Dear Readers:

This past July, the New York State Insurance Department published notice of its Proposed Thirty-Second Amendment to Regulation No. 83 (11 NYCRR 68).  The proposed regulation would add new Part L to Appendix 17-C of 11 NYCRR to read as follows:

(L)  Licensed Acupuncture fees

     (a)     A licensed acupuncturist is an individual who has complied with the requirements of Article 160 of the Education Law.

     (b)     The maximum permissible charge for treatment rendered by a licensed acupuncturist shall not exceed the maximum permissible charge for a licensed physician certified to perform acupuncture in accordance with the Official New York Workers' Compensation Medical Fee Schedule referenced in 12 NYCRR 329.3.

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There seems to be a lot of uncertainty out there about whether this new fee schedule has taken effect.  It has not.   I asked Buffy Cheung, the Supervising Insurance Examiner at the Property Bureau of the NYSID, and she responded to me today, as follows:  "The proposed amendment is not effective yet.  The Department is still reviewing the public comments."

Therefore, for now, acupuncturist payments under No-Fault are guided by the prevailing court decision:  "As a matter of law... an insurer may use the workers' compensation fee schedule for acupuncture services performed by chiropractors to determine the amount which a licensed acupuncturist is entitled to receive for such acupuncture services" (Great Wall Acupuncture, P.C. v Geico Ins. Co, 26 Misc 3d 23, 24 [App Term, 2d, 11th & 13th Jud Dists 2009]).

Larry Rogak 

http://www.newyorknofaultadvisor.com/

Sent from my Verizon Wireless BlackBerry

BAD FAITH CLAIM AGAINST INSURER DISMISSED ON SUMMARY JUDGMENT; DOUBTS AS TO EXTENT OF INJURY EXISTED

Does a liability insurer act in "bad faith" by refusing to tender policy limits if liability is certain but doubts exist as to whether or not the injuries meet the "no fault" threshold?  No, says the Fourth Department, with two judges dissenting. 

This was an appeal from an order of the Supreme Court, Erie County (Penny M. Wolfgang, J.), entered October 2, 2008. The order granted defendant's motion for summary judgment dismissing the complaint.   The Appellate Division affirmed without costs.

"Plaintiffs, as assignees of Thomas S. Fitzpatrick, the defendant in the underlying personal injury action, commenced this action alleging that defendant acted in bad faith by failing to settle the underlying action and thereby exposing Fitzpatrick to personal liability. Plaintiffs commenced the underlying action seeking damages for injuries sustained by Jennifer M. Doherty (plaintiff) when the vehicle she was operating was rear-ended by a vehicle operated by Fitzpatrick. The jury awarded plaintiffs damages in excess of the coverage that Fitzpatrick had pursuant to his insurance policy with defendant and, in this action, plaintiffs seek damages in the amount of the difference between the verdict and the policy limit. Supreme Court (Wolfgang, J.) granted defendant's motion seeking summary judgment dismissing the complaint. We affirm."

"To prevail in . . . an action seeking damages for an insurer's bad faith refusal to settle an underlying action, a plaintiff must establish that the insured lost an actual opportunity to settle the . . . action . . . at a time when all serious doubts about his or her liability were removed . . . , and that defendant insurer acted with gross disregard for the insured's interests, i.e., it engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that the insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted (Kumar v American Tr. Ins. Co., 57 AD3d 1449, 1450 [2008]; see Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453-454 [1993], rearg denied 83 NY2d 779 [1994])."

"In the underlying action, Supreme Court (Curran, J.) denied Fitzpatrick's motion seeking summary judgment dismissing the complaint based in part on its determination that plaintiffs raised a triable issue of fact whether plaintiff sustained a serious injury within the meaning of Insurance Law § 5102 (d), and the court granted plaintiffs' cross motion seeking partial summary judgment on the issue of Fitzpatrick's negligence."

"It is undisputed that, prior to the trial of the underlying action, the attorneys for plaintiffs and Fitzpatrick requested that defendant settle the underlying action for the policy limit of $300,000.  Nevertheless, it is settled that an insurer cannot be compelled to concede liability and settle a questionable claim . . . simply because an opportunity to do so is presented. (Pavia, 82 NY2d at 454). In support of its instant motion, defendant established that it investigated the claim in the underlying action and arranged for a physical examination of plaintiff to determine the extent of her alleged injuries and whether they constituted a serious injury."

"Although the expert retained by defendant and plaintiff's treating physician had differing views with respect to the extent of plaintiff's injuries, the expert determined that plaintiff sustained cervical, thoracic and lumbar strains that resulted in a 'moderate, partial, temporary disability for recreational activities and activities of daily living in the home.' Defendant's investigation included a videotape of plaintiff engaged in activities without apparent difficulty, despite her alleged injuries. Defendant further established that it participated in settlement negotiations prior to and during the trial and that Supreme Court (Curran, J.) was actively engaged in the settlement negotiation process."

"Prior to trial, plaintiffs reduced their demand to $250,000 and, during the trial, they further reduced their demand to $240,000. Defendant thereafter increased its settlement offer from $25,000 to $55,000. Furthermore, the internal records of defendant submitted in support of the instant motion establish that the 'high-low' offer that it made after the trial commenced was 'not well received,' and plaintiffs' attorney testified at his deposition that the 'high-low' offer was rejected."

"We conclude that defendant established that Fitzpatrick did not lose an actual opportunity to settle the claim at a time when all serious doubts about his liability were removed and it was clear that the potential recovery far exceeded the insurance coverage, and thus that it did not act with gross disregard for Fitzpatrick's interests. We therefore conclude that defendant established its entitlement to summary judgment dismissing the complaint, and that plaintiffs failed to raise a triable issue of fact in opposition (see generally Zuckerman v City of New York, 49 NY2d 557, 562 [1980])."

All concur except Centra and Carni, JJ., who dissent and vote to reverse in accordance with the following memorandum.

Centra and Carni, JJ. (dissenting). "We respectfully dissent and begin our analysis with the well-settled proposition that a jury question exists in most cases where the issue is whether an insurer's good faith obligation has been met (see 2 NY PJI2d 4:67, at 1016 [2010]). Bad faith is generally proven by evidence largely circumstantial in nature (see Cappano v Phoenix Assur. Co. of N.Y., 28 AD2d 639 [1967]). Like many other actions involving bad faith, it is a rare occasion to uncover a 'smoking gun' and instead the proof of these cases requires the careful and collective evaluation of a confluence of factors and inferences uniquely within the province of a jury. The determination of whether an insurer acted in bad faith involves a review of the evolving body of information that is developed over the course of the management of the claim and the settlement posture of the parties as the litigation progresses."

"Although the plaintiff's burden of proof in a bad faith action is correctly stated by the majority, in our view the majority fails to provide appropriate scrutiny to the legion of factors the Court of Appeals has identified as necessary in reaching the conclusion that there was no bad faith as a matter of law (see Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 454-455 [1993], rearg denied 83 NY2d 779 [1994]). Although not mentioned by the majority, we also note at the outset that the jury verdict against Thomas S. Fitzpatrick in the underlying personal injury action was $740,000 and defendant's highest settlement offer was $55,000. The limit of Fitzpatrick's insurance policy with defendant was $300,000, and the sum of $289,489 was available after payment of other claims."

"One of the important factors to be considered in evaluating the merits of a bad faith claim is the likelihood that a verdict in favor of the injured claimant, in this case Jennifer M. Doherty (Doherty), would exceed the policy limit (see PJI 4:67). Here, the record establishes that, on May 9, 2003, defendant concluded, with respect to the issue of negligence, that it had "no legal defenses" and, on January 9, 2003, defendant determined that its proportionate share of fault for liability in this rear-end accident was '100%.'  On December 11, 2003, defendant's claim representative advised defendant's counsel that a motion for summary judgment on the serious injury threshold was not authorized because defendant's own 'IME indicated Doherty is disabled' and that such a motion would not be granted since defendant's 'IME was completed on 11/4/03 (1 year and 2 mos after the [date of loss]) indicating [Doherty] is still disabled.' Thus, defendant had already determined that its insured was 100% responsible for the accident and that Doherty was still disabled more than one year after the accident. All serious doubts about culpability for the accident were resolved in Doherty's favor very early on in the process. The only issues to be resolved were whether Doherty sustained a threshold serious injury and, if so, the damages to be awarded."

"On August 13, 2004, notwithstanding defendant's prior determination that Doherty was still disabled more than a year after the accident, Supreme Court denied a motion for summary judgment by Fitzpatrick on the issue of the serious injury threshold. In making this determination, the court stated that Doherty and her husband presented 'objective evidence' of a serious injury which was supported by the 'qualitative assessment' of Doherty's orthopedic surgeon."

"Doherty was 27 years old in December 2003 and had a life expectancy of 54.4 years (see 1B NY PJI3d, appendix A, at 1729 [2010]). Thus, defendant's potential exposure included 54.4 years of future pain and suffering and disability. The jury awarded $500,000 for future pain and suffering. There is no indication in defendant's file that it calculated Doherty's life expectancy at any time."

"Necessarily inherent in an insurer's duty to its insured is a well-reasoned and thorough analysis leading to the establishment of a predicted jury verdict value in the event of a verdict in favor of the injured claimant (see PJI 4:67). The record is devoid of any assertion by defendant that it had evaluated and actually assigned a potential jury verdict value, as compared to a settlement value, to Doherty's personal injury claim. Indeed, defendant's claim representative admitted that she never assigned a value or even a value range to the claim and could not recall how she arrived at the $10,000 settlement offer that remained in place until the first day of trial, when it was increased to $25,000. The record does not contain evidence of any analysis by defendant of the potential for high-end jury verdicts in the trial venue or any examination of jury verdict reports in cases with similar injuries in similar venues. Thus, in our view, on this record, defendant utterly failed to satisfy one of the most fundamental factors essential to a finding of good faith."

"Although the majority concludes that defendant 'investigated the claim in the underlying action,' we submit that the quality and thoroughness of that investigation should be the subject of careful review. It is for the jury to decide if a reasonable investigation of the facts . . . would indicate that the chances of successfully defending the underlying action were very remote. (State of New York v Merchants Ins. Co. of N.H., 109 AD2d 935, 936 [1985]). Here, it is undisputed that Doherty and her husband presented defendant with qualified and well-respected medical testimony and opinion that she had sustained a significant shoulder injury in addition to permanent injuries at multiple levels of her cervical spine and a disc injury in her lumbar spine at the L5-S1 level. Yet, the record is equally clear that defendant did not attempt to obtain an independent medical examination related to Doherty's shoulder and, in fact, relied upon the limited examination of a neurologist who admitted that she was not qualified to offer an opinion regarding Doherty's shoulder and that accident biomechanics was 'a weak point in her expertise.' Defendant's examining physician provided this videotaped testimony on August 31, 2004. The trial commenced on September 9, 2004. Thus, we conclude that, when the trial began, defendant knew that it had no competent evidence to rebut the evidence of Doherty and her husband with respect to Doherty's injured shoulder and the need for surgical repair."

"While the majority notes that defendant had obtained videotape surveillance of Doherty—a stay-at-home mother of two children ages five and seven—engaging in 'activities without apparent difficulty,' including carrying her children, the record establishes that, once the trial began, defendant made no evaluation of the jury composition, which included four women who might understand and sympathize with Doherty's lack of choice in engaging in those activities while Doherty's husband worked at two jobs. In our view, a defendant does not establish good faith by using tunnel vision to evaluate the claim and the evolving nature of the process."

"The record also establishes that defendant was never prepared to offer the policy limits in that the claim manager's settlement authority was limited to $150,000, and the claim manager testified that he never spoke with his supervisor concerning authorization to offer a greater amount."

"We disagree with the majority's conclusion that defendant's participation in settlement negotiations is indicative of its good faith. Even the ultimate tender of full policy limits on the eve of trial cannot insulate an insurer from liability for bad faith failure to settle within policy limits (see Knobloch v Royal Globe Ins. Co., 38 NY2d 471, 478 [1976]). Here, on the first day of trial, defendant's counsel advised that he needed to revise his exposure opinion and that, if the jury believed that Doherty needed surgery, the potential exposure was above $250,000. Although defendant had no expert to rebut Doherty's need for shoulder surgery, its settlement offer remained at $25,000. Four days into trial, defendant's settlement offer was increased to $55,000. The settlement demand of Doherty and her husband was $240,000—well within the policy limits and below the potential exposure indicated by defendant's counsel. Their counsel thereafter declined to continue negotiations and an opportunity to settle within the policy limits had been lost. To the extent that defendant contends that Doherty and her husband cut off settlement discussion or denied defendant an opportunity to settle, the jury could reasonably conclude that their decision to do so was the direct result of defendant's own conduct because defendant never indicated that it would make a fair and reasonable offer and, by failing to do so, defendant suppressed negotiations. (State of New York v Merchants Ins. Co. of N.H., 109 AD2d 935, 937 [1985])."

"We also recognize that opportunities to settle the claim within the policy limits can be lost at various points in the evolving continuum of the litigation and claim management process. In our view, an opportunity to settle the claim may be lost early in the process and may not be recovered or the bad faith cured by subsequent conduct. In other words, we do not believe that an insurer's bad faith is measured at the moment before the jury returns a verdict. Instead, conduct by the insurer weeks or months before the jury verdict may have entrenched the parties or foreclosed the opportunity for settlement long before a jury is empaneled. Thus, in our view, the fact that defendant made a 'high-low' offer four days after the trial commenced is not dispositive. Even assuming, arguendo, that the 'high-low' offer was meaningful, which, in our view, it was not, such 'a belated tender [does not] operate without more to exonerate a carrier from a pre-existing liability for bad-faith failure to settle within policy limits.' (Knobloch, 38 NY2d at 478.  Our own precedent establishes that the delayed unconditional making of a settlement offer of the full policy limits does not automatically relieve the carrier of liability (see Reifenstein v Allstate Ins. Co., 92 AD2d 715, 716 [1983]). It is not the mere fact that a 'high-low' offer was made, but also the timing of that offer that must be evaluated in light of all the circumstances. Therefore, we cannot agree with the majority that defendant's 'high-low' offer conclusively demonstrates that defendant met its good faith obligation. Instead, it is 'but a factor for the jury to consider on the question of bad faith' (id. at 716)."

"Lastly, in our view, the contention of defendant that its reliance upon the trial court's discussions during settlement conferences provides some form of absolution from a bad faith claim is misplaced. We conclude that, had the trial court recommended a settlement figure more favorable to Doherty, such as $700,000, defendant would have summarily rejected the trial court's view. In any event, we are well aware that, during settlement conferences, a trial court is not provided full access to the files and investigative materials of the parties. In our view, defendant's good faith is measured by what it knew and had in its files—not by a trial court's view of the case based upon limited information provided during a settlement conference."

"Therefore, we conclude that there are issues of fact whether defendant 'engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that [its] insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted' (Pavia, 82 NY2d at 453-454; see Kumar v American Tr. Ins. Co., 57 AD3d 1449 [2008])."

"Thus, we would reverse the order, deny defendant's motion for summary judgment and reinstate the complaint."

Larry Rogak

WITNESS MAY BE QUESTIONED ABOUT TAPED TELEPHONE CONVERSATIONS; CHAIN OF CUSTODY PROOF NOT NECESSARY

[Note: This court decision deals with a number of issues that came up in an ugly, contentious litigation.  Those issues include questioning a witness about a tape of a telephone conversation; a lawyer instructing his witness not to answer questions at a deposition; and a motion to disqualify the opposing counsel.  All of these issues can come up in insurance and/or liability litigation, especially, as in this case, when counsel for one or both sides has engaged in incivility.  -- LNR]

In this vigorously fought and acrimonious litigation, where a plaintiff alleges that she was the victim of a major fraud perpetrated by a religious organization and its leader, the Court has conducted numerous conferences. The Court's purpose has been to guide the litigation to an orderly resolution or conclusion. Yet, the experience of this litigation has shown that the Court's directives on discovery have been flouted. Now, among the interesting issues to be decided is whether counsel for one of the defendants violated a prior direction by the Court forbidding counsel from instructing his client not to answer a question at the examination before trial. Also, at issue is whether a cross motion by one of the defendants seeking to disqualify plaintiff's counsel has any legitimate merit where a lawyer in plaintiff's law firm drafted a will for the plaintiff leaving most of plaintiff's estate to the defendant Temple and whether the three year delay in filing the cross motion seeking the disqualification of plaintiff's counsel, made at the eve of trial, provides independent grounds for its denial.

Plaintiff in this breach of contract/fraudulent inducement action seeks damages for monies which she gave to defendants. Plaintiff was a member of defendant The Society of Shaolin Temple, Inc. ("the Temple"), a place of Buddhist worship at 132-11 41st Avenue, in Flushing, Queens County, New York. Co-defendant Guolin Shi ("Shi") was the president of the Temple at all relevant times.

In the complaint, dated April 26, 2007, the plaintiff alleges that she was defrauded of large sums of money by defendant Shi and members of the Temple. Defendant Shi's verified answer is dated June 28, 2007. On November 25, 2009, defendant Shi's counsel, Kenneth Jiang, Esq., filed a motion for summary judgment. The Court adjourned the motion, pointing out the futility of seeking summary judgment at a pre-deposition stage in light of the many disputed factual issues. Since counsel for the parties could not agree civilly to a discovery schedule, the Court and the undersigned's Principal Law Clerk, Howard L. Wieder, Esq., spent numerous hours at conferences working out a discovery schedule and attempting to resolve other disputes. On March 25, 2010, an extensive record was made in open Court, with the Court's direction forbidding counsel from instructing their clients not to answer questions and preserving all objections at trial.

Shi, as noted, moved for summary judgment to dismiss the complaint and all cross claims on the ground that the monies given were donations by plaintiff to the Temple and that plaintiff cannot establish otherwise. Plaintiff's cross motion is to resume the examination before trial of Shi and for the witness, defendant Shi, to listen to an audio recording of an alleged telephone conversation between plaintiff and Shi and answer questions regarding it, in particular the identity of persons speaking on the recording. The cross motion centers on the propriety of Mr. Jiang directing his client, defendant Shi, not to answer questions regarding the tape recording, notwithstanding the Court's direction on March 25, 2010, forbidding such instructions. Defendant Shi opposes the cross motion and cross-moves to disqualify plaintiff's attorney from continued representation of the plaintiff, pursuant to Rule 3.7 of the Rules of Professional Conduct.

The case had actually first appeared on the calendar of the Trial Assignment Part on March 18, 2010 and was adjourned to May 20, 2010 and then to August 25, 2010. Finally, on August 30, 2010, the case was assigned to trial to the Honorable James Golia, J.S.C., for trial. Justice Golia has deferred the trial until motions pending before the undersigned were decided.

Plaintiff testified that defendant Shi, her spiritual leader, pressured her into giving significant sums of money, indeed, hundreds of thousands of dollars, to the co-defendant Temple. According to plaintiff, defendant Shi falsely and misleadingly told plaintiff that the money would be used to help finance a condominium project at the Temple site, and that in return for advancing the money, plaintiff would be given a sizable discount on the price of a penthouse apartment. When the project never materialized, plaintiff asked for her money back, but Shi refused.

Shi testified to the contrary. In substance, Shi testified that the project was for construction of a rental apartment; and that plaintiff's payments to the Temple were voluntary contributions, not a quid pro quo for a condominium unit. Notably, there is no documentary evidence that there was ever any such project at all, rental or condominium.

The affidavit of plaintiff's customer service representative at her bank, Sungho Kang, was also submitted. Kang avers that he had several conversations with plaintiff and Shi at the bank where plaintiff often went to withdraw the subject monies, and that the subject of the conversations was that plaintiff was getting a condominium unit at a reduced price. Shi admits to speaking with Kang, but claims not to remember the substance of their conversation.

It is well settled, that the proponent on a motion for summary judgment has the initial burden to affirmatively demonstrate their prima facie entitlement to judgment as a matter of law (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985]; Zuckerman v City of New York, 49 NY2d 557 [1980]). The moving party must tender sufficient admissible evidence to demonstrate as a matter of law the absence of a material issue of fact. Failure to make that initial showing requires denial of the motion, regardless of the sufficiency of the opposing papers (Winegrad v New York University Med. Ctr., 64 NY2d 851, supra ; Cendant Car Rental Group v Liberty Mutual Ins. Co., 48 AD3d 397 [2nd Dept. 2008]; Martinez v 123-16 Liberty Avenue Realty Corp., 47 AD3d 901 [2nd Dept. 2008]; St. Luke's-Roosevelt Hosp. v American Tr. Ins. Co., 274 AD2d 511 [2nd Dept. 2000]; Greenberg v Manlon Realty, Inc., 43 AD2d 968 [2nd Dept. 1974]).

Here, upon the foregoing papers, in moving for summary judgment Shi merely contends that plaintiff cannot establish a prima facie case. A proponent's burden, however, is not met by pointing out the gaps in the opponent's proof (see, Calderone v Town of Cortland, 15 AD3d 602 [2nd Dept. 2005]; Doe v Orange-Ulster Bd. of Co-op. Educational Services, 4 AD3d 387 [2nd Dept. 2004]; Fromme v Lamour, 292 AD2d 417 [2nd Dept. 2002]). On a motion for summary judgment where the proponent has not affirmatively made out a prima facie case, the party opposing the motion is not required to assemble, lay bare and reveal her proof and show that her claims are capable of being established at trial (see, Scott v Long Island Power Auth., 294 AD2d 348 [2nd Dept. 2001]; Spearman v Times Square Stores Corp., 96 AD2d 552 [2nd Dept. 1983]).

In any event, the conflicting testimony as to the purpose of the monies given raises issues of fact and credibility which cannot be resolved on a motion for summary judgment (see, Medina v 203 West 109th Street Realty Corp., 16 AD3d 220 [1st Dept. 2005]). Since summary judgment is a drastic remedy, it should not be granted where there is any doubt as to the existence of a triable issue (Rotuba Extruders, Inc. v Ceppos, 46 NY2d 223 [1978]). In reviewing a motion for summary judgment, the court must accept as true the evidence presented by the nonmoving party and must deny the motion if there is "even arguably any doubt as to the existence of a triable issue" (Baker v Briarcliff School Dist., 205 AD2d 652 [2nd Dept. 1994]).

Since Shi's motion merely asserts that he is moving to dismiss under Article 32, without specifying which provision of the statute, the court will briefly note that the action is also not amenable to dismissal under CPLR 3211(a)(7). Plaintiff's claim against Shi is for fraudulent inducement. Specifically, it is alleged that Shi induced plaintiff to give the Temple $240,000 by promising plaintiff that she would be able to purchase, at a discount, a penthouse apartment in the condominium project allegedly to be built on the Temple site. Plaintiff contends that Shi knew at that time that there was no such project.

To state a cause of action for fraudulent inducement, it is sufficient that the claim alleges a material representation, known to be false, made with the intention of inducing reliance, upon which the victim actually relies, consequentially sustaining a detriment (Channel Master Corp. v Aluminium Ltd. Sales, 4 NY2d 403 [1958]; Megaris Furs v Gimbel Bros., 172 AD2d 209 [1st Dept. 1991]). "An expression or prediction as to some future event, known by the author to be false or made despite the anticipation that the event will not occur, is deemed a statement of a material existing fact, sufficient to support a fraud action' " (Cristallina S.A. v Christie, Manson & Woods Intl., 117 AD2d 284, 294-295 [1st Dept. 1986], quoting Channel Master Corp., supra at 407). The Court finds no basis for dismissing the action pursuant to CPLR 3211(a)(7).

Shi also contends that plaintiff's allegations of fraud fail to satisfy the pleading requirements of CPLR 3016(b) as to the individual defendant. Rejecting Shi's contention, this Court finds that plaintiff's complaint satisfies CPLR 3016(b).

CPLR 3016(b) provides that where a cause of action or defense is based upon fraud, "the circumstances constituting the wrong shall be stated in detail." In such an action, "corporate officers and directors may be held individually liable if they participated in or had knowledge of the fraud, even if they did not stand to gain personally" (Polonetsky v Better Homes Depot, 97 NY2d 46, 55 [2001]). The purpose of section 3016(b)'s pleading requirement is to inform a defendant with respect to the incidents complained of. The courts have cautioned that CPLR 3016(b) should not be so strictly interpreted "as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud' " (Lanzi v Brooks, 43 NY2d 778, 780 [1977], quoting Jered Contr. Corp. v New York City Tr. Auth., 22 NY2d 187, 194 [1968]). Thus, where concrete facts "are peculiarly within the knowledge of the party" charged with the fraud (Jered Contr. Corp., 22 NY2d at 194), it would work a potentially unnecessary injustice to dismiss a case at an early stage where any pleading deficiency might be cured later in the proceedings (see, CPC Intl. v McKesson Corp., 70 NY2d 268, 285-286 [1987]; Houbigant, Inc. v Deloitte & Touche, 303 AD2d 92, 97-98 [1st Dept 2003]; see also, Siegel, 2003 Supplementary Practice Commentary, (McKinney's Cons Laws of NY, Book 7B, CPLR C3016:3, 2008 Pocket Part, at 17) ["Misrepresenters have not been known to keep elaborate diaries of their fraud for the use of the defrauded in court"]).

Critical to a fraud claim is that a complaint allege the basic facts to establish the elements of the cause of action. Although under CPLR 3016(b) the complaint must sufficiently detail the allegedly fraudulent conduct, that requirement should not be confused with unassailable proof of fraud. Necessarily, then, CPLR 3016(b) may be met when the facts are sufficient to permit a reasonable inference of the alleged conduct (see, Polonetsky, 97 NY2d at 55 [alleged facts sufficient to permit a jury to "infer (defendant's) knowledge of or participation in the fraudulent scheme"]; Lanzi, 43 NY2d at 780; Jered, 22 NY2d at 194).

In Polenetsky, for example, the complaint alleged that Better Homes marketed substandard properties to potential buyers at inflated prices under the guise of foreclosures offered below market value. The complaint alleged that repairs would be made for observable defects, along with other false assurances, and that potential buyers were discouraged from consulting their own attorneys, and instead steered to attorneys with ties to Better Homes. Finally, the complaint alleged that Better Homes' president "participate[d] in [Better Homes'] operations on a day-to-day basis and [was] actively involved in its marketing and sales activities" (Polonetsky, 97 NY2d at 55). Taking the allegations in the light most favorable to the complainant, the Court of Appeals concluded that, under the circumstances, sufficient facts were alleged to permit a factfinder to infer that the individual defendant knew of or actually participated in Better Homes' alleged scheme to defraud its consumers (id.). The Court of Appeals, significantly, noted that the inference was cognizable "given the degree of [the president's] personal activities [within the organization] and the nature and extent of the customers' dissatisfaction" (id.).

As alleged by the plaintiff, the fraud in this case was not an isolated incident, but rather a scheme that took place over a number of years. The very nature of the scheme, as alleged, gives rise to the reasonable inference - - rebuttable though it may later prove to be - - that Shi knew of and was involved in the fraud (see, Houbigant, Inc. v Deloitte & Touche, 303 AD2d 92 [1st Dept. 2003]). Plaintiff has alleged only some specific details of defendant Shi's conduct. Courts have consistently acknowledged that, in certain cases, less than plainly observable facts may be supplemented by the circumstances surrounding the alleged fraud (see, Polonetsky, 97 NY2d at 55; Jered, 22 NY2d at 194;; see also, Bd. of Mgrs. of 411 E. 53rd St. Condominium v Dylan Carpet, 182 AD2d 551 [1st Dept. 1992]).

Taken in the light most favorable to the nonmoving party, here the plaintiff, and according that party the benefit of every possible favorable inference, this Court need determine only whether the facts as alleged are cognizable within the claim asserted to CPLR 3016(b)'s satisfaction (see, Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409 [2001]). It cannot be said, as a matter of law, that a finder of fact could not reasonably infer the requisite knowledge or participation by defendant Shi (see, id.; see also, Lanzi, 43 NY2d at 780; Jered, 22 NY2d at 194; Marine Midland Bank v Russo Produce Co., 50 NY2d 31 [1980]).

The Court, accordingly, denies defendant Shi's motion for summary judgment to dismiss. Numerous factual issues require a trial.

The cross motion by plaintiff, pursuant to CPLR 3124 and 3126, is to resume the examination before trial of Shi solely for the purpose of listening to an audio recording of an alleged conversation between Shi and plaintiff and to answer questions regarding it, particularly the identity of the persons speaking on the recording.

Defendant Shi urges that plaintiff failed to establish a complete chain of custody of the tapes from the time they were made until the time of the deposition, thus rendering them inadmissible. In examining the foundation laid in these cases, however, it cannot be said that the tapes are inadmissible.

The standard to be applied is that applicable to any real evidence sought to be admitted. In determining whether a proper foundation has been laid for the introduction of real evidence, the accuracy of the object itself is the focus of inquiry, which must be demonstrated by clear and convincing evidence (see, United States v Fuentes, 563 F2d 527 [2nd Cir.], cert. denied sub nom. Sansone v United States, 434 US 959 [1977]). Accuracy or authenticity is established by proof that the offered evidence is genuine and that there has been no tampering with it (cf. People v Julian, 41 NY2d 340 [1977]). The foundation necessary to establish these elements may differ according to the nature of the evidence sought to be admitted. For instance, a chain of custody is employed when "the evidence itself is not patently identifiable or is capable of being replaced or altered" (People v Connelly, 35 NY2d 171, 174 [1974] [drugs]). Mere identification by one familiar with the object, however, will be sufficient "when the object possesses unique characteristics or markings" and any material alteration would be readily apparent (id.; see, People v Flanigan, 174 NY 356 [1903]).

Tape recordings made by a participant to a conversation do not fall within the category reserved for fungible evidence, such as drugs. The uniformity of these substances, making identification difficult, generally, justifies a requirement of tracing fungible goods through each hand with which it comes in contact. The inherent difficulty with fungible goods simply is not present when evidence of a conversation is sought to be introduced, for the conversation itself is unique and the participants are available to attest to its accuracy. Thus, a chain of custody is not required for the introduction of tape recordings such as those present here (see, People v McGee, 49 NY2d 48 [1979], cert. denied sub nom. Waters v New York, 446 US 942 [1980]; see also, People v Ely, 68 NY2d 520 [1979]). A foundation may be established by a participant to the conversation who testifies that the conversation has been accurately and fairly reproduced (see, United States v Amrep Corp., 560 F2d 539 [2nd Cir. 1977], cert. denied, 434 US 1015 [1978]; United States v Steinberg, 551 F2d 510 [2nd Cir. 1977]; United States v Knohl, 379 F2d 427 [2nd Cir.], cert. denied 389 US 973 [1967]; Monroe v United States, 234 F2d 49 [D.C. Cir.], cert. denied 352 US 873 [1956]). Proof that the evidence has not been altered may be established in a similar fashion.

On this record, there is sufficient proof of accuracy and authenticity of the tapes offered to warrant their admission. Indeed, plaintiff may testify as to the accuracy and authenticity of the tapes offered to warrant their admission. In any event, the infirmities concerning chain of custody or inaudibility properly go to the weight of the evidence, not its admissibility (cf. People v Julian, 41 NY2d 340, supra ; People v White, 40 NY2d 797 [1976]).

The Court, accordingly, grants the cross motion by plaintiff to resume the deposition of Shi. The Court orders defendant Shi, at the resumed examination before trial, to answer the questions as to the identity of the parties on the tape.

The Court expresses its frustration at the obstruction of the deposition of defendant Shi, held on April 21, 2010, by the repeated instructions of Kenneth Jiang, Esq., defendant Shi's lawyer, not to answer questions, despite the clear direction of this Court at a lengthy, on-the-record conference.

In the cross motion to compel a further deposition regarding the audio tape, plaintiff's counsel repeatedly refers to the March 25, 2010 conference in which the Court warned prospectively against counsel instructing witnesses not to answer questions. Plaintiff's counsel, however, failed to attach a copy of the transcript for the convenience of the Court. The undersigned, nonetheless, ordered a copy of the transcript of the March 25, 2010 proceedings ("Transcript") and has made it a part of the record.

On March 25, 2010, the undersigned's Principal Law Clerk, Howard L. Wieder, held an off-the-record conference to help streamline the needed discovery. Even when it was thought that an agreement had been reached, the on-the-record conference that occurred on March 25, 2010 demonstrated the bitterness of counsel, each attacking the other side's non-cooperation. Plaintiff's counsel, at the hearing, accused defense counsel of dodging depositions and not showing up at scheduled examinations before trial. Mr. Jiang, in turn, repeatedly accused plaintiff's counsel of being engaged in a "fishing expedition." The Court, at the March 25 hearing, directed that examinations before trial must be held in April 2010, and, during the course of the depositions, there should be no direction by counsel not to answer, preserving all objections for the trial judge.

Despite the Court's warning in advance of the deposition, directing the lawyers not to instruct witnesses not to answer - - obviously except for claims of privilege or other obvious reasons - - Mr. Jiang directed his client, defendant Shi not to answer the questions. As stated by the federal court in Nunez v. Puerto Rico Elec. Power Authority, 2007 WL 4618580 [D.P.R. 2007]:

Instead of noting her objections on the record and allowing the deposition to continue, as would have been the proper procedure, Defendants' counsel instructed the witness not to answer any of the questions posed. Consequently the depositions could not continue as the witness refused to provide responses. An attorney cannot unilaterally decide to exclude testimony from a witness.

The Court is frustrated by the lack of civility among counsel in this case. Even after several conferences in this case by the undersigned and Mr. Wieder, the undersigned's Principal Law Clerk, culminating in the March 25, 2010 on-the-record conference, the attorneys for the parties kept on their vituperative attacks on each other. Mr. Wieder was constrained to hold additional conferences by telephone in late March and early April, 2010, after receiving letters and telephone calls from counsel pointing to the other side's alleged failure to cooperate on discovery.

The record is cluttered by letters with repeated cries for this Court's intervention on matters that should have been resolved by cooperation of counsel. Even when this Court intervened and spent numerous hours on discovery issues, counsel were embroiled in discovery disputes.

Plaintiff's counsel, during the course of the deposition on April 21, 2010, continuously reminded Mr. Jiang of the undersigned's prior warnings, and Mr. Jiang, while not styling his "advice" to his client as an instruction not to answer, in effect, did so, barring his client from answering the questions of plaintiff's counsel. Mr. Jiang uses the Yiddish term of "chutzpah," meaning nerve or temerity, to defend against the attacks made in plaintiff's cross motion. Mr. Jiang needs to be reminded of the quotation from the late, famed, British-born, American trial lawyer and author Louis Nizer [1902-1994], who stated: "When a man points a finger at someone else, he should remember that four of his fingers are pointing to himself." L. Nizer, My Life in Court p. 115 [Doubleday 1961].

As stated by the Appellate Division, First Judicial Department, in Orner v. Mount Sinai Hospital, 305 AD2d 307 [2003]:

A complete reading of the depositions reveals that defense counsel's attitude toward plaintiff's counsel was sardonic and unprofessional which, in turn, fostered an uncooperative attitude from defendants' witnesses. Indeed, [d]efendants' counsel in ordering his clients not to respond during depositions to questioning in areas which counsel unilaterally deemed to be irrelevant, and in continually objecting to matters other than form . . .effectively thwarted plaintiffs' efforts to depose defendants" (Levine v. Goldstein, 173 AD2d 346, 569 NYS2d 715). We take this opportunity to express our regret to these and other such fundamental principles of procedure and professional civility to an experienced defense lawyer.

Further depositions will undoubtedly result in the same chaos, acerbity and delay. Accordingly, we direct that these depositions be conducted before a Special Referee. Similarly, all remaining discovery exchanges are to be conducted before or with the assistance of a Special Referee.

Orner, 305 AD2d at 309-310; accord, Minnick v Minnick, 109 AD2d 871 [2nd Dept. 1985] [approving of the lower court's appointment of a Special Referee to supervise discovery].

In the case at bar, in light of the bitterness of this litigation, and the fact that repeated Court warnings have gone intentionally broken, the Court, on its own initiative and motion, appoints a Special Referee to supervise the continued examination before trial of defendant Shi. The Court appoints Jeffrey Kim, Esq., a partner of the law firm of Kim, Patterson & Sciarrino, P.C., in Bayside, Queens County, New York, as a Special Referee to supervise the remaining [*9]discovery and to hold settlement talks, following discovery. The Court knows that Jeffrey Kim, Esq., is a respected and skillful trial lawyer and is on the Part 36 list of approved, qualified fiduciaries in Queens County.

The appointment of Jeffrey Kim, Esq., is made at the expense of Mr. Jiang personally. Imposition of appropriate sanctions, including attorney's fees, is proper for disobeying a court's order on discovery (see, CPLR 3126; Keingarsky v. Keingarsky, 145 AD2d 537 [2nd Dept. 1988]). The Court directs that Mr. Jiang shall pay Mr. Kim's fees and expenses. Mr. Kim shall be compensated at the rate of $300.00 per hour, including all of his related expenses and disbursements, including parking, meals, photocopying, etc. Mr. Jiang, in addition, shall pay the law firm of Dai & Associates, P.C., within two weeks of the entry of this order the sum of $2,000 for the making of the cross motion to compel further discovery and for its time making a record at the prior examination before trial. The Court orders Mr. Jiang to make that payment of $2,000 from his personal account and to charge his client for it in light of his violation of this Court's express directions at the March 25, 2010 conference. In addition, the appearance fee for the court stenographer, at the continued deposition, shall also be made by Mr. Jiang personally. Dai & Associates shall pay for the copies of the transcripts of the continued deposition. If the aforementioned sums are not paid as directed, the undersigned will hold a hearing for both contempt and sanctions against the offender.

The continued deposition of defendant Shi shall occur at the offices of Dai & Associates, at a date to be selected by Mr. Kim, after consulting with counsel. At the continued examination before trial, defendant Shi is directed to answer all questions posed to him regarding the tape recording. In making this ruling and in defending the instruction given by the undersigned at the March 25, 2010, the Court believes that the prospective instruction, warning counsel not to make instructions to a witness not to answer, was proper.

In making these rulings and its sua sponte decision, the Court is mindful that it is not following the decision of the Appellate Division, First Department, in White v. Martins, 100 AD2d 805 [1984] [3-2 decision], reversing a trial court for having directed prospectively that all questions to be asked at the deposition be answered, without knowing what those questions might be. In the present case, the audio evidence was germane to the facts in dispute. It was not a side trip on some unforeseen alley such as asking the plaintiff about irrelevant details of any prior litigations or questioning him on what he ate for breakfast or what subway train he took earlier that morning. The instruction by this Court, at the March 25, 2010 conference, was clear that all questions were to be answered, and that all objections would be considered and ruled upon at trial. This Court believes that, in the 25 years following the holding by the Appellate Division, First Department, in White v. Martins, 100 AD2d 805, increasingly other federal and state court judges and magistrates are using the prospective instruction used by the undersigned (see, Morales v. Zondo, Inc., 204 FRD 50, 54 [SDNY 2001] [imposing sanctions for attorney's "detailed objections, private consultations with the witness, instructions not to answer, instructions how to answer, colloquies, interruptions, and ad hominem attacks"]; see also, In re Osborne, 1 AD3d 31 [1st Dept. 2003] [attorney disciplined for repeatedly showing disdain for a court's discovery rulings]).

At any rate, as well observed by David Paul Horowitz, Esq., in an excellent article, "Objections and Objectionable Conduct at Depositions," 77 Jan. NY St. BJ 20 [Jan. 2005]:

The witness should be permitted to answer all questions subject to objections in accordance with CPLR 3115. CPLR 3113(b) contemplates that the deposition shall proceed subject to the right of a person to apply for a protective order, and provides that the deposition shall be taken continuously.

However, a party objecting on the basis of relevancy, and directing a witness not to answer, may be acting properly, such as when the questioner is trying to elicit facts that cannot be proven at trial.

Questions that should not be answered include those that

1. infringe upon a privilege, or

2. are so improper that to answer them will substantially prejudice the party, or

3. are grossly irrelevant or unduly burdensome.

Id. at 22-23 [footnote references omitted].

The proposed questions propounded to defendant Shi at the April 2010 examination before trial, but thwarted by Mr. Jiang's obstructionist instructions, went to the heart of the issues, were not grossly irrelevant or unduly burdensome, were not so prejudicially improper, and did not infringe upon any privilege. To that extent, as expressed above, that questions do not infringe on privileges, are not grossly irrelevant or burdensome, and not substantially improper and prejudicial, this Court still adheres to its instruction barring anyone from instructing witnesses not to answer a question.

Mr. Kim shall also supervise the remaining discovery in this case and ensure that all discovery is completed. When sufficient time has elapsed following the resumed deposition of defendant Shi, for the purpose of affording defendant Shi the opportunity to make any corrections to the transcript of his continued examination before trial, plaintiff's counsel, upon obtaining the approval of Mr. Kim, the Special Referee, shall contact the Chambers of Justice James Golia and request a scheduling of the trial of this action.

Cross Motion by Shi to Disqualify Plaintiff's Counsel

Defendant Shi cross moves to disqualify the law firm of Dai & Associates, P.C., from continued representation of the plaintiff.

The pivotal issue in this case is why plaintiff gave $240,000 to the co-defendant Temple during the spring and summer of 2006. Plaintiff claims that the money was given to the Temple in anticipation of her purchase of a unit in a condominium apartment building that the Temple planned to build, as represented to her by Shi. Since the building was never built and may have been a sham concocted by Shi to obtain money from plaintiff, she wants her money back. The defendants Temple and Shi, on the other hand, claim that there was a project and that plaintiff's $240,000 was a free and unrestricted charitable donation towards it.

Plaintiff executed a last will and testament (the "Will') in June 2006. The Will was prepared by Dawei Gongsun, Esq. ("Gongsun"), who is still an attorney of Dai & Associates, P.C., plaintiff's counsel in this action. In the Will, plaintiff leaves her entire estate, except for a few thousand dollars, to the Temple. The Will makes no mention of the money that plaintiff had given, and was planning to give, to the Temple or the reasons for making the temple the object of her bounty. Plaintiff thus contends that the Will has nothing to do with the question of why plaintiff gave the Temple $240,000. Shi's argument, however, is that the Will somehow inferentially supports his and the co-defendant Temple's argument that the $240,000 was a donation. In other words, defendants in the action maintain that if plaintiff planned to give the Temple all her money when she died, she must have meant to donate the $240,000 to the Temple while she was alive.

The action began when the Code of Professional Responsibility ("Code") was in effect. On April 1, 2009, new Rules of Professional Conduct ("Rules"), found at 22 NYCRR section 1200.00, became effective for New York, replacing the Code of Professional Conduct.^[FN1] Rule 3.7 of the Rules of Professional Conduct discusses "Lawyer as a Witness." Rule 3.7, codified in section 1200.29 of the Rules, in pertinent part, provides:

(a) A lawyer shall not act as advocate before a tribunal in which the lawyer is likely to be a witness on a significant issue of fact . . .

****

(b) A lawyer may not act as advocate before a tribunal in a matter if:

(1) another lawyer in the lawyer's firm is likely to be called as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony may be prejudicial to the client.

First, no showing has been made that the testimony of Gongsun, if called to the stand, would be prejudicial to the plaintiff, within the strictures of Rule 3.7(b)(1), codified in section 1200.29(b)(1) of the Rules.

Second, whether a witness "ought" to testify is not alone determined by the fact that he or she has relevant knowledge or was involved in the transaction at issue (S & S Hotel Ventures Limited Partnership v 777 S.H. Corp., 69 NY2d 437 [1987]). Disqualification may be required only when it is likely that the testimony to be given by the witness is necessary (Foley & Co. v Vanderbilt, 523 F2d 1357 [2nd Cir. 1975]). Testimony may be relevant and even useful, but still not necessary. A finding of necessity takes into account "such factors as the significance of the matters, weight of the testimony, and availability of other evidence" (see, S & S Hotel Ventures Limited Partnership v 777 S.H. Corp., 69 NY2d 437, 446, , supra ; accord, Talvy v American Red Cross in Greater New York, 205 AD2d 143, 152 [1st Dept. 1994], aff'd on the majority opinion below, 87 NY2d 826 [1995]; see also, Universal Athlete Sales Co. v American Gym, Recreational & Athletic Equip. Corp., 546 F2d 530, n 21 [3rd Cir. 1976], cert. denied, 430 US 984 [1977]; Foster Wheeler Corp. v Babcock & Wilcox Co., 440 F Supp 897 [SDNY 1977]). Testimony is necessary in situations where the attorney is the only person with firsthand knowledge of the issue on which the case hinges (S & S Hotel Ventures Limited Partnership v 777 S.H. Corp., 69 NY2d 437, 445-446, supra ).

Third, courts have invariably denied motions to disqualify either because the attorney in question did not have firsthand knowledge of a key issue in the case, or where her testimony would be cumulative of other available testimony or documentary evidence (see, Congregation Talmud Torah Ohev Shalom R. Morris Kevelson v Sorscher, 69 AD2d 898, 899-900 [2nd Dept. 2010] [remanding the issue of disqualification of counsel back to the lower court since after the trial court's ruling that the testimony was cumulative and while the appeal was pending, the plaintiff's principal died, and thus the testimony might be considered to be necessary]; Eisenstadt v Eisenstadt, 282 AD2d 570 [2nd Dept. 2001]; accord, Sea Tow International, Inc. v Pontin, 2007 WL 4180679 [EDNY 2007];Leonard v University of Delaware, 1997 WL 158280 [D. Del. 1997]; United Food and Commercial Workers Health and Welfare Fund of Northeastern Pennsylvania v. Darwin Lynch Administrators, 781 F Supp 1067, 1069-1070 [M.D. Pa. 1991]; Cannon Airways, Inc. v Franklin Holdings Corp., 669 F Supp 96, 100-103 [D. Del. 1987]; Zutler v Drivershield Corp., 15 AD3d 397 [2nd Dept. 2005]; Morgasen v Federated Consultant Service, Inc., 174 AD2d 656 [2nd Dept. 1991]; Luk Lamellen u Kupplungsbau GmbH v Lerner, 167 AD2d 451 [2nd Dept. 1990]).

In the case at bar, Gongsun does not have firsthand knowledge of the key issue of the case, namely, why plaintiff gave the Temple $240,000. Gongsun was not present during the conversations that took place between plaintiff and Shi concerning her reason for giving the Temple $240,000-and Shi does not claim otherwise. Gongsun was merely present at the execution of the Will, which Shi claims inferentially supports his argument that the $240,000 was an outright gift.

Furthermore, even assuming arguendo, that Gongsun's testimony is supportive of Shi's inferential argument, Gongsun's testimony about the Will's execution would be cumulative to evidence provided by the Will itself or cumulative to the potential testimony of the two witnesses present at the execution of the Will. Defendant Shi failed to rebut plaintiff's contentions that:

(1) the pertinent events occurring during the negotiating period are memorialized in correspondence and other documentation obviating the need for Gongsun's testimony other than for authentication purposes, if so required, and

(2) two other witnesses were present during the signing of the Will and are available to testify to the key events surrounding the signing of the Will.

The Court notes, moreover, that defendants delayed in seeking disqualification of Dai & Associates, P.C., plaintiff's counsel, for a period of three years, even though they were well aware of Gongsun's alleged "integral" role in preparation of the Will, the very basis upon which they now claim that her disqualification is required.

Delay in making a disqualification motion is not a bar to that relief considering the paramount interest of the courts in being guardians and protectors of the Rules of Professional Conduct, and, here, in particular, Rule 3.7 of the Rules of Professional Conduct (see, M.A.C. Duff, Inc. v ASMAC, LLC, 61 AD3d 828, 830 [2nd Dept. 2009] [delay in making the motion to disqualify was excusable and not a bar to relief since counsel had timely raised the making of a motion at a preliminary conference, but yielded only to a directive by the court, at the time, to refrain from making the motion]; see, e.g., California Earthquake Auth. v Metropolitan West Securities, LLC, 712 F. Supp. 2d 1124, 1133 [E.D. Cal. 2010] [motion to disqualify was not untimely]; Leatherman v Guardview Mem. Gardens, Inc., 2010 WL 1381893 [SD Ind. 2010] [in the face of a patent conflict of interest, 16 month delay in making a disqualification of counsel motion was excusable, even though six depositions had already been taken].

