Court of Appeals Finds That Policy Language For "Residence Premises" Is Ambiguous

On September 9, we wrote in advance of oral arguments in the Court of Appeals for the matter of Dean v. Tower Insurance Co. of New York, an insurance coverage action in which the controversy involved the loss of alleged “residence premises” where such premises were defined for the insured as “where you reside.”  In the decision released October 25, the Court of Appeals concluded that the word “reside” was undefined in the policy, making “residence premises” ