Reported in New York Official Reports at Evanston Ins. Co. v P.S. Bruckel, Inc. (2019 NY Slip Op 50589(U))
Evanston Insurance
Company, Plaintiff(s),
against P.S. Bruckel, Inc., State of New York, Henrique Staveski and Izabel Camargo, Defendant(s). |
13-60034
PLAINTIFF’S ATTORNEY:
TRESSLER LLP
ONE PENN PLAZA,
SUITE 4701
NEW YORK, NY 10119
DEFENDANTS’ ATTORNEYS:
TREVETT CRISTO SALZER PC
TWO STATE STREET, SUITE 1000
ROCHESTER, NY 14614
NEW YORK STATE DEPT OF LAW
300 MOTOR
PARKWAY
HAUPPAUGE, NY 11788
SACKS & SACKS ESQS
150 BROADWAY
NEW YORK, NY 10038
Sanford Neil Berland, J.
Upon the reading and filing of the following papers in this matter: (1) Notice of Motion, [*2]by defendant New York State, dated September 5, 2018, and supporting papers; (2) Notice of Cross-Motion, by defendant PS Bruckel, dated November 8, 2018, and supporting papers; (3) Affirmation in Opposition, by plaintiff, dated November 16, 2018, and supporting papers; and oral argument having been heard on February 14, 2019, it is
ORDERED that motions sequenced 007 and 009 are hereby denied without prejudice to renewal upon a more complete record; and it is further
ORDERED that all attorneys of record in this action are directed to appear before this Court in Part 6 for a compliance conference on April 24, 2019 at 10:00am at the Supreme Court located at One Court Street, Riverhead, New York; and it is further
The parties are reminded that pursuant to the Rules of the Chief Judge (22 NYCRR 202.27) the Court may without further notice grant judgment by default or order an inquest against any defendant who fails to appear or the Court may dismiss the action against any Plaintiff who fails to appear; or make such orders as may be just.
Background
This declaratory judgment action arises from a worksite accident that occurred on July 8, 2008, when Henrique Staveski, an employee of P.S. Bruckel, Inc. (“Bruckel”), fell from scaffolding while performing sandblasting work on the Route 135 overpass at Route 24 in Nassau County. Bruckel had been contracted by the State of New York to repaint highway bridges along Route 135, including the bridge where Staveski fell, and Staveski and his wife, Izabel Camargo, brought a personal injury action against the State in the Court of Claims, alleging that the State had, among other things, been negligent and reckless in maintaining the worksite where he fell and had violated §§ 200, 240 and 241 of the Labor Law (Staveski and Camargo v. State of New York (Department of Transportation), Claim No. 115633) (the “Staveski action”). When Evanston Insurance Company (“Evanston”) denied the State’s claim for coverage for the claims asserted against it in the Staveski action (the “Staveski claims”) under a certificate of insurance and various insurance policies that Bruckel had procured from Evanston for itself or for the State, the State commenced a third-party action against Evanston, seeking a declaratory judgment that Evanston was required to defend it against and indemnify it for the Staveski claims. Eventually, Evanston agreed to provide coverage for the Staveski claims against the State under one of the policies referenced in the certificate of insurance [FN1] and to waive that policy’s $10,000 deductible, and the State, by stipulation dated May 19, 2009, discontinued its third-party action against Evanston with prejudice. Evanston balked, however, at the State’s request that the law firm retained to defend the State in the Staveski action assert a third-party claim on behalf of the State against Bruckel in the Court of Claims litigation. On March 9, 2012, [*3]the State commenced a separate indemnification, contribution and breach of contract action against Bruckel in this court, State of New York v. P.S. Bruckel, Inc., Index no. 7744-2012 (Sup Ct, Suffolk County) (“State v. Bruckel” or the Bruckel action”).
Pursuant to a January 3, 2014 Stipulation of Settlement and Discontinuance, the Staveski claims against the State were settled for a total of $2,725,000 and the Staveski action was discontinued with prejudice, with Evanston paying $1,000,000 and the State the balance of the settlement. The State v. Bruckel action, however, remained pending. Although it appears to be undisputed that Bruckel’s President, Peter S. Bruckel, was personally served with the summons and complaint in that action on March 12, 2012, Bruckel did not forward the pleadings or any other paper with which Mr. Bruckel had been served to Evanston nor did it notify Evanston of the commencement of the action or take any steps to tender the defense of the claims asserted against it to Evanston [FN2] . The State, however, asserts that although it did not provide Evanston with copies of the summons and complaint in the State v. Bruckel action until March 2013, nearly a year after it commenced the action, it had alerted Evanston of its intention to commence that action before it did so, informed it within a month after it filed the summons and complaint that it had commenced the action, and then, after Bruckel failed to appear in the action, informed Evanston of Bruckel’s default and of the State’s intention to seek a default judgment. Emails, adjuster notes and one or more “trial reports” to Evanston prepared by the attorney retained by Evanston to defend the State in the Staveski action corroborate the State’s account but also corroborate Evanston’s contention that despite several requests it made to the State to be provided with copies of its summons and complaint in the State v. Bruckel action, the State did not do so until March 1, 2013. Two weeks later, by letter dated March 15, 2013, addressed to Bruckel, with copies both to the State and to the attorneys for the Staveskis and for Camargo, the law firm of Goldberg Segalla LLP, as attorneys for Evanston’s claim service manager and on behalf of Evanston, issued a “Disclaimer of Coverage,” dated March 15, 2013, for the claims asserted by the State against Bruckel. Among other things, the letter asserted that Bruckel, the State, Staveski and Camargo had all violated the policies’ “prompt and/or immediate notice of any occurrence, claim or suit” requirements, and that Bruckel had breached policy provisions requiring “Bruckel and any other involved insured to immediately send Evanston copies of any demands, notices, summons, or legal papers received in connection with any claim or ‘suit’.” Citing several provisions of the polices, the letter further asserted that “multiple policy exclusions and limitations to coverage contained in the Evanston policies apply to the claims and causes of action asserted by the State of New York in the [Bruckel] lawsuit.”
The Current Action – Procedural History
The summons and complaint in this declaratory judgment action by Evanston was filed on March 18, 2013, just a few days following the utterance of the Goldberg Segalla disclaimer letter. After Bruckel’s motion to the Supreme Court in Livingston County, to change the venue of this action to that county — where Bruckel maintains its principal place of business — was [*4]denied on the dual grounds that Bruckel had waited too long to file its motion based upon improper venue (see CPLR 510[1] and 511[b]) and that, in any event, a motion seeking, in whole or in part, a change of venue for the convenience of witnesses (CPLR 510[3]) must be made in the court where the action has been brought (see Evanston insurance Company v. P.S. Bruckel, Inc., et al., Index No. 0393-2013, Decision & Order dated July 15, 2013 [Sup Ct, Livingston County, Wiggins, J.]), Bruckel filed a motion for change of venue pursuant to CPLR 510[3] in this court. The State then moved for leave to amend its answer to assert a counterclaim against Evanston for a declaratory judgment that Evanston’s “denial and disclaimer of coverage to indemnify the State in the [Staveski action] was not timely, proper, and valid” (emphasis in original). Evanston opposed both motions and cross-moved for summary judgment in its favor declaring that because of breaches of the notice provisions of its insurance policies, it had no duty to defend or indemnify Bruckel — “or any other person or entity” — for the claims in the State’s underlying action against Bruckel for indemnification and contribution or, alternatively, that the employer’s-liability and breach-of-contract exclusions of the Evanston policies excluded coverage for the State’s claims against Bruckel. Both Bruckel and the State opposed Evanston’s cross-motion, and Bruckel cross-moved for summary judgment in its favor, inter alia, declaring that Evanston is required under the CGL and Excess liability policies to defend and indemnify it in the State’s action against it.
In a Decision and Order dated December 30, 2014 (the “December 30, 2014 Decision and Order”), Justice Asher denied Bruckel’s motion to change the venue of the action to Livingston County for Bruckel’s failure adequately to demonstrate that the convenience of material witnesses would be served and the ends of justice promoted by transferring the action to Livingston County; denied the State’s motion to amend its answer to assert a counterclaim for a declaration of coverage under the CGL and excess liability polices as foreclosed by the May 19, 2009 stipulation that discontinued the State’s third-party claims against Evanston in the Staveski action with prejudice; denied Bruckel’s cross-motion for summary judgment granting a declaratory judgment in its favor as improper, as Bruckel had failed to interpose a counterclaim for a declaratory judgment [FN3] ; and held that although Evanston had carried its burden of establishing, prima facie, an entitlement to summary judgment for Bruckel’s failure to satisfy the policies’ notice requirements, including the fact that the March 2012 summons and complaint in the State’s action against Bruckel had not been delivered to Evanston until March 2013, issues of fact concerning the timeliness of Evanston’s disclaimer of coverage and as to whether Evanston had been provided with “sufficient notice” of the Bruckel action by others — specifically, John L. Belford, IV, the Assistant Attorney General who was assigned to represent the State’s interests in the Staveski action and who commenced the State’s action against Bruckel, and Lawrence Buchman, the attorney retained by Evanston to represent the State in the Staveski action — required that Evanston’s cross-motion be denied. With respect to this last holding, Justice Asher explained that:
[D]efendants raise triable issues of fact as to whether Evanston had notice of the [State v. Bruckel] lawsuit and whether it failed to issue a timely disclaimer. The failure of an [*5]insured to timely notify the insurer of a claim does not excuse the insurer’s failure to timely disclaim coverage (Schulman v Indian Harbor Ins. Co., 40 AD3d 957 [2d Dept 2007]). Indeed, an insurer waives its affirmative defenses of late notice if it fails to disclaim coverage “as soon as is reasonably possible” (Hermitage Ins. Co. v Arm-ing, Inc., 46 AD3d 620, 621, 847 NYS2d 628 [2d Dept 2007]). Insurance Law § 3420(d)(2) requires written notice of disclaimer to be given “as soon as is reasonably possible” after the insurer learns of the grounds for disclaiming liability (Sirius Am. Ins. Co. v Vigo Const. Corp., 48 AD3d 450, 451, 852 NYS2d 176 [2d Dept 2008]; see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 65, 769 NYS2d 459 [2003]). The reasonableness of the delay is measured from the time when the insurer “has sufficient knowledge of facts entitling it to disclaim, or knows that it will disclaim coverage” (Allstate Ins. Co. v Gross, 27 NY2d 263, 264, 317 NYS2d 309 [1970]. Sirius Am. Ins. Co. v Vigo Const. Corp., supra). It is the insurer’s responsibility to explain its delay in giving written notice of disclaimer, and an unsatisfactory explanation will render the delay unreasonable as a matter of law (Tully Const. Co., Inc. v TIG Ins. Co., 43 AD3d 1150, 1151, 842 NYS2d 528 [2d Dept 2007]; see Sirius Am. Ins. Co. v Vigo Const. Corp., supra).
(Decision and Order, December 30, 2014, at 4-5, emphasis supplied). “At issue,” Justice Asher held, “is whether P.S. Bruckel failed to provide timely notice of the lawsuit commenced by the State of New York against it,” further explaining that
While P.S. Bruckel did not satisfy its obligation to provide prompt notice by forwarding the summons and complaint to Evanston Insurance in a timely [manner], it is unclear whether Evanston Insurance was put on notice of the existence of the lawsuit and the potential implications it held for its policy. Pursuant to the Insurance Law, an injured person or any other claimant may provide sufficient notice to an insurer (Ins. Law 3420[a][3]; Rose v. State, 265 AD2d 473, 696 NYS2d 473 [2d Dept 1999]).
(Id. at 5). Given Assistant Attorney General John Belford’s assertion that he had “informed Pat Dunstan, senior claims examiner for Markel Services Incorporated [FN4] , of the [Bruckel] lawsuit when it was commenced” and attorney Buchman’s April 2012 trial report to Dunstan, “indicating that the State of New York had commenced an action against P.S. Bruckel,” Justice Asher concluded that “triable issues of fact remain as to whether Evanston Insurance had notice of the lawsuit,” thereby requiring the denial of Evanston’s cross-motion for summary judgment validating its disclaimer of coverage and relieving it of any obligation to defend or indemnify Bruckel against the State’s claims.
Evanston appealed the denial of its cross-motion for summary judgment. In a decision dated May 3, 2017, the Appellate Division affirmed Justice Asher’s decision and order to the extent it had been appealed by Evanston (Evanston Ins. Co. v P.S. Bruckel, Inc., 150 AD3d 693 [2d Dept 2017]). Citing its earlier decision in Nationwide Ins. Co. v Shedlick, 274 AD2d 519 [2d Dept 2000] — which upheld an order permanently staying arbitration of a claim for underinsured motorist benefits where the claimant gave the insurer prompt notice of his claim for coverage under his automobile insurance policy’s supplemental uninsured motorists endorsement but failed for 2-1/2 years to comply with the endorsement’s requirement that he “immediately” forward [*6]copies of the summons and complaint to the insurer if he commenced a lawsuit against the underinsured tortfeasor — and the Court of Appeals’ decision in American Tr. Ins. Co. v Sartor, 3 NY3d 71, 75-76 [2004] — which held that the proviso in Vehicle & Traffic Law § 370(4), that failure to comply with that statute’s requirement that the operator of a vehicle for hire give notice to the insurer or surety for the vehicle within five days of an accident (violation of which is a misdemeanor) “shall not affect the liability of the surety or insurer,” does not obviate the right of the insurer to condition coverage upon its being provided with timely notice of the initiation of litigation against the insured and to disclaim coverage where timely notice is not received from the insured or other persons who are entitled to provide notice pursuant to Insurance Law § 3420(a)(3) — the Appellate Division noted that Evanston had “established, prima facie, that Bruckel failed to comply with the condition in the subject policy that required it to ‘immediately’ forward to [Evanston] copies of any legal papers received in connection with a lawsuit” (Evanston Ins. Co. v P.S. Bruckel, Inc., 150 AD3d at 694), as the State had commenced the action against Bruckel and served it with the summons and complaint in March 2012 but copies of those papers were not received by Evanston until March 2013. The Appellate Division also noted that because the “subject policy” was issued before Insurance Law § 3420 was amended, it was not necessary for Evanston to show that it had been prejudiced by the failure to give it timely notice. Nonetheless, it agreed that because “‘[t]he failure of an insured to timely notify the insurer of a claim does not excuse the insurer’s failure to timely disclaim coverage’ (Delphi Restoration Corp. v. Sunshine Restoration Corp., 43 AD3d 851, 852, 841 N.Y.S.2d 684; see Atlantic Cas. Ins. Co. v. RJNJ Servs., Inc., 89 AD3d 649, 651, 932 N.Y.S.2d 109),” and “‘[t]he timeliness of an insurer’s disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage’ (Matter of Allcity Ins. Co. [Jimenez], 78 NY2d 1054, 1056, 576 N.Y.S.2d 87, 581 N.E.2d 1342 [1991]; see First Fin. Ins. Co. v. Jetco Contr. Corp., 1 NY3d 64, 68—69, 769 N.Y.S.2d 459, 801 N.E.2d 835 [2003]),” there were “triable issues of fact as to whether [Evanston] acquired knowledge of the commencement of the [State v. Bruckel] action in April 2012, or, at the latest, October 2012, and thus, whether it timely disclaimed coverage in March 2013, on the basis of, inter alia, late receipt of a copy of the summons and complaint” (Evanston Ins. Co. v P.S. Bruckel, Inc., 150 AD3d at 694)[FN5] .
The Current Motion and Cross-Motion.
Some [FN6] discovery having been conducted following the Appellate Division’s decision, the [*7]State now moves for summary judgment in its favor dismissing Evanston’s complaint and requiring Evanston to defend and indemnify Bruckel in the State’s action against Bruckel on the ground that Evanston’s disclaimer of coverage for Bruckel was untimely and, therefore, ineffective. Bruckel, having been granted leave to amend its answer to assert a counterclaim for the relief sought in its prior cross-motion for summary judgment (see Order dated December 23, 2015 (Asher, J.)), cross-moves [FN7] again for summary judgment in its favor, both dismissing Evanston’s complaint and declaring that Evanston is required to defend and indemnify it in the State’s action against it, on the same ground as the State’s motion. Neither moving party disputes that if the timeliness of Evanston’s disclaimer of coverage were measured from the date Evanston was provided with a copy of the summons and complaint, Evanston’s disclaimer would have been sufficiently prompt. Both argue, however, that Evanston knew even before the Bruckel action was commenced that the State intended to bring such an action against Bruckel, that Evanston knew by April 2, 2012, when Buchman, the attorney it had retained to represent the State in the Staveski action, informed it, in a pretrial report to Patricia Dunstan, the adjuster handling the claim for Evanston, that he had been told by Belford, the Assistant Attorney General assigned to the matter, that the State had “instituted an action against P.S. Bruckel in State Court for indemnification”; that any doubt about the commencement of the Bruckel action — and Bruckel’s failure to notify Evanston of that fact and to provide it with copies of the pleadings that had been served upon it — would have been dispelled in May 2012, when Buchman, by his own account, would have reported to Dunstan conversations he had with Belford regarding Bruckel’s default in the State’s action against it and Belford’s request for samples of CPLR 3215 default notices; a conversation Belford had with Dunstan on October 26, 2012, in which Belford told Dunstan that he had a suit pending against Bruckel and was in the process of filing a default against Bruckel, and also in which Dunstan requested “a copy of the suit”; and a November 29, 2012 “Claims Note” made by Dunstan concerning following up with Belford “related to getting suit against P.S. Bruckel” and a telephone conversation she then had with Belford that day in which he again told her that Bruckel had been served and that he would be filing a default judgment against them, and in which Dunstan again requested a copy of the State’s complaint against Bruckel [FN8] . Bruckel also makes the further argument that because Evanston had been [*8]“promptly put on notice” of both the underlying occurrence and of the commencement, shortly thereafter, of the Staveski action, and therefore had early and ample opportunity to, among other things, investigate the underlying claim and to assess the State’s entitlement to indemnification from Bruckel and to coverage under Bruckel’s insurance policies; because Evanston did in fact so investigate and “noted that the Staveski claim could far exceed policy limits”[FN9] ; and because Evanston was aware of the State’s action against Bruckel months before it was provided with copies of the pleadings in that action, not only was Evanston’s disclaimer of coverage fatally belated, but Evanston cannot show any prejudice from Bruckel’s failure promptly to forward to it the pleadings with which it had been served.
Evanston opposes both motions, arguing, among other things, that Insurance Law § 3420(d)(2), which requires that written notice of a disclaimer of liability or denial of coverage “for death or bodily injury arising out of . . . [an] accident occurring within this state” shall be given “as soon as is reasonably possible . . . to the insured and the injured person or any other claimant,” does not apply because the State v. Bruckel action seeks indemnification and contribution and is not a claim “for death or bodily injury”; that even if Insurance Law § 3420(d)(2) does apply, Evanston’s disclaimer was timely, as Evanston acted diligently in conducting and completing its investigation — which included determining that Bruckel had been served with the summons and complaint a year earlier — and in issuing its disclaimer on March 15, 2013, eleven days after it first “received”[FN10] the complaint in the Bruckel action; and, alternatively, that in the event the court does not conclude that Evanston’s disclaimer was timely on the undisputed facts, that there are, then, issues of fact concerning whether Evanston’s waiting until shortly after it had been sent copies of the State’s summons and complaint against Bruckel, confirming that the action had in fact been brought and revealing its actual allegations, rendered its disclaimer untimely.
Discussion
Summary judgment helps “expedite all civil cases by eliminating . . . claims which can properly be resolved as a matter of law” (Andre v Pomeroy, 35 NY2d 361, 364, 362 NYS2d 131 [*9][1974]). A party seeking summary judgment has the burden both of “tendering sufficient evidence to demonstrate the absence of any material issues of fact” (Alvarez v Prospect Hosp., 68NY2d 320, 324, 508 NYS2d 923, 925 [1986]; see Granados v Cox, 43 AD3d 391, 392, 840 NYS2d 427, 428 [2d Dept 2007]), and of “demonstrating its entitlement to judgment as a matter of law” (Blackwell v Mikevin Mgt. III, LLC, 88 AD3d 836, 837 [2d Dept 2011]). The motion must be “supported by affidavit, by a copy of the pleadings and by other available proof, such as depositions and written admissions” (CPLR 3212 [b]). However, a “movant fails to satisfy its prima facie burden by merely pointing out gaps in the plaintiff’s case” (Blackwell v Mikevin Mgt. III, LLC, supra, 88 AD3d at 837, citing Englington Med., P.C. v Motor Veh. Acc. Indem. Corp., 81 AD3d 223 [2011]; Shafi v Motta, 73 AD3d 729, 730 [2010]; Doe v Orange-Ulster Bd. of Coop. Educ. Servs., 4 AD3d 387, 388 [2004]). Moreover, failing to make a prima facie showing will result in the motion’s denial, “regardless of the sufficiency of the opposing papers” (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 852, 487 NYS2d 316 [1985]). If the movant establishes a prima facie case of entitlement to summary judgment, the burden shifts to the party opposing the motion to produce “evidentiary proof in admissible form sufficient to require a trial of material questions of fact” (Zuckerman v City of New York, 49 NY2d 557, 562, 427 NYS2d 595, 597 [1980]).
As the Appellate Division, quoting from the Court of Appeals decision in Matter of Allcity Ins. Co. [Jimenez], 78 NY2d 1054, 1056 [1991], ruled in addressing Evanston’s appeal from the denial of its earlier cross-motion for summary judgment, “‘[t]he timeliness of an insurer’s disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage.'” see First Fin. Ins. Co. v. Jetco Contr. Corp., 1 NY3d 64, 68—69, 769 N.Y.S.2d 459, 801 N.E.2d 835).” Although Insurance Law § 3420(d)(2) requires that an insurer “give written notice as soon as is reasonably possible” when it disclaims or denies coverage “for death or bodily injury,” that statute does not apply to claims for “common-law indemnification/contribution, contractual indemnification and breach of contract for failure to procure the promised liability insurance” (Preserver Ins. Co. v Ryba, 10 NY3d 635, 638-39, 642 [2008]) (holding, in action brought by New York worksite owner against New Jersey contractor who employed a worker who was gravely injured when he fell from scaffolding while performing work on plaintiff’s premises, that “even if the policy were ‘issued for delivery’ in New York, Preserver still would not be barred from denying coverage for Almeida’s breach of contract claim since Insurance Law § 3420 (d) requires timely disclaimer only for denials of coverage ‘for death or bodily injury'”)). Rather, the test is whether the insurer is foreclosed by common law waiver or estoppel principles from asserting policy exclusions and conditions or otherwise denying coverage (see KeySpan Gas E. Corp. v Munich Reins. Am., Inc., 23 NY3d 583, 590-91 [2014]).
In KeySpan Gas E. Corp., supra, the Long Island Lighting Company (“LILCO”) and its assignee, Keyspan, sought coverage from the defendant insurers for claims for environmental damage at, or attributable to, manufactured gas plants sites previously owned or operated by LILCO. The Appellate Division held that although LILCO had failed to provide timely notice of the environmental occurrences to the defendants, there were triable issues of fact as to whether the defendant insurers, which had sent LILCO letters reserving their rights and defenses, including the defense of late notice, had “issued written notice of disclaimer on the ground of late [*10]notice as soon as is reasonably possible after first learning of the accident or of grounds for disclaimer of liability” (Long Is. Light. Co. v Allianz Underwriters Ins. Co.,104 AD3d 581, 582 [1st Dept 2013]). On the insurers’ appeal on certified question [FN11] , the Court of Appeals held that the Appellate Division had applied an incorrect standard to the issue of whether the defendant insurers had waived the right to disclaim coverage for LILCO’s late notice to them:
“Where, as here, the underlying claim does not arise out of an accident involving bodily injury or death, the notice of disclaimer provisions set forth in Insurance Law § 3420(d) are inapplicable” (Vecchiarelli v. Continental Ins. Co., 277 AD2d 992, 993, 716 N.Y.S.2d 524 [4th Dept.2000]; see e.g. Ryba, 10 NY3d at 642, 862 N.Y.S.2d 820, 893 N.E.2d 97 [insurer “not required by Insurance Law § 3420(d) to make timely disclaimer of coverage” for breach of contract claim][FN12];Travelers Indem. Co. v. Orange & Rockland Utils., Inc., 73 AD3d 576, 577, 905 N.Y.S.2d 11 [1st Dept.2010], lv. dismissed, 15 NY3d 834, 909 N.Y.S.2d 8, 935 N.E.2d 799 [2010]; Topliffe v. U.S. Art Co., Inc., 40 AD3d 967, 969, 838 N.Y.S.2d 571 [2d Dept.2007]; Fairmont Funding v. -Utica Mut. Ins. Co., 264 AD2d 581, 581, 694 N.Y.S.2d 389 [1st Dept.1999]. In such cases, the insurer will not be barred from disclaiming coverage “simply as a result of the passage of time,” and its delay in giving notice of disclaimer should be considered under common-law waiver and/or estoppel principles (Travelers, 73 AD3d at 577, 905 N.Y.S.2d 11; see Allstate, 27 NY2d at 269, 317 N.Y.S.2d 309, 265 N.E.2d 736).
(KeySpan Gas E. Corp. v Munich Reins. Am., Inc., 23 NY3d at 590-91 (footnote omitted.) Accordingly, the Court of Appeals remitted the matter to the Appellate Division to determine “whether the evidence supporting this defense” of common-law waiver — by the defendant insurers of their right to disclaim coverage for the insured’s failure to give timely notice — “is sufficient to defeat defendants’ motion for summary judgment based on LILCO[‘s] failure, as a matter of law, to give timely notice under the policies” (id., 23 NY3d at 591). The requisite inquiry, the Court emphasized, is a precise one:
Specifically, the Appellate Division must consider if, under common-law principles, triable issues of fact exist whether defendants clearly manifested an intent to abandon their late-notice defense (see e.g. Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgt., L.P., 7 NY3d 96, 104, 817 N.Y.S.2d 606, 850 N.E.2d 653 [2006]; Gilbert Frank Corp. v. Federal Ins. Co., 70 NY2d 966, 968, 525 N.Y.S.2d 793, 520 N.E.2d 512 [1988]; Albert J. Schiff Assoc. v. Flack, 51 NY2d 692, 698, 435 N.Y.S.2d 972, 417 N.E.2d 84 [1980]; Allstate, 27 NY2d at 269, 317 N.Y.S.2d 309, 265 N.E.2d 736).
(Id., 23 NY3d at 591 (emphasis supplied)).