In the present case, however, this Court holds that the delay in bringing the cross motion to disqualify is pertinent and is additional and compelling grounds for its denial. Mr. Jiang's verified answer is dated June 28, 2007. The case had actually first appeared on the calendar of the Trial Assignment Part on March 18, 2010. Only after Dai & Associates, P.C., made its cross motion to compel discovery, citing Mr. Jiang's obstructive behavior at the April 2010 deposition of Shi did Jiang respond with his own cross motion to disqualify (see, River West, Inc. v Nickel, 188 Cal. App. 3d 1297, 1311, 234 Cal. Rptr. 33 [1987] [motion to disqualify should not have been granted where it was made 47 months after the moving party's answer was filed]).

Mr. Jiang's motives to file the cross motion to disqualify counsel are transparent. The cross motion was meant to harass and to get vindictive "payback." Mr. Jiang filed the cross motion only after the plaintiff filed her cross motion for discovery sanctions against Mr. Jiang for his repeated instructions to his client during the deposition of April 21, 2010 not to answer the questions, in contravention of this Court's direction at the March 25, 2010 hearing. Mr. Jiang's cross motion for disqualification was not filed because of a genuine concern for upholding the conflict of interests rules in the Rules of Professional Conduct, but as a perceived stratagem, misusing an important ethical code setting forth professional standards as a chessboard maneuver to get a checkmate, since the action was already on the trial calendar, and the trial date had been postponed repeatedly.

The Court denies defendant Shi's cross motion to disqualify the firm of Dai & Associates as plaintiff's counsel.

The Court appreciates the fact that Mr. Jiang is a well-respected and aggressive litigator. Yet, the tactics of interrupting the flow of a deposition that had been ordered by the Court, disobeying this Court's instructions, and making an eleventh hour motion to disqualify counsel are inappropriate. Finally, with equal relevance to the present case, the Court concludes with the final observation noted by the federal court in Eggleston v. Chicago Journeymen Plumbers' Local Union No. 130, 657 F.2d 890, 908 n.36 [7th Cir. 1981]: "Nothing in this opinion is intended to imply any view whatsoever as to the possible merit of plaintiffs' claims, but what has happened so far in this case is not the way to find out whether there may be merit or not."

The foregoing constitutes the decision, opinion, and order of the Court.

______________________________________J.S.C.

Dated: November 3, 2010

Appearances of Counsel:

ADDITIONAL INSURED'S LATE NOTICE VITIATES COVERAGE

As a purported additional insured under a commercial liability policy, Bovis was required to give defendant notice of the underlying claim as soon as practicable. Absent a valid excuse, the failure to satisfy this notice requirement, which is a condition precedent to coverage, vitiates the policy (Sec. Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 440 [1972]). Here, defendant properly denied coverage inasmuch as plaintiff's May 2006 notice was not given to defendant until nine months after the claim accrued.

Larry Rogak

In today's Rogak No-Fault Blog:

What does a licensed acupunturist have to prove about the fee schedule?   Find out!

http://www.newyorknofaultadvisor.com/

(navigate to the blog page)

Larry Rogak

INSURER'S NAKED NON-COOPERATION DISCLAIMER NOT ENOUGH TO SUPPORT UM ARBITRATION DEMAND

It happens all the time: an auto insurer gets a demand for uninsured motorist arbitration.  It turns out the adverse vehicle became "uninsured" because of a disclaimer based on alleged non-cooperation.  The UM insurer brings a petition to stay the arbitration.  The adverse insurer submits its disclaimer letter.  Is that enough to overcome the petition to stay?  No, explains the Supreme Court here.   -- LNR

UPON DUE DELIBERATION AND CONSIDERATION BY THE COURT of the foregoing papers, the motion is decided as follows: it is

ORDERED that the petition (001) by Hartford Insurance Company for an order permanently staying the arbitration for uninsured motorist benefits demanded by respondent Priscilla Mulcahy pursuant to CPLR §7503 is granted and the arbitration is permanently stayed; and it is further

ORDERED that the petitioner shall promptly serve a copy of this Order upon counsel for all parties by first class mail, and shall promptly thereafter file the affidavit(s) of such service with the County Clerk.

In this action, petitioner, Hartford Insurance Company, seeks an order pursuant to CPLR §7503 permanently staying uninsured motorist arbitration demanded by its insured, respondent Priscilla Mulcahy. On December 13, 2006, respondent Mulcahy was operating a motor vehicle insured by Hartford when she was involved in a motor vehicle accident with a vehicle owned by additional respondent, Shaun S. Faraday, and operated by additional respondent Wahab M. Belo-Osagie. It is undisputed that at the time of the accident, the Faraday vehicle was insured by additional respondent, GEICO Insurance Company. In a one page affirmation in opposition, counsel for GEICO contends that GEICO had disclaimed coverage for the loss on the basis of late notice, in that GEICO first received notice of the accident on December 26, 2008, more than two years after it occurred.

It is well-settled that once the petitioner meets the burden of establishing, prima facie, that the vehicle in question was covered by the additional respondent insurer at the time of the subject accident, the burden shifts to that additional respondent to establish lack of coverage or a timely and valid disclaimer of coverage (State Farm Mut. Auto. Ins. Co. v Mazyck, 48 AD3d 580, 849 NYS2d 906 [2d Dept 2008]; Eagle Ins. Co. v Rodriguez, 15 AD3d 399, 790 NYS2d 167 [2d Dept 2005]; Allstate Ins. Co. v Frederick, 266 AD2d 283, 698 NYS2d 266 [2d Dept 1999]). In support of the contention that GEICO disclaimed coverage for the subject accident, counsel for GEICO annexes to her affirmation a purported GEICO disclaimer letter, dated February 16, 2009. The letter, however, is unsworn and unsupported by an affidavit from the party insurer. As such, the disclaimer is not proper evidence upon which the Court may rely sufficient to find that such disclaimer was valid (see Great Atlantic Ins. Co. v Shepard, 89 AD2d 832, 454 NYS2d 1 [1st Dept 1982]).

Even if the disclaimer were in proper evidentiary form, GEICO has failed to show that the alleged noncooperation disclaimer was otherwise valid. In this regard, to effectively deny coverage based upon lack of cooperation, an insurance carrier must demonstrate that: (1) it acted diligently in seeking to bring about the insured's cooperation; (2) the efforts employed by the insurer were reasonably calculated to obtain the insured's cooperation; and (3) the attitude of the insured, after his or her cooperation was sought, was one of willful and avowed obstruction (Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 225 NE2d 503, 278 NYS2d 793 [1967]; Preferred Mut. Ins. Co. v SAV Carpentry, Inc., 44 AD3d 921, 844 NYS2d 363 [2d Dept 2007]; Allstate Ins. Co. v United Intl. Ins. Co., 16 AD3d 605, 792 NYS2d 549 [2d Dept 2005]; Pawtucket Mut. Ins. Co. v Soler, 184 AD2d 498, 584 NYS2d 192 [2d Dept 1992]). Accordingly, the disclaiming insurer must sustain the very heavy burden of demonstrating that the insured's alleged failure to cooperate was deliberate (see Mount Vernon Fire Ins. Co. v 170 E. 106th St. Realty Corp., 212 AD2d 419, 622 NYS2d 758 [1995]). Mere inaction by an insured will not, by itself, justify a disclaimer of coverage on the ground of lack of cooperation (New York State Ins. Fund v Merchants Ins. Co. of N.H., 5 AD3d 449, 773 NYS2d 431 [2d Dept 2004]; Pawtucket Mut. Ins. Co. v Soler, supra ).

Here, there has been an undisputed prima facie showing that the GEICO policy for the Faraday vehicle was in effect at the time the subject accident occurred. Nevertheless, GEICO's one page opposition fails to demonstrate that it made diligent efforts which were reasonably calculated to secure its insured cooperation, or that its insured's attitude in allegedly failing to cooperate was one of "willful and avowed obstruction" (see Thrasher v United States Liab. Ins. Co., supra ; Preferred Mut. Ins. Co. v SAV Carpentry, Inc., supra ; Allstate Ins. Co. v United Intl. Ins. Co., supra ; Pawtucket Mut. Ins. Co. v Soler, supra ). Therefore, GEICO has not established a valid disclaimer of coverage (State Farm Mut. Auto. Ins. Co. v Mazyck, 48 AD3d 580, 849 NYS2d 906 [2d Dept 2008]; Eagle Ins. Co. v Rodriguez, 15 AD3d 399, 790 NYS2d 167 [2d Dept 2005]; Allstate Ins. Co. v Frederick, 266 AD2d 283, 698 NYS2d 266 [2d Dept 1999]).

Consequently, Hartford's petition is granted and the arbitration for uninsured motorist benefits demanded by respondent Mulcahy pursuant to CPLR §7503 is permanently stayed.

This constitutes the Order and Judgment of the Court.

Larry Rogak

CONSTRUCTION WORKER SLIPS ON WET STAIRS, FALLS THROUGH PLASTIC NETTING THAT REPLACED RAILING -- BUT NO SUMMARY JUDGMENT

On March 30, 2001, the plaintiff Miroslaw Linkowski was working at a Department of Sanitation Facility owned by the defendant The City of New York. The City hired Linkowski's employer, Rapid Demolition Company, Inc., to perform asbestos abatement and demolition work. The City also hired Bovis Lend Lease as construction manager, for the construction of garages after the abatement and demolition work was completed.

Pursuant to contract, Bovis, as consultant, agreed to indemnify the City for all claims and damages resulting from the negligence of Bovis in the performance of the contract. 

"It is undisputed that Linkowski was injured when he slipped and fell from a wet concrete stairwell platform into an orange plastic safety netting which replaced a section of stairwell railing. The netting failed, causing his fall to the garage floor below."

"Linkowski commenced this action seeking damages based upon common-law negligence and violations of Labor Law §§ 200, 240[1], and 241[6]. In response, the City and Bovis cross-claimed against one another seeking contribution and common-law or contractual indemnification. In addition, Bovis commenced a third-party action against Rapid seeking the same relief."

"During his examination before trial (EBT), Linkowski stated that he was a Rapid foreman and oversaw other Rapid employees. At the time of his accident, he was cleaning out a storage room containing asbestos gear protection. He removed and threw out empty boxes by bringing them to the wet stairway platform and tossing them over the orange plastic netting. It was his understanding that asbestos abatement would occur before demolition, and that Rapid would perform the demolition."

"Rapid used water to spray down areas where asbestos was removed, and then the contaminated materials were placed in special bags. A week prior to his accident, asbestos abatement was performed in the garage area and on the same floor where his accident occurred. It had been raining for many days and the pipes in the building did not drain the water. The area in which his accident occurred was on the platform on the stairs leading to the garage, and he slipped because the platform was wet. In connection with asbestos abatement, he attended safety meetings with his Rapid supervisors and Bovis inspectors who monitored air quality. He did not know who installed the safety netting. He never dealt with anyone from the City."

"During his EBT, a Bovis representative stated that at the time of the accident, the only company performing work at the premises was Rapid, and the remainder of the project had not been designed. The City hired Rapid to perform environmental abatement and demolition of the building before a new building was constructed."

"Bovis ensured only that Rapid was in compliance with any approvals obtained from the Department of Environmental Protection. He was on site daily, as was a Bovis environmental consultant. Basically, he filed monthly reports based on daily submissions by Rapid. The work was done in two phases, the first being abatement and demolition by Rapid, and there was no on-site general contractor for that work. There were several roof leaks and water was also used to wash down contaminated areas. If he saw a barrier or rail missing, he could direct the contractor to install a rail." 

"Linkowski moves for partial summary judgment against the City and Bovis contending that: (1) the orange netting failed, to provide him with proper protection; (2) there was a violation of Industrial Code 12 NYCRR 23-1.7[b] [1], 23-1.7[d] and 23-1.7[e]; and, (3) Bovis and the City created or had actual and constructive notice of the slippery condition and roof leaks."

"Bovis cross-moves for summary judgment dismissing the complaint, contending that: (1) it is not liable under any theory as it lacked any contractual relationship with Rapid, it did not act as general contractor, and it did not supervise or control Linkowski's work; (2) in any event, Linkowski fell off of a stairwell which was a permanent structure so Labor Law § 240[1] does not apply; and, (3) the Industrial Code provisions relied upon by Linkowski are inapplicable, as there was no hazardous opening and the stairwell platform was not a work site."

"The City cross-moves for summary judgment dismissing the complaint, based on the same arguments made by Bovis, adding that Linkowski was not engaged in any of the enumerated activities covered by the Labor Law, and it lacked actual or constructive notice of any dangerous condition. In the alternative, it contends that it is entitled to common-law and/or contractual indemnification from Bovis and Rapid, and it is entitled to breach of contract damages from Bovis and Rapid based upon their failure to procure insurance."

"Bovis replies, inter alia, that there is no evidence that the accident was solely the result of its negligence, and it procured an annexed insurance policy."

"Linkowski replies, inter alia, that: (1) Bovis is liable as construction manager; (2) he should be permitted to supplement his bill of particulars to add additional Industrial Code violations; and, (3) he is protected by the Labor Law even though he was not performing asbestos abatement at the time of the injury." 

"With respect to the liability of Bovis, Bovis was hired as construction manager and was present at the site during Rapid's work only to monitor air quality and compliance with the permits obtained by Rapid. There is no evidence that it acted as general contractor overseeing Rapid's work. Thus, Bovis established that it was not a general contractor or statutory agent of the City subject to liability under any of the theories interposed in the complaint (see Walls v Turner Constr. Co., ___ NY3d ___ 2005 NY LEXIS 1091 [5/505]; Lazarou v Turner Constr. Co., AD3d , 2005 NY App Div LEXIS 5800 [lst Dept 5/31/05]; cf. Aranda v Park E. Constr., 4 AD3d 315 [2004])."

"As a result, the branches of Linkowski's motion seeking summary judgment against Bovis are denied, and Bovis' cross motion seeking summary judgment dismissing the complaint interposed against it is granted." 

"With respect to the City, Labor Law § 240 [1] provides special protection to those engaged in the "erection, demolition, repairing, altering, painting, cleaning or pointing of a building or structure" (see Prats v Port Auth. of NY & N.J., 100 NY2d 878, 880 [2003]). The intent of the statute is to protect workers employed in the enumerated acts, even while performing duties ancillary to those acts."

"Moreover, the statute is directed solely at elevation-related hazards, and is not applicable where the injury sustained results from other types of hazards, even if proximately caused by the absence of an adequate scaffold or other required safety device (see Georaopulos v Gertz Plaza, Inc., 13 AD3d 478 [2004]). Where the statute applies, it imposes liability upon an owner and general contractor for failing to provide proper protection against elevation-related hazards, whether or not the owner or contractor actually exercised supervision or control over the work (see Perri v Gilbert Johnson Enters, Ltd., 14 AD3d 681 [2005])."

"Contrary to the City's claim, although Linkowski was not performing asbestos abatement at the time of his injury, he was undertaking a task ancillary to Rapid's asbestos work and was only at the site solely in his capacity of foreman for Rapid. As a result, Linkowski was involved in the cleaning of a building or structure within the meaning of the statute (see Prats, supra at 881-882; Danelewski v Realty Co., LLC, 2 AD3d 666 Campisi v Epos Contr. Corp., 299 AD2d 4 [2002])."

"Nonetheless, at the time of his injuries Linkowski was not exposed to any elevation-related risk for which Labor Law § 240[1] liability would result (see Rocovich v Consolidated Edison Co., a normal appurtenance to the building, and did not constitute a safety device designed to protect Linkowski from an elevation-related risk (see Parsuram v I.T. Barain Stores, Inc. 16 AD3d 471 [2005]; Avelino v 26 R.R. Ave. Inc., 252 AD2d 912 [1998]; Williams v City of Albany, 245 AD2d 16 [1997] appeal dismissed, 91 NY2d 957 [1998]; cf. Griffin v New York City Transit Auth, 16 AD3d 202 [2005])."

"As a result, the branch of the motion by Linkowski seeking summary judgment on the issue of the liability of the City for a violation of Labor Law § 240[1] is denied, and the branch of the cross motion by the City for summary judgment dismissing that cause of action is granted." 

"Labor Law § 241[6] imposes liability on owners and general contractors for failure to comply with the specific provisions of the Industrial Code, even in the absence of control or supervision of the work site (see Perri, supra ; Norton v Park Plaza Owners Corp., 263 AD2d 531 [1999])."

"Here, Linkowski demonstrated that the stairwell platform was in a slippery condition due to the presence of water and that a handrail was missing. The evidence reveals several possible sources for the water condition such as rain, leaking pipes, roof leaks or Rapid's containment work. Thus, although Linkowski demonstrated a prima facie violation of 12 NYCRR 23-1.7[d], the evidence creates issues of fact for trial concerning the duration and source of the water condition at issue, whether the water was a "foreign substance" within the meaning of that Industrial Code provision or whether it was part of Rapid's work, and whether the failure to remove or otherwise treat the water condition constitutes negligence (see O'Brien v Triborouah Bride & Tunnel Auth., AD3d 793 NYS2d 24 [2005]; Earl v Starwood Ceruzzi Saratoga, LLC., 9 AD3d 879 [2004]; Ventura v Lancet Arch Inc., 5 AD3d 1,053 [2004])."

"Otherwise, Linkowski failed to demonstrate the applicability of 12 NYCRR 23- 1.7[e], requiring the removal of tripping hazards from passageways and working areas (see Roman v Hudson Tel. Assocs., 15 AD3d 227 [2005]), or of 12 NYCRR 23- 1.7[b] [1], applicable to hazardous openings into which a person may step or fall (see Wells v British Am. Dev. Corp., 2 AD3d 1141 [2003])."

"As a result, the branches of Linkowski's motion and the City's cross motion seeking summary judgment on the Labor Law § 241[6] cause of action are denied." 

"Finally, Labor Law § 200 codifies the common-law duty of an owner or employer to provide employees with a safe place to work (see Linares v United Mqmt. Corn., AD3d , 791 NYS2d 165 [2005]) Section 200 applies, inter alia, to owners and contractors who either created a dangerous condition or had actual or constructive notice of it, and/or those who direct and control the work (see Linares, supra ; Amaxes v Newmaker & Co. Real Esate, Inc., 15 AD3d 321 [2005])."

"Although the City established that it did not direct or control Linkowski's work, there is an issue of fact with respect to whether the City created or had actual or constructive notice of the dangerous water condition. As a result, the branches of the motion by Linkowski and the cross motion by the City seeking summary judgment on the Labor Law § 200 cause of action are denied."

"In view of the grant of Bovis' cross motion for summary judgment dismissing the complaint interposed against it, the City's alternative request for relief as against Bovis is denied as academic. As neither the City/Rapid contract nor any counterclaim or cross claim by the City against Rapid forms part of the record, the branch of the City's cross motion seeking alternative relief against Rapid is denied. Linkowski's request to amend his bill of particulars to add additional Industrial Code violations is denied." 

"Based upon the papers submitted to the court and the determinations set forth above, it is

ORDERED that the motion by the plaintiff, pursuant to CPLR 3212, for summary judgment on the issue of the liability of the defendants based upon common-law negligence and violations of Labor Law §§ 200, 240[1], and 241[6] is denied; and it is further

ORDERED that the cross motion by the defendant Bovis Lend Lease, LMB, Inc., f/k/a Lehrer McGovern Bovis, Inc. and Bovis Lend Lease LMB, Inc., s/h/a Lehrer McGovern Bovis Construction Management Corp. for summary judgment dismissing the complaint is granted, and the complaint interposed against that defendant is dismissed; and it is further

ORDERED that the cross motion by the defendant The City of New York for summary judgment dismissing the complaint or, in the alternative, for summary judgment on its cross claim seeking contractual or common-law indemnification is granted to the extent that The City of New York is granted summary judgment dismissing the Labor Law § 240[1] cause of action, that cause of action interposed against that defendant is dismissed and, otherwise, the cross motion is denied. "

Larry Rogak

In today's Rogak No-Fault Blog:

When volunteer firefighters are injured while travelling to or from a call, are they eligible for PIP benefits?  Find out!

http://www.newyorknofaultadvisor.com/

Larry Rogak

In today's Rogak No-Fault Blog:

Three case reports, all dealing with how a medical provider has to oppose summary judgment motions based on IMEs.   Be there.  Aloha.

http://www.newyorknofaultadvisor.com/

Larry Rogak

WITNESS IS DENIED RIGHT TO "PLEAD THE FIFTH" AT HIS DEPOSITION; NO SHOWING OF POTENTIAL CRIMINAL LIABILITY

This multi-party litigation arises from the March 15, 2008 tragic crane collapse accident during the construction of a high-rise building in Manhattan, which caused seven fatalities, serious injuries to many individuals, and multi-million dollars in property damage.

Non-party witness Matthew Bunora ("Bunora") now moves to reargue a ruling made during his deposition by the Court (Smith, J.), finding that he waived his Fifth Amendment right against self incrimination and directing him to answer certain questions about his conversation with the District Attorney's office concerning the accident. Bunora seeks, upon reargument, an order permitting him to maintain such privilege.

Factual Background

At the time of the accident, construction workers were in the process of "jumping" (extending the height of) the tower crane. The collapse allegedly occurred when a six-ton steel "collar" being fitted around the crane's tower at the 18th floor broke free, causing the length of the tower to plummet, and shear off other braces in place at the 9th floor.

Bunora is a former employee of Joy Contractors, Inc., one of the contractors at the site. Bunora was the initial operator of the subject crane immediately before the incident. Bunora was replaced by Wayne Bleidner, who died when the crane collapsed. This action, brought in August 2008 by Denise C. Bleidner, Individually and as Executrix of the Estate of Wayne R. Bleidner, ensued.

Thereafter, in January 2009, the New York County District Attorney's office secured an indictment against William Rapetti ("Rapetti"), the owner of Rapetti Rigging Services Inc., for, inter alia, manslaughter and criminally negligent homicide as a result of the accident. Rapetti Rigging Services Inc. was hired by Joy Contracting, and was in charge of, inter alia, assembling and "jumping" the crane, including raising the height of the crane as the height of superstructure grew.

In June 2010, Bunora met with Assistant District Attorney Deborah Hickey (the "ADA") and provided statements concerning his operation of the crane and his use of the computer that was in the crane. Prior to the meeting, Bunora and the ADA executed a "Debriefing Agreement" (the "Proffer Agreement"), under which the ADA essentially agreed, with certain exceptions, not to use his statements in any prosecution against him.^[FN1]

Thereafter, on July 12, 2010, Bunora testified in this action, pursuant to a court-ordered subpoena. Plaintiff Crave Foods Inc. ("plaintiff") asserts, inter alia, that whether the computer was operating properly immediately before the accident is critical because the crane is used to hold the collar sections and then the tie-in beams. If the computer was inoperative or reporting a false weight, the operator would not be able to tell that the crane was not operating within its safe weight range and thus the crane could be used to pull itself out of true off balance, causing a collapse.

According to plaintiff, Bunora testified that there was a computer in the crane which gave a readout of the radius of the crane and the load on the hook. At the time of the collapse, additional tower sections had been placed into the tower frame, heightening the tower. At the time of the accident, workers were in the process of attaching two collar halves which were tied into the tower as an attachment point for three steel tie-in beams which hold the tower stable and vertical.

During his deposition, Bunora was asked if there was any additional information he provided the ADA that was not testified to at the deposition. It was at this point that Bunora asserted his Fifth Amendment right against self incrimination. Counsel at the deposition sought a ruling from the Court, and after a brief argument by counsel, the Court ruled that Bunora waived his Fifth Amendment privilege because of his conversation with the ADA, notwithstanding the fact that such statements were made pursuant to a "proffer" agreement with the ADA (Transcript, p. 79). The Court directed that Bunora "answer the question" (Transcript, p. 80). Nevertheless, Bunora reasserted his Fifth Amendment privilege, the deposition was adjourned, and this application to reargue the Court's ruling followed.

