager that was never tendered for coverage. Accordingly, the third-party defendant’s 43-day delay before disclaiming coverage was unreasonable as a matter of law. Munoz v. City of New York. Decided 5/17/12.



 

Another Anti-insurer Late Notice Decision from Appellate Court in New York:

City of New York v. Greenwich Ins. Co.
5/29/2012
First Department

INSURANCE LAW. DISCLAIMER. TIMELINESS. FIVE MONTHS DELAY. Plaintiffs (insureds) brought an action for a judgment declaring that the defendant (carrier) had a duty to defend and indemnify it in an underlying personal injury case. In moving for summary judgment, the carrier contended that it validly disclaimed coverage because: (1) the insureds gave late notice of the underlying accident; and (2) it had to investigate its right to disclaim because the letter tending coverage only provided the date of loss, without indicating when the insureds learned of the accident. In opposition and in support of their own cross-motion for summary judgment, plaintiffs contended that the carrier’s disclaimer was invalid because it was issued 5½ months after its tender of coverage. Order denying both motions is modified by granting plaintiffs’ motion. A carrier must give written notice disclaiming coverage based upon late notice “as soon as is reasonably possible” [Insurance Law §3420(d)(2)]. Here, the disclaimer was invalid as a matter of law because: (1) the defendant did not even begin its investigation until 35 days after it received plaintiffs’ tender; (2) it delayed sending its disclaimer for a total of 5½ months; and (3) even a cursory investigation would have disclosed grounds for disclaiming coverage. City of New York v. Greenwich Ins. Co. Decided 5/29/12.

 

Bad Faith - Florida Supreme Court Holds no First Party Claim for Breach of Implied Covenant of Good Faith :
Finally, we have a pro-insurer decision out of the Florida Supreme court. In this first party case involving hurricane damage, the Supreme Court held that Florida law does not permit a common law cause of action for breach of the implied warranty of good faith and fair dealing by an insured against its insurer based on the insurer’s failure to investigate and assess the insured’s claim within a reasonable period of time. Florida is a state in which an obligation of good faith and fair dealing is implied in all contracts, and this particular plaintiff tried to go that route against its insurer. The Court, thankfully, rejected that claim, but, of course, such claims can be brought as statutory bad faith claims under F.S. 624.155 (which, among other things, incorporates the Unfair Claims Settlement Practices Act). See OBE Ins. Corp. v. Chalfonte Condo. Assoc., Inc., 37 Fla. L. Weekly S395 (May 31, 2012).

 

New York Appellate Court Holds that a Plaintiff is not Entitled to a Partial Summary Judgment on Defendant's Fault Where There is an Issue of Comparative Negligence in the Case:

This is an interesting issue because it might also affect situations where you might want to not contest negligence, or just admit negligence (so as to look like a most reasonable defendant), but still keep the issue of the plaintiff’s negligence alive. In this crosswalk pedestrian knockdown case, plaintiff moved for partial summary judgment on liability. Trial court’s order granting plaintiff’s motion, with a direction that the damages trial includes the issue of plaintiff’s comparative fault, is modified by the First Appellate Department (4-1) by denying plaintiff’s motion. The court held that a plaintiff is not entitled to summary judgment as to liability where, as here, the record demonstrates a question of fact as to the plaintiff’s comparative fault. The court stated that “the causal role of each party's conduct should not be determined in isolation. . . .” Because of the divergence of holdings on this issue even within the First Department itself, the panel in this case called for resolution of the issue by the Court of Appeals.

See Maniscalco v. NYCTA, First Dep’t., decided 5/8/12. See 2012 NY Slip Op 03548.