It is beyond dispute now, as it was when Evanston moved for summary judgment in its favor in 2014, that “Bruckel failed to comply with the condition in the subject policy that required it to ‘immediately’ forward to [Evanston] copies of any legal papers received in connection with [the Sate’s] lawsuit” against it and that although that lawsuit was commenced in March 2012, Evanston “did not receive a copy of the summons and complaint until March 2013” (Evanston Ins. Co. v P.S. Bruckel, Inc., supra, 150 AD3d at 694), when Assistant Attorney General Belford, who, again, had commenced the State’s action against Bruckel, emailed those pleadings to Buchman, the Evanston-retained attorney representing the State in the Staveski action, who, in turn, promptly forwarded the email with the attached pleadings to Dunstan, the Markel claims examiner who was handling the Staveski action for Evanston. Likewise, it is beyond dispute now, as it was in 2014, that Evanston had been told a number of times, beginning as early as April 2, 2012 and again in May, October and November of 2012, that the State was in the process of instituting, or had instituted, an indemnification action against Bruckel in “state court in New York,” that Bruckel had defaulted in that action, and that the State was filing — “based on Buchman’s . . . recommendation” — a notice of default against Bruckel (see, e.g., December 30, 2014 Decision and Order at 5; Evanston Ins. Co. v P.S. Bruckel, Inc., supra, 150 AD3d at 694; “Pre-Trial Report Outline Defense Litigation,” dated April 2, 2012, from Pillinger Miller Tarallo, LLP by Lawrence J. Buchman to Patricia Dunstan, RN, JD, cc: John L. Belford (the “April 2, 2012 pre-trial report”), at pp. 2 and 5, Ex. F to Affirmation of John L. Belford, IV, dated May 22, 2014 (the “Belford 2014 Affirmation”); the Belford 2014 Affirmation, passim; Affidavit of Pat Dunstan, sworn to June 30, 2014, ¶ 6). Although the additional discovery that has been conducted — in particular, the depositions of Belford and Buchman and the production of claims notes prepared by Dunstan and a number of billing entries made by Buchman — add texture to the exchanges among Belford, Buchman and Dunstan and to Bruckel’s passivity in response to the State’s claim against it — most notably, that the categorical statement in Buchman’s April 2, 2012 pre-trial report to Dunstan was qualified in the “Supplemental Pre-Trial Report” he sent to her two days later [FN13] (see “Supplemental Pre-Trial Report,” dated April 4, 2012, [*11]from Pillinger Miller Tarallo, LLP by Lawrence J. Buchman to Patricia Dunstan, RN, JD, copy to John L. Belford (the “April 4, 2012 supplemental pre-trial report”), Ex. E to the deposition of Lawrence Buchman, August 3, 2018 (the “Buchman Dep.”)); that Belford’s failure to provide copies of the State’s pleadings in the State’s action against Bruckel to Dunstan before March 1, 2013, which he conceded he had been asked to do on more than one prior occasion, may not have been inadvertent [FN14] (see Deposition of John Belford, November 5, 2018 (the “Belford Dep.”), tr. at 78-79, 92-93); and that when Buchman reached out to Bruckel — Buchman, at his deposition, did not recall with whom he spoke, whether he had one conversation or two, or the date or dates on [*12]which the conversation or conversations occurred — the explanation he received for Bruckel’s non-responsiveness to the State’s claim was that its business was “not going well, business closing down” and “it’s just a corporation, they’re insulated” (Buchman Dep., tr. at 151)[FN15] – they do not alter the pattern of essential facts that was before the court in 2014, when Justice Asher found that “triable issues of fact remain as to whether Evanston Insurance had notice of the lawsuit” (December 30, 2014 Decision and Order, at 5) and upon which the Appellate Division held that there was a triable issue as to the point in time — “April 2012, or, at the latest, October 2012” (Evanston Ins. Co. v P.S. Bruckel, Inc., supra, 150 AD3d at 694) — at which Evanston had sufficient information for the clock to begin running on its time to disclaim coverage “on the basis, inter alia, of late receipt of the summons and complaint” (id.).
Notwithstanding the relative stasis in the marshaling and presentation of the essential facts — despite the additional discovery that has been conducted — and even though they were successful in defeating Evanston’s earlier showing of prima facie entitlement to summary judgment in its favor by demonstrating that there were issues of material fact concerning the sufficiency and timing of Evanston’s knowledge of the content and posture of the State’s lawsuit against Bruckel and the timeliness of Evanston’s disclaimer of coverage, and although the burden is now on them to show a prima facie entitlement to judgment in their favor based upon those same facts, both the State and Bruckel urge that the action can, nonetheless, now be resolved on the somewhat more fulsome record that now exists. That is, based upon the largely unaltered scenario that led to the denial of Evanston’s earlier motion by Justice Asher and to the affirmance of that denial by the Appellate Division — essentially because it raised, but did not answer, questions concerning the sufficiency of the notice of the Bruckel action that Evanston received, beginning in April 2012, and whether the disclaimer that eventually was uttered on March 15, 2013 was timely — the State and Bruckel contend that there are now no material issues of fact to impede the granting of their summary judgment motion and cross-motion on the ground that [*13]Evanston’s disclaimer is ineffective because it was uttered too late [FN16] .
In contrast to those situations in which an insurer has received no notice of an injury — producing occurrence involving its insured until some appreciable time after the injured person has commenced litigation against the insured, here, as Justice Asher found, “it is undisputed that Evanston Insurance was provided timely notice of the underlying accident involving Henrique Staveski” (December 30, 2014 Decision and Order, at 5), as well as timely notice of Staveski’s and Camargo’s action against the State in the Court of Claims. Ultimately, it defended the State in that action and oversaw and participated in the settlement of the case. As a result, Evanston unquestionably was fully and intimately aware of the circumstances of the underlying occurrence, the extent of Staveski’s injuries and of both the State’s and Bruckel’s exposure. Further, it is indisputable that Evanston was long aware of the State’s desire to pursue recoupment of its uninsured costs from Bruckel and, later, was apprised that the State was asserting that it had commenced an action seeking such relief against Bruckel. Although the State, despite Evanston’s and Buchman’s requests, did not supply Evanston with copies of the pleadings in its action against Bruckel until almost a year after that action had been commenced, and Bruckel never did so, there is nothing to indicate that Evanston, prior to the utterance of the March 15, 2013 disclaimer letter, itself [FN17] made any serious effort to cause Bruckel to provide it with copies of those pleadings or to otherwise cooperate in the defense of the action or the litigation overall.
Effectiveness of Evanston’s Disclaimer.
Assuming that the State and Bruckel are right that the references to the Bruckel action in Buchman’s April 2, 2012 Pre-Trial Report to Dunstan, either independently or along with the various antecedent, contemporaneous, and subsequent communications cited by the parties, including Dunstan’s admitted October 26 and November 29, 2012 conversations with Belford (see June 30, 2014 Dunstan Affidavit, ¶¶ 6-7) constituted sufficient notice to Evanston of the commencement of that action (see Insurance Law 3420(a)(3); December 23, 2014 Order at 5), the mixed legal and factual issues, then, within the context framed by Evanston’s current opposition and the prior holdings in this case, are whether Bruckel’s failure immediately to forward to Evanston the pleadings with which it had been served, as required by the Evanston CGL and excess policies, provided grounds for Evanston’s disclaiming coverage to Bruckel for the State’s action against it; if so, the point in time at which Evanston became aware of those [*14]grounds; and, assuming Evanston’s disclaimer was not issued as soon as it became aware of the grounds for the disclaimer, the point in time past which any delay in issuing the disclaimer became unreasonable, taking into account any satisfactory explanation offered by Evanston for the delay, or — if Evanston is correct in arguing that Insurance Law § 3420(d)(2) is inapplicable to coverage for the State’s claims against Bruckel — whether Evanston, as a result of the amount of time that passed before the disclaimer issued, or otherwise, waived or is estopped from relying on Bruckel’s failure to provide it with the pleadings to disclaim coverage (compare, e.g., Matter of Allcity Ins. Co. [Jimenez], supra, 78 NY2d 1054 [1991], with KeySpan Gas E. Corp. v Munich Reins. Am., Inc., supra, 23 NY3d 583 [2014], and Preserver Ins. Co. v Ryba, supra, 10 NY3d 635 [2008]). As framed in the prior decisions in this case, these are disputed factual issues that the additional discovery conducted following the Second Department’s has not eliminated and which, at least as the record now stands, can only be resolved by the jury.
Even before the Insurance Law was amended in 2008 to add paragraph (5) to § 3420(a), the Court of Appeals had recognized exceptions to strict application of New York’s “no-prejudice rule” (see, e.g.,Sec. Mut. Ins. Co. of New York v Acker-Fitzsimons Corp., 31 NY2d 436, 439 [1972]) where the insurer had received timely notice of the insurance-triggering occurrence and, thus, had a full and prompt opportunity to investigate and to protect its interests, but the insured subsequently failed to comply with a further notice requirement of the insurance policy. Thus, in Matter of Brandon (Nationwide Mut. Ins. Co.), 97 NY2d 491 [2002], the Court of Appeals held that where the insurer had received timely notice of the underlying accident, it could not deny its insured supplementary uninsured/underinsured motorists (“SUM”) benefits for failing to provide it with prompt notice that she had commenced an action against the other driver without showing that it had been prejudiced by the delay:
[U]nlike most notices of claim—which must be submitted promptly after the accident, while an insurer’s investigation has the greatest potential to curb fraud—notices of legal action become due at a moment that cannot be fixed relative to any other key event, such as the injury, the discovery of the tortfeasor’s insurance limits or the resolution of the underlying tort claim.
(97 NY2d at 498). Three years later, in Rekemeyer v State Farm Mut. Auto. Ins. Co., 4 NY3d 468, 472 [2005], the Court of Appeals applied the rationale of Brandon where the SUM claim itself had not been filed “as soon as practicable,” as required by the insured’s policy. In that case, the insured had given her automobile insurer prompt notice of the accident in which she was injured and of her claim for no-fault benefits, but she did not notify the insurer that she was suing the other driver until nearly three months after filing the action and did not inform the insurer that she was making a claim against her own policy for SUM benefits until six months after she learned that the other driver’s coverage was inadequate. The Court acknowledged that the facts of the case before it differed from those in Brandon but held that they nonetheless “also warrant a showing of prejudice by the carrier”:
Here, plaintiff gave timely notice of the accident and made a claim for no-fault benefits soon thereafter. That notice was sufficient to promote the valid policy objective of curbing fraud or collusion. Moreover, the record indicates that State Farm undertook an investigation of the accident. It also required plaintiff to undergo medical exams in December 1998 and February 2000. Under these circumstances, application of a rule that [*15]contravenes general contract principles is not justified. Absent a showing of prejudice, State Farm should not be entitled to a windfall (Brandon, 97 NY2d at 496 n. 3 [743 N.Y.S.2d 53, 769 N.E.2d 810], citing Clementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223, 230 [Colo. 2001] ). Additionally, State Farm should bear the burden of establishing prejudice ‘because it has the relevant information about its own claims-handling procedures and because the alternative approach would saddle the policyholder with the task of proving a negative’ (id. at 498 [743 N.Y.S.2d 53, 769 N.E.2d 810]; see also Unigard, 79 NY2d at 584 [584 N.Y.S.2d 290, 594 N.E.2d 571] [placing the burden of showing prejudice on the reinsurer] ). Thus, we hold that where an insured previously gives timely notice of the accident, the carrier must establish that it is prejudiced by a late notice of SUM claim before it may properly disclaim coverage.
(Id., 4 NY3d at 475-76.) Accord In re Liberty Mut. Ins. Co. (Frenkel), 58 AD3d 1089, 1090-91 [3d Dept 2009]; New York Cent. Mut. Fire Ins. Co. v Ward, 38 AD3d 898, 901 [2d Dept 2007]; State Farm Mut. Auto. Ins. Co. v Rinaldi, 27 AD3d 476, 476 [2d Dept 2006]; New York Mut. Underwriters v Kaufman, 257 AD2d 850, 851 [3d Dept 1999].
The Third Department’s decision in New York Mut. Underwriters v Kaufman, supra, is particularly apt. In that case, the insured homeowner, sued in 1996 for an injury that allegedly occurred on his premises in 1994, did not forward the pleadings to his insurer until 2-1/2 months after he was served. The insurer brought a declaratory judgment action against both the homeowner and the personal injury plaintiff and then moved for summary judgment, contending that the insured homeowner’s two-year delay in notifying it of the occurrence and failure promptly to forward to it the pleadings in the personal injury action relieved it of any obligation to defend or indemnify the homeowner. In opposition to the insurer’s motion, both the homeowner and the personal injury plaintiff averred that the homeowner had timely notified the insurer’s agent of the accident and of the eventual tort plaintiff’s injuries more than two years earlier, approximately two weeks after the accident occurred. The trial court denied the motion, and the Appellate Division affirmed, holding that the homeowner’s contention that he had given the insurer timely notice of the occurrence raised a credibility issue to be decided by the trier of fact and that the insurer had failed to show that it was prejudiced by the delay in the forwarding of the pleadings to it:
Plaintiff further urges that Supreme Court erred in denying summary judgment inasmuch as Kaufman failed to promptly forward the summons and complaint as required by plaintiff’s policy of insurance. Plaintiff contends that such failure vitiates the contract without regard to whether plaintiff was prejudiced as a result of the late notice. We disagree. This court previously has held that the principles governing the failure of an insured to give timely notice of an accident are entirely different from those governing the requirement of notice of suit. In the latter case, late notice will be excused where no prejudice has inured to the insurer (see, Aetna Ins. Co. of Hartford, Conn. v. Millard, 25 AD2d 341, 269 N.Y.S.2d 588); see also, Romano v. St. Paul Fire & Mar. Ins. Co., 65 AD2d 941, 410 N.Y.S.2d 942. Inasmuch as O’Neill did not take a default judgment against Kaufman in the underlying personal injury action, no prejudice to plaintiff has been demonstrated (see, id.).
(New York Mut. Underwriters v Kaufman, 257 AD2d 850, 851 [3d Dept 1999]. See also Mark A. [*16]Varrichio and Assoc., Mark A. Varichio v Chicago Ins. Co., 312 F3d 544, 549 [2d Cir 2002], certified question accepted sub nom. Mark A. Varrichio and Assoc. v Chicago Ins. Co., 99 NY2d 545 [2002], and certified question withdrawn sub nom. Mark A. Varrichio and Assoc. v Chicago Ins. Co., 328 F3d 50 [2d Cir 2003], and Mark A. Varrichio and Assoc. v Chicago Ins. Co., 100 NY2d 527 [2003]).
Even if the delay in the forwarding of the pleadings to Evanston is viewed from the perspective of a claimed lack of required cooperation by Bruckel, there are factual issues that cannot be resolved on the current record. As the Appellate Division recently restated in Robinson v Glob. Liberty Ins. Co. of New York, 164 AD3d 1385, 1386 [2d Dept 2018], quoting from its earlier decisions in , respectively, Allstate Ins. Co. v United Intl. Ins. Co., 16 AD3d 605, 606 [2005], and Matter of Government Empls. Ins. Co. v Fletcher, 147 AD3d 940, 941 [2017]:
“To effectively deny coverage based upon lack of cooperation, an insurance carrier must demonstrate (1) that it acted diligently in seeking to bring about the insured’s cooperation, (2) that the efforts employed by the insurer were reasonably calculated to obtain the insured’s cooperation, and (3) that the attitude of the insured, after his or her cooperation was sought, was one of willful and avowed obstruction” (Allstate Ins. Co. v United Intl. Ins. Co., 16 AD3d 605, 606 [2005]; see Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168-169 [1967]; DeLuca v RLI Ins. Co., 153 AD3d 662 [2017]). ” ‘[M]ere efforts by the insurer and mere inaction on the part of the insured, without more, are insufficient to establish non-cooperation’ ” (Matter of Government Empls. Ins. Co. v Fletcher, 147 AD3d 940, 941 [2017], quoting Matter of Country-Wide Ins. Co. v Henderson, 50 AD3d 789, 791 [2008]).
Here, although Buchman testified that he had reached out to Bruckel to inquire whether they had “received the papers, what do they plan to do with the papers, have they informed Evanston or whoever it was, Evanston or Markel or Investors Mutual, whatever they went by, whoever they referred to them by” (Buchman Dep. At 151), he further testified that he was doing so not as an emissary for Evanston, but “to stir the pot,” that is “because I’m trying to get my client, the state, more coverage” (id., at 141, 149; see footnotes 14 and 16, supra). Moreover, although Buchman was confident that he had informed Dunstan of his contact with Bruckel, it appears that neither his files nor Dunstan’s contains any record of his having done so, nor has any party submitted anything on the current motion indicating that Dunstan’s efforts to obtain copies of the pleadings in the State’s action against Bruckel included seeking to obtain them from Bruckel. On the other hand, Bruckel has yet to be deposed in this action, and it is evident that discovery from it is incomplete. Thus, on the current record, issues of fact and the incomplete state of discovery preclude any summary determination that Bruckel’s failure timely to provide copies of the pleadings to Evanston viewed from a lack of cooperation perspective constituted a basis for disclaiming coverage that Evanston relinquished either through waiver or by waiting too long to invoke after learning of the grounds therefor.
For all of the foregoing reasons, the motion of defendant the State of New York, for summary judgment in its favor dismissing the complaint, and the motion of defendant P.S. Bruckel, Inc., incorrectly denominated a cross-motion, for summary judgment in its favor dismissing the complaint and granting its first counterclaim, are denied without prejudice to renewal upon a more complete record if the parties are so advised.
This constitutes the decision and order of the court.
Dated: April 19, 2019
Riverhead, New York
HON. SANFORD NEIL
BERLAND, A.J.S.C.
Footnotes
Footnote 1: The certificate of insurance referenced three policies — a commercial general liability policy (the “CGL policy”), an Excess Liability Policy (the “Excess policy”) and a so-called “Owners and Contractors Protective Liability” policy (the “OCP policy”). Initially, Evanston had “determined” that the State was not an “additional insured” under Bruckel’s CGL policy and was not entitled to coverage for the Staveskis’ claims under any of the policies. After the State commenced the third-party action against it, however, Evanston conducted a “further investigation” and agreed that the State was entitled to coverage under the OCP policy “as the named insured,” but not under the CGL or Excess policies.
Footnote 2: Indeed, except to the extent that Bruckel’s prior and current cross-motions for summary judgment in this action, dated May 22, 2014 and November 8, 2018, respectively, and Bruckel’s opposition to Evanston’s earlier cross-motion for summary judgment may be so construed, it does not appear that Bruckel has ever done so.
Footnote 3: Subsequently, by order dated December 23, 2015, the court (Asher, J.) granted Bruckel’s motion to amend its answer to assert a counterclaim for declaratory relief against Evanston.
Footnote 4: Markel was Evanston’s Claims Service Manager for the Staveski claim (see footnote 8, infra).
Footnote 5: With respect to Evanston’s contention that the claims asserted in the State’s action against Bruckel were subject to exclusions in the Evanston policies and that its cross-motion should have been granted based upon those exclusions, the Appellate Division held that because the court below had not addressed that contention, it “remains pending and undecided.” None of the parties, however, have addressed those exclusions in connection with the current motion and cross-motion.
Footnote 6: Both Buchman — the attorney retained by Evanston to represent the State in the Staveski action — and — Belford — the Assistant Attorney General who represented the State’s interests in that matter and who filed both the earlier impleader action against Evanston and the Bruckel action — have been deposed, but there has been no deposition of Bruckel nor of Evanston, although claim notes and other documents made or maintained by Pat Dunstan, the Markel claims examiner who handled the Staveski claim for Evanston (and whose current medical condition has precludes the parties from taking of her deposition (see fn. 8, infra)), have been produced, albeit in some instances with redactions.
Footnote 7:Because Bruckel is seeking relief against a non-moving party, its cross-motion should more properly have been denominated a “motion.” (See CPLR 2215.) There being no substantial prejudice to the right of any party, the error in denomination will be disregarded for purposes of this decision and the Bruckel’s cross-motion will be treated as if noticed as a motion. (See CPLR 2001.)
Footnote 8: Dunstan, an employee of Markel Services Incorporated and a registered nurse who also holds a law degree, has been diagnosed with Parkinson’s disease. During the relevant time period, Dunstan held the title of Senior Claims Examiner for Markel Services, Inc., the Claims Service Manager for Evanston. As a result of her medical condition, Dunstan has not been deposed in this action. She did, however, execute affidavits on April 2 and June 30, 2014, which are part of the current record.
Footnote 9: Among other things, Bruckel cites the amended “Reservation of Rights Letter,” dated January 7, 2009, that Dunstan, writing for Markel Underwriting Managers, Inc. on behalf of Evanston, addressed to the State of New York, Office of the Attorney General (Exhibit E to the April 2, 2014 Dunstan Affidavit).
Footnote 10: Evanston concedes, and the moving parties do not dispute, that the summons and complaint were first emailed to Evanston on March 1, 2013, when Buchman, the attorney retained by Evanston to defend the State in the Staveski action, forwarded an email that Belford, the Assistant Attorney General who commenced the Bruckel action, had sent to him 21 minutes earlier. Because both emails were sent after business hours on a Friday, Evanston measures begins its day count from the immediately following business day, Monday, March 4, 2013.
Footnote 11: See Long Is. Light. Co. v Allianz Underwriters Ins. Co. – KeySpan Corp. – Am. Re-Ins. Co., 2013 NY Slip Op 80446(U) [1st Dept July 23, 2013].
Footnote 12: The Court of Appeals’ citation to its earlier decision in Preserver Ins. Co. v Ryba, 10 NY3d 635, 642 [2008], is particularly instructive here because it eliminates any doubt that the “underlying claim,” the characterization of which determines the applicability, vel non, of Insurance Law Section § 3420(d)(2), is the claim that has been asserted against, or the alleged liability of, the named insured party for which that insured party is seeking insurance coverage — e.g., breach of contract or common law, statutory or contractual indemnification or contribution — and not any antecedent personal injury or other claim or liability that has been asserted against the party who is seeking judgment against the insured party. (Accord Johnson v Atl. Cas. Ins. Co., 13-CV-1002S, 2015 WL 5021953, at 5 [WDNY Aug. 24, 2015]; New Hampshire Ins. Co. v JVA Indus. Inc., 57 Misc 3d 1209(A), at 3 [Sup Ct, New York Co. 2017]). Indeed, this is consistent with Evanston’s allegations in its complaint in this action, which label the State’s action against Bruckel — but not Staveski’s and Camargo’s action against the State — as “the underlying action” (Complaint, ¶ 5).
Footnote 13: In his April 2, 2012 pre-trial report to Dunstan, with copy to Belford, Buchman recited that he had been “informed by John Belford of the Attorney General’s Office of the State of New York that they have instituted an action against P.S. Bruckel in State Court for indemnification. The Attorney General’s Office plans to expedite the matter against P.S. Bruckel.” In his April 4, 2012 supplemental pre-trial report, however, he was less categorical about the status of the State’s claim against Bruckel, advising, in pertinent part, as follows:
As discussed, according to conversations with John Belford of the Attorney General’s Office, The State of New York is commencing an action against P.S. Bruckel in State Supreme Court for contractual indemnification. We have contacted Mr. Belford and are awaiting confirmation of the commencement of the State Court action as well as a copy of the summons and complaint.
Footnote 15: Buchman testified that he reached out to Bruckel, inquiring whether they had given the carrier notice and if not, “about giving the notice about what’s going on or why aren’t you moving on it” (Buchman Dep., tr. at 151). Their response, as recounted by Buchman in his deposition, was as follows
[T]here was some reference to business not going well, business closing down, something like that, and “they can own my trucks if I have a problem,” something like that because it’s just a corporation and they’re insulated.
That’s why I’m trying to stir the pot. “We got a suit. What are you guys doing about it? Hey, we got this coverage. What’s going on here?”
Footnote 17: Again, Buchman testified that he reached out to Bruckel on one or more occasions, in his capacity as defense counsel for the State in the Staveski action and with the goal of increasing the resources — specifically, insurance coverage – available to settle that action (see fn. 15, supra). Although apparently not reflected in any of the writings that are part of the current record, Buchman testified that he was “sure” that he had talked with Dunstan about his contacting Bruckel, that she was aware that he was doing so and that he informed her of the conversation in which he referenced “coverage” (Buchman Dep. at 140, 142; see fn. 15, supra).
Reported in New York Official Reports at B.Z. Chiropractic, P.C. v Allstate Ins. Co. (2019 NY Slip Op 50241(U))
B.Z. Chiropractic, P.C., Petitioner,
against Allstate Insurance Company, Respondent. |
719878/2018
Appearances of Counsel:
Attorney for Petitioner
Amos Weinberg, Esq.
Somerset Drive South
Great Neck NY 11020-1821
(516) 829-3900
Attorney for Respondent
Adam Waknine, Esq.
Peter c. Merani, PC.
1001 Avenue of the Americas, Suite 1800
New York, N.Y. 10018
(212) 629-9690
Laurence L. Love, J.
The following papers numbered EF 1-22 read on this petition by B.Z. Chiropractic, P.C., seeking a declaratory judgment to turn over monies from its bank account maintained outside of New York State with Bank of America, N.A. in such sum as is sufficient to satisfy the judgment, and determining that the judgment has and continues to accrue interest pursuant to the Insurance Department Regulations in effect at the time of the subject accident involving plaintiff’s assignor, in accordance with prior case law, at the rate of 2% per month compounded and Respondent’s Cross-Petition, seeking dismissal of this action based upon the doctrines of res judicata and collateral estoppel and sanctions for the filing of an allegedly frivolous action.
Papers NumberedNotice of Petition, Petition, Exhibits EF 1-9
Notice of Cross-Petition, Petition, Exhibits EF 10-21
Affirmations in Opposition, Exhibits EF 22
Upon the foregoing papers, it is ordered that this petition and cross-petition are determined as follows:
The instant action arises out of an action filed in the Civil Court of the City of New York, Queens County, entitled B.Z. Chiropractic, P.C. a/a/o Tony Dance v. Allstate Insurance Company, Index No. 70935/00, which sought to recover first party No-Fault benefits for services rendered to defendant’s insured by plaintiff. Plaintiff was granted summary judgment in that action and on November 15, 2001, the Clerk of the Court entered judgment in favor of the plaintiff in the amount of $8,847.49. Plaintiff did not attempt to enforce said judgment until 2015, at which time defendant moved for a protective order and modification of the judgment pursuant to CPLR 5240. At that time, the amount of the judgment had grown to $227,060.57 ($8,847.49 plus 2% per month interest, compounded from November 15, 2001 through August 11, 2015). In an Order, dated November 16, 2015, the Civil Court found that plaintiff unreasonably allowed the compound interest to accrue and stayed said interest for the period of November 1, 2005 through June 19, 2015, the date that defendant received the plaintiff’s collections letter. Respondent issued checks in the amount of $22,999.70 in accordance with that decision and sought a satisfaction of judgment, moving by Order to Show Cause to compel same. Said motion was granted on July 7, 2016. Plaintiff appealed and on August 18, 2017, the Appellate Term, consolidated both appeals and reversed the lower court’s decision, finding that contrary to defendant’s assertions, plaintiff did not prevent defendant from timely paying the judgment. The Appellate Term added in an advisory capacity that the postjudgment rate of interest should be calculated pursuant to CPLR 5004 and not at the 2% per month rate provided for in 11 NYCRR 65-3.9(a). Thereafter, B.Z. Chiropractic moved before the Appellate Term seeking clarification of said decision or, in the alternative, for leave to appeal to the Appellate Division. The Appellate Term clarified that it was the Court’s intention to note that interest be awarded at the rate of 9% per year as in CPLR 5004, but that same is advisory and not appealable as of right or by permission.
The portion of Petitioner’s Petition seeking to turn over monies from its bank account maintained outside of New York State with Bank of America, N.A. in such sum as is sufficient to satisfy the judgment is denied in its entirety as Bank of America, N.A. is not a party to this action as required by CPLR §5225(b).
The portion of Petitioner’s Petition seeking a declaratory judgment on the proper interest rate which accrues on first party no-fault benefits after the entry of judgment is decided as follows: Pursuant to CPLR §5004, interest shall be at the rate of nine per centum per annum, except where otherwise provided by statute. Pursuant to 11 NYCRR 65-3.9(a), All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, calculated on a pro-rata basis using a 30-day month. At the time that the underlying claims were filed, said interest accrued at a compound rate. It is well settled that “with respect to interest on first party benefits due under the no-fault statute,…the Insurance Law supersedes the provisions for interest contained in CPLR 5002, 5003 and 5004 (Gov’t Emp. Ins. Co. v. Lombino, 57 AD2d 957, 959, 394 N.Y.S.2d 898 [1977]) The policies of encouraging prompt payment of claims and reducing litigation outweigh limits on [*2]interest found elsewhere, See, Matter of McKenna v County of Nassau, Off. of County Attorney, 97 AD2d 440 (2d Dept 1983). The interest rate on No-Fault actions is intentionally punitive, with severe penalties in order to encourage prompt adjustment of claims. As such, the rate of interest is not reduced simply because the claim has been reduced to a judgment. While such claims remain overdue, they accrue interest at two percent per month. As such, plaintiff is entitled to a declaratory judgment recognizing same.
Respondent’s cross-petition seeking dismissal and sanctions for the filing of a frivolous action is denied in its entirety for the reasons above.
Dated: 2/25/2019
_________________________
Laurence L. Love,
J.S.C.
Reported in New York Official Reports at A & S Med. Supply, Inc. v MVAIC Ins. Co. (2019 NY Slip Op 29019)
| A & S Med. Supply, Inc. v MVAIC Ins. Co. |
| 2019 NY Slip Op 29019 [62 Misc 3d 72] |
| Accepted for Miscellaneous Reports Publication |
| Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts |
| Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. |
| As corrected through Wednesday, April 3, 2019 |
[*1]
| A & S Medical Supply, Inc., as Assignee of Abram Aranbayev, Respondent, v MVAIC Ins. Co., Appellant. |
Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, January 11, 2019
APPEARANCES OF COUNSEL
Marshall & Marshall, PLLC (Naim M. Peress and Jeffrey Kadushin of counsel) for appellant.
Zara Javakov, P.C. (Zara Javakov of counsel) for respondent.
{**62 Misc 3d at 73} OPINION OF THE COURT
Ordered that the judgment is reversed, with $30 costs, and the matter is remitted to the Civil Court for the entry of a judgment in favor of defendant dismissing the complaint.
At the commencement of a nonjury trial in this action by a provider to recover assigned first-party no-fault benefits from Motor Vehicle Accident Indemnification Corporation (sued herein as MVAIC Ins. Co.), the parties stipulated that since the sole issue was whether plaintiff had exhausted its remedies, “if [MVAIC] can prove . . . that there was potential coverage through the assignor’s son who . . . lived with him on the date of the loss, then MVAIC has no burden to pay . . . these claims.” The only witness at trial was an employee of the New York Liquidation Bureau (NYLB), who testified pursuant to a subpoena served by MVAIC. He stated that, after the Supreme Court had entered an order placing Long Island Insurance Company (LIIC) into liquidation, NYLB had seized all of LIIC’s books and records, and administered LIIC’s claims, and that LIIC was closed. In response to the subpoena, he reviewed documents in a file seized from LIIC regarding a particular date of loss, a named person and a claim number. Among the documents he reviewed was an insurance policy from LIIC which was apparently issued to a [*2]person living at the same address as plaintiff’s assignor and whose name was the same as the assignor’s son with the exception of one letter. The Civil{**62 Misc 3d at 74} Court held that the documents were not admissible because the NYLB witness was unable to establish that the documents were admissible as business records pursuant to CPLR 4518. Although the court stated that the witness was credible, the court held that the issue to be resolved “was whether or not there was an insurance policy or coverage at the time of the accident” and that MVAIC had failed to sustain its burden.
[1, 2] The record establishes that NYLB seized records of LIIC after an order of liquidation of LIIC had been entered by the Supreme Court. Moreover, claims examiners employed by NYLB utilize the records to administer outstanding no-fault claims which have been submitted to LIIC. As NYLB incorporates and relies upon the records of LIIC, the records are admissible (see People v DiSalvo, 284 AD2d 547 [2001]; Plymouth Rock Fuel Corp. v Leucadia, Inc., 117 AD2d 727 [1986]; cf. West Val. Fire Dist. No. 1 v Village of Springville, 294 AD2d 949 [2002]). Since the pretrial stipulation simply required MVAIC to prove “that there was potential coverage,” MVAIC was not required to prove that “there was an insurance policy or coverage at the time of the accident.” In light of the foregoing, MVAIC sustained its burden of proving “that there was potential coverage.” Plaintiff, as assignee, was required to exhaust its remedies against all potential insurance carriers before seeking relief from defendant (see Hauswirth v American Home Assur. Co., 244 AD2d 528 [1997]; Orlin & Cohen Orthopedic Assoc. v Motor Veh. Acc. Indem. Corp., 58 Misc 3d 132[A], 2017 NY Slip Op 51778[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2017]). Here, plaintiff did not demonstrate that it had exhausted its remedies.
Accordingly, the judgment is reversed and the matter is remitted to the Civil Court for the entry of a judgment in favor of defendant dismissing the complaint.
Pesce, P.J., Aliotta and Elliot, JJ., concur.
Reported in New York Official Reports at American Alternative Ins. Corp. v Washington (2018 NY Slip Op 51210(U))
American Alternative
Insurance Corporation and any and all of its subsidiaries and affiliates, Plaintiff,
against Hattie M. Washington, ALEXANDER ANGLADA, DHD MEDICAL SUNSET PART, D.H.D. MEDICAL, P.C., ENGLINGTON MEDICAL, P.C., GREATER HEALTH THROUGH CHIROPRACTIC PC, EAST MIDWOOD VOLUNTEER AMBULANCE, LOMIS ACUPUNCTURE P.C., LENOX HILL RADIOLOGY & MEDICAL IMAGING ASSOCIATES, INTEGRAL ASSIST MEDICAL PC, NEW YORK COMMUNITY HOSPITAL, NYEEQASC LLC (NORTH QUEENS SURGICAL CENTER), ROCKVILLE ANESTHESIA GROUP, LLP, AARON ROVNER, MD, PLLC, COLIN CLARKE, MD, COUNTY LINE PHARMACY, and ISURPLY LLC, Defendants. |
652007/17
Attorney for Plaintiff
GOTTLIEB OSTRAGER, LLP
300 Wheeler Road, Suite 204
Hauppauge, New York 11788
By: AARON EITAN MEYER, Esq.
Attorney for Defendants Hattie M. Washington and Alexander Anglada
Brian J. Levy & Associates PLLC
303 Jackson Ave
Syosset, NY 11791
By: BRIAN J. LEVY, Esq.
Attorney for Defendants DHD MEDICAL SUNSET PARK and D.H.D. MEDICAL, P.C.
LAW OFFICES OF GEWURZ & ZACCARIA
50 Charles Lindbergh Blvd, Ste 204 Uniondale, NY 11553-3600
By: DAYVA ZACCARIA, Esq.
Attorney for Defendant NEW YORK COMMUNITY HOSPITAL
BREA YANKOWITZ PC
15 Verbena AvenueFloral Park, NY 11001
By: PATRICK JOHN BREA, Esq.
Attorney for Defendant AARON ROVNER MD, PLLC
Russell Friedman & Associates, LLP
3000 Marcus Avenue, Suite 2E03
New Hyde Park, NY 11042
By: CHARLES H. HORN, Esq.
No appearance for all other defendants
Robert R. Reed, J.
In this action for a declaratory judgment, defendants Hattie M. Washington (Washington) and Alexander Anglada (Anglada) claim to have been involved in an accident involving a vehicle insured by plaintiff American Alternative Insurance Corporation. Washington and Anglada both contend that they were pedestrians who were struck by that vehicle, and then fell to the ground, sustaining injuries caused by that fall.
Plaintiff now moves, pursuant to CPLR 3215, for an order granting it a default judgment against non-answering defendants DHD Medical Sunset Park, D.H.D. Medical, P.C., Englington Medical P.C., Greater Health Through Chiropractic PC, East Midwood Volunteer Ambulance, Lomis Acupuncture P.C., Lenox Hill Radiology & Medical Imaging Associates, Integral Assist Medical PC, NYEEQASC, LLC (North Queens Surgical Center), Rockville Anesthesia Group, LLP, Aaron Rovner MD, PLLC, County Line Pharmacy and ISurply LLC (collectively, the provider defendants or the defaulting defendants), and directing the Clerk to enter judgment that plaintiff, and any and all of its subsidiaries and affiliates, are not obligated to provide any coverage, reimbursements or pay any invoices, sums or funds to the provider defendants on behalf of individual defendants Washington or Anglada, for any and all no-fault related services for which claims/bills have been or may in the future be submitted by said defendants to plaintiff relating to these claims, for a permanent stay of any and all No-Fault lawsuits and arbitrations that have been or may be brought by defaulting medical providers relating to these claims, and for costs and disbursements of this action.
For the reasons set forth below, plaintiff’s motion is granted.
BACKGROUND
On May 24, 2017, the defaulting defendants, with the exception of County Line Pharmacy, were served with the Notice of Commencement of Action Subject to Mandatory Filing, and the summons and complaint (see affirmation of Aaron E. Meyer, Esq., exhibit A [*2][proofs of service]). Pursuant to CPLR 3215 (g) (4) (i), on August 1, 2017, plaintiff mailed additional notices of the summons and complaint to the defaulting defendants, with the exception of County Line Pharmacy (see id., exhibit B). Plaintiff asserts that, as of the date of the affirmation, the additional notices have not been returned as undeliverable by the U.S. Postal Service.
On June 6, 2017, defaulting defendant County Line Pharmacy was personally served with the Notice of Commencement of Action Subject to Mandatory Filing, and the summons and complaint (see id., exhibit C [proof of service]).
Accordingly, County Line Pharmacy’s response was due on June 26, 2017, and the responses of the remaining of the defaulting defendants were due on September 5, 2017.
Plaintiff contends that, as of the date of the motion, the defaulting defendants have not responded to the complaint.
Subsequent to the filing of the motion, the action was discontinued against defendant DHD Medical, P.C. by stipulation. In addition, plaintiff asserts that it no longer seeks a default judgment against defendant Aaron Rovner MD LLP.
The core claim of both Washington and Anglada was that each was caused to fall to the ground as the result of the operation of the vehicle at issue. Plaintiff contends that, however, the insured vehicle was equipped with four video cameras, which do not show that either Washington or Anglada was knocked down or fell during the alleged incident.
Plaintiff denied benefits to both Washington and Anglada, the defaulting defendants’ assignors, based on the video evidence, subsequent investigation, witness testimony and sworn testimony by claimants, on the ground that their purported injuries neither arose out of a covered incident nor occurred as alleged. Specifically, plaintiff denied the claims on the ground that Washington and Anglada intentionally made fraudulent statements calculated to result in the provision of first party benefits to which neither was entitled.
Pursuant to CPLR 3215 (f), “‘[a]n applicant for a default judgment against a defendant must submit proof of service of the summons and complaint, proof of the facts constituting the claim, and proof of the defaulting defendant’s failure to answer or appear'” (HSBC Bank USA, N.A. v Clayton, 146 AD3d 942, 944 [2d Dept 2017] [citation omitted]; accord 154 E. 62 LLC v 156 E. 62nd St. LLC, 159 AD3d 498, 498 [1st Dept 2018]; Bank of Am. N.A. v Agarwal, 150 AD3d 651, 652 [2d Dept 2017]). The plaintiff can satisfy this requirement through an affidavit of a party with personal knowledge of the facts (Reynolds Sec. v Underwriters Bank & Trust Co., 44 NY2d 568, 572 [1978]; Goodman v New York City Health & Hosps. Corp., 2 AD3d 581, 581 [2d Dept 2003]).
Plaintiff has satisfied the first and third of these requirements by submitting the affidavits of service, and the affirmation of Aaron E. Meyer, its attorney, in which Meyer asserts that the defaulting defendants have not answered or appeared. Plaintiff has also submitted proof of the facts constituting its claims.
An insurer may disclaim all insurance coverage based upon “the fact or founded belief that the alleged injury does not arise out of an insured incident” (Central Gen. Hosp. v Chubb Grp. of Ins. Co., 90 NY2d 195, 199 [1997]). In meeting this burden, a No-Fault insurer is “not required to establish that the subject collision was the product of fraud, which would require proof of all elements of fraud, including scienter, by clear and convincing evidence” (V.S. Med. Servs., P.C. v [*3]Allstate Ins. Co., 25 Misc 3d 39, 41 [App Term, 2d Dept 2009] [internal citation omitted]). Rather, the No-Fault insurer must demonstrate the facts elicited during an investigation that make up the founded belief. Circumstantial evidence is sufficient to prove such facts if a party’s conduct “may be ‘reasonably inferred’ based upon ‘logical inferences to be drawn from the evidence'” (Benzaken v Verizon Communications, Inc., 21 AD3d 864, 865 [2d Dept 2005] [citation omitted]).
An assignee, such as the provider defendants, may only obtain the rights of its assignors. The general rule of assignment provides that the assignee stands in the shoes of the assignor upon assignment of the interest, and takes the assignment subject to the defenses assertable against the assignor (Kolbeck v LIT America Inc., 923 F Supp 557, 567 [SD NY 1996]; see also Long Is. Radiology v Allstate Ins. Co., 36 AD3d 763, 765 [2d Dept 2007])
Plaintiff submits the affidavit of Ellen C. Henry, liability representative for Glatfelter Claims Management, Inc, which provides claims management services to plaintiff, in which Henry sets forth the proof of the facts constituting plaintiff’s claim (the denial of coverage and the basis therefor). Henry avers that she personally obtained the recorded statements of both Washington and Anglada, in which they stated that the collision with the insured vehicle caused them to fall to the ground (Henry aff, ¶¶ 7-10). Washington and Anglada repeated these statements to defendant medical providers (id., ¶¶ 11-13). Henry also avers that she “can personally attest to the fact that the video evidence directly and materially conflicted with both Defendants’ statements made to their treating medical providers and to myself” (id., ¶ 16). Specifically, Henry avers that the video evidence revealed that “while it is at best debatable as to whether the vehicle ever came into actual contact with either Defendant, it is indisputable that neither Defendant was knocked down or otherwise fell during the course of the incident” (id., ¶ 22). Accordingly, Henry determined that the claims were fraudulent and denied them (id., ¶ 23).
The facts set forth in the Henry affidavit are sufficient to create a founded belief that the claims were fraudulent, and that, as such, Washington and Anglada are not entitled to no-fault benefits. As assignees of the allegedly fraudulent claims, the defaulting defendants would likewise not be entitled to receive any payments for services allegedly provided as the result of the accident. Accordingly, plaintiff is entitled to a default judgment as against the defaulting defendants.
The defaulting defendants do not oppose the motion. The only opposition was submitted by Washington and Anglada. However, their response is completely irrelevant, as the motion was not brought against them. Moreover, their response does not speak to plaintiff’s prima facie entitlement to judgment against the defaulting providers, or excuse the non-answering defendants for their failure to take any action.
The court has considered the remaining arguments, and finds them to be without merit.
Accordingly, it is
ORDERED that plaintiff’s motion for a default judgment is granted, and plaintiff is directed to serve a copy of this Decision and Order with Notice of Entry upon defendants within 20 days.
Dated: August 14, 2018
ENTER:
_______________________
J.S.C.
Reported in New York Official Reports at Ameriprise Ins. Co. v Hampton (2018 NY Slip Op 51207(U))
Ameriprise Insurance
Company, Plaintiff,
against Latanya Hampton, JOHN T. BUNN, CHERYL ARMOUR, LILLIAN SPOONER, SAFIYAH SOUZA, SHAKEYA WITHERSPOON, NAKIA MCCRAE, AUDREY JOHNSON, (the individual, defendants) And AVALON RADIOLOGY, P.C., AVANGUARD MEDICAL GROUP, PLLC., B.S.A CHIROPRACTIC, P.C., EAST COAST MEDICAL DIAGNOSTIC, P.C., EAST COAST METROPOLITAN MEDICAL, P.C., HARDEN STREET MEDICAL, P.C., KEYSTONE REHABILITATIONS SYSTEMS, LAURUS ACUPUNCTURE, P.C., METROPOLITAN MEDICAL & SURGICAL, P.C., ONE TO ONE REHAB, PT, P.C., PSYCHOLOGICAL ADAPTATION SERVICES, P.C., SELENA APELIS, D.C. and VIVID ACUPUNCTURE, P.C., (the healthcare provider defendants), Defendants. |
152076/2017
Attorney for Plaintiffs
BRUNO, GERBINO & SORIANO, LLP
45 Broad Hollow Road, Suite 220
Melville, New York 1174
By: VANESSA HELEN HLINKA, Esq.
Attorney for Defendants: B.S.A.
Chiropractic, P.C.; East Coast Metropolitan Medical, P.C.; Laurus Acupuncture, P.C.; One to
One Rehab, PT, P.C., and Psychological Adaptation Services, P.C.
KOPELEVICH & FELDSHEROVA PC 241 37th St, Ste 615
Brooklyn, NY 11232
By: DAVID MICHAEL LANDFAIR, Esq.
Attorney for remaining Defendants
No appearance
Robert R. Reed, J.
Motion sequences 001, 002, and 003 are consolidated for disposition. In this declaratory judgment action, plaintiff Ameriprise Insurance Company moves for an order for a preliminary injunction, pursuant to CPLR 6301, and / or a stay, pursuant to CPLR 2201, of all pending and future lawsuits for uninsured / underinsured no-fault insurance benefits to defendants (motion sequence 001); an order of default judgment declaring that defendants Latanya (Dawn) Hampton (Hampton), John T. Bunn (Bunn), Cheryl Armour (Armour) , Safiyah Souza (Souza), Shakeya Witherpsoon (Witherpsoon), Nakia McCrae (McCrae), Audrey Johnson (Johnson), Avalon Radiology, P.C., Avanguard Medical Group, PLLC, East Coast Medical Diagnostic, P.C., Harden Street Medical, P.C., Metropolitan Medical & Surgical, P.C., Selena Apelis, D.C. and Vivid Acupuncture, P.C. are in default (motion sequence (002); and, pursuant to CPLR 3211 (a) (6), to dismiss the counterclaim because it was improperly interposed and /or pursuant to CPLR 3211 (a) (7), because the counterclaim fails to state a cause of action as against defendants BSA Chiropractic, Eastcoast Metropolitan Medical, P.C., Laurus Acupuncture, P.C., One to One Rehab PT, P.C., and Psychological Adaptation Services P.C. (motion sequence 003).
BACKGROUND
This litigation arises from an alleged motor vehicle accident (the incident) on July 22, 2013 involving a vehicle insured by John T. Bunn and another vehicle owned by Lillian Spooner and operated by Safiyah Souza in Brooklyn, New York. At the time of the incident, Bunn’s vehicle allegedly contained passengers Hampton, Armour, Witherspoon, McCrae and Johnson. Upon receipt of notification of the incident, plaintiff assigned the incident claim number 1673052. Then, plaintiff began receiving bills for medical treatment from several of the defendants, including Hampton, Armour, Witherspoon, McCrae, and Johnson.
Examination Under Oath (EUO) of Defendant John T. Bunn
Bunn testified that he lives at 1060 Hendricks Street, Brooklyn, New York (Bunn tr at 9). On the date of the incident, he was leasing a 2012 Honda Accord (id. at 19). He testified that he purchased the vehicle one year ago, but that he does not remember what address he gave plaintiff when he purchased the insurance policy (id. at 21-22). He lived at 99 Metropolitan in the Bronx when he first purchased the vehicle, and was paying $250 per month (id.).
He testified that, before the incident, he had driven from around the corner, at his mother’s house, to the location of the incident (id. at 26). After leaving his mother’s house, he saw Armour, who got into his vehicle at Bergen Street, where the incident occurred (id. at 18-22, 31). He testified that he and Armour did not go anywhere prior to the incident, and that he could not remember going out to eat prior to the incident (id. at 29). After Armour got into his vehicle, he told her to sit in the vehicle while he ran upstairs, because he had parked the vehicle in front of a fire hydrant (id. at 28, 32). Armour was the only person in his vehicle when he left the vehicle, and he left the key in the ignition (id. at 28, 32). He was going to 654 Kingsborough 6th Walk, to an apartment on the sixth floor, to visit the son of his [*2]childhood friend, Hampton (id. at 30-31).
He testified that he received a phone call from Armour when the incident occurred, and that when he came back down Armour’s friends were in his vehicle (id. at 34). He was unsure as to whether all of Armour’s friends were in the vehicle (id. at 35). He testified that Hampton was also in the vehicle, and he has known Hampton all his life (id. at 34, 36). He was told that Armour’s scratch under her eye was caused by a female driver in the other vehicle involved in the incident who tried to attack her (id. at 49).
EUO of Defendant Cheryl Armour
Armour testified that, at the time of the alleged incident, she was seated in the driver’s seat of Bunn’s vehicle (Armour tr at 21). Prior to the incident, Bunn had taken her and several other people, except for Johnson, to Dunkin Donuts (id. at 16). After they went to Dunkin Donuts, Bunn parked his vehicle in front of a fire hydrant so that he could go inside to drop something off for a friend’s mother named Lorraine (id. at 20, 97). Bunn told her to sit in the driver’s seat in case she had to move the car to avoid getting a ticket (id. at 21). She testified that the other vehicle reversed into Bunn’s parked vehicle twice, with the second hit pushing Bunn’s vehicle up onto a curb and into the fire hydrant (id. at 21-22, 92). As a result of the incident, she was bleeding underneath her left eye (id. at 22). She testified that she, McCrae, Witherspoon, and Johnson all went to the same medical facility that she found out about through Hampton’s sister, Robin (id. at 38). She further testified that people approached her at the scene of the incident to offer her legal services, but she did not take any of their business cards (id. at 32-33).
EUO of Defendant Shakeya Witherspoon
Witherspoon testified that at the time of the incident, she was a passenger in Bunn’s vehicle sitting in the middle of the backseat (Witherspoon tr at 19, 27). Armour was in the driver’s seat, Johnson was in the front passenger seat, Hampton was in the backseat on the right side, and McCrae was seated with her child in the backseat on the left side (id. at 21-25). At the time of the incident the vehicle was not moving (id. at 20, 27). She first got into the vehicle when she, Armour, Bunn, McCrae, McCrae’s child and Johnson went to the Dunkin Donuts, 20 to 30 minutes prior to the incident (id. at 29). Prior to going to Dunkin Donuts, she Armour, McCrae and Johnson were on Bergen Street when Bunn pulled up to them to take them to Dunkin Donuts (id. at 29, 31). She later testified that Johnson was not in the vehicle when they went to Dunkin Donuts (id. at 34). When they returned to Bergen Street, they parked in front of a fire hydrant and Bunn got out of the car because he had to take something to his godmother (id. at 39). Everyone else stayed in the car because they were discussing what they planned to do next (id. at 41). Bunn’s vehicle hit the fire hydrant after the other vehicle backed into Bunn’s vehicle twice (id. at 45). After the incident, strangers attempted to give them business cards for legal services but they did not take them (id. at 59).
She testified that she received medical treatment at a facility on Flatlands Avenue from a referral from Armour, and that someone from the facility transported her to and from the facility (id. at 59-60). She found out about her attorney through Armour and Armour’s friend dealt with the attorney (id. at 87).
EUO of Defendant Nakia McCrae
McCrae testified that at the time of the incident Armour was in the driver’s seat of Bunn’s vehicle, she was sitting behind the driver’s seat, Johnson was in the front passenger’s seat, Witherspoon was in the middle seat next to her, and Hampton was seated next to Witherspoon (McCrae tr at 18-19). It was drizzling on the day of the incident and she went outside to Bergen Street and met up with Witherspoon, Armour, Johnson and Hampton to watch their kids play and talk with each other while they had coffee (id. at 20-21). Bunn arrived by himself and at that point everyone decided to go to [*3]Dunkin Donuts because she had a Dunkin Donuts gift card (id. at 22). Bunn drove them to Dunkin Donuts (id. at 23). After Dunkin Donuts, they returned to Bergen Street and Bunn parked the vehicle, took the keys with him, and left everyone else in the car while he went to visit his godmother (id. at 28-29). The other vehicle backed into Bunn’s vehicle twice pushing Bunn’s vehicle onto the sidewalk, but she did not believe Bunn’s vehicle hit the fire hydrant (id. at 32, 34). Armour’s face was bleeding but she was not sure if Armour and the driver of the other vehicle got into a physical altercation (id. at 36-37).
She testified that people came to the hospital to give them business cards for attorneys and medical facilities but they did not take any of the cards (id. at 46). The next day she went to Harden Street Medical PC, a facility on Flatbush Avenue, for medical treatment (id. at 47-48). She found out about the facility through Armour and Witherspoon, and was transported there by drivers hired by the facility (id. at 49, 84). She found her attorney though friends, and Witherspoon told her they were going to do everything with Armour (id. at 84-85).