In support of reargument, Bunora contends that the Fifth Amendment protects him against disclosures he reasonably believes could be used in a criminal prosecution or could lead to other evidence that might be so used, and that he did not waive this right.

Bunora then contends that the three prongs which must exist in order for a waiver to be found have not been satisfied. First, his statements to the ADA were not made under oath, and were not made at a trial or part of a grand jury proceeding. Further, since Bunora's statements to the ADA could not be used against him by virtue of the Proffer Agreement, what he told her was not incriminating. To be sure, his statements to the ADA did not increase his chances of criminal prosecution or conviction. And, even if Bunora spoke to the ADA in the absence of the Proffer Agreement, any incriminating statements were unsworn and thus, do not result in a waiver of his Fifth Amendment right.

Second, Bunora argues, he did not make any distorted statement, which created a significant likelihood that, absent further testimony, the finder of fact would be left with and prone to rely on a distorted version of the truth stemming from earlier testimony.

Third, since Bunora did not make any distorted statement, Bunora had no reason to know that his statements would cause a distortion.

Bunora argues that if forced to testify as to the matter he believes is privileged, Bunora may say something incriminating. Any witness, therefore, who speaks to a prosecutor, police officer, or even a friend would be unable to later assert the Fifth Amendment privilege if called to testify at a judicial proceeding. Under the Court's rationale the ADA could have called Bunora to testify in the trial against Rapetti and forced him to testify under the theory that because he had already spoken with her, he waived his Fifth Amendment privilege. The Court's ruling, if maintained, would have a chilling effect of the government's ability to secure information from witnesses, since no one would cooperate with the prosecution knowing that a proffer agreement is worthless. Further, that Bunora is not a criminal target of the prosecution is irrelevant.

In response, plaintiff, and by adoption, defendants East 51st Street Development Company, LLC and Reliance Construction Ltd. ("opponents"), oppose the motion and cross move for an order (1) finding Bunora in contempt of Court for failure to obey the Court's order directing him to answer and (2) for attorneys fees related to a second deposition of Bunora necessitated by his refusal to answer the questions as ordered.

The opponents argue that Bunora's motion is not predicated on any facts overlooked by the Court. Further, Bunora failed to demonstrate that the Court misapplied the law regarding the Fifth Amendment privilege against self-incrimination. Bunora failed to show that he is the target of a criminal prosecution or engaged in conduct in which he can he held criminally liable. Bunora cannot demonstrate that the danger of self-incrimination is substantial and real given that admittedly, his conversation with the ADA was not self-inculpatory and he was not the target of criminal prosecution. Further, Bunora's equivocation as to whether his statements were incriminatory or whether they may be incriminatory does not evince a substantial and real danger.

Plaintiff also maintains that, Bunora's sporadic invocation of the privilege by answering questions specific to the computer (stating twice that there were no problems with the computer without asserting the privilege) but refusing to answer at other times, is improper and constitutes a waiver of the privilege. Caselaw holds that a person cannot waive his privilege under the Constitutional provisions and give testimony to his advantage and then in the same proceeding assert his privilege and refuse to answer questions that are to his disadvantage. And, if, according to Bunora, the computer worked properly then his testimony regarding the computer would not be incriminatory, thereby rendering his assertion of the Fifth Amendment improper.

Therefore, as the Court's order directing Bunora to answer was unequivocal and proper, his continued refusal to answer the question constitutes a basis for a finding of contempt of court. Additionally, costs and expenses, including counsel fees, may be recoverable in a contempt proceeding.

In reply, Bunora argues that the Court's previous ruling, issued without an opportunity to review the law and based on plaintiff's incorrect statements of the law, was made in error. The Court acknowledged that Bunora may not have waived his Fifth Amendment right by speaking with the ADA by inviting him to reargue or appeal. Bunora points out that plaintiff abandoned the argument that his conversation with the ADA must be disclosed even if incriminating. Plaintiff now argues that Bunora waived his Fifth Amendment right because his moving papers claim that his statements were not incriminating, but ignores the fact that the Proffer Agreement protected Bunora's statements; it was the proffer, not the contents of what was said during the meeting, that made Bunora's statements non-incriminating. The proffer was demanded because Bunora was concerned that in its absence he might incriminate himself. Bunora need not be a target of a criminal investigation in order to legally assert the privilege.

The DA's office ultimately sought an indictment against Rapetti on the theory that Rapetti violated proper safety standards by using a defective strap to support the crane. Given these actions by the DA's office, Bunora has a real and legitimate right to be concerned about being charged with a crime. Bunora's testimony that there was nothing wrong with the computer is a very different issue that how the computer was being used. Although Bunora's testimony about the computer was not incriminating, if forced to testify about his operation of the crane computer, he might incriminate himself. And, because Bunora never said anything incriminating at his deposition, he never waived his Fifth Amendment privilege.

As to the contempt of court application, the Court was equivocal in its ruling. Even though the Court ordered Bunora to answer the subject questions, the deposition transcript indicates that if Bunora did not accept her ruling, he could file an order to show cause and an appeal. And, Bunora promptly moved to reargue, after the Court imposed a stay of its own order and after the Court expressed to plaintiff that its decision may not have been made with sufficient consideration. Bunora also points out that plaintiff's motion for contempt is based on an argument plaintiff has abandoned.

Discussion

A motion for leave to reargue under CPLR 2221, "is addressed to the sound discretion of the court and may be granted only upon a showing 'that the court overlooked or misapprehended the facts or the law or for some reason mistakenly arrived at its earlier decision'" (William P. Pahl Equipment Corp. v Kassis, 182 AD2d 22 [1st Dept] lv. denied and dismissed 80 NY2d 1005, 592 NYS2d 665 [1992], rearg. denied 81 NY2d 782, 594 NYS2d 714 [1993]). Reargument is not designed to afford the unsuccessful party successive opportunities to reargue issues previously decided (Pro Brokerage v Home Ins. Co., 99 AD2d 971, 472 NYS2d 661) or to present arguments different from those originally asserted (Foley v Roche, 68 AD2d 558, 418 NYS2d 588; William P. Pahl Equipment Corp. v Kassis, supra ). On reargument, the court's attention must be drawn to any controlling fact or applicable principle of law which was misconstrued or overlooked (see Macklowe v Browning School, 80 AD2d 790, 437 NYS2d 11 [1st Dept 1981]).

At the deposition at issue, Bunora was asked what he told ADA Hickey:

Q: What did you speak about with her?

A: Pretty much the same thing you guys are asking me. The same things you guys have been asking me all morning, same questions.

Q: What did you tell Debra Hickey?

A: The same stuff I'm answering to you today.

Q: Is there anything that you didn't tell us today that you did say to Debra Hickey?

A: What I'm answering you guys is my honest answers. I can't - you know, I'm not telling you anything different than I told her.

When probed further, Bunora refused to answer and broadly asserted privilege :

Q: Is there anything additional that you spoke about with her that we haven't spoken about today? You can answer if you understand the question.

MR. FINK: I think there is a pending question.

A: There is [sic] things I spoke with the district attorney about that I take the Fifth on.

Q: Is then anything additional you spoke with the district attorney on that you haven't spoken with us about today?

MR. FINK: The answer is yes.

***colloquy***

A: Yes.

Q: What else did you speak about with the district attorney that you didn't speak about with us here today?

MR. FINK: He just said he's asserting his Fifth Amendment right.

In issuing its earlier ruling directing Bunora to answer the question, the Court reasoned that there was no indication that Bunora was a "target," and there was no indication that he had a founded belief that he was a target. Thus, Bunora could not "just" assert the privilege (Transcript, p. 71). According to the Court, the right to assert the privilege "only comes if there is a criminal or a threat of criminal prosecution" (Transcript, p. 73). Although the Court was advised that Bunora's statements to the ADA, which counsel at the deposition sought to elicit, were made only as a result of the Proffer Agreement, the Court stated that the Proffer Agreement was only between the ADA and Bunora, and did not insulate or grant protection or privilege in the civil action.

Bunora's argument that the Court's ruling was contrary to the law concerning the Fifth Amendment and waiver of same warrants the grant of leave to reargue.

The Fifth Amendment provides, "No person ... shall be compelled in any criminal case to be a witness against himself ...." (U.S. Const. amend. V). The Fifth Amendment privilege against self-incrimination can be asserted in any proceeding, civil or criminal, administrative or judicial, investigatory or adjudicatory (Kastigar v US, 406 US 441, 92 SCt 1653 [1972]; see Agnello v Corbisiero, 177 AD2d 445, 576 NYS2d 541 [1st Dept 1991]; Bradley v O'Hare, 2 AD2d 436, 156 NYS2d 533 [1st Dept 1956] (The right of a witness in a civil suit to be protected against any form of self-incrimination under legal compulsion "is available to a witness in an examination before trial"]). However, while a party may not be compelled to answer questions that might adversely affect his criminal interest, the privilege does not relieve the party of the usual evidentiary burden attendant upon a civil proceeding; nor does it afford any protection against the consequences of failing to submit competent evidence (Access Capital, Inc. v DeCicco, 302 AD2d 48, 752 NYS2d 658 [1st Dept 2002], citing United States v Rylander, 460 US 752, 761 ["the claim of privilege is not a substitute for relevant evidence"]). Thus, having asserted the privilege, Bunora bears the burden of sustaining the claim, as the burden of proof is on the one who asserts the privilege (Walsh v Parkchester General Hosp., 33 AD2d 540, 304 NYS2d 270 [1st Dept 1969]).

That being the case, "[a]n individual may invoke the Fifth Amendment to decline to answer a deposition question when the individual has reasonable cause to apprehend that answering the question will provide the government with evidence to fuel a criminal prosecution" (Lopez v City of New York, 2007 WL 2228150 [EDNY 2007] citing Osrecovery, Inc. v One Group Int'l, Inc., 262 F Supp 2d 302, 306 [SDNY 2003]). "The protection of the [Fifth Amendment] privilege is confined to instances where the witness has reasonable cause . . . to believe that a direct answer would support a conviction or furnish a link in the chain of evidence needed to prove a crime" (Carter-Wallace, Inc. v Hartz Mountain Indus., Inc., 553 FSupp 45 [DCNY 1982]), and the privilege protects against any disclosures which the witness reasonably believes could be used in a criminal prosecution or could lead to other evidence that might be so used (Kastigar v US, supra ). "[T]he right to assert one's privilege against self-incrimination does not depend upon the likelihood, but upon the possibility of prosecution" (Carter-Wallace, Inc. v Hartz Mountain Indus., Inc., citing In re Master Key Litigation, 507 F2d 292, 293 [9th Cir 1974] (emphasis in original)). Thus, as pointed out by the opponents to his motion, the Fifth Amendment, as a defense to withhold disclosure, is ineffectual unless Bunora "has made 'a colorable showing that he [was] involved in some activity for which he could be criminally prosecuted'" (Kourakos v Tully, 92 AD2d 1051, 461 NYS2d 540 [1983]). If neither the question nor the setting in which it is asked suggests a real and appreciable danger of self incrimination, the proponent of the privilege "is obliged to come forward with some indicia of potential incrimination" (id. citing United States v Neff, 615 F2d 1235, 1240, cert den 447 US 925). Indeed, "[t]he danger of self-incrimination must be real, not remote or speculative" (OSRecovery, Inc. v One Groupe Intern., Inc., 262 F Supp 2d 302 [SDNY 2003]). Determining whether the privilege is available in given circumstances thus involves essentially a factual inquiry (id.). A judge must determine, "from the implications of the question, in the setting in which it is asked," whether "a responsive answer to the question or an explanation of why it cannot be answered might be dangerous because injurious disclosure could result" (id).

The Court's previous ruling, premised upon the notion that the privilege "only comes if there is a criminal or a threat of criminal prosecution" is not wholly inconsistent by case law, and its finding that there was no indication that Bunora was a "target," or of a founded belief that he was a "target" was supported by the record. A witness may not refuse to answer "merely because he declares that in so doing, he would incriminate himself-his say-so does not of itself establish the hazard of incrimination" (Textron Financial Corp. v Eddy's Trailer Sales Inc., 2010 WL 1270182 [EDNY 2010]). And, here, Bunora, on reargument, has yet to make a showing that the statements he seeks to shield from disclosure (those statements he made to the ADA) would incriminate him or reflect his involvement in activity for which he could be criminally prosecuted. Instead of establishing the application of the Fifth Amendment to his statements, or at least presenting to the Court the statements he seeks to shield to from discovery, Bunora's motion rests principally on the purported failure of the opponents to establish that he waived the privilege. Further, Bunora, through his counsel's affidavit, states that if "forced to testify as to the subject matter which he has asserted his Fifth Amendment privilege, Bunora may say something incriminating." (Emphasis added) (Affidavit of Jonathan A. Fink, ¶9). However, such conclusory, unsupported statements are insufficient to establish entitlement to assert the Fifth Amendment privilege. The record fails to indicate that one's operation of the computer in the crane and description of the manner in which the computer functions, gives rise to criminal activity. Unfortunately, Bunora failed to demonstrate at the deposition, and on reargument, that the statements he made to the ADA apart from the testimony he gave at the deposition are potentially incriminating, and his ship has now sailed.^[FN2]

That Bunora's statements to the ADA were made pursuant to the Proffer Agreement does not alter this analysis. Proffer agreements are interpreted according to principles of contract law (see U.S. v Mergen, 2010 WL 395974 [EDNY 2010] citing United States v Rexach, 896 F.2d 710, 713 [2d Cir. 1990]). Here, the Proffer Agreement was solely between the ADA and Bunora, in order to preclude the ADA from using the statements made to her at the meeting in any prosecution against Bunora, with certain exceptions not relevant to this analysis. Therefore, as indicated by the Court's prior ruling, the Proffer Agreement does not apply to the parties in this action. Nor does the Proffer Agreement give Bunora any independent, automatic right to maintain a Fifth Amendment privilege claim apart from his ability to demonstrate entitlement to same. In other words, that his statements to the ADA were privileged from use by the ADA due to the protections afforded by the Proffer Agreement (with certain exceptions), does not translate into a finding that those statements were incriminating and thus, protected under the Fifth Amendment. And, while Bunora perhaps would not have made his statements to the ADA had he known that he might be compelled to repeat those statements in this proceeding, there is no showing that there is a likelihood such statements repeated at the deposition will lead to his prosecution. Having failed to come forward with any indicia of potential incrimination, Bunora's assertion of the Fifth Amendment privilege in this action lacks legal justification. Therefore, Bunora shall appear at a deposition and provide answers posed to him concerning the statements he made to the ADA.

The issue of whether Bunora established his entitlement to assert the Fifth Amendment privilege at his deposition, is unrelated to the separate issue of whether Bunora's conversation with the ADA constitutes a waiver of his right to assert the Fifth Amendment. The loss or "waiver" of the protection afforded by the Fifth Amendment privilege against self-incrimination "may be inferred from a witness' course of conduct or prior statements concerning the subject matter of the case" (In re DG Acquisition Corp., 208 BR 323 [Bkrtcy SDNY1997]). A waiver of such a fundamental constitutional guarantee is not to be lightly inferred and courts are to "indulge every reasonable presumption against finding a testimonial waiver" (id. citing Klein v Harris, 667 F2d 274, 287 [2d Cir 1981] (" testimonial waiver' is not to be lightly inferred") and United States v O'Henry's Film Works, Inc., 598 F2d 313, 318-19 [2d Cir 1979]).

A court should only infer such a waiver from a witness' prior statements if (1) the witness' prior statements have created a significant likelihood that the finder of fact will be left with and prone to rely on a distorted view of the truth, and (2) the witness had reason to know that his prior statements would be interpreted as a waiver of the Fifth Amendment's privilege against self-incrimination (Klein v Harris, supra ). As to the first prong of the test for a testimonial waiver, courts consider whether the witness' prior testimony has created a significant danger of distortion (Rogers v United States (340 US 367 [1951]). The requisite reason to know that a waiver might be inferred should be found only if the witness' prior statements were (a) "testimonial," meaning that they were voluntarily made under oath in the context of the same judicial proceeding, and (b) "incriminating," meaning that they did not merely deal with matters "collateral" to the events surrounding commission of the crime, but directly inculpated the witness on the charges at issue (id) (internal citations omitted) (Klein v Harris, 667 F2d at 288). Thus, where a witness has made statements that were both "testimonial" and "incriminating," he has made statements that, by virtue of their "testimonial" nature, will likely influence the finder of fact, and that, by virtue of their "incriminating" nature, contain information that the witness was privileged not to reveal (id).

The Court notes that the opponents do not dispute that the elements of waiver have not been met. Interestingly, the opponents also do not contest that Bunora's statements to the ADA were unsworn, and therefore, cannot be characterized as "testimonial." Nor do the opponents challenge Bunora's claim that the statements were not "incriminating" since the ADA is precluded from using such statements in support of any prosecution against Bunora.^[FN3]

Instead, the opponents argue that Bunora waived his Fifth Amendment privilege by his "intermittent, inconsistent and selective invocation" of the privilege. In this regard, Bunora waived his right to assert this privilege against questions concerning the computer. On the one hand, Bunora asserted the Fifth Amendment as to how the computer functions, but later testified that "There was no computer problems" when asked if anyone was aware of any computer problems. "A witness who fails to invoke the Fifth Amendment against questions as to which he could have claimed it is deemed to have waived his privilege respecting all questions on the same subject matter" (O'Henry's Film Works, Inc., 598 F.2d at 317 citing Rogers v United States, 340 US 367 [1951]; see also OSRecovery, Inc. v One Groupe Intern., Inc., 262 F Supp 2d at (finding that a party to the lawsuit who voluntarily testified via an affidavit in order to strengthen his legal position waived his privilege against self-incrimination with regard to matters relevant to his affidavit; witness may not offer such testimony and yet "claim the right to be free from cross-examination on matters raised by her own testimony on direct examination"]). And, a witness in a civil case may "refuse to answer any questions about a matter already discussed, even if the facts already revealed are incriminating, as long as the answers may tend to further incriminate him (Carter-Wallace, Inc. v. Hartz Mountain Indus., Inc., 553 F Supp 45 [DCNY 1982] (stating that where executives had given deposition testimony in civil actions after the grand jury was convened, such testimony should still not be construed as waiving their fifth amendment rights)). However, there is no justification for Bunora's blanket invocation of the privilege. There is simply no showing that the answer to the question to which a claim of privilege was directed would subject Bunora to a real danger of further crimination. A witness who foregoes the protection of the Cconstitutional privilege against self-incrimination by giving testimony to his advantage or to the advantage of his friends cannot in the same proceeding assert the privilege and refuse to answer questions that are to his disadvantage or the disadvantage of his friends (People v Bagby, 65 NY2d 410 [1985] citing People v Cassidy, 213 NY 388, 394).

Therefore, upon reargument, the Court adheres to its earlier ruling and directs Bunora to provide testimony concerning his use of the computer in the crane, even if his answers reveal the conversation he held with the ADA pursuant to the Proffer Agreement.

As to the cross-motion for an order finding Bunora in contempt, and awarding attorneys fees recoverable in a contempt proceeding, such request is unwarranted. To prevail on a motion to punish a party for civil contempt, the movant must demonstrate that the alleged contemnor has violated a clear and unequivocal court order, known to the parties (Condon v Inter-Religious Foundation for Community Org., Inc., 23 Misc 3d 1129, 886 NYS2d 66 [Sup Ct, New York County 2009] citing Judiciary Law § 753[A][3]). The actions of the alleged contemnor must have been calculated to, or actually defeated, impaired, impeded or prejudiced the rights or remedies of the other side ((Condon v Inter-Religious Foundation for Community Org., Inc., supra citing Farkas v Farkas, 209 AD2d 316, 618 NYS2d 787 [1st Dept 1994]). A party seeking contempt must show that there are no alternative effective remedies available (id.).

Although Bunora failed to follow the Court's direction to answer the questions posed at his deposition, Bunora was invited to seek reargument and appeal the Court's ruling. Bunora's instant motion ensued and plaintiff's argument giving rise to the Court's ruling (i.e., that Bunora's conversation with the ADA constitutes a waiver) has been abandoned and replaced with a separate waiver argument, not made at the deposition. Therefore, under the circumstances, it cannot be said that Bunora "violated a clear and unequivocal court order," so as to support a contempt finding.

Conclusion

Based on the forgoing, it is hereby

ORDERED that the motion by Matthew Bunora for leave to reargue the ruling made during his deposition by the Court (Smith, J.), is granted; however, upon reargument, Bunora's application, upon renewal, for an order permitting him to maintain such privilege is denied; and it is further

ORDERED the cross-motion by plaintiff for contempt and costs and expenses is denied; and it is further

ORDERED that Matthew Bunora serve a copy of this order with notice of entry upon all parties within 20 days of entry.

This constitutes the decision and order of the Court.

Dated: September 24, 2010_____________________________

Hon. Carol Robinson Edmead, J.S.C.

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NO PROHIBITION ON BUYING LIFE INSURANCE AND ASSIGNING BENEFITS TO STRANGERS, HOLDS COURT OF APPEALS

The United States Court of Appeals for the Second Circuit has certified the following question for our consideration:

"Does New York Insurance Law §§ 3205 (b) (1) and (b) (2) prohibit an insured from procuring a policy on his own life and immediately transferring the policy to a person without an insurable interest in the insured's life, if the insured did not ever intend to provide insurance protection for a person with an insurable interest in the insured's life?"

This litigation involves several insurance policies obtained by decedent Arthur Kramer, a prominent New York attorney, on his own life, allegedly with the intent of immediately assigning the beneficial interests to investors who lacked an insurable interest in his life. In May 2008, Arthur's widow, plaintiff Alice Kramer, as personal representative of her husband's estate, filed an amended complaint in the United States District Court for the Southern District of New York seeking to have the death benefits from these insurance policies paid to her. She alleges that these policies, which collectively provide some $56,200,000 in coverage, violate New York's insurable interest rule because her husband obtained them without the intent of providing insurance for himself or anyone with an insurable interest in his life.

As alleged in the plaintiff's complaint, defendant Steven Lockwood, the principal of Lockwood Pension Services, Inc. ("Lockwood Pension"), approached Arthur, presumably a sophisticated investor, about participating in a "stranger-owned life insurance" ("SOLI" or "STOLI") scheme as early as 2003 ^[FN1]. They commenced such a scheme in June 2005, when Arthur established the first of two insurance trusts ("the June trust") and named two of his adult children, Andrew and Rebecca Kramer, as beneficiaries. A present Lockwood Pension employee was named as trustee, succeeded by defendant Jonathan Berck. In June and July 2005, defendant Transamerica Occidental Life Insurance Co. funded the trust with one or more insurance policies with a total death benefit of approximately $18,200,000. Andrew and Rebecca then assigned their beneficial interests in the trust to a stranger investor, defendant Tall Tree Advisors, Inc. ("Tall Tree"). In 2007, Berck, as trustee, sold the ownership interests in the policies to a non-party purchaser.

Arthur established a second trust in August 2005 ("the August trust") and named a third adult child, Liza Kramer, as beneficiary. Hudson United Bank ("Hudson") was named trustee,^[FN2] also succeeded by Berck. In July 2005, defendant Phoenix Life Insurance Co. ("Phoenix") issued three insurance policies to fund the August trust, with a total death benefit of $28,000,000, and Liza likewise assigned her interest to Tall Tree. In November 2005, defendant Lincoln Life & Annuity Co. of New York ("Lincoln") also issued a policy to the August trust with a death benefit of $10,000,000, and Liza assigned her interest to another stranger investor, defendant Life Products Clearing, LLC ("Life Products"). Intervenor Lifemark alleges that it purchased the Phoenix policy from the August trust in August 2007, just over two years after its issuance. Allegedly both trust agreements were prepared by counsel for Lockwood Pension, neither Arthur Kramer nor his children ever paid premiums on the policies, and the Kramer children were never "true beneficiaries" of the trusts after the policies were issued. Phoenix and Lincoln allege that Lockwood served as broker pursuant to an "Independent Producer Contract" he had with Phoenix and a "Broker Agreement" he had with Lincoln.

