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Dear Clients, Friends and Readers:
Because our law firm was presented with a unique and highly favorable
opportunity for growth, we will be relocating our offices as of
September 6, 2005.
Our new address will be:
Lawrence N. Rogak LLC
P.O. Box 708
Plainview, New York 11803
Our new telephone number will be:
516 576 8500
However, our present telephone number, 516 763 2996, will continue to
operate and calls to that number will automatically forward.
Beginning tomorrow, September 2, and during the week of September 6 -
9, we will be in our transition phase while we set up and unpack, and
get our computers and server wired up at our new location. Our
individual telephone extensions may not be in service until Monday,
If anyone has trouble communicating with us, call my personal cell
phone directly: 516 322 2470.
Thanks for your business and support, and we look forward to serving
you from our new location!
HEATING OIL SPILL CLEANUP SERVICE IS A WARRANTY, NOT INSURANCE
Petro Inc. v. Serio, NYLJ 09/01/05 (Supreme Court, New York County)
Petro sells heating fuel oil in seven states along the East Coast
including New York, and offers customers of its automatic heating
fuel oil delivery plan to subscribe, for an additional fee, to a
program entitled "Clean Up for Accidental Release to the
Environment," also known as the "Care Program." Under the Care
Program, subscribers are provided with inspection, maintenance and
repair of heating fuel oil systems, in an effort to minimize the risk
of fuel oil spills, and are additionally provided with cleanup
services of up to $100,000 in the event that there is a heating fuel
oil spill onto a subscriber's property.
The Insurance Department notified Petro that the Program amounted to
an insurance contract, and therefore, Petro was in violation of
Insurance Law for providing insurance coverage without a license.
Petro brought this action seeking a declaratory judgment that it was
not required to obtain an insurance license for offering the Care
Program because it does not constitute insurance coverage.
Insurance Law §1101 states,
"Insurance contract" means any agreement or other transaction where
one party, the "insurer", is obligated to confer benefit of pecuniary
value upon another party, the "insured" or "beneficiary", dependant
upon the happening of a fortuitous event in which the insured or
beneficiary has, or is expected to have at the time of such
happening, a material interest which will be adversely affected by
the happening of such event.
The Department claimed that the Care Program meets this definition of
an insurance contract because it obligates Petro to "confer [a]
benefit of pecuniary value upon another party [the subscribing
customer]", by absorbing up to $100,000 in cleanup costs, and
furthermore, Petro's duties under the Program are dependant on the
happening of a fortuitous event, an accidental heating fuel oil spill
on a subscribing customer's property. In contrast, Petro argued that
the Care Program is not an insurance contract subject to regulation
by the Department on the grounds that the Care Program constitutes a
service contract or a warranty within the meaning of Insurance Law
§1101(b)(3-a), and is therefore exempted from regulation.
Insurance Law §1101(b)(3-a) states,
. . . a service contract pursuant to article seventy-nine of this
chapter or warranty, service contract or maintenance agreement
conditioned upon or otherwise associated with the sale or supply of
heating fuel shall not constitute doing an insurance business in this
state. NY CLS Ins §1101(b)(3-a).
Insurance Law Article 79, §7901, states that "this article [Article
79] shall not apply to . . . warranties, service contracts and
maintenance agreements that are conditioned upon or otherwise
associated with the sale or supply of heating fuel." NY CLS Ins §7901.
Finally, Insurance Law §7901(k) states that "as used in this article
[Article 79]" a "service contract" means,
. . . a contract or agreement, for a separate or additional
consideration, for a specific duration to perform the repair,
replacement or maintenance of property, or indemnification for
repair, replacement or maintenance, due to materials or workmanship
or wear and tear, with or without an additional provision for
indemnity payments for incidental damages, provided any such
indemnity payment per incident shall not exceed the purchase price of
the property serviced.
Article 79 is the only article in the Insurance Law which provides a
definition for "service contract," otherwise stating that the
definition of "service contract" provided under Insurance Law §7902
(k) is to govern all references made to "service contracts"
throughout the article. While Insurance Law §7901(b)(4) provides that
service contracts related to the sale of heating fuel oil are
otherwise removed from the ambit of regulation of service contracts
under Article 79, in order to qualify as a service contract eligible
for this exemption, the agreement at issue must therefore first meet
the definition of "service contract" under Insurance Law §7902(k).
Alternatively, Insurance Law §1101(b)(3-a) consists of two clauses
which contain a reference to a "service contract," and the clauses
are separated by the word "or." Taking the two clauses together,
stated the Court, the statute can be interpreted to read that a
service contract can be exempt from insurance regulation on two
alternative grounds: under the first clause, as a "service contract"
pursuant to Article 79, or, under the second clause, as a service
contract that is related to the sale or supply of heating fuel oil.
In a letter from sponsoring Assemblyman Farrell to Governor Pataki's
office, he states,
"This bill [2000 Amendment] clarifies the Legislature's intent to
exclude fuel oil company warranties, service contracts and
maintenance agreements from operation of the Insurance Law . . .
Such contracts may provide for the maintenance of equipment as well
as clean up services . . . . this provides an effective means for the
fuel oil supplier to promptly detect a fuel oil leak . . . such fuel
oil service contracts, thus, provide both an effective means to
prevent or contain spillage or leaks as well as increased protection
to the citizens of New York . . . . . . if such contracts were not
made available by fuel oil suppliers, it is unlikely that any cleanup
services would or could be performed by the fuel oil purchaser in the
event of an oil leakage or spill. . . . if the fuel oil purchaser
were required to purchase an insurance contract to cover maintenance
and cleanup costs, it would significantly add to the cost of owning a
fuel oil unit."
Senior Assistant Majority Leader Velella wrote, in the legislative
history, that "the Legislature's intent was not to include
maintenance agreements issued by companies that deliver fuel oil or
propane because issuance of such agreements was only ancillary to
their primary business of delivering oil."
"Thus," held the Court, "by definition, these service contracts were
not to be considered as insurance and therefore exempt from the
provisions of the law. This bill merely clarifies the original
legislative intent that warranties, service contracts and maintenance
agreements associated with sale or supply of heating fuel are exempt
from the service contracts law."
"The most logical interpretation of these letters" from the
Legislature, stated the Court, "is that to be exempt from regulation,
the agreements at issue necessarily have to first qualify as a
warranty, maintenance agreement or service contract."
"Accordingly, the court concludes as a matter of law that in order to
qualify as a service contract under Insurance Law §1101(b)(3-a), the
agreement must meet the definition of 'service contract' under
Insurance Law §7902(k)."
Insurance Law §7902(k) defines a "service contract" as,
. . . a contract or agreement, for a separate or additional
consideration, for a specific duration to perform the repair,
replacement or maintenance of property, or indemnification for
repair, replacement or maintenance, due to materials or workmanship
or wear and tear, with or without an additional provision for
indemnity payments for incidental damages, provided any such
indemnity payment per incident shall not exceed the purchase price of
the property serviced . . . Service contracts may also include
contracts to repair, replace or maintain residential appliances and
"Because the Care Program's coverage of up to $100,000 far exceeds
the costs of most customer's fuel oil system, comprised of tanks and
pipes, the Care Program does not constitute a service contract under
Insurance Law §7902(k), and therefore, the Program is necessarily not
entitled to the statutory exemption for service contracts related to
the sale of heating fuel oil under Insurance Law §1101(b)(3-a)."
But is the Care Program a warranty? "Under the first prong of the
inquiry developed by courts to determine whether a service and
maintenance plan constitutes a warranty contract or an insurance
contract subject to regulation, dubbed the 'substantial control'
test, the court determines whether the provider's liability for loss
under the plan at issue is triggered by the happening of a fortuitous
event. Under the substantial control test, an event is deemed
fortuitous if its occurrence is beyond the substantial control of
either party. Determination of whether coverage is dependant on
fortuitous events is generally an issue of law for the court to
decide. Furthermore, plans providing for the replacement or
maintenance of parts not actually manufactured or sold by the
coverage provider, often termed 'third party product' warranties, are
generally considered insurance contracts and not warranties, because
the actual service provider is a third party to the transaction
between the seller of the product and the consumer, and therefore the
provider's coverage obligation is seen as unrelated to the quality or
efficiency of the product being manufactured or sold, and thus the
plan is deemed to be the assumption of losses caused by fortuitous
In Gerenstein v. Weiner, 9 Misc2d 259, 260 (NY App Term 1957), an
agreement providing for the servicing of neon signs covering the
replacement of parts not manufactured or sold by the servicing
company for a monthly fee was held to be an insurance contract
because the provider's liability was not related to defects in
quality but was the assumption of a fortuitous risk.
"'Third-party product' warranties may still be considered warranty
contracts for the purposes of insurance regulation exemption,
however, as long as there is a sufficient relationship between the
service provided by the third party provider and the quality of the
product sold by another, and the service provider's liability is
otherwise not dependent on the happening of fortuitous events."
Petro argued that its inspections, maintenance and repair of a
customer's heating fuel oil system under the Care Program prevents
and limits oil spills. Further, Petro argues that although the
Program does not exclude every fortuitous event imaginable, the
Program only incidentally involves risks arising from fortuitous
events. In the event that Petro is unable to prevent a heating fuel
oil spill, whether due to a service error, or wear and tear, Petro
provides for cleanup under the Care Program by sending its own
technicians or contracting out the work.
"Accordingly, Petro has substantial control over the types of events
that would otherwise subject it to liability, because the purpose of
its routine inspections and maintenance of a customer's heating fuel
oil system and monitoring of the customer's oil usage after
installation, is to detect defects that, if left undetected, would
ultimately lead to an oil spill. Additionally, the services provided
by Petro have a substantial relation to the heating fuel oil it
sells, because it ensures that its product, heating fuel oil, does
not spill onto a customer's property, causing environmental and
property damage. Given that the inspection, maintenance and repair
services Petro provides under the Care Program is substantially
related to the quality of the heating fuel oil systems itself, Petro
has at least partially met the requirements of the 'substantial
Petro additionally maintained that the majority of heating fuel oil
spills are not caused by "acts of God," but rather by wear and tear
in heating fuel oil systems. Petro argued that in the seven years
since the Care Program's inception, out of roughly 1,750 heating fuel
oil spills, including at least 59 such occurrences in New York alone,
not one spill was the result of a catastrophic act of nature, or 'act
of God.' Because Petro has since included an express exclusion
for "acts of God" to the Care Program, "the court is satisfied that
Petro is not subjecting itself to liability for unforeseen risks..."
"The court rejects the Department's argument that the Care Program
embraces a level of fortuity not tolerated in Insurance Law in the
absence of a regulated insurance contract, including its
dissatisfaction with the recently added exclusion for 'acts of God,'
because, as the Department argues, the Program still does not exclude
fortuitous events such as damage accidentally or intentionally caused
by a third party or by an animal."
In In re Feinstein, 36 NY2d 199, the Court of Appeals held that plans
for prepaid legal services operated through a welfare trust fund and
a local bar association for the benefit of union members did not
constitute insurance, in part, because the rendition of legal
services was not generally triggered by fortuitous events, although
some degree of fortuity is indeed involved in the need for legal
services. As the Feinstein court noted, "terms like fortuitousness in
the law, as with the word accident, have always caused conceptual
difficulties . . . in this area it is easy to slip into
metaphysical . . . distinctions." "While Feinstein's holding was
subsequently narrowed to apply primarily to the rendition of prepaid
legal services, See State v. Blue Crest Plans, Inc., 72 AD2d 713, 714
(1st Dept 1979), its comment on the difficulty in adhering to a rigid
definition of fortuity buttresses Petro's argument that a relatively
minimal degree of fortuity in a service plan will otherwise not
render a warranty contract an insurance contract."
"Therefore, as the court has found that the Care Program meets
the 'substantial control' test, in that Petro has substantial control
over the happening of events that would trigger its liability, the
Care Program is a warranty contract, and under Insurance Law §1101(b)
(3-a), will not be considered to be 'doing an insurance business,' as
it is a ' . . . warranty . . . conditioned upon or otherwise
associated with the sale or supply of heating fuel . . . ' That the
exclusions contained in the Care Program, for, inter alia, 'acts of
God,' in addition to damages caused by war or revolution, and by the
customer's negligence or recklessness, do not cover every conceivable
act which could result in damage does not otherwise render Petro's
liability dependent on the happening of fortuitous events, because
the Program's minimal embrace of fortuity is reasonable. Accordingly,
the Care Program is exempt from insurance regulation under Insurance
Law §1101(b)(3-a) as a warranty contract that is associated with the
sale of heating fuel oil."
"Given the benefits identified by the Legislature as a basis for
drafting a statutory exemption to these agreements, the court finds
that the equities tip in favor of allowing the continued availability
to the subscribing public agreements such as the Care Program.
Therefore, the court declines to enjoin Petro from issuing contracts
under the Care Program."
"Finally, the Court is mindful that in finding that Petro is not in
violation of Insurance Law as a basis for denying the motion for
preliminary judgment, Petro is entitled to a declaratory judgment to
The court therefore "adjudged and declared that the Care Program is
not a contract of insurance under the New York Insurance Law."
WITHOUT POLICY AS EVIDENCE, INSURER CAN'T PROVE EXCLUSION
DiCristi v. Liberty Mutual Ins. Co., NYLJ 9/02/05 (Supreme Court,
Kings County) (RIVERA, j)
In December of 2002, plaintiff commenced a personal injury suit in
Queens County Civil Court against Delroy Stephens. The complaint
alleged that on April 8, 2002, plaintiff was driving in Kings County
when he was struck and injured by a vehicle owned and operated by
Delroy Stephens. A default judgment in the amount of $25,000.00 was
granted to plaintiff. Liberty Mutual admitted that Delroy
Stephens'car was covered by an automobile insurance policy issued by
them. Liberty notified their insured and the plaintiff that they
were disclaiming coverage based on an exclusion provision of the
insurance contract pertaining to use of the vehicle as a public or
livery conveyance. There is no dispute that a police accident report
was prepared by a New York City police officer which indicated that
the vehicle which struck Richard Dicristi and left the scene was
being operated as a "dollar van."
Pursuant to Insurance Law §3420(d) injured claimants have an
independent right to seek coverage under a policy of insurance
regardless of whether the actual insureds have complied with its
coverage provisions. The court ordered a hearing to determine the
timeliness and validity of the disclaimer. On April 12, 2005, the
court conducted such a hearing. Liberty had the burden to prove the
existence of the disclaimer, the timely notice of its intention to
disclaim coverage, and its validity. Liberty produced evidence in
the form of testimony from its employees who investigated the
accident report and the insurance coverage. However, Liberty did not
produce as evidence, the original contract.
"Without the insurance contract itself, any recitation of the
contract's terms through testimony or other documents in evidence is
rank hearsay and contrary to the best evidence rule," held the
Court. "The absence of Liberty Mutual's insurance policy thus
prevents any finding that a disclaimer under that policy is valid as
a very threshold matter. As a result, there is no need not address
the issue of the timeliness of defendant's disclaimer."
"Defendant's admission of coverage of the offending vehicle is all
that remains. There is no issue fact as to defendant's liability
pursuant to Insurance law §3420(a)(2) for the judgement entered
against its insured based on the insured's negligent operation of
Plaintiff was granted summary judgment for $25,000 plus interest
from the date of the judgment.
Happy Labor Day Weekend!
Various internet chain emails urge people to fight rising gasoline
prices -- and terrorism -- through boycotts of certain gasoline
brands, boycotting gas purchases on certain days, etc. Are any of
these emails on the money?
Not according to Snopes.com, a website that examines and debunks
This is what Snopes.com has to say about these emails:
Rumor: Spurning gasoline from Shell, Chevron, Texaco, Exxon, and
Mobil will cut off the funding of terrorists.
[These examples of email gas rumors are cited by snopes:]
WHERE TO BUY YOUR GAS, THIS IS VERY IMPORTANT TO KNOW. READ ON
Why didn't George W. think of this? Gas rationing in the 80's worked
even though we grumbled about it. It might even be good for us! The
Saudis are boycotting American goods. We should return the favor. An
interesting thought is to boycott their GAS.
Every time you fill up the car, you can avoid putting more money
into the coffers of Saudi Arabia. Just buy from gas companies that
don't import their oil from the Saudis.
Nothing is more frustrating than the feeling that every time I fill-
up the tank, I am sending my money to people who are trying to kill
me, my family, and my friends.
I thought it might be interesting for you to know which oil
companies are the best to buy gas from and which major companies
import Middle Eastern oil :
Shell............................. 205,742,000 barrels
Chevron/Texaco.................... 144,332,000 barrels
Exxon /Mobil...................... 130,082,000 barrels
Marathon/Speedway................. 117,740,000 barrels
If you do the math at $30/barrel, these imports amount to over $18
BILLION! We're now at $53+ a barrel.
Here are some large companies that do not import Middle Eastern oil:
All of this information is available from the Department of Energy
and each is required to state where they get their oil and how much
they are importing.
But to have an impact, we need to reach literally millions of gas
It's really simple to do.
Now, don't wimp out at this point... keep reading and I'll explain
how simple it is to reach millions of people!!
I'm sending this note to about thirty people.
If each of you send it to at least ten more (30 x 10 = 300)... and
those 300 send it to at least ten more (300 x 10 = 3,000) ... and so
on, by the time the message reaches the sixth generation of people,
we will have reached over THREE MILLION consumers!
If those three million get excited and pass this on to ten friends
each, then 30 million people will have been contacted!
If it goes one level further, you guessed it ..... THREE HUNDRED
Again, all you have to do is send this to 10 people.
How long would all that take?
If each of us sends this e-mail out to ten more people within one
day, all 300 MILLION people could conceivably be contacted within
the next eight days!
(I don't like chain e-mail, but I think this is worth while)
Nothing is more frustrating to me than the feeling that every time I
fill-up the tank, I am sending my money to people who are trying to
kill me, my family, and my friends. It turns out that some oil
companies import a lot of middle eastern oil and others do not
import any. I thought it might be interesting for Americans to know
which oil companies are the best to buy their gas from.
Here is the list:
Top 4 companies that import middle eastern oil (for the period
9/1/00 - 8/31/01). By the way, 86% of all middle eastern oil comes
from Saudi Arabia and Iraq.
Shell 205,742,000 barrels of oil
If you do the math at $30/barrel, these imports amount to about $18
billion. That's a lot of money.
Here are some large companies that do not import much Middle Eastern
Citgo 0 barrels of oil
BP Amoco 62,231,000
All this information is available from the Department of Energy and
can be easily documented. Refineries located in the U.S. are
required to state where they get their oil and how much they are
importing. They report on a monthly basis.
[Here, Snopes comments on the above sample emails]:
Origins: If it weren't for all the gross statistical errors and
the naïve grasp of oil industry economics exhibited here, this piece
might actually have some validity.
Although the message quoted above doesn't address where (outside of
the Middle East) we import oil from, many people come away from
reading it with the mistaken impression that most of the USA's crude
oil is imported from the Middle East. It isn't. According to some
recent figures regarding crude oil imports, only 31% of the USA's
imports came from Arab OPEC countries (Algeria, Iraq, Kuwait, Qatar,
Saudi Arabia) in January 2002. The top six countries (by percentage
of total USA imports) supplying crude oil to the USA in January 2002
Saudi Arabia: 16.9%
(Henceforth, our definition of "Middle East" will encompass the five
countries identified by the U.S. Department of Energy as "Arab OPEC"
nations: Algeria, Iraq, Kuwait, Qatar, and Saudi Arabia. This
definition does not include other oil-exporting countries identified
by the DoE as "Persian Gulf" exporters, such as Bahrain, Iran, and
the United Arab Emirates.)
Moving along, we find that nearly all of the statistics offered in
the piece quoted above are erroneous or outdated:
"By the way, 86% of all middle eastern oil comes from Saudi Arabia
Sorry, but no. According to the... U.S. Department of Energy's (DoE)
web site, only 56% of the oil exported from the Persian Gulf in 2001
came from Saudi Arabia and Iraq, and that figure is probably even
lower now that Iraq has cut its oil exports in protest of Israel's
recent actions on the West Bank.
"Here are some large companies that do not import much Middle
Citgo 0 barrels of oil
BP Amoco 62,231,000"
Wrong again. The DoE tracks oil imports by company each month, and
although the raw data are a little hard to follow (fortunately, the
DoE also provides an explanation of their symbols), for February
2002 the totals were as follows:
CITGO is a wholly-owned subsidiary of the national oil company of
Venezuela, so naturally most of its crude oil comes from there.
However, in February 2002 CITGO also imported from Middle Eastern
countries in the following quantities:
Iraq: 1,342,000 barrels
Kuwait: 437,000 barrels
Conoco imports primarily from Mexico, Venezuela, and Canada, and not
from Middle Eastern countries. However, they are planning to merge
with Phillips, which does import from Middle Eastern countries.
BP imports from a variety of oil-producing countries, but in
February 2002 BP North America also imported from Middle Eastern
countries in the following quantities:
Iraq: 470,000 barrels
Kuwait: 415,000 barrels
Saudi Arabia: 2,123,000 barrels
Algeria: 3,853,000 barrels
Phillips also imports from a variety of oil-producing countries, but
in February 2002 Phillips imported from Middle Eastern countries in
the following quantities:
Iraq: 717,000 barrels
Saudi Arabia: 1,100,000 barrels
Sinclair imports from Canada, not the Middle East.
Sunoco imports primarily from Canada, Angola, and Nigeria, not
Middle Eastern countries.
So, "doing the math" and multiplying these monthly figures by
$30/barrel and projecting them over the course of a year, supporting
only the companies listed above would still be putting $3.76 billion
dollars per year in the coffers of Middle Eastern
Statistics aside, the glaring fallacy here is the suggestion that we
could possibly buy our gasoline only from these selected companies.