EUO of Defendant Audrey Johnson
Johnson testified that at the time of the incident Armour was in the driver’s seat, she was in the front passenger seat, Hampton was behind her and McCrae was next to Witherspoon behind Armour (Johnson tr at 18-20). It was drizzling on the day of the incident and she was coming out of a building when she saw Armour, Witherspoon, and McCrae parked so she went over to talk to Armour and got in Bunn’s vehicle (id. at 21-22). As she was talking, the other vehicle backed into Bunn’s vehicle, and Bunn’s vehicle hit the fire hydrant (id. at 24). Bunn’s vehicle was parked when it was hit (id. at 18-19). At the scene of the incident, people came up to them to give them business cards for medical and legal services but no one took the cards (id. at 35).
She testified that the next day she began receiving medical treatment at a facility on Flatlands and Avenue D in Brooklyn (id. at 30). Armour learned about the facility through friends, and referred her to the facility (id.). Armour’s friend drove she and Armour to the facility (id. at 35). She presently goes to the facility three times a week and the facility provides a car service (id. at 63). Armour also referred her to her attorney, but she does not know how Armour learned of the attorney (id. at 62).
EUO of Defendant Latonya Hampton
Hampton testified that, at the time of the incident, she was a passenger in Bunn’s vehicle (Hampton tr at 11). She was in the back rear right-side seat, Johnson was in the passenger front seat, and Armour was in the driver’s seat (id. at 16-17, 19). Witherspoon was sitting in the middle seat and McCrae was in the left seat behind the driver’s seat with her son (id. at 19, 23). She testified that there was Dunkin Donuts in the vehicle (id. at 25). Before the incident, her youngest child came over and asked them to move Bunn’s vehicle in order to get water from the fire hydrant (id. at 17). They moved Bunn’s vehicle about five feet, so the vehicle was then about five feet away from the fire hydrant (id.). The first impact occurred when they moved Bunn’s vehicle up, which then moved Bunn’s vehicle into the fire hydrant (id. at 41). She testified that she did not see anyone bleeding after the incident (id. at 26). She also did not know of anyone giving business cards for medical or legal services (id. at 29, 34). Her current attorney referred her to the facility where she is receiving medical treatment (id.).
After notification of the incident, plaintiff investigated the legitimacy of the incident. Plaintiff found the following during the investigation:
(1) When procuring the insurance policy, Bunn utilized a residential address of 118 Thielman Road, Hudson, NY 12534, but Bunn actually resided at 1060 Hendrix Street, Brooklyn, NY 11207 (plaintiff order to show cause, Hlinka affirmation [Hlinka Affirm.], exhibit E);
(2) The driver of Bunn’s vehicle at the time of the incident was not a listed driver on the insurance policy, and Bunn was not in the vehicle at the time of the incident;
(3) The police report stated that the vehicle was moving before the incident occurred, but Bunn contacted plaintiff several times to ensure that plaintiff’s notes stated that he was not at fault, because his vehicle was parked (Hlinka Affirm., exhibit G);
(4) There was a discrepancy between Bunn’s EUO and Armour’s EUO in terms of who was in the vehicle at the time of the incident;
(5) Except for Hampton, all of the alleged passengers in Bunn’s vehicle started receiving nearly identical treatment at the same multi-disciplinary medical facility, which included acupuncture, chiropractic treatment, and physical therapy;
(6) Plaintiff received billing for Armour, McCrae, Johnson, and Witherspoon from defendant Harden Street Medical PC as well as various sub-providers affiliated with the facility the day after the incident.
On March 3, 2017, plaintiff commenced the action by filing a summons and complaint. Plaintiff seeks a declaratory judgment that the vehicle in the incident was not a product of a covered event as it was the result of an intentional and / or staged occurrence. Defendants BSA Chiropractic, Eastcoast Metropolitan Medical, P.C., Laurus Acupuncture, P.C., One to One Rehab PT, P.C., and Psychological Adaptation Services P.C. (Answering defendants) oppose the motion.
DISCUSSION
Plaintiff seeks, by order to show cause, an order for a preliminary injunction, pursuant to CPLR 6301, and/or a stay, pursuant to CPLR 2201, of all pending and future lawsuits for uninsured/underinsured no-fault insurance benefits to the defendants pending determination of this declaratory judgment action.
CPLR 2201 states “[e]xcept where otherwise prescribed by law, the court in which an action is pending may grant a stay of proceedings in a proper case, upon such terms as may be just.” This court may issue a stay of an action pending before it, but “it lacks statutory authority to stay actions pending in the Civil Court or District Court. [Therefore], plaintiff’s motion for a ‘stay’ of the pending lower court actions is in fact one for a preliminary injunction” (St. Paul Travelers Ins. Co. v. Nandi, 15 Misc 3d 1145 [A], 2007 NY Slip Op 51154 [U] *7 [Sup Ct, Queens County 2007] [internal citations omitted]).
CPLR 6301 provides the following:
“A preliminary injunction may be granted in any action where it appears that the defendant threatens or is about to do, or is doing or procuring or suffering to be done, an act in violation of the plaintiff’s rights respecting the subject of the action, and tending to render the judgment ineffectual, or in any action where the plaintiff has demanded and would be entitled to a judgment restraining the defendant from the commission or continuance of an act, which, if committed or continued during the pendency of the action, would produce injury to the plaintiff. A temporary restraining order may be granted pending a hearing for a preliminary injunction where it appears that immediate and irreparable injury, loss or damage will result unless the defendant is restrained before the hearing can be had.”
“Preliminary injunctive relief is a drastic remedy that will not be granted unless a clear right to it is established under the law and upon undisputed facts found in the moving papers, and the burden of showing an undisputed right rests upon the movant” (Zanghi v State, 204 AD2d 313, 314 [2d Dept 1994] [internal quotation marks and citations omitted]). The moving party has the burden of demonstrating “(1) a likelihood of ultimate success on the merits; (2) the prospect of irreparable injury if the provisional relief is withheld; and (3) a balance of equities tipping in the moving party’s favor” (Doe v Axelrod, 73 NY2d 748, 750 [1988]). “The decision to grant or deny provisional relief, which requires the court to weigh a variety of factors, is a matter ordinarily committed to the sound discretion of the [] court[]” (id.).
Plaintiff contends that it is entitled to a preliminary injunction because it has demonstrated a [*4]likelihood of success on the merits. Plaintiff argues that it is not obligated to indemnify, defend against, or pay benefits for the incident because the incident was a result of intentional actions by the individual defendants. “An accident has been defined as an event which . . . is unusual and unexpected by the person to whom it happens. Thus, the rule in [New York] and in other jurisdictions is that [w]hether or not a certain result is accidental is usually determined by looking at the casualty from the point of view of the insured to see whether or not from his point of view the event was unexpected, unusual and unforeseen” (Nallan v Union Labor Life Ins. Co., 42 NY2d 884, 885 [1977] [internal quotation marks and citations omitted]).
A motor vehicle collision that is the result of intentional actions is not an accident (see Matter of Eagle Ins. Co. v Gueye, 26 AD3d 192, 193 [1st Dept 2006]; Matter of Travelers Indem. Co. v Morales, 188 AD2d 350, 351 [1st Dept 1992]; see also Matter of Fuscaldo v Motor Vehicle Acc. Indemnification Corp., 24 AD2d 744, [1st Dept 1965]).
Here, plaintiff has presented sufficient evidence to support its determination that the incident was not an accident. The verified complaint, affidavit of plaintiff’s Special Investigative Unit Senior Special Investigator James Glampe, and the EOUs of the individual defendants contain sufficient non-conclusory factual allegations for plaintiff to conclude that the incident was intentional and not eligible for no-fault coverage. Furthermore, the Answering defendants have not presented any factual evidence to contradict such a finding. Contrary to Answering defendants’ argument, the unsigned EUO transcripts of the individual defendants are admissible. “In order to use a transcript that is not signed by the witness, if the witness is a nonparty, or, if a party and the transcript is not signed by the witness or certified, it is the burden of the party wanting to use the deposition transcript to show that the transcript was sent to the witness to be reviewed for any corrections, and that sufficient time to do so has passed” (Palumbo v Innovative Communications Concepts, Inc., 175 Misc 2d 156, 157-158 [Sup Ct, NY County 1997], affd, 251 AD2d 246 [1st Dept 1998]). Plaintiff has provided copies of correspondence with its moving papers demonstrating that it requested individual defendants to review and execute the EOU, and gave each of them a proper amount of time to comply (see Hlinka Affirm., exhibits F,H, L, M, N, O). Likewise, contrary to Answering defendants’ contention, Glampe’s affidavit is also admissible given his personal knowledge and expertise in accident investigation (see Matter of Travelers Indem. Co. v Morales, 188 AD2d 350, 351 [1st Dept 1992] [ finding that “the officers'[] statements concerning the intentional nature of the incident were correctly considered by the court since the officers were trained experts in accident investigation”]).
Moreover, to the extent that Answering defendants’ argue that prior summary judgment motions in related cases determined that there are questions of fact, that is of no moment as questions of fact do not defeat a motion for preliminary injunction. (see CPLR 6312 [c]). “Provided that the elements required for the issuance of a preliminary injunction are demonstrated in the plaintiff’s papers, the presentation by the defendant of evidence sufficient to raise an issue of fact as to any of such elements shall not in itself be grounds for denial of the motion” (id.).
Answering defendants’ contention that plaintiff’s allegations of fraud are inapplicable to Answering defendants because they are innocent third-parties is unavailing. Answering defendants are not innocent third-parties as they all obtained assignments of individual defendants’ no-fault benefits, thus they are subject to the same defenses as their assignors (A.B. Med. Servs. PLLC v Commercial Mut. Ins. Co., 12 Misc 3d 8, 11 [App Term, 2d Dept 2006] [“hold[ing] that only innocent third parties who are injured are protected, and not a health care provider who deals with the assignor-insured at its peril in accepting an assignment of the insured’s no-fault benefits”] [internal citation omitted]).
Plaintiff argues that it is entitled to a preliminary injunction because it will suffer irreparable harm if it must defend against several pending actions, as well as any actions that may be initiated in the [*5]future. Plaintiff further argues that it should not have to bear the unreasonable costs of defending against multiple actions when there is a declaratory judgment action that would resolve the issue of coverage and liability for all pending actions. In addition, plaintiff argues that the possibility of inconsistent decisions in the pending actions could cause an undue burden on plaintiff. “Irreparable injury, for purposes of equity, has been held to mean any injury for which money damages are insufficient” (McLaughlin, Piven, Vogel v W.J. Nolan & Co., 114 AD2d 165, 174, [2d Dept 1986] [internal citation omitted]). “Where . . . a litigant can fully be recompensed by a monetary award, a preliminary injunction will not issue” (Price Paper & Twine Co. v Miller, 182 AD2d 748, 750 [2d Dept 1992]). “[T]he ‘balancing of the equities’ usually simply requires the court to look to the relative prejudice to each party accruing from a grant or a denial of the requested relief'” (Ma v Xuan T. Lien, 198 AD2d 186, 186-187 [1st Dept 1993]). A plaintiff demonstrates irreparable harm and a balancing of the equities in its favor when injunctive relief would minimize repetitive litigation with the same claims, defense, and inconsistent judicial or arbitral decisions (St. Paul Travelers Ins. Co. v. Nandi, 15 Misc 3d 1145 [A], 2007 NY Slip Op 51154 [U] at *7 [Sup Ct, Queens County 2007]). “Rather than require insurers to wait to be sued so as to assert the affirmative defense of fraud, New York courts routinely permit insurers to proactively seek injunctive relief against any current and future actions and arbitration proceedings brought by, or on behalf of, the insured while the Court considers the merits of the alleged fraud.” (Liberty Mut. Ins. Co. v. Colot, 2012 NY Slip Op 33500[U], *1 [Sup Ct, NY County 2012]).
In the instant matter, plaintiff has demonstrated irreparable harm and a balancing of the equities in its favor. Preliminary injunction would not only be beneficial to plaintiff but also to Answering defendants in reducing legal costs and attorneys’ fees, and none of the parties would be subject to varying inconsistent court orders or arbitration awards.
Answering defendants argue that if plaintiff is granted a preliminary injunction, plaintiff must post a bond or undertaking pursuant to CPLR 6312(b) and CPLR 6315. Plaintiff does not oppose this, stating in its affirmation in reply that “[p]laintiff has no issue in posting of a bond in the event that the [c]ourt grants the injunction” (plaintiff’s order to show cause, reply affirmation at 8). The court has considered the remaining arguments and finds them unavailing. Therefore, plaintiff’s order to show cause is granted.
Plaintiff moves, pursuant to CPLR 3215, declaring that defendants Latanya Hampton, John T. Bunn, Cheryl Armour, Safiyah Souza, Shakeya Witherpsoon, Nakia McCrae, Audrey Johnson, Avalon Radiology, P.C., Avanguard Medical Group, PLLC, East Coast Medical Diagnostic, P.C., Harden Street Medical, P.C., Metropolitan Medical & Surgical, P.C., Selena Apelis, D.C. and Vivid Acupuncture, P.C. are in default in appearing or answering the summons and complaint. The aforementioned defendants have not opposed the motion; therefore, it is granted.
Plaintiff moves, pursuant to CPLR 3211 (a) (6), to dismiss Answering defendants’ counterclaim, because it was improperly interposed, and/or pursuant to CPRL 3211 (a) (7), because the counterclaim fails to state a cause of action.
Pursuant to CPLR 3211(a) (6), dismissal is permitted where, “with respect to a counterclaim, it may not properly be interposed in the action.” “This ground for dismissal applies where a counterclaim may not be interposed in a particular action such as when a fiduciary brings an action and a counterclaim has been improperly interposed against him or her in his or her personal capacity and not in the capacity in which he or she has sued” (MCC Funding LLC v Diamond Point Enterprises, LLC, 36 Misc 3d 1206[A], 2012 NY Slip Op 51212 [U] *5 [Sup Ct, Kings County 2012]). Although plaintiff cites to CPLR 3211 (a) (6) as a grounds for dismissal of Answering defendants’ counterclaims, plaintiff has not offered any grounds which would support dismissal on this basis.
Under CPLR 3211 (a) (7), a pleading may be dismissed for failing to state a cause of action. [*6]Under this section, “a motion to dismiss a pleading will fail, if, from its four corners, factual allegations are discerned which taken together manifest any cause of action cognizable at law” (Tenzer, Greenblatt, Fallon & Kaplan v Ellenberg, 199 AD2d 45, 45 [1st Dept 1993] (upholding denial of plaintiff’s motion to dismiss defendant’s counterclaim for failure to state a cause of action pursuant to CPLR 3211 [a] [7]). Answering defendants have failed to state a cause of action in their counterclaim. Answering defendants’ counterclaim seeks a payment of attorneys’ fees if they should succeed in alleging entitlement under assignments of no-fault benefits executed by plaintiff’s insured. However, plaintiff does not owe Answering defendants a duty to defend, as there is no recovery for attorneys’ fees in declaratory judgment actions to facilities that submit claims to the insurer on behalf of a non-insured parties (see Hertz Vehs., LLC v Cepeda, 156 AD3d 440, 441[1st Dept 2017] [holding no duty to defend where defendant is not an insured to which plaintiff owes a duty to defend because “[a]lthough [defendant] was assigned the claimants’ rights for reimbursement of no-fault benefits, the claimants were only passengers in the insured vehicle at the time of the accident, and were not parties to whom [plaintiff] owed a duty to defend”]; see also Fiduciary Ins. Co. of Am. v Med. Diagnostic Serv., P.C., 150 AD3d 498 [1st Dept 2017]).
Answering defendants’ reliance on Insurance law § 5106 entitled “Fair claims settlement” is unavailing, as there is nothing in the statute indicating that it applies to declaratory judgment actions. Section 5106 (a) states in part, “Payments of first party benefits and additional first party benefits shall be made as the loss is incurred . . . . If a valid claim or portion was overdue, the claimant shall also be entitled to recover his attorney’s reasonable fee, for services necessarily performed in connection with securing payment of the overdue claim, subject to limitations promulgated by the superintendent in regulations” (Insurance Law § 5106 [a]). Section 5102 (b) defines first party benefits as “payments to reimburse a person for basic economic loss on account of personal injury arising out of the use or operation of a motor vehicle . . .” (Insurance Law § 5102 [b]). There is nothing in section 5106 (a) or the definition of first party benefits in section 5102 (b) that supports application to declaratory judgment actions. Moreover, although section 5106 permits a claimant “to recover his attorney’s reasonable fee, for services necessarily performed in connection with securing payment of the overdue claims, subject to limitations promulgated by the superintendent in regulations,” there is nothing in the referenced regulations to support application to declaratory judgment actions (Insurance Law § 5106 [a]); see 11 NYCRR 65-4.6).
Answering defendants’ reliance on Mighty Midgets v Centennial Ins. Co. (47 NY2d 12 [1979]), and U.S. Underwriters Ins. Co. v City Club Hotel, LLC (3 NY3d 592 [2004]) is misplaced because those cases specifically dealt with indemnification of an insured. Here, the Answering defendants are not the insured parties but rather “assignee[s] of the rights of the no-fault claimants in the underlying automobile accident to whom [they] provided medical treatment” (Hertz Vehs, 156 AD3d at 441). The insured parties in Mighty Midgets and U.S. Underwriters Ins. were able to recover attorneys’ fees because “an insurer’s duty to defend an insured extends to the defense of any action arising out of the occurrence, including a defense against an insurer’s declaratory judgment action” (U.S. Underwriters, 3 NY3d at 597-598). However, an insurer’s duty to defend does not extend to assignees of the rights of no-fault claimants, here the answering defendants (Hertz Vehs., 156 AD3d at 441). The court need not address plaintiff’s and Answering defendants’ remaining contentions.
CONCLUSION
Accordingly, it is hereby
ORDERED that plaintiff’s order to show cause for a preliminary injunction is granted (motion sequence 001); and it is further
ORDERED that plaintiff and BSA Chiropractic, Eastcoast Metropolitan Medical, P.C., Laurus [*7]Acupuncture, P.C., One to One Rehab PT, P.C., and Psychological Adaptation Services P.C. submit affidavits on the proper amount of plaintiff’s undertaking within 14 days of entry of this order; and it is further
ORDERED that plaintiff’s motion for default judgment against defendants Latanya Hampton, John T. Bunn, Cheryl Armour, Safiyah Souza, Shakeya Witherpsoon, Nakia McCrae, Audrey Johnson, Avalon Radiology, P.C., Avanguard Medical Group, PLLC, East Coast Medical Diagnostic, P.C., Harden Street Medical, P.C., Metropolitan Medical & Surgical, P.C., Selena Apelis, D.C. and Vivid Acupuncture, P.C. is granted (motion sequence 002); and it is further
ORDERED that plaintiff’s motion to dismiss the counterclaim of BSA Chiropractic, Eastcoast Metropolitan Medical, P.C., Laurus Acupuncture, P.C., One to One Rehab PT, P.C., and Psychological Adaptation Services P.C. is granted (motion sequence 003).
Dated: August 14, 2018
ENTER:
J.S.C.
Reported in New York Official Reports at State Farm Mut. Auto. Ins. Co. v Sweetwater Chiropractic, P.C. (2018 NY Slip Op 51177(U))
State Farm Mutual
Automobile Insurance Company, STATE FARM INDEMNITY COMPANY AND STATE
FARM FIRE AND CASUALTY COMPANY, Plaintiffs,
against Sweetwater Chiropractic, P.C., Defendant. |
152175/2015
Plaintiffs: Nicole R. McErlean, Freiberg, Peck & Kang, LLP, 200 Business Park Drive, Suite 202, Armonk, NY 10504
Defendant: David Karp, Fuld & Karp, P.C., 1963 Coney Island Avenue, Brooklyn, NY 11223
Carmen Victoria St. George, J.
In this declaratory judgment action, the plaintiff insurer moves for summary judgment pursuant to CPLR § 3212 against the defendant Sweetwater Chiropractic, P.C., a medical provider, which, as assignee of the thirteen individuals who were allegedly injured in various motor vehicle accidents, sought payment for no-fault benefits under polices issued by the plaintiff. The basis for plaintiffs’ motion is that defendant failed to appear for scheduled examinations under oath (“EUOs”) which was a breach of a condition precedent to coverage under the No-Fault regulations. Defendant cross-moves for an order, pursuant to CPLR § 3126(3), for a default judgment against the plaintiffs on the defendant’s counter-claims and dismissing the plaintiffs’ complaint, or for an order pursuant to CPLR § 3126(1). Alternatively, defendants seek an order compelling the plaintiffs to provide outstanding discovery and submit to an examination before trial by a date certain pursuant to CPLR § 3124. Defendant further moves for an order pursuant to CPLR § 603 severing this action into thirteen separate and individual actions relating to the claims submitted by defendant for each individual eligible injured person. For the reasons stated below, plaintiffs’ motion for summary judgment and defendant’s cross-motion to dismiss are denied. Defendant’s cross-motion to sever the action is [*2]also denied. Defendant’s cross-motion seeking an order compelling discovery is granted.
Thirteen individuals were allegedly injured in various motor vehicle accidents and made claims as eligible injured persons (“EIPs”) for no-fault insurance coverage under plaintiffs’ automobile insurance policies. On the date of each motor vehicle accident, the respective insurance policy was in effect for each claimant. Furthermore, each policy contained a no-fault endorsement which provided that State Farm would reimburse an EIP for the treatment of injuries occurring out of the use or operation of the insured vehicle. The defendant is a health service provider that allegedly treated the EIPs and was assigned the right to collect no-fault reimbursement on behalf of the EIPs. As an assignee, the defendant submitted no-fault billings to State Farm for reimbursement. The policies under which defendant has sought or will seek reimbursement for no-fault benefits from State Farm contain a condition precedent that EIPs or their assignees seeking reimbursement may be required to submit to EUOs.
Plaintiffs assert that defendant breached a condition precedent to No-Fault recovery by failing to appear for duly scheduled EUOs. Plaintiffs allege they duly and timely requested defendant to appear for EUOs in connection with claim reimbursements under New York Administrative Code Sections 65-3.5(b) (“11 NYCRR”) and 65-3.8(a)(1), but defendant failed to appear for every scheduled EUO. In support of this contention, plaintiff submits affidavits from Keith Bertrand (“Bertrand Affidavit”), Brian Rafalski (“Rafalski Affidavit”), and Christopher Howard (“Howard Affidavit”).[FN1] Accordingly, plaintiffs ask this court to issue a declaration that 1) defendant failed to appear for EUOs, thereby breaching a condition precedent to no-fault coverage and violating the No-Fault regulations; 2) all automobile insurance policies named within the complaint are void back to the inception of each respective policy; and 3) plaintiffs owe no coverage for any and all, past or future, no-fault claims made by the defendant.
In opposition, defendant argues, inter alia: (1) the Howard Affidavit does not establish why the EUOs were requested by the plaintiffs on any of the claims that are the subject of this action; (2) the affidavits of Bertrand and Rafalski do not establish the admissibility of the EUO request letters; and (3) necessary discovery remains outstanding, precluding summary judgment at this stage. With respect to the remaining discovery, defendant argues that it is entitled to discover what correspondence, if any, the plaintiffs or their counsel received in objection to the alleged EUO requests. Defendant submits three letters sent by defendant’s counsel, in response to the EUO requests, seeking to ascertain the basis for the plaintiffs’ requests for the EUOs. Defendant further asserts that plaintiffs are the only ones who know what responsive communications were received. Additionally, defendant points out that plaintiffs have not responded to defendant’s discovery demands dated March 30, 2015.
With regard to defendant’s request to sever the action, it contends that severance is proper because the facts and circumstances for each individual claimant is different. Defendant further points out that a trial of this matter would necessitate testimony regarding the generation and mailing of multiple EUO scheduling letters for each of the thirteen separate and distinct claims.
On a motion for summary judgment, the moving party has the initial burden of establishing its entitlement to judgment as a matter of law with evidence sufficient to eliminate any material issue of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1985]). The facts must be viewed “in the light most favorable to the non-moving party” (Ortiz v Varsity Holdings, LLC, 18 NY3d 335, 339 [2011]). The failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposition papers (Voss v Netherlands Ins. Co., 22 NY3d 728, 734 [2014]). Once the moving party “produces the requisite evidence, the burden then shifts to the non-moving party to establish the existence of material issues of fact which require a trial of the action” (Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft, LLP, 26 NY3d 40, 49 [2015]). The court’s task in deciding a summary judgment motion is to determine whether there is bonafide issues of fact and not to delve into or resolve issues of credibility (Vega v Restani Constr. Corp, 18 NY3d 499, 505 [2012]). If the court is unsure whether a triable issue of fact exists, or can reasonably conclude that fact is arguable, the motion must be denied (Tronlone v Lac d’Amiante Due Quebec, Ltee, 297 AD2d 528, 528-529 [1st Dept 2002], aff’d 99 NY2d 647 [2003]).
A No-Fault insurer may request that an eligible injured person or that person’s assignee submit to an EUO as may reasonably be required (see 11 NYCRR 65-1.1).[FN2] A request for an EUO
“must be based upon the application of objective standards so that there is a specific objective justification supporting the use of such examination” (see 11 NYCRR 65-3.5[e])
Appearance at a properly demanded EUO is a condition precedent to an insurer’s liability to pay no-fault benefits (see Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC, 82 AD3d 559, 560 [1st Dept 2011]). No liability exists on the part of the no-fault insurer unless there has been full compliance with the conditions’ precedent to coverage (see Hertz Vehicles, LLC v Delta Diagnostic Radiology, P.C., 2015 WL 708610, 2015 NY Slip Op 302429 [U], *3 [Sup Ct, NY County, Feb 18, 2015]; 11 NYCRR 65-1.1). The denial of coverage premised on a breach of a condition precedent to coverage voids the no-fault policy ab initio (see Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC, supra; Mapre Ins. Co. of New York v Manoo, 140 AD3d 468, 469 [1st Dept 2016][“The failure of a person eligible for no-fault benefits to appear for a properly noticed EUO constitutes a breach of a condition precedent vitiating coverage”]).
State Farm, as the proponent of the summary judgment motion, had the initial burden of showing its prima facie entitlement to judgment as a matter of law by submitting evidentiary proof in admissible form from someone with personal knowledge that valid notices of the EUOs [*3]were mailed to the defendant, and that the defendant failed to appear for the EUOs (Bath Ortho Supply Inc. v New York Central Mut. Fire Ins. Co., 2012 NY Slip Op 50271[U], *1 [App Term 1st Dept 2002], citing Unitrin, 82 AD3d at 560; Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720, 721-722 [2d Dept 2006]).
