Court of Appeals Supports Renewal of Annual Aggregate Limits Under Excess Policies

In Union Carbide Corp. v. Affiliated FM Ins. Co., Union Carbide had purchased primary and excess insurance involving multiple layers of coverage spread across multiple insurers up to at least $100 million in coverage. The primary policy covered UCC up to $5 million, with the policy aggregate limit being applicable to a 12 month policy period despite the fact that the policy was written for a three year period. UCC, an asbestos producer, was compelled to pay over $1.5 billion in defense, settlement and judgment costs for claims asserted over the applicable policy period.

At issue on this appeal was the fifth layer of excess, between $70 and $100 million, which was insured by six carriers at $5 million each. The fifth layer excess carriers insured UCC on a "follow-the-form" basis subject to the Declarations of the primary policy. In holding that the annual aggregate for each insurer, $5 million, renewed annually as did the primary insurer's aggregate limit, the Court found that the "follow-the-form" clause "serve[s] the important purpose of allowing an insured, like UCC, that deals with many insurers for the same risk to obtain uniform coverage, and to know, without a minute policy-by-policy analysis, the nature and extent of that coverage."

The Court declined to find as a matter of law, however, that, with respect to one of the excess carriers, a two-month extension of its policy period exposed the carrier to a fourth annual aggregate, thus leaving the issue open to be decided on motion or at trial.

Additional Insured Endorsement Covering Work Performed By Named Insured For Additional Insured Does Not Insure Lessor Under Lessee's Policy

In Admiral Ins. Co. v. Joy Contractors, Inc., a tower crane operated by Joy Contractors Inc. that had been leased from New York Crane, collapsed during the construction of a high-rise condominium project, resulting in the deaths of seven people. Joy was insured for the project under a Commercial General Liability (CGL) policy issued by Lincoln General Ins. Co. and an excess liability policy issued by Admiral Ins. Co.

New York Crane sought additional insured coverage from Lincoln and Admiral under an additional insured endorsement which provided that "all insureds shown in a written contract, or agreement. . ." are additional insureds, "but only with respect to liability . . . caused . . . by [Joy's] acts or omissions; or . . . [t]he acts or omissions of those acting on [Joy's] behalf; in the performance of [Joy's] ongoing operations for the additional insured(s)" (emphasis added).

In affirming the denial of coverage to New York Crane, the First Department rejected the contention that "Joy's contractual obligation to follow industry standards in its operation of the crane leased to it by New York Crane transformed Joy into a party working 'for' or 'on behalf' of New York Crane. Plainly, the parties had a lessor/lessee relationship, which could have been insured by an appropriate endorsement, such as one for leased equipment (see e.g. Westchester Fire Ins. Co. v Continental Cas. Co., 2006 WL 786866, 2006 Minn App Unpub LEXIS 274 [Minn App 2006])."

Fall From A Height Held Not to Be Labor Law 240(1) Related Because Plaintiff Was Not Hired To Perform Elevation-Related Tasks

In Simoes v. City of New York, the plaintiff was working as a flagman directing traffic at a renovation project. A manlift being used in the course of the renovations malfunctioned. As such, it was driven to a nearby vacant lot. Significantly, however, the manlift was unable to ascend the curb next to the lot, so "plaintiff climbed up the boom and into the aerial basket in an attempt to use the controls in the basket to negotiate the manlift over the curb. Moments later, a foreman drove another vehicle toward the manlift in an attempt to push it into the lot. When that vehicle made contact with the manlift, the manlift fell over with plaintiff still within the aerial basket."

In a unanimous opinion, the First Department affirmed the dismissal of plaintiff's Labor Law § 240(1) claim, holding that plaintiff "was not protected by the statute since his duties as a flagman did not entail elevation-related risks"(citing Rocovich v Consolidated Edison Co., 78 NY2d 509, 514 [1991]; Modeste v Mega Constr. Inc., 40 AD3d 255 [2007]; Jamison v County of Onondaga, 17 AD3d 1142, 1143 [2005]).