This notion is like claiming that we could put the big grocery
chains out of business if we all bought our food only from small mom
& pop stores, but ignoring the fact that these small shops couldn't
possibly come close to supplying all our grocery needs. The oil
companies named above are relatively small (which is a large part of
the reason why they don't necessarily import from the Middle East)
and could not satisfy the demand that would be created if a
significant portion of the USA's consumer base were to shun all the
largest oil companies, unless they bought up the output of the
companies we were supposed to be avoiding in the first place (or,
alternatively, unless they raised their prices sky-high).
Moreover, the idea that oil companies sell gasoline only through
their branded service stations, and therefore if you don't buy
gasoline from Shell-branded gas stations you're not sending money to
Shell (or, by extension, the Middle East), is wrong. Oil companies
sell their output through a variety of outlets other than their
branded stations; as well, by the time crude oil gets from the
ground into our gasoline tanks, there's no telling exactly where it
came from. (A good deal of the crude oil purchased from Russia, for
example, is oil from Iraqi fields sold through Russian middlemen.)
As the St. Louis Post-Dispatch noted:
Economics Prof. Pat Welch of St. Louis University says any boycott
of "bad guy" gasoline in favor of "good guy" brands would have some
unintended (and unhappy) results.
Although foreign relations wax and wane, Welch says, the law of
supply and demand is set in stone. "To meet the sudden demand," he
says, "the good guys would have to buy gasoline wholesale from the
bad guys, who are suddenly stuck with unwanted gasoline."
So motorists would end up buying Arab oil anyway — and paying more
for it, because they'd be buying it at fewer stations.
And yes, oil companies do buy and sell from one another. Mike Right
of AAA Missouri says, "If a company has a station that can be served
more economically by a competitor's refinery, they'll do it."
Right adds, "In some cases, gasoline retailers have no refinery at
all. Some convenience-store chains sell a lot of gasoline -- and buy
it all from somebody else's refinery."
St. Louis University's Welch says, "The e-mail presupposes that you
know who the supplier is, and that's not always the case."
Finally, what this scheme proposes is merely a symbolic solution
rather than a practical one, because even if the USA stopped
importing oil from the Middle East, other countries will still
purchase it. (Japan alone, for example, generally buys as much or
more oil from countries such as Saudi Arabia and Kuwait than the USA
Complex problems rarely lend themselves to simple, painless answers.
Simply shifting where we buy gasoline isn't nearly as good a
solution as the much tougher choice of sharply curtailing the amount
of gasoline we buy.
And that's the lowdown on the gasoline boycott emails. Ultimately,
the two most powerful forces to bring down oil prices are the two
things that bring down prices for every other product: lower demand,
Demand for gasoline will not go down by much until the majority of
vehicles on the road get extremely high, which isn't going to happen
soon. In any event, the sheer number of vehicles on the road
increases every year, reducing the net effect of higher gas mileage
A better solution is to come up with an alternative fuel. When
people can choose between gasoline powered vehicles and, say,
natural gas, electric or hydrogen cell cars, gasoline sales will get
hurt and prices will drop -- but never much lower than the relative
cost of the other fuels.
The free market being what it is, products will sell for the highest
amount that people are willing to pay. When they stop buying,
that's when things go on sale. There is never a sale on umbrellas
when it's raining, and gas prices won't drop until sales do.
Now I can climb into my Chevy Suburban and drive away for the
Law Schools from all over the country are accepting law
students from Tulane and Loyola who have been displaced by Katrina.
Go to the following site for more info and please pass this info on
This information was contributed by:
Delores J. Simmons
Staff Attorney to Chief Judge UW Clemon
Federal District Court, Northern District of Alabama
Hugo Black Courthouse
1729 - 5th Ave North
Birmingham, Alabama 35203
PROPERTY OWNER AND ARCHITECT NOT LIABLE FOR BARRICADE COLLAPSE AT
HERNANDEZ v. RACANELLI CONSTRUCTION CO., NYLJ 9/02/05 (Supreme Court,
Bronx County) (WEBBER, j)
On April 29, 2002, plaintiffs Maria Hernandez and Jennifer Cordero
allegedly sustained personal injuries when they were struck on the
head by wooden boards that fell during the demolition of a building
while walking past a construction site located at 2746-56 East
Tremont, Bronx, NY. The falling plywood came from a fence or
barricade that was built to secure the construction site. The
premises in question was owned by MENLO. On October 2, 2001 and on
February 24, 2004, MENLO and UNICORP executed two Development
Agreements to develop an Eckerd Drug Store. On October 16, 2001,
NIEGO entered into a contract with UNICORP to obtain building permits
from the Department City of New York. UNICORP then hired RACANELLI as
the general contractor. Thereafter RACANELLI hired GRANDVIEW as a
subcontractor to remove debris and perform the demolition of the old
"There is no genuine issue of material fact as to whether MENLO and
NIEGO controlled, supervised or were involved in the work performed
at the construction site that caused injury to the plaintiffs," held
the Court. "Specifically, there is no showing that the construction
site located at 2746-56 East Tremont nor the wooden fences that
surrounded such property was within MENLO's and NIEGO's dominion and
control. The record indeed shows that MENLO and NIEGO never exercised
or attempted to exercise any oversight over the work performed at the
A property owner is entitled to common-law indemnity against the
construction manager, regardless of whether any actual negligence by
the construction manager had been proven, where it is undisputed that
the owner did not exercise any actual control or supervision over the
work, and hired the contractor to exercise such control and
supervision. "Here, it is undisputed that MENLO was an out of
possession owner during the time of the accident..... It has been
held that a general contractor has a duty of general supervision over
the work and is responsible for keeping the premises' safe. It is
clear that in this case RACANELLI failed to discharge their duty as a
general contractor to the plaintiffs.
"RACANELLI built the barricade fence that collapsed and injured the
plaintiffs.... Furthermore, when an employee or independent
contractor assumes the duty of performing an act which is dependent
upon his personal care and attention, and an injury arises by their
lack of care and attention, such person is liable to the owner of the
property if he is called upon to pay and does pay the damages arising
from such negligence. Specifically, when an owner of property is held
to respond in damages for injuries to another merely because of his
ownership and not by reason of participation in the negligence of the
principle wrongdoer, he is entitled to indemnification from the one
primarily at fault."
"Employees from GRANDVIEW were in the process of demolition and
removing debris when an excavator they were using malfunctioned
causing the barricade fence to collapse unto the sidewalk.
Furthermore, a laborer from GRANDVIEW testified that at the time of
the accident he was trying to direct traffic into the street while
the demolition by the excavator was taken place..... Clearly, it was
GRANDVIEW and RACANELLI and not MENLO or NIEGO that was controlling
and supervising the work performed at the construction site during
the time of the accident. As such, this Court grants indemnification
to MENLO ASSOCIATES from UNICORP NATIONAL DEVELOPMENTS, INC. and
In respect to Niego's Motion for summary judgment, the other
defendants argued that as the applicant for a fence permit, NIEGO
agreed to comply with all applicable laws and rules with respect to
construction of the fence or to see that other did so. "This Court
disagrees. Contrary to GRANDVIEW's and ADMIRAL's argument, the record
as a whole simply does not raise a question of fact as to whether
NIEGO designed, directed or controlled the barricade fence that
collapsed and injured the plaintiffs. NIEGO merely assisted RACANELLI
in obtaining a fence permit. In moving for summary judgment, NIEGO
contends that his contract with UNICORP did not impose upon him any
duties or obligations of the construction site in question. This
Court agrees. There is no material issue of fact as to whether NIEGO
designed, supervised, operated, or controlled the barricade fence
that collapsed and caused injury to the plaintiffs. NIEGO'S contract
with UNICORP clearly states that it would 'not be responsible, have
control, or be in charge of construction and shall have no
responsibility for construction means, methods, techniques, or
sequences of procedure for safety of [sic] precautions and programs
in connection with the work, for the acts or omissions of the
contractors, subcontractor, or any other person performing any of the
work, or for failure of any of them to carry out of the work in
strict accordance with the drawings.' It is evident from the
aforesaid contractual provisions that NIEGO had no supervisory powers
"Furthermore... architects are under no duty to supervise unless they
expressly agree to do. According to both Labor Law §§240 and 241
architects are exempt from liability when their services do not
involve directing or controlling the work in question..... As such,
this Courts holds that NIEGO'S activities did not extend beyond
obtaining permits from the Building Department of the City of New
York and therefore is entitled to summary judgement as a matter of
REINSURER FOLLOWS THE FORTUNES OF CEDING INSURER, EVEN IF UNDERLYING
SETTLEMENT IS ALLOCATED TO MAXIMIZE REINSURANCE RECOVERY
Travelers Casualty & Surety Co. v. Gerling Global Reinsurance Corp.
of America, NYLJ 9/06/05 (2nd Circuit)
In reinsurance, does the "follow-the-fortunes" doctrine apply to the
ceding insurer's post-settlement allocation? The Federal District
Court said no, but the Second Circuit reversed and said yes.
After Travelers settled its insurance dispute with its underlying
insured, Owens-Corning Fiberglas Corporation ("OCF"), it allocated
the settlement amount among the OCF policies in a way that implicated
its own reinsurance policies with Gerling, a reinsurer. The district
court concluded that because Travelers' settlement with OCF suggested
that Travelers had accepted, at the time of settlement, a different
allocation position from the position it asserted for reinsurance
purposes, Gerling was not required to honor that allocation under
the "follow-the-fortunes" doctrine.
Between 1953 and 1972, OCF, the world's second-largest manufacturer
of asbestos-containing products, manufactured and distributed Kaylo,
an insulation product containing asbestos. OCF also installed Kaylo
at numerous building sites around the country.
From 1952 through 1979, Travelers insured OCF for bodily injury and
property damage through a series of annual primary policies. With
respect to claims for bodily injury, the primary policies
distinguished between "products" and "non-products" claims. Products
coverage protected OCF from claims for asbestos-related injuries that
occurred either after asbestos products were placed into the stream
of commerce or after an asbestos-related operation was completed. Non-
products coverage protected OCF from claims for asbestos-related
injuries resulting from asbestos exposure on OCF's premises or during
its business operations, for example, injuries occurring during the
installation or removal of asbestos products. Each primary policy had
a $1 million "per occurrence" limit of liability, regardless of
whether the claims arising from that occurrence fell within the
products or non-products category. Thus, for any single occurrence,
Travelers was not required to pay more than $1 million under any
single primary policy.
Each primary policy also had a $1 million "aggregate" limit of
liability -- but for products coverage only. Thus, if claims arising
from multiple occurrences triggered products coverage, the most that
Travelers had to pay under any single policy was $1 million. Once the
aggregate limit was reached, the policy was exhausted, regardless of
any additional occurrences. However, if claims arising from multiple
occurrences triggered non-products coverage, then Travelers was
exposed to unlimited liability; each occurrence was subject to a $1
million limit on liability, but there was no cap on total liability.
Regardless of how much Travelers had paid for previous non-products
occurrences under a single policy, each additional non-products
occurrence under that policy subjected Travelers to liability anew.
During the same period, Travelers also issued to OCF a number of
excess policies that provided the layer of coverage directly above
the primary policies. Each excess policy included a $25 million "per
occurrence" limit on liability. The combined "per occurrence" limit
of all of the OCF-Travelers' policies, both primary and excess, was
Although the parties disagreed as to whether or not Travelers
obtained reinsurance on the primary OCF policies, it was undisputed
that Travelers obtained reinsurance on its excess policies from a
number of reinsurers. Relevant to this litigation were five
facultative reinsurance certificates that Travelers purchased from
Gerling covering specified portions of the excess policies Travelers
had issued to OCF for the period 1975 to 1977. As is customary, those
certificates contained provisions under which Gerling agreed to be
bound by any loss settlements entered into by Travelers with the
underlying insured, so long as they fell within the terms and
conditions of the original policy and of the certificate.
Beginning in the 1970s, asbestos manufacturers faced a crush of
lawsuits for asbestos-related injuries, and OCF was no exception.
Until the early 1990s, OCF categorized its asbestos-related claims as
falling within the products category, and as arising from a single
occurrence, when submitting claims to Travelers. But by the early
1990s, Travelers had paid OCF more than $400 million, which included
indemnification for one set of occurrence limits as well as defense
costs, and OCF's products coverage had been exhausted. OCF then began
to submit its asbestos claims as non-products claims. Travelers,
however, disputed any additional coverage for these claims. In March
1993, OCF and Travelers entered into arbitration. OCF argued that (1)
the claims arising from OCF's contracting operations fell under non-
products coverage, and (2) each of the claims, or at least each set
of claims arising from a particular job site, was a separate
occurrence. Travelers responded that (1) OCF had not adequately
documented its assertion that these were non-products claims, and (2)
all of OCF's claims, whether products or non-products, arose from a
single occurrence. Were Travelers correct as to either assertion, it
would not owe OCF any additional amount, since (1) under the terms of
the policies, OCF had already reached the aggregate limit on
liability for products claims, and (2) Travelers had already paid one
set of occurrence limits.
Prior to any final, arbitral determination, OCF and Travelers
settled. Travelers agreed to pay roughly $273.5 million, which was
approximately one additional occurrence limit. OCF and
Travelers "explicitly disclaimed any particular theory of coverage,"
and they never reached agreement as to whether the claims arose from
a single occurrence or multiple occurrences.
Although the settlement did not resolve the occurrence issue,
Travelers had to choose an occurrence position in order to allocate
the settlement among its primary and excess OCF policies. It decided
to allocate most of the settlement amount as a single, additional
occurrence of non-products claims, which it represented as best
reflecting the OCF-Travelers compromise. Using what is commonly known
in the industry as the "rising bathtub" methodology, Travelers
allocated the settlement amount evenly among policy years. Because
each year's primary policy had a $1 million per occurrence limit, the
primary polices were quickly exhausted. The remaining amount was then
spread among the excess policies, including those reinsured by
In May 2001, after Gerling had refused to pay the roughly $4.4
million that Travelers billed as Gerling's share of the OCF
settlement, Travelers filed the breach-of-contract suit giving rise
to this appeal. Gerling's refusal to pay stemmed from its
disagreement with Travelers over the allocation method; specifically,
Gerling insisted that the allocation be made on a multiple-
occurrence, rather than a single-occurrence, basis. "Its reasons for
doing so," wrote the Court, "were obvious: given the lack of an
aggregate limit on liability for non-products coverage, allocation on
a multiple-occurrence basis would necessarily assign a larger portion
of the settlement amount to the primary policies, and a much smaller
portion to the excess policies that Gerling had reinsured."
Gerling moved for summary judgment, asking the district court to find
that Gerling was not required to follow Travelers' post-settlement,
single-occurrence allocation. The district court granted Gerling's
motion in September 2003, finding that the follow-the-fortunes
doctrine did not apply.
The district court's decision was based upon its understanding of the
purpose of the follow-the-fortunes doctrine, which is to prevent the
reinsurer from "second-guessing" the settlement decisions of the
ceding company. Absent such a rule, an insurance company would be
obliged to litigate coverage disputes with its insured before paying
any claims, lest it first settle and pay a claim, only to risk losing
the benefit of reinsurance coverage when the reinsurer raises in
court the same policy defenses that the original insurer might have
raised against its insured.
"The district court construed the follow-the-fortunes doctrine as
protecting the cedent, where the cedent relinquishes position A in
its dispute with the original insured, who advocates position B. In
such situations, the reinsurer is precluded from denying coverage on
the ground that the cedent should have insisted on position A.
Although the settlement between OCF and Travelers followed this
formulation in that Travelers, in order to settle, did not insist
upon its initial, single-occurrence position, Travelers nevertheless
allocated the claims according to the very single-occurrence position
it had, according to Gerling, given up. Gerling objected to
Travelers' allocating the settlement on the basis of a position that
Travelers, in Gerling's view, had necessarily relinquished in the
process of settling. Instead, Gerling argued, Travelers should have
allocated the settlement according to the multiple-occurrence
position that Gerling believed Travelers had implicitly accepted in
order to settle with OCF, even though the settlement itself expressly
disclaimed resolution of the occurrence issue. In denying reinsurance
coverage, Gerling thus argued it was not challenging the terms of the
settlement, but was rather seeking to enforce them. The district
court agreed and held, in substance, that because there was
no 'second-guessing' by Gerling, the follow-the-fortunes doctrine was
Travelers argued that under the Second Circuit's holding in North
River II, a reinsurer is required to follow the cedent's post-
settlement allocation, whether or not the allocation reflects a
position initially taken by the cedent as to a particular coverage
issue (here, number of occurrences) in the underlying insurance
dispute. Travelers argued in addition that it is entitled not just to
have summary judgment against it vacated, but to an award of summary
judgment in its favor because Gerling cannot establish any other
basis upon which to deny application of follow-the-fortunes.
The appeals in North River I and II, on which Travelers relied in
support of its claim that follow-the-fortunes should apply, were
pending while this case was before the district court. The Second
Circuit rendered its decision in North River II after summary
judgment was granted to Gerling. The district court initially held
Gerling's summary judgment motion in abeyance, noting that this case
involved "precisely the same issues about the applicability of the
follow the fortunes doctrine" as the North River litigation. In the
end, however, the district court granted summary judgment to Gerling
some six months before the 2nd Circuit rendered North River II, "thus
acting without the benefit of our decision in that case. In any
event, we believe that North River II is not only relevant to the
case at bar, but is in fact controlling."
The North River litigation also involved OCF non-products asbestos
claims. North River had provided OCF with several layers of excess
insurance, ranging from $26 million to $76 million (i.e., the layers
of insurance directly above the excess Travelers policies at issue in
the instant litigation). ACE provided facultative reinsurance to
North River, primarily for the lowest layer of coverage, $26 to $30
million. Like Travelers, North River ultimately settled with OCF --
on the same underlying non-products claims as those at issue here --
for approximately $335 million. And like Travelers, North River used
the "rising bathtub" methodology to allocate the settlement amount
and assumed a single occurrence for each year of coverage. As a
result, the settlement was allocated almost entirely to the layer of
coverage reinsured by ACE. Like Gerling, ACE, upon receiving its bill
for $49 million, disputed North River's allocation methodology.
"Specifically, ACE disputed the post-settlement allocation because it
differed from the pre-settlement analysis North River had conducted,
which had considered various litigation outcomes, and had identified
the potential for greater risk of loss to higher policy levels not
reinsured by ACE. ACE argued 'that the follow-the-fortunes doctrine
either does not apply at all to the issue of how an insurer chooses
to allocate its settlement payment among various policies or must at
least be consistent with the theory of allocation (if discernible)
that the insurer used in negotiating the settlement with its
insured . . . .'"
The district court rejected ACE's argument, noting that "the attempt
to distinguish settlement from allocation would undermine the
entire 'follow the settlements' doctrine . . . . [T]he determination
of which among several policies covers which particular loss . . . is
not much different from the more general decision that the losses are
covered by the policies . . . . Review of either type of decision has
an equal likelihood of undermining settlement and fostering
On appeal, the Second Circuit affirmed. "Of particular relevance to
the present case is the 'mutuality of interest' argument raised by
ACE: 'ACE argues that North River's interests in allocating the loss
to it are in conflict with those of ACE and thus a fundamental
premise of the follow-the-settlements doctrine, mutuality of
interest, is missing.'"
The Second Circuit "squarely rejected ACE's argument: The existence
of a mutuality of interest is not the only factor underlying the
follow-the-settlements doctrine. In fact, the main rationale for the
doctrine is to foster the goals of maximum coverage and settlement
and to prevent courts, through de novo review of the cedent's
decision-making process, from undermining the foundation of the
cedent-reinsurer relationship." The Court held that "the follow-the-
fortunes doctrine extends to a cedent's post-settlement allocation
decisions, regardless of whether an inquiry would reveal an
inconsistency between that allocation and the cedent's pre-settlement
assessments of risk, as long as the allocation meets the typical
follow-the-fortunes requirements, i.e., is in good faith, reasonable,
and within the applicable policies."
"The similarities between this case and North River are striking and
ultimately decisive. Both cases involve OCF non-products asbestos
claims. In both cases, post-settlement allocations were made using a
single-occurrence, rising-bathtub methodology. In both cases, the
reinsurer challenged that allocation methodology, which resulted in
higher liability for the reinsurer than would have resulted from an
alternative methodology. And in both cases, the reinsurer's challenge
was based upon the fact that the ultimate allocation differed from an
earlier position allegedly taken by the cedent."
"The one factual distinction between the cases does not alter North
River's relevance. In North River I and II, ACE's challenge was based
on the pre-settlement risk analysis conducted by North River, which
differed from its post-settlement allocation position. In this case,
Gerling's challenge is based on the difference between the concession
Travelers presumably made by settling with OCF (i.e., its acceptance
of a multiple-occurrence position) and its post-settlement, single-
occurrence allocation, which -- according to Gerling -- was the
position it had abandoned in its settlement negotiations. But this
factual distinction does not affect the applicability of the
rationale of North River, which is that a cedent's post-settlement
allocation is subject to follow-the-fortunes, regardless of any pre-
settlement position taken by the cedent, whether that position is
articulated in a pre-settlement risk analysis, or implicit in the
settlement with the underlying insured."
"Indeed, the differences between North River and this case suggest,
if anything, that Gerling's position is even weaker than ACE's. In
North River, the cedent had clearly considered an alternative
allocation position, as evidenced by its documented, pre-settlement
analysis. ACE thus stood on somewhat firmer ground when it claimed an
inconsistency between North River's pre-settlement and post-
settlement positions. Here, by contrast, it is not clear that
Travelers ever accepted -- as a legal matter -- OCF's multiple-
occurrence position. The settlement explicitly declined to resolve
the occurrence issue. To the extent the settlement indicated any
position at all as to the occurrence issue, it arguably suggested a
single, additional occurrence. As the district court found, the
settlement was for 'roughly' one occurrence limit. In such a case,
where the cedent's earlier position as to a particular coverage issue
is unclear, it is even less appropriate than it was in North River
for the reinsurer to claim an inconsistency between that earlier
position and the cedent's subsequent allocation."