This Court rejects defendant’s argument regarding the admissibility of the EUO request letters. While the Bertrand and Rafalski Affidavits when viewed together, explain State Farm’s standard mailing procedure, they do not state whether the EUO request letters at issue here were mailed out in accordance with that procedure. Notwithstanding this, this Court finds the affidavits to be sufficient as the Bertrand Affidavit states that all EUO letters are mailed in the way attested to in his affidavit. As such, the Court considers the EUO request letters not for truth of their contents, but only to show that they were mailed.
At the very least, however, triable issues of fact exist as to whether the EUO requests were reasonably or properly made. In support of its motion, State Farm submits an affidavit from Christopher Howard, an investigator in the plaintiffs’ special investigative unit, attesting to the basis for the EUOs that defendant failed to attend. Plaintiffs allege that the EUOs were properly requested in order to obtain additional verification of no-fault claims submitted for payment by the defendant, on behalf of thirteen eligible persons, whom defendant treated for injuries sustained in different motor vehicle accidents. The Howard Affidavit states in relevant part “State Farm commenced an investigation into Sweetwater for the following reasons: (i) to verify that ownership, control and operation of the professional practice complied with New York State Licensing requirements; and (ii) to verify that the services were medically necessary” (Howard Aff at 1-2). Mr. Howard further attests that he “reviewed a sampling of medical records from Sweetwater, which revealed that chiropractic treatment was being rendered at a high frequency concurrently with acupuncture and physical therapy There also appears to be a pattern of high frequency diagnostic testing which has no effect on the course of treatment” (Howard Aff at 2). The key issue for this Court is the lack of specificity in the affidavit. While Mr. Howard identified indicators for requesting an EUO, he did not set forth any of the facts that State Farm considered in making its determination to request an EUO for the specific claims at issue here. Nor did he provide the timeframe for which State Farm seeks to verify that defendant’s ownership, control, and operation of the professional practice complies with New York licensing requirements. Likewise, the affidavit is equally ambiguous with regard to which services were being questioned as medically necessary. In particular, the affidavit fails to identify which services arising out of which specific injury and which motor vehicle accident. Insofar as Mr. Howard states that he “reviewed a sampling of medical records,” the Court is left to speculate if those medical records were related to the claims at issue in the instant matter.
Contrary to plaintiffs’ contention, defendant’s reliance on American Transit Insurance Co. v Jaga Medical Service, P.C., 128 AD3d 441 (1st Dept 2015), is not misplaced. The Appellate Division, First Department held that that an insurer’s motion for summary judgment should be denied as premature if defendant seeks discovery as to the reason for the EUO request or the “handling of the claim so as to determine whether, inter alia, the EUO’s were timely and properly requested” (Am. Tr. Ins. Co. v Jaga Med. Svcs., P.C., 128 AD3d 441 [1st Dept 2015]). Given the lack of specificity set forth in Howard Affidavit, the Court finds that discovery as to plaintiffs’ reasoning for requesting the EUOs is warranted. Additionally, the Court notes that the EUO objection letters submitted by defendant raises a question of fact with respect to whether the EUO requests were justified or not (see defendant’s exhibit B).
On this record, therefore, State Farm does not make a prima facia showing that an EUO was reasonably required for the verification of the thirteen claims at issue, and thus fails to show that defendant breached the policy.
The Court next turns to defendant’s request to sever this action into thirteen separate and distinct individual actions. CPLR § 603 reads as follows, “[i]n furtherance of convenience or avoid prejudice the court may order a severance of claims, or may order a separate trial of any claim, or on any separate issues.” A court has discretion under CPLR § 603 to order a severance or a separate trial when doing so will avoid confusion, delay or prejudice (McKinney’s Consolidated Annotated, Book 7; CPLR § 603; Utica Mut. Ins. Co. v American Re-Insurance Co., 132 AD3d 1405 [4th Dept 2015]). The granting of a motion to sever generally depends on the absence of common uses of law or fact. “[S]everance may be inappropriate where there are common factual and legal issues involved in two causes of action, and the interests of judicial economy and consistency of verdicts will be served by having a single trial” (Herskovitz v Klein, 91 AD3d 598, 599 [2d Dept 2012]). Least important to the court’s determination is the actual number of assignors involved in the lawsuit. Courts have severed combined no-fault claims with as few as two separate assignors, asserting that, even though there were only two distinct accidents involved, “[t]he facts relating to each claim are [u]nlikely to raise few, if any, common issues of fact” (Georgetown Mind-Body Med., P.C. v State Farm Mutual Automobile Insurance Co., 25 Misc 3d 142 [A], 2009 NY Slip Op 52464[U], * 1 [App Term, 2d, 11th & 13th Jud Dists 2009]; High Definition MRI, P.C. v Mapre Ins. Co. of NY, 148 AD3d 470 [1st Dept 2017] [severance appropriate where the 198 no-fault claims that there the subject of the action were unrelated]; Radiology Res. Network, P.C. v Fireman’s Fund Ins., Co., 12 AD3d 185 [1st Dept 2004] [severance is appropriate where the 68 accidents that were the subject of the action were unrelated]).
Severance of the action is not warranted here as defendant has failed to show how severing this action would further convenience the parties or would prevent prejudice. As the plaintiffs point out, there appears to be only one issue to be determined, namely the validity of denying the claims submitted by the defendant as the assignee of the named claimants for the defendant’s failure to appear for the duly scheduled EUOs. Moreover, beyond pointing out the number of claims, defendant fails to fully articulate the uncommon issues of law and fact that require separate actions. Based on the papers, the Court denies the motion to sever as defendant has not set forth adequate support for why it would be more efficient to adjudicate these claims separately.
Based on the foregoing, it is hereby
ORDERED that the plaintiffs’ motion for summary judgment is denied; and it is further
ORDERED that defendant’s cross-motion pursuant to CPLR §§3126 (3) and 3126(1) is denied; and it is further
ORDERED that defendant’s cross-motion is granted to the extent that plaintiffs shall respond to defendant’s discovery demands dated March 30, 2015 within thirty (30) days of the date of this decision and order is electronically filed; and it is further
ORDERED that defendant’s motion to sever the action into thirteen separate and distinct individual actions is denied; and it is
ORDERED that the parties shall appear in Part 34 of this Court on Thursday, October 4, 2018 at 2:15 p.m. for a preliminary conference.
This constitutes the decision and order of this Court.
Dated: August 6, 2018
ENTER:
_______________________________________
CARMEN VICTORIA ST. GEORGE, J.S.C.
Footnotes
Footnote 1: Plaintiffs also submit affirmations of Edward M. Ryan, Esq., Elizabeth Adels, Esq., Stuart Flamen, Esq., and Patrick J. McDonnell, Esq., attorneys employed by a law firm that represents the plaintiffs. These affirmations are purportedly offered to establish defendant’s non-appearance at the scheduled EUOs.
Footnote 2:Pursuant to 11 NYCRR 65-1.1(d), all minimum benefit insurance polies for motor vehicle personal injuries shall include a Mandatory Personal Injury Protection Endorsement, the form of which is specified in the regulation. The subsection of the Endorsement entitled “Proof of Claim; Medical, Work Loss, and Other Necessary Expenses,” found within the “Conditions” section, states that any “eligible injured person or that person’s assignee or representative shall (b) as may reasonably be required submit to examinations under oath by any person named by the [insurance] Company and subscribe the same” (emphasis added).
Reported in New York Official Reports at Nationwide Mut. Fire Ins. Co. v Oster (2018 NY Slip Op 51018(U))
[*1]| Nationwide Mut. Fire Ins. Co. v Oster |
| 2018 NY Slip Op 51018(U) [60 Misc 3d 1208(A)] |
| Decided on June 29, 2018 |
| Supreme Court, Putnam County |
| Grossman, J. |
| Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. |
| This opinion is uncorrected and will not be published in the printed Official Reports. |
Decided on June 29, 2018
Nationwide Mutual
Fire Insurance Company, Plaintiff,
against Lisette M. Oster, CAROL DANIELE, As Executrix of the Estate of DOUGLAS P. DANIELE, Deceased, and CAROL DANIELE, Individually, GABRIELLE M. OSTER, ANDREW J. ABBENE and STATE FARM MUTUAL INSURANCE COMPANY, Defendants. |
304/2016
Law Office of Galleonardo & Hartford
950 New Loudon Road, Suite 200
Latham, New York 12110
and
Seiger Gfeller Laurie LLP
Attorneys for Plaintiff Nationwide Mut. Fire Ins. Company
977 Farmington Avenue, Suite 200
West Hartford, Connecticut 08540
Rivkin Radler LLP
Attorneys for Defendant State Farm Mut. Ins. Company
926 RXR Plaza
Uniondale, New York 11556-0927
Collins Fitzpatrick & Schoene, LLP
Attorneys for Defendant Lisette Oster
34 South Broadway, Suite 407
White Plains, New York 10601
Mead, Hecht, Conklin & Gallagher, LLP
Attorneys for Defendant Gabrielle Oster
925 Westchester Avenue, Suite 302
White Plains, New York 10604
Gaines, Novick, Ponzini, Cossu & Venditti, LLP
Attorneys for Defendant Carole Daniele
1133 Westchester Avenue, Suite N-202
White Plains, New York 10604
Andrew Abbene
Defendant, Pro Se
Victor G. Grossman, J.
The Court has considered the following papers:
PAPERS/NUMBERED
Joint Record, 4 vols., Exhs. A-T/Trial Transcript 1-20
Nationwide Notice of Motion/Affirmation/Affidavit/Memorandum of Law 21-24
Daniele Notice of Cross-Motion/Affirmations/Memorandum of Law (State Farm) 25-28
Daniele Notice of Cross-Motion/Affirmations/Exhs. U-Y/Memorandum of Law in Support of Cross Motion and in Opposition to Nationwide Motion 29-37
Oster Notice of Cross Motion/Affirmation/Memorandum of Law 38-40
Nationwide Notice of Motion for Default Judgment/Affidavit/Affirmation/Exhs. A-E 41-48
State Farm Notice of Motion for Summary Judgment/Affirmation/Memorandum of Law 49-51
Daniele Reply Memorandum of Law in Support of Cross-Motion 52
Nationwide Reply Memorandum of Law 53
State Farm Further Memorandum of Law in Support of Motion for Summary Judgment and in Opposition to Motions filed by other parties 54
Transcript of Oral Argument (April 19, 2018)[FN1] 55
Post Argument Submissions:
Nationwide Supplemental Brief 56
State Farm – letter submission 57
Daniele, as Executrix, letter submission 58
In this declaratory judgment action, the Court considers six (6) motions, all arising after a jury verdict in the related wrongful death action.[FN2] The motions address the existence, or absence, and extent of, insurance coverage on the particular facts here. The parties dispute which carrier, or carriers, bears the obligation of contributing to a damage award totaling nearly three million dollars. Counsel agreed to a Joint Record, submitted by Plaintiff’s counsel, to facilitate the Court’s efforts. Some individual parties supplemented the Joint Record with their own exhibits. The facts, issues, and relief requested comprise a legal Gordian knot.
FACTS
On August 31, 2011, Lisette Oster (“Lisette”), her daughter, Gabrielle Oster (“Gabrielle”), and Andrew J. Abbene (“Abbene”) (an Oster family friend), drove to Cycle City on Route 17 in Sloatsburg, New York in two separate cars. Lisette and Abbene rode together in Abbene’s 1995 BMW. Gabrielle followed them, driving her family’s Honda. Abbene remained at Cycle City while Lisette drove his BMW back to Putnam County. As Lisette and Gabrielle were leaving Cycle City, Abbene instructed them that to return home from Cycle City, they should proceed north on Route 17, make a U-turn onto Harriman Avenue, and travel back in the opposite direction to get onto the New York State Thruway. Lisette drove Abbene’s BMW insured by Defendant State Farm Mutual Insurance Company (“State Farm”). Gabrielle followed in the Honda owned by Lisette and insured by Allstate Insurance Company (“Allstate”).
Lisette turned left onto Harriman Avenue and then made a U-turn in a driveway to go back to Route 17 and the New York State Thruway. After making the U-turn, Lisette stopped her vehicle at an angle on or near the shoulder where Harriman Avenue meets Route 17 to wait for her daughter to make the same turn “because we had to go back the opposite direction to get home.” The engine was running, but the car was not moving. Lisette could not recall whether the gear was in “park,” whether her foot was on the brake, or both.
Lisette saw Gabrielle driving and waved to her through the open driver’s side window “to let her see that that’s where we were turning around, to make sure…that she saw where we were turning around.” Gabrielle saw Lisette and turned left to go onto Harriman Avenue so she could follow her. As Gabrielle changed lanes to make the left turn, Douglas P. Daniele, who was traveling behind Gabrielle on his motorcycle, struck her vehicle, and was fatally injured.
On August 4, 2010, Plaintiff Nationwide Mutual Fire Insurance Company (“Nationwide”) issued a Homeowner’s Policy to William and Lisette Oster for the policy period September 22, 2010 to September 22, 2011.
On or about December 28, 2011, the Estate of Douglas P. Daniele commenced a lawsuit in Supreme Court, Putnam County (Index No. 3481/2011), entitled “Carol Daniele, as Executrix of the Estate of Douglas P. Daniele, Deceased, and Carol Daniele, Individually, Plaintiffs, against Gabrielle M. Oster, Lisette M. Oster and Andrew J. Abbene, Defendants,” seeking damages for the personal injuries and wrongful death of Douglas P. Daniele (hereinafter referred to as “the Wrongful Death Action”).
The Wrongful Death Action included a claim that Lisette Oster “while in the course of operating the aforesaid BMW vehicle owned by Defendant Andrew J. Abbene, did signal, motion and/or wave to the Defendant, Gabrielle M. Oster, who was operating the aforesaid Honda vehicle owned by Defendant Lisette M. Oster, to make an illegal u-turn at the stated location.” The Wrongful Death Action also alleged that Lisette Oster “was negligent, reckless and careless by giving a signal, motion and/or wave to the Defendant Gabrielle M. Oster” without reference to the operation of a motor vehicle. The Wrongful Death Action further alleged that Gabrielle Oster was negligent in the operation of the motor vehicle she was driving.
On or about December 9, 2011, before the Wrongful Death Action was commenced, Nationwide received notice of that action. By letter dated December 16, 2011, Nationwide issued a disclaimer of coverage to Lisette and Gabrielle for the claims contained in the Wrongful Death Action and provided a copy of the disclaimer to Mrs. Daniele’s attorney. In the disclaimer, Nationwide asserted the Homeowner’s policy excluded coverage for claims arising out of the use or operation of a motor vehicle by an insured, and asserted the accident occurred from the use of a motor vehicle. State Farm (Abbene’s insurer) also denied coverage, asserting the “accident was not the result of the ownership, maintenance or use” of Abbene’s BMW from which Lisette waved to Gabrielle.
Allstate provided a defense to Lisette and Gabrielle in the Wrongful Death Action under the Honda’s automobile policy. At the time of the accident, Gabrielle drove the Honda owned by Lisette.[FN3]
The issue of liability in the Wrongful Death Action was tried before a jury in December 2015. At the conclusion of the Wrongful Death Trial, the Court charged the jury regarding Lisette’s liability, as follows:
“In appropriate circumstances, a driver may incur a duty to another by waving that it is safe to turn. This duty extends not only to the waved-to driver, but also to all those reasonably within the ambit of potential injury including any party involved in a collision with the waved-to driver.
In the present case, you must first decide whether Lisette Oster waved to Gabrielle Oster to merely indicate where Lisette Oster was located or to signal to Gabrielle to turn.
If you find that Lisette Oster waved to Gabrielle Oster to solely indicate where Lisette Oster was located, then you must find that Lisette Oster was not negligent.
However, if you find that Lisette Oster waved to Gabrielle Oster to turn, then you must determine whether that wave was negligent under the circumstances.
If you find that Lisette Oster’s wave was negligent, you must then decide whether that wave was a proximate cause or substantial factor in causing the accident.
If you find that Lisette Oster’s wave was not negligent, then you will not decide the question of proximate cause.
Such a wave can only constitute a proximate cause of the accident where the waved-to driver relied on the wave as an implicit assurance that it was safe to turn.
If you find that Gabrielle Oster relied upon Lisette Oster’s wave as an implicit assurance that it was safe to turn, then you may find that Lisette Oster’s wave was a substantial factor in causing the accident, but if you find that Gabrielle Oster did not rely upon Lisette Oster’s wave as an implicit assurance that it was safe to turn, then you may find that Lisette Oster’s wave was not a substantial factor in causing the accident.”[FN4]
The jury concluded that Lisette was negligent in the manner in which she waved to Gabrielle, and that Lisette’s negligence was a substantial factor in causing the accident. Similarly, the jury concluded that Gabrielle was negligent and her negligence was a substantial factor in causing the accident. The jury also concluded Mr. Daniele was negligent and his negligence was a substantial factor in causing the accident. The jury apportioned the percentage of fault, as follows:
| Gabrielle M. Oster | 73% |
| Lisette Oster | 20% |
| Douglas P. Daniele | 7% |
| 100% |
Following the May 2016 trial on the issue of damages, the jury awarded the Estate $2,148,000.00 in damages, and with interest, costs, and disbursements, the total damages were $2,976,402.34. Judgment was entered on July 1, 2017.
THE INSTANT ACTION
On March 2, 2016, before the commencement of the damages portion of the Wrongful Death Action, Nationwide commenced the instant action seeking a judgment:
“(1) declaring that the Nationwide policy does not provide coverage for the incident of August 31, 2011, and the claims set forth in the [Wrongful Death Action] and that Nationwide is not required to defend or indemnify Lisette M. Oster with respect to the incident of August 31, 2011, and the claims set forth in the [Wrongful Death Action] or any claims for contribution or indemnity therein and (2) declaring that the State Farm policy provides coverage for the incident of August 31, 2011, and the claims set forth in [*2]the [Wrongful Death Action] and that State Farm is required to defend and indemnify defendant Lisette M. Oster with respect to the incident of August 31, 2011, and the claims set forth in the [Wrongful Death Action] and any claims for contribution or indemnity therein together with such other and further relief as to the court may seem just and proper.”
Lisette answered and cross-claimed [FN5] against Nationwide, alleging it “has wrongfully refused to fulfill its obligation to defend and indemnify” her in the Wrongful Death Action. Lisette further cross-claimed against State Farm, alleging it too “has wrongfully refused to fulfill its obligation to defend and indemnify” her in the Wrongful Death Action. As to each cross-claim, Lisette sought a declaratory judgment, directing the carrier to defend her in the Wrongful Death Action and to indemnify her against any judgment within the policy limits.
Mrs. Daniele interposed an Answer, containing affirmative defenses, two counterclaims and two cross-claims. She sought a declaration that Nationwide was obligated to defend and to indemnify Lisette within her policy limits. She also asserted a counterclaim, alleging Nationwide acted in bad faith “by wrongfully refusing to defend and indemnify Defendant Lisette M. Oster.” In a cross-claim, she asserted State Farm was obligated to defend its insured, Abbene, and the driver of his car, Lisette, and to indemnify them against any judgment within its policy limits. The second cross-claim alleged State Farm’s bad faith by wrongfully refusing to defend and indemnify Lisette.
Nationwide replied and denied all counterclaims. State Farm denied the cross claims alleged by Mrs. Daniele and Lisette. Abbene has defaulted in all proceedings. His liability in the Wrongful Death Action was that of a vehicle owner vicariously liable for the negligence of the vehicle operator, Lisette, under VTL §388.
PENDING MOTIONS
The following motions are before the Court:
(A) Plaintiff Nationwide moves for an Order, pursuant to CPLR §§3001, 3212:
(1) Granting summary judgment (1) declaring that the Nationwide policy does not provide coverage for the incident of August 31, 2011, and the claims set forth in the Wrongful Death Action and that Nationwide is not required to defend or indemnify Lisette M. Oster with respect to the incident of August 31, 2011, and the claims set forth in the Wrongful Death Action or any claims for contribution or indemnity therein (2) declaring that the State Farm policy provides coverage for the incident of August 31, 2011, and the claims set forth in the Wrongful Death Action and that State Farm is required to defend and indemnify defendant Lisette M. Oster with respect to the incident of August 31, 2011, and the claims set forth in the Wrongful Death Action and any claims for contribution or indemnity therein and (3) dismissing Defendant Lisette Oster’s counterclaim (improperly designated as a “cross-claim”) and Defendant Estate’s counterclaim with such other and further relief as to the Court may seem just and proper.
(B) State Farm Mutual Insurance Company moves for an Order, pursuant to CPLR §3212:
(1) Granting the motion of Defendant State Farm Mutual Automobile Insurance Company i/s/h/a State Farm Mutual Insurance Company (“State Farm”) for summary judgment dismissing the action against State Farm, including any cross-claims, and declaring that State Farm has no obligation to defend Lisette Oster for the underlying lawsuit and no obligation to pay any portion of the judgment in the underlying lawsuit to Mrs. Daniele or indemnify Lisette Oster for the judgment in the underlying lawsuit; and (2) for such other and further relief as may seem proper to the Court.
(C) Carol Daniele, as Executrix, moves for an Order, pursuant to CPLR §3001 and CPLR §3212:
(1) Granting judgment on the counterclaims and declaring that Plaintiff Nationwide is obligated to indemnify Defendant Lisette M. Oster against the judgment entered in the underlying Wrongful Death Action captioned “Carol Daniele, as Executrix of the Estate of Douglas P. Daniele, deceased, and Carol Daniele, Individually v. Gabrielle Oster, Lisette M. Oster and Andrew J. Abbene” (Supreme Court, Putnam Co.) (Index No. 3482/2011) within the limits of its policy ($1,000,000.00), exclusive of interest and costs; (2) that Defendants Carol Daniele, as Executrix of the Estate of Douglas P. Daniele, Deceased, and Carol Daniele, Individually, recover of Plaintiff Nationwide and Defendant State Farm, reasonable attorneys’ fees, as well as costs and disbursements incurred in the prosecution of the instant action; and (3) granting summary judgment dismissing the Complaint herein, together with such other and further relief as may seem just and proper, including but not limited to interest, costs and disbursements.
(D) Carol Daniele, as Executrix, moves for an Order, pursuant to CPLR §3001 and CPLR §3212:
(1) Granting judgment on the Daniele cross-claims and declaring that defendant State Farm is obligated to indemnify defendants Andrew J. Abbene and Lisette M. Oster in the underlying wrongful death action captioned “Carol Daniele, as Executrix of the Estate of Douglas P. Daniele, deceased, and Carol Daniele, Individually v. Gabrielle Oster, Lisette M. Oster and Andrew J. Abbene” (Supreme Court, Putnam Co.) (Index No. 3482/2011) and indemnify them against the judgment entered against them therein, within the limits of its policy ($100,000.00/$300,000.00), exclusive of interest and costs; (2) that Defendants Carol Daniele, as Executrix of the Estate of Douglas P. Daniele, Deceased, and Carol Daniele, Individually, recover of defendant State Farm, reasonable attorneys’ fees, interest, costs and disbursements incurred in the prosecution of the instant action, and (3) granting summary judgment dismissing the State Farm cross-claims herein, together with such other and further relief as may seem just and proper, including but not limited to interest, costs and disbursements.
(E) Defendant Lisette Oster, moves for an Order:
(1) declaring that the Nationwide policy provides Lisette Oster coverage for the incident of August 31, 2011 and the claims set forth in the wrongful death suit and that Nationwide is required to defend and indemnify Lisette Oster with respect to that incident; (2) declaring that the State Farm policy provides Lisette Oster coverage for the [*3]incident of August 31, 2011 and the claims set forth in the wrongful death suit and that Nationwide is required to defend and indemnify Lisette Oster with respect to that incident; (3) granting Lisette Oster’s cross and counterclaims, together with such other, additional and different relief which this court may deem just and proper.
(F) Plaintiff Nationwide moves for an Order pursuant to CPLR §3215 granting default judgment in favor of Plaintiff against Defendant Andrew Abbene together with such other and further relief as the Court deems just and proper.
THE NATIONWIDE AND STATE FARM MOTIONS
Nationwide’s motion pursuant to CPLR §3215 for a default judgment in favor of Nationwide and against Defendant Andrew Abbene is unopposed and granted.
The essence of Nationwide’s motion for summary judgment is that the liability claims against Lisette and Gabrielle arise out of the “use and operation” of the 1995 BMW by Lisette, and the Honda by Gabrielle, and are, therefore, excluded from coverage under the Homeowner’s Policy. Nationwide also asserts the “use” of the Honda by Lisette is a claim that is not covered under the Nationwide Homeowner’s Policy. Nationwide relies on the following policy provision:
“Coverage E – Personal Liability and Coverage F – Medical Payments to Others do not apply to bodily injury or property damage:
g) arising out of the ownership, maintenance or use of; entrustment or the negligent supervision by an insured of; or statutorily imposed liability on an insured related to the use of:
(2) a motor vehicle . . . owned by or operated by, or . . . loaned to an insured.”
(Policy Liability Exclusion 1[g][2]) at p. H1)(emphasis added).
Nationwide contends that Lisette’s use of the BMW and her wave to Gabrielle constitutes “use” of a motor vehicle and is therefore excluded under their Homeowner’s Policy. Nationwide also contends that Gabrielle’s driving and left turn constitutes use of the motor vehicle and is therefore not covered. Regardless, if either activity is insured under the Homeowner’s policy, they are covered.
The Homeowner’s policy, like any insurance policy, is a contract. Policies of insurance or indemnity are construed in favor of the insured and against the carrier. However, the policy must be considered in light of existing law. State Farm Mut. Auto Ins. Co. v. Westlake, 35 NY2d 587 (1974). The Court must interpret the contract. Doing so requires an examination of the “plain meaning of its terms”, with some caveats. That “plain meaning” “may not be disregarded to find an ambiguity where none exists.” Atlantic Balloon & Novelty Corp. v. American Motorists Inc. Co., 62 AD3d 920, 922 (2nd Dept. 2009). The phrase “‘arising out of'” is unambiguous and is interpreted broadly to mean “‘originating from, incident to, or having connection with.'” Scottsdale Indemn. Co. v. Beckerman, 120 AD3d 1215 (2nd Dept.), lv. denied 24 NY3d 912 (2014) (citations omitted); see also Maroney v. New York Cent. Mut. Fire Ins. Co., 5 NY3d 467, 472 (2005). At the same time, an exclusion from coverage “must be specific and clear in order to be enforced.” Essex Ins. Co. v. Pingley, 41 AD3d 774, 776 (2nd Dept. 2007). In addition, such exclusions are narrowly drawn and interpreted in favor of insureds. Seabord Sur. Co. v. Gillette Co., 64 NY2d 304, 311 (1984). These rules apply with equal force to the State Farm policy, [*4]which uses the term “involves”, rather than “arising out of,” although it may be argued that “involves” should be interpreted more broadly consistent with a liberal construction.[FN6]
The State Farm motion seeks a declaration that it has no obligation to defend Lisette in the underlying lawsuit or to pay any portion of the Judgment to Mrs. Daniele, or to indemnify Lisette, and, as a consequence, it seeks dismissal of the action, including any cross-claims. State Farm urges three points in support of its motion. One, Gabrielle’s and Mr. Daniele’s accident did not result from the ownership, maintenance, or use of the Abbene vehicle in which Lisette was seated. Two, the Abbene vehicle’s role, in which Lisette was seated, was not the proximate cause of the injuries. Three, the “bad faith” cause of action filed by Mrs. Daniele is without merit because she has no standing to assert a bad faith claim, and the bad faith claim is duplicative of the claim that State Farm wrongly disclaimed coverage.
State Farm relies on the following provision:
Insured means:
1. you and resident relatives for:
a. the ownership, maintenance, or use of:
(1) your car…
3. any other person for his or her use of:
a. your car…
4. Any other person or organization vicariously liable for the use of a vehicle by aninsured as defined in 1., 2., or 3. above, but only for such vicarious liability. Thisprovision applies only if the vehicle is neither owned by, nor hired by, that other person or organization…
Insuring Agreement
1. We will pay:
a. damages an insured becomes legally liable to pay because of:
(1) bodily injury to others; and
(2) damage to property caused by an accident that involves a vehicle for which that insured is provided Liability Coverage by this policy;”
By letter dated March 2, 2012, after the commencement of the Wrongful Death Action, State Farm advised both Abbene, the policyholder, and Lisette (Joint Record, Exh. O):
“….the policy issued to you by State Farm Insurance does not provide insurance coverage for Mr. Abbene, the owner of the vehicle, or to the permissive driver of the vehicle at the time of the accident, Lisette M. Oster.
The State Farm policy of insurance provides coverage for owners of vehicles and permissive users of those vehicles, but only for liability caused by accident resulting from the ownership, maintenance or use of the vehicle.
State Farm denies coverage for this accident due to the fact that this accident was not the result of the ownership, maintenance or use of your insured car, as those terms have been interpreted by New York law.”
Clearly, both State Farm and Nationwide dispute the “use and operation” of the Abbene BMW in which Lisette was seated when she waved to Gabrielle, but for different reasons. If the actions of Lisette constitute solely “use and operation,” then Nationwide’s motion should be granted, and they should not be liable under the Homeowner’s Policy. If it is determined that Lisette’s actions constitute “use and operation,” State Farm’s motion fails and it is obligated to satisfy the Judgment to the extent of the policy limits. However, if Lisette’s actions do not constitute “use and operation,” then Nationwide may be compelled to pay the Judgment to the extent of its policy limits while State Farm escapes liability. Both Lisette and Mrs. Daniele claim Lisette’s actions do not constitute “use and operation.” Abbene has defaulted through the proceedings. Gabrielle cannot seriously dispute the “use and operation” of the Honda automobile she was driving, but her “use and operation” is separate from the claims against Lisette.
Both carriers have asserted their policies do not cover the claims involving Lisette. If their positions are accurate, there is no coverage for her role in the loss. See United Servs. Auto Assn. v. Aetna Cas. & Sur. Co., 75 AD2d 1022 (4th Dept. 1980). The jury found Lisette negligent by waving as she did, and her negligence contributed to the injuries and death of Mr. Daniele. The absence of coverage advanced by both carriers would effectively allow a motor vehicle to utilize the roads of the State of New York without protecting others. Such a result is contrary to statute and public policy, and the Court declines such interpretation. VTL §310, et. seq., 11 NYCRR §60-1.1. Alternatively, one, if not both, of the carriers will be responsible.
Still, the actions present a close question of unusual facts that requires a review of existing cases to understand and apply the reasoning and judicial experience to the facts of this case.
USE AND OPERATION
The definition and application of “use and operation” language varies with the statutory purposes and policies served. For example, Vehicle and Traffic Law §388(1) defines “use and operation” for purposes of vicarious liability. Insurance Law §3420 addresses “use and operation” for policy and coverage issues. Vehicle and Traffic Law §1192 defines “operation,” at times, with a breadth that promotes safe driving policy, but simultaneously strains the imagination (see People v. Alaimo, 34 NY2d 453 [1974]; People v. Prescott, 95 NY2d 655 [200l]), but it too has limits. See People v. O’Connor, 159 Misc 2d 1072, 1074 (Dist.Ct. [Nassau] 1994); People v. Moore, 186 Misc 2d 614 (Dist.Ct. [Suffolk] 2000); People v. DeSantis, Vol. 203, No. 97, NYLJ, p. 32, col. 4 (App.Term [9th & 10th J.D.] May 21, 1990). The phrase has anything but a uniform meaning. Various decisions define “use” broadly as “encompasses more than simply driving it, and includes all necessary incidental activities such as entering and leaving its confines.” Matter of Allstate Ins. Co. v. Reyes, 109 AD3d 468, 469 (2nd Dept. 2013), citing Rowell v. Utica Mut. Ins. Co., 77 NY2d 636, 638 (1991). Moreover, an accident arising from the “use,” “must have arisen out of the inherent nature of the automobile and, as such, inter alia, the automobile must not merely contribute to the condition which produces the injury, but must, itself, produce the injury.” Matter of Allstate Ins. Co. v. Reyes, supra, at 469. Here, the vehicle was parked, and Lisette waved to her daughter through its open window, similar to the parked car and open window through which the dog in Reyes reached out to bite the pedestrian. Historically, “use” was added to denote more than driving to cover those circumstances that were not technically “operation.” Argentina v. Emery World Wide Delivery [*5]Corp. 188 F.3d 86 (2d Cir. 1999); Gering v. Merchants Mut. Ins. Co., 75 AD2d 321 (2nd Dept. 1980); Eckert v. G.B. Farrington Co., 262 A.D. 9 (4th Dept. 1941), aff’d 287 NY 714 (1942).
On the other hand “operation” denotes putting the vehicle into motion, with physical control of the vehicle. A driver is one who “operates or drives or is in actual physical control of a vehicle.” VTL §113. A motor vehicle may be in “operation” without motion. See Bouchard v. Canadian Pac., 267 AD2d 899 (3rd Dept. 1999); Eckert v. G.B. Farrington Co., supra. So too, it would appear that “operation” includes the cessation of motion, such as by applying a foot brake, or shifting a gear to “park.” People v. O’Connor, 159 M.2d 1072 (Dist.Ct. [Nassau] 1994); Matter of Prudhomme v. Hults, 27 AD2d 234 (3rd Dept. 1967).
The “use” and “operation” both incorporate the intended purpose of the automobile to serve as a means of transportation from one location to another. By doing so, the terms may overlap in their application, and, as a result, they can produce conflicting interpretations. Nevertheless, the imposition of liability on a financially responsible defendant is an expression of policy that affects the definitions. Continental Auto Lease Corp. v. Campbell, 19 NY2d 350, 352 (1967).
The “plain language” and meaning of “use” and “operation” encompasses a broad range of activity. The tendency “to know it when one sees it” (to paraphrase Justice Stewart in another context) yields a long line of decisions that reflect varied forms of human behavior, but provide little guidance where there are close questions of fact. “Not every injury occurring in or near a motor vehicle is covered by the phrase ‘use or operation.’ The accident must be connected with the use of an automobile qua automobile (Reisinger v. Allstate Ins. Co., 58 AD2d 1028 [4th Dept.], aff’d. 44 NY2d 881 [1978].” United Servs. Auto Assn. v. Aetna Cas. & Sur. Co., 75 AD2d, supra at 510.
In 1979, the Second Department expressly adopted a three-part test to determine an insurer’s liability under standard automobile policies:
“1. The accident must have arisen out of the inherent nature of the automobile, as such; 2. The accident must have arisen within the natural territorial limits of an automobile, and the accidental use, loading, or unloading must not have terminated; 3. The automobile must not merely contribute to cause the condition which produces the injury, but must, itself, produce the injury;”
Matter of Manhattan & Bronx Surface Transit Operating Authority (Gholson), 71 AD2d 1004, 1005 (2nd Dept. 1979) (internal quotations and citations omitted).
The test was originally set forth in Goetz v. General Acc. Fire & Life Assur. Corp., 47 Misc 2d 67, 69 (App. Term, 2nd Dept. 1965), aff’d. without opn., 26 AD2d 635 (2nd Dept. 1966), aff’d. without opn., 19 NY2d 762 (1967), and Gholson extended it to the issue of no fault benefits. This formulation applies to the collision of Gabrielle’s Honda and Mr. Daniele’s motorcycle, but it is inapplicable to Abbene’s BMW. The BMW was not performing a transportation function at the time of the accident. The accident did not take place within the BMW’s natural territorial limits. Finally, the BMW did not “produce the injury.” Levitt v. Peluso, 168 Misc 2d 239 (Sup.Ct. [Nassau] 1995). This conclusion is troubling from a policy perspective, as it potentially leaves a personal injury victim without protection, in the absence of homeowner’s coverage. See, e.g., Farmers Fire Ins. Co. v. Kingsbury, 118 Misc 2d 735 (Sup.Ct. [*6][Delaware] 1983), aff’d. 105 AD2d 519 (3d Dept. 1984).
The Gholson standard appears slightly modified in Eagle Ins. Co. v. Butts, 269 AD2d 558, 558-59 (2nd Dept. 2000), lv. to appeal denied 95 NY2d 768 (2000), by the elimination of the territorial limits of the automobile criterion:
“Generally, the determination of whether an accident has resulted from the use or operation of a covered vehicle requires consideration of whether, inter alia, the accident arose out of the inherent nature of the vehicle and whether the vehicle itself produced the injury” (see U.S. Oil Ref. & Mktg. Corp. v. Aetna Cas. & Sur. Co., 181 AD2d 768, 581 N.Y.S.2d 822) or, in other words, whether the use of the vehicle was a proximate cause of the injury (see Wausau Underwriters Ins. Co. v. St. Barnabas Hosp., 145 AD2d 314, 534 N.Y.S.2d 982; Lumberman’s Mut. Cas. Co. v. Logan, 88 AD2d 971, 451 N.Y.S.2d 804).
Butts is illustrative of the simplicity, and difficulty, of applying the standard. There, a horse was being unloaded from a van. While on the ramp, the horse jumped, throwing the plaintiff to the ground and causing injury. The complaint alleged the negligence of the owner in the training of the horse, not in the unloading of the horse. The disclaimer of coverage in Eagle Ins. Co. v. Butts, based on the ground that the claim did not arise from the “ownership, maintenance or use” of a motor vehicle was affirmed. The court recognized the act of “loading or unloading” is a “use” and looked to whether the use of the vehicle was a proximate cause of the injury. Concluding the accident was not “the result of some act or omission related to the use of the vehicle (cf. Argentina v. Emery World Wide Delivery Corp., 93 NY2d 554 [1999]),” the court upheld the disclaimer. As evidenced by the reference to Argentina v. Emery World Wide Delivery Corp., the term “use or operation” has multiple meanings, not only in factual interpretation, but also in statutory interpretation.
Applying Butts, the “use” of a motor vehicle was found not to exist where a dog reached through an open window and bit a passer-by when the automobile was parked in a “no parking” zone in front of a store (Matter of Allstate v. Reyes, supra; Allstate Ins. Co. v. Staib, 118 AD3d 625 [1st Dept. 2014]); where a hand truck was moving down a truck ramp (Staker Sheet Metal II Corp. v. Harleysville Ins. Co. of New York, 2018 WL 654445 [EDNY January 31, 2018]); and where trucks had been stationary for two to three hours and rendered immobile by wheel chocks (Great American E & S Ins. Co. v. Hartford Fire Ins. Co., 2012 WL 3186086 [SDNY August 3, 2012], as amended August 9, 2012). But, “use” was found to exist in the loading of equipment onto a truck. See Paul M. Maintenance Inc. v. Transcontinental Ins. Co., 300 AD2d 209 (1st Dept. 2002).
On the other hand, there was no “use” of a vehicle where a crate fell apart while unloading, resulting in injury. See ABC, Inc. v. Countrywide Ins. Co., 308 AD3d 309 (1st Dept. 2003). Nor was there “use or operation” when a tenant fell from a truck while assisting his four-year-old son. See Empire Ins. Co. v. Schliessman, 306 AD2d 512 (2nd Dept. 2003). When a passenger threw a cup from an automobile and struck a pedestrian, the action did not involve the use or operation of the vehicle. “Where the operation or driving function of the automobile or the condition of the automobile itself is not the proximate cause of the injury,” the injuries do not “arise from the use or operation of a motor vehicle.” Ciminello v. Sullivan, 2008 NY Slip. Op. 30911(U) (Sup.Ct. [Suffolk] 2008), aff’d 65 AD3d 1002 (2nd Dept. 2009).
The above-cited examples illustrate the conclusion that “use or operation” must be connected to “the use of an automobile qua automobile.” Olin v. Moore, 178 AD2d 517 (2nd Dept. 1991), quoting United Services Auto Assn. v. Aetna Cas. & Sur. Co., 75 AD2d 1022 (4th Dept. 1980). In United Services Auto Assn. v. Aetna Cas. & Sur. Co., the Fourth Department further defined the “use of an automobile qua automobile” in the negative by what it did not include: “[w]here the operation or driving function of an automobile or the condition of the vehicle itself is not the proximate cause of the injury, the occurrence does not arise out of its use or operation.” 75 AD2d, supra at 1022. Under that criteria, there is no “use or operation” of the Abbene BMW by Lisette. Progressive Cas. Ins. Co. v. Yodice, 180 Misc 2d 863 (Sup.Ct. [Richmond] 1999), aff’d. 276 AD2d 540 (2nd Dept. 2000).
However, the Third Department held a disabled vehicle was in “use or operation” where it could not be restarted, and it was pushed to the shoulder where it was struck by two snowmobiles while the driver was returning to the vehicle after making towing arrangements. Trentini v. Metropolitan Prop. & Cas. Ins. Co., 2 AD3d 957 (3rd Dept. 2003). The Third Department focused on the nature of “an unplanned stop due to the temporary disability of his car in a place where the vehicle would not normally be parked,” the use of hazard lights, and the seeking of assistance, as constituting an “on-going activity relating to the vehicle,” leading to the conclusion the vehicle was “in use.” As a result, the plaintiff was entitled to no-fault benefits. Trentini v. Metropolitan Prop. & Cas. Ins. Co., supra at 958. The “use” of a vehicle encompasses “more than just driving a car” (Gering v. Merchants Mut. Ins. Co., 75 AD2d 321, 323 [2nd Dept. 1980]), and can include a temporary interruption “directly connected to the continued ‘use’ of the vehicle.” Id. at 323.
Further, by way of analogy to those cases where the driver of the vehicle undertakes to stop his vehicle to allow a police car to proceed, or to direct a pedestrian safely across the road in front of his vehicle, it is not claimed that there is an issue of “use” or “operation,” but rather the issue, if it arises, is one of whether the driver negligently carried out the duty. See, e.g., Ohlhausen v. City of New York, 73 AD3d 89 (1st Dept. 2010) and cases cited therein.
There is a line of cases involving motorists, including bus drivers, who motion, or signal to other drivers or pedestrians that they may proceed. Often, those motions, or signals, may be confusing, yielding to unanticipated behavior and injuries. In Riley v. Board of Educ. of Cent. School Dist. No. 1, 15 AD2d 303 (3rd Dept. 1962), a school teacher was found negligent where she drove a youngster to his home, and after the child exited the car, she gave a signal, which she said was to warn the child of an oncoming automobile, but which the child might have misunderstood to mean it was safe to cross the road, and the child upon crossing the road, was struck and killed. In another Third Department decision, summary judgment was denied when a driver’s hand motions may have induced a child to cross when it was not safe to do so. See Thrane v. Haney, 264 AD2d 926 (3rd Dept. 1999). There, the issue of the driver’s gesture in directing the child may result in liability if he failed to exercise reasonable care and his conduct was a proximate cause of the child’s injuries. The Third Department again addressed these issues in Barber v. Merchant, 180 AD2d 984 (3rd Dept. 1992), where a driver and passenger gestured to the defendant, before the defendant began her turn, and in the process of making a turn, the defendant collided with a station wagon. As recently as 2013, the Third Department restated the proposition that when a gesturing driver signals that it is safe to proceed, he assumes a duty to [*7]pedestrians, other motorists and passengers, as well as to the person who is being signaled, to do so reasonably under the circumstances. See Dolce v. Cucolo, 106 AD3d 1431 (3rd Dept. 2013).
The meaning of the gesture is crucial to the issue of negligence. In Valdez v. Bernard, 123 AD2d 351 (2nd Dept. 1986), the Second Department reversed a jury verdict and held that the wave of a bus driver’s hand was not the proximate cause of an accident where the pedestrian interpreted the “wave” to mean only that the driver would not move the bus while she walked in front of it. See also Shapiro v. Mangio, 259 AD2d 692 (2nd Dept. 1999). In 2011, the Second Department reversed an award of summary judgment and reinstated the complaint against a bus driver based on issues of fact as to whether pedestrians relied upon bus driver’s wave in crossing the street. See Kievman v. Philip, 84 AD3d 1031 (2nd Dept. 2011). Ultimately, the significance attributable to the hand signal is a question for the trier of fact. See Golding v. Farmer, 273 AD2d 834 (4th Dept. 2000).
Here, there was testimony that the wave was intended by Lisette to assert “Here I am,” not that Gabrielle could make the turn safely. Lisette also acknowledged that her waving to Gabrielle “to make a U-Turn” was “a poor choice of words.” Gabrielle told the police she saw her mother’s wave. She was inconclusive as to whether her mother told her to make a U-Turn at the barrier. She did understand the wave to mean it was safe to cross. She thought the wave was saying “Here I am.” At one point, she said she did not remember; but at another point, she said her mother told her to make a U-Turn at the barrier. The jury had the opportunity to hear this testimony, evaluate it, and reach its verdict. It was for the jury to say what effect, if any, Lisette’s wave had on Gabrielle’s actions. Its verdict compels the conclusion that Lisette waved to Gabrielle to turn, that such wave was negligent under the circumstances, and the wave was a substantial factor in causing the accident. But it cannot be said that the “wave” was essential to the use of the Abbene vehicle.
The “use” or “operation” of a vehicle is not limited to a vehicle in motion. A vehicle is in “use” or being “operated” when stopped in traffic, or not in motion when waiting for a traffic light or the direction of a police officer, or even when it is undergoing repairs while the occupants are traveling. See Gering v. Merchants Mut. Ins. Co., supra. Here, Lisette was sitting in the driver’s seat of the Abbene BMW at an intersection, with the vehicle in “park” or her foot on the brake, or both, when she waved to her daughter. She had driven from her home to Cycle City, and she was returning home when she stopped moving at Harriman Avenue and Route 17, to make sure her daughter followed her on their journey home. While stopped, her hazard lights were off and the engine was running. Defendant’s reliance on Zaccari v. Progressive Northwestern Ins. Co., 35 AD3d 597 (2nd Dept. 2006), overlooks the absence of any connection between Zaccari’s use of his automobile and the automobile involved in the accident that led to Zaccari’s assistance and injury. The Zaccari vehicle was not “closely related to the injury.”[FN7] Zaccari, supra, at 599, quoted in Allstate Ins. Co. v. Reyes, supra, at 469. The facts here do not [*8]lend themselves to a strict application of the three-part test [FN8] set forth in Gholson, and re-stated in U.S. Oil Ref. & Mktg. Corp. v. Aetna Cas. & Sur. Co., 181 AD2d 768, 768-69 (2nd Dept. 1992), citing 6B Appelman, Insurance Law and Practice, §4317 at 367-69. The connection, if any, between events was significantly more remote in U.S. Oil than here, notwithstanding the fact that Lisette’s automobile did not produce the injury.
Still, Lisette’s “actions” and her wave set the events in motion, even if they did not “produce the injury,” unlike the remote and unrelated connections alleged in Zaccari. Gabrielle claims she did not rely on the “wave” from her mother while operating her vehicle. That testimony presents issues of fact, and also raises issues of proximate cause. Ohlhausen v. City of New York, 73 AD3d, supra, at 95-96, Shapiro v. Mangio, 259 AD2d 692, supra. “Proximate cause is generally a factual issue to be resolved by a jury” (Dolce v. Cucolo, supra at 1432), and there can be more than one proximate cause. See Burghardt v. Cmaylo, 40 AD3d 568 (2nd Dept. 2007). Here, the jury’s determination is entitled to great weight. Lisette’s “wave” was an act independent of the “use and operation” of the Abbene BMW. The fact that it was made from the driver’s seat, with the engine running and other indicia of “use and operation” is fortuitous, but it is neither convincing or controlling. “Not every injury occurring in or near a motor vehicle is covered by the phrase ‘use or operation.'” Olin v. Moore, 178 AD2d 517 (2nd Dept. 1991); see Horney v. Tisyl Taxi Corp., 93 AD2d 291 (1st Dept. 1983). There is no nexus between the wave and the actual operation of the automobile. Lisette’s wave could just as easily have been made while standing outside the BMW or 50 feet away from it, without affecting “use and operation.” The accident was not “connected with the use of an automobile qua automobile.” Reisinger v. Allstate Ins. Co., 58 AD2d 1028, supra. While it may be said that the travel plans for Lisette and Gabrielle contemplated continued travel, or use of the BMW (and the Honda) – so as to be a part of a more broad use and operation (see e.g. Gering v. Merchant’s Mut. Ins., supra), Lisette’s wave, which the jury found to be negligent, was not a part of, or reasonably contemplated, within “use and operation,” let alone negligent use and operation. See generally Progressive Ins. Co. v. Yodice, 276 AD2d 540 (2nd Dept. 2000) (a running engine did not lead to the “use” of the vehicle).
The complaint proffered two alternative theories of liability — ordinary negligence, or negligently operating a motor vehicle. The jury charge focused on Lisette’s wave, not her driving, notwithstanding the reference to a “driver” incurring “a duty to another by waving that it is safe to turn.” At the moment of the “wave,” Lisette was neither driving nor was the BMW in a traffic lane. In 1975, the Fourth Department held a vehicle parked and locked on the street in front of the owner’s residence was not being “used” in connection with no-fault benefits. McConnell v. Fireman’s Fund Am. Ins. Co., 49 AD2d 676 (4th Dept. 1975). In so holding, the court stated that “while authority broadly interprets the phrase ‘use or operation’ the determinative predicate in establishing liability therefrom would appear to be the designed purpose of the use or [*9]activity of the involved motor vehicle which is the proximate cause of the injury or damage sustained.” Id. at 677 (emphasis added). While McConnell is factually distinct from the instant case, the “use or activity” here is not connected to the motor vehicle.
Riley v. Board of Educ. Of Cent. Sch. Dist. No. 1, 15 AD2d 303, supra, does not hold that a “wave” by a motorist constitutes “use and operation” of a motor vehicle. The Third Department has distinguished the alleged negligent act from the use of a motor vehicle. In Thrane v. Haney, 264 AD2d 926, supra, the court stated, “It being inferable from the child’s testimony that defendant voluntarily assumed the duty to direct the child [across the street], defendant may be held liable if he failed to exercise reasonable care and his conduct was a proximate cause of the child’s injuries.” Id. at 927.
In Williams v. Weatherstone, 23 NY3d 384 (2014), the Court of Appeals recognized the limitation that must be applied to Riley and similar cases: “All of these cases entail some intentional hand motion or gesture directed by the motorist at the pedestrian. Having thereby assumed a duty to guide the pedestrian safely, the motorist must exercise reasonable care in doing so.” Id. at 402. That duty is “actually a separate duty, one that arises only upon the making of the gesture” and is separate from the duty to operate a vehicle with reasonable care. Ohlhausen v. City of New York, 73 AD3d 89, 92-93 (1st Dept. 2010). That duty neither explicitly nor implicitly involves the “use or operation” of a motor vehicle. Such “use or operation” must still be shown, and negligence in the use or operation must be shown as well. Argentina v. Emery World Wide Delivery Corp., 93 NY2d 554, 562 (1999); Progressive Cas. Ins. Co. v. Yodice, 276 AD2d, supra at 542. Here, it is not disputed that the Abbene vehicle was the location of the “wave” and was incidental to the accident, but no negligence in the operation of the vehicle has been shown. Empire Ins. Co. v. Schliessman, supra; United States Auto Assn. v. Aetna, supra.
Accordingly, the Court concludes that Lisette was not “using” the Abbene vehicle when she waved to her daughter. The vicarious liability of VTL §388 does not apply. Instead, the wave, found by the jury as a negligent act, gives rise to coverage under the Nationwide Homeowner’s policy, and the exclusion for the use of an automobile does not apply here. In addition, since the “accident was not the result of the ownership maintenance or use” of the Abbene vehicle, but was merely the location for which Lisette waved to her daughter, the denial of coverage by State Farm was not improper. In light of these determinations, the Court need not address the sufficiency of the disclaimers asserted by Nationwide and State Farm. Matter of Worcester Ins. Co. v. Bettenhauser, 95 NY2d 185, 188-89 (2000).[FN9]
OBLIGATION TO DEFEND AND INDEMNIFY
Lisette cross-claimed against Nationwide and State Farm, alleging they each failed to fulfill their obligation to defend and indemnify her within policy limits. Mrs. Daniele moved for similar relief, alleging more specifically that Nationwide and State Farm each engaged in bad faith by wrongfully refusing to defend and to indemnify Lisette, and that such actions were a [*10]gross disregard of their responsibilities and obligations under their insurance policies. Mrs. Daniele also asserted she is a third-party beneficiary. Nationwide, inter alia, denied the Oster counterclaim and affirmatively asserted it had no obligation to defend or to indemnify. Nationwide also claimed that Mrs. Daniele lacked standing to assert “bad faith.” State Farm asserted, inter alia, it had no obligation to defend or to indemnify.
Prior to the commencement of the Wrong Death Action, Mrs. Daniele’s counsel, David Lever, notified Lisette by certified mail, return receipt requested, of claims against her, arising from the events on August 31, 2011, resulting in Mr. Daniele’s death. On Monday, December 12, 2011, Mr. Lever received a telephone call from a Nationwide representative, Cheryl Knight, who had been informed about the pending commencement of the lawsuit. In response to Ms. Knight’s inquiry as to why the claim involved a homeowner’s policy and not an automobile policy, Mr. Lever advised her of the claim against Lisette for her negligent waving, or motion, to Gabrielle. Ms. Knight confirmed the conversation by letter dated December 13, 2011. On December 16, 2011, by letter to Lisette, Nationwide denied coverage for the incident, stating (incorrectly), “the accident arose while you were using and occupying your motor vehicle” – a fact true of Gabrielle, but not Lisette. Nationwide also refused to defend Lisette.
On November 3, 2011, Mrs. Daniele’s counsel notified State Farm of the accident and the claims against Abbene and Lisette for causing the accident and death of Mr. Daniele. By letter dated February 9, 2012, State Farm denied coverage, asserting that it was “questionable” whether the accident arose out of the ownership, maintenance, or use of the motor vehicle.
In the interim, on December 28, 2011, the Wrongful Death Action was commenced. The complaint alleged two alternative theories of Lisette’s negligence. One theory involved the negligent operation of the Abbene BMW; the second theory involved Lisette’s negligent wave to Gabrielle. The alternative theories simultaneously supported, and defeated, the conclusions reached by Nationwide and State Farm. The “use” of a motor vehicle, as discussed herein, involves the exclusion relied on by Nationwide and defeats State Farm’s position, while Lisette’s wave, as a negligent act, involves the Nationwide homeowner’s policy and eliminates the State Farm automobile policy. The close factual question further clouds the issue.
The strongest indicia of Nationwide’s “bad faith” can be found in the haste by which they reached their decision to deny coverage. Between Monday, December 12, 2011 and Friday, December 16, 2011, it appears that Nationwide investigated and determined that coverage should be denied. It is unknown, at this stage, when Nationwide received the November 8, 2011 letter from Mr. Lever, but Ms. Knight’s inquiry suggests either an unfamiliarity with the claim, or the need for factual clarity. How that was established, beyond a telephone conversation with Mr. Lever, is unknown. Indeed, Mr. Lever’s Affirmation recites that Ms. Knight advised “she had just received the claim.”
Nationwide and State Farm remained on notice with respect to the progress of the litigation, the pre-trial conference, and the liability and damages trials. Nevertheless, they persisted in their positions and did not participate in the proceedings. They were also advised that Plaintiffs would seek to hold them responsible for any excess verdict over the coverage provided by Allstate covering Gabrielle and Lisette. There was neither a tender of the policies nor entry into negotiations on behalf of the respective insured. However, once liability had been determined against Lisette, the exposure was evident.
Nationwide opted to stay on the sidelines of the Wrongful Death Action. They did so with the knowledge that Insurance Law §3420 grants the victorious plaintiff, here Carol Daniele, as Executrix, and Individually, the right to sue Nationwide to satisfy the Judgment against Lisette. While Nationwide might assert the disclaimer, as it has done here, under Insurance Law §3420, it surrendered the right to challenge the liability or damages contained in the Judgment. Lang v. Hanover Ins. Co., 3 NY3d 350, 356 (2004); see also Martin v. Safeco Ins. Co. of Am., 19 AD3d 221 (1st Dept. 2005).[FN10] The ultimate issue for Nationwide, i.e, whether the negligence arose from Lisette’s “use and operation” of the Abbene BMW, or whether her wave constituted a “personal negligent act” within the meaning of the homeowner’s policy, would be decided at trial, but that does not defeat Nationwide’s obligation to defend the action.
Our Courts have long recognized an insurer’s duty to defend is:
“exceedingly broad” (Colon v. Aetna Life & Cas. Ins. Co., 66 NY2d 6, 8). An insurer must defend whenever the four corners of the complaint suggest — or the insurer has actual knowledge of facts establishing — a reasonable possibility of coverage (Fitzpatrick v. American Honda Motor Co., 78 NY2d 61, 66-67; Seaboard Sur. Co. v. Gillette Co., 64 NY2d 304, 311-312). The duty is broader than the insurer’s obligation to indemnify: “[t]hough policy coverage is often denominated as ‘liability insurance’, where the insurer has made promises to defend ‘it is clear that [the coverage] is, in fact, ‘litigation insurance’ as well'” Seaboard Sur., 64 NY2d at 310, supra.).
Continental Casualty Co. v. Rapid-American Corp., 80 NY2d 640, 648 (1993). That duty encompasses matters of policy, as well as contract interpretation, to virtually all forms of human behavior. See Automobile Ins. Co. of Hartford v. Cook, 7 NY3d 131 (2006)(homeowner’s policy contains duty to defend in wrongful death action involving a shooting committed in self defense); Colon v. Aetna Life & Cas. Ins. Co., 66 NY2d 6 (1985) (issue of whether driver was operating vehicle with owner’s permission required defense where complaint alleged driver had owner’s permission, and insurer disputed claim). The allegations in the complaint and the terms of the policy will invoke the duty to defend and will negate exclusions:
“If the complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend (Ruder & Finn v. Seaboard Sur. Co., 52 NY2d 663, 669-670). Moreover, when an exclusion clause is relied upon to deny coverage, the insurer has the burden of demonstrating that the ‘allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and further, that the allegations, in toto, are subject to no other interpretation’ (International Paper Co. v. Continental Cas. Co., 35 NY2d 322, 325).”
Technicon Electronics Corp. v. American Home Assur. Co., 70 NY2d 66, 73 (1989).
Applying this standard, it is evident the Complaint alleges negligent acts independent of the excluded use and operation of a motor vehicle. The Nationwide Homeowner’s policy states:
“COVERAGE E – PERSONAL LIABILITY
We will pay damages an insured is legally obligated to pay due to an occurrence resulting from negligent personal acts or negligence arising out of the ownership, maintenance or use of real or personal property. We will provide a defense at our expense by counsel of our choice. We may investigate and settle any claim or suit.
This coverage is excess over other valid and collectible insurance. It does not apply to insurance written as excess over the applicable limits of liability.
Further, “occurrence” means “bodily injury or property damage resulting from an accident…” The phrase “negligent personal acts” is not defined in the policy. Accordingly, the obligation to defend, as stated in the policy (“We will provide a defense…”) cannot be seriously disputed.
Turning to the duty to defend, the standard has been repeatedly, and recently, stated:
“An insurer’s duty to defend its insured is ‘exceedingly broad’ (BP A.C. Corp. v. One Beacon Ins. Group, 8 NY3d 708, 714, 840 N.Y.S.2d 302, 871 N.E.2d 1128 (2007), quoting Automobile Ins. Co. of Hartford v. Cook, 7 NY3d 131, 137, 818 N.Y.S.2d 176, 850 N.E.2d 1152 [2006]). An ‘insurer will be called upon to provide a defense whenever the allegations of the complaint suggest…a reasonable possibility of coverage’ (id., quoting Cook, 7 NY3d at 137, 818 N.Y.S.2d 176, 850 N.E.2d 1152 [internal quotation marks omitted]). ‘If [a] complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend’ (id., quoting Technicon Elecs. Corp. v American Home Assur. Co., 74 NY2d 66, 73, 544 N.Y.S.2d 531, 542 N.E.2d 1048 [1989] [internal quotation marks omitted]). This standard applies equally to additional insureds and named insureds (see id. at 714-715, 544 N.Y.S.2d 531, 542 N.E.2d 1038, citing Pecker Iron Works of NY v. Traveler’s Ins. Co., 99 NY2d 391, 393, 756 N.Y.S.2d 822, 786 N.E.2d 863 [2003]).”
Regal Const. Corp. v. National Union Fire Ins. Co., of Pittsburgh, PA, 15 NY3d 34, 37 (2010); Ruder & Finn v. Seabord Sur. Co., 52 NY2d 663, 670 (1981). That duty extends not only to the insured, but to third persons, such as Lisette, in relation to the State Farm policy as well. Colon v. Aetna Life & Cas. Ins. Co., supra.
Nationwide’s assertion of an exclusion, or State Farm’s disclaimer of coverage, does not relieve the insurer of responsibility “to provide a defense,” “unless it can demonstrate the pleadings [are] solely and entirely within policy exclusions…and are subject to no other interpretation.” Automobile Ins. Co. of Hartford v. Cook, 7 NY3d, supra at 137, quoting Allstate Ins. v. Mugavero, 79 NY2d 153, 159 (1992)(citation omitted). Here, the complaint alleges two theories of liability. One alleges the use and operation of an automobile and the second alleges a personal act of negligence. The Nationwide exclusion applies to the first theory but not the second. The State Farm exclusion applies to the second but not the first. Nationwide has not established that Lisette’s wave, for purposes of a duty to defend, could be only attributable to the use of the automobile. Accordingly, Nationwide’s duty to defend Lisette has been established. Physicians Reciprocal Insurers v. Loeb, 291 AD2d 541, 542 (2nd Dept. 2002).
The duty to defend is broader than the duty to indemnify. Nationwide does not dispute the duty to indemnify, nor could it after the jury’s determination of liability (Servidone Constr. [*11]Corp. v. Security Ins. Co. of Hartford, 64 NY2d 419 (1985), although the arguments in Nationwide’s Memorandum of Law limit the right of indemnification to Lisette, and do not extend to Mrs. Daniele.
Counsel for Nationwide asserts Nationwide was never served with the Judgment with Notice of Entry in the Wrongful Death Action. As such, it is claimed that the requirements of Insurance Law §3420(a)(2), have not been met and the Daniele motions should be denied as to Nationwide. Lever’s Affirmation at Paragraph 15 contains the following assertion:
“On February 15, 2017, on behalf of Daniele, as plaintiff in the underlying wrongful death action, my office served the Notice of Entry of Judgment After Damages Trial by Jury with accompanying Bill of Costs upon all parties. One day later, on February 16, 2017, my office served counsel for the insurer’s [sic] in the declaratory judgment action with the entered judgment and by letter dated February 21, 2017, I served said entered judgment upon the insurers, Nationwide and State Farm. (A copy of the February 21, 2017 letter to Nationwide and State Farm serving the Notice of Entry of the Judgment after Damages Trial By Jury and Bill of Costs, as well as Affidavits of Service upon counsel in the wrongful death action and counsel for the insureds, annexed hereto as Exhibit AA).”
The Affidavits of Service attest to service of the Judgment with Notice of Entry upon the firm of Galleonardo & Rayhill, attorneys for Nationwide. Such an affidavit is prima facie proof of proper service, and it is not rebutted by an unsubstantiated denial that lacks factual specificity and detail, such as Claims Manager Mr. Macaluso’s conclusory statement, “The Judgment after Damages Trial by Jury was not served upon Nationwide.” Deutsche Bank Nat. Trust Co. v. Quinones, 114 AD3d 719 (2nd Dept. 2014); Liriano v. Eveready Ins. Co., 65 AD3d 524 (2nd Dept. 2009); Simonds v. Grobman, 277 AD2d 369 (2nd Dept. 2000).
The procedural posture here adds to the complexities. Nationwide commenced the action for a declaratory judgment after Lisette’s liability had been determined, but before damages had been established in a bifurcated trial and before Judgment had been entered. It sought a declaration that Nationwide is not required to provide coverage for the August 31, 2011 incident, and they were not required to defend or to indemnify Lisette. Lisette asserts the contrary. Mrs. Daniele, in the declaratory judgment action, interposed a counterclaim, inter alia, seeking a declaration that Nationwide is obligated to defend Lisette “against any judgment” with the limits of its policy ($1,000,000.00) exclusive of costs that may be recovered. Mrs. Daniele also sought to recover reasonable attorneys’ fees as well as costs and disbursements. After the declaratory judgment action was commenced and before the instant motion had been made, the damages in the Wrongful Death Action had been determined and Judgment was entered. These procedural developments raise issues involving CPLR§3001 and Insurance Law §3420. CPLR §3001 authorizes the Court to determine “the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed.” Further, CPLR §3019 authorizes a counterclaim for “any cause of action.” Notably, CPLR §3001 contains a specific provision for declaratory judgment actions where the sole issue is the timeliness of a [*12]disclaimer notice under Insurance Law §3420(a)(6).[FN11] Thus, Nationwide asserts that Mrs. Daniele lacks standing to pursue the counterclaims, and, in effect, there is no justiciable controversy involving Mrs. Daniele and Nationwide. Mrs. Daniele argues that the Judgment resolves the standing issue, but if true, then it begs the question of whether there was standing when the counterclaim was interposed and before the Judgment was entered, i.e., after the liability verdict.[FN12]
Clearly, Insurance Law §3420 requires a Judgment as a precondition to a direct action against an insurer on a Judgment, but it is otherwise silent where, as here, Mrs. Daniele is asking the Court for the same type of relief as Nationwide — a determination of the parties’ rights and obligations. The Second Department addressed these issues in Watson v. Aetna Cas. & Sur. Co., 246 AD2d 57 (2nd Dept. 1998). There, the plaintiff was injured at the premises of the defendant’s insured and the plaintiff obtained a default judgment on the issue of liability. The plaintiff sought a judgment declaring the defendant insurer must defend and indemnify its insured. There, as here, the defendant asserted the plaintiff lacked standing as no Judgment had been entered. The Court read Insurance Law §3420 “as prohibiting, by its plain terms, only a direct cause of action to recover money damages, and not prohibiting a declaratory judgment action by the Plaintiff in the underlying tort action seeking a declaration that a disclaiming insurance company owes a duty to defend or indemnify the tortfeasor.” Id. at 62. The court further recognized that the dispute between the plaintiff and the defendant insurer was “a genuine dispute that is justiciable, i.e.’state[s] a real controversy, involving substantial legal interests.'” Id. at 64.
Here, the argument supporting Nationwide’s action is that it should not be obligated to defend and to indemnify its insured, who has been found liable to Defendant. It is patently obvious that Mrs. Daniele’s position is the opposite and where either side stands to benefit from a ruling, it must be said there is “a real controversy involving substantial legal interests.” Id. at 64 (citation omitted). See also Tepedino v. Zurich-American Ins. Group, 220 AD2d 579 (2nd Dept. 1995). Moreover, to entertain only one side of a dispute, as Nationwide argues, by denying the opportunity to Mrs. Daniele, raises issues of res judicata and collateral estoppel, especially if Mrs. Daniele were bound by a ruling against Lisette, without the opportunity to be heard. Alternatively, if Mrs. Daniele had to await the entry of Judgment before commencing an action, the interests of judicial economy would be threatened, as multiple duplicative actions would [*13]surround, and prolong, issues of liability and damages.[FN13]
Watson v. Aetna Casualty, supra, properly distinguishes between a direct action against an insurer to recover an unsatisfied judgment (Jimenez v. New York Cent. Mut. Fire Ins. Co., 71 AD3d 637 [2nd Dept. 2010]), and an action to declare issues of defense and indemnification. In Mortillaro v. Public Serv. Mut. Ins. Co., 285 AD2d 586 (2nd Dept. 2001), the Second Department stated:
“A plaintiff need not be privy to an insurance contract to commence a declaratory judgment action to determine the rights and obligations of the respective parties, so long as the Plaintiff stands to benefit from the policy.”
Id. at 587. Accordingly, both Lisette Oster, and Ms. Daniele, may assert the obligation to defend and indemnify.
ATTORNEY’S FEES
Lisette Oster is entitled to recover her attorneys’ fees in opposing Nationwide’s declaratory judgment action and in enforcing her right to a defense and indemnification. Mrs. Daniele is not entitled to recover her attorneys’ fees.[FN14] New York has followed the rule that an insured may not recover in an affirmative action to determine its rights, but may do so, where, as here, the insured has been “cast in a defensive posture by the legal steps an insurer takes in an effort to free itself from its policy obligations (see Johnson v. General Mutual Ins. Co., 24 NY2d 42; Glens Falls Ins. Co. v. United States Fire Ins. Co., 41 AD2d 869 [3rd Dept. 1973] aff’d. on opn. below, 34 NY2d 778 [1974]).” Mighty Midgets v. Centennial Ins. Co., 47 NY2d 12 (1979). This holding is in contrast with the so-called American Rule — that absent a contractual provision or statutory basis for recovery, each party is responsible for their own attorneys’ fees. In Johnson, supra, the insured was permitted to recover costs of defending the action, but could not recover the costs of a cross-claim against the insurer, nor could the injured party recovery its costs. The exception is one of policy, and it is not lightly expanded. However, some courts have recognized the recovery also includes not only the costs and expenses of a defense to the insurer’s actions, but also the costs and defenses of the counterclaim to assert the right to coverage. Admiral Ins. Co. v. Weitz & Luxenberg, P.C., 2002 WL 31409450 (SDNY October 24, 2002); Lancer Ins. Co. v. Saravia, 40 Misc 3d 171, 177 (Sup.Ct. [Kings] 2013). The Second Department has made its position clear:
“[A]n insured who is ‘cast in a defensive posture by the legal steps an insurer takes in an effort to free itself from its policy obligations,’ and who prevails on the merits, may recover an attorney’s fee incurred in defending against the insurer’s action” (Insurance Co. of Greater NY v. Clermont Armory, LLC , 84 AD3d 1168, 1171, 923 N.Y.S.2d 661, quoting U.S. Underwriters Ins. Co. v. City Club Hotel, LLC, 3 NY3d 592, 598, 789 N.Y.S.2d 470, 822 N.E.2d 777 [internal quotation marks omitted]; see Mighty Midgets v. Centennial Ins. Co., 47 NY2d 12, 21, 416 N.Y.S.2d 559, 389 N.E.2d 1080; Johnson v. General Mut. Ins. Co., 24 NY2d 42, 298 N.Y.S.2d 937, 246 N.E.2d 713). ” ‘It is well settled than an insurer’s responsibility to defend reaches the defense of any actions arising out of the occurrence, and defense expenses are recoverable by the insured, including those incurred in defending against an insurer seeking to avoid coverage for a particular claim.'” (RLI Ins. Co. v. Smiedala, 77 AD3d 1293, 1294-1295, 909 N.Y.S.2d 263, quoting National Grange Mut. Ins. Co. v. T.C. Concrete Constr., Inc., 43 AD3d 1321, 1322, 843 N.Y.S.2d 877 [internal quotation marks omitted]). “Moreover, ‘an insured who prevails in an action brought by an insurance company seeking a declaratory judgment that it has no duty to defend or indemnify the insured may recover attorneys’ fees regardless of whether the insurer provided a defense to the insured'” (RLI Ins. Co. v. Smiedala, 77 AD3d at 295, 909 N.Y.S.2d 263, quoting U.S. Underwriters Ins. Co. v. City Club Hotel, LLC, 3 NY3d at 598, 789 N.Y.S.2d 470, 822 N.E.2d 777).”
Farm Family Cas. Ins. Co., v Habitat Renewal, LLC, 91 AD3d 903, 905-06 (2nd Dept. 2012). Accordingly, Lisette Oster may recover her attorney’s fees, but Ms. Daniele may not.
BAD FAITH
The Estate interposed a counterclaim alleging Nationwide engaged in “bad faith” in failing to meet its obligations under the policy. The Estate asserts Nationwide engaged in a “gross disregard” of the rights of its insured, Lisette, by such acts as disclaiming coverage, after little or no real investigation, failing to participate in the liability phase of the trial, failing to respond when placed on notice of Lisette’s liability, failing to participate in the damages phase of the trial, and otherwise failing to participate in the litigation. Nationwide asserts there can be no independent action for “bad faith,” and such action, if any, is one of breach of contract.[FN15] Further, it disputes that its actions were in “bad faith,” but were, at most, a coverage dispute concerning the terms of the policy. Having determined there was no coverage under the Homeowner’s Policy, it followed that there was no reason for Nationwide to participate in the litigation. However, once liability was determined against Lisette, the damage exposure became apparent.
In Pavia v. State Farm Mut. Auto. Ins. Co., 82 NY2d 445 (1993), the Court of Appeals recognized a form of bad faith where an insurer grossly disregarded the insured’s interest by failing to settle within policy limits when liability was clear. Somewhat less clear was whether Pavia created a new cause of action or simply expanded a contractual basis for relief arising from a breach of its “duty of good faith,” but insofar as the duty of good faith was “derived from the [*14]insurance contract,” the cause of action suggested one of contract rather than tort. Id. at 452. But, the performance of a contractual obligation with reasonable care may give rise to a duty of reasonable care, and “the breach of that independent duty will give rise to a tort claim.” New York Univ. v. Continental Ins. Co., 87 NY2d 308, 316 (1995).
The duty imposed on insurers to act in good faith in defending and settling claims derives from their virtually complete control over the settlement and the defense of claims, and reflects, to some degree, a balancing of that control in favor of the insured’s interests. That balancing, however, may be slight in light of the high barrier on the insured of establishing a “gross disregard” of the insured’s interests, which usually entails a pattern of conduct. Each element of a pattern of conduct must be established to conclude the insurer culpably failed to honor a contract. Gordon v. Nationwide Mut. Ins. Co., 30 NY2d 427, 437 (1972); CBL Path Inc. v. Lexington Ins. Co., 73 AD3d 829, 830 (2nd Dept. 2010). One aspect of that pattern is whether the insurer’s obligation to investigate and evaluate the insured’s claim was sufficient. See Pavia v. State Farm Mut. Auto. Ins. Co., supra; Gordon v. Nationwide Mut. Ins. Co., supra. So too, is the notice, participation, or lack of participation in the determination of liability (Knobloch v. Royal Globe Ins. Co., 38 NY2d 471 [1976]), and the risks to the insured of the failure to resolve the matter. Vecchione v. Amica Mut. Ins. Co., 274 AD2d 576 (2nd Dept. 2000). These factual disputes standing alone, are sufficient to deny the motions for summary judgment, based on “bad faith.”
However, it is not “bad faith” where, as here, there was an arguable basis for denying coverage. Nationwide conducted some investigation and took a position that a denial of coverage was warranted. Its actions flowed from that decision. To the extent that the decision denying coverage was a close question (as discussed herein), it cannot support a finding of “bad faith”. Sukup v. State of New York, 19 NY2d 519 (1967). Thus, exclusive of the denial of coverage, any issue of bad faith herein would be based on, among other things, the sufficiency of the Nationwide investigation, and the failure to re-evaluate their position as the facts and litigation progressed.
Accordingly, it is
ORDERED that the motion seeking a default judgment against Defendant Andrew Abbene is granted; and it is further
ORDERED that the Nationwide policy provides coverage for the incident of August 31, 2011, and the claims set forth in the Wrongful Death Action and that Nationwide is required to defend and indemnify Lisette M. Oster with respect to the incident of August 31, 2011, and the claims set forth in the Wrongful Death Action or any claims for contribution or indemnity therein; and it is further
ORDERED that the State Farm policy does not provide coverage for the incident of August 31, 2011, and the claims set forth in the Wrongful Death Action and that State Farm was not required to defend or indemnify Defendant Lisette M. Oster with respect to the incident of August 31, 2011, the claims set forth in the Wrongful Death Action and any claims for contribution or indemnity therein; and it is further
ORDERED that the motion to dismiss Defendant Lisette Oster’s counterclaim (improperly designated as a “cross-claim”) and Defendant’s Estate’s counterclaim is denied; and it is further
ORDERED that the motion of Defendant State Farm Mutual Automobile Insurance Company i/s/h/a State Farm Mutual Insurance Company (“State Farm”) for summary judgment dismissing the action against State Farm, including any cross-claims, and declaring that State Farm had no obligation to defend Lisette Oster for the underlying lawsuit and no obligation to pay any portion of the judgment in the underlying lawsuit to Carole Daniele or indemnify Lisette Oster for the judgment in the underlying lawsuit is granted; and it is further
ORDERED that Carol Daniele, As Executrix, is granted judgment on the counterclaims declaring that Plaintiff Nationwide is obligated to indemnify Defendant Lisette M. Oster against the judgment entered in the underlying Wrongful Death Action captioned “Carol Daniele, as Executrix of the Estate of Douglas P. Daniele, deceased, and Carol Daniele, Individually v. Gabrielle Oster, Lisette M. Oster and Andrew J. Abbene” (Supreme Court, Putnam Co., Index No. 3482/2011) up to the limits of its policy ($1,000,000.00), together with interest and costs, and attorneys’ fees if covered under the policy or otherwise collectible at law; and it is further
ORDERED that Defendants Carol Daniele, as Executrix of the Estate of Douglas P. Daniele, Deceased, and Carol Daniele, Individually, are not entitled to recover of Plaintiff Nationwide and Defendant State Farm, attorneys’ fees, as well as costs and disbursements incurred in the prosecution of the instant action; and it is further
ORDERED that the Complaint herein is dismissed; and it is further
ORDERED that Lisette Oster’s cross claims and counterclaims are granted as set forth herein.
The foregoing constitutes the Decision and Order of the Court.
Dated: Carmel, New York
June 29, 2018
__________________________________
HON. VICTOR G. GROSSMAN, J.S.C.
Footnotes
Footnote 1:Following the submission of the motions, at counsel’s request, the Court entertained oral argument, and allowed post-argument submissions. The Court permitted counsel to submit responses to decisions relied upon by the attorneys for Carole Daniele, Individually and as Executrix, and provided to the Court during oral argument.
Footnote 2:In the wrongful death action, the issue of liability was tried before Hon. Lewis J. Lubell. The issue of damages was tried before Hon. Robert DiBella. The Judgment has not been appealed.
Footnote 3:Prior to the instant actions, on December 19, 2013, Carol Daniele, as Executrix of the Estate of Douglas P. Daniele, Deceased, and Carol Daniele, Individually (hereinafter referred to as the Estate”), initiated a declaratory judgment action against Nationwide, State Farm, Allstate, Gabrielle, Lisette, and Abbene, in Supreme Court, Putnam County (Index No. 2811/13). On August 8, 2014, the Court granted Nationwide’s motion to dismiss the Estate’s complaint on the grounds that the Estate lacked standing (Lubell, J.).
Footnote 4:No objection was made to the charge.
Footnote 5:The pleading was labeled as a cross-claim, but in fact, it was a counterclaim.
Footnote 6:None of the parties have cited any authority defining the term “involves” as it used in the State Farm policy.
Footnote 7:Zaccari is a weak precedent. The Decision cites a “four paragraph affidavit” that “failed to set forth exactly what caused his injury.” 35 AD3d, supra at 600. In contrast, the detail in Encompass Indemn. Company v. Rich, 131 AD3d 476 (2nd Dept. 2015) established the connection not made in Zaccari. Rich, however, involved supplemental underinsured/uninsured coverage rather than a liability policy.
Footnote 8:That test states: “1. The accident must have arisen out of the inherent nature of the automobile, as such; 2. The accident must have arisen within the natural territorial limits of an automobile, and the actual use, loading, or unloading must not have terminated; 3. The automobile must not merely contribute to cause the condition which produces the injury, but must, itself, produce the injury”
Footnote 9:In any event, the Court would limit the issue of sufficiency to those exclusions stated in the disclaimer letters. General Acc. Ins. Group v. Cirucci, 46 NY2d 862 (1979); Abreu v. Huang, 300 AD2d 420 (2nd Dept. 2002).