Managing Agent Exposed to Potential Liability For Lead Paint Condition

In Ortiz v. Gun Hill Mgt., Inc., the First Department affirmed a finding of questions of fact with respect to the scope and extent of a managing agent's control over the property, which if "complete and exclusive" could render the agent liable for failing to abate a lead-based paint condition that allegedly injured the infant plaintiff. More specifically, the Court found that contract language giving the agent "complete and unfettered authority to undertake all repairs costing less than" $2,000, as well as the repair of any condition it deemed an emergency, could give rise to a finding of control.

The Court also found that issues of fact existed as to whether the agent could be held liable to plaintiffs for its alleged affirmative acts of negligence (again, assuming a finding of exclusive control). The Court observed that the agent purportedly failed to timely or adequately remedy the condition despite plaintiff's repeated complaints for several years. In addition, the agent did not move the infant plaintiff into another apartment until two months after the Department of Health and Mental Hygiene had found 10 lead-based paint violations.

Helpful Practice Tip: Remember to Object to Jury Verdict Sheet When Necessary

Also in Aguilar v. New York City Transit Authority, the trial court took into consideration the extensive proof of plaintiff's psychological trauma, to recommend that the jury verdict sheet include an itemization of damages for past and future mental pain and suffering as well as past and future physical pain and suffering. The defendant failed to object, but apparently raised the novelty of this practice as an issue on appeal. In declining to consider the issue, the First Department held that "[b]ecause defendants failed to object to the errors in the verdict sheet, the charge became the law applicable to the determination of the case." Moreover, the Court also observed that the error in the charge was not so fundamental as to prevent the jury from fairly considering the issues at trial.

Recent Pain and Suffering and Loss of Consortium Awards For Leg Amputation

In Aguilar v. New York City Transit Authority, the First Department described the accident and injuries involving the plaintiff as follows: "Plaintiff, a 45-year-old married mother of three, was hit by a bus, dragged along the street and remained under the bus for some time while rescuers attempted to free her. As a result of the accident, her left leg was amputated above the knee and her right leg was rendered, essentially, useless. Plaintiff underwent 10 surgeries, had numerous setbacks and suffers from post-traumatic stress disorder and severe depression. She depends on others for the most basic of care, and because of complications from her prosthesis and residual pain from the accident, she has been unable to engage in relations with her husband."

The jury awarded the plaintiff $8 million for 3.7 years of past pain and suffering and $8 million for 32.6 years of future pain and suffering. The jury awarded the husband $1 million each for past lost services and future loss of services. On appeal, the First Department conditionally reduced the awards to $5 million for past pain and suffering, $5 million for future pain and suffering, and $500,000 for past loss of services, thereby affirming the future loss of services award of $1 million.

Missing Drain Cover Not A Structural Defect

In Harris v. Trustees of Columbia University, the First Department held that a missing drain cover is not a structural defect for purposes of imposing liability upon an out-of-possession landowner who retains the right of re-entry to its premises. The Court also held that Building Code provisions pertaining to load-bearing floors were inapplicable to plaintiff's claim, since the provisions were intended to protect against a harm not suffered by plaintiff.

Court of Appeals Reminds Us of Broker's "Dual Agency Status"

In People v. Wells Fargo Ins. Servs., Inc., the Court of Appeals held that an insurance broker does not breach its fiduciary duty to its customer when it fails to disclose the fact that the broker will receive compensation from the insurer for the policy it will ultimately place on behalf of the customer. The Court noted that this practice has recently been prohibited by regulation of the Insurance Department (11 NYCRR 30.3[a][2] effective January 1, 2011). Since the allegations in this particular case arose prior to enactment of the regulation, and because the regulation is not retroactive, the Court found that it did not apply to this case.