"More important than whether or not the settlement reflected a one-
occurrence position, however, is the fact that a number of occurrence
positions were on the table. In the OCF-Travelers dispute, OCF had
advocated at least two different occurrence positions (i.e., each
claimant as a separate occurrence, or, alternatively, each job site
as a separate occurrence), while Travelers had advanced the
alternatives of either no new occurrence or a single non-products
occurrence. That all of these possibilities as to the occurrence
issue were subsumed by the settlement only serves to underscore the
relevance of North River."
As the district court in North River I noted, "Whenever settlements
are made in cases involving multiple policies and multiple insurers
and reinsurers, numerous good faith methods of allocation will be
available and under consideration, but only one will ultimately be
chosen . . . . To allow reinsurers to second-guess that allocation
would be to make settlement impossible and reinsurance itself
"In short," concluded the Second Circuit, "we decline to authorize an
inquiry into the propriety of a cedent's method of allocating a
settlement if the settlement itself was in good faith, reasonable,
and within the terms of the policies.... Given that Travelers and
OCF expressly declined to resolve the occurrence issue, there is no
cause for us to do so now. Indeed, were we to undertake such an
analysis, we would be engaging in precisely the kind of 'intrusive
factual inquiry' that the follow-the-fortunes doctrine is meant to
avoid. Judicial review of either the settlement decision or the
allocation decision 'has an equal likelihood of undermining
settlement and fostering litigation.'"
Gerling cited Travelers Cas. & Sur. Co. v. Certain Underwriters at
Lloyd's of London, 96 N.Y.2d 583 (2001) for the proposition that
follow-the-fortunes does not apply to post-settlement
decisions. "Lloyd's, however, is inapposite," held this
Court. "Lloyd's involved reinsurance treaties rather than facultative
certificates, and those treaties contained their own definitions
of 'loss' and 'disaster,' which were distinct from the coverage terms
of the underlying insurance policies. The Lloyd's treaties, in other
words, were distinguishable from Gerling's reinsurance certificates,
which did not contain an independent definition of 'occurrence.' The
Court of Appeals in Lloyd's held that follow-the-fortunes did not
apply to the cedent's post-settlement allocation because the
allocation did not fall reasonably within the treaties' definition
of 'disaster.' That holding has no bearing here. The district court
never held that Travelers' allocation violated the terms of either
OCF's underlying policies or the facultative certificates issued by
Gerling to cover those policies."
"In sum, we find North River to be directly applicable to the case at
bar. We therefore reject the district court's conclusion that
Travelers' and Gerling's failure to agree on the occurrence issue
barred application of follow-the-fortunes, and reiterate that follow-
the-fortunes 'extends to a cedent's post-settlement allocation
decisions . . . as long as the allocation meets the typical follow-
the-fortunes requirements, i.e., is in good faith, reasonable, and
within the applicable policies.'"
Gerling also argued that Travelers settled in bad faith, thus making
the follow-the-fortunes doctrine inapplicable. "Follow-the-fortunes
applies only to claims submitted in good faith," held the Court. "A
reinsurer who seeks to avoid application of follow-the-fortunes by
claiming bad faith, however, must make an 'extraordinary showing of a
disingenuous or dishonest failure . . . .' Gerling relies primarily
on two arguments in support of its contention that Travelers
submitted its reinsurance claims in bad faith. First, Gerling
contends that the allocation of all non-products claims to a single
occurrence was inconsistent with the definition of 'occurrence' in
the underlying policies and rested on a construction of that term
that is so legally baseless that it has never been adopted by any
court in any jurisdiction. Second, Gerling contended that because
Travelers had not reinsured its primary policies (a contention that
Travelers disputes), it sought to shift its settlement loss from the
primary to the excess policies, so as to maximize its reinsurance
"The former argument may be rejected insofar as allocation on a
legally novel theory does not itself constitute evidence of
dishonesty or disingenuousness. But we note that this argument of
Gerling's is really a challenge under the exception to follow-the-
fortunes that allows a reinsurer to challenge a cedent's construction
of underlying policy terms as unreasonable, and is therefore
addressed in the discussion of this exception, infra. Regarding the
latter argument, Gerling maintains that Travelers' allocation of the
settlement in a manner aimed at maximizing reinsurance recovery
constituted bad faith. As a result, Gerling asserts, the excess
policies that it reinsured, which otherwise would have
faced 'virtually no exposure,' were allocated the bulk of the
"Our review of the record, however, reveals that bad faith cannot
provide an alternative basis upon which to sustain the district
court's grant of summary judgment to Gerling."
"Specifically, Gerling cannot substantiate its claim that had a
multiple-occurrence allocation method been used, it would have
faced 'virtually no exposure' because only the primary policies would
have been implicated. As the district court recognized, 'the record
provides no basis for determining if the adoption of OCF's position
would have led to an allocation of greater than one million dollars
to any one occurrence and thus potentially triggered liability under
some of the excess policies at issue in the present case.' In other
words, even if -- as OCF had contended and Gerling now urges -- each
claimant were deemed a separate occurrence, if any individual
claimant had been awarded a large sum (i.e., more than $1 million),
that claim would have spilled into the excess layers of coverage, and
Gerling's certificates -- which corresponded to the lowest layer of
excess coverage -- would have been implicated. The same is true, and
even more likely, under the alternative occurrence position Gerling
advocates, where each job site would be considered a separate
"Gerling's assertion that Travelers failed to reinsure its primary
policies -- another key premise underlying its bad-faith story -- is
likewise unsupported. The primary evidence Gerling offers -- the
statement of a former OCF employee that Travelers' 'excess policies,
unlike its primary policies, were and are routinely reinsured,' says
nothing about the specific primary policies at issue in this case. In
addition, Travelers directly disputes Gerling and asserts that its
primary policies were covered by treaty reinsurance."
"Cases in which reinsurers allege bad faith usually involve a
cedent's alleged failure to notify the reinsurer of coverage changes,
as required in the reinsurance certificate, or a cedent's decision to
settle with the underlying insured. Here, Gerling's complaint is not
that Travelers failed to notify it of material facts, or even that
Travelers' settlement with OCF was somehow improper. Instead, Gerling
complains that -- after entering into a settlement in which the
occurrence issue was deliberately left unresolved and to which
Gerling had no objections -- Travelers, when faced with multiple
potential allocations of the settlement amount, chose an allocation
that evinced bad faith. Reinsurers raising such claims will generally
face a very heavy burden; a cedent choosing among several reasonable
allocation possibilities is surely not required to choose the
allocation that minimizes its reinsurance recovery to avoid a finding
of bad faith.... An allocation that increases reinsurance recovery --
when made in the aftermath of a legitimate settlement and when chosen
from multiple possible allocations -- would rarely demonstrate bad
faith in and of itself. In any event, we need not determine when a
post-settlement allocation is no longer a reasonable business
decision and instead becomes a decision made in bad faith because
Gerling has failed to demonstrate anything approaching the requisite
intent on the part of Travelers. Accordingly, Gerling's bad-faith
allegations are too insubstantial to sustain the district court's
grant of summary judgment, or even to raise a triable issue of fact
requiring further proceedings."
Next, Gerling argued that Travelers' allocation did not fall within
the terms of the policies. "It is well-established and not at all
surprising that follow-the-fortunes does not require indemnification
for losses not covered by the underlying policies. Thus, 'the
reinsurer retains the right to question whether the reinsured's
liability stems from an unreinsured loss.' A loss is unreinsured 'if
it was not contemplated by the original insurance policy or if it was
expressly excluded by terms of the certificate of reinsurance.' Were
the record to indicate that the losses occasioning Travelers' claim
against Gerling were not covered by the OCF-Travelers policies, we
might conclude that follow-the-fortunes did not apply, or at least
that further proceedings on the issue were necessary. The record,
however, demonstrates the opposite."
"Disputes between a cedent and a reinsurer frequently arise when a
reinsurer refuses to indemnify a cedent on the ground that the
underlying claim was not covered by the underlying insured's policy.
No such dispute is involved here. Gerling agrees that non-products
asbestos claims fell within the coverage provided by Travelers to
OCF, and, derivatively, within the certificates issued to Travelers
by Gerling. What Gerling finds objectionable is Travelers' single-
occurrence methodology. We have difficulty understanding how
Travelers' allocation of a loss that concededly falls within the
policies could nevertheless violate the terms of those policies. If
Travelers had allocated the loss to an entirely unrelated set of
policies, for instance, policies providing dental insurance, then
Gerling could understandably argue that the allocation violated the
terms of those policies. But Travelers simply allocated the
settlement loss to the policies that covered that loss, using one of
several possible allocation methods.... If a loss is covered by
several policies, a good-faith, reasonable allocation among those
policies cannot violate their terms. We therefore reject any
suggestion that Travelers' allocation of the settlement fell outside
the policies' terms."
Finally, in order to trigger the deference due under follow-the-
fortunes, a settlement must be reasonable. "Travelers asserts that
its post-settlement allocation was unquestionably reasonable, and we
"First, it is undisputed that until the early 1990s, when this
controversy arose, OCF had consistently submitted its asbestos claims
to Travelers -- and Travelers had paid them -- on a single-occurrence
basis. Only when OCF's products liability coverage was exhausted did
OCF argue that its claims actually arose out of multiple occurrences
falling under its non-products coverage. In light of this history, it
was reasonable for Travelers to adopt a single-occurrence position,
both in its negotiations with OCF and, ultimately, in its allocation
of the settlement."
"Second, Travelers' allocation method was reasonable when viewed in
the context of then-prevailing case law. The settlement was concluded
in 1995, and Travelers had allocated the settlement by January of
1996, although it did not notify its reinsurers of the allocation
until November of 1996. The relevant period was therefore late 1995.
At that time, numerous courts -- including courts applying Ohio law,
which governed OCF's policies, and construing OCF policies -- had
treated asbestos-related bodily injury claims as arising out a
single 'occurrence.'... The only pre-1996 case cited by Gerling in
support of its multiple-occurrence position was decided by this court
on December 13, 1995.... We are unwilling to find, based on a single
decision issued one month before Travelers completed its allocation,
that Travelers' one-occurrence methodology, which was otherwise fully
consistent with existing case law and with OCF and Travelers' past
dealings, was unreasonable."
"Because Travelers' post-settlement allocation was made in good faith
and was reasonable, and because we discern no other material factual
dispute that might preclude application of follow-the-fortunes to
Travelers' reinsurance claim, we conclude that the doctrine applies.
Under follow-the-fortunes, we ask only 'whether there is any
reasonable basis' supporting the cedent's claims. Having already
concluded that Travelers' post-settlement allocation was reasonable,
we find that it easily meets this deferential standard of review. We
therefore hold that Gerling is required to indemnify Travelers for
that portion of the OCF settlement-as allocated by Travelers-covered
by Gerling's reinsurance certificates."
As the process of rescue and recovery begins in New Orleans, those of
us in the insurance industry cannot help but wonder: can the city
itself be restored?
Not only was 80% of the city flooded, but those flood waters have
turned into a putrid soup. With the sewer system out of service, the
human waste of tens of thousands of residents is added to the soup on
a daily basis. Add the waste of all the pets and other animals for
good measure. Then there are the corpses: maybe hundreds, maybe
thousands, floating in the soup, adding toxins as they decay.
And to make matters worse, it's very warm in New Orleans. The toxic
soup is simmering at an ideal temperature for the proliferation of
every kind of bacterium, spore and disease vector.
The toxic soup has soaked and saturated the basements and lower
floors of the vast majority of the buildings in New Orleans, even
those which sustained little physical damage.
The question is: will any building in New Orleans that got wet, ever
be habitable again? Would you want to work in any building whose
drywall, flooring and all those spaces in the walls and ceilings were
contaminated with toxic soup?
New Orleans has become the world's largest petrie dish. It is the
most favorable place in the inhabited world for mold, bacteria and
every living agent of rot, decay and disease to spawn and flourish.
The city is going to become the mold capital of the world as the
flood waters recede. And mold is the mildest of the allergens and
toxins that will be literally everywhere.
You'd have to flood the city with bleach to the same degree it was
flooded with seawater to have any hope of killing all the crud.
Which begs the question: will New Orleans -- at least the 80% that
got flooded -- have to be razed to the ground and rebuilt? Will the
cost of remediation exceed the cost of rebuilding, thereby making
demolition and reconstruction the only viable option?
What about irreplacable historic structures? Should they be
rehabilitated at any cost, or simply rebuilt to the original
I invite my readers to submit their thoughts about this important
Friends, I will be the speaker at the next meeting on September 15th.
I hope you can attend. Details follows:
Date: September 15th
Time: 6PM Registration and Networking, 6:30PM Dinner and Program
Location: Luxe Summit Bel Air Hotel, 11461 Sunset Blvd., LA
Program: Recent court decisions relating to expert witnesses
including how an expert may sue a lawyer for equitable indemnity if
sued for expert witness Malpractice; the ability of an expert to
testify based on hearsay and the fact that cross-examination of an
expert can include facts not in evidence.
A PORTION OF THE MEETING WILL BE DEVOTED TO A ROUNDTABLE DISCUSSION
OF QUESTIONS, PROBLEMS, ISSUES CURRENTLY EXPERIENCED BY EXPERTS IN
THEIR PRACTICES. PLEASE COME ARMED WITH YOUR LATEST PEEVE, A "HOW DO
I HANDLE THIS" QUESTION, RECENT EXPERIENCES THAT WE SHOULD ALL KNOW
ABOUT, OR ANYTHING ELSE YOU WANT TO DISCUSS OR RECEIVE FEED BACK FROM
THE ASSEMBLED WEALTH OF EXPERT KNOWLEDGE.
RSVP: Required. Email: info@... no later than 9/13.
Cost: $45 members $60 non members. Non Members must
prepay with Visa or MC or check in advance.
Barry Zalma, Esq., CFE
Barry Zalma, Inc.
4441 Sepulveda Boulevard
CULVER CITY CA 90230-4847
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FRAUDULENTLY INCORPORATED MEDICAL FACILITY IS NOT ENTITLED TO RECOVER
NO FAULT BENEFITS, EVEN IF DENIAL IS LATE
Multiquest PLLC a/a/o Paulette Cleckley v. Allstate Ins. Co., NYLJ
9/07/05 (Civil Court, Queens County) (BUTLER, j)
Plaintiff brought suit to recover payment under the No-Fault Law for
medical services provided to assignor Paulette Cleckley.
Plaintiff contended that it properly issued a claim on behalf of the
assignor and that such claim was not timely denied. Allstate did not
dispute that its denial was late. Allstate contended, however, that
plaintiff was not entitled to recover payment for medical services
because the plaintiff's medical facility was fraudulently
incorporated at the time the alleged services were rendered to the
Allstate provided a copy of plaintiff's Application for Employer
Identification dated September 4, 1998, which lists Yevgeny Gorbatov,
a licensed acupuncturist, as president of Multiquest Psychological
and Acupuncture Services, PLLC. Allstate also provided a copy of the
Articles of Organization filed with the New York State Department of
State on July 14, 1998 which lists Mr. Gorbatov and Kathryn Clarke, a
licensed psychologist, as "original members and managers" of
Multiquest Psychological and Acupuncture Services, PLLC.
Allstate also submitted a copy of a stock certificate labeled "Number
2" which was issued to Dr. Joseph Indelicato on September 6, 2001 and
which lists Dr. Indelicato as an owner of Multiquest. Allstate
asserted that as President of Multiquest, Mr. Gorbatov should have
been issued stock certificate "Number 1" in 1998 when the company was
first formed. Therefore, Allstate contended that had there been a
proper incorporation in 1998 a second stock certificate would have
been issued by the medical facility to a licensed
psychologist. "However," held the Court, "the documents submitted on
the motion herein do not indicate that Ms. Clarke or any other
licensed psychologist was ever issued a stock certificate by the
medical facility in 1998."
Allstate submitted a copy of a certified transcript of an examination
under oath of Ms. Clarke dated April 26, 2004, wherein Ms. Clarke
denied ever being a member or owner of Multiquest. Furthermore, Ms.
Clarke stated that she never gave Multiquest permission to list her
as a Principal in the professional corporation. "The court notes that
defendant submitted, in the cross-motion, the Articles of
Organization filed by Mr. Gorbatov on July 14, 1998 listing Ms.
Clarke as one of the owners. The defendant asserts in their cross-
motion that Mr. Gorbatov fraudulently listed Ms. Clarke as one of the
owners in such document for the sole purpose of acquiring a valid New
York State Licence to perform psychological services."
"With respect to defendant's allegations of fraud and misconduct,
plaintiff merely alleges that Ms. Clarke's testimony is not credible
as it was provided pursuant to an agreement wherein defendant agreed
not to commence an action against Ms. Clarke in exchange for such
testimony. Plaintiff, however, fails to submit any documentary proof
rebutting defendant's assertions of fraud or misconduct.
Additionally, plaintiff fails to submit an affidavit from someone
with personal knowledge of the facts disputing such allegations by
"The Court of Appeals has ruled that under New York State's No-Fault
Insurance Laws, insurance carriers may withhold payment for medical
services provided by fraudulently incorporated enterprises. State
Farm Automobile Ins. Co. v. Robert Mallela, 4 NY3d 313. The Mallela
III Court followed the Superintendent of Insurance's promulgation
prohibiting the reimbursement of benefits on behalf of unlicensed or
fraudulently licensed providers. 11 NYCRR 65-3.16(a)(12) (effective
April 4, 2002). Accordingly, Mallela III ruled that medical providers
fraudulently incorporated are therefore not entitled to
reimbursement. Pursuant to the proof submitted in support of the
motion and cross-motion, it appears that plaintiff provider,
Multiquest, was not properly licensed at the time the alleged medical
services were provided. Additionally, defendant has submitted
uncontroverted testimony under oath that the Articles of Organization
improperly listed Ms. Clarke as an owner without her knowledge or
"This court finds that the intent of the Mallela III Court was that
NYCRR 65-3.16(a)(12) be applied to claims prior to April 4, 2002. The
analysis of this court concurs with the decision in Metroscan
Imaging, PC v. Geico, to the extent that reading 'the Mallela III
decision as only pertaining to claims maturing post April 4, 2002 is
simply illogical' and would negate the intent of the Mallela III
Court. Metroscan Imaging, PC v. Geico, 2005 WL 1384369 (NY City Civil
Court June 8, 2005). The Mallela III Court, in considering such
determination, relies on the argument presented in the amicus brief
of the Superintendent of Insurance which alleges that such rule was
promulgated to 'combat rapidly growing incidences of fraud in the No-
Fault regime, fraud that has been identified as correlative with the
corporate practice of medicine by nonphysicians.' Clearly, the
Mallela III Court strongly concurs with the findings of the
Superintendent of Insurance that services provided by fraudulently
licensed No-Fault 'regimes' should not be reimbursed."
"It is well settled that despite an untimely denial, an insurer is
not precluded from raising the issue of coverage such as a breach of
a condition precedent of the terms of the insurance contract. In
addition, the court notes that proper licensing of a medical provider
is a condition precedent to payment." (citing Valley Physical Med.
and Rehab v. NY Central Mutual Ins., 193 Misc.2d 675 [App.Term 2nd
"Accordingly, as the plaintiff has failed to proffer sufficient
evidence to rebut defendant's allegations that the medical provider
was fraudulently incorporated at the time the alleged services were
provided to the assignor and that they provided services by
unlicensed psychologists, the medical services provided by the
plaintiff to its assignor are therefore not covered under No-Fault
The Complaint was dismissed.
DEFECTIVE ASSIGNMENT MEANS MEDICAL PROVIDER HAS NO STANDING TO SUE,
EVEN IF NOT SPECIFIED IN THE DENIAL
T & G Medical Supplies Inc. a/a/o Yolette Milford v. National Grange
Mutual Ins. Co., NYLJ 9/08/05 (Civil Court, New York County) (MENDEZ,
Plaintiff mailed a bill to defendant National Grange Mutual Insurance
Company for treatment it rendered to the assignor. The carrier
received the bill on 6/5/03 and timely denied it on 6/6/03. The
carrier moved to dismiss this lawsuit on the ground that plaintiff
has no standing to sue because no valid assignment has been exchanged
with the plaintiff's responses to the defendant's discovery demands.
Recently, the Appellate Term, Second Department held that admissible
proof authenticating an assignor's signature on an assignment form is
not necessary to establish its prima facie entitlement to summary
judgment(AB Medical Services PLLC a/a/o Colon v. Nationwide Mutual
Ins. Co., 2004 NY Slip Op 24506). It also held that the only thing
required of a health care provider/assignee/plaintiff in regards to
an assignment is that it submit a "properly executed assignment" on
one of four forms. The four forms the Court named are 1)the NYS form
NF-3 which is the prescribed verification of treatment by the
attending physician or other provider of service form; 2) the NYS
form NF-4 which is the prescribed verification of hospital treatment
form; 3) the NYS form NF-5 which is the prescribed hospital facility
form, and 4) the NYS form NF-AOB which is the prescribed no-fault
assignment of benefits form.
Courts have also held that a defendant's failure to pay or deny a
claim, whether in whole or partially, within the thirty days mandated
by the statute, prevents it from alleging any defense related to the
adequacy of the claim forms provided by the plaintiff including the
lack of necessary signatures on an assignment form.
Plaintiff argued that National Grange's motion should be denied
because it failed to state any deficiency regarding the assignment in
its denial, thereby waiving any defense not included in the denial.
"Standing to sue is one of the basic elements any action," held the
Court. Notably, without it, you are not entitled to begin an action.
As such, the issue of standing can not be waived even if a defendant
fails to object to the issue of standing beforehand. In order to
establish standing in a No-Fault claim, plaintiff health care
providers must produce 'properly executed' assignments of insurance
benefits, signed by the patient naming the provider as assignee. Like
any contract, the assignment should reflect the names of the assignor
and assignee, the date the accident leading to treatment occurred,
the signatures of both parties, and the date the assignment took
The assignment of benefits form provides blank spaces for the
patient/assignor's name, for the health care provider/assignee's
name; for the date of the accident; for the signatures and addresses
of both assignor and assignee; and for the date of the
assignment. "The form clearly illustrates that the particular
information requested is required in order for the assignment to be
deemed valid and for plaintiff to have standing to sue. In this case,
the assignment in question happens to be on a NYS form NF-AOB2 and
the only section of the assignment that is completed is the signature
of the alleged assignor. Conspicuously absent is the name of the
party receiving the assignment, who in the future would have standing
to bring an action."