Following Arthur's death in January 2008, Alice refused to turn over copies of the death certificate to investors holding beneficial interests in the policies. She filed this action alleging that these policies violated New York's insurable interest rule and so should be paid to her, as the representative of the decedent's estate. Defendants are the insurance companies that issued the policies, trustees, and various insurance brokers/investors. They filed counterclaims, cross-claims, and third-party complaints. As relevant here, Berck, as trustee, and Life Products filed nearly identical answers seeking to have the proceeds of the Lincoln policy awarded to them. Intervenor Lifemark, claiming to be a good faith purchaser for value, seeks to have the Phoenix policy proceeds paid to it. Phoenix and Lincoln brought claims against Lockwood for breach of contract and also seek a declaratory judgment declaring that the policies are void and that they are not required to pay policy proceeds to anyone.

District Court granted motions to dismiss many of the parties' claims, but denied Lockwood's motion to dismiss the insurers' claims against him. Relying primarily on District Court precedent, the court stated that, according to the alleged facts:

"Lockwood breached provisions of the New York Insurance Law in that he caused to be procured directly or through assignment or other means, a contract of insurance upon the life of the decedent [Kramer] for the benefit of strangers who did not have an insurable interest in his life at the time the policy was obtained" (Kramer, 653 F Supp 2d at 388 [internal quotation marks omitted]).

District Court certified its order to allow for an interlocutory appeal to the Second Circuit pursuant to 28 USC § 1292 (b), noting that "there is indeed substantial ground for difference of opinion on the application of New York Insurance Law to SOLI arrangements of this type" (653 F Supp 2d at 398), and that "[n]umerous claims in this suit, including but not limited to the initial Declaratory Judgment action by Plaintiff, turn on the interpretation of" New York Insurance Law § 3205 (id.). The Second Circuit granted Lifemark's petition for leave to appeal District Court's interlocutory order, and certified the question at issue to us.^[FN4]

New York's insurable interest requirement is codified in Insurance Law § 3205 (b). Section 3205 (b) (1) addresses individuals obtaining life insurance on their own lives:

"Any person of lawful age may on his own initiative procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation. Nothing herein shall be deemed to prohibit the immediate transfer or assignment of a contract so procured or effectuated" (Insurance Law § 3205 [b] [1]).

"No person shall procure or cause to be procured, directly or by assignment or otherwise any contract of insurance upon the person of another unless the benefits under such contract are payable to the person insured or his personal representatives, or to a person having, at the time when such contract is made, an insurable interest in the person insured" (Insurance Law § 3205 [b] [2]).

The insurable interest requirement at common law was designed to distinguish an insurance contract from a wager on someone's life (see Ruse v Mutual Benefit Life Ins. Co., 23 NY 516, 523 [1861] ["A policy, obtained by a party who has no interest in the subject of insurance, is a mere wager policy"]). From the first, an insurable interest was required only where a policy was "obtained by one person for his own benefit upon the life of another". This basic distinction between policies obtained on the life of another and those obtained on one's own life is reflected in the twin provisions of § 3205 (b) (1) and (b)(2). As we have explained:

"When one insures his or her own life, the wagering aspect is overridden by the recognized social utility of the contract as an investment to benefit others. When a third party insures another's life, however, the contract does not have the same manifest utility and assumes more speculative characteristics which may subject it to the same general condemnation as wagers (New England Mut. Life Ins. Co., 73 NY2d at 77-78)."

Plaintiff and the insurers urge us to find that an individual who procures insurance on his own life with the intent of immediately assigning the policy to one without an insurable interest is subject to the insurable interest requirement articulated in § 3205 (b) (2), despite the fact that § 3205 (b) (1) contains no such requirement. They make three basic arguments: (1) that a policy obtained with the intent to assign it to a party lacking an insurable interest violates § 3205 (b) (2); (2) that this scenario is precluded by a common law rule that an insured could only assign a policy to one without an insurable interest if the policy was obtained "in good faith" compliance with the insurable interest rule, not as a means of circumventing it; and (3) that one who obtains insurance on one's own life in accordance with a prior arrangement with a third party, as alleged here, does not act "on his own initiative" within the meaning of the statute. In response, Lifemark, Life Products, Berck, Lockwood, and Lockwood Pension argue that the language of § 3205 (b) (1) confers great freedom on an insured in assigning life insurance benefits, including the freedom to obtain insurance for any reason and to immediately assign a policy to an investor with no insurable interest, and that this freedom cannot be reconciled with any older common law "good faith" limitation.

The "starting point" for discerning statutory meaning is, of course, the language of the statute itself (see Roberts v Tishman Speyer Props., L.P., 13 NY3d 270, 286 [2009]). "[W]here the language of a statute is clear and unambiguous, courts must give effect to its plain meaning" (Matter of Crucible Materials Corp. v New York Power Auth., 13 NY3d 223, 229 [2009] [internal quotation marks omitted]).

Here, § 3205 (b) (1) clearly provides that, so long as the insured is "of lawful age" and acts "on his own initiative," he can "procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation" (Insurance Law § 3205 [b] [1]). This language is unambiguous and not limited by the statutory text. It thus codifies the common law rule that an insured has total discretion in naming a policy beneficiary (see Olmsted v Keyes, 85 NY 593 [1881]). Our lower courts have long held that, under § 3205 (b), "[w]here the deceased effects the insurance upon her own life, it is well-established law that she can designate any beneficiary she desires without regard to relationship or consanguinity" (Corder v Prudential Ins. Co., 42 Misc 2d 423, 424 [Sup Ct, Erie County 1964]; see also Gibson v Travelers Ins. Co., 183 Misc. 678 [Sup Ct, New York County 1944]).

It is equally plain that a contract "so procured or effectuated" may be "immediately transfered or assigned" (Insurance Law § 3205 [b] [1]). The provision does not require the assignee to have an insurable interest and, given the insured's power to name any beneficiary, such restriction on assignment would serve no purpose. This freedom of assignment is not limited by § 3205 (b) (2), which addresses procurement of an insurance policy on another's life, "either directly or by assignment," because § 3205 (b)(2) requires an insurable interest only "at the time when such contract is made" (Insurance Law § 3205 [b] [2]), that is, when such insurance is initially procured.

The statute therefore incorporates the common law rule that a policy valid at the time of procurement may be assigned to one without an insurable interest in the insured's life and, relatedly, no insurable interest is required when one holds a policy on another's life, so long as the policy was "valid in its inception" (Olmsted, 85 NY 598). As one appellate court has summarized, "Insurance Law § 3205 (b) permits any person of lawful age who has procured a contract of insurance upon his or her own life to immediately transfer or assign the contract, and does not require the assignee to have an insurable interest" (Hota v Camaj, 299 AD2d 453 [2d Dept 2002]).

There is simply no support in the statute for plaintiff and the insurers' argument that a policy obtained by the insured with the intent of immediate assignment to a stranger is invalid. The statutory text contains no intent requirement; it does not attempt to prescribe the insured's motivations. To the contrary, it explicitly allows for "immediate transfer or assignment" (Insurance Law § 3205 [b] [1]). This phrase evidently anticipates that an insured might obtain a policy with the intent of assigning it, since one who "immediately" assigns a policy likely intends to assign it at the time of procurement.

The statutory mandate that a policy must be obtained on an insured's "own initiative" requires that the decision to obtain life insurance be knowing, voluntary, and actually initiated by the insured. In common parlance, to act on "one's own initiative" means to act "at one's own discretion: independently of outside influence or control" (Merriam-Webster's Collegiate Dictionary, 10th ed., 602 [1996]). The key point is that the policy must be obtained at the insured's discretion. As the dissent acknowledges, common sense dictates that some outside influence is acceptable — advice from a broker or pension planner, for example. The notion of obtaining insurance and the details of the insurance contract need not spring exclusively from the mind of the insured. Rather, the insured's decision must be free from nefarious influence or coercion.

Contrary to the dissent's view, the initiative requirement, without more, does not prohibit an insured from obtaining a policy pursuant to a non-coercive arrangement with an investor. Under the dissent's interpretation, a sophisticated party who approaches an investor about such an arrangement, drafts necessary documents, procures insurance on his own life, and assigns it for compensation is not acting "on his own initiative." The language of the statute simply does not support such a reading.

Further, the insurable interest requirement of § 3205 (b) (2) does not alter our reading of § 3205 (b) (1) because it does not apply when an insured freely obtains insurance on his own life. Rather, it requires that when a person "procure[s] or cause[s] to be procured, directly or by assignment or otherwise" an insurance policy on another's life, the policy benefits must run, "at the time when such contract is made," to the insured or one with an insurable interest in the insured's life (Insurance Law § 3205 [b] [2]). Where an insured, "on his own initiative," obtains insurance on his or her own life, the validity of the policy at its inception is instead governed by § 3205 (b) (1).

Our reading of the statutory language is buttressed by the legislative history of § 3205 (b). A forerunner to the current provision appeared in the 1939 recodification of the Insurance Law as a single paragraph (1939 NY Laws ch. 882, art. 7, § 146),^[FN6] and a 1984 recodification broke that single paragraph into the two provisions we have today. The sentence "[n]othing herein shall be deemed to prohibit the immediate transfer or assignment of a contract so procured or effectuated," however, was not added until 1991. It was prompted by a United States Internal Revenue Service private letter ruling suggesting that if a person obtained an insurance policy with the intent of transferring it to a charitable organization lacking an insurable interest in his life, the transaction would violate § 3205 (b) (2) (see Mem of Assemblyman Lasher, Bill Jacket, L 1991, ch 334, at 6; IRS Private Letter Ruling, March 1991, PLR 9110016). The Legislative aim was to "correct [this] erroneous interpretation" (Mem of Assemblyman Lasher, Bill Jacket, L 1991, ch 334, at 6). Thus, it not only added, in terms not limited to charitable organizations, that a policy may be "immediate[ly] transfer[red] or assign[ed]" (Insurance Law § 3205 [b] [1]), but it did so to clarify the legislative understanding that a policy might be assigned regardless of the insured's intent in procuring it.

In light of the overwhelming textual and historical evidence that the Legislature intended to allow the immediate assignment of a policy by an insured to one lacking an insurable interest, we are not persuaded by plaintiff and the insurers' argument that § 3205 (b) is limited by the common law requirement that an insured cannot obtain a life insurance policy with the intent of circumventing the insurable interest rule by immediately assigning it to a third party (see Steinback v Diepenbrock, 158 NY 24, 30-31 [1899]). To the extent that there is any conflict, the common law has been modified by unambiguous statutory language. We note further that if our Legislature had intended to impose such a limitation, it could easily have done so. The Legislature has been very active in this area, most recently in its redrafting of Article 78 of the Insurance Law.

Finally, we recognize the importance of the insurable interest doctrine in differentiating between insurance policies and mere wagers (see Caruso, 73 NY2d at 77-78), and that there is some tension between the law's distaste for wager policies and its sanctioning an insured's procurement of a policy on his or her own life for the purpose of selling it. It is not our role, however, to engraft an intent or good faith requirement onto a statute that so manifestly permits an insured to immediately and freely assign such a policy.

Accordingly, the certified question should be answered in the negative.


SMITH, J.(dissenting):

I would answer the certified question with a qualified yes: My view of New York law is that where, as in this case, an insured purchases a policy on his own life for no other purpose than to facilitate a wager by someone with no insurable interest, the transaction is unlawful.

"Stranger-originated life insurance" is a new name for an old idea. Transactions not basically different from the one before us have been known, and condemned, by courts for more than a hundred years.

In 1872, a young man named Henry Crosser took out a policy on his own life. On the same day, Crosser entered a contract with something called the Scioto Trust Association, in which Crosser agreed to assign the policy to Scioto, and Scioto agreed to pay the premiums on it. It was agreed that at Crosser's death, Scioto would get 90 percent of the insurance proceeds. When Crosser died the following year, his administrator sued Scioto, claiming all the proceeds, and the United States Supreme Court, applying pre-Erie federal common law (see Erie R.R. Co. v Tompkins, 304 US 64 [1938]), held the Crosser-Scioto contract invalid. The Court said that what it called "wager policies" were "independently of any statute on the subject, condemned, as being against public policy" (Warnock v Davis, 104 US 775, 779 [1882]).

Warnock also stated a broader rule: "The assignment of a policy to a party not having an insurable interest is as objectionable as the taking out of a policy in his name" (104 US at 779). That rule was too broad. New York, as the Warnock court recognized, had already rejected it (see id. at 781-82, citing Saint John v American Mut. Life Ins. Co., 13 NY 31 [1855]), and a few decades later the United States Supreme Court rejected it also (Grigsby v Russell, 222 US 149 [1911]). In Grigsby, Justice Holmes explained that a contract taken out by a third party with no insurable interest in the insured's life is generally more problematic than an assignment by the insured to such a person:

"A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end. . . .

"But when the question arises upon an assignment it is assumed that the objection to the insurance as a wager is out of the case. . . . The danger that might arise from a general license to all to insure whom they like does not exist. Obviously it is a very different thing from granting such a general license, to allow the holder of a valid insurance upon his own life to transfer it to one whom he, the party most concerned, is not afraid to trust"

Grigsby thus established the general rule, consistent with the New York common law of that day and with our current statutory law (Insurance Law § 3205 [b]), that while a third party without an insurable interest may not purchase a life insurance policy, an insured may do so and assign it to the third party, whether the third party has an insurable interest or not. That is the rule the majority applies here.

But this rule of free assignability has always had an exception — an exception for cases like Warnock, and like this case, where the insured, at the moment he acquires the policy, is in substance acting for a third party who wants to bet on the insured's death. Justice Holmes explained the exception in Grigsby, and thus distinguished Warnock, but did not overrule its narrow holding:

"[C]ases in which a person having an interest lends himself to one without any as a cloak to what is in its inception a wager have no similarity to those where an honest contract is sold in good faith . . .

"[Warnock v Davis] was one of the type just referred to, the policy having been taken out for the purpose of allowing a stranger association to pay the premiums and receive the greater part of the benefit, and having been assigned to it at once."

There are good reasons why the common law, as reflected in both Warnock and Grigsby, invalidated stranger-originated life insurance.  Even if we ignore the possibility that the owner of the policy will be tempted to murder the insured, this kind of "insurance" has nothing to be said for it. It exists only to enable a bettor with superior knowledge of the insured's health to pick an insurance company's pocket .

In a sense, of course, all insurance is a bet, but for most of us who buy life insurance it is a bet we are happy to lose. We recognize that the insurance company is more likely than not to make a profit on the policy, receiving more in premiums than it will ever pay out in proceeds, and that is the result we hope for; we pay the premiums in order to protect against the risk that we will die sooner than expected. But stranger-originated life insurance does not protect against a risk; it does not make sense for the purchaser if it is expected to be profitable for the insurance company. The only reason to buy such a policy is a belief that the insured's life expectancy is less than what the insurance company thinks it is. Thus, we may be confident that the Scioto Trust Association, which acquired a policy on the life of 27-year-old Henry Crosser, was not surprised when Crosser died before he was 30. And we may be equally confident that the purchasers in this case thought, probably with good reason, that they knew something about Arthur Kramer's health that the insurance companies did not know.

When Grigsby was decided, New York common law had anticipated the federal common law, adopting not only the rule of Grigsby — that life insurance policies are, in general, freely assignable — but also the exception recognized in Grigsby — that the assignment cannot be used as a "cloak to what is in its inception a wager." In Steinback v Diepenbrock (158 NY 24, 31 [1899]), answering an objection to the rule of free assignability, we observed:

"[I]t is said that if the payee of a policy be allowed to assign it, a safe and convenient method is provided by which a wagering contract can be safely made. The insured, instead of taking out a policy payable to a person having no insurable interest in his life, can take it out to himself and at once assign it to such person. But such an attempt would not prove successful, for a policy issued and assigned, under such circumstances, would be none the less a wagering policy because of the form of it. The intention of the parties procuring the policy would determine its character, which the courts would unhesitatingly declare in accordance with the facts, reading the policy and the assignment together, as forming part of one transaction."

Under New York common law, therefore, the purchasers of stranger-originated life insurance could not prevail in a case like this: the law would look through the form of the transaction, and "[t]he intention of the parties procuring the policy would determine its character." It hardly seems open to doubt, on the facts before us, that the intention of the purchasers here was to bet on Arthur Kramer's death, and that Kramer's intention was to be compensated for helping them do so.

The majority holds, in effect, that Insurance Law § 3205 (b) has displaced the common law, and eliminated the exception recognized in Grigsby and Steinback to the rule of free assignability. I think this is an incorrect reading of the statute. I see no reason to believe the Legislature ever intended to abolish the anti-wagering rule.

While statutes relating to the insurable interest requirement in New York date at least to 1892 (L. 1892, ch. 690 § 55), it is enough for present purposes to go back to 1984, when Insurance Law § 3205 (very similar to a predecessor statute, Insurance Law § 146) was enacted, containing the following language:

"(b)(1) Any person of lawful age may on his own initiative procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation.

"(2) No person shall procure or cause to be procured, directly or by assignment or otherwise any contract of insurance upon the person of another unless the benefits under such contract are payable to the person insured or his personal representatives, or to a person having, at the time when such contract is made, an insurable interest in the person insured."

Thus the 1984 version of the statute protected the insured's right to buy a policy and name any beneficiary he or she liked, but otherwise prohibited life insurance where the beneficiary had no insurable interest. It did not specifically address the question of an assignment by the insured to a person lacking an insurable interest; it did not restate the long-standing common-law rule that, in general, life insurance contracts were freely assignable, even to such assignees.

This omission became a problem in 1991, when the United States Internal Revenue Service ruled that a plan to procure a policy on one's life with the intent to transfer the policy immediately to a charity would violate section 3205(b)(2), so that any such assignment could not be treated as a charitable gift for tax purposes (see IRS Ruling 9110016 [March 8, 1991]). The Legislature acted promptly to correct this "erroneous interpretation" of the New York Insurance Law (memorandum of Assemblyman Lasher on A 8586, Bill Jacket for L. 1991, ch. 334, at 6). It added a second sentence to Insurance Law § 3205 (b) (1), so that that subdivision now reads:

"Any person of lawful age may on his own initiative procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation. Nothing herein shall be deemed to prohibit the immediate transfer or assignment of a contract so procured or effectuated."

The 1991 amendment gave statutory form to the long-established New York rule that life insurance contracts may be freely assigned, even to someone without an insurable interest. But there was also, as I have explained, a long-established exception to the rule: Assignability could not be used to cloak a third-party wagering transaction. I see no reason to think that the Legislature, in codifying the general rule, meant to abolish the exception. The majority opinion offers neither any reason for the Legislature to consider abolishing it, nor any evidence that the Legislature thought it was doing so. Indeed, nothing in the history of the statute suggests that the Legislature intended to alter the common law of insurable interest in any way: the sponsor's memorandum says its purpose was to "restate and clarify" it (id.).

As I read the 1991 amendment, it codified not only the free assignability rule, but also the anti-wagering exception to it — although I admit it could have expressed the exception much more clearly. The new second sentence of Insurance Law § 3205 (b) (1) refers, in the words "so procured or effectuated," to the words of the first sentence, which says that a person "may on his own initiative procure or effect a contract of insurance." "On his own initiative" is a rather mysterious phrase, which can hardly be taken literally. Life insurance does not become invalid because its purchase was initiated (in the sense of being proposed or suggested) by the insured's spouse or an insurance agent. Rather, I see in the words "on his own initiative" an echo of the rule recognized in Steinback and Grigsby — that an insured may not, in procuring a policy, act as an agent for a third-party gambler without an insurable interest. So read, Insurance Law § 3205 (b) (1) is completely consistent with the pre-existing common law of New York, and with the wise public policy underlying the common law.

The majority today rejects this analysis, and holds in substance that Insurance Law §3205 (b) enacts the general rule of free assignability, while abolishing the "cloak for a wager" exception. For the reasons I have explained, I think this holding is unnecessary and unfortunate. I agree with the majority that there may be cases where a policy can be valid, even though the insured bought the policy intending to assign it to someone (perhaps a charity, or the insured's domestic partner) without an insurable interest in the insured's life. Thus, I would not answer with an unqualified yes the Second Circuit's question whether an insured must have intended to "provide insurance protection for a person with an insurable interest." But I think the answer should be yes when the question is limited to a case, like this one, in which the parties attempted the kind of wagering transaction forbidden by the common law.

The majority's negative answer to the Second Circuit's question, though I think it is wrong, may be of limited importance. Any harm done may have already been repaired by the 2009 enactment of a statutory prohibition on stranger-originated life insurance (see majority op at 7 n 5). The new statute may create its own problems; insurable interest rules, as our opinions in this case surely demonstrate, are tricky to handle. But I view the new statute as an attempt to implement what I think has always been the public policy of New York to condemn wagers on the early death of an insured.

* * * * * * * * * * * * * * * * *
Following certification of a question by the United States Court of Appeals for the Second Circuit and acceptance of the question by this Court pursuant to section 500.27 of the Rules of Practice of the New York State Court of Appeals, and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified question answered in the negative. Opinion by Judge Ciparick. Chief Judge Lippman and Judges Graffeo, Read and Jones concur. Judge Smith dissents in an opinion in which Judge Pigott concurs.
Decided November 17, 2010

Footnote 1: All facts here are drawn from allegations in the parties' complaints, and are discussed in greater detail in the District Court opinion (see Kramer v Lockwood Pension Servs., Inc., et al., 653 F Supp 2d 354 [SDNY 2009]).

Footnote 2: Lincoln alleges that, in January 2006, Hudson was acquired by and merged with TD Bank, N.A.

Footnote 3: Other claims that survived the District Court order include Life Products and Berck's counterclaims against Alice, in the alternative, for misrepresentation/breach of warranty; Life Products' third-party claims against Liza for breach of express warranty and breach of contract; and Life Products and Berck's cross-claims against Lincoln for breach of contract. Notably, District Court determined that the insurers could not attempt to void the policies, as they had been issued over two years earlier and so are incontestible (see Insurance Law § 3203 [a] [3]; New England Mut. Life Ins. Co. v. Caruso, 73 NY2d 74 [1989]). As a result, it dismissed the insurers' counterclaims and cross-claims for, among other things, fraud, fraudulent concealment, aiding and/or abetting fraud, and for a declaratory judgment.

Footnote 4: The Second Circuit denied Phoenix and Lincoln's petitions seeking to appeal District Court's order "because an immediate appeal concerning the issues presented therein is unwarranted." Nonetheless, the insurers urge us to expand the scope of the certified question and consider whether District Court properly dismissed their claims. We have considered Phoenix and Lincoln's arguments relating to the incontestability issue, but decline their request to expand the scope of the certified question. Thus, we are denying Alice and Lifemark's motions in this Court to strike the portions of the insurer's briefs addressing whether the incontestability rule should apply here ( __ NY3d __ [decided today]).

Footnote 5: In 2009, the Legislature added several new provisions to the Insurance Law regulating permissible "life settlement contracts," i.e. agreements by which compensation is paid for "the assignment, transfer, sale, release, devise or bequest of any portion of: (A) the death benefit; (B) the ownership of the policy; or (C) any beneficial interest in the policy, or in a trust . . . that owns the policy" (see Insurance Law § 7802 [k]). In addition to regulating the life settlement industry (see Insurance Law art 78), this new law prohibits "stranger-originated life insurance," defined as "any act, practice or arrangement, at or prior to policy issuance, to initiate or facilitate the issuance of a policy for the intended benefit of a person who, at the time of policy origination, has no insurable interest in the life of the insured under the laws of this state" (Insurance Law § 7815). It also prohibits anyone from entering a valid life settlement contract for two years following the issuance of a policy, with some exceptions (see Insurance Law § 7813 [j] [1]). Because these provisions did not go into effect until May 18, 2010, they do not govern this appeal.