The broader significance of the Court's decision, however, is its reminder that typical agency principles are not strictly applied to brokers. The Court observed that a broker is the agent of the insured, but customarily is paid by the insurer. The broker, at times, also acts on behalf of the insurer, i.e. when collecting premiums. The broker thus has a more complex relationship with its customer than a typical agent. The Court further described the broker as having a "dual agency status."

Court Dismisses Action In Favor of Non-Appealing Party

In Ikeda v. Hussain, the First Department reversed the denial of defendant Hussain's motion for summary judgment on threshold serious injury grounds, granted the motion and dismissed the plaintiff's complaint. Upon a search of the record, the Court also granted the cross-motion of non-appealing co-defendants, Christine and Samantha Brooks. The Court held "if plaintiff cannot meet the threshold for serious injury against one defendant, [she] cannot meet it against [others]" (citing Taylor v Vasquez, 58 AD3d 406, 408 [2009] [internal quotation marks omitted]).

Court Of Appeals Addresses Proof Of Damages In A Wrongful Birth Case

In a wrongful birth action, the plaintiff alleges that the defendant failed to detect birth defects in utero and had the defects been detected the parents would have taken steps to terminate the pregnancy.  Damages in such an action are the increased financial obligation to the parents arising from the extraordinary medical treatment the child will need during his/her minority. 

In Foote v. Albany Medical Center, the plaintiffs brought a wrongful birth action claiming through their expert that while government services were available to pay for the cost of care for the child, those services only provided a baseline and did not provide the child with "optimal" care.  The Supreme Court granted the defendants' motion for summary judgment finding that the plaintiffs failed to raise a question of fact as to whether they had or will incur extraordinary expenses in raising the child because of the availability of government services.  The Third Department, however, reversed finding that the plaintiffs' expert affidavit raised a question of fact as to whether available government services were sufficient to meet all of the child's needs.  The Third Department also noted that to the extent government services were available, they would be set off as collateral sources. 

Today the Court of Appeals affirmed holding that the plaintiffs raised a question of fact as to whether there is a difference between the resources provided by government programs and the extraordinary medical and other treatment or services necessary for the child.  The Court, however, did not express an opinion whether pursuant to the statutory collateral source rule "'the availability of another source of compensation does not obviate'" plaintiffs' injury but, instead, can only offset any damages awarded after trial (Foote, 71 AD3d at 28). That issue, along with issues pertaining to liens, if any, and the underlying medical malpractice issues remain open for consideration by Supreme Court."

The implication should be that damages are limited to only what the parents will have to pay out-of-pocket, above and beyond what is already publically available at no charge to them, in order to meet the child's actual needs.  

Second Department Agrees With First That Ex Parte Arons Interviews Permitted Before Note Of Issue

Following the Court of Appeals decision in Arons v. Jutkowitz, some questioned whether ex parte interviews of nonparty treating physicians were allowed only after the filing of the note of issue. In Wright v. Stam, the Second Department agreed with the First Department's decision in Shefer v. Tepper, that such interviews were allowed, and in fact, preferred prior to the filing of the note of issue.  

First Department Agrees With Third Department On Collateral Source Issue

In Adams v. Genie Indus., Inc., at issue was whether the defendants were entitled to collateral source offsets for future Social Security disability benefits and Social Security benefits received by the plaintiffs' daughter.  The trial court granted an offset of $608,559.08 for SSD benefits and $24,000 for Social Security benefits for the plaintiff's daughter.  The First Department, however, reversed holding that the defendants failed to prove with reasonable certainty that SSD benefits would continue because the jury found that the plaintiff would be able to return to work.  Furthermore, the Court followed the Third Department (Young v. Knickerbocker Arena, 281 A.D.2d 761 [3rd Dept. 2001]) in holding that Social Security benefits for a child are not collateral sources because these benefits belong to the child and not the plaintiff. 