 

Florida Appellate Court Strikes Down Parents' Indemnity of Provider of Commercial Services with Respect to their Minor Children:

This is a very interesting and potentially far-reaching decision. In this new decision from the Fourth District Court of Appeals (Ft. Lauderdale up to Titusville), the plaintiffs (parents) took their minor daughter to Claire’s Boutique to get her ears pierced in the store. An infection developed and the minor ended-up with serious permanent injuries allegedly as a result of the negligence of the store’s employees who performed the piercing procedure. The parents sued Claire’s on behalf of their minor daughter. Prior to performing the procedure, however, the store required the parents to execute an agreement that contained, among other things, a clause to the effect that the parents would indemnify the store for its own negligence with respect to the piercing procedure. The store, obviously, had a policy of requiring such indemnity agreements from parents of minors on whom they perform such ear piercings because parents cannot validly waive claims on behalf of their minor children. Significantly, the Fourth District held that the parents’ indemnity agreement was void, holding that it violated public policy. Recognizing the significance of their decision since it would apply to a parents’ indemnity of a provider of any commercial services with respect to their children, the court certified the issue to the Supreme Court of Florida as being one of great public importance.

See Claire’s Boutiques, Inc. v. Locastro, 37 Fla. Law Weekly D963 (4th DCA, April 25, 2012).

 

New York Appellate Court Holds Property Owner Excluded Under AI Endorsement of GC's Liability Policy:

In this very recent decision, the plaintiff, a General Contractor, brought a DJA seeking a declaration that the defendant liability insurer had a duty to defend and indemnify an additional insured, which was the property owner, in an underlying personal injury action. Both sides moved for summary judgment, with the carrier contending that coverage was excluded under the Additional Insured Endorsement, which provided, among other things, that the insurance did “not apply to . . . liability imposed on the Additional Insured by statute, ordinance or law.” The trial court’s order granting plaintiff’s motion and denying the carrier’s motion was reversed in its entirety. The First Department held that the carrier properly disclaimed coverage. It noted that the Additional Insured endorsement did not cover the putative AI, property owner, because the court in the underlying action dismissed all claims against the additional insured other than those based upon statutory liability under the Labor Law §§240(1) and 241(6). This is a very significant decision because almost every time there is an injury on a construction site in N.Y. a claim is made against the property owner pursuant to the Labor Law, especially if, in any respect, the injury has to do with scaffolding.

See Concept Total Carpentry, Inc. v. Tower Insurance Co. of N.Y., 2012 N.Y. Slip. Op. 03367, Decided 5/1/12 (First Department).

 

NY Appellate Court says Ortho and Radiologist IME's not competent on biomechanical and causation issues:

In this fender/bender chain collision in the waiting line of a fast food drive through, plaintiff, who was driving a truck, alleged that the collision “precipitated, triggered and/or accelerated a preexisting and prior condition” consisting of lumbar spondylolisthesis and disc tears, thoracic disc herniations, and cervical disc herniations. In moving for summary judgment, the defendants’ orthopedic surgeon and radiologist both affirmed that the collision did not cause any exacerbation because the collision was insignificant and inconsistent with an exacerbation of the plaintiff’s condition. The trial court’s order denying defendants’ threshold motion is affirmed. The Third Department held that neither of the defendants’ physicians was qualified to offer an opinion with respect to the biomechanics or physics of the collision. See Russell v. Pulga-Nappi, 2012 NY Slip Op 02745 (3d App. Dep’t, April 10, 2012).

Accordingly, in those minimal impact cases where the plaintiff is trying to claim serious injury as a consequence of exacerbation of preexisting orthopedic conditions – and that’s a lot of cases – you need to seriously consider getting a biomechanical expert instead of just relying on the IME to cover the causation issue.

 

MFR Coverage on Large Fleets on Long Term Lessors:

On May 6, 2008, in Long Island, New York, a severe motor-vehicle collision occurred resulting in one fatality and several people injured. In addition to a wrongful death claim, numerous personal injury and property damage claims were filed against the at-fault driver, who was operating a leased vehicle at the time of the collision. However, the lessee’s automobile insurance carrier had previously cancelled coverage due to non-payment of premiums; and, as a result, plaintiffs sought recovery against the owner/lessor as well as the lessee.