"The undated assignment [at issue here]... does not contain the name
of the assignor, the signature of the assignee or the date of the
alleged occurrence. Upon a reading of the purported assignment, one
is not certain who the alleged assignor is delegating her rights to
or when she did so. The assignment also fails to state when she
suffered the injuries leading to the need for medical supplies. These
defects in the alleged assignment of benefits to plaintiff illustrate
its lack of standing to maintain this action."
The carrier's Motion was granted and the action was dismissed.
The best-informed attorney is the most effective attorney. Call us
today to discuss how Lawrence N. Rogak LLC can give your company the
winning edge over plaintiffs. Our new telephone number is: 516 576
8500 (you can bypass the menu by pressing "1" for Larry Rogak).
A Legal System in Shambles
By PETER APPLEBOME and JONATHAN D. GLATER, NY Times
BATON ROUGE, La., Sept. 8 - At Rapides Parish Detention Center 3 in
Alexandria, which normally holds convicted felons, there are now 200
new inmates who arrived hot, hungry and exhausted on buses this week
after being evacuated from flooded jails in New Orleans.
They have no paperwork indicating whether they are charged with
having too much to drink or attempted murder. There is no judge to
hear their cases, no courthouse designated to hear them in and no
lawyer to represent them. If lawyers can be found, there is no
mechanism for paying them. The prisoners have had no contact with
their families for days and do not know whether they are alive or
dead, if their homes do or do not exist.
"It's like taking a jail and shaking it up in a fruit-basket
turnover, so no one has any idea who these people are or why they're
here," said Phyllis Mann, one of several local lawyers who were at
the detention center until 11 p.m. Wednesday, trying to collect basic
information on the inmates. "There is no system of any kind for
taking care of these people at this point."
Along with the destruction of homes, neighborhoods and lives,
Hurricane Katrina decimated the legal system of the New Orleans
More than a third of the state's lawyers have lost their offices,
some for good. Most computer records will be saved. Many other
records will be lost forever. Some local courthouses have been
flooded, imperiling a vast universe of files, records and documents.
Court proceedings from divorces to murder trials, to corporate
litigation, to custody cases will be indefinitely halted and when
proceedings resume lawyers will face prodigious - if not
insurmountable - obstacles in finding witnesses and principals and in
It is an implosion of the legal network not seen since disasters like
the Chicago fire of 1871 or the San Francisco earthquake of 1906,
events in times so much simpler as to be useless in making much sense
of this one.
"There aren't too many catastrophes that have just wiped out entire
cities," said Robert Gordon, a professor at Yale Law School who
teaches legal history.
The effects on individual lawyers vary, from large firms that have
already been able to find space, contact clients and resume working
on cases, to individual lawyers who fear they may never be able to
put their practices back together. But the storm has left even
prominent lawyers wondering whether they will have anything to go
William Rittenberg, former president of the Louisiana Association of
Criminal Defense Lawyers and a lawyer for 35 years in New Orleans,
said he had spent the time since the storm living like a gypsy with
his wife and two dogs, moving from Columbus, Miss., to Houston to San
Antonio. Mr. Rittenberg said that his firm's main client had been the
teachers union for the New Orleans schools, but that there is no way
to know when or if school will resume this year.
"I really don't know if I have a law practice anymore," he said.
Some logistical issues are being addressed as the courts scramble to
find new places to set up shop. The Louisiana Supreme Court is moving
its operations from New Orleans to a circuit court in Baton Rouge.
The United States Court of Appeals for the Fifth Circuit is moving to
Houston, and electronic technology has allowed lawyers and courts to
save files and documents in a way that would have been impossible in
But the biggest immediate problem is with criminal courts in southern
Louisiana, with thousands of detainees awaiting hearings and trials
who have been thrust into a legal limbo without courts, trials, or
So in Alexandria, a city in central Louisiana, in a scene repeated at
prisons and jails throughout the state, Ms. Mann said she and other
lawyers had interviewed all 200 inmates, and the criminal defense
lawyers' organization was painstakingly trying to compile a registry
of prisoners and lawyers. The goal is to put them together, though
many of the prisoners do not yet have lawyers and many of the lawyers
are scattered across the country.
Ms. Mann said that some prisoners, no doubt, were accused of serious
crimes, but that most had been arrested on misdemeanor charges like
drunkenness that typically fill local lockups. Most were either
awaiting hearings or had not been able to make bond and were awaiting
trial, which, for many, had been set for the day the hurricane hit.
"I talked to one guy who was arrested for reading a tarot card
without a permit," she said. "These are mostly poor people. They
haven't been in contact with their family. They have no word at all.
A lot of them are pretty devastated. You had a lot of grown men
breaking down and boohooing when you talked to them. The warden said
they hadn't had food or water for two or three days. So a lot of them
were just grateful to be out of the sun, in an air-conditioned place
where they could find food and a shower and a mattress."
In addition to the logistical problems of setting up courts, finding
a place to meet, and getting judges, lawyers and evidence, a major
question looms about how to pay for the defense of indigent
detainees. Louisiana has been in a low-grade crisis for years over
the issue, and currently two-thirds of the money to defend those too
poor to afford lawyers comes from court costs for traffic and parking
But with the evacuation of New Orleans and its environs, none of that
money will be available.
Legal officials say that without a quick resolution of the problem
the state may be forced to apportion cases to public defenders on a
level that makes adequate representation impossible or to free
prisoners rather than violate their constitutional right to a speedy
More than a week after the storm, not all the news is bad. Some law
firms, particularly larger ones with offices outside New Orleans,
have reorganized with remarkable speed, saving records
electronically, finding new space and housing for lawyers in Baton
Rouge, Lafayette, Houston, or other areas.
Lawyers at McGlinchey Stafford, a firm of about 200 lawyers based in
New Orleans and with offices in Baton Rouge and other cities, were
among the lucky ones. The lawyers, support staff and their families
left New Orleans in advance of the storm as partners in its Baton
Rouge office worked to find them housing and office space, said Rudy
Aguilar, managing partner of the firm.
After the storm, Mr. Aguilar said, the firm put two college students
whose parents worked for the firm on a plane to Chicago to buy
computers for the new office space. The students rented a truck and
drove the computers back to Baton Rouge for the new office, which by
Labor Day was up and running, he said.
Within days, Rick Stanley of Stanley, Flanagan & Reuter, an 11-lawyer
litigation firm had people working in borrowed space in offices in
Baton Rouge and Lafayette and at homes in Jackson, Miss., and
Amarillo, Tex. On Labor Day, Mr. Stanley signed a lease for new space
in Baton Rouge on the hood of his car in a Home Depot parking lot.
"The Monday of the storm," he said, "I was in a state of shock,
realizing the whole way of life we knew had passed away, and Tuesday
I just said we need to get back up and running, and we did."
And some say, with the perverse logic of the law, Hurricane Katrina -
months from now, when people return home - will spawn an unimaginable
flood of legal issues. Beth Abramson who is organizing pro bono
efforts for the state bar anticipates a torrent of legal issues
having to do with ruined property, insurance, environmental issues
and countless other concerns.
Michelle Ghetti, a law professor at the Southern University Law
Center in Baton Rouge said some courts and lawyers moved faster than
she could have imagined to shift operations and resume business. On
the other hand, the legal issues posed by the storm multiply almost
"Someone just mentioned child molesters," Ms. Ghetti said. "There's a
registry in which people are supposed to be notified where they are.
But for all we know, they're in shelters or being taken into people's
"New things come up every day. I think this storm is going to produce
more legal issues and complications than anyone has ever imagined."
Peter Applebome reported from Baton Rouge for this article and
Jonathan D. Glater from New York.
Copyright 2005 The New York Times Company
Please note: Our new address and phone numbers are:
Lawrence N. Rogak LLC
P.O. Box 708
131 East Ames Court
Plainview, New York 11803
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UM ARBITRATOR'S REFUSAL TO ADMIT EVIDENCE OF SETTLEMENT WITH THIRD
PARTY LEADS TO VACATING OF AWARD
Matter of State Farm Mutual Automobile Ins. Co. v. Gutkin, NYLJ
9/12/05 (Supreme Court, Richmond County) (MINARDO, j)
State Farm moved to vacate an arbitrator's award after SUM
arbitration on the grounds that the arbitrator's decision was
arbitrary and capricious.
This claim arose from a two-car collision that allegedly resulted in
Gutlin's sustaining a serious injury. When Gutkin demanded
arbitration, State Farm initially brought on, and later withdrew
pursuant to stipulation, a motion to stay the arbitration.
After the withdrawal of State Farm's application to stay arbitration,
and prior to commencement of the arbitration hearing, Gutkin settled
a third-party claim against the other vehicle involved in the
underlying accident for $25,000 -- without the notice or consent of
State Farm claimed, without contradiction, that it first learned of
the settlement during Gutkin's testimony at the arbitration, and
that, over its objection, the arbitrator precluded any inquiry into
the amount and underlying details of the settlement. The arbitrator's
award made no mention of the third-party settlement, which exceeded
the amount he awarded respondent on her SUM claim.
"The test applicable for review of the arbitrator's award where an
alleged error of law is at issue is whether any reasonable hypothesis
can be found to support the questioned interpretation by the
arbitrator. In this regard, the court will not set an award aside for
errors of law or fact unless the award is so irrational as to require
vacatur," held the Court.
"As a general rule, the extent of an insurer's liability and the
availability of offsets in a Supplemental Uninsured Motorist
arbitration proceeding are matters to be determined by the
arbitrator, whose decision will not be disturbed so long as it is
rational and not arbitrary or capricious."
"Here, it is undisputed that the issue of the insured's recovery of
damages from an insured third-party was broached for the first time
at the arbitration hearing, and that the arbitrator precluded inquiry
into the issue. In his award, the arbitrator found that the
negligence of the uninsured driver was a substantial factor in
causing the accident and that there was no evidence that the insured
was negligent. He further determined that the insured had suffered
a 'serious injury,' and awarded her the sum of $17,000 from the
insurer in full disposition of all Supplemental Uninsured Motorist
"It is clear that an error of law was made by the arbitrator when he
failed to allow evidence of, or to take into consideration in making
his award, the amount recovered by respondent in settlement with the
third-party insurance carrier and its insured. The issues of the
extent of the insurer's liability and the availability of offsets are
matters expressly within the language of the arbitration clause of
the relevant SUM endorsements, and thus should have been determined
at arbitration. The failure of the arbitrator to allow evidence of
the prior settlement with the allegedly uninsured/underinsured
motorist and to consider the amount of that settlement in determining
the amount of the award to which the insured was entitled were
fundamental errors that rendered the award irrational as a matter of
"While the usual evidentiary rules applicable in a court of law are
waived in arbitration, the arbitrator generally may not exclude
pertinent evidence. Therefore, since the amount that should have been
offset and applied in this case exceeded the amount of damages found
by the arbitrator, there is no rational basis for the award, and it
must be set aside, and the matter referred back to the arbitrator to
render a complete, final and definite award on all of the issues."
The arbitrator's award was vacated and the matter was remanded to the
American Arbitration Association for further proceedings.
I like quotations, especially when they are pithy or ironic. And I
especially like when I find a quote from a famous person that
is "new," in that it is not cited in any of the usual "famous
One of my favorite historical figures is John F. Kennedy. I think he
was a brave and principled man. Oh sure, he had his dalliances, and
I don't excuse them. (But I do have to wonder how a man whose back
pain was so severe that he took daily medication and wore a brace,
and suffered from Addison's disease, managed to engage in dalliances
in the first place).
Also, JFK knew during his term, better than anyone else, that the whole world
could very well be destroyed in a nuclear holocaust at any given moment. At
several times during his term that was a distinct possibility. Maybe this
knowledge led him to engage in some of the personal risky behavior that people
are known to engage in when they feel that any given moment might be their last.
Though many of his contemporaries considered him "liberal," he was quite
conservative by today's standards. He was staunchly anti-Communist, which was
why he tried to topple Castro and took measures to oppose Soviet expansion in
Southeast Asia, South America, Europe and Africa. But he was also pragmatic: he
knew that a showdown with Communism would lead to nuclear destruction, so he
sought instead to contain it, and also to counter its influence on neutral
countries by convincing the world that our way of life was better.
For example, in 1962, when JFK sent Federal troops to Mississippi to ensure that
Medgar Evers could register at the State University, several African leaders who
had been wooed by the Soviets made the decision to become allied with the U.S.
As one African President put it, he was impressed that the United States sent
its Army "just to ensure that one Negro could go to school." Ironically, many
civil rights leaders of the time thought that JFK was not moving forcefully
enough against segregation and prejudice. But JFK knew that the South was
boiling on the segregation issue and was fearfully close to insurrection.
In the course of my readings of history books, I have come across
some poignant and ironic quotes from JFK which I have never seen
anywhere else. Here are a few of them.
"Victory has a thousand fathers; defeat is an orphan." (Comment made by JFK in
the aftermath of the failed Bay of Pigs invasion, 1961. Someone in the room
asked where that quote came from, and Kennedy replied, "I don't know, somebody
once said that." An aide contacted the editors of all the major quotation books
and none had any record of it. JFK is the first attributed author of this
"If I do the right kind of a job, I don't know whether I am going to
be here four years from now." -- (to Richard M. Nixon, right after the Bay of
Pigs invasion, 1961).
"I guess this is the week I earn my salary." -- (during the Cuban Missile
Crisis, October 1962)
"If someone is going to kill me, they are going to kill me." -- (to Arthur M.
Schlesinger Jr., 1962)
"If I am to die, this is the week for it." -- (to aide John McClone in response
to a CIA report about rumours of an assassination plot, June 1962)
"This is a good time to go to the theatre, like Lincoln." -- (28 October 1962,
joking in nervous relief right after Russia accepted the deal to end the Cuban
"I think there is a law of equity in these disputes. When one party
is clearly wrong, it will eventually give way... They had no business
putting those missiles in and lying to me about it. They were in the
wrong and knew it. So, when we stood firm, they had to back down. But
this doesn't mean at all that they would back down when they felt
they were in the right and had vital interests involved." -- (29 October 1962,
reflecting on the Cuban Missile Crisis to Arthur M. Schlesinger Jr.)
"Who can tell who will be the President a year from now?" -- (to Arthur M.
Schlesinger Jr., 2 October 1963)
"The trouble with conservatives today is that most of their thinking
is so naive. As for the liberals, their thinking is more
sophisticated; but their function ought to be to provide new ideas,
and they don't come up with any." -- 1962
"My father always told me that all businessmen were sons of bitches,
but I never believed it till now." (Comment made 10
April 1962 in reaction to news that U.S. Steel was raising prices by
$6 per ton, right after the unions negotiated a modest new contract
under pressure from JFK to keep inflation down.)
"They are a bunch of bastards - and I'm saying this on my own now,
not just because my father told it to me." (Comment about businessmen in
general, made a few days after the newspapers printed his statement of 10 April
1962 that his father always told him that businessmen were "sons of bitches.")
"All of us have in our veins the exact same percentage of salt in our
blood that exists in the ocean, and, therefore, we have salt in our
blood, in our sweat, in our tears. We are tied to the ocean. And when
we go back to the sea -- whether it is to sail or to watch it -- we
are going back from whence we came." -- (Speech given at Newport at the dinner
before the America's Cup Races, September 1962)
"My God, I am hit." -- John F. Kennedy's last words, 12:30 PM, 22
November 1963, after being struck in the neck by the first bullet. About two
seconds later, a second bullet struck him in the upper right part of his skull,
causing a fatal injury.
UNDER NEW LAW, CITY OF NEW YORK, NOT BOARD OF EDUCATION, IS PROPER
PARTY FOR SCHOOL NEGLIGENCE SUIT
Perez v. City of New York, NYLJ 9/15/05 (Supreme Court, Bronx County)
Plaintiff, a student at Evander Childs High School in the Bronx, sued
the City of New York for negligence after being slashed in the face
with a sharp object by two fellow students on January 9, 2003. The
City moved for dismissal on the grounds that the City of New York was
not a proper party to this action and that any alleged tort liability
stemming from the incident lies with the "Department/Board of
Education - a separate and distinct legal entity from the City of New
York." [Actually the City's papers were in error -- the Department
of Education and the Board of Education are separate entities].
In 2002, the Education Law was amended so as to radically restructure
the governance of the school district of the city of New York. The
legislation, in order to provide for greater mayoral control of the
schools, effected a wholesale transfer of power from the Board of
Education to a chancellor, hired by and serving at the pleasure of
the mayor. The Board of Education's only remaining powers relate to
city-wide educational policy issues. [Education Law §§2554, 2590-g
and 2590-h as amended by L 2002, c.91.]
The Department of Education is nowhere mentioned in the legislation
and has no independent legal status. Rather, the Department of
Education is a mayoral agency, just as are all the other city
departments, with its chancellor, rather than its commissioner,
answerable to the mayor.
Prior to the enactment of the 2002 amendments, the powers and duties
of the New York City Board of Education to operate and control the
schools were set forth in Education Law §2554. That section was
amended, stripping from the city board of the city of New York the
powers granted to other city school boards. Those powers were
explicitly transferred to the chancellor by amending Education Law
"Education Law §2590-g cannot be more clear," held the Court: "The
board shall exercise no executive power and perform no executive or
administrative functions. Nothing herein contained shall be construed
to require or authorize the day-to-day supervision or the
administration of the operations of any school within the city school
district of the city of New York."
"Thus, while the Board of Education continues to exist (denominated
in its by-laws as the Panel for Educational Policy), its former
powers and duties are exercised by the mayor through his or her
employee, the chancellor. Furthermore, the only power granted to the
Board with respect to litigation, contained in Education Law §2590-g
(6) is to 'approve litigation settlements only when such settlements
would significantly impact the provision of educational services or
programming within the district.' It is not argued or alleged that
the outcome of this action would have any impact on the provision of
educational services or programming."
"In addition to having no executive or administrative powers, the
Board of Education has no offices and no staff. Education Law §2590-b
(1)(a). The Court is left to wonder where and on whom one serves an
entity which by law has no offices and no staff? More importantly,
assuming that, in the appropriate circumstances, the Board of
Education/Panel for Educational Policy may be sued, what is the
liability of an entity which has no executive power, performs no
administrative functions and is not authorized to supervise or
administer the operations of any school with the city school district
of the city of New York? Given its limited power, authority, and
functions, what did the Board/Panel do or fail to do in this case?
What ability did it have to prevent the plaintiff's injuries?"
"There is no doubt that prior to the enactment of L 2002, c.91,
defendant would be entitled to the relief sought.... However, in
light of the wholesale transfer of power and responsibility form the
Board of Education to the Mayor, the City may not now shield itself
from liability by claiming that the Board of Education is the
responsible party." The City's Motion was denied.
EXCESS LINES BROKERS FOUND NOT LIABLE TO INSUREDS FOR NON-ADMITTED INSURER'S
Polly Esther's South Inc. v. Bogdanoff, NYLJ 9/16/05 (Supreme Court,
New York County) (RAMOS, j)
In this action to recover damages from an insolvent insurance carrier
for unpaid claims, the defendant insurance brokers moved for summary
The Plaintiffs were comprised of affiliated nightclubs operating
1970s-themed dance clubs in several states, including New York,
referred to collectively as Polly Esther's Nightclubs. Lexington
Insurance Co. previously provided the Nightclubs with general
liability and surplus lines insurance coverage. In December 1998,
Lexington communicated to the Nightclubs that it was going to
terminate the Nightclubs' policy in March 1999. Just prior to
cancellation of the Lexington policy in 1999, Polly Esther's
Nightclubs contracted with fellow plaintiffs, Do The Hustle Inc., Do
The Hustle LLC and Hustle's owner, Timothy Ouellette, to perform
various managerial and administrative duties including procuring
insurance for the Nightclubs chain.
Ouellette engaged defendant Kaye as insurance broker to render
insurance brokerage services. Ken Haupert was appointed by Kaye as
account manager for the Nightclubs' account, and sought to place
insurance for the Nightclubs with a new carrier. Kaye alleged that
finding an insurance carrier for the Nightclubs was a difficult task,
given the large risk involved in the nightclub operation business.
On March 23, 1999, after several informal communications with
Ouellette, Kaye provided plaintiffs with two insurance proposals. The
policy ultimately bound by plaintiffs and at issue in this action was
submitted by Legion Indemnity Company, an insurance carrier Kaye
alleged was rated "A" or "excellent" by Best's at the time the policy
was bound. Legion was not, however, a carrier licensed to conduct
insurance business in the State of New York, but rather a "non-
admitted" "excess lines" or "surplus lines" carrier which, while able
to issue premiums in the state, is not regulated by the New York
Department of Insurance nor the state's guaranty fund. Therefore, in
the event that a non-admitted carrier doing business in the state
becomes insolvent, state guaranty funds are unavailable to cover
outstanding insurance claims.
Plaintiffs alleged that defendant brokers did not explain the risks
associated with binding coverage with a non-admitted excess lines
carrier, but plaintiffs did not dispute that Ouellette signed a
letter sent by Kaye, dated April 21, 1999, and entitled "Notice of
Excess Line Placement," on May 10, 1999, thereby binding the
Nightclubs to the Legion policy. In the letter, Haupert informed
Ouellette of Legion's non-admitted status and the possible
ramifications from a carrier holding that status, including exemption
from New York insurance regulation and the inability to access state
funds in the event of Legion's insolvency. Ouellette signed the
Notification of Excess Line Placement on May 10, 1999. A physical
copy of the final policy was delivered to Ouellette and Hustle in
September 1999 by defendant broker Setnor, following Setnor's
acquisition of the Nightclubs' Legion account, along with other Kaye
insurance accounts, pursuant to a purchasing agreement between Kaye
Under the Kaye-Setnor transaction, Setnor agreed to gradually
undertake service of Kaye's accounts leading up to a transfer of all
client accounts, scheduled to take place in April 2000. Subsequent to
its acquisition of the account, Setnor renewed plaintiffs' Legion
policy for a second year-long term commencing on March 28, 2000.
In March 2002, the Insurance Department of Pennsylvania announced
that Legion had been ordered into rehabilitation, followed by a
conservation proceeding in Illinois in April in response to the
company's insolvency. The Illinois conservation action later
progressed to liquidation. Legion subsequently notified plaintiffs
that due to the carrier's insolvency, Legion would be unable to cover
costs related to defending or settling claims left outstanding at the
time of liquidation.
The Nightclubs thereafter commenced this action naming Setnor as
defendant, seeking estimated damages in excess of $1.7 million;
Setnor subsequently impleaded Kaye, prompting plaintiffs to file an
amended complaint naming both Setnor and Kaye as co-defendants. Kaye
then joined Hustle and Ouellette as fourth-party defendants in the
current action, seeking contribution.
Plaintiffs' lawsuit asserted three causes of action for breach of
duty to exercise reasonable care in performance of duties, breach of
contract, and failure to comply with applicable provisions of New
York Insurance Law and Insurance Department Regulations.
The Court stated, first, that Insurance Law section 2117 prohibits
the sale of insurance underwritten by non-admitted insurance
carriers. The Legislature carved out a significant exception to this
rule, however, permitting the sale of insurance underwritten by
unauthorized carriers by certain brokers licensed to procure "excess
line" or "surplus line" insurance from unauthorized carriers, for the
purpose of widening the availability of insurance for otherwise
uninsurable risks, provided that the excess line brokers adhere to
strict statutory guidelines articulated in Insurance Law §2118.
Under section 2118, excess line brokers have a statutorily imposed
duty to "use due care in selecting [an] unauthorized insurer." "Due
care" is partially fulfilled by the broker's compliance with various
affirmative disclosure requirements. The Nightclubs maintained that
these defendants violated these disclosure requirements by not
advising plaintiffs of Legion's non-admitted status, and that this
non-compliance constitutes negligence per se.
Under the terms of Insurance Law §2118(e)(2)(C), a licensed "excess
lines" broker "shall provide written notice to the insured that the
placement was made with an unauthorized insurer."
The substance of this "written notice" is elaborated in the Insurance
Regulations issued by the Department of Insurance, which provides
that any insurance policy or insurance contract placed with an
unauthorized insurer must bear a specified legend alerting the
insured to the insurer's unauthorized status and its consequences,
(see 11 NYCRR §27.18(a)), and additionally be stamped by the excess
lines association of New York.
Further, according to the Insurance Regulation §27.17(b), "No excess
line broker shall deliver, or cause to be delivered by a producing
broker . . . any document evidencing insurance coverage, unless the
document constitutes an insurance policy or contract of insurance
actually issued by the insurer . . . " (11 NYCRR §27.17(b)).
An exception to the above rule, barring an excess line broker, or
producing broker working with the excess line broker, from
transmitting any informal documentation relating to coverage placed
with an unauthorized insurance carrier, provides that a producing or
excess line broker may transmit to the insured written confirmation
of placement of coverage, although not itself an insurance policy or
contract, provided that the document contains the same specified
legend that the insurance policy itself must bear. (11 NYCRR §27.17.)
Insurance Law §2118(e) further extends the affirmative duties of
excess line brokers dealing in unauthorized insurance by requiring
them to submit, within forty-five days after a policy is procured
from an unauthorized carrier, the declarations page of the policy or
the policy binder to the excess lines association. The excess lines
broker must accompany this submission with an affidavit, written by
herself or the producing broker, detailing that after "diligent
efforts" were made to place coverage with an authorized carrier, full
coverage as requested by the insured could only be placed with an
unauthorized insurer. Finally, the "affirming broker," as defined in
the statute, meaning that broker who submits this affidavit to the
excess lines association, must additionally attach a copy of the
written notice provided to the insured containing the specified
"Under the provisions discussed, Kaye was under an affirmative
obligation to obtain an excess line broker's license, file an
affidavit with the excess lines association detailing the 'diligent
efforts' made to place coverage with an authorized carrier, and
finally, Kaye was under an affirmative obligation to affix the
specified legend discussed above on every document sent to the
Nightclubs constituting an insurance policy or contract.
Additionally, any other document sent to the Nightclubs
constituting 'written confirmation of placement of coverage' with
Legion, as an unauthorized carrier, must have been affixed with same
specified legend. Finally, every document constituting an insurance
policy or contract sent by Kaye to the Nightclubs must also have been
stamped by the excess lines association of this state."
Kaye maintained that its letter of April 21, 1999, entitled, "Notice
of Excess Line Placement," provided plaintiffs with sufficient notice
of Legion's unauthorized status and the consequences therefrom.
Further, Kaye argued that as Nightclubs did not receive the actual
physical insurance policy until September 19, 1999 from Setnor,
subsequent to Setnor's acquisition of the Nightclubs account, the
Legion policy was not actually bound until that date in
September. "However, inasmuch as the court can comprehend from Kaye's
inconsistent arguments, April 21, 1999, the date the Notice of Excess
Line Placement was transmitted to plaintiffs, was the 'legally
operative date,' which presumably Kaye indicates can alternatively be
considered the date of binding."
The Insurance Law, section 2118(f)(2)(b), defines a "binder"
as "written evidence of a temporary insurance contract." The Court
of Appeals has elaborated on the meaning of "binder," defining it as
a temporary insurance policy, effective in the interim from the date
of application until a formal policy providing coverage is issued,
but, ultimately, does not constitute part of the insurance policy,
and is otherwise considered a distinct agreement from the policy
issued subsequently. [Springer v. Allstate Life Ins. Co., 94 NY2d
645, 649-650 (2000)].
"Therefore, because a binder constitutes an insurance policy, albeit
a temporary one, the specified legend must appear on its face, in
compliance with Insurance Regulation §27.18(a)."
"The Notice of Excess Line Placement sent by Kaye to the Nightclubs
on April 21, 1999, and signed by plaintiffs' agent, Ouellette on May
10, 1999, is the functional equivalent of a binder. Kaye itself
characterizes this letter... as a 'legally binding agreement,' and
that it 'bound the Legion policy in 1999.' The letter further
contains details suggesting it was intended to constitute a
binder.... For these reasons, the Notice of Excess Line Placement is
a binder consistent with the definition provided in Insurance Law
"While the letter's opening text does contain a header indicating
that placement is being made with an unauthorized insurer, the Court
is unable to discern whether the phrases are in ten point bold red
font from the photocopied version submitted to the Court, as required
under Insurance Regulation §27.18(a). Accordingly, the Court is not
prepared to rule on whether a violation of the applicable Insurance
Law disclosure provisions occurred, insofar as Kaye is concerned."
The Lexington renewal policy declarations page for the policy period
March 26, 1997 to March 26, 1998, expiring just prior to Kaye's
placement of coverage with Legion, submitted to the Court is stamped
with a legend that reads, "This insurance is issued pursuant to the
Florida surplus lines law. Persons insured by surplus lines carriers
do not have the protection of the Florida Insurance Guaranty Act to
the extent of any right of recovery for the obligation of an
insolvent unlicensed insurer."
"While the placement of this legend on plaintiffs' previous policy
may constitute some evidence of knowledge on plaintiffs' part of the
nature and consequences of excess line coverage," held the Court, "it
in no way discharges Kaye and Setnor's affirmative disclosure
obligations for excess line placement under the Insurance Law,
discussed at length above. Moreover, irrespective of both plaintiffs'
ratification of excess line coverage by Ouellette's signature on
Kaye's Notice of Excess Line Placement and plaintiffs' alleged
knowledge of the nature of excess lines coverage due to its previous
coverage with Lexington, both brokers were required to comply with
these disclosure obligations."
"The Insurance Law does not provide an exception to these statutory
disclosure requirements, rather the relevant provision clearly states
that the specified legend appear on 'every insurance policy' placed
with an unauthorized carrier, 11 NYCRR §27.18(a), and does not exempt
brokers from complying where a previous policy, bound by a different
broker, in a different state and with a different insurance carrier,
as was the case with the Lexington policy, is proven to contain
information alerting the insured to the nature and consequences of
placement with an unauthorized carrier."
"Neither does the Insurance Law make any distinction between a
binder, the insurance policy itself, or the renewal of that policy,
in terms of the extent of disclosure requirements. Rather the
Insurance Law requires 'every insurance policy placed with an
unauthorized broker,' 'shall bear across its face' the specified
"The Insurance Law explicitly treats those brokers who procure
insurance from unauthorized carriers as distinct from other insurance
brokers, statutorily imposing on them certain obligations, including
strict disclosure requirements. Irrespective of the selection of the
carrier itself, Kaye was still under a statutorily imposed duty to
comply with the Insurance Law's disclosure requirements which Kaye
has simply failed to demonstrate as a matter of law in its
submissions in support of its motion for summary judgment."
"The disclosure requirements imposed on excess line and producing
brokers apply to all insurance policies, irrespective of whether it
is a renewal, and no exceptions to this rule is enumerated in the
statute. The court is not inclined to read such an exception into the
"Although Insurance Law §2118 imposes a statutory duty on excess line
brokers to use due care in selecting an unauthorized carrier, and
further requires that diligent effort be made to first place coverage
with an authorized carrier, the statute itself contains no language
which confers a private cause of action to enforce its provisions,
and no court has yet to recognize a private cause of action for
violation of these specific provisions."
However, held the Court, "courts have frequently found for plaintiffs
against noncompliant brokers almost unfailingly in the context of a
broader claim for common law negligence, rather than for violation of
an Insurance Law provision." Therefore, concluded the Court,
violation of an insurance department regulation is not negligence per
se; the plaintiffs must prove negligence.
Legion was solvent and had been successfully paying claims for three years prior
to insolvency, which occurred in March of 2002, and the policy was renewed by
plaintiffs during this time, in March of 2000. Moreover, at the time of binding,
Legion's disclosed financials and then-current "A" rating in Best's placed the
provider within the top third of the nation's insurance operating companies, and
rendered Legion a suitable choice for plaintiffs if, in fact, Kaye could not
place coverage with an authorized carrier due to plaintiffs' significant loss
history, stated the Court.
"While Legion was otherwise financially sound and solvent, the
applicable provision requires the filing of an affidavit to the
excess line association detailing the broker's 'diligent effort' in
placing with an authorized carrier. Kaye maintains that it did
attempt, but ultimately failed to place plaintiffs' coverage with an
authorized carrier prior to binding with Legion. Defendants make no
mention of the required affidavits detailing this effort, and neither
submit a copy of this affidavit nor allege that it was ever filed.
Therefore, as stated above the court is unable to rule as a matter of
law that Kaye discharged its duties to undertake 'diligent efforts'
under Insurance Law §2118(b)(3)(A)."
As to the duty of care owed by an insurance broker, the Court
observed that "Generally, insurance brokers' procurement duty is
defined by the nature of the customer's request for coverage." In
Murphy v. Kuhn, 90 NY2d 266, the Court of Appeals detailed
circumstances creating a "special relationship" imposing upon an
agent a duty beyond mere procurement: (1) where the agent receives
compensation for consultation apart from payment of premiums, (2)
interaction between the agent and the insured regarding specific
questions of coverage, and (3) an extended period of dealings.
None of those circumstances exist here, ruled the Court.
"Plaintiffs here effectively ratified Kaye's placement of insurance
with an unauthorized carrier through both affirmative acts and
failure to repudiate the policy. At the outset, Kaye's Notice of
Excess Line Placement, signed by Ouellette on May 10, 1999,
constitutes documented communication of the material facts necessary
for valid ratification. Upon receiving notice of Legion's
unauthorized status, Ouellette neither rejected the procured policy
nor communicated to Kaye the Nightclubs' desire to obtain coverage
only with an authorized carrier."
"Still further, plaintiffs affirmatively ratified Kaye's initial
placement by renewing the purportedly insufficient Legion policy the
following year, well after receiving notice of its unauthorized
status. Finally, in 2001 the plaintiffs, through another broker,
replaced the Legion policy with coverage provided by another
unauthorized carrier. Plaintiffs' actions and omissions, in light of
their knowledge of the pertinent material facts, clearly constitute
The final element in the negligence analysis, proximate cause, "requires a
showing by plaintiffs that the insurance they sought was available and would
have been procured but for defendant's negligence in selecting an unauthorized
carrier," held the Court. "Even if plaintiffs establish that defendants
did fail to comply with the disclosure obligations of the applicable
Insurance Law provisions and Regulations, plaintiffs fail to
establish that defendants' negligence was the proximate cause of
their injury." Plaintiffs would have to show that they would have
procured the insurance which they sought but for the broker's
"Here, the Nightclubs are unable to demonstrate proximate causation... For one,
plaintiffs admit that their most recent coverage prior to 1999 was obtained
through an unauthorized carrier, and have produced no evidence that authorized
carriers covered the Nightclubs in the more distant past. Further, a former
officer of Lexington, Stephen Andrick, in an affidavit dated February 1, 2005,
indicates that the insurer terminated the Nightclubs' casualty policy on the
basis of plaintiffs' excessive loss history. During the course of the 1998-1999
policy, Lexington paid out $719,000 in losses on plaintiffs' behalf, while
receiving only $298,915 in premium payments."
The nightclub industry has proven "historically difficult to
insure" due to a typically large number of claims. These general
comments are confirmed by the April 21, 1999 "Notice of Excess Line
Placement" which notes that Kaye's best efforts to secure the Nightclubs'
placement with an authorized insurance carrier
had failed. "Accordingly, as plaintiffs have not demonstrated that
they would have obtained coverage with an authorized carrier but for
defendants' negligence, plaintiffs fail to establish that defendants'
negligence was a proximate cause of their injury."
Finally, notwithstanding their inability to demonstrate proximate cause,
plaintiffs' claims were held to be time-barred by the three year statute of
D. The Applicable Statutory Limitations
CPLR section 214(4) establishes a standard three-year time limit for "any injury
to property" not attributable to bodily exposure to substances. Section 213(2)
imposes a six-year limit on claims related to express or implied contractual
The question before the Court was: when did the plaintiffs' cause of action
accrue: when the insurer became insolvent? Or when the policy was negligently
Here, plaintiffs' discovery of Legion's unauthorized status can be
fixed at the very latest at May 10, 1999, when Mr. Ouellette signed
Kaye's Notification of Excess Lines Placement. Plaintiffs took no
action in response to the discovery, effectively assuming the risk
associated with the placement. Immediately following the alleged
violation of Insurance Law, but prior to Legion's insolvency, the
current plaintiffs perhaps became entitled to a refund of Kaye's
fees, but certainly not to the damages now sought." Therefore "accrual of the
cause of action took place at
the date of the alleged failure to comply with statutory disclosure
requirements and for negligent selection of an unauthorized carrier,
both of which occurred in 1999, and plaintiffs' negligence action is
thus time-barred under CPLR 214(4)," held the Court.
As to the claim of breach of contract, the Court came to the conclusion that
there was no detailed agreement. "Even viewing the circumstances in the light
most favorable to plaintiffs, the only viable contract between plaintiffs and
defendants was for procurement of insurance coverage, a promise defendants
honored in placing the Nightclubs' policy with Legion. Accordingly, plaintiffs
have failed to raise a triable issue of fact that defendants breached an oral
contract, and thus summary judgment is appropriate."
The Court dismissed the Complaint against all the brokers, in its entirety.
Comment: Under Insurance Law §2105, the Superintendent of Insurance
has discretionary authority to grant an excess line license to a broker already
licensed as an insurance broker, provided that the licensed excess line broker
adhere to the strict statutory regiment provided in the Insurance Law. The
Superintendent may suspend or revoke the license for non-compliance. In addition
to obtaining a license, excess lines brokers are required to post a penal bond
for $15,000 with the Superintendent.
A "producing broker" is defined under the Insurance Regulations
as "any person . . . or corporation who or which acts as an insurance
broker other than the excess line broker." 11 NYCRR §27.1(m). In
practice, the producing broker is also known as the "retail broker,"
who works with the excess lines broker to procure a policy on behalf
of the insured.
Insurance Law §2105, §2118 and Regulation §27.21 prohibits a licensed
excess line broker from filing affidavits with the excess lines association on
behalf of a producing broker not licensed to procure excess lines coverage.
Additionally, the excess lines broker who works with the producing broker must
The Insurance Law elaborates that a broker's "diligent efforts"
means three attempts, followed by three declinations, to place
coverage with an authorized insurer prior to placement with an
As this case illustrates, obtaining coverage from non-admitted insurers is risky
business for both the insureds and the brokers -- but for certain kinds of
business risks, there is no other choice.
PATRON KNOCKED OVER BY STUMBLING DRUNK ON NIGHTCLUB DANCE FLOOR
CANNOT PROVE LIABILITY
DeMarco v. Ouellette, NYLJ 9/19/05 (USDC - SDNY) (HOLWELL, j)
This personal injury action was brought by plaintiff Lisa DeMarco
against individual defendant Timothy Ouellete, and corporate
defendant The Culture Club NYC, which owns a nightclub by the same
name on Varick Street in New York City. While patronizing that
nightclub on the evening of June 20-21, 2003, plaintiff suffered a
fractured ankle when an unidentified male patron fell on her.
Plaintiff claimed that the Culture Club was responsible for her
injury because it (i) negligently failed to remove the unidentified
male from its premises prior to the accident; (ii) operated an
inherently dangerous "tiered" dance floor; (iii) negligently allowed
the club to become overcrowded; and (iv) violated New York's Dram
Shop Act. Defendant Culture Club moved for summary judgment on all
On the evening of June 20, 2003, plaintiff and a friend, Gina
Giarratana, arrived at the Culture Club between 9 and 11 o'clock.
Both had been to the Club on several previous occasions. As the
evening wore on, the two danced and socialized, consuming
approximately two drinks each between the time they arrived and 2
a.m. the next morning. There is no evidence that plaintiff was
intoxicated when she arrived at the Club, and plaintiff testified
that she remained sober throughout the evening, most of which she
spent with Giarratana on the Club's "tiered" dance floor.
The "tiered" nature of the dance floor can be described as follows.
There is a "bottom" level, which is flush with the main floor of the
club, but readily distinguishable by embedded lights. This bottom
level is roughly square, is constructed of wood, and can accommodate
approximately 40-45 dancers. Sitting on top of the bottom level, and
entirely contained within it, is a "second" level. Relative to the
bottom level, this second level is significantly smaller in square
footage-it can accommodate between 15 and 25 people-and is reached by
climbing a step of approximately one foot. Like the bottom level, the
second level is "lit up", and is otherwise distinguished by a colored
band running its perimeter. The "third" or "top" level sits on top of
the second level, and is similarly constructed, with a light-colored
band running its perimeter. It has the smallest square footage of the
three levels, and can hold approximately 6 people.
Plaintiff's injury occurred on the second level of the dance floor in
the following manner. According to plaintiff, she and Giarratana were
dancing just after 2 a.m. when an unidentified male patron bumped
into her, causing her to lose her balance and fall straight back.
In a sort of "domino" reaction, the unidentified patron also fell
down, landing on top of plaintiff with her left leg still trapped
under her. Plaintiff's ankle fractured under the added weight.
Realizing that she had been seriously injured, plaintiff yelled for
the man to get off her, which he did without delay.
There was no dispute that plaintiff's injury was accidental.
Plaintiff remembered that between six and eight people fell at the
same time she did, including Giarratana. Although plaintiff
considered the dance floor to be crowded at the time she fell, so
much so that "you [couldn't] see where the [tiers] end[ed]",
plaintiff didn't see anyone push, shove, or attack the man who fell
on her. Neither had there been any previous contact that evening
between plaintiff and the male patron; plaintiff did not talk to him
prior to the accident, and had no recollection of how long he had
been at the club that night.
Plaintiff denied that she was intoxicated at the time of her fall;
she also testified that her shoes had nothing to do with the
accident. However, an employee incident report said otherwise on
Discussing defendant's summary judgment Motion, the court
stated, "Like any other property owner, defendant Culture Club has a
duty to control the conduct of guests on its premises. Landowners in
general have a duty to act in a reasonable manner to prevent harm to
those on their property. But this duty is limited in several
important respects; first to conduct that it has the opportunity to
control and of which it is reasonably aware, and second, to conduct
that is foreseeable or expected." There is "no duty to protect
patrons against unforeseeable and unexpected assaults. In this case,
there is no doubt that the Club had the opportunity to control the
patron who injured plaintiff. This means that the Club's duty to
plaintiff, if any, will turn on (i) its awareness of the conduct that
caused her injury; and (ii) the predictability of the accident.
Plaintiff, of course, contends both that the Club was aware of the
impending danger, and that the accident was entirely foreseeable."
"Having carefully reviewed the record, the Court disagrees. To begin,
there is no basis for plaintiff's claim that the Club was 'reasonably
aware' that the male patron who injured her was a risk to other
customers, whether because he was intoxicated or otherwise."
"Neither is there any evidence that the Club should - or indeed,
could - have been independently alerted to the patron's allegedly
dangerous propensity. For example, there is no evidence that other
customers complained about the male patron on the night in question,
or more generally about the conditions at the Club. Nor is there
evidence that the Club had been the site of similar accidents, or any
other dangerous activity, at any point in the past. New York caselaw
is clear on this point: absent awareness, there can be no duty."
"Moreover, by all accounts the accident occurred suddenly, which both
supports the conclusion that it was not foreseeable, and calls into
question what, if anything, the Club might have done to prevent it.
In this regard, to the extent plaintiff contends that there were
insufficient security staff working on the night of her injury, she
has failed to present a triable issue by neglecting to introduce
expert testimony on the subject."
"For all of these reasons, the Court finds that the Club did not owe
plaintiff a duty to remove or control the patron who caused her
"Plaintiff next argues that the Club was negligent because
the 'tiered' nature of the dance floor was inherently dangerous.
There are several problems with this theory. First and most
obviously, there is no expert testimony on the subject, and
plaintiff's attorney is not qualified to give his opinion on the
matter. Nor is there any independent support for the proposition
under New York law."