Footnote 6: The 1939 statute read: "Any person of lawful age may on his own initiative procure or effect a contract of insurance upon his own person for the benefit of any person, firm, association or corporation, but no person shall procure or cause to be procured, directly or by assignment or otherwise any contract of insurance upon the person of another unless the benefits under such contract are payable to the person insured or . . . to a person having, at the time such contract is made, an insurable interest in the person insured" (L 1939, ch 882, § 146).

Comment:  For the reasons contained in that paragraph of the dissenting opinion which I highlighted in yellow,  I don't like this decision.  It legalizes the purchase of life insurance on strangers by investors.   How will life insurers view this?  Well, on the one hand, it could benefit them by increasing the sales of life insurance policies.  With the right premium, this could be quite a boon to them.  But for life insurers with a distaste for the concept of this form of "investment," they could insert a non-assignability clause in their policies.  

Imagine the implications: a celebrity (major or minor) could buy a life insurance policy, assign it to an investment house, and that company could sell shares in the policy.  So if, for example, Lindsay Lohan decided she needed money, she could buy one of these policies, assign it, and then thousands of investors would  eagerly scan the gossip columns every day, hoping to read that she died of an overdose.  

There is a related field called viatical settlements, a form of investment where a person with life insurance -- typically one who is elderly, seriously ill or both --  sells his life insurance policy to an investor.  The investor takes over the payment of the premiums as long as the insured lives, and the investor hopes that the insured doesn't live too long.   So, for example, a 79 year old man with cancer and diabetes and a $1 million life insurance policy, who needs cash, might sell his policy to an investor for $500,000.  The policyholder gets to use the cash while he's still living, the investor pays the premiums and hopes the old guy dies real soon.    It may strike some as distasteful but it serves a useful purpose by giving the policyholder cash while he's still alive.

Today's decision by the Court of Appeals opens up a new investment field, but, as the dissent points out, may very well lead to a lot of mischief.   I can picture gamblers in debt being pressured to buy life insurance and assign it to the bookies to whom they are in debt -- and then suffering an untimely demise.    The same may happen to other people who are vulnerable or in trouble.

Nasty business.

Larry Rogak

DRUG INJURY MAY BE "LATENT" EVEN IF IT OCCURS WITHIN HOURS AFTER INGESTION; STATUTE OF LIMITATIONS GETS TOLLED UNTIL SCIENCE LINKS DRUG WITH INJURY

The United States Court of Appeals for the Second Circuit has asked us three questions about the interpretation of CPLR 214-c (4), which extends the statute of limitations for certain tort victims who do not, for some time, know the cause of their injuries. We answer the questions by holding that:

(1) the provisions of CPLR 214-c (4) are limited to actions for injuries caused by the latent effects of exposure to a substance;

(2) an injury that occurs within hours of exposure to a substance can be considered "latent" for these purposes; and

(3) "technical, scientific or medical knowledge and information sufficient to ascertain the cause of [the plaintiff's] injury" is "discovered, identified or determined" within the meaning of the statute when the existence of the causal relationship is generally accepted within the relevant technical, scientific or medical community.

Plaintiff suffered a series of strokes in March of 1999. The strokes were caused, we assume for present purposes, by ephedra, a substance contained in a dietary supplement that plaintiff had been using for about two years. Ephedra causes in some users a short-term elevation in blood pressure, heart rate or both, and a temporary constriction of certain blood vessels. This effect, which increases the risk of stroke, typically occurs within a few hours after ephedra is consumed.

Neither plaintiff nor the doctors who treated him for his strokes knew at the time that ephedra was to blame. When they could, or reasonably should, have known of the causal connection is disputed. The United States District Court for the Southern District of New York has found that studies published as early as 1996 suggested a link between ephedra and stroke, but that as late as 2005 scientific evidence did not establish the link "with any degree of medical or scientific 'certainty'" (In re Ephedra Prods. Liab. Litig., 598 F Supp 2d 535, 536 [SD NY 2009]).

Plaintiff claims that he became aware of a possible link between ephedra and stroke in February 2003, when news reports suggested that the sudden death of a major league baseball player might have been caused by ephedra. On July 28, 2003 — about four years, four months after his strokes — plaintiff sued the distributor of the product he had taken in New York State Supreme Court. The case was removed to federal court, the manufacturer of the product was added as a defendant, and the case was consolidated with other ephedra-related litigation in the Southern District of New York.

Defendants moved to dismiss the case as barred by the statute of limitations, relying on CPLR 214 (5), which imposes a three-year limitation period, with certain exceptions, on "an action to recover damages for a personal injury." It is undisputed that the claim is barred by CPLR 214 (5) unless it is saved by the exception in CPLR 214-c (4), which we quote in the next section of this opinion.

Defendants' statute of limitations motion generated a series of opinions in the District Court and the Second Circuit. Initially, the District Court granted the motion to dismiss (In re Ephedra Prods., 2006 WL 944705, 2006 US Dist LEXIS 18691 [SD NY 2006]). Plaintiff appealed to the Second Circuit, which remanded the case for determination of an issue the District Court had not reached (Giordano v Market America, Inc., 289 Fed Appx 467 [2d Cir 2008]). Following the District Court's ruling on that issue (In re Ephedra Prods. Liab. Litig., 598 F Supp 2d 535 [SD NY 2009]), the Second Circuit certified to us the three questions that we now address (Giordano v Market America, Inc., 599 F3d 87 [2d Cir 2010]).

Directly in issue here is subdivision four of CPLR 214-c, which refers to subdivisions two and three of the same section. The text of the three relevant subdivisions is:

"2. Notwithstanding the provisions of section 214, the three year period within which an action to recover damages for personal injury or injury to property caused by the latent effects of exposure to any substance or combination of substances, in any form, upon or within the body or upon or within property must be commenced shall be computed from the date of discovery of the injury by the plaintiff or from the date when through the exercise of reasonable diligence such injury should have been discovered by the plaintiff, whichever is earlier.

"3. For the purposes of sections fifty-e and fifty-i of the general municipal law, section thirty-eight hundred thirteen of the education law and the provisions of any general, special or local law or charter requiring as a condition precedent to commencement of an action or special proceeding that a notice of claim be filed or presented within a specified period of time after the claim or action accrued, a claim or action for personal injury or injury to property caused by the latent effects of exposure to any substance or combination of substances, in any form, upon or within the body or upon or within property shall be deemed to have accrued on the date of discovery of the injury by the plaintiff or on the date when through the exercise of reasonable diligence the injury should have been discovered, whichever is earlier.

"4. Notwithstanding the provisions of subdivisions two and three of this section, where the discovery of the cause of the injury is alleged to have occurred less than five years after discovery of the injury or when with reasonable diligence such injury should have been discovered, whichever is earlier, an action may be commenced or a claim filed within one year of such discovery of the cause of the injury; provided, however, if any such action is commenced or claim filed after the period in which it would otherwise have been authorized pursuant to subdivision two or three of this section the plaintiff or claimant shall be required to allege and prove that technical, scientific or medical knowledge and information sufficient to ascertain the cause of his injury had not been discovered, identified or determined prior to the expiration of the period within which the action or claim would have been authorized and that he has otherwise satisfied the requirements of subdivisions two and three of this section."

The three questions that the Second Circuit has asked us are:

"1. Are the provisions of N.Y. C.P.L.R. § 214-c (4) providing for an extension of the statute of limitations in certain circumstances limited to actions for injuries caused by the latent effects of exposure to a substance?

"2. Can an injury that occurs within 24 to 48 hours of exposure to a substance be considered 'latent' for these purposes?

"3. What standards should be applied to determine whether a genuine issue of material fact exists for resolution by a trier of fact as to whether 'technical, scientific or medical knowledge and information sufficient to ascertain the cause of [the plaintiff's] injury' was 'discovered, identified or determined' for N.Y. C.P.L.R. § 214-c (4) purposes?"

We answer yes to both of the first two questions; thus, our answers are favorable to defendants on question one but to plaintiff on question two. We answer question three by saying, as we explain more fully below, that the test is one of general acceptance in the relevant technical, scientific or medical community.

Question One: Is the statute limited to injuries caused by latent effects?

CPLR 214-c (2), providing a statute of limitations that runs "from the date of discovery of the injury . . . or from the date when . . . such injury should have been discovered," is expressly restricted to cases of injury "caused by the latent effects of exposure to any substance or combination of substances." CPLR 214-c (3), relating to notice of claim requirements, contains an identical restriction. The Second Circuit's first question is, in essence, whether the same restriction is incorporated into CPLR 214-c (4), governing cases in which "discovery of the cause of the injury" was allegedly delayed. We conclude that it is.

CPLR 214-c (4) mentions "subdivisions two and three of this section" three times. The third mention, we conclude, answers the Second Circuit's question: "The plaintiff or claimant shall be required to allege and prove . . . that he has otherwise satisfied the requirements of subdivisions two and three of this section." Since subdivisions two and three require that the claim or action be one for injury "caused by the latent effects" of exposure, subdivision four, on its face, also imposes a latency requirement.

Even if subdivision four could be read otherwise — if it could be read as creating an independent exception to the general three-year statute of limitations, not one dependent on the provisions of subdivisions two and three — such a reading would be inconsistent with the statute's history and purpose. CPLR 214-c was enacted in 1986 to give relief to plaintiffs in certain toxic tort cases. Its legislative history, which we discussed in Matter of New York County DES Litig. (89 NY2d 506, 513-514 [1997]), shows that it was intended to overrule decisions in which we had held that toxic tort claims accrued upon exposure, even though the illness resulting from that exposure might be long delayed (see e.g., Fleishman v Lilly & Co., 62 NY2d 888 [1984]; Schwartz v Heyden Newport Chem. Corp., 12 NY2d 212 [1963]). The Legislature's concern when it enacted the statute was the problems raised by toxic tort cases in which the latency of a substance's effect could prevent the plaintiff from bringing a timely lawsuit.

Plaintiff stresses that the word "latent" does not appear in CPLR 214-c (4). Indeed, the words "exposure to any substance" do not appear there either. But the whole point of CPLR 214-c was to deal with substance exposure cases. No other kind of case is discussed in the legislative history, and the Governor, when he signed the bill, identified it as the "Toxic Tort Bill" (see Public Papers of Governor Cuomo, "Governor Approves Toxic Tort Bill" [July 30, 1986]). It can hardly be argued, and plaintiff does not argue, that CPLR 214-c (4) extends beyond substance exposure cases — that for example, it would benefit a plaintiff injured by a hit and run driver or an unidentified falling object. It is thus undisputed that the words "exposure to any substance" in subdivisions two and three are incorporated into subdivision four of CPLR 214-c. We see no possible reading of the statute under which those words are incorporated but the word "latent" is not.

Question Two: Can an effect that appears within a matter of hours be considered "latent"?

While we think it clear that CPLR 214-c (4) is limited to injuries from "latent effects," whether effects that are concealed only briefly count as "latent" is a harder question. The Second Circuit's question to us implies that the harmful effects of ephedra show themselves within "24 to 48 hours of exposure." Opinions of the District Court suggest that the time may be even shorter — a matter of a "few hours" (In re Ephedra Prods. Liab. Litig., 393 F Supp 2d 181, 193 [SD NY 2005]; see also In re Ephedra Prods., 2006 WL 944705, *1, 2006 US Dist LEXIS 18691, *3). This discrepancy need not concern us, because we conclude that even effects concealed for a few hours may be "latent" within the meaning of the statute.

The dictionary definition of "latent" is "not now visible, obvious, active, or symptomatic" (Merriam-Webster's Collegiate Dictionary 702 [11th ed 2003]). Using that word to describe a condition that exists only for hours puts no strain on its literal meaning. But in interpreting this statute, it might intuitively seem that so brief a period of latency should be disregarded as insignificant — that, as the District Court put it in its opinion granting defendants' motion to dismiss, to treat the stroke-causing effects of ephedra as latent "would effectively eliminate the statute's limitation to 'latent effects'" (In re Ephedra Prods., 2006 WL 944705, *1, 2006 US Dist LEXIS 18691, *4). In fact, however, even a brief period of latency can be important when the problem is one of determining an injury's cause — the problem with which CPLR 214-c (4) is concerned.

Perhaps the task, often confronted by doctors or scientists, of finding a causal connection between exposure to a toxic substance and an injury is never an easy one. It is certainly less difficult, however, when the effect of the toxic substance can be seen immediately — when, for example, someone breaks out in a rash as soon as his skin touches a suspected toxin. Or, to suggest an example closer to this case, if plaintiff had suffered symptoms of a stroke at once upon swallowing a pill containing ephedra, his chances and those of his doctors of inferring the causal link would have been immeasurably better. Indeed, if that had occurred, it seems highly likely that plaintiff could have discovered the cause of his injury within the normal three-year limitation period. But because his symptoms showed themselves hours later, it may have been very hard to say whether ephedra and the strokes were causally connected.

Thus cases where a toxin's effects are latent for hours are much more likely than those in which there is no latency period to present the problem addressed by CPLR 214-c (4): a difficulty in promptly learning the cause of an injury. It is entirely plausible that several hours' delay in the manifestation of symptoms could lead to a delay of years in detecting an injury's cause. It thus seems reasonable that the authors of CPLR 214-c (4) would have considered even a few hours of latency enough to justify the extension of the statute of limitations authorized by that subdivision.

Defendants, and our dissenting colleagues, argue otherwise, contending that, as we said in New York County DES, the legislative history of CPLR 214-c shows that the Legislature that enacted it was concerned with long-term latency — with plaintiffs who were unaware that they had been injured "until after the limitations period had expired" (89 NY2d at 514; internal quotation omitted). There is no doubt that the problem of injuries that go undiscovered for years was the Legislature's primary concern. But that was not its sole concern, for if it was there was no need to enact subdivision four of CPLR 214-c at all. That subdivision benefits only those plaintiffs and claimants who, having already discovered they were injured, have not discovered "the cause of the injury." A few hours of latency might well cause a plaintiff to be in such a predicament — as plaintiff here says he was.

Defendants, and the dissenters, argue in substance that the benefits of CPLR 214-c (4) should be afforded only to those plaintiffs and claimants who also benefit from CPLR 214-c (2) or CPLR 214-c (3) — i.e., those who cannot discover their injury within the limitations period. But the statute does not say that, and we see no reason to read it in that way. Defendants' and the dissent's reading would produce anomalous results. Those who benefit from subdivisions two and three may bring suits or make claims many years, even decades, after their exposure to a substance. For such plaintiffs and claimants, it is undisputed, the already-long delay can be extended by subdivision four for up to another six years (five years from the discovery of the injury to the discovery of its cause, plus another year to sue or file a claim). But defendants and the dissenters would deny the benefit of subdivision four to plaintiffs, like the present one, whose injuries are discovered within hours of exposure — even though subdivision four would effectively require those plaintiffs to sue no more than six years after that exposure.

In other words, for plaintiffs like the present one, subdivision four would replace the three-year tort statute of limitations with at most a six-year statute — an extension less generous to plaintiffs, and risking less hardship to defendants, than the indefinite extensions that can result from long-term latency. Defendants and the dissent would have us read the statute to countenance extremely old claims, but to bar relatively fresh ones. We reject that reading.

Question 3: What standards apply to the issue of when sufficient information "to ascertain the cause" of an injury has been "discovered, identified or determined"?

The Second Circuit's third question arises from CPLR 214-c (4)'s requirement that plaintiff "allege and prove that technical, scientific or medical knowledge and information sufficient to ascertain the cause of his injury had not been discovered, identified or determined" before the expiration of the otherwise-applicable limitation period. That question calls on us to resolve two possible ambiguities noted by both the District Court and the Second Circuit: Is it the plaintiff and his lawyers or the technical, scientific or medical community that must be able to "ascertain the cause of his injury"? And what level of certainty is implied by the word "ascertain"? Both aspects of this question have been previously addressed by New York courts.

As to the first of them, we said in New York County DES:

"It is apparent from the over-all statutory plan . . . that only the technical knowledge of the scientific and medical communities [was] to be considered in determining whether the injured's delay following the discovery of injury should be excused."

(89 NY2d at 515).

We now reaffirm that the statute refers to the time when information is sufficient for the technical, medical or scientific community "to ascertain" the cause of an injury. It is not reasonable to extend the statute of limitations until the time when a reasonable lay person or lawyer could "ascertain" the cause without consulting an expert — in many cases, that time might never come. Plaintiff suggests that the statute of limitations in his case did not begin to run until the relevant scientific findings were publicized in the non-expert community, but the statute's language does not create a "publicity" test. We see no unfairness in requiring that injured people who want to protect their rights seek out expert advice, rather than waiting for the media to bring a possible cause of the injury to their attention.

The other aspect of the Second Circuit's third question — the issue of what level of certainty "to ascertain" implies — is not one we have previously discussed. We generally agree, however, with the Appellate Division's comments on that issue in Pompa v Burroughs Wellcome Co. (259 AD2d 18 [3d Dept 1999]). The statute

"does not require medical certainty or information sufficient to prevail at trial, but does entail showing that sufficient information and knowledge existed to enable the medical or scientific community to ascertain the probable causal relationship between the substance and plaintiff's injury"

Making the Appellate Division's "probable causal relationship" test a bit more specific, we hold that the test is one of general acceptance of that relationship in the relevant technical, scientific or medical community. That test is familiar to New York lawyers and judges. Our courts follow Frye v United States (293 Fed 1013 [DC Cir 1923]) in making "general acceptance" the test for admitting expert testimony about scientific principles or discoveries (see People v LeGrand, 8 NY3d 449, 457 [2007]; People v Wesley, 83 NY2d 417, 422 [1994]). Thus, under our holding today a causal relationship will be sufficiently ascertained for CPLR 214-c (4) purposes at, but not before, the point at which expert testimony to the existence of the relationship would be admissible in New York courts.

The above, we believe, answers the Second Circuit's third question: "What standards should be applied?" We have not been asked to, and do not, apply those standards to the facts of this case. The federal courts dealing with this and related cases are more familiar than we with the science relating to the effects of ephedra, and are thus better able to perform that task.

Accordingly, the first and second questions should be answered in the affirmative, and the third question should be answered in accordance with this opinion.


READ, J. (DISSENTING):

The majority opines that "effects [of an exposure to substances] concealed for a few hours may be 'latent'" for purposes of CPLR 214-c because "even a brief period of latency can be important when the problem is one of determining an injury's cause". In effect, the majority defines effects as "latent" so long as symptoms do not appear "as soon as [someone's] skin touches a suspected toxin" or "at once upon swallowing a pill". And whatever "as soon as" and "at once" may mean, it would seem to be something less than the 24 to 48 hours referred to in the second certified question. This approach finds no support in the statutory text or legislative history, which uniformly demonstrate that section 214-c was intended to relieve the plight of plaintiffs who became sick long after their initial exposure to a toxic substance, which is when their causes of action would otherwise accrue.

I.

A latent disease is generally understood to be an illness that does not manifest clinically diagnosable symptoms until years after initial exposure to the disease-causing agent (see e.g. David Schottenfeld and Joanna F. Haas, "Carcinogens in the Workplace," in Cancer Causing Chemicals, at 23 [Newton I. Sax ed. 1981]). And as we have recounted numerous times, the Legislature enacted CPLR 214-c to "overcome the effect of a line of Court of Appeals decisions" beginning with Schmidt v Merchants Despatch Transp. Co. (270 NY 287 [1936]), which held that the claims of plaintiffs suffering from latent diseases "accrue[d] upon 'impact' or exposure even though the resulting illness [might not have been] manifested for a long time thereafter" (Matter of New York County DES Litig. [Wetherill v Eli Lilly & Co.], 89 NY2d 506, 513 [1997] [emphasis added]; see also Snyder v Town Insulation, 81 NY2d 429, 433 [1993] [noting that Schmidt and its progeny addressed the "question of how accrual should be determined when an injury was latent and went undiscovered until long after exposure" [emphasis added]; Consorti v Owens-Corning Fiberglass Corp., 86 NY2d 449, 454 [1995] [reviewing history of Court's adherence to "the Schmidt rule fixing the occurrence of tortious injury as the date when the toxic substance invades or is introduced into the body"] [emphasis added]). As a result of the Schmidt rule, the three-year statute of limitations in CPLR 214 (5) lapsed before these plaintiffs even became aware they were sick.

To remedy this injustice, the Legislature adopted CPLR 214-c, which replaced the Schmidt rule in such cases with a rule of accrual keyed to "the discovery of the manifestations or symptoms of the latent disease that the harmful substance produced" (Wetherill, 89 NY2d at 514). Section 214-c, adopted as a part of a larger tort reform package (L 1986 ch 682), reflected numerous compromises. In particular, the bills passed by the Assembly in the run-up to the Legislature's adoption of CPLR 214-c invariably provided for accrual not only upon discovery of the injury, but also upon discovery of the injury's cause. For example, in 1984 the Assembly passed Assembly Bill A. 3547-A, which called for commencement of an action for personal injuries attributable to the latent effects of exposure to a substance "within two years of the date of discovery of the illness or injury, or the date of death, or the discovery of the cause of such injury, illness or death, whichever is later" (emphases added). By contrast, the Senate majority's versions of a time-of-discovery rule did not require discovery of causation before the statute of limitations would begin to run (see generally Steven L. White, Note, "Toward a Time-of Discovery Rule for the Statute of Limitations in Latent Injury Cases in New York State," 13 Fordham Urb L J 113, 154-160 [1984-1985]).

The Legislature ultimately compromised on this issue and adopted related time-of-discovery provisions for actions brought by plaintiffs to recover for latent injuries, CPLR 214-c (2) and CPLR 214-c (4). CPLR 214-c (2) enacts a three-year statute of limitations commencing upon a plaintiff's discovery (actual or constructive) of latent injuries from exposure to a substance. This provision assumes that the plaintiff knows the cause of the injuries at the time they are discovered — i.e., become manifest (see generally Wetherill, 89 NY2d at 513 ["That CPLR 214-c (2)'s reference to 'discovery of the injury' was intended to mean discovery of the condition on which the claim was based and nothing more is . . . apparent from the legislative history of the provision"]).

Section 214-c (4), which "has to be read in conjunction with subdivision 2" (McLaughlin, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 214-c, 1990 Supp Pamph at 340; see also Siegel, NYS Law Digest, No. 321, Sept. 1986, at 1), specifies that if the cause of the injury is discovered less than five years after the injury is suffered, the plaintiff may commence an action within one year after identifying the cause. In order to take advantage of section 214-c (4), however, the plaintiff must show that there was insufficient medical or scientific information available to make out the injury's cause within the three-year period otherwise prescribed in CPLR 214-c (2) (see id. [commenting that "[t]he issues of causation and knowledge on which this alternative time measure depends will often generate heavy fact disputes . . . likely to be intertwined with the merits"]).

The majority acknowledges that "[t]here is no doubt that the problem of injuries that go undiscovered for years was the Legislature's primary concern," but then adds that this was not the Legislature's

"sole concern, for if it was there was no need to enact subdivision four of CPLR 214-c at all. That subdivision benefits only those plaintiffs . . . who, having already discovered they were injured, have not discovered 'the cause of the injury.' A few hours of latency might well cause a plaintiff to be in such a predicament . . . " (majority opn at 11).

As Judge McLaughlin (coincidentally a member of the Second Circuit panel in this case) observed, "[i]t need not be said that [CPLR 214-c (4)] is a complicated statute," which "reeks of the midnight oil of political compromise. And the draftsmanship cannot be described as commendable" (McLaughlin, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 214-c, 1990 Supp Pamph at 340). There is no suggestion in the statutory text or the legislative history or the contemporary commentary, however, that the Legislature adopted section 214-c (4) to address any effects of exposure to substances so long as the cause was difficult to figure out when the injuries became manifest, as the majority concludes. Rather, the Legislature was concerned only with the latent effects of exposure — i.e., latent diseases triggered by (but manifest well after) an initial (and sometimes prolonged) exposure to a toxic substance. Sections 214-c (2) and 214-c (4) simply represent the compromise struck by the Assembly and the Senate to reconcile their differing time-of-discovery rules for latent diseases, previously discussed.