A recent federal statute bars vicarious liability against vehicle lessors, 49 U.S.C. § 30106(a) (“The Graves Amendment”), but here the plaintiffs also argued that the Graves Amendment does not exempt lessors from NY’s Minimum Financial Responsibility (MFR) statute, which requires that all vehicles licensed in New York have at least $25,000/50,000 in liability coverage. The court unequivocally held, however, that New York’s MFR statute, VTL §370, only applies to “rental vehicles” and not “leased vehicles.” The impact of this decision on long-term motor vehicle lessors cannot be understated. The cost to provide even MFR coverage on large fleets of long-term leased vehicles is very significant.

 

New York Appellate Court Holds Year is too Long to Assert On-Point Exclusions:

The statute in NY says that a liability carrier must assert coverage defense as soon as reasonably possible. See Insurance Law §3420(d). That doesn’t give a whole lot of guidance. The 1st Department (Manhattan) has just held that a year is too long.

In this declaratory judgment action, defendant (carrier) moved for leave to amend its answer to assert a disclaimer based on the subject policy’s exclusion for residential projects. In opposition, plaintiffs contended that the defendant was on notice of the underlying claim for one year. Order denying the carrier’s motion is affirmed. The court noted that although motions for leave to amend are ordinarily granted, the carrier’s unexplained delay in asserting the exclusion was unreasonable as a matter of law. See Parkview Owners, Inc. v. DF Restoration, Inc., 2012 NY Slip Op 02772, First Department, Decided 4/12/12.

So, if you’re as late as the carrier in this case in asserting an exclusion, and you’re thinking that you can save the exclusion by arguing the general rule that on-point exclusions cannot be waived, or coverage cannot be created by estoppel, or similar such argument, forget it -- at least in first department. You’ll have to assert a reasonable excuse for the delay.

 

NEW FLORIDA DECISION REGARDING CHOICE-OF-LAW IN FIRST PARTY BAD FAITH CONTEXT:

This new case involved a bad faith action brought in Orange County (Orlando) Florida by a Minnesota resident who was involved in an accident with an uninsured person in Florida against her own UM insurer, West Bend Mutual Ins. Co., which is a Wisconsin insurer. The insured/plaintiff claimed bad faith against the insurer by allegedly failing to settle a UM claim in good faith, obviously trying to take advantage of Florida’s liberal law pertaining to such bad faith actions. The policy in question was issued by the Wisconsin insurer to the insured/plaintiff in Minnesota. The 5th District Court of Appeals in Florida held that Minnesota’s substantive law applied to the action under the lex loci contrctus analysis, i.e., the place of contracting. The court rejected the plaintiff/insured’s argument that the place of the tort controls the issue as to which state’s law applies. More significantly, the court rejected the plaintiff’s argument that since the matter involved improper claims handling, it was a performance issue and Florida law applied since the performance (handling the claim) was due in Florida. The court disagreed with this argument since this was a bad faith case which arose from a first party UM claim, and it, thus, distinguished the performance-based analyses done by cases where the bad faith arose from failing to properly handle a third party claim brought against an insured which was based in Florida. See Higgins v. West Bend Mut. Ins. Co., 37 Fla. L. Weekly D757 (5th DCA, March 30, 2012).

Accordingly, if you ever have a first claim such as a UM claim made against you by an insured who is a resident of a state – any state other than Florida -- arising from an accident in Florida, the substantive law of the place where the insured is a resident controls. In most cases, this won’t amount to much of a difference, but if the claim goes awry, for whatever reason, and you are sued for bad faith, it can be very significant to be able to establish that the substantive bad faith law of Florida does not apply.