Case To Watch At The Court of Appeals

Yesterday the Court of Appeals heard arguments in State Farm Mut. Auto Ins. Co. v. Langan.  The case will ask the Court to revisit its 1963 decision in McCarthy v Motor Veh. Acc. Indem. Corp. (16 AD2d 35 [1962], affd 12 NY2d 922 [1963]), which upheld the denial of uninsured motorist benefits for injuries resulting from intentional conduct. As Justice Mastro of the Second Department, however, noted in his partial dissent "in the years since McCarthy was decided, the overwhelming national trend has been to permit such coverage under facts similar to those at bar, with a substantial majority of jurisdictions now doing so."  The Court, therefore, could decide to adhere to years of precedent or break from precedent and join the majority of other states.  A decision can be anticipated in mid-March. 

At issue is also whether the plaintiff is entitled to recover benefits under the policy's mandatory personal injury protection (PIP) endorsement and its death, dismemberment, and loss of sight provisions.  The majority held that unlike with uninsured motorist benefits, intentional conduct was irrelevant.  The issue is whether from the insured's perspective the accident was unexpected, unusual or unforeseen.  The dissent, however, found such a decision inconsistent with its prior holding in this case that no coverage was available for intentional conduct under the entire policy. Furthermore, the dissent argued that it could not support "radically" different interpretations of similar language within the same policy. 

Second Department Reinstates Class Action By Delivery Drivers

Hernandez v. Chefs Diet Delivery - In a class action brought by delivery drivers pursuant to Labor Law Article 6, the defendants moved to dismiss on the basis that the plaintiffs were independent contractors.  The Supreme Court agreed, but the Second Department reversed holding that the facts set forth in the complaint were sufficient to establish that the defendants exercised the requisite degree of control over their work or the means to do their work.  According to the Court, "[s]pecifically, the plaintiffs alleged that the defendants, among other things, provided daily delivery manifests directing the drivers as to where deliveries were to be made, reimbursed the drivers for mileage, and required the plaintiffs to attend mandatory meetings, to obtain approval for vacation time, to undergo approximately one to two weeks of training, and to refrain from playing loud music while making deliveries."

The Appellate Division also held that federal income tax forms designating some of the plaintiffs as independent contractors were not conclusive.  Additionally, a confidentiality and noncompete agreement signed by one of the plaintiffs was not dispositive.  Instead, the Court noted that the noncompete agreement weighed in favor of the plaintiffs.

Additional Insured's 4 Month Delay In Providing Notice of Accident Held Untimely As A Matter of Law

In Kogan v. North St. Community, LLC, the plaintiff was injured in a slip and fall on ice that had allegedly accumulated in a parking lot owned by North St. The First Department affirmed the denial of North St.'s motion to dismiss, finding that questions of fact existed as to whether North St. had notice of the alleged condition. The Court dismissed the case against North St.'s snow removal contractor, Tripicchio, finding that Tripicchio was not obligated to salt the parking lot. The Court further held that Tripicchio could not be obligated to indemnify North St. under either contract or common law.

Finally, the Court held that Tripicchio's insurer, Merchants Mutual, was not obligated to insure North St. for this loss. It was established that North St. learned of the accident approximately two weeks after it occurred, but failed to notify Merchants until four months later. This delay, the Court held, was untimely as a matter of law.

Default Reinstated Where Plaintiff Failed To Show Meritorious Cause of Action

In Chiaramonte v. Coppola, an action alleging medical malpractice and wrongful death, the trial court had granted plaintiff's motion to vacate a default judgment entered against her for failure to appear at a scheduled status conference (see 22 NYCRR 202.27[b]). On appeal, the First Department reversed, finding that plaintiff had failed to show a meritorious cause of action. The Court observed that the affidavit of plaintiff's expert failed to make factual allegations, describe the extent of his or her knowledge of the matter, or state with specificity the observations as to the procedures or treatments performed and defendant's alleged deviations from the acceptable standards of medical care. Nor did the expert explain how the alleged departures from those standards contributed to the decedent's death.