The majority further speculates that "it seems reasonable that the authors of CPLR 214-c (4) would have considered even a few hours of latency enough to justify the extension of the statute of limitations authorized by that subdivision". If this was part of the authors' design, they kept it well hidden. The statute's legislative history evidences only a desire to enact a time-of-discovery rule for plaintiffs afflicted with latent diseases, such as workers exposed to asbestos or the adult daughters of mothers who ingested DES during pregnancy, not a free-floating intention to alter the accrual rule in every case where a disease's etiology is difficult to divine.

II.

In this case, the scientific evidence does not provide a sound basis for a jury to conclude that plaintiff's strokes were a latent effect of his exposure to dietary supplements containing ephedra. At least, this is what I glean from the District Court's opinion addressing general causation (see In re Ephedra Products Liability Litigation, 393 F Supp 2d 181 [SDNY 2005]), handed down in the consolidated ephedra litigation, and the same Judge's later decision concluding that this plaintiff's lawsuit was time-barred.

Ephedra is a plant that contains several chemically related biologically active substances known as ephedrine alkaloids. The ephedra products at issue in the consolidated litigation combined ephedra with caffeine, and were marketed to consumers seeking weight loss, increased energy and improved athletic performance. The District Court Judge conducted a Daubert hearing to assess, as particularly relevant here, whether evidence might be introduced at trial that dietary supplements containing ephedra/ephedrine cause strokes.

After a two-week evidentiary hearing at which various scientists testified as generic experts for plaintiffs and the defense, the District Court Judge concluded that none of plaintiff's experts would be permitted to testify "within a reasonable degree of scientific certainty" that ephedra causes strokes. He did, however, also rule that some of plaintiff's experts would be permitted to testify (based on such things as animal studies, analogous human studies, and plausible theories of the biological mechanisms involved) that there was a reliable basis to believe that ephedra might be a contributing cause of strokes in people with, for example, high blood pressure or a genetic sensitivity to ephedra — provided that such experts qualified their testimony with the acknowledgment that none of this had been the subject of a definitive study and might in the future be disproved.

The biologically plausible theory about how ephedra might cause injury — one of the factors that persuaded the District Court Judge to allow some of plaintiffs' generic experts to offer an opinion that ephedra might be a contributing cause of strokes in susceptible individuals — was that ephedra was known to "stimulate cardiovascular activity and constrict blood vessels, thereby increasing stress on the heart and circulatory system" (id. at 194; see also id. at 192 [discussing hypothesis that heart attacks, strokes or sudden death might be triggered by the coincidence of peak events, such as transient peak blood pressure due to other causes, occurring at the same time as peak ephedrine blood level]). The Judge also noted that ephedra is short-acting (id. at 193).

The District Court Judge subsequently dismissed plaintiff's complaint as time-barred under CPLR 214-c. He specifically commented that

"evidence admitted during the Court's extensive Daubert hearings showed that ephedra acts within a few hours to cause a transitory elevation of blood pressure and heart rate and a temporary constriction of blood vessels. Experts designated by [plaintiffs] have submitted reports stating that these immediate effects of ephedra may likely be a contributing cause of stroke in some people" (emphases added).

In other words, based upon scientific evidence adduced at the Daubert hearing and credited by the District Court Judge, he concluded that any stroke attributable to ephedra would have been caused by an exposure occurring shortly (24 hours to three days) beforehand. This is because ephedra is short-acting and its effects transitory, not permanent; therefore, it is not biologically plausible for plaintiff's strokes to have been caused by his initial exposure to ephedra, or the cumulative effect of his exposures over time. As a result, plaintiff's strokes were not a latent disease within the meaning of section 214-c (4).

Plaintiff's attorney argues in his reply brief that "assuming latency is a requirement for applying [CPLR 214-c (4)], same is present because the stroke resulted from ingestion of the product over time"; and that "plaintiff did become ill after using Ephedra based products for two years."^[FN1] In other words, he proposes that it was, in fact, plaintiff's initial and repeated exposures to ephedra over a two-year period which rendered him susceptible to a stroke by effecting permanent physiological change, presumably by creating a condition of permanently elevated blood pressure. I simply do not think the District Court Judge accepted as reasonably based on good science the notion that ephedra might act on the human body to cause a stroke in this manner (see e.g. 393 F Supp 2d at 194 [noting three points on which the scientific evidence is "sparse and inconclusive"]). If I am wrong about that, I would agree with plaintiff that section 214-c (4) governs the timeliness of his cause of action, and that this would be the case whether he suffered a stroke 24 hours or 24 years after he last ingested ephedra.

III.

The majority's interpretation of section 214-c (4) — divorcing it from whether the exposure to a substance may have caused a latent disease and focusing solely on the lapse of time from last exposure to manifestation of illness — creates a number of practical problems. The Second Circuit asked if injuries occurring within 24 to 48 hours after exposure to a substance were "latent" within the meaning of section 214-c. In response, the majority holds that "an injury that occurs within hours of exposure to a substance can be considered 'latent' for these purposes" (majority opn at 2 [emphasis added]). Is "within hours" the same as 24 to 48 hours, or is it a shorter period of time? What about 12 hours? eight hours? Presumably, "within hours" must mean at least two hours, or does it? Is this purely a legal judgment, or is scientific evidence relevant? When an effect occurs "within hours" of exposure to a substance, does it matter whether a scientist would consider such an effect to be latent?

The majority acknowledges that a disease is not latent if symptoms appear "as soon as" or "at once" upon exposure. Indeed, the majority almost has to make this concession or it would be even more obvious than it already is that section 214-c (4) now covers lawsuits relating to the "effects" — not just the "latent" effects — of exposure to a substance, despite the majority's answer to the first certified question. But what do "as soon as" or "at once" mean in this context? Most substances that are ingested, for example, are not instantaneously absorbed. Does whether an injury is latent depend upon scientific evidence about how quickly a substance is taken up in the body or reaches a certain concentration in the blood?

It is difficult to predict the practical effects of the majority opinion. Certainly we now have a six-year statute of limitations in New York, running from the date an injury becomes manifest, for every purported side effect of a drug or other substance that may be ingested, subject to the restrictions in section 214-c (4) — the five-year and one-year limits and the necessity for proof about the state of medical or scientific evidence at the relevant time. Because there is no reason to believe that the Legislature had any such result in mind when it enacted CPLR 214-c (4), I respectfully dissent.

* * * * * * * * * * * * * * * * *
Following certification of questions by the United States Court of Appeals for the Second Circuit and acceptance of the questions by this Court pursuant to section 500.27 of the Rules of Practice of the New York State Court of Appeals, and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified questions answered in accordance with the opinion herein. Opinion by Judge Smith. Chief Judge Lippman and Judges Ciparick and Jones concur.
Judge Read dissents in an opinion in which Judges Graffeo and Pigott concur.
Decided November 18, 2010

Footnote 1:Plaintiff's attorney does not indicate how frequently plaintiff may have ingested ephedra over a two-year period. The District Court Judge noted that the label on one of the ephedra products did not state any maximum period for continuing the daily "suggested use" of up to 96 mg, while a competing product recommended a maximum daily dosage for a healthy adult of no more than 100 mg in a 24-hour period for not more than 12 weeks (393 F Supp 2d at 194 n 10).

Comment:  The best summary of the effect of this decision comes from the line in the dissenting opinion which I highlighted above: that we now have a six-year statute of limitations for every purported side effect of a drug or other ingested substance, subject to the 5-year and 1-year limits of CPLR 214(c) and proof about the state of medical or scientific knowledge at the relevant time.

Larry Rogak

OWNERS, CONTRACTORS, HAVE NO VICARIOUS LABOR LAW LIABILITY FOR AIRBORNE CONTAMINANTS LIKE ASBESTOS

The issue before us is whether vicarious liability under Labor Law § 241 (6) may be predicated solely on a violation of regulations contained in part 12 of the Industrial Code. We conclude that it may not.

During the 1970s and 1980s, decedent Donald Nostrom worked as a boilermaker for subcontractors on construction projects at various energy facilities, including those owned by defendants Orange & Rockland Utilities, Inc. (O & R) and Central Hudson Gas & Electric Corp. According to Nostrom, defendant Sequoia Ventures, Inc., f/k/a Bechtel Corporation, served as the general contractor for two of the projects. While working at these power plants, Nostrom was allegedly exposed to asbestos through airborne dust and contact with asbestos-containing materials. He subsequently contracted mesothelioma.

Nostrom and his wife, suing derivatively, commenced this action against more than 60 defendants, including O & R, Central Hudson and Sequoia ^[FN1]. As relevant here, Nostrom asserted a Labor Law § 200 claim against Central Hudson and a violation of Labor Law § 241 (6) against each of the three defendants involved in this appeal. The section 241 (6) claim was premised on violations of Industrial Code (12 NYCRR) part 12 regulations, which require the prevention of air contamination (12 NYCRR 12-1.4 [b] [3], [4]) and the removal of dangerous air contaminants (12 NYCRR 12-1.6 [a]). After discovery, defendants separately moved for summary judgment dismissing the complaint.^[FN2]

Supreme Court granted the motions and dismissed the complaint insofar as asserted against defendants. Nostrom appealed the dismissal of the Labor Law § 241 (6) cause of action and the Appellate Division affirmed, reasoning that a violation of regulations from part 12 of the Industrial Code cannot sustain a section 241 (6) claim (59 AD3d 159 [1st Dept 2009]). Alternatively, the Appellate Division concluded that the two regulations invoked by Nostrom were not "sufficiently specific to support a section 241 (6) claim for asbestos-related injury" (id. at 160). We granted Nostrom leave to appeal (13 NY3d 880 [2009]).^[FN3]

Because defendants did not direct or control decedent's work, they can be liable only if Labor Law § 241 (6) applies, imposing vicarious liability on owners and contractors for the conduct of others. Section 241 (6) provides:

"All areas in which construction, excavation or demolition work is being performed shall be so constructed, shored, equipped, guarded, arranged, operated and conducted as to provide reasonable and adequate protection and safety to the persons employed therein or lawfully frequenting such places. The commissioner may make rules to carry into effect the provisions of this subdivision, and the owners and contractors and their agents for such work, except owners of one and two-family dwellings who contract for but do not direct or control the work, shall comply therewith."

The second sentence of this provision, requiring owners and contractors to comply with the Commissioner of Labor's rules, creates a nondelegable duty "where the regulation in question contains a specific, positive command" (Morris v Pavarini Constr., 9 NY3d 47, 50 [2007] [internal quotation marks and citation omitted]). At issue is whether the section 241 (6) claim in this case may be based on the violation of Industrial Code part 12 regulations pertaining to the control of air contaminants in the workplace.

Nostrom argues that sufficiently specific regulations are set forth in part 12 of the Industrial Code and, like those found in part 23, these may be invoked to impose vicarious liability under Labor Law § 241 (6). Consequently, she asserts that O & R and Central Hudson, as owners, and Sequoia, as a general contractor, may be held liable for the alleged failures of various subcontractors to comply with sections 12-1.4 (b) and 12-1.6 (a) of the Code. Defendants respond that the Appellate Division correctly held that the relevant language and history underlying these regulations demonstrate that part 12 cannot support vicarious liability except to the extent that part 12 regulations are specifically incorporated into part 23.

In matters of statutory and regulatory interpretation, "legislative intent is the great and controlling principle, and the proper judicial function is to discern and apply the will of the enactors" (Matter of ATM One v Landaverde, 2 NY3d 472, 477 [2004] [internal quotation marks and citation omitted]). As we have noted, the text of a provision is the clearest indicator of the enactors' intent, "and courts should construe unambiguous language to give effect to its plain meaning" (Matter of DaimlerChrysler Corp. v Spitzer, 7 NY3d 653, 660 [2006]). Additionally, inquiry should be made into "the spirit and purpose of the legislation, which requires examination of the statutory context of the provision as well as its legislative history" (Landaverde, 2 NY3d at 477 [internal quotation marks and citation omitted]).

Part 23 of the Industrial Code governs the protection of workers in construction, demolition and excavation operations. Its "Application" provision expressly states that the rules in part 23 apply to "owners, contractors and their agents obligated by the Labor Law to provide such persons with safe working conditions and safe places to work" (12 NYCRR 23-1.3). Hence, it is clear that part 23 was promulgated pursuant to the authority granted by Labor Law § 241 (6) and that owners and contractors may be vicariously liable based on violations of part 23 regulations ^[FN4]. In contrast, the "Application" section of part 12 does not specify that its rules apply to owners, contractors and their agents. The absence of such wording suggests that part 12 was not created to give effect to the provisions of section 241 (6) and indicates an intent not to impose vicarious liability in connection with part 12 regulations.

Furthermore, the language of 12 NYCRR 23-1.7 (g) confirms that part 12 regulations, by themselves, were not intended to serve as a predicate for liability under Labor Law § 241 (6). Section 23-1.7 (g) makes any "unventilated confined area" where dangerous air contaminants may be present subject to the provisions of part 12. By incorporating the requirements of part 12 into this narrow subset of work sites governed by part 23 — unventilated confined areas — it is evident that the intent was to impose a nondelegable duty on owners and contractors in these limited circumstances. Consequently, a plaintiff may bring a section 241 (6) claim based on a violation of a part 12 rule only where the injury occurred in an unventilated confined area, thereby triggering section 23-1.7 (g)'s "pass-through" provision (see Rivera v Ambassador Fuel & Oil Burner Corp., 45 AD3d 275 [1st Dept 2007])^[FN5]. Accepting Nostrom's position that vicarious liability may be grounded on a part 12 violation regardless of the location of the exposure would render section 23-1.7 (g) superfluous. And a construction that "renders one part meaningless should be avoided" (Rocovich v Consolidated Edison Co., 78 NY2d 509, 515 [1991]). 

Our conclusion that part 12 does not impose liability on owners and contractors under Labor Law § 241 (6), except insofar as it is expressly incorporated into part 23, is consistent with the regulatory history underlying the two parts. Industrial Code Bulletin No. 23, part 23's predecessor, was adopted by the State Industrial Commission in 1920. In 1941, the Board of Standards and Appeals replaced the original regulations with a new part 23, specifically referencing the rule-making authority vested in the Board by Labor Law § 241. The Board again invoked section 241 when it revised part 23 in 1963. Although the Board did not refer to section 241 when it completed its most recent substantive changes to part 23 in 1972, it is clear that part 23 continues to implement the authority granted by the Legislature under section 241 (6) because it explicitly applies to owners, contractors and their agents (see 12 NYCRR 23-1.3). On the other hand, although part 12's predecessor was redesignated as part 12 in 1954 and was thereafter substantially revised in 1956, 1961 and 1971, the Board did not cite section 241 as a basis for these enactments.

In short, the language and history of the relevant provisions establish that part 12 regulations do not provide a basis for liability under Labor Law § 241 (6) except to the extent that particular regulations are specifically incorporated into part 23. As a result, the Appellate Division correctly affirmed the dismissal of Nostrom's section 241 (6) claim, which was predicated solely on alleged violations of 12 NYCRR 12-1.4 (b) and 12 NYCRR 12-1.6 (a). We therefore need not reach the Appellate Division's alternative holding that the regulations in question are not specific enough to permit recovery under section 241 (6) for an asbestos-related injury.

Accordingly, the order of the Appellate Division, insofar as appealed from, should be affirmed, with costs.

* * * * * * * * * * * * * * * * *
Order, insofar as appealed from, affirmed, with costs. Opinion by Judge Graffeo. Judges Ciparick, Smith, Pigott and Jones concur. Chief Judge Lippman and Judge Read took no part.
Decided November 18, 2010

Dear Readers:

The first edition of my book, Rogak's New York No-Fault Law & Practice, came out in 2007.  The second (current) edition came out in 2009.   I have been holding off issuing a third update because the Insurance Department has published a draft of proposed new No-Fault regulations, which include many changes.  However, it does not appear that the revised Regulations will be coming out any time soon.  In the meantime, many important new court decisions have been released since my 2009 edition went to press.  Therefore, I am working on a new 2011 edition.  The expected availability date is March 2011.  In the meantime, check my Rogak No-Fault Blog  every day for the latest developments in this field.

Larry Rogak

BRIEF CONVALESCENCE, LONG GAPS IN TREATMENT DEFEAT PLAINTIFF'S THRESHOLD CLAIMS

Plaintiff in this motor vehicle injury suit appealed from an order of the Civil Court of the City of New York, Bronx County (Lizbeth Gonzàlez, J.) which granted the defendants' motion seeking summary judgment dismissing the complaint as against them.  The Appellate Term affirmed. 

"Defendants met their initial burden of establishing that plaintiff did not sustain a serious injury (Insurance Law § 5102[d]) by submitting the affirmed reports of physicians who examined plaintiff, quantified normal ranges of motion in plaintiff's lumbar spine, cervical spine and shoulder, and concluded, based upon objective testing, that plaintiff, who suffered sprains and contusions that had resolved without permanent disability, had no objective abnormalities (see Mendez v Mendez, 72 AD3d 402 [2010]; Cekic v Zapata, 69 AD3d 464 [2010])."

"In opposition, plaintiff failed to submit admissible objective medical evidence of a serious injury contemporaneous with the accident (see Cabrera v Gilpin, 72 AD3d 552 [2010]; Toulson v Young Han Pae, 13 AD3d 317 [2004]). Moreover, neither plaintiff nor her doctor offered any explanation for the six- and eight-month gaps in her treatment (see generally Pommells v Perez, 4 NY3d 566 [2005]). Plaintiff's serious injury claim predicated on the 90/180-day category was refuted by the admission in her verified bill of particulars of a relatively brief convalescence, and plaintiff offered no competent medical proof substantiating her claim under that category (see Weinberg v Okapi Taxi, Inc., 73 AD3d 439 [2010]; Zhijian Yang v Alston,73 AD3d 562 [2010])."

Larry Rogak 

In today's Rogak No-Fault Blog:

At trial, can a plaintiff's attorney get around the Urban Radiology rule by asking a doctor whether he believes the medical reports to be "true"?  Find out!

http://www.newyorknofaultadvisor.com/

Larry Rogak

NO LIABILITY TO UNSEEN PEDESTRIAN HIT BY STRAY BULLET DURING POLICE SHOOTOUT

On May 27, 2005 at approximately 6:30 p.m., New York City Police Officers Williams and Loor received a complaint from a pedestrian that two men had just attempted to rob him with a gun. The officers pursued one of the suspects from 125th Street, along Lenox Avenue, onto 126th Street. Officer Williams transmitted the attempted robbery complaint over the radio while Officer Loor drove their police cruiser to the corner of 126th Street and Lenox Avenue, parking two car lengths away from the suspect. When the officers got out of the cruiser and ordered the suspect to drop his weapon, he pointed the gun at them and started shooting. The officers returned fire and sought cover behind a trailer on the south side of the street; the suspect hid behind a van farther up 126th Street on the same side.

Officer Loor then ran from the south side of 126th Street to the north side positioning himself behind a tree directly across the street from the suspect. The suspect fired at Officer Loor, who responded in kind. According to the pretrial testimony, Officer Loor did not see any bystanders in the area while he was shooting, and the area near the suspect was clear of pedestrians. Officer Williams—who continued using the trailer for cover—observed the suspect back onto the sidewalk from behind the van and, having a view of the suspect's profile and being concerned for Officer Loor's safety, fired one or two shots at the suspect. She testified that she did not observe any pedestrians in the area when discharging her weapon.

During the melee, three other officers appeared on the scene. Officer Garcia heard a scream from the direction of Lenox Avenue. He walked toward the commotion and observed the suspect shoot at Officers Williams and Loor and then hide behind the van. Officer Garcia took cover in a brownstone well on the north side of the street. He had a clear view of the suspect and fired at him out of concern for Officer Loor, who was taking fire; Officer Garcia did not see any pedestrians or bystanders on the street.

Officers Beddows and Eckert separately responded to the scene. Officer Beddows took cover on the north side of the street behind a cruiser. He observed the suspect firing shots from behind the van. Officer Beddows had a clear view when he fired two shots at the suspect, and he saw no pedestrians on the street other than the suspect.

Officer Eckert positioned his cruiser in front of the van. He observed only the suspect and did not see any other pedestrians on the block. He walked toward the rear of his cruiser and took cover behind a car on the south side of the street. During the exchange of gunfire between Officer Loor and the suspect, the suspect moved to the sidewalk and Officer Eckert, having a clear view, fired one shot at the suspect. Officer Eckert reholstered his weapon and saw Officer Loor walking toward the suspect, who was lying face down on the ground. Officers Loor and Eckert met near the suspect and Officer Loor kicked the firearm away from the suspect's hand.

Plaintiff Tammy Johnson was playing with her 18-month-old daughter and socializing with neighbors on 126th Street near her residence when she heard gunshots, which sent her neighbors fleeing into the house. Johnson saw two men running toward her, one of whom was carrying a gun. Johnson and her daughter lay on the ground behind a white SUV, which was two vehicles away from the van behind which the suspect was hiding. She looked under the SUV and saw the suspect on the south side of the street lying on the ground shooting at a police officer across the street. An errant bullet struck Johnson's elbow.

Johnson, individually and on behalf of her daughter, commenced this negligence action against the City and police officers alleging, among other things, that the officers negligently discharged their firearms in violation of department guidelines. The City interposed an answer and, upon completion of discovery, moved for summary judgment on the ground that the officers exercised their professional judgment and acted reasonably in returning fire once fired upon.

Johnson opposed the City's motion and cross moved for summary judgment on liability, claiming that the officers violated Police Procedure No. 203.12, entitled "Deadly Physical Force," which sets forth the guidelines for the use of firearms. The relevant guidelines state that:

"(a) Police officers shall not use deadly physical force against another person unless they have probable cause to believe that they must protect themselves or another person present from imminent death or serious physical injury.

(b) Police officers shall not discharge their weapons when doing so will unnecessarily endanger innocent persons."

Supreme Court denied Johnson's cross motion insofar as relevant to this appeal, and the City's motion for summary judgment, holding that although the City met its burden of establishing that the officers exercised their professional judgment, there was an issue of fact as to whether the officers violated police guidelines by discharging their weapons.

The Appellate Division, in a 3-2 decision, reversed and dismissed the complaint, holding that Johnson failed to show that the officers violated any of the guidelines. The court pointed to the uncontradicted testimony of the officers that there were no pedestrians in sight as the officers "sought to protect themselves and their fellow officers by returning fire". It concluded that, absent any proof that there were pedestrians in view, the report from Johnson's expert that there were questions of fact as to whether the officers violated police guidelines was without merit. The dissenters, on the other hand, concluded that the deposition testimonies of Officers Garcia and Beddows, where they testified that they did not look for bystanders while they were shooting at the suspect, raised an issue of fact as to whether those officers violated police guidelines "by failing to even ascertain whether innocent persons were unnecessarily endangered at the time they discharged their weapons" (id. at 479-480). We now affirm.

The professional judgment rule insulates a municipality from liability for its employees' performance of their duties "'where the . . . conduct involves the exercise of professional judgment such as electing one among many acceptable methods of carrying out tasks, or making tactical decisions . . .'" (McCormack v City of New York, 80 NY2d 808, 811 [1992] quoting Kenavan v City of New York, 70 NY2d 558, 569 [1987]). Immunity under the professional judgment rule "'reflects a value judgment that—despite injury to a member of the public—the broader interest in having government officers and employees free to exercise judgment and discretion in their official functions, unhampered by fear of second-guessing and retaliatory lawsuits, outweighs the benefits to be had from imposing liability for that injury'" (Mon v City of New York, 78 NY2d 309, 313 [1991] quoting Haddock v City of New York, 75 NY2d at 484 [1990]). This immunity, however, presupposes that judgment and discretion are exercised in compliance with the municipality's procedures, because "the very basis for the value judgment supporting immunity and denying individual recovery becomes irrelevant where the municipality violates its own internal rules and policies and exercises no judgment or discretion" (Haddock, 75 NY2d at 485).

The guideline here calls for such judgment, i.e., the police must not discharge their firearms if doing so would "unnecessarily endanger innocent persons." It does not prohibit officers from discharging their weapons when innocent bystanders are present in every instance. Rather, the guideline grants officers the discretion to make a judgment call as to when, and under what circumstances, it is necessary to discharge their weapons.