 

New York High Court Decision Regarding WC's Carrier's Apportionment Liability for Fees for Future Medical Expenses:

This is an interesting new case regarding the apportionment to be done as to a comp carrier’s obligation to pay an equitable share of fees incurred by a plaintiff in obtaining a judgment that includes future medical expenses in a third party liability case. Here, the plaintiff, who sustained a spinal cord injury and was rendered a paraplegic, received a multi-million dollar award from an Erie County jury, which included an award of $4.65 million for future medical expenses that was reduced by the court to a present value of $4,259,536. Although the State Fund acknowledged its equitable fee obligations under the Kelly line of decisions, it refused pay its equitable share of litigations costs (33.5) for the future medical expenses awarded by the jury as “fresh money” by contending that it was not bound by the jury’s award and was only obligated to pay the apportionment when the future medical bills were actually incurred. Plaintiff then commenced a proceeding to compromise the entirety of the Fund’s lien pursuant to WCL §29(1). The trial court granted the petition and awarded the plaintiff $1,399,734 in “fresh money” based upon the Fund’s equitable share of the litigation costs with respect to the present value of the future medical expenses awarded by the jury. Appeals were taken. The Court of Appeals ultimately held that a workers’ compensation carrier, including the State Fund, is not bound by a jury’s award for future medical expenses because it is not an exact measurement of those expenses. Rather, the benefit received by the carrier can only be determined when the future medical expenses are actually incurred. Thus, the Court held that it is up to the trial court to “fashion a means of apportioning litigation costs to be paid by a comp carrier with respect to future medical expenses as they accrue and to fashion a means to monitor (e.g., by court order or stipulation of the parties) how the carrier’s payments to the claimant are made.”

See Matter of Bissell v. Town of Amherst, 2012 NY Slip Op 02250 (Decided 3/27/12).

 

Very Recent Florida Appellate Decision Strikes Down Proposal for Settlement (Offer of Judgment) That Did Not Attach Release:

This new decision is an April 4, 2012 Fourth District Court of Appeals opinion holding invalid the defendants' Proposal for Settlement following a defense verdict as the proposed releases requiring indemnity and confidentiality agreements were not attached to the proposals, nor were their terms set forth within the proposals. I have cut-and-paste the actual decision below, along with the header, from the current Florida Law Weekly since it is pretty short:

Torts -- Medical malpractice -- Attorney's fees -- Proposal for settlement -- Validity -- Proposals for settlement conditioned upon plaintiffs signing releases, indemnity agreements, and confidentiality agreements did not satisfy particularity requirement of rule 1.442(c)(2) where none of the agreements were attached to proposals, nor were their terms included in proposals -- Error to award attorney's fees pursuant to these proposals

OLIVIA ZIADIE, as plenary guardian of the person and property of FRANCIS ZIADIE, incapacitated, and for FRANCIS ZIADIE, as parent and legal guardian of PHILIP ZIADIE and PAUL ZIADIE, Appellants, v. DAVID M. FELDBAUM, M.D. and SURGERY GROUP OF SOUTH FLORIDA, INC., Appellees.
Fourth District. Case No. 4D10-3043. April 4, 2012. Appeal from the Circuit Court for the Seventeenth Judicial Circuit, Broward County; Charles M. Greene, Judge; L.T. Case No. 04-3336 26. Counsel: Bard D. Rockenbach of Burlington & Rockenbach, P.A., West Palm Beach, and Crane A. Johnstone of Sheldon J. Schlesinger, P.A., Fort Lauderdale, for appellant. Roberta G. Mandel of Roberta G. Mandel, P.A., Miami, for appellees.

(Per Curiam.) We reverse an order awarding attorney's fees pursuant to several proposals for settlement to all of the plaintiffs/appellants. The defendants offered each plaintiff $1,000 to settle this medical malpractice action, conditioned upon the plaintiffs signing releases, indemnity agreements, and confidentiality agreements. None of the agreements were attached to the proposals, nor were their terms included in the proposals. After a trial at which the defendants prevailed, they moved for attorney's fees pursuant to the proposals for settlement, which the trial court granted and for which it awarded fees. The trial court erred, because the proposals for settlement did not comply with Florida Rule of Civil Procedure 1.442. Without the attachment of the agreements for release, indemnity, and contribution, or an inclusion of their terms in the proposals of settlement, the proposals did not satisfy the particularity requirement of Rule 1.442(c)(2), which requires the settlement proposals to "state with particularity any relevant conditions" and "non-monetary terms." [fn.1]. See State Farm Mut. Auto. Ins. Co. v. Nichols, 932 So. 2d 1067, 1079 (Fla. 2006). Thus, they are "too ambiguous to satisfy rule 1.442." Id.