Footnote 10:The same conclusion is reached when there is a default, in the case of Defendant Abbene, and the insurer remains bound by the Judgment.
Footnote 11:To the extent that Insurance Law §3420 should be construed narrowly as it is in derogation of the common law, the express wording of the statute requires that it be construed “equally or more favorable to the insured and to judgment creditors.”
Footnote 12:While Insurance Law §3420 establishes a Judgment establishing liability as a precondition to recovery, there is a suggestion that a finding of liability may trigger the duty to indemnify. In Westchester Fire Ins. Co. v. Utica First Ins. Co., 40 AD3d 978 (2nd Dept. 2007), the Court observed, “When insurers agree to pay all sums which an insured becomes legally obligated to pay as damages,” there must be “an establishment of legal liability for payment of damages” to trigger the insurers’ duty to indemnify the insured.” Id. at 980.
Footnote 13:Here, the Judgment awarding damages was entered while this action was pending. It may have been fortuitous that the instant action had not been resolved. At the very least, if Mrs. Daniele had to await the entry of Judgment, the Court would be faced with a new declaratory judgment action, possible consolidation, possible inconsistent rulings, and a continuation of the seven years of litigation already completed.
Footnote 14:There is a Fourth Department
case suggesting the contrary. RLI Ins. v.
Smiedala, 77 AD3d 1293 (4th Dept. 2010), but the Second Department appears to limit
the holding to the right of the insured. Farm Family Cas. Ins. Co. v. Habitat Rental, LLC, 91 AD3d 903
(2nd Dept. 2012).
Footnote 15:Nationwide also asserts the Estate lacks standing, an issue previously addressed, supra.
Reported in New York Official Reports at Global Liberty Ins. Co. of N.Y. v Otero (2018 NY Slip Op 51025(U))
Global Liberty Ins. Co.
of N.Y., Plaintiff,
against Rosalee Otero, et als., Defendants. |
21843/2017E
Counsel for Plaintiff: Jason Tenenbaum, P.C. (Jason Tenenbaum, Esq.)
Counsel for Defendant: Kopelevich & Feldsherova, P.C. (David Landfair, Esq.)
Mary Ann Brigantti, J.
The following papers numbered 1 to 6 ere read on this motion (Seq. No. __ )
for __SUMMARY JUDGMENT__ noticed on __February 28, 2018__.Notice of Motion – Order to Show Cause – Exhibits and Affidavits Annexed No(s).1,
Answering Affidavit and Exhibits No(s). 3, 4
Replying Affidavit and Exhibits No(s). 5, 6
Upon the foregoing papers, the plaintiff Global Liberty Insurance Company of New York (“Plaintiff”) moves for an order (1) granting Plaintiff summary judgment pursuant to CPLR 3212 against Prompt Medical Supply, Inc. (“Prompt”), ordering, adjudging, and decreeing that Prompt is not entitled to no-fault coverage for the motor vehicle accident that occurred on August 24, 2015, since defendant Rosalee Otero (“Otero”) failed to attend properly scheduled IME’s, and (2) permanently staying all Civil Court matters and no-fault arbitrations. Prompt opposes the motion.
Plaintiff provided a policy of insurance to its insured which included a no-fault endorsement providing coverage to an insured, or an eligible injured person, in an amount of at least $50,000 for all necessary expenses resulting from a motor vehicle accident. This policy was in effect on August 24, 2015. On that date, Otero was allegedly involved in a motor vehicle accident and she thereafter made claims as an eligible person under the above-referenced insurance policy. Otero specifically sought no-fault benefits from the named provider defendants, including Prompt. Otero assigned her rights to collect no-fault benefits to the provider defendants, who thereafter submitted no-fault billing to Plaintiff for the services they rendered to Otero.
On October 13, 2015, OmniMed Evaluation Services (“OmniMed”), on behalf of Plaintiff, sent Otero a letter requesting that she attend a chiropractor/acupuncture independent medical examination (“IME”) scheduled for October 26, 2015. Otero failed to appear for the duly scheduled IME. On October 26, 2015, OmniMed sent Otero a second letter requesting that she attend a chiropractor/acupuncture IME on November 9, 2015. Again, Otero failed to attend the duly scheduled IME. Plaintiff states that the first no-fault billing on this case was received from the answering defendant on October 13, 2015. Plaintiff thereafter commenced this declaratory judgment action and now moves for summary judgment.
Under New York Code of Rules and Regulations 11 (“NYCRR”), §65-1.1, the failure to appear for IMEs requested by the insurer “when, and as often as, [it] may reasonable require” is a breach of a condition precedent to coverage under a No-Fault policy. Accordingly, when the [*2]defendants’ assignor Otero failed to appear for the requested IMEs, Plaintiff had the right to deny all claims retroactively to the date of loss (see 11 NYCRR §65-3.8[c]). Otero’s non-appearance at the IMEs constitutes a failure of a condition precedent to receipt of insurance benefits for the motor vehicle accident, to any parties potentially entitled to benefits under Insurance Law §5103 or their assignees (11 NYCRR §65-1.1(a). See NY Ins. Law §5103[d] and [h]; Unitrin Advantage Ins. Co. v. Bayshore Physical Therapy, PLLC, 82 AD3d 559, 560 [1st Dept. 2011], lv. den., 17 NY3d 705 [2011]; Mapfire Ins. Co. of NY v. Manoo, 140 AD3d 468 [1st Dept. 2016]). Plaintiff’s submissions established its entitlement to summary judgment, as it provided evidence that it sent notices scheduling Otero’s IME examination on two occasions, and Otero failed to appear. Plaintiff also provided sufficient evidence that it complied with the procedures and time frames set forth in the no-fault implementing regulations (Unitrin, 82 AD3d at 560]). Plaintiff has therefore demonstrated that it is entitled to disclaim coverage to an eligible insured and to his or her assignees, retroactive to the date of loss.
In opposition to the motion, Prompt first asserts that the affidavits from Regina Abbatiello and Karin Bruford are not in admissible form. Prompt alleges that the affidavits failed to adequately show that the affiants proved their identities to the notary. However, the notary on both affidavits contains the language “sworn to before me” on a date certain. A notary public is “presumed to have acted within his or her jurisdiction and carried out his or her duties as required by law” where, as here, there is no showing to the contrary (see Collins v. AA Truck Renting Corp., 209 AD2d 363 [1st Dept. 1994]). Prompt also asserts that the captions on two of the affidavits are incorrect. However Prompt does not claim to have sustained any prejudice as a result of this error, and it was able to provide substantive opposition to this motion. “Defects, mistakes, and irregularities” may be ignored where, as here, there is no showing of prejudice (see First Wisconsin Trust Co. v. Hakiman, 237 AD2d 249, 249 [2nd Dept. 1997]).
Prompt next argues that Plaintiff failed to demonstrate that it properly scheduled the IME within 30 days of receipt of billing in accordance with 11 NYCRR §65-3.5(d). This contention is unavailing. Plaintiff has supplied an affidavit from Regina Abbatiello, a no-fault claims examiner, who stated that she has personal knowledge of Plaintiff’s office procedures and processing of no-fault claims. She asserts that, in this case, the first no-fault billing was received from the answering defendant on October 13, 2015. The first IME was scheduled for October 26, 2015, within 30 days of receipt of that billing. Contrary to Prompt’s contentions, these sworn assertions are sufficient to demonstrate Plaintiff’s compliance with the statute (compare American Transit Inc. Co. v. Longevity Med. Supply, Inc., 131 AD3d 841, 842 [1st Dept. 2015][plaintiff failed to establish that it complied with 30-day requirement where it provided “no evidence in affidavit form or any other form” indicating the date upon which plaintiff received the prescribed verification form from defendant]). Prompt failed to submit any admissible evidence refuting the allegations in the Abbatiello affidavit.
Prompt contends that Plaintiff has failed to establish the proper mailing of the IME scheduling letters. Prompt alleges that the affidavit from Karin Bruford of OmniMed is insufficient because she fails to allege that she had personal knowledge of the standard used to mail scheduling letters, and she fails to provide substantive information regarding how mailing addresses are verified or how postage is affixed to mailings, or how Plaintiff delivers mail into the custody of USPS.
After review of the challenged affidavit and accompanying submissions, this Court finds that Plaintiff has sufficiently carried its burden of proof. It order to raise the presumption of proper mailing, a movant may either provide “proof of actual mailing or proof of a standard office practice or procedure designed to ensure that items are properly addressed and mailed” (see American Transit Ins. Co. v. Lucas, 111 AD3d 423, 424 [1st Dept. 2013], citing Residential Holding Corp. v. Scottsdale Ins. Co., 286 AD2d 679, 680 [2nd Dept. 2001]). In this case, the Bruford affidavit competently explains the office procedure for affixing postage and states that clerical staff in her office transfer mail to the exclusive possession of the United States Postal [*3]Service. She affirms that the IME letters in this case were sent to Otero’s address, which was 230 New Lots Ave., 6D, Brooklyn, New York 11207. Plaintiff has also supplied mailing ledgers date-stamped and signed by a United States Postal Service employee. Each of these ledgers indicates that mailings were sent to Otero and her attorney’s office. This evidence, when considered alongside the Bruford affidavit, sufficiently carried Plaintiff’s burden of demonstrating that the IME letters were properly mailed (see American Transit Ins. Co. v. Lucas, 111 AD3d 423, 424; Residential Holding Corp. v. Scottsdale Ins. Co., 286 AD2d 679, 680 [testimony, certificate of mailing, and signed and stamped mailing ledger provided proof of actual mailing]). Furthermore, the foregoing evidence establishes that the mailings were sent to Otero’s proper address. While Plaintiff’s counsel and Abbattiello state that Otero’s address was “230 Lotts Avenue, Apt. 4D, Brooklyn, NY 11207,” Otero’s application for no-fault benefits sent to Plaintiff lists her address as “230 New Lots Avenue, Apt. 6D, Brooklyn, NY 11207” which is the address the mailings were sent to. There is no evidence that Plaintiff was ever made aware of the different address that Otero provided to Prompt in her assignment of benefits form, which post-dates the date of the two mailings.
Finally, Prompt contends that the affidavit from Plaintiff’s IME physician is insufficient to establish that Otero failed to appear for duly-scheduled appointments. This Court disagrees. Plaintiff’s physician Dr. Antionette Perrie states that she was personally present at her office on the IME dates, but the claimant failed to appear. The doctor notes that it was her office’s practice to note a claimant’s non-appearance, and she can say with certainty that claimant failed to appear on the appointment dates. The foregoing contentions are sufficient to establish the basis for the doctor’s personal knowledge that claimant-Otero failed to appear for duly-scheduled IME appointments (see American Transit Ins. Co. v. Lucas, 111 AD3d 423, 424 [1st Dept. 2013]). The physician affidavit is substantially similar to the one presented in support of a motion for summary judgment in American Transit Ins. Co. v. Clark, New York County Index No. 152876/2012 (see Ronald G. Lafranchi Affidavit dated April 7, 2013; Exhibit 4 to plaintiff’s motion for a default judgment/summary judgment). On appeal, while the First Department determined that the plaintiff’s motion should have been denied on other grounds, the Court did find that the plaintiff had adequately established that the claimant failed to appear for duly-scheduled IME’s (131 AD3d 840 [1st Dept. 2015]). Furthermore, in American Tr. Ins. Co. v. Solorzano, the plaintiff’s IME doctor submitted an affidavit that only stated, in pertinent part, “[claimant] was scheduled to appear for a Medical Examination on Monday, February 28, 2011 and Monday, March 14, 2011 pursuant to requests made by Independent Physical Exam Referrals, Inc. The claimant failed to comply with the requests and did not appear on those dates” (see Dr. Cirino G. Sesto Affidavit, dated May 9, 2011; Exhibit 4 to plaintiff’s motion for a default judgment/summary judgment; Bronx County Index No. 307769/2011). The First Department found that this affidavit, along with plaintiff’s other submissions, was sufficient to demonstrate that the claimant failed to appear for duly scheduled IME’s (108 AD3d 449 [1st Dept. 2013). In this case, this Court similarly finds that the affidavits of Plaintiff’s IME physician and from Ms. Bruford are sufficient to demonstrate that claimant Otero failed to appear for her scheduled IMEs.
Accordingly, it is hereby,
ORDERED, that Plaintiff’s motion for summary judgment against defendant Prompt is granted, and it is further,
ORDERED and DECLARED, that Prompt is not entitled to no-fault coverage for the subject motor vehicle accident that occurred on August 24, 2015, since claimant Otero failed to attend properly scheduled IMEs, and it is further,
ORDERED, that any related Civil Court matters and no-fault arbitrations are permanently stayed.
This constitutes the Decision and Order of this Court.
Dated: June 15, 2018
[*4]Hon.___________
J.S.C.
Reported in New York Official Reports at Maidstone Ins. Co. v Medical Records Retrieval, Inc. (2018 NY Slip Op 50556(U))
Maidstone Insurance
Co., Petitioner,
against Medical Records Retrieval, Inc., D/B/A Kamara Medical Supplies, as Assignee of Sandra Pereira, Respondent. |
27526/2017E
Counsel for Petitioner: Jason Tenenbaum, Esq.
Mary Ann Brigantti, J.
The following papers numbered 1 to _2_ Read on this motion, VACATE ARBITRATION AWARD Noticed on September 14, 2017 and duly submitted on the Motion Calendar of September 14, 2017:
PAPERS NUMBERED
Notice of Motion- Exhibits and Affidavits Annexed 1,2
Upon the foregoing papers, the petitioner Maidstone Insurance Company (“Petitioner”) seeks an order (1) pursuant to CPLR 7511, vacating the award of the master arbitrator that affirmed an award of the lower arbitrator finding that the respondent Medical Records Retrieval Inc., d/b/a Kamara Medical Supplies, a/a/o Sandra Pereira (“Respondent”) was entitled to compensation for services performed (a) from March 12, 2016 through April 22, 2016, in the sum of $3,750.00; (b) from March 12, 2016 until April 1, 2016, in the sum of $1,323.00; and (c) from March 12, 2016 in the sum of $19.50 and $34.22, and entering judgment in favor of Petitioner vacating the award, and remanding the matter to a different arbitrator to compute the amount due and owing under the Medicaid fee schedule, which would be 1/6 times the wholesale price of the CPM and CTU, divided by 30, times the amount of days the items were rented, or $1031.27; (2) such other and further relief as this Court may deem just, proper, and equitable, and (3) costs and disbursements as taxed by the clerk, including Petitioner’s $325 master arbitration fee. The petition is unopposed.
In cases of compulsory arbitration, judicial review of a master arbitrator’s award is restricted to the grounds set forth in Article 75 of the CPLR (see Matter of Petrofsky, 54 NY2d [*2]207, 210-11 [1981]). The “governing consideration is ‘whether the decision was rational or had a plausible basis'” (Curley v. State Farm Ins. Co., 269 AD2d 240, 242 [1st Dept. 2000], citing Petrofsky at 211). “Vacatur of an arbitrator’s award is statutorily limited to occasions involving fraud, corruption or bias… or occasions where the arbitrator exceeded his or her power, or so imperfectly executed it so that a final and definite award was not made” (id., citing CPLR 7511[b]; Lopez 375 v. New York City Health and Hospitals Corp., 257 AD2d 530 [1st Dept. 1999]). The party seeking vacatur must prove that the award was irrational, in violation of public policy, or in excess of the arbitrator’s powers (id., citing In re Travelers Insurance Company v. Job, 239 AD2d 289 [1st Dept. 1997]). Furthermore, “‘an arbitrator’s award will not be set side even though the arbitrator misconstrues or disregards [the proof] or misapplies substantive rules of law, unless it violates strong public policy or is totally irrational'” (id., quoting Sims v. Siegelson, 246 AD2d 374, 376 [1st Dept. 1998]). While an arbitration award may be deemed arbitrary and capricious where it does not follow “clear precedent,” (Matter of State Ins. Fund [Country-Wide Ins. Co.], 276 AD2d 432, [1st Dept. 2000]), vacatur should not be granted if the decision had a reasonable hypothesis and the controlling issue is “unsettled and subject to conflicting court decisions” (see Motor Vehicle Accident Indemnification Corp. v. Aetna Casualty and Surety Co., 89 NY2d 214, 224 [1996]).
In this matter, although the petition is unopposed, it must be denied because Petitioner has failed to carry its initial burden of demonstrating that vacatur of the arbitration awards is warranted. Petitioner received billing for a CPM knee machine (Code E0935) in the sum of $3,570.00, representing 42 days of usage (March 12, 2016 – April 22, 2016), at the billed rate of $85.00 per day, and billing for a water circulating pump (Code E0236) in the sum of $1,323.00, representing 21 days of usage (March 12, 2016 – April 1, 2016), billed at a rate of $125.00 per day. Petitioner was billed for other services as well, but it only disputes the billing rate for the aforementioned two items. Petitioner asserted that this billing was in excess of the applicable fee schedule. At the arbitration hearing, and in the instant petition, Petitioner argued that the applicable fee schedule for the above-referenced durable medical equipment (DME) is limited to 1/6th of the acquisition cost of the equipment on a monthly basis. In support of this position, Petitioner relied primarily on what it characterizes are “opinion letters” from the New York State Department of Health (“DOH”) and the Workers’ Compensation Board (“WCB”), as well as a 2016 Queens County Supreme Court decision. Petitioner also submits “frequently asked questions” the were published on the WCB website which states that the reimbursement rate of CPM (E0935) rental shall not exceed the amount specified in the Durable Medical Equipment Manual – Policy Guidelines – see section on “Rental of Durable Medical Equipment.” Those policy guidelines state – “for DME items that have been assigned a Maximum Reimbursement Amount (MRA), the rental fee is 10%[FN1] of the listed MRA. For DME items that do not have a MRA, the rental fee is calculated at 10% of the equipment provider’s acquisition cost.” Petitioner argued that its documentation established that where, as here, the DME items have not been assigned a Maximum Reimbursement Amount (“MRA”), the rental fee is calculated at 1/6th of the equipment provider’s acquisition cost.
The lower arbitrator considered these arguments, and specifically found that the DME at issue – the CPM and the CTU – were not listed in the Medicaid DME fee schedule, and no specific amount had been set by the DOH for the monthly rental of those items. While the arbitrator understood the calculations made by Petitioners’ professional coder, he noted that coder’s methodology was flawed because the DOH had indicated in a letter dated June 8, 2016, that according to 12 NYCRR section 442.2(g), the Medicaid Policy Guidelines and Medical Policy Manual are not to be included in the Medicaid DME fee schedule except to the extent that such documents contain the Medicaid DME fee schedule. The lower arbitrator thus rejected Petitioner’s fee schedule defense, and found that the billing was proper in accordance with 12 NYCRR 442.2. The master arbitrator affirmed these findings, holding that the arbitration interpretation of the evidence and applicable law pertaining to this fee schedule dispute was not arbitrary, capricious, or contrary to law.
After review of the instant petition, this Court finds that the arbitration awards were supported by a rational and plausible basis and were not contrary to clear precedent. 12 NYCRR 442.2(b) provides that “[t]he maximum permissible monthly charge for such equipment, supplies and services provided on a rental basis shall not exceed the lower of the monthly rental charge to the general public or the price determined by the New York State Department of Health area office. The total accumulated monthly rental charges shall not exceed the fee amount allowed under the Medicaid fee schedule” (emphasis added). Petitioner’s submissions fail to establish that the New York DOH area office has set or determined a price for the DME at issue. The June 8, 2016 letter from the DOH senior attorney established that the earlier July 2014 letter was clearly not an instance where DOH made such a determination. Furthermore, the correspondence from the WCB employee did not constitute an official “interpretation of a regulation” or an “informal opinion” of the agency’s regulations (compare Matter of Elcor Health Servs. v. Novello, 100 NY2d 273, 280 [2003]; A.M. Medical Services, P.C. v. Progressive Cas. Ins. Co., 101 AD3d 53, 64 [2nd Dept. 2012]). Contrary to Petitioners’ contentions, the arbitrator also had a rational basis for determining that the Medicaid policy guidelines are inapplicable to these facts (see 12 NYCRR 442.2[g]). Even if the Medicaid guidelines are applicable here, as noted in the WCB “FAQ,” they only state that the “1/6th” (10% as of July 1, 2016) calculation of rental fee applies where the DME items “do not have a MRA.” It is rational to conclude that this calculation only applies to DME items that are listed in the fee schedule but are not assigned a MRA value. Where, as here, the DME items are not listed at all on the Medicaid fee schedule, the Department of Health has not determined a monthly rental charge. Under these circumstances, the applicable monthly rental charge will be the rate charged to the general public (12 NYCRR §442.2[b]). Petitioner argues that its contentions further the cost containment policies behind the no-fault system, however, engaging in such an analysis goes beyond the narrow issue that is before this Court (see Curley v. State Farm Ins. Co., 269 AD2d 240, 242).
Accordingly, it is hereby
ORDERED, that the petition is denied, and the Master Arbitration Award is confirmed (CPLR 7511[e]).
This constitutes the Decision and Order of this Court.
Dated: April 4, 2018
Hon. Mary Ann Brigantti, J.S.C.
Footnotes
Footnote 1:According to Petitioners’ professional coder, the Medicaid Policy Guidelines changed the reimbursement formula from 1/6th to 10% of the acquisition cost on July 1, 2016.
Reported in New York Official Reports at Rehabxpress, PT, P.C. v Auto One Ins. Co. (2017 NY Slip Op 27246)
| Rehabxpress, PT, P.C. v Auto One Ins. Co. |
| 2017 NY Slip Op 27246 [57 Misc 3d 17] |
| Accepted for Miscellaneous Reports Publication |
| Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts |
| Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. |
| As corrected through Wednesday, October 25, 2017 |
[*1]
| Rehabxpress, PT, P.C., as Assignee of Ashley Wallace, Respondent, v Auto One Ins. Co., Appellant. |
Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, July 14, 2017
APPEARANCES OF COUNSEL
Law Office of Jason Tenenbaum, P.C. (Jason Tenenbaum of counsel) for appellant.
Korsunskiy Legal Group, P.C. (Henry R. Guindi of counsel) for respondent.
{**57 Misc 3d at 18} OPINION OF THE COURT
Ordered that the order is affirmed, with $25 costs.
In July 2012, plaintiff (the provider) commenced this action to recover assigned first-party no-fault benefits for medical services rendered to its assignor, who had allegedly been injured in a motor vehicle accident that had occurred on August 8, 2011. Defendant (the insurer) failed to timely answer or appear in this action, and instead commenced a declaratory judgment action in the Supreme Court, New York County, against the provider, among others, seeking a declaration that the defendants in that action were not entitled to recover no-fault benefits arising out of the August 8, 2011 motor vehicle accident.
After the insurer defaulted in the instant action, the provider moved for leave to enter a default judgment against the insurer. The Civil Court granted the motion, and a default judgment in the principal sum of $475 was entered against the insurer on March 6, 2013.[FN*] In July 2013, the insurer moved to vacate the default judgment and to compel the provider to accept its late{**57 Misc 3d at 19} answer. The provider opposed the motion and cross-moved for “summary judgment.” The insurer did not oppose the cross motion. By order entered July 16, 2014, the Civil Court (Devin P. Cohen, J.) denied the insurer’s motion and granted, on default, the provider’s cross motion, stating that “the judgment stands.”
On July 28, 2014, the insurer moved for “summary judgment” dismissing the complaint, contending that the amount due and owing pursuant to the Civil Court judgment had been satisfied, as an order and judgment in the Supreme Court declaratory action had been entered in [*2]the insurer’s favor on July 14, 2014, declaring that the provider, among others, was not entitled to recover no-fault benefits with respect to the motor vehicle accident at issue. The order and judgment further provided that the insurer recover from the various named defendants therein, including the provider, “costs and disbursements as taxed by the Clerk in the sum of $1,125.” The insurer alleged, in its motion papers, that the judgment in this action had been fully satisfied by virtue of a “partial satisfaction,” resulting from the judgment entered in the Supreme Court declaratory judgment action. Annexed to the motion papers was a document entitled “Partial Satisfaction of Judgment” which had been executed by the insurer’s counsel on July 28, 2014, and which bore the caption of the Supreme Court action. In the alternative, the insurer’s motion sought a “satisfaction of any entered judgment” in the Civil Court, pursuant to CPLR 5020 (c). The provider opposed the insurer’s motion. By order entered April 23, 2015, from which the insurer appeals, the Civil Court denied the insurer’s motion. We affirm.
[1] We initially note that the branch of the insurer’s motion seeking “summary judgment” was inappropriate because a judgment had already been entered against the insurer. However, the insurer also sought, in the alternative, a “satisfaction of any entered judgment” in the Civil Court, based on the judgment in favor of the insurer in the Supreme Court declaratory judgment action. Although reference was made to CPLR 5020 (c) in support of this branch of the insurer’s motion, this provision has no applicability to the circumstances herein. If the insurer was actually seeking the entry of a satisfaction of judgment, the proper way to seek such relief would be by way of a motion pursuant to CPLR 5021 (a) (2). However, in support of its motion, the insurer did not demonstrate that it had filed a partial satisfaction of judgment in the Supreme Court action, in accordance with CPLR 5020 (a). Consequently,{**57 Misc 3d at 20} insofar as the insurer’s motion sought the entry of a satisfaction of judgment in the Civil Court action, such relief was properly denied by the Civil Court.
[2] Notwithstanding the foregoing, it was apparently the insurer’s objective to have a portion of the judgment in the Supreme Court declaratory judgment action fully offset the judgment obtained against it in the Civil Court action. While a court may exercise its “inherent authority to set one judgment off against another” (see Joseph Kali Corp. v A. Goldner, Inc., 49 AD3d 397, 398 [2008]; see also Scianna v Scianna, 205 AD2d 750 [1994]), the granting of such relief rests in the discretion of the court (see Beecher v Vogt Mfg. Co., 227 NY 468, 473 [1920]; Kretsch v Denofrio, 137 App Div 617, 619 [1910]). Assuming, without deciding, that the Civil Court possessed the jurisdiction to entertain such an application (cf. Stilwell v Carpenter, 62 NY 639 [1875]), the Civil Court’s determination not to set off the judgments was not an improvident exercise of discretion.
Accordingly, the order is affirmed.
Pesce, P.J., Weston and Aliotta, JJ., concur.
Footnotes
Footnote *:The record indicates that an amended judgment in the principal sum of $475 (and in the aggregate sum of $939.90) was entered on August 15, 2014.