Torts, Insurance and Compensation Law Weblog

In BP Air Conditioning Corp. v. One Beacon Ins. Grp., the New York Court of Appeals held that in the context of a Comprehensive General Liability insurance policy, additional insured coverage is not contingent upon a liability finding and that the obligation of an insurer to provide a defense to an additional named insured under the policy exists to the same extent as it does to a named insured.

The Court also addressed an issue regarding regarding priority of coverage.

On June 20, 2007, the New York Senate passed a Bill that will eliminate New York's "no-prejudice rule." After passing the Bill, the Senate referred Bill No. 06306 (access Bill here) to the New York Assembly, which in turn, referred the Bill to its Judiciary Committee. As of July 20. 2007, the Bill has been placed before Governor Spitzer (see Bill's status here).

New York's no-prejudice rule sets forth a standard that presumes prejudice regarding late notice of claim to a primary insurer. An insured's failure to satisfy the condition precedent of proffering a timely notice of claim, absent a valid excuse for the late notice under New York's current no-prejudice rule, vitiates the insurance policy. The New York "no prejudice" rule for primary insurers is a limited exception to two established rules of contract law: (1) that ordinarily one seeking to escape the obligation to perform under a contract must demonstrate a material breach or prejudice * * *; (2) that a contractual duty ordinarily will not be construed as a condition precedent absent clear language showing that the parties intended to make it a condition.

A mere two years ago, the State's highest Court, the New York Court of Appeals, discussed in Argo v. Greater New York Mut. Co., 4 N.Y.3d 332, 794 N.Y.S.2d 704, 827 N.E.2d
762 (2005), the benefits of the no-prejudice rule under a liability insurance policy. The Court stated:

A liability insurer, which has a duty to indemnify and often also to defend, requires timely notice of lawsuit in order to be able take an active, early role in the litigation process and in any settlement discussions and to set adequate reserves. Late notice of lawsuit in the liability insurance context is so likely to be prejudicial to these concerns as to justify the application of the no prejudice rule.

We'll keep you apprised as to whether Governor Spitzer signs the Bill.

Yesterday, Governor Eliot Spitzer vetoed Bill No. 06306 that jeopardized New York's "no prejudice" rule (see prior post discussing no prejudice and Bill here).

I will post the veto memorandum when I obtain it.

Thanks to TICL's very own Jean for the quick notification of this news.

Dan Kohane of Hurwitz and Fine P.C. has written this summary about activity on possible bills on New York's no-prejudice rule. See prior posts about no-prejudice legislation here and here.

The New York Court of Appeals recently heard oral arguments on whether an insured may recover consequential damages in a breach of contract action against his or her insurer.  The two appeals -- Bi-Economy Market, Inc. v. Harleysville Ins. Co. of New York [Fourth Department] and Panasia Estates, Inc. v. Hudson Ins. Co. [First Department] -- reached opposite results.

The Fourth Department in Bi-Economy held that the insured could not recover consequential damages.  The Court observed that the insurance policy expressly excludes coverage for consequential losses, and thus it cannot be said that such damages were “contemplated by the parties when the contract was formed.”

By contrast, the First Department in Panasia held that the insured could recover consequential damages, citing   Acquista v. New York Life Ins. Co., 285 A.D.2d 73, 730 N.Y.S.2d 272 [2001] ).  The insurance policy in Panasia excluded consequential losses.  The First Department held that the insurer had not shown that the exclusion was an applicable provision and observed that the terms "consequential loss" and "consequential damages" are not synonymous.

The forthcoming decision will finally put to rest whether consequential damages are recoverable in this context.

Who says insurance coverage is boring? Check out the United States Court of Appeals for the Ninth Circuit's opinion in Manzarek v. St. Paul Fire & Marine Ins. Co. -- yes, that's Ray Manzarek the famous keyboard player of The Doors. In this insurance coverage and bad faith lawsuit arising out of two lawsuits involving members of the rock band, The Doors, dismissal of plaintiffs' complaint is reversed and remanded where: 1) the underlying complaints raised at least the potential for coverage under the operative insurance policies; and 2) the district court abused its discretion by not giving plaintiffs an opportunity to amend their complaint.

The Decision was unanimous -- 3-0, not 5 to 1 or 1 in 5. Apparently everyone also got out of there alive.

The New York Court of Appeals' decision in Arons v. Jutkowitz and Kish v. Graham raised quite a stir. The Court held that opposing counsel may conduct an ex parte interview of the adversary's treating physician post-note of issue where that party puts his or her medical condition at issue.

Litigants are now required to provide their adversary with HIPAA compliant authorizations that permit the interview. The Chief Administrative Judge, by order dated February 27, 2008, promulgated an official form to be used as the litigant's authorization to allow the treating physician to submit to an ex parte interview. The authorization is addressed to the physician. You can obtain this form here.

Here is all the current information on Senator DeFranciso's proposed to prohibit ex parte interviews of treating physicians in malpractice and wrongful death actions. Your comments are welcome and encouraged below.

For an article in this Sunday's New York Post, journalist Susan Edelman is looking for malpractice or personal injury lawsuits to cite as examples of so-called "never events,'' or preventable medical errors. They include: wrong-site surgery, wrong body part, wrong procedure, wrong patient; "retained foreign object;'' death or near-death and/or severe injury from medication errors; abducted infants; etc. Along with data from the state Department of Health, she hopes to include some details from some recent cases and, if possible, comments from the patients.

Please feel free to contact Susan directly off-list if you have material responsive to this query.

e-mail address: sedelman@nypost.com

Desk phone: 212-930-8062.

Cell: 917-584-7675

Thank you to Paul at Supraspinatus for the head's up.