Reversed. (Warner, Stevenson and Conner, JJ., concur.)
_________________

1. Although appellants also argue that the indemnity and confidentiality agreements could constitute monetary terms, we do not address this question, as that would depend on the terms of the agreement, which were not disclosed.


 

NY High Court: Homeowners not Responsible for Social / Party Guests Who Drive Away Drunk:

The New York Court of Appeals recently handed down a decision, “Martino v. Stolzman”, 2012 NY Slip Op 01145, which provides substantial legal protection to homeowners who provide alcohol to social guests who are later involved in automobile accidents. The subject accident occurred as the offending driver (who had a BAC of .14, nearly twice the legal limit) left a New Years party in the early hours of January 1st, 2007. In addition to suing the intoxicated driver, the injured plaintiffs also sued the homeowner/party host alleging 1) violation of NY’s Dram Shop Act and 2) the homeowner had a common law duty to prevent their guest from leaving the premises and driving home intoxicated.

After the trial court denied the homeowner’s motion to dismiss both counts; the Appellate Division (in a 3-2 decision) dismissed the Dram Shop count but allowed the common law claim to go forward. In a unanimous decision, the Court of Appeals dismissed all of plaintiff’s claims against the homeowner. First, NY’s Dram Shop Act requires a predicate of commercial sale of alcohol “for profit” in order for there to be statutory liability. As for the common law claim, the court held that although landowners have a duty to control the conduct of third persons while on their premises, “requiring social hosts to prevent intoxicated guests from leaving their property would inappropriately expand the concept of duty.” The court held that the defendant homeowner was no longer in a position to control the intoxicated driver once he entered his vehicle and drove away.

Simply put, it appears that under NY law, a homeowner/party host has no legal duty to take away the car keys of a drunken guest.

 

RECENT TOXIC MOLD DECISION IN NY:

The plaintiff, who was a tenant in the defendant’s apartment building for many years, brought an action to recover damages for respiratory injuries allegedly sustained as a result of toxic mold in the basement of the building which eventually spread to her apartment one floor above. Both parties moved for summary judgment, with the key issues being whether the medical evidence established that the types of molds in the premises were associated with the types of respiratory ailments suffered by the plaintiff (general causation), and whether the plaintiff’s exposure was sufficient to cause her injuries (specific causation). On motions for summary judgment, the plaintiff submitted an affidavit from her treating physician, who relied upon a number of peer-reviewed studies and opined that the conditions in the plaintiff’s apartment caused her respiratory injuries. The defendant contended that the opinions of the plaintiff’s treating physician were inadmissible under Frye. The trial term of the Supreme Court granted the defendant’s motion for summary judgment on the ground that it was constrained by the First Department’s prior holding in Fraser v. 301-52 Townhouse Corp., 57 App.Div.3d 416 (2008), where the limited studies submitted by plaintiff’s experts in that case did not establish that the types of respiratory injuries suffered by the plaintiff resulted from toxic mold. The First Department appellate court held that the order granting defendant’s motion for summary judgment should be reversed (3-2). The court held that the opinions of plaintiff’s treating physician satisfied Frye because the scientific studies he relied upon facially demonstrated that exposure to toxic mold can cause the types of respiratory symptoms claimed by the plaintiff (general causation); and because he reached his conclusion on causation after completing a differential diagnosis and ruling out causes other than the toxic mold (specific causation). See Cornell v. 360 W. 51st St. Realty, LLC., 2012 NY Slip Op 01643 (First Dep’t, Decided 3/6/12).