In this case, "there is no dispute that the dance floor was well lit
and otherwise well defined at the time of plaintiff's accident; it
was therefore not inherently dangerous to a person using due care."
"Even setting aside these problems of proof, this claim still fails
because plaintiff clearly assumed the risk of any inherent danger. In
New York, the doctrine of assumed risk rests on the common sense
proposition that, 'by engaging in a sport or recreational activity, a
participant consents to those commonly appreciated risks which are
inherent in and arise out of the nature of the sport [or activity]
generally and flow from such participation.' Here, there is no
dispute that plaintiff was aware that the dance floor was tiered; she
had patronized the club on several prior occasions and had spent much
of the evening in question on the dance floor. Under similar
circumstances, where a plaintiff was aware of the condition of which
he or she complained, New York courts routinely apply the doctrine of
assumed risk to preclude negligence claims based on a theory of
Further, held the Court, "there is no evidence that the Club
negligently allowed its premises to become 'overcrowded.' The
term 'overcrowding' has a specific application in New York negligence
law, and requires a plaintiff to 'establish that 'he [or she] was
unable to find a place of safety or that his [or her] free movement
was restricted due to the alleged overcrowding condition.'Plaintiff
has failed to establish either element here. Indeed, it is undisputed
that she could have left the dance floor, or even the Club, at any
point during the evening. These options both preclude her
overcrowding claim, and preempt the dispute, noted supra, regarding
the exact size of the Club's crowd on the night in question. The
Court also notes that plaintiff has not alleged that she was injured
because the Club was overcrowded; rather, she alleges that her injury
was caused by an unruly patron."
That leaves just plaintiff's claim under New York's "Dram Shop Act",
N. Y. General Obligations Law §11-101. The Dram Shop Act "creates a
cause of action unknown at common law by allowing recovery against a
tavern owner for injuries caused as a result of a patron's
intoxication." In particular, the statute provides that a party who
unlawfully sells alcohol to a visibly-intoxicated person is liable
for injuries caused by reason of that person's intoxication.
Accordingly, to sustain a claim under the Dram Shop Act, a plaintiff
must present some evidence that an alcohol vendor (i) sold alcohol to
a patron (ii) while that patron was visibly intoxicated.
"Even assuming that the male patron was intoxicated at the time of
the accident, and that he had been drinking at the bar earlier in the
evening, there is no evidence that he was served alcohol while he was
visibly intoxicated, either from the bar or otherwise. It is
incumbent upon a plaintiff who charges a violation of the Dram Shop
Act to offer evidence that the party to whom liquor was sold acted or
appeared to be intoxicated at the time of the sale. Absent evidence
of this essential nexus, the Court must grant defendant's motion on
this final ground."
The Motion for summary judgment was granted and the case dismissed.
STEAM ROOM SEATING AREA IS NOT SUBJECT TO BUILDING CODE REQUIREMENTS
FOR INTERIOR STAIRS
Kahn v. Town Sports International Inc., NYLJ 9/20/05 (USDC - SDNY)
Plaintiff Kahn slipped and was injured on July 24, 2002 as he
attempted to step from the first to the second seating level in the
steam room at the East 76th Street branch of defendants' New York
Sports Club. Plaintiff's expert engineer, Scott Silberman submitted
an expert report concluding that the two level seating area also
functioned as a stairway that did not conform to the City building
code. Defendant moved to preclude that aspect of Silberman's expert
testimony and a second aspect dealing with the "coefficient of
friction" of the seating area.
The Court held, first, as a matter of law, that Administrative Code
of the City of New York §27-375, which governs the construction and
maintenance of interior stairs that provide a means of exit from a
building, "clearly does not apply to the two-level seating area in
the steam room."
"The levels of seating in a steam room do not, by any stretch of the
imagination, act as an 'interior staircase' used as a means
of "egress from the building" under the Administrative Code of the
City of New York. The expert's testimony about Administrative Code
§27-375 was precluded.
Defendants also argued that the expert should not be allowed to
testify as to the "coefficient of friction" on the tiles of the steam
room seating levels because he did not take into account the fact
that plaintiff "was wearing something on his feet when the accident
occurred." According to defendants, "by failing to include the
measurement of the Static Coefficient of Friction of footware, Mr.
Silberman's calculations fail to lay a proper foundation in order to
have his measurements introduced as evidence."
But, held the Court, "Defendants have cited to no authority for this
position, and the Court is unpersuaded that Silberman's testimony is
rendered unduly speculative and not based upon evidence because he
did not take . . . into account that plaintiff was wearing something
on his feet when the accident occurred. This fact goes to the weight
of the expert's testimony, not its admissibility.
"Defendants are correct," stated the Court, "that a failure to
provide a non-slip surface does not constitute negligence per se.
This evidence, however, can be introduced at trial and considered by
the jury, along with other evidence, as to the issue of defendants'
negligence." The expert "will not be precluded from testifying as to
the coefficient of friction of the seating area, subject to cross-
examination as to his non-consideration of plaintiff Kahn's footwear
in measuring the coefficient of friction."
The plaintiff's expert was therefore precluded from testifying that
the steam room steps were subject to Code provisions about interior
staircases, but he could testify that they were too slippery.
HOMEOWNER'S POLICY DOES NOT PROVIDE COVERAGE FOR LAWSUIT ARISING FROM
Automobile Insurance Company of Hartford v. Cook, NYLJ 9/21/05 (3rd Dept 2005)
This appeal presented the legal question of whether an individual's homeowner's
insurance policy affords coverage when that individual is sued for wrongful
death after killing a person in self-defense.
On February 20, 2002, defendant Alfred S. Cook shot and killed Richard A. Barber
("decedent") after a disagreement over a business
arrangement spun out of control. Decedent had entered Cook's home
without permission and, during their discussions, Cook, armed with a
handgun, retreated to his bedroom to retrieve a 12-gauge shotgun and
then returned to the living room where the fatal confrontation
occurred. Cook was indicted for a number of crimes, including murder
in the second degree, stood trial and was acquitted on all counts of
the indictment and lesser included crimes. The jury apparently
concluded in the criminal case that the prosecution failed to prove
beyond a reasonable doubt that the 120-pound Cook did not have legal
justification for shooting the 360-pound decedent -- who had previously attacked
and injured Cook -- after he refused to leave Cook's home and approached Cook in
a menacing way.
The administrator of the decedent's estate resumed prosecution of a wrongful
death action commenced against Cook shortly after the shooting. In response,
Cook sought coverage under his homeowner's insurance policy issued to him by
Subsequently, Hartford commenced this action against Cook and the administrator,
seeking a declaration that it had no duty to either defend or indemnify Cook in
the underlying wrongful death action. Hartford contended that Cook's shooting of
decedent was not a covered occurrence under the policy and, in any event, fell
within the policy's "expected or intended" exclusion.
Supreme Court denied Hartford's Motion for summary judgment and
ruled that Hartford was obligated to provide Cook with a defense. Hartford
Cook's policy defined "occurrence" as an "accident." The Court stated, "It is
well settled that in deciding whether a loss is the result of an accident, it
must be determined, from the point of view of the insured, whether the loss was
unexpected, unusual and unforeseen."
The Court of Appeals has established a "transaction as a whole" test for
determining whether an occurrence constituted an accident (see McGroarty v.
Great Am. Ins. Co., 36 NY2d 358, 364 . Under this test, it is "not legally
impossible to find accidental results flowing from intentional causes."
However, "where harm to the victim is inherent in the nature of the
act performed, whatever injuries result are, as a matter of law,
intentionally caused." Cook admitted at his deposition that
he knew "a shot with a shotgun would injure, yes. I expected it to
injure him, I certainly did not expect to kill him."
"On these unrebutted facts set forth by plaintiff in support of its motion for
summary judgment, the result of Cook's intentional act cannot be characterized
as accidental and the dissent's suggestion that the negligence cause of action
alleged in the complaint remains viable must be rejected. While he allegedly did
not anticipate that the injury inflicted would result in death, the facts (and
his admission) establish that he intended the result of a bodily injury. Indeed,
he fired a 12-gauge shotgun at close range into decedent's stomach. We thus
conclude as a matter of law that Cook's actions were not covered by the
homeowner's policy issued by plaintiff."
The Court also said that the "expected and intended" exclusion applied as well,
to defeat coverage. "We further note that the exclusion can take on independent
significance when accompanied by a relevant exception. In Handlebar, Inc. v.
Utica First Ins. Co. (290 AD2d 633 , lv denied 98 NY2d 601 ), the
exclusion in that commercial liability policy was accompanied by an exception
for 'bodily injury resulting from the use of reasonable force to protect persons
or property.' Such an exception, which would provide a basis for coverage for
justifiable acts of self-defense, did not
accompany the exclusion in Cook's homeowner's policy."
The lower court ruling was reversed, and Hartford is not obligated to provide
IN ABSENCE OF PHYSICAL INJURY, EMOTIONAL DISTRESS IS WORTH NO MORE
THAN $50,000, RULES COURT
Rainone v. Potter, NYLJ 9/26/05 (USDC - EDNY)
Plaintiff filed this discrimination action against his employer, the
United States Postal Service, claiming that he was not promoted due
to his gender and in retaliation for protected activity. At the
conclusion of the jury trial, the jury rendered a verdict in favor of
the Defendant on the claim of gender discrimination and in favor of
the Plaintiff on the retaliation claim. The jury awarded the
Plaintiff the sum of $11,166, representing the five year differential
in salary between his original position and the promotion that he was
denied. In addition, the jury awarded the Plaintiff the sum of
$175,000 as damages for emotional distress caused by the Defendant's
failure to promote him. The Defendant moved for a new trial on the
ground that the award for the Plaintiff's emotional distress was
The Court stated that "In the employment discrimination context,
there appears to be a 'spectrum' or 'continuum' of damage awards for
emotional distress.... The spectrum of damage awards ranges from
$5,000 to more than $100,000, representing 'garden-
variety,' 'significant,' and 'egregious' emotional distress claims."
"At the low end of the continuum are what have become known
as 'garden-variety' distress claims in which district courts have
awarded damages for emotional distress ranging from $5,000 to
$35,000. 'Garden-variety' remitted awards have typically been
rendered in cases where the evidence of harm was presented primarily
through the testimony of the plaintiff, who describes his or her
distress in vague or conclusory terms and fails to describe the
severity or consequences of the injury."
"The middle of the spectrum consists of 'significant' ($50,000 up to
$100,000) and 'substantial' emotional distress claims ($100,000).
These claims differ from the garden-variety claims in that they are
based on more substantial harm or more offensive conduct, are
sometimes supported by medical testimony or evidence, evidence of
treatment by a healthcare professional and/or medication, and
testimony from other, corroborating witnesses."
"Finally, on the high end of the spectrum are 'egregious' emotional
distress claims, where the courts have upheld or remitted awards for
distress to a sum in excess of $100,000. These awards have only been
warranted where the discriminatory conduct was outrageous and
shocking or where the physical health of plaintiff was significantly
After citing examples of the garden-variety and significant forms of
emotional distress, the Court stated that "Courts have awarded
damages for emotional distress in the sum of $100,000 only in cases
where the employer's discriminatory conduct has caused plaintiff
stress which manifested itself in the form of severe emotional or
physical reactions. For example, in Bick v. City of New York, No. 95-
8781, 1998 WL 190283, at 20 (S.D.N.Y. Apr. 21, 1998), a female
sergeant succeeded against the New York City Police Department on her
claims of harassment, gender discrimination, and retaliation. The
jury awarded the plaintiff $750,000 in compensatory damages. The
evidence at trial included testimony from the plaintiff, her
therapist, and a supervising officer, who all suggested that her
distress was 'far more than minimal injury.' In fact, the
corroborated testimony showed that the plaintiff was 'devastated' and
at times 'hysterical.' The Plaintiff also received treatment from a
certified social worker trained in psychotherapy and medication from
a psychiatrist. She was diagnosed as suffering from anxiety,
depression and feelings of powerlessness and 'suicidal ideation.' In
addition, at the time of trial the plaintiff continued to receive
treatment, although she was described as improved. Based on this
evidence, the court reduced the jury award from $750,000.00 to
"At the high end of the spectrum are awards that are well in excess
of $100,000, in cases that generally contain evidence of debilitating
and permanent alterations in lifestyle. See, e.g., Ramirez v. Off
Track Betting, 112 F.3d 38 (2d Cir. 1997) (award of $500,000
appropriate where the plaintiff's psychiatric difficulties had become
so severe after his discharge that he was unemployable); Shea v.
Icelandair, 925 F. Supp. 1014, 1021 (S.D.N.Y. 1996) (awarding damages
of $175,000 for mental anguish exacerbated by Parkinson's disease and
a heart condition); see also Town of Hempstead v. State Div. of Human
Rights, 233 A.D.2d 451, 649 N.Y.S.2d 942 (2d Dep't 1996) (awarding
$500,000 for 'pervasive and relentless' sexual harassment of a former
victim of child sex abuse under New York state law under
the 'deviates materially' standard). The New York 'deviates
materially' standard is less deferential to a jury verdict than the
federal 'shock the conscience' standard."
"The cases cited above that have upheld awards for emotional distress
in excess of $100,000 illustrate the shocking nature of the award in
this case. Here, there was no evidence of permanency, debilitation,
or physical manifestations of distress. At the trial Rainone, his
wife, and Doctor Gary Springstubb, who is a psychologist, testified
as to the emotional distress the Plaintiff suffered after not being
selected for a promotion from his position as a supervisor to manager
in the United States Postal Service's Long Island Computer Forwarding
"The sole testimony that the Plaintiff provided with regard to his
non-selection was that immediately thereafter his mind
was 'swimming;' that his 'future looked extremely grim;' and that he
had developed sleeping and 'other manifestations.' As a result, the
Plaintiff requested sick leave for approximately six months until he
had used all of his leave. Remarkably, the Plaintiff emphatically
testified that he did not consider himself incapacitated in 'any way,
shape, or form.' Further, the Plaintiff commented that he was
enjoying a 'productive life,' had published two books, and sold
collectibles such as comic books on the internet auction website
known as 'Ebay.'"
"The Plaintiff's wife Anne Rainone testified that after learning
about the non-selection the Plaintiff was depressed, had difficulty
sleeping, was 'completely distraught,' 'frustrated,' and 'completely
shattered.' However, the Plaintiff's testimony indicates that he made
a good recovery."
"In these circumstances, it is appropriate that Rainone's damages be
reduced to an amount that does not materially deviate from the sum
that would be reasonable compensation for his emotional injuries. In
comparing the evidence presented on the Plaintiff's emotional
distress to similar cases, it is apparent that this case falls
squarely in the low end of the 'significant' range. The Plaintiff
suffered from a level of emotional distress after the non-selection
to the supervisor position that was more than mere 'garden variety.'
The evidence of emotional distress was corroborated by the testimony
of his wife. Rainone also received treatment from a psychologist for
four years and was diagnosed with major depression. However, there
was no evidence of physical manifestations of emotional distress or
debilitating alterations in lifestyle, and no evidence of permanency.
A review of comparable cases which address verdicts for emotional
distress damages show that, absent serious psychological injuries,
such awards generally result in less than $50,000."
"Accordingly, based on the testimony and the non-permanent emotional
distress sustained by the Plaintiff as a result of the retaliation,
the Court finds that the jury award for emotional distress shocks the
conscience of the Court. The award for emotional distress should be
reduced from $175,000 to $50,000. There will be a new trial on
damages, unless the plaintiff agrees to the reduction to the sum of
$50,000 for his emotional distress damages. If this remittitur is
accepted, the Plaintiff would be entitled to the total sum of $50,000
in compensatory damages, and the sum of $11,166 in back wages for a
total sum of $61,166."
Comment: Emotional distress is, I think, a very interesting concept
in tort law. Some people can take stress and adversity better than
others, just as some people can withstand and recover from physical
injury better than others. But, I suppose, just as with physical
injury, a tortfeasor takes a plaintiff "as he finds him." However, I
can't help but feel that some of the people who claim emotional
distress, were already emotionally distressed before the incident
that sparked the lawsuit.
This was a Federal case. In New York State court cases, generally
there must be a physical injury in order to sustain a claim of
emotional distress. Otherwise, the tortfeasor must commit an act of
an "outrageous" nature. What is the definition of outrageous?
Whatever the jury says it is, generally, unless the act falls so far
outside range of typical behavior that everyone can agree it is
outrageous. And of course the goalposts are constantly moving; what
was outrageous in 1960 may be considered ordinary these days; what
was scandalous in 1910 might be considered laughable today. Lenny
Bruce was arrested and convicted for obscenity in the early 1960s for
saying things that are now routinely spoken on television.
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WHEN DEFENDANT DIES, ESTATE HAS NO OBLIGATION TO APPOINT AN
Abecasis v. Fontanazza, NYLJ 9/27/05 (Civil Court, Kings County)
This action arose out of an automobile accident in which Plaintiff
was allegedly struck by Defendant's motor vehicle. On or about May
24, 2005, defense counsel forwarded a copy of a death certificate for
Defendant and, as a result thereof, all proceedings were stayed
pursuant to CPLR section 1015.
Defendant died intestate with no assets of value or any personal
affairs requiring the appointment of an administrator, "and the
family has no intention of ever petitioning for the appointment of an
estate fiduciary." No fiduciary was appointed by the Surrogate's
Plaintiff moved to have the court order Defendant's counsel to apply
for appointment as a temporary administrator or, in the alternative,
appoint defense counsel as the temporary administrator for the
limited purpose of defending this action. Plaintiff has agreed to
limit his recovery to the available insurance coverage. Defense
counsel was retained by Defendant's insurance carrier for the purpose
of representing the deceased Defendant's interests in this matter.
No notice of trial had been filed with respect to this action.
"It is well settled that the death of a party terminates his
attorney's authority to act and stays the action as to him pending
the substitution of a legal representative. CPLR 1015(a). The
question presented is whether this court has the authority to
substitute a person to continue the action."
"Although the Surrogate's Court is the usual forum for the
appointment of estate fiduciaries, it does not have exclusive
jurisdiction in these matters. The Supreme Court is a court of
general jurisdiction with the power to appoint a guardian to serve as
temporary administrator, and also has broad discretion to act in
matters involving substitution."
"However, the Civil Court of the City of New York is a court of
limited jurisdiction; its powers are specified in the New York City
Civil Court Act. Pursuant to section 212 of that statute, the civil
court shall have all of the powers that the supreme court would have
in like actions and proceedings. Therefore, it would appear that the
Civil Court could appoint a temporary guardian in the same manner as
Supreme Court in situations in which the Supreme Court would so act.
Consequently, this court must determine when and under what
circumstances the Supreme Court would appoint a temporary estate
"The Supreme Court has exercised its power to appoint temporary
administrators when such action avoids undue delay and the case is
otherwise trial ready. The courts have noted that the exercise of
this authority should be exercised sparingly, with due regard for the
expertise of the Surrogate's Court in these matters and only in
limited circumstances. The Supreme Court has only exercised this
authority in emergency situations, and in ordinary cases the courts
have stated that the representative should be appointed in
"In this case there is no unusual circumstance that would warrant
this court's appointment of a temporary administrator: the trial has
not started, no undue prejudice has been alleged to Plaintiff if an
administrator were appointed in the usual manner, and Defendant died
only a few months ago. Therefore, the court denies Plaintiff's motion
to appoint a temporary administrator."
"Plaintiff's alternative request, opposed by Defendant's counsel, is
that Defendant's counsel be ordered to apply to the Surrogate's Court
for the appointment of a temporary administrator."
"It is not the burden of Defendant's counsel to make a motion to
effect a substitution of Defendant. Since Defendant's counsel no
longer has a client to represent, Defendant's attorneys would have no
logical reason to promote Plaintiff's lawsuit by seeking the
appointment of an administrator. Therefore, Plaintiff's attorneys are
directed to make the appropriate motion in the Surrogate's Court to
have a representative appointed and substituted for Defendant."
The lawsuit was "stayed pending the appointment and substitution."
SCAFFOLD LAW APPLIES TO INJURY SUSTAINED WHILE WORKER WAS LOWERING
PIPE FROM SIDEWALK INTO TRENCH
Kaferstein v. JP Morgan Chase & Co., NYLJ 9/28/05 (Supreme Court,
New York County (LEHNER, j)
The basic legal issue presented in this Labor Law §240(1) was whether
the section applies when the plaintiff, who was positioned on the
sidewalk, injured his arm when lowering a pipe into the basement of
the abutting building.
Plaintiff, who was employed by General, was engaged in lowering an
eleven foot-long pipe that weighed between 200 and 300 pounds into a
sidewalk shaft to a point in the basement of the Building
approximately eighteen feet below the sidewalk level. This pipe was
needed to replace a leaking steam pipe. To move the pipe from the
sidewalk into the basement, plaintiff's supervisor was located at the
bottom of the shaft, and plaintiff asserted that an employee of the
Building was stationed at a midway point to guide the pipe into the
basement. To effect the lowering, a rope was attached to plaintiff's
forearm. He asserts that he was injured when the pipe free fell with
his arm attached.
Defendants did not argue that the activity in which plaintiff was
engaged in moving the pipe into the Building was not covered by the
statute. Rather they maintained that the section is inapplicable
because the pipe was not being hoisted to a higher level, but instead
was being lowered to below the sidewalk level where plaintiff was
"The basic principles to be following in determining elevation
related issues on a claim under §240(1) were set forth in Rocovich v.
Consolidated Edison Company, 78 NY2d 509 (1991):"
"The various tasks in which these devices are customarily needed or
employed share a common characteristic. All entail a significant risk
inherent in the particular task because of the relative elevation at
which the task must be performed or at which materials or loads must
be positioned or secured. The contemplated hazards are those related
to the effects of gravity where protective devices are called for
either because of a difference between the elevation level of the
required work and a lower level or a difference between the elevation
level where the worker is positioned and the higher level of the
materials or load being hoisted or secured."