The officers clearly had probable cause to fire their weapons at the suspect: they were in pursuit of an armed individual who opened fire on them on a public street, endangering the lives of the officers and the public. Johnson asserts, however, that she met her burden of raising a question of fact that the officers violated the guideline because they did not survey the area to see if bystanders were present before firing at the suspect. However, on this record, it is uncontroverted that all of the officers who fired at the suspect did so when they had a clear view of him, and all testified that they did not see any bystanders in the area while firing, such that it cannot be said that the officers failed to exercise discretion in discharging their weapons. Nor is there any evidence that Johnson and her daughter were in the line of fire during the melee such that a question of fact was presented as to whether officers' discharge of their firearms violated the guideline (cf. Lubecki v City of New York, 304 AD2d 224 [1st Dept] lv denied 2 NY3d 701 [2003] [violation of guideline where officers failed to call hostage negotiator and also fired at suspect when he was using hostage as a shield]; Rodriguez v City of New York, 189 AD2d 166 [1st Dept 1993] [officer violated police procedure by discharging weapon at suspect when there was a crowd between them]). Although Johnson submitted an affidavit from an expert who claimed that Johnson and her daughter were "totally exposed" to Officer Garcia, the expert's claim that Officer Garcia must have seen them does not answer the more basic question—did the officers exercise their judgment when confronted with an armed suspect firing at them? There is no evidence that they did not. The fact that the officers did not observe the bystanders who were present at the time they were exercising that judgment does not raise an issue as to whether they unnecessarily endangered innocent persons.

Accordingly, the order of the Appellate Division should be affirmed, with costs.


JONES, J. (dissenting):

Because there is an issue of fact as to whether the police officers violated a New York City Police Department guideline that prohibits unnecessarily endangering innocent persons by failing to ascertain the presence of bystanders before firing their weapons, I respectfully dissent and would reverse the order of the Appellate Division.

Generally, municipalities are immunized from liability for the exercise of discretion by their agencies or officials. When official acts, including those of police officers (see Rodriguez v City of New York, 189 AD2d 166, 178 [1st Dept 1993]) involve the exercise of discretion or reasoned judgment, there is no liability for injuries even if the official action is negligent or malicious (see Tango v Tulevech, 61 NY2d 34, 40 [1983]).

However, this broad protection is neither absolute, nor automatically afforded, as the municipality must exercise discretion in compliance with its own procedures (see Haddock v City of New York, 75 NY2d 478, 486 [1990]). Governmental immunity will not be provided "where the municipality violates its own internal rules and policies and exercises no judgment or discretion" (id. at 485). In the context of police officers, immunity "does not extend to situations where the employee, a police officer, violates acceptable police practice" (Rodriguez, 189 AD2d at 178).

New York City Police Department Procedure No. 203.12, entitled "Deadly Physical Force," as relevant here, commands that:

"(b) Police officers shall not discharge their weapons when doing so will unnecessarily endanger innocent persons."

Here, there is an issue of fact as to whether the police officers violated this elemental requirement. Record evidence establishes the presence of bystanders in the immediate area of the shooting. For example, photographic evidence indicates plaintiffs were in close proximity to the suspect, who was positioned approximately two car lengths away. A crime scene sketch, created by the Police Department Crime Scene Unit, showing the relative positions of all the individuals involved in the incident indicates that when Officer Garcia fired his weapon, he was positioned across the street from plaintiffs and the suspect. The sketch also supports the inference that plaintiffs, who were taking cover behind a parked vehicle, should have been plainly visible to Officer Garcia as he fired at the suspect just beyond them.

Further, when questioned about the incident, Officer Garcia answered that he never affirmatively looked for pedestrians before firing his weapon. Officer Beddows similarly testified that he did not determine whether pedestrians were present before firing his weapon. In fact, he stated that he did not look for bystanders until "after pretty much everything was done." Given the close proximity of plaintiffs to the suspect, the admitted failure of some officers to look for bystanders before firing their weapons creates a triable issue as to whether the police violated departmental guidelines prohibiting actions that unnecessarily endanger innocent persons.

While I acknowledge the difficulties faced by police officers in the performance of their duties, I find it troubling that some of the officers in this incident failed to observe the surrounding area prior to firing their weapons. Our governmental immunity precedent is premised on the inherent requirement that reasoned judgment be used in exercising discretion. And where, as here, there is evidence that police officers failed to look for innocent persons before firing their weapons, it does not seem possible to conclude as a matter of law that the necessary judgment was exercised and, concomitantly, that there was no violation of the guideline against unnecessarily endangering innocent persons. As this Court has previously stated, immunity will not be provided where "[t]here is no indication that . . . the City made any effort to comply with its own personal procedures" (Haddock, 75 NY2d at 485).

The majority relies on Rodriguez and Lubecki v City of New York (304 AD2d 224 [1st Dept 2003]) to conclude that there is no issue of fact as to whether the officers violated guidelines because plaintiffs were not in the line of police fire. However, the applicable guideline does not merely prohibit police from discharging their weapons when there is a civilian directly in the path of police fire. Rodriguez and Lubecki dealt with facts indicating clear violations of police guidelines because of certain injury to innocent persons. In Rodriguez, an officer fired through a crowd, at a suspect, and in Lubecki, officers fired at a suspect holding an innocent person hostage. While these cases present classic scenarios of endangerment, they should not be understood to be the exclusive examples of violations of the applicable guideline. For the subject guideline's intended purpose and protections to be afforded, the exercise of reasoned judgment must be extended to situations where civilians are close enough to a target to be endangered. Here, the record establishes the presence of plaintiffs in the immediate area of the suspect and the affirmative failure of the officers to look for innocent persons before firing their weapons. In a summary judgment context particularly, where a court's function is "issue finding, rather than issue-determination" (Pirrelli v Long Island R.R., 226 AD2d 166 [1996]), plaintiffs have raised sufficient questions of fact on the issue of unnecessary endangerment to warrant a trial.

Note:  The dissent, in my opinion, would impose a nearly impossible burden on police officers to "look for innocent persons" in the vicinity when they are being fired upon, even if no bystanders are evident.

Larry Rogak

UNSUPPORTED ALLEGATION THAT CANCELLATION NOTICE TYPE FACE WAS TOO SMALL IS NOT ENOUGH TO STAY UM ARBITRATION

"Petitioner's own submissions showed that the policy previously issued to the driver of the offending vehicle by Esurance had in fact been terminated before the accident, and that a hearing was not required to explore the possibility that such coverage was not properly canceled (see Matter of Allstate Ins. Co. v Holloway, 272 AD2d 539 [2000]). The notice of termination included "a statement that proof of financial security is required to be maintained continuously throughout the registration period" (Vehicle and Traffic Law § 313[1][a]). Petitioner was not entitled to a hearing based on its unsupported claim that the legend in the notice was printed in less than 12-point type, in violation of the statute (see Matter of Eagle Ins. Co. v Peguero, 299 AD2d 294 [2002])."

Comment:  Vehicle & Traffic Law section 313 (1)(a), pertaining to cancellations of auto insurance policies, provides in part as follows:  "Every  notice  or  acknowledgement  of termination for any cause whatsoever sent to the insured shall include  in type of which the face shall not  be  smaller  than  twelve  point  a   statement  that proof of financial security is required to be maintained   continuously throughout the registration period and a notice  prescribed  by  the  commissioner  indicating  the  punitive  effects  of failure to maintain continuous proof of financial security and actions which may be taken by the insured to avoid such punitive effects."  In the case reported here, I am not sure whether Progressive's argument about the type size was simply not supported by any evidence (such as an expert's opinion or a copy of the cancellation notice), or whether the Court had other reasons for not holding that a hearing was required on this issue.

Larry Rogak

--- In TheRogakReport@yahoogroups.com, Jeena Belil <jeena.belil@...> wrote:
>
> Larry,
> Do you know if Progressive is appealing this decision?
>
> Jeena R. Belil, Esq.
> 150 Motor Parkway, Suite 401
> Hauppauge, New York 11788
> Tel:    631-828-5552
> Txt:    631-445-7380
> Fax:   631-514-3615
> www.jeenabelil.com

Larry Rogak responds:  No, I don't.  The decision just came out today.  Perhaps
Progressive can tell us.  -- LNR
>
>
>
>
>
> On Tue, Nov 23, 2010 at 2:06 PM, Lawrence <insurancelawyer@...> wrote:
>
> >
> >
> > *UNSUPPORTED ALLEGATION THAT CANCELLATION NOTICE TYPE FACE WAS TOO SMALL
> > IS NOT ENOUGH TO STAY UM ARBITRATION*
> >
> >
> >   *Matter of Progressive Preferred Ins. Co. v
Williams<http://www.courts.state.ny.us/reporter/3dseries/2010/2010_08643.htm>
> >  * 2010 NY Slip Op 08643 Decided on November 23, 2010 Appellate Division,
> > First Department *Edited by Lawrence N. Rogak*
> > Progressive Ins. Co. moved for a permanent stay of a claim for uninsured
> > motorist arbitration which was filed against it.  Supreme Court, Bronx
> > County (Lucy Billings, J.) denied the Petition without a hearing.  The
> > Appellate Division affirmed.
> >
> > "Petitioner's own submissions showed that the policy previously issued to
> > the driver of the offending vehicle by Esurance had in fact been terminated
> > before the accident, and that a hearing was not required to explore the
> > possibility that such coverage was not properly canceled (*see Matter of
> > Allstate Ins. Co. v Holloway*, 272 AD2d 539 [2000]). The notice of
> > termination included "a statement that proof of financial security is
> > required to be maintained continuously throughout the registration period"
> > (Vehicle and Traffic Law § 313[1][a]). Petitioner was not entitled to a
> > hearing based on its unsupported claim that the legend in the notice was
> > printed in less than 12-point type, in violation of the statute (*see
> > Matter of Eagle Ins. Co. v Peguero*, 299 AD2d 294 [2002])."
> >
> > Comment:  Vehicle & Traffic Law section 313 (1)(a), pertaining to
> > cancellations of auto insurance policies, provides in part as follows:
> > "Every  notice  or  acknowledgement  of termination for any cause whatsoever
> > sent to the insured shall include  in type of which the face shall not  be
> > smaller  than  twelve  point  a   statement  that proof of financial
> > security is required to be maintained   continuously throughout the
> > registration period and a notice  prescribed  by  the  commissioner
> > indicating  the  punitive  effects  of failure to maintain continuous proof
> > of financial security and actions which may be taken by the insured to avoid
> > such punitive effects."  In the case reported here, I am not sure whether
> > Progressive's argument about the type size was simply not supported by any
> > evidence (such as an expert's opinion or a copy of the cancellation notice),
> > or whether the Court had other reasons for not holding that a hearing was
> > required on this issue.
> >
> > Larry Rogak
> >
> >
> >
>

Today's Rogak No-Fault Blog is a Thanksgiving cornucopia of new decisions.  Bring your laptop to the dinner table and read up while you eat up!  What could be more fun than No-Fault and cranberry sauce?

Happy Thanksgiving!

http://www.newyorknofaultadvisor.com/blog.php

Larry Rogak

PROCESS SERVER'S LACK OF LICENSE TO SERVE OUT-OF-STATE MAY BE EXCUSED; DEFAULT JUDGMENT STANDS

Plaintiff Louise Ruffin was injured while riding as a passenger on a tour bus in New York City on December 4, 2000. She filed a timely summons and complaint, naming as defendants both the bus driver and the tour bus company, "Lion Corp. d/b/a Lion Tour Bus Company a/k/a Lion Tour & Travel, Inc. a/k/a Lion Trailways." On November 10, 2003, a process server, Richard Rubin, served the summons and complaint on the tour bus company, at its headquarters in Levittown, Pennsylvania, by personal service on a company vice-president. Rubin's affidavits of service identify him as a Pennsylvania resident.

Lion Corp. failed to respond to the summons and complaint — despite a notice of default that plaintiff's counsel sent to Lion Corp. by certified mail. Subsequently, plaintiff moved for a default judgment, serving Lion Corp. with the motion papers by mail. Supreme Court granted the motion. Lion Corp. did not appear at an inquest and, on April 8, 2005, Supreme Court granted plaintiff judgment in the amount of $450,000, plus interest, costs and disbursements.^[FN1]

Two years later, in May 2007, Lion Corp. broke its silence and moved to dismiss the action under CPLR 3211 (a) (8) and to vacate the default judgment pursuant to CPLR 5015 (a)(4). In support of its motion, Lion Corp. cited CPLR 313, pointing out that at the time of service Rubin was not a New York resident, he was not a sheriff authorized to make service by Pennsylvania law, and he was not an attorney, solicitor, barrister or equivalent. As a result, Rubin was not authorized under CPLR 313 to effect service in Pennsylvania and therefore, Lion Corp. argued, Supreme Court had not acquired jurisdiction over it.

Supreme Court denied Lion Corp.'s motion, ruling that the violation of CPLR 313 was a mere irregularity that could be disregarded and not a jurisdictional defect. The Appellate Division reversed, holding that statutes defining the methodology of service are jurisdictional and may not be disregarded (63 AD3d 814 [2d Dept 2009]). That Court vacated the judgment, and dismissed the complaint. We granted leave to appeal, and now reverse.

Plaintiff concedes that Rubin was not authorized to make service, but challenges the jurisdictional implications of this improper service. She relies on CPLR 2001 and argues that the irregularity in service can and should be disregarded under that statute.

CPLR 2001 provides:

"At any stage of an action, including the filing of a summons with notice, summons and complaint or petition to commence an action, the court may permit a mistake, omission, defect or irregularity, including the failure to purchase or acquire an index number or other mistake in the filing process, to be corrected, upon such terms as may be just, or, if a substantial right of a party is not prejudiced, the mistake, omission, defect or irregularity shall be disregarded, provided that any applicable fees shall be paid."

The statutory language clarifying that CPLR 2001 applies at the commencement of an action, including mistakes in the filing process, was added in 2007. The amendment was in response to decisions of our Court that held an action (or proceeding) should be dismissed as jurisdictionally defective if the plaintiff (or petitioner) does not fulfill all the filing requirements under CPLR 304 and 306-a, and the defendant (or respondent) timely objects (see New York State Senate Introducer's Memorandum in Support, at 3, citing Matter of Harris v Niagara Falls Bd. of Education, 6 NY3d 155 [2006]; Matter of Gershel v Porr, 89 NY2d 327 [1996]; Matter of Fry v Village of Tarrytown, 80 NY2d 714 [1997]). Those opinions suggested that CPLR 2001 could not be applied to mistakes made at the commencement of an action.

The question before us is whether a plaintiff's failure to fulfill the service requirements of CPLR 313 because the process server's residence renders him unauthorized to serve process constitutes an irregularity that courts may disregard under CPLR 2001 or a jurisdictional defect that courts may not overlook. We hold that the error may be disregarded under CPLR 2001.

It is clear from the Sponsor's Memorandum ^[FN2] that the purpose of the 2007 amendment to CPLR 2001 was to allow courts to correct or disregard technical defects, occurring at the commencement of an action, that do not prejudice the opposing party (New York State Senate Introducer's Memorandum in Support, at 3). The Legislature considered the amendment to be necessary "to fully foreclose dismissal of actions for technical, non-prejudicial defects".

Although the payment of a filing fee and the filing of initiatory papers are the acts that commence an action or special proceeding, and service comes thereafter (CPLR 304 [a]; see Gershel, 89 NY2d at 330), we perceive no reason why the Legislature would wish to foreclose dismissal of actions for technical, non-prejudicial defects in filing, but not service. Moreover, CPLR 2001 by its own terms applies "[a]t any stage of an action" (emphasis added). We therefore reject the Appellate Division's holding that a CPLR statute defining method of service can in no circumstance be disregarded.

Our inquiry does not end here, however. CPLR 2001 may be used to cure only a "technical infirmity" (Miller v Board of Assessors, 91 NY2d 82, 87 [1997]; see also e.g. Tagliaferri v Weiler, 1 NY3d 605, 606 [2004]; Great Eastern Mall, Inc. v Condon, 36 NY2d 544, 548 [1975]; Board of Trustees v Commissioner of Education, 33 NY2d 601, 603 [1973]). In deciding whether a defect in service is merely technical, courts must be guided by the principle of notice to the defendant — notice that must be "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections" (Raschel v Rish, 69 NY2d 694, 696 [1986], quoting Mullane v Central Hanover Trust Co., 339 US 306, 314 [1950]).^[FN3]

Defendant's actual receipt of the summons and complaint is not dispositive of the efficacy of service. For example, simply mailing the documents to defendant or e-mailing them to defendant's web address would present more than a technical infirmity, even if defendant actually receives the documents, inasmuch as these methods in general introduce greater possibility of failed delivery. Likewise, delivery of a summons and complaint to the wrong person (see Macchia v Russo, 67 NY2d 592 [1986]; see also Raschel) is a substantial defect. On the other hand, delivery of a summons and complaint by a process server who is unauthorized to serve simply because of his place of residence will not affect the likelihood that the summons and complaint will reach defendant and inform him that he is being sued. We therefore conclude that a defect related to the residence of a process server has no effect on the likelihood of defendant's receipt of actual notice, and the court may choose to correct or disregard it as a technical infirmity under CPLR 2001.

The Appellate Division therefore erred in concluding that the defect in service in this case could not be disregarded under CPLR 2001, and should have reached such other issues as defendant may have raised upon its appeal.

Accordingly the order of the Appellate Division should be reversed, with costs, and the case remitted to the Appellate Division, for further proceedings in accordance with this opinion.
* * * * * * * * * * * * * * * * *

Footnote 1: An amended default judgment, including additional names under which Lion Corp. does business, was entered on October 13, 2006.

Footnote 2: The wording of the memorandum was drawn from a report of the Chief Administrative Judge's Advisory Committee on Civil Practice, which recommended the amendment.

Footnote 3: CPLR 313 is a notice statute, applicable only if there is some independent basis for the exercise of personal jurisdiction over the person to be served — in the present case an alleged tortious act within New York State (see CPLR 302 [a] [2]; Yarusso v Arbotowicz, 41 NY2d 516, 518 [1977]).

Comment:  It is also interesting to note that the defendant won at the Appellate Division level, before losing in the Court of Appeals.  Which just goes to prove, once again, that the law is whatever the judge says it is.

Larry Rogak

INTEREST BEGINS TO RUN ON DATE OF LIABILITY AWARD, EVEN IF DAMAGES ARE DECIDED LATER

In August 1996, plaintiff Lindsay Grobman was injured in a car accident; at the time, she was traveling as a passenger in car driven by defendant Adam J. Chernoff and owned by defendant Rhonda Globman.  A bifurcated trial was held in plaintiff's ensuing lawsuit. In June 2000, a jury found defendants 100% at fault in the happening of the accident. The next month, a jury found that plaintiff had suffered a serious injury; namely, "permanent consequential limitation of use of a body organ or member" (see Insurance Law § 5102 [d]), and awarded her damages for future medical expenses, but not for future pain and suffering. Supreme Court entered judgment for plaintiff in the amount of $10,000 in August 2001. This sum included $1,100 for past pain and suffering and $8,900 for future medical expenses.

Plaintiff appealed. The Appellate Division concluded that the jury's "failure to award any damages for future pain and suffering [could not] be reconciled with the finding of permanent injury," and remitted the matter to Supreme Court for a new trial on the issue of damages (Ajoudanpour v Grobman, 2 AD3d 373 [2d Dept 2003]).

On remand, Supreme Court granted defendants' motion to compel arbitration on all issues, including the threshold issue as to whether plaintiff suffered serious injury. Plaintiff appealed again, and the Appellate Division reversed. The court concluded that the jury's determination that plaintiff had sustained serious injury within the meaning of New York's no-fault statute, which neither party challenged in the first appeal, was a final and binding determination that could not be relitigated in arbitration (Grobman v Chernoff, 35 AD3d 658, 659 [2d Dept 2006]).

The case then returned to arbitration solely on the issue of damages. The parties agreed to high/low parameters of $150,000 and $10,000; that "any and all pending litigation arising from this action shall be discontinued with prejudice upon the determination of this matter"; and that damages were at issue. After a hearing, the arbitrator awarded plaintiff a "net amount award" of $125,000. The arbitrator's decision did not mention interest.

Plaintiff subsequently moved and defendants cross moved to confirm the arbitration award and enter judgment. While these motions were pending, defendants' insurance carrier tendered a check for $125,000 as "full and final settlement." Plaintiff retained this check, but did not cash it.

In a decision in August 2008 disposing of the motions, Supreme Court noted that the "principal issue" contested by the parties was "whether plaintiff [was] entitled to interest on the arbitration award computed from the date of the jury verdict in her favor on the issue of liability," or, alternatively, "from the date of the arbitration award." The judge added that "[t]he decision of the arbitrator does not allude to the subject and neither side contends that the question was presented to the arbitrator."

Supreme Court confirmed the award in the amount of $125,000, "with interest . . . at the judgment rate from the date of the award with credit to be given to defendants for the payment tendered, computed from the date of receipt of the check." The judge acknowledged that "[i]n general," where a plaintiff has obtained a favorable jury verdict on liability, "interest on a judgment ultimately entered in a motor vehicle accident case begins to run from the date of . . . the jury's verdict"; however, he added, the usual rule did not govern this case "because the parties agreed to submit the entire dispute to arbitration."

Plaintiff appealed to the Appellate Division for a third time. As relevant here, the court held that plaintiff was entitled to interest on the damages award from the date the jury found defendants liable, citing our decision in Love v State of New York (78 NY2d 540 [1991]) (63 AD3d 786 [2d Dept 2009]). We granted defendants' motion for leave to appeal, and now affirm.

Defendants argue that the parties' arbitration agreement includes a "broad arbitration clause," which empowered the arbitrator to decide the entire controversy, including the amount of any prejudgment interest. While the parties in this case were free to submit the issue of prejudgment interest to the arbitrator, we do not read their arbitration agreement as having done this. As relevant, the agreement says merely "AT ISSUE: Damages" and, as we pointed out in Love, damages and prejudgment interest are not the same thing. Damages compensate plaintiffs in money for their losses, while prejudgment interest "is simply the cost of having the use of another person's money for a specified period" (Love, 78 NY2d at 544 [citing Siegel, NY Prac § 411, at 623 [2d ed]).

Further, as plaintiff observes, there was "no necessity to negotiate whether plaintiff was entitled to interest" as a part of the arbitration agreement because "she already possessed that right as a matter of law as of the date of her liability verdict." Finally, there are no circumstances in this case indicating that plaintiff gave up that right when she agreed to arbitrate damages (cf. Rice v Valentine, 75 AD3d 631 [2d Dept 2010]).

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Comment:  Note that the jury award on liability was made in June 2000.  That means that the arbitrator's award of $125,000 is entitled to 10.5 years of interest.   According to this decision, defendant's insurance carrier tendered a check in the amount of $125,000 after Supreme Court confirmed the arb award -- sometime after 2006, probably around 2007.   So now there may be a new battle over whether the defendant must pay interest on the whole $125,000 from the time the check was tendered until today.  Since these parties have been litigating for over 10 years, I'm sure the legal fees far exceed the amount of the award.

Larry Rogak

I've got three new decisions for you in today's Rogak No-Fault Blog:

1. Fraudulent incorporation: does only the Insurance Department have the power to take action against medical providers?

2. Declaratory judgments: does a judgment against a medical provider, granted on default, holding that it has no right to collect benefits, have res judicata effect in subsequent no-fault suits?

3. Does a blanket denial relieve a medical provider of the obligation to comply with outstanding verification requests?

Read up!  http://www.newyorknofaultadvisor.com/blog.php

Larry Rogak

In today's Rogak No-Fault Blog:

When a claimant fails to show for "pre-claim" IMEs or EUOs, what are the insurer's rights?  Find out!

http://www.newyorknofaultadvisor.com/blog.php

Larry Rogak

In today's Rogak No-Fault Blog:

When a customer's car is in the shop and he takes out a loaner car and gets into an accident, who pays PIP: the customer's own insurer or the loaner car's insurer?

Find out!   http://www.newyorknofaultadvisor.com/blog.php

Larry Rogak