This case cuts back on the safeguards of the earlier Fraser decision. It looks like plaintiffs can now overcome a bona fide “Frye motion” by the defense merely with an affidavit of his or her treating physician so long as the affidavit cites third party studies/articles on the general causation issue.

 

N.Y. Appellate Court addresses costs incurred with respect to ESI production:

The First Appellate Department follows-up on VOOM HD Holdings decision (see below) re: voluminous – and costly -- ESI searches and production. In this new case, the Plaintiff, a major bank, brought an action against a mortgage origination company to recover losses arising out of its purchase of a trust of 30,000 subprime mortgages that were originally securitized by the defendant. Concurrently with the commencement of the action, plaintiff served discovery demands for electronically stored information (ESI) and other documents. In response, the defendant moved for an order, among other things, requiring the plaintiff to pay for the costs of searching, retrieving and producing the documents and the attorneys fees associated with it. The Supreme Court, Trial Term, in accordance with New York’s long standing rule that the party requesting discovery must bear the costs of production, granted the defendant’s motion to the extent of directing that the plaintiff was to bear the costs of the search, retrieval and production of the ESI. The First Department reversed the order, with a direction that the defendant is to bear the discovery costs, subject to reallocation under the Zubulake standard. The First Department, in adopting Zubulake v. UBS Warburg, LLC, (117 FRD 309, 317-18), with respect to apportioning the costs associated with ESI discovery, holds that the producing party should bear the initial costs of searching for, retrieving and producing discovery, with an allocation of costs upon a showing by the producing party that costs should be shifted. In making such a determination, the First Department notes that the following nonexclusive factors should be considered by the court, as listed in Zubulake: “(1) the extent to which the request is specifically tailored to discover relevant information; (2) the availability of such information from other sources; (3) the total cost of production, compared to the amount in controversy; (4) the total cost of production, compared to the resources available to each party; (5) the relative ability of each party to control costs and its incentive to do so; (6) the importance of the issues at stake in the litigation; and (7) the relative benefits to the parties of obtaining the information.” See U.S. Bank N.A. v. GreenPoint Mortgage Funding, Inc., 2012 NY Slip Op 01515 (Decided 2/28/12).

 

N.Y. Appellate court decision re: open and obvious change in elevation on floor:

This is a potentially useful case since there’s never any shortage of slip and fall cases, whether under CGL’s, commercial property or homeowners’ policies. In this case the plaintiff was injured from a fall when she missed a five-inch transition step from a hallway into a banquet room at the defendants’ premises. Plaintiff alleged that the step constituted a latent defective condition because it created “optical confusion,” and that it violated §27-375(d)(2) and (f) [handrail for step having less than two risers in succession] and §27-370(d) [ramp required in an exit passageway where there are fewer than two risers] of NYC’s Building Code. In moving for summary judgment, the defendants submitted photographs of the area, depostion testimony, and the affidavit of a professional engineer who opined that the step did not constitute a latent defect and that adequate warnings were provided, including reflective strips and a sign which read “Step Down,” with an arrow, that were visible to anyone. In opposition, the plaintiff submitted her own expert’s affidavit, who stated that the similarity of the flooring in the hallway and the banquet room obscured the step. The trial court’s order granting defendants’ motion for summary judgment was affirmed. A step or change in elevation may be considered dangerous where the condition create “optical confusion,” such that the area gives the illusion of a flat surface. Here, the defendants’ submissions established that the area was “well-lit,” and that the stair strips were “bright.” Further, the defendants established that there was no history of any fall being reported so there was no actual notice. Lastly, the appellate court held that plaintiff’s reliance on the NYC Building Code was misplaced because the step in question was not an “interior stair,” did not serve as a “required exit,” and was not an “exit passageway” within the meaning of the cited code provisions. See Langer v. 116 Lexington Ave., Inc., First Appellate Department, 2012 NY Slip Op 01492 (Decided 2/28/12.).