"Based on the foregoing interpretation of the statute, at first blush
it would appear that defendants and General were correct in their
argument in that plaintiff, who was stationed on the sidewalk, was
not performing work at an 'elevation' level, and the pipe was not at
a higher level. However, the section has in general terms been stated
to apply 'not simply where the work is performed at heights but where
the work involves risks related to differences in elevation,' and
where the protective devices listed in the statute were not
provided 'to shield the injured worker from harm directly flowing
from the application of the force of gravity to an object or
"Here if plaintiff's supervisor, who was stationed in the basement
approximately 18 feet below the sidewalk, was injured by the free
fall of the pipe, there is no doubt that the section would be
applicable under the interpretation set forth in Rocovich as he would
have been injured from the fall of the load located at a higher
"Here, although the level of the required work was the sidewalk, it
was an 'elevated' level insofar as the location to which the pipe was
to be lowered. If instead of being located on the sidewalk lowering
the pipe to the basement, plaintiff were standing a floor above and
was lowering the pipe to the sidewalk, the statute would clearly be
applicable. There should be no different result because the pipe was
being lowered from the sidewalk. With respect to the lowering of the
pipe... the fact that the object was being lowered rather than raised
does not remove the case from the statute's coverage."
Since the work performed involved "risks related to the differences
in elevation and the injury to plaintiff's arm resulted from a free
fall of the pipe into the shaft and hence flowed directly "from the
application of the force of gravity"I find that §240(1) is applicable
and defendants were required to provide plaintiff with the protection
"Since it is undisputed that the sole protection provided to
plaintiff in lowering this eleven-foot pipe weighing between 200 and
300 pounds a distance of approximately 18 feet was a rope attached to
his forearm, I find that defendants have failed to provide him the
protection mandated by §240(1). That plaintiff did not fall or be
struck by a falling object does not affect defendants' liability as
the injury to his arm was the result of the application of gravity
causing the free fall of the pipe."
Plaintiff's motion for summary judgment against defendants on
liability based on his claim of a violation of Labor Law §240(1) was
Quote of the Day:
"I'll send a pair of my pants to your office and you can try to get
into them on your own time." -- Heather Locklear to a leering William
Shatner in "Boston Legal," 9/27/05
NEW YORK CITY ORDINANCE MAKING LANDOWNERS LIABLE FOR SIDEWALK DEFECTS
DOES NOT NEGATE PLAINTIFF'S BURDEN OF PROVING NEGLIGENCE
Padob v. 127 E. 23rd Street LLC, NYLJ 9/29/05 (Supreme Court, New
York County) (EDMEAD, j)
Plaintiff was injured on April 30, 2004 as a result of a trip and
fall on a sidewalk in front of the commercial premises located at 127
East 23rd Street, Manhattan. Defendant "127" owns the building
adjacent to the subject sidewalk and defendant Delmar manages the
adjacent building. It was alleged that prior to the date of the
accident, the owner 127 leased the commercial premises to
defendant "Absolute," and that Absolute assigned the lease to
Plaintiff moved for partial summary judgment against 127 on the issue
of liability, contending that, although 127's answer denied any "duty
to maintain and/or repair the sidewalk," the recently added New York
City Administrative Code §7-210 placed a duty on 127, as owner of the
subject premises, to maintain and repair the public sidewalk abutting
The Court stated that "Plaintiff herein bases her motion for summary
judgment entirely on the application of the recently added N.Y.C.
Adm. Code §7-210, which states that 'it shall be the duty of the
owner of real property abutting any sidewalk to maintain such
sidewalk in a reasonably safe condition, . . . ' and that 'the owner
of real property abutting any sidewalk shall be liable for any
personal injury proximately caused by the failure of such owner to
maintain such sidewalk in a reasonably safe condition . . . .'
Essentially, as of §7-210's effective date of September 14, 2003,
certain landowners have an affirmative duty to maintain their
adjacent sidewalks in a reasonably safe condition."
"Prior to §7-210's passage, an owner of land did not owe a duty to
the public to maintain the sidewalk in a safe condition unless the
owner created the defect or used the sidewalk for a special purpose,
such as when an appurtenance was installed for its benefit or at its
request. Although §7-210 now alters an abutting landowner's duty to
maintain sidewalks in a reasonably safe condition, §7-210 does not
impose absolute tort liability upon these landowners for injuries
arising from alleged unsafe conditions on an abutting sidewalk."
"Generally the violation of a rule of an administrative agency
lacking the force and effect of a substantive legislative enactment
does not establish negligence per se, but is simply some evidence of
negligence which the jury can take into consideration with all the
other evidence bearing on the subject.... It has been held that a
property owner's violation of a municipal code provision that imposes
a special duty cannot give rise to statutory liability without regard
to negligence. Absolute and instant liability without regard to
negligence may be imposed only from a statute duly enacted by the
State Legislature, but the ordinances of a municipality lack the
force and effect of a substantive legislative enactment."
"In any cause of action founded upon negligence, a successful
plaintiff must demonstrate the existence of a duty, the breach of
which may be considered the proximate cause of the damages suffered
by the injured party. When the duty to maintain and repair public
sidewalks rested with the City of New York, a plaintiff seeking to
recover damages based on the City's breach thereof was obligated to
establish actual or constructive notice... Likewise, under premises
liability line of cases, the plaintiff must establish notice.
Therefore, it appears that in order for plaintiff to recover for the
injuries alleged herein under §7-210, she must establish that
defendant 127 created, or had actual or constructive notice of the
alleged dangerous condition that proximately caused her injuries."
"Moreover, in an action arising out of a slip and fall accident, a
plaintiff's motion for summary judgment should be denied where no
discovery had been conducted, where no photographs or other proof of
the place of the accident was attached, where no proof of length of
time that the place of the accident existed in poor condition was
given, . . . and where no evidence was offered regarding culpable
"Plaintiff's citation of §7-210 alone, without any other evidentiary
showing, falls short of making a prima facie showing that she is
entitled to a judgment as a matter of law. The sole evidentiary proof
offered by plaintiff is a list of assertions from the complaint that
127 breached its duty to maintain the sidewalk and that 127 had
knowledge of the allegedly defective sidewalk. However, these
assertions are mere affirmations by plaintiff's counsel, lacking in
proof, and unsupported by any sworn testimony. Regardless of whether
defendant 127 has a duty to maintain the sidewalk as the provision
dictates, plaintiff offers no evidence that 127 had notice of the
alleged defective condition, failed to properly maintain the
sidewalk, and that 127 proximately caused plaintiff's injuries. While
§7-210 likely places a duty on landowners such as 127, plaintiff's
failure to provide evidence establishing the remaining elements of
negligence is fatal to plaintiff's motion."
"...Notwithstanding that 127 had such a duty to maintain the subject
sidewalk, plaintiff is not entitled to summary relief on the issue of
Summary judgment was denied.
QUESTION OF WHETHER MERCEDES REPAIR BY NON-AUTHORIZED SHOP MAY IMPAIR
VALUE OF CAR REQUIRES A TRIAL
McNulty v. Allstate Ins. Co., NYLJ 10/03/05 (District Court, Nassau
County) (MILLER, j)
Plaintiff, insured by Allstate, suing under her comprehensive
coverage in relation to a vandalism incident involving her 2002
Mercedes Benz SL500. "As is well-known in the community," stated the
Court, "an SL500 is a very expensive car. The Defendant presumably
collected substantially more than an average premium on the vehicle,
arising out of its elevated market value."
After the vandalism incident, Plaintiff notified Allstate that she
wished to have her vehicle repaired at Mid-Island Collision, a
facility that purports to be authorized by Mercedes Benz to perform
body work. Apparently Allstate contacted Mid-Island. "The nature of
the Defendant's contacts with Mid-Island are disputed, but it is
clear that Defendant and Mid-Island reached no agreement to repair
the Plaintiff's vehicle. It seems relatively clear that no agreement
was likely to be reached, because Defendant apparently has a policy
of paying no more than $40 per hour for labor, and Mid-Island alleges
that it will not work for less than $65 per hour."
"In the end, Defendant alleges that it notified the Plaintiff that it
could not agree on a repair contract with Mid-Island, and it gave her
several choices of repair shops where she could obtain repairs at $40
per hour, including Master Collision, whose work Defendant said it
would guarantee. Plaintiff's witness alleges that Master is not
authorized by Mercedes to perform body work, and that allegation is
uncontested by Defendant. Defendant tendered a check based on
Master's estimate. Plaintiff endorsed the check under protest, and
now sues for the difference between Mid-Island's estimate and
Allstate moved for summary judgment, arguing that an April 16, 2002
opinion letter from the New York State Insurance Department
conclusively establishes its rights. In that letter, an Insurance
Department Supervising Attorney opined, in reply to an ex parte
inquiry from Allstate, that when an insurer makes a bona fide offer,
the insurer need not pay more than the amount of the offer.
"While the Court is charged with giving deference to administrative
agencies when they interpret their own regulations, the Court does
not believe that it must abdicate its own authority to interpret
regulations. That is particularly so when the agency in question is
responding to an ex parte inquiry, rather than making a determination
that it has been statutorily charged with making after holding a
"The Court need not reach the question of whether the Insurance
Department correctly interpreted its regulations, however, because
the fundamental issue of fact in this case is whether the Defendant
made a bona fide offer in the first place. If it did not, the premise
of the opinion letter does not hold. Defendant's argument assumes
that issue has already been resolved in their favor. It has not. It
is a triable issue of fact whether it is reasonable to expect
Plaintiff to accept the offer of a non-Mercedes-approved body shop to
repair a late-model SL 500. The Court acknowledges the possibility
that a car of such value cannot be repaired at an unauthorized
facility without substantially affecting its market value. Whether
that is true or not must be determined on the basis of evidence to be
submitted at trial."
Accordingly, Allstate's motion to dismiss was denied.
Comment: What happens now? I have tried such cases. Plaintiff will
likely bring in an expert auto appraiser, and maybe even a Mercedes
Benz dealer, to testify that a repair by an unauthorized dealer
impairs the value of the car. Allstate will likely counter with its
own expert who will say that as long as the repairs are expertly
done, the value should be the same. I predict Allstate will lose.
The Court of Appeals has already held that insurers may not steer
policyholders to particular body shops, and $65 per hour to repair a
Mercedes is not out of line with typical rates on Long Island.
Automobile dealers have asked us: What happens to a car which is
returned to the dealer pursuant to a Lemon Law arbitration? Is there
any way to avoid having the title "branded"?
The following information comes from an opinion issued by former New
York State Attorney General Dennis Vacco in 1996:
Each year thousands of vehicles are repurchased by manufacturers from
consumers who claim that such vehicles have serious defects. Such
buybacks are the result of lemon law arbitration awards, settlements
after the institution of lemon law proceedings but prior to decision,
and voluntary action (described as "goodwill") taken by the
manufacturers. Although the total number of buybacks on a national
level is not known precisely, estimates have placed this figure at
about 25,000 annually. In New York, from 1987 through 1995, the total
number of buybacks under the State's new and used car lemon law
arbitration programs is approximately 8,100. There are no records
which would reflect the number of vehicles bought back by
manufacturers and dealers outside of the State's programs.
The New York Attorney General, as the chief law enforcement officer
in the State, is responsible for the enforcement of the State's
consumer protection laws, including the lemon laws. The Attorney
General therefore "has a keen interest in the disposition of vehicles
repurchased under the lemon laws."
A vehicle's lemon law history is a material fact which should be
disclosed to a subsequent purchaser prior to sale. Such fact could
clearly influence a purchasing decision and the amount to be paid for
the vehicle. Further, if the reason for the buyback was safety
related, a subsequent purchaser without knowledge of that history may
be jeopardizing his and others' safety.
New York General Business Law ("GBL") 198-a(c)(2) requires
manufacturers to notify the state Department of Motor Vehicles upon
the repurchase of any vehicle pursuant to New York's -- or any other
state's-- lemon laws, that the vehicle was returned to the
manufacturer for nonconformity to its warranty. A similar requirement
exists for dealers repurchasing used cars pursuant to the state's
used car lemon law. DMV is required to print the mandated disclosure
on any subsequent certificate of title issued for the repurchased
vehicle. Further, any vehicle which bears a sister state's lemon law
brand on its certificate of title, when sought to be registered in
New York, will be issued a certificate of title by the DMV which
reflects the out-of-state brand.
In addition, New York Vehicle & Traffic Law 417-a(2) requires the
manufacturer, upon the sale or transfer of title of a repurchased
vehicle, to notify the buyer (usually a dealer) in writing, that the
vehicle had been repurchased because it did not conform to its
warranty. The same notice-to-the-buyer requirement applies to a
dealer who sells a used vehicle (usually to a consumer) that was
previously repurchased by a manufacturer or dealer for failure to
conform to its warranty. This disclosure requirement extends to each
vehicle repurchased for failure to conform to its warranty, whether
or not a determination was formally made that the vehicle was a
lemon. Thus, cars repurchased as part of a settlement may also be
subject to disclosure provided the consumer has filed for arbitration
under the lemon law. This position was upheld by the State Supreme
Court in NYS Automobile Dealers Association, Inc. v. Adduci (Albany
Vehicles that were repurchased outside of New York pursuant to
another state's lemon law are also covered by the notification
requirements when resold in New York.
Some manufacturers have sold repurchased vehicles within the State
through auctions or directly to dealers. These vehicles are then
resold to New York consumers. However, it appears that most
manufacturers dispose of the repurchased vehicles outside the State
through auctions or directly to dealers. The A.G. has taken the legal
position that a manufacturer must follow the New York disclosure
requirements for all vehicles repurchased in the State, even where
the repurchased vehicle was disposed of outside the State.
The A.G.'s investigations have disclosed that vehicles which were
repurchased in New York but disposed of elsewhere, frequently have
found their way back into the State with a "clean" (unbranded) title
and have been subsequently sold in New York without any of the
required disclosures. This results from two possible scenarios:
first, the manufacturer fails to notify the DMV upon repurchase and
therefore the title will remain unbranded; or second, the vehicle
will be sold in a state which does not require title branding and the
brand is therefore dropped from the out-of-state title. Thus, when
the vehicle re-enters New York, it enters with an unbranded title.
The A.G.'s office "has taken vigorous action against manufacturers
who failed to comply with the State's disclosure requirements."
Indeed, New York was the first state in the nation to pursue a
manufacturer for failing to disclose to subsequent buyers and to the
DMV that a car had been repurchased under the lemon law. In 1988,
Chrysler signed an Assurance of Discontinuance under the terms of
which it agreed to make a cash offer to the nearly 400 buyers of
repurchased lemons and to provide an extended warranty to those
buyers. It also agreed to pay the State $100,000 in costs. Since
then, New York has obtained similar agreements from Nissan, Hyundai,
Mazda, Mitsubishi and Mercedes-Benz. Investigations into the
practices of other manufacturers are ongoing.
"Nevertheless," says the A.G., "while neither our office nor the DMV
always tracks the disposition of every vehicle repurchased under the
new or used lemon law, it can be reasonably assumed that there has
not been full compliance with the disclosure requirements in every
case and that many subsequent purchasers have unwittingly purchased
vehicles with lemon law histories."
While the title branding requirement is effective for law enforcement
purposes, it normally does not provide consumers with notice of the
vehicle's history at the critical time prior to sale since the
certificates of title are not generated by the DMV until many weeks
following the sale. Further, the required written certificate of
prior lemon law history to be furnished by the dealer at the time of
sale is often not provided "because the dealer is either unaware of
that history or is engaged in fraud," says the A.G.
Given the lack of uniformity of state disclosure requirements, it
will be difficult for the States to solve this problem on their own.
BECAUSE NO FAULT INSURER CANNOT PROVE THAT ITS DENIAL WAS TIMELY, IT
LOSES THE 'INTOXICATION' AND 'DEFECTIVE ASSIGNMENT'DEFENSES
The New York and Presbyterian Hospital a/a/o John Wynne v. Liberty
Mutual Ins. Co., NYLJ 10/05/05 (Supreme Court, Nassau County)
In this no-fault suit, plaintiff New York Presbyterian was the
assignee for health services rendered to John Wynne during the period
from July 10, 2004 through August 19, 2004 arising out of an
automobile accident that occurred on July 10, 2004. On September 15,
2004, plaintiff sent to the defendant a Hospital Facility Form (N-F
5) and a UB-92, constituting its claim for payment of a hospital bill
in the amount of $142,697.59. Defendant received the claim on
September 16, 2004.
NY Presbyterian moved for summary judgment upon the ground that
defendant is precluded from interposing a defense because of its
failure to issue a timely denial.
An insurer is required to either pay or deny a claim within thirty
(30) calendar days after proof of the claim is received. Pursuant to
11 NYCRR 65-3.5(g), an insurer must accept a completed hospital
facility form (Form NF-5 or an NF-5 and uniform billing form) from a
provider of health services in lieu of a prescribed no-fault
application. Receipt of a hospital facility form is considered
tantamount to receipt of proof of claim and an insurer must send any
request for additional verification within 15 business days.
Defendant asserted that it sent plaintiff a denial of claim, dated
September 28, 2004 which was within 30 business days. The basis for
the denial was that John Wynne was "intoxicated or otherwise
impaired." Alternatively, defendant argued that the assignment of
first party no-fault benefits from John Wynne to NY Presbyterian was
"It is undisputed that plaintiff mailed and that defendant received
the hospital facility form and uniform billing form within the
statutory time frame. Plaintiff mailed these forms certified mail
return receipt requested and submits a signed certified mail receipt,
dated September 16, 2005. Furthermore, defendant acknowledges
receipt," stated the Court.
NY Presbyterian submitted an affidavit of an account representative
employed by Hospital Receivables System, Inc. which stated that
defendant "failed to either pay the entire claim or issue a denial of
claim form." To counter plaintiff's assertion that it did not receive
a timely denial, defendant submits an affidavit of a litigation team
manager employed in the no-fault department, which states that
defendant issued a denial on September 28, 2004 and that "the denial
was mailed on the same date."
"The court notes that the affidavit of the litigation manager merely
includes generalized assertions that defendant's practices were
followed with respect to plaintiff's claim. As a result, the court
finds his affidavit to be conclusory and therefore insufficient to
establish defendant's entitlement to summary judgment as a matter of
law. The court notes that defendant has failed to present a
certified mail receipt, affidavit of service or proof other than the
affidavit of the litigation manager to prove that the denial of claim
form was in fact sent."
As to the defective assignment, the insurer alleged that the assignee
was unconscious on the date the assignment was signed and in any
event the assignment form was signed by Mr. Wynne's mother who was
not authorized to execute the assignment on behalf of her eighteen
year old son. "The court finds that even if the assignment would be
found to be defective, defendant's failure to raise this objection
within 30 days of receipt of the claim for payment from plaintiff,
constitutes a waiver of this defense."
"Moreover, the court notes that even assuming the denial was not
timely sent by defendant, defendant is not excused from failing to
reject NY Presbyterian's claim within the 30 days proscribed by
Insurance Law §5106(a) and 11 NYCRR 65-3.8(a)(1). The court finds
that defendant is precluded from interposing a defense of
intoxification or impairment as a result of drug use for failing to
pay or deny plaintiff's claim within the required time. The court
notes that a denial based upon a policy exclusion such as an
intoxification exclusion, is different than a denial based on lack of
coverage. When a denial is due to lack of coverage, such as an
allegation that no contractual relationship exists, an insurer would
not be subject to preclusion where there was never any insurance in
effect. No determination regarding coverage can be made in the
context of a presumptively intoxicated insured until the
hospitalization or intervention by a health care provider. Therefore
the insured had coverage up to the moment of the motor vehicle
accident and by definition covered by the existing policy until such
moment. If covered, the carrier is asserting exclusion and not
coverage in its denial and must be subject to the rules regarding
Plaintiff's motion for summary judgment was granted.
Comment: What strikes me most about this decision is that the issue
of whether or not the denial was timely mailed, came down to two
opposing affidavits: one from the hospital's collection agent, and
one from the insurer's litigation manager. The former swore she
never got the denial, while the latter swore he sent it. Generally,
in summary judgment Motions, a battle between opposing affidavits is
supposed to result in denial of summary judgment because the only
issue is the credibility of the witnesses. I think there is an
appealable issue here as to whether Liberty Mutual should be entitled
to a trial on the issue of the timely denial, and let a judge or jury
determine the credibility of the two witnesses.
INSURED'S KNOWLEDGE OF ENOUGH ACCIDENT FACTS TO MAKE HIM EXPECT A
LAWSUIT TRIGGERS DUTY TO NOTIFY INSURER
Tower Ins. Co. of New York v. Navana Restaurant Inc., NYLJ 10/06/05
(Supreme Court, New York County) (TOLUB, j)
Tower Insurance Company of New York issued a commercial general-
liability insurance policy to Navana Restaurant, effective September
17, 2003 to September 17, 2004, which included as insureds all
executive officers of Navana.
On or about December 2, 2003, a personal injury action was commenced
entitled Barbara Cirone and William Cirone v. Navan Restaurant, Inc.
The plaintiffs in the personal injury action alleged that Moinul
Alam, an employee of Navana, while making deliveries to customers, on
or about October 15, 2003, struck them, while riding a bicycle
through the crosswalk located at East 87th Street and Second Avenue.
Tower commenced this declaratory judgment action against Navana and
Julfiqar Choudhry, the principal owner of Navana, on February 5,
2004, seeking a judgment declaring that it has no duty to defend or
indemnify Navana and Choudhry against the claims being made against
them in the underlying personal injury action, for their failure to
give notice of the occurrence "as soon as practical" as provided for
by the insurance policy.
The accident occurred on October 15, 2003 and notice of the accident
was received by Tower, on December 23, 2003, approximately five days
after service of the summons and complaint upon the insureds in the
underlying personal injury action, and 69 days after the occurrence.
The defendants Navana and Choudhry, on February 27, 2004, commenced a
third-party action as against David S. Kaplan Associates, Inc., their
insurance broker, alleging that, in the event timely notice was not
provided to Tower, such failure was the result of their reliance upon
their broker, who informed them shortly after the incident that there
was no need, at that time, to report the matter to the insurer.