Practitioners often grumble about the New York Court of Appeals' holding in Brill v. City of New York -- i.e., the outside time limit for a summary judgment motion is 120 days after the filing of the note of issue, unless good cause is shown for the delay.  During the first Session of the Court's new Term, the Court will revisit what constitutes "good cause" under CPLR 3212.

The New York Court of Appeals recently addressed at oral argument the following certified question in Briggs Avenue LLC v. Insurance Corp. of Hanover.  Here is the issue:

When an injured party begins its suit against an insured by serving process on the Secretary of State, who, under New York corporate and limited liability company law, is the insured's agent for such service, does this service suffice to trigger the provisions in the relevant insurance policy that require the insured to inform its insurer in a timely manner that a suit has been brought, where: (a) the insurance policy does not expressly refer to notice that a suit has been brought being (a) the insurance policy does not expressly refer to notice that a suit has been brought being given to an insured's "representative" rather than the insured itself, and (b) the insured plausibly argues that - due to its failure to update its address with the Secretary of State - it had not received actual notice that the suit had been brought?

Briggs Avenue LLC, the owner of an apartment building at 2570 Briggs Avenue in the Bronx, was informed when part of the ceiling in one of the apartments fell down in May 2003, but apparently it was not informed that Nelson Bonilla, the son of the tenant, had been injured.  Briggs did not notify its liability insurer, Insurance Corporation of Hannover (ICH), of the incident.  When Bonilla filed a $2 million negligence suit against Briggs in July 2003, he served the complaint on New York's Secretary of State, who serves as Briggs's agent for service of process under New York law.  The Secretary of State forwarded copies of the complaint to the address it had on file for Briggs, but the company did not receive them.  Briggs had moved its office and failed to advise the Secretary of State of its new address. 

Briggs became aware of the lawsuit in late March or early April of 2004, when Bonilla moved for a default judgment and directly served the papers on Briggs at its new address.  Briggs then notified ICH of the lawsuit.  ICH disclaimed coverage, contending that Briggs violated the notification conditions of the policy by failing to notify ICH for eleven months after the ceiling fell and eight months after the suit was filed.  The policy required Briggs to notify ICH "as soon as practicable of an 'occurrence' or an offense which may result in a claim," notify it "as soon as practicable" when a suit is filed, and "immediately" send ICH any papers received in connection with a lawsuit.

The Appellate Division First Department recently decided a case involving the rights of parties covered by an Owner Controlled Insurance Program (OCIP). The case was Osowski v. AMEC Construction Management, Inc.
The opinion was written by Justice James M. Catterson.

An OCIP requires the owner, general contractor and all subcontractors to obtain all necessary insurance, including excess coverage through the same insurance companies. As part of the program all entities that are enrolled in the program waive all rights of subrogation that they may have against each other so long as the claims are covered by the OCIP. The subrogation rights survive if there are liabilities that are not covered by the OCIP.

In this case the plaintiff sustained multiple injuries including the loss of his left leg and multiple toes on his right foot while working on the new headquarters for the New York Times.. The defendants in the underlying personal injury action sought to bring in AIG as the excess carrier because of the potential size of the liability they were facing. AIG disclaimed. That caused the main defendants to impleaded the employer and sought contribution from them. This is known as Dole v. Dow Chemical action. The defendants also brought as well as bring a declaratory judgment action against AIG to challenge their disclaiming liability. The employer was allowed to intervene in the declaratory judgment action. The impleader claim would have been barred by the OCIP if AIG had accepted their responsibility to defend the claim as the excess carrier.

The plaintiff won a summary judgment motion for liability under §240(1) and §241(6) of the Labor Law. During the damages trail the plaintiff settled with the main defendants. The settlement was paid with a $2 million payment by Travelers (the initial liability carrier for the limits of their policy). An additional $10 million was paid to the plaintiff on behalf of the main defendants by an irrevocable and unconditional letter of credit paid for by AIG for the benefit of the plaintiff. The settlement was to be confidential between the parties to the settlement. Part of the agreement was that although AIG was to fund the letter of credit they were in no way accepting any liability in the case and were still maintaining that they had properly disclaimed liability in the case.

The employer in the case was advised that the main defendants in the personal injury case were to give the plaintiff the letter of credit without any information concerning the funding of the letter of credit. As far as the employer knew the defendants were funding the letter of credit. Eventually the employer was advised of the funding method of the letter of credit and made an oral motion to dismiss the third party case against itself as well as the declaratory judgment action against AIG.

At a later appearance in court the third party complaint against the employer was dismissed because the defendants had no out of pocket loss and therefore the employer was insulated from a subrogation or contribution action because of the OCIP.

The defendants and AIG appealed the decision of Justice Jane Solomon because they maintained that AIG was still maintaining that they properly disclaimed liability. On appeal the Appellate Division ruled that the decision to order full disclosure of the “confidential” settlement agreement was require by CPLR §3101(a) because it was relevant to a defense available to the employer. It was deemed relevant because it impacted on the claim for indemnification. If AIG paid for the letter of credit the defendants did not pay any money out of their pockets and the employer had the right to benefit from the OCIP which barred any claim for indemnification.

The Appellate Division also affirmed the fact that for all intents and purposes that AIG had paid on the policy it declaimed by funding the $10 million letter of credit. By doing it so it wiped out any claim the defendants may have had against the employer.

The Appellate Division was less than pleased with the actions of the attorneys for AIG. The court believed that the continued prosecution of the third party complaint against the employer and their lack of forthrightness and candor to the court raised substantial issues of whether or not their actions were in compliance with the Code of Professional responsibility. The Justices directed that the Clerk of the Court refer this matter to the Departmental Disciplinary Committee.