 

LITIGATION HOLD ON ELECTRONIC EVIDENCE:

In this litigation between two major TV providers, plaintiff moved for discovery sanctions based upon the defendant’s spoliation of electronically stored information (ESI) after its executives made decisions that they knew would lead the litigation. The trial court’s order granting the plaintiff’s motion to the extent of directing an adverse inference charge and barring defendant’s named expert from testifying was affirmed. The First Department took this opportunity to adopt the federal Zubulake standard (220 FRD 212 (SDNY 20030)), as follows:
Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold to ensure the preservation of relevant documents. … The preservation obligation is not limited simply to avoiding affirmative acts of destruction. Since computer systems generally have automatic deletion features that periodically purge electronic documents such as e-mail, it is necessary for a party facing litigation to take active steps to halt that process. … Regardless of its nature, a hold must direct an appropriate employee to preserve all relevant records, electronic or otherwise, and create a mechanism for collecting the preserved records so they might be searched by someone other than the employee. The hold should, with as much specificity as possible, describe the ESI at issue, direct that routine destruction policies such as auto-delete functions and rewriting over e-mails cease, and describe the consequences for failure to so preserve electronically stored evidence. Where a party is a large company, it is insufficient, in implementing such a litigation hold, to vest total discretion in the employee to search and select what the employee deems relevant without the guidance and supervision of counsel.
In this new case, the defendant’s executives were planning for litigation months before suit was commenced, yet failed to implement a litigation hold, the court found, either intentionally or because of gross negligence. As to the latter, the court noted that failures which support a finding of gross negligence include: “(1) the failure to issue a written litigation hold, when appropriate; (2) the failure to identify all of the key players and to ensure that their electronic and other records are preserved; and (3) the failure to cease the deletion of e-mail.”

See VOOM HD Holdings, LLC v. EchoStar Satellite, LLC. Decided 1/31/12, First Department (Manhattan and the Bronx)

 

NEW SINKHOLE DECISION FROM THE FLORIDA SUPREME COURT:

The Florida Supreme Court has resolved an interesting and contentious issue in the sinkhole litigation context. It has to do with Florida Statute §627.7073(1)(c) which provides that the opinions, findings and recommendations of the engineer and professional geologist as to the verification or elimination of a sinkhole loss, and as to land stabilization and foundation repair shall be presumed correct. It had been a hot issue as to whether this presumption applies in the litigation context when the insured brings suit after going through the rather detailed claims process. In Universal Ins. Co. of North America v. Warfel, 37 Fla. L. Weekly S50 (Jan. 26, 2012) the Court reversed a trial court which treated this presumption as shifting the burden of proof on the issue at trial and which instructed the jury accordingly. The Court held that this statutory provision creates a “vanishing” or “bursting bubble” presumption which applies in the claims context only. It
plainly held that section 627.7031 was enacted to govern reports required
during the claims process and does not apply in the litigation.

 

"LATE NOTICE" DECISION IN NY:

The plaintiffs, as additional insureds, brought an action against an excess liability carrier for a judgment declaring that its late-notice disclaimer was untimely because it was issued four months after the tender of coverage was made. In moving for summary judgment, plaintiffs contended that the disclaimer was invalid as a matter of law because it was not issued “as soon as [was] reasonably possible,” as required by Insurance Law §3420(d), given that the tender indicated that the underlying personal injury action had been in suit for two years. In opposition and in support of its own counter-motion for summary judgment, the defendant contended that its notice was timely as a matter of law, following the First Department’s DiGuglielmo rule, because it took four months for it to complete its investigation as to whether the plaintiffs were “additional insureds” under the primary insured’s policy. The trial court granted insured’s motion for summary judgment and the order granting plaintiffs’ motion for summary judgment was affirmed. The First Department overrules its own decision in Guglielmo v. Travelers, 6 AD3d 344 (1st Dept. 2004), rev. denied 3 N.Y.3d 608 (2004), whereby it held that “an insurer is not required to disclaim on timeliness grounds before conducting a prompt, reasonable investigation into other possible grounds for disclaimer.” Instead, the first Department (Manhattan and the Bronx) now adopts the rule followed in the Second Department (Brooklyn and Long Island) that “§3420(d) precludes an insurer from delaying issuance of a disclaimer on a ground that the insurer knows to be valid — here, late notice of the claim — while investigating other possible grounds for disclaiming.” George Campbell Painting v. National Union Fire Insurance Co. Decided 1/17/12. See 2012 NY Slip Op 00254.