The insurance policy provided that the insured was obligated to give
notice of an occurrence or offense which may result in a claim "as
soon as practicable". "The law is well settled that an insurer is not
obligated to pay for the loss of its insured in the absence of timely
notice in accordance with the terms of the policy and that absent a
valid excuse, a failure to satisfy the notice requirement vitiates
the policy even in the absence of prejudice to the insurer," held the
The insureds alleged that based upon the unique facts of this case
notice was given "as soon as practicable". On the night of the
accident, Choudhry, the manager of the Navana was not present. He
received a telephone called from an employee at the restaurant
informing him that the police were inquiring about an accident. The
next day he was interviewed by the police and was told that the
accident involved a boy, approximately twelve years old, who, while
riding a bicycle, struck two pedestrians in the cross walk on the
west side of Second Avenue, while making a delivery for the
restaurant. The police identified the boy as "Shofi" and also
informed him that one of the accident victims was in the hospital in
critical condition. Choudhry maintained that the restaurant did not
own a bicycle and did not employ a delivery boy, however, he admits
that "Shofi" had come to the restaurant several times asking for work
and was told not to come back until he brought in paperwork and was
put on a schedule.
Choudhry allegedly telephoned his insurance broker Kaplan on October
17, 2003, to report the accident, but he was put on hold and he did
not speak to anyone or leave a message. On October 20, 2003,
investigators from the New York State Department of Labor visited the
restaurant inquiring about the accident and about "Shofi's" alleged
employment at Navana, since he was underage.
On October 21, 2003, Choudry went to Kaplan's office and met with
Alledo Vargas, an employee of Kaplan, and allegedly told him about
the police and Department of Labor investigations and asked whether
the accident should be reported to his insurer. Choudry, at his
deposition, testified that he told his broker, "Look, the way the
police have described, I know likely they have a lawsuit coming."
"The duty to give notice," said the Court, "arises when, from the
information available relative to the accident, an insured could
glean a reasonable possibility of the policy's involvement."
"Clearly, from the above facts, Choudry, himself, envisioned the
likelihood of a lawsuit. The insureds have failed to raise a triable
issue of fact as to whether their delay in giving notice was
reasonably founded upon a good-faith belief of nonliability, and a
delay of 69 days has been held to be untimely as a matter of law."
"Additionally, Choudry may not rely upon his broker's alleged failure
to report the incident, as it is no excuse that the delay was caused
by the error of the insured's broker. Further notice to the broker,
who is deemed the agent of the insured, cannot be treated as notice
to the insurer."
"Finally, the court finds that the claim that the insureds' failure
to give timely notice was excusable due to their lack of sufficient
information, until commencement of the personal injury action, is
unpersuasive. Choudhry had enough meaningful information to notify
the insurer, including how, when and where the occurrence took place
and that the injuries were serious. While he may not have had the
names and addresses of the injured parties, he could have obtained
the police report of the incident, which contained such information,
and, in any event, the subject policy provided the notice should
include the names and addresses of any injured person only to the
The insureds argued that Tower's disclaimer letter, dated January 6,
2004, lacked accuracy and specificity based upon two factors. The
first is that the notice is unclear as to whether the disclaimer is
based upon lack of insurance coverage or due to untimely notice,
since the letter states, "we have reviewed this matter and have
determined that it is not covered under your policy for the reason
set forth below." The second is that the disclaimer indicates the
accident occurred on September 17, 2003, rather than the actual date
of October 15, 2003.
"This court finds no ambiguity as to the denial of coverage as the
disclaiming letter specifically states that the insured breached the
policy condition of failing to notify the insurer of the incident as
soon as practicable and that such was the basis for disclaiming
"Insurance Law §3420(d) provides that an insurer may disclaim
coverage by giving written notice of the disclaimer as soon as
reasonable possible. The notice of disclaimer must promptly apprise
the claimant with a high degree of specificity of the ground or
grounds on which the disclaimer is predicated."
"As to the wrong date, notification to the insurer whether 69 days or
97 days is of no importance as either was not as soon as practicable.
Additionally, the correct date was alleged in Tower's complaint in
this declaratory action and an insurer, while not allowed to advance
a new ground upon which coverage is denied, is permitted to set forth
additional facts to support its initial disclaimer on the ground of
"Under the facts presented, Tower has no duty to defend or indemnify
defendants... in the [underlying personal injury] action..."
"Additionally, the issue of whether [the insureds] are entitled to a
declaration that Kaplan is responsible for the costs of defense and
indemnity equivalent to what Tower would have provided, had it been
timely notified, is a justiciable controversy, which is properly
raised by their third-party declaratory action." The third party
action against the broker was severed for continuation.
U.S.A. HAD NOT RATIFIED AMENDMENT TO WARSAW CONVENTION IN 2001, SO
AIRLINE WHICH RE-ROUTED CARGO CANNOT LIMIT LIABILITY FOR ITS LOSS
AVERO BELGUIM INSURANCE, formerly known as Royal & Sun Alliance
Insurance v. AMERICAN AIRLINES, INC. and All Freight Co-Ordinators,
N.V. (2d Cir.) (Decided: Sept. 7, 2005)
A shipper's subrogated underwriter brought this action against air
carrier to recover for loss of goods transported by international air
freight. The Southern District of New York denied the underwriter's
motion for partial summary judgment, and underwriter appealed.
The question presented was whether, at the time of the loss on
3/09/2001, the United States was a party to The Hague Protocol of
1955 that amended the Warsaw Convention of 1929.
American Airlines issued an air waybill to Asco Industries for the
carriage of five crates from Brussels, Belgium to Tulsa, Oklahoma.
The waybill listed Chicago as the only stop en route, but, due to
rescheduling, the cargo was shipped through Dallas. Only one of the
five crates arrived in Tulsa. On August 16, 2002, this action for
damages for the loss of the other four crates was brought against AA
by Asco's subrogated underwriter, Royal & Sun Alliance Insurance
American maintained that its liability for the lost crates was
limited to $20 per kilogram by Article 22(2) of the Original Warsaw
Convention. Plaintiff responded that American could not take
advantage of the limitation on liability set forth in Article 22(2)
of the Original Warsaw Convention because American had failed to
comply with the requirements of Articles 9 and 8(c) of the
Convention, both of which had to be fulfilled in order to trigger
Article 22(2)'s limitation of liability. Article 9 states that "if
the air waybill does not contain all the particulars set out in
article 8(a) to (i) ..., the carrier shall not be entitled to avail
himself of the provisions of this convention which exclude or limit
In turn, Article 8(c) requires that "the air waybill shall
contain ... the agreed stopping places." Plaintiff alleged that
American had not met these requirements -- and could not limit its
liability pursuant to the treaty -- because American's air waybill
listed Brussels, Chicago, and Tulsa, but the shipment was re-routed
American replied that in 2001 the United States and Belgium both
adhered, not to the Original Warsaw Convention, but to the amended
version adopted by The Hague Protocol of 1955, and that Article VI of
The Hague Protocol deleted most of the "air consignment note"
requirements of the Original Warsaw Convention, including the "agreed
stopping places" requirement of Article 8(c).
On February 21, 2003, plaintiff moved for partial summary judgment on
the limited liability issue, urging that the United States had not
yet ratified The Hague Protocol at the time the air waybill was
signed (March 9, 2001), and that the unamended Original Warsaw
Convention therefore governs this incident.
American opposed the motion on the ground that the United States had
acceded to The Hague Protocol on March 4, 1999, when the United
States' ratification of Montreal Protocol No. 4 took effect.
The District Court denied plaintiff's motion for partial summary
judgment, finding that the United States had acceded to The Hague
Protocol by virtue of its ratification of Montreal Protocol in 1998.
The Second Circuit ruled that "We hold that the District Court erred
in finding that The Hague Protocol of 1955 governs the present
dispute. When the United States ratified Montreal Protocol No. 4 in
1998 (effective March 4, 1999), it did not accede to The Hague
Protocol. Rather, it expressed an intention not to be bound by The
Hague Protocol against States that, like Belgium, were not parties to
Montreal Protocol No. 4. This intention is evident from the treaty
language and is not overcome by any 'secondary' evidence of the
United States' intentions. We therefore reverse the District Court's
denial of plaintiff's motion for partial summary judgment and remand
the cause to the District Court. We further direct the District Court
to grant plaintiff's motion for partial summary judgment consistent
with our holding that the Original Warsaw Convention governs the
"We look principally to two factors in determining whether a
particular international agreement constitutes binding treaty law in
the United States: (1) whether the United States has consented to be
bound by that agreement, and (2) whether that agreement, by its
terms, has entered into force as of the date in question."
A self-executing treaty becomes "the law of this land" only after it
has been (1) duly consented to by the Senate, and (2) ratified by the
"The term 'ratification' is often inadvertently or informally used to
describe a vote by the Senate consenting to a treaty that has been
sent to the Senate by the President for legislative consideration....
However, as a matter of international law -- the law governing
relations among States inter se -- Senate consent is not synonymous
with 'ratification.'... Nor does the Senate's approval, by itself,
constitute consent to be bound by an international agreement. Under
the domestic or 'municipal' law of the United States, it is the
province of the Senate to give its consent vel non to the treaty
negotiated by the President and submitted to the Senate for its
consideration; and if two thirds of the Senators present vote in
favor of that treaty, the President may ratify it."
The consent of a State to be bound by a treaty is expressed by
(a) The treaty provides for such consent to be expressed by means of
(b) It is otherwise established that the negotiating States were
agreed that ratification should be required;
(c) The representative of the State has signed the treaty subject to
(d) The intention of the State to sign the treaty subject to
ratification appears from the full powers of its representative or
was expressed during the negotiation.
The ratification process, in whatever form it may take, serves
several functions. First and foremost, it affords a state the chance
to scrutinize closely the provisions of a complicated agreement after
signing it. In addition, in the time between signing and
ratification, States are able, inter alia, (1) to effect changes in
domestic law that may be necessary for the implementation of a
treaty, (2) to seek and obtain the consent of legislative bodies as
may be required, and (3) to re-examine the relevant provisions before
committing to them.
A "State only becomes bound by -- that is, becomes a party to -- a
treaty when it ratifies the treaty. We must therefore inquire whether
the United States has ratified a treaty, or otherwise acceded to its
provisions... in order to determine whether or not the United States
has consented to be bound by that treaty.
In addition to consent to be bound, a treaty must have entered into
force in order to constitute law that binds a ratifying State it in
its relations with other States. Upon ratification, an international
agreement comes into force in accordance with its terms. In the case
of some multilateral treaties, a treaty may enter into force only
after a certain proportion of States have deposited instruments of
ratification, approval, acceptance or accession with the depositary.
In other cases, States may require that other States ratify the
agreement before the treaty enters into force. And in other cases
still, a treaty will only enter into force at a specified time after
a certain number of States have deposited instruments signifying
their accession with the depositary. "In all cases, however, we will
look to see whether a treaty ratified by the President of the United
States has entered into force in order to determine whether that
treaty is binding on the United States and, by its terms or pursuant
to action of the Senate and the President, enforceable in our courts."
"Whether a dispute arising out of the international carriage of goods
by air is governed by a given substantive treaty ... depends on
whether the places of departure and destination are within the
territories of two contracting parties to that treaty. Accordingly,
we must identify the air transportation treaty, if any, to which both
Belgium and the United States were a party on March 9, 2001, the date
of the issuance of the air carrier waybill in question."
"The Original Warsaw Convention was adopted in 1929. It entered into
force in accordance with its terms in 1933, ninety days after the
fifth instrument of ratification belonging to a party State was
deposited with the Ministry for Foreign Affairs of Poland. The United
States ratified the Convention in 1934, effective the same year.
Belgium ratified it in 1936, effective the same year."
"The Hague Protocol, which amended the Original Warsaw Convention,
was adopted at an international conference at The Hague in 1955. It
entered into force in accordance with its terms in 1963, ninety days
after the thirtieth instrument of ratification belonging to a party
State was deposited with the Government of the People's Republic of
Poland. Belgium ratified The Hague Protocol in 1963, effective the
same year. Although the United States signed The Hague Protocol in
1956, as of March 9, 2001--the date when AA issued the air 'waybill'
to Asco -- the Senate had not given its 'advice and consent' to its
"Yet another related treaty, Montreal Protocol No. 4 -- which amended
the Original Warsaw Convention as amended by The Hague Protocol --
was adopted in 1975. It entered into force in accordance with its
terms in 1998, ninety days after the thirtieth instrument of
ratification belonging to a party State was deposited with the
Government of the People's Republic of Poland. Although Belgium did
not ratify Montreal Protocol No. 4, the United States ratified
Montreal Protocol No. 4 in 1998, effective March 4, 1999. Article
XVII of Montreal Protocol No. 4 provides that ratification of
Montreal Protocol No. 4 by a State that, like the United States, was
not a party to The Hague Protocol shall have the effect of accession
to the Warsaw Convention as amended at The Hague, 1955, and by
Protocol No. 4 of Montreal, 1975."
"After the events giving rise to the present action, in 2002, the
Department of State acknowledged 'the difficult question of whether
the United States, by reason of its adherence to Montreal Protocol
No. 4 became a party to The Hague Protocol and therefore entered into
treaty relations under The Hague Protocol with other countries party
to that instrument (but not to Montreal Protocol No. 4).' In order
to seek certainty on that score, the George W. Bush administration re-
transmitted The Hague Protocol to the Senate for advice and consent.
The Senate approved The Hague Protocol on July 31, 2003, and it was
ratified by President Bush effective December 14, 2003.
"It is therefore undisputed that the United States had not ratified
The Hague Protocol as of March 9, 2001, the date of the issuance of
the air waybill in the instant case. The question remains, however,
whether the United States had acceded to the provisions of The Hague
Protocol by virtue of its ratification of Montreal Protocol No. 4 in
1998. Accordingly, we must determine whether the United States'
ratification of Montreal Protocol No. 4 constituted consent to be
bound to one treaty -- namely, the Warsaw Convention as amended at
The Hague, 1955, and by Protocol No. 4 of Montreal, 1975 -- or
consent to be bound by two treaties -- namely, (1) the Warsaw
Convention as amended at The Hague, 1955 and (2) a separate treaty
called Protocol No. 4 of Montreal, 1975."
It appears that ratification of Montreal Protocol No. 4 "by [a] State
which is not a Party to the Warsaw Convention as amended at The Hague
1955," such as the United States, "[has] the effect of accession
to" "one single instrument," namely, "the Warsaw Convention as
amended at The Hague, 1955, and by Protocol No. 4 of Montreal,
1975." "Therefore," held the Court, "according to the plain terms of
the treaty, by ratifying Montreal Protocol No. 4, a State consents to
be bound by one instrument consisting of the combination of three
related treaties (and not by an additional instrument consisting of a
combination of two related treaties--The Hague Protocol and Montreal
Protocol No. 4)."
"We construe the text of Montreal Protocol No. 4 according to its
plain terms and not deem the United States to have acceded to an
international agreement unless such an intention to accede was made
clear by appropriate actions of the political branches of Government."
"Even if the United States had consented to be bound by The Hague
Protocol, it does not appear that such accession would have become
effective as of March 9, 2001, since, at that time, the United States
had not complied with the express terms of The Hague Protocol for
adherence through a means other than ratification to the treaty."
Article XXIII of The Hague Protocol sets forth a procedure by which a
State that is not a party to the Protocol may accede to it:
1. This Protocol shall, after it has come into force, be open for
adherence by any non-signatory State.
2. Adherence to this Protocol by any State which is not a Party to
the Convention shall have the effect of adherence to the Convention
as amended by this Protocol.
3. Adherence shall be effected by the deposit of an instrument of
adherence with the Government of the People's Republic of Poland and
shall take effect on the ninetieth day after the deposit.
"It is undisputed that the United States had not deposited an
instrument of adherence ... with the Government of the Republic of
Poland as of March 9, 2001 and therefore had not complied with the
terms of Article XXIII for adherence through a means other than
"Finally, the undisputed fact that the President of the United States
re-transmitted The Hague Protocol to the Senate for its 'advice and
consent' in 2002 suggests that the United States did not accede to
that instrument when it became a party to Montreal Protocol No. 4 in
In conclusion, "we reverse the judgment of the District Court and
hold that, on March 9, 2001, the United States had not yet consented
to be bound by The Hague Protocol. Accordingly, we reverse the
District Court's denial of partial summary judgment and remand the
cause for further proceedings consistent with this opinion."
Comment: In summary, then, American loses the benefit of the
limitation of liability in the Warsaw Convention because it re-routed
the plaintiff's cargo through Dallas, which was not listed as a
stopover on the waybill. However, if the loss had occurred on or
after 12/14/03, when the U.S. formally ratified the Hague Protocol of
1955, the unscheduled stopover would not have constituted a waiver of
the limitation of liability.
The Warsaw Convention is a multilateral treaty that regulates
liability for international air carriers. Originally adopted in
Warsaw in 1929, it was amended at The Hague in 1955 and again in
Montreal in 1975. The Warsaw Convention "system" includes the various
laws, treaties and individual contracts governing the international
transportation of persons, baggage, and goods by air. No one treaty
or contract governs the relationships of one State with other States.
A single State might be bound to one version of the Warsaw Convention
with one State, another version of the Warsaw Convention with another
State, a separate bilateral treaty with another State, and a separate
contract with a private party.
POLICE OFFICER'S WARRANTLESS SEARCH FOR SUSPECT IS NOT A STATUTORY
VIOLATION WHICH CAN CREATE LIABILITY FOR SUSPECT'S SHOOTING OF COP
Mosomillo v. City of New York, NYLJ 10/05/05 (Supreme Court, Kings
County) (PARTNOW, j)
On May 26, 1998, Anthony Mosomillo, a police officer, was executing
an arrest warrant when he was shot and killed by the suspect, Jose
Serrano. Anthony Mosomillo was survived by his wife, Margaret
Mosomillo, and their daughter, Francesca Mosomillo and by his
daughter, Marie Mosomillo. On or about October 22, 1998, Margaret
Mosomillo, individually and as administratrix of the estate of her
late husband, commenced a wrongful death action premised upon the
negligence of the City and General Municipal Law (GML) §205-e.
In its motion, the City pointed out that Anthony Mosomillo and his
partner, Officer Miriam Torres, arrived at 534 East 34 Street in
Brooklyn to execute an arrest warrant for Serrano because of his
failure to appear in Criminal Court pursuant to a misdemeanor desk
appearance ticket. After speaking to the landlady of the subject
premises, the officers were advised that Serrano was in the basement
apartment with a woman named Betsy Ramos. According to the City, the
officers spoke to Ramos who denied that Serrano was in the apartment,
but consented to a search of the premises. The search was initially
unsuccessful but, after a further conversation with the landlady
regarding a possible hiding place in a closet, the officers returned
to Ramos' apartment and searched again. After they discovered
Serrano, a struggle ensued and Serrano shot Anthony Mosomillo with a
gun removed from Torres' holster.
The City contended that plaintiffs were barred from pursuing a
negligence claim against the City by the "firefighter's rule."
Moreover, because plaintiffs lack sufficient statutory predicates for
a claim based upon GML §205-e, the City asserts that those claims
must likewise be dismissed. Specifically, the City maintained that
plaintiffs only alleged that it violated some "internal procedures"
and that "violations of internal rules or even New York City Police
Department Patrol Guide regulations are not sufficient predicates to
sustain a 205-e action."
In opposition to the motion, plaintiffs "essentially" conceded that
the "firefighter's rule bars police and firefighters from recovering
in negligence for line of duty injuries"; however, they characterized
GML §205-e1 as a "narrow passageway around the common law rule."
Plaintiffs argued that the City, through Officer Miriam Torres,
violated the Fourth Amendment to the United States Constitution; that
is, the provision which "prohibits police from making a warrantless
and non-consensual entry into a suspect's home in order to make a
routine felony arrest." According to plaintiffs, although the police
officers had an arrest warrant, they did not have a search warrant.
Since "there is no actual indication that Ms. Ramos consented to the
search," her Fourth Amendment rights were violated and that violation
constitutes a predicate for Mosomillo's GML §205-e claim. She further
asserted that proximate cause need not be established, only a
reasonable connection between the violation and the police officer's
injury or death. In this case, she added, "had the Fourth Amendment
not been violated, neither of the searches would have been performed."
In reply, the City faulted plaintiffs for waiting seven years to
present a statutory predicate as a basis for their GML §205-e claims
and then presenting "a new theory of liability [which] comes as a
complete surprise to the City." The City further noted that
plaintiffs produced no evidence to controvert the testimony of Torres
that Ramos consented to the search of her apartment. Moreover, the
City asserted that plaintiffs cannot establish a reasonable
connection between an alleged Fourth Amendment violation and
The Court held, "While a police officer can assert a common-law tort
claim against the general public, liability against a fellow officer
or employer can only be based on the statutory right of action in GML
§205-e. Therefore, to the extent that the complaints herein plead
negligence causes of action against the City, such claims are
"To make out a claim under GML §205-e, a plaintiff must identify the
statute or ordinance with which the defendant failed to comply,
describe the manner in which the police officer was injured or killed
and set forth those facts from which it may be inferred that the
defendant's negligence directly or indirectly caused the harm. In
this case, plaintiffs' failure to satisfy the pleading requirements
in either the complaints or the bill of particulars renders the cause
of action legally insufficient."
"To establish a prima facie case under GML §205-e, a plaintiff, in
addition to demonstrating a violation of a relevant statute,
ordinance or regulation, must also establish a practical or
reasonable connection between the violation and the injury or death
of the police officer. Here, the facts alleged by plaintiffs are
insufficient to establish the requisite causal connection between the
alleged constitutional violation and the injuries sustained. The
fatal injury to Anthony Mosomillo did not result from the violation,
if any, of Ramos' constitutional right to be free from an
unreasonable search but, rather, from the criminal act of Serrano in
shooting decedent. Therefore, plaintiffs' remaining claims, which are
premised upon GML §205-e, are dismissed."
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