 

DANGEROUS INSTRUMENTALITY:

The Florida Supreme Court has just recently held that a farm tractor is a “dangerous instrumentality” so as to result in unlimited vicarious liability as against the owner of the tractor with respect to the negligence of the lessee or other permissive user. See Rippy v. Shepard, 37 Fla. Law Weekly, Issue No. 3 at S31 (Jan. 19, 2012).

 

WRONGFUL DEATH ACTIONS:

In this wrongful death action that resulted in a plaintiff’s verdict, the Supreme Court signed the plaintiff’s proposed judgment, which included pre-verdict interest. In doing so, the court discounted future wrongful death damages to the date of death, using a discount rate of 4.8%, and then calculated interest at the 9% statutory rate. On appeal, the parties stipulated that the sole question to be determined was “whether the trial court properly discounted future wrongful death damages back to the date of death, and awarded interest thereon from the date of death to the date of judgment.” The Appellate Division affirmed the judgment. The Court of Appeals affirms (5-2). In accordance with EPTL 5-4.3, “interest upon the principal sum recovered by the plaintiff from the date of the decedent’s death shall be added to and be part of the total sum awarded.” Thus, “the proper method for calculating pre-verdict interest in a wrongful death action is to discount the verdict to the date of liability, i.e., the date of death, and award interest on that amount from the date of death to the date of judgment.” Obviously, this could add, significantly, to the verdict amount in many a case in NY where they can take quite a while to work their way through the court system. Toledo v. Ni Christo. Decided 1/10/12. See 2012 NY Slip Op 00089.

 

AVIATION DECISION:

There is an interesting recent aviation decision from a Florida intermediate appellate court having to do with the “rolling” provision of the GARA repose period. The case was brought against an aircraft manufacturer by the pilot of a crop duster injured when the right wing spar failed. Pilot claimed a defective wing assembly and modification kit designed and manufactured by the same defendant. The court held that the repose period was not re-started by the replacement kit, which was a five bolt spar splice, and the service bulleting that went along with it. The court noted that the kit did not replace an item on the plane but rather modified the original design; the kit and bulleting did not constitute a “new part” and, thus, the court held, did not qualify under the rolling provision of GARA to extend the statute of repose period. Summary judgment for the manufacturer was, therefore, affirmed by the appellate court. See Inmon v. Air Tractor, Inc., 36 Fla. L. Weekly D2359 (4th Dist., Oct. 26, 2011).

 

CLICK IT OR WAIVE IT:   A practical guide to using the 'seatbelt' defense. By Alan R. Levy

From the first day of torts in law school, attorneys are taught the maxim that a plaintiff has a duty to mitigate his or her own damages. Over a century of New York law holds that a plaintiff "who claims to have suffered personal injuries by reason of defendant's negligence or other tortious conduct is required to use reasonable and proper efforts to make damage as small as practicable, and is not entitled to recover for any damage which by the use of such effort might have been avoided.....

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PRODUCTS LIABILITY:   The Door Is Open Once Again to Product Manufacturers Who Seek the Benefits of the Statute of Repose. By Alan R. Levy

An unpublished Appellate Division decision which went almost entirely unnoticed by the legal community last summer may have a significant impact in the realms of both construction law and products liability law involving products used in commercial and residential real estate construction projects. In Miles v. Deluxe Bldg. Systems, Inc., 2009 WL 2224258 (App. Div. 2009), a plaintiff suffered personal injuries when the second story of his modular home collapsed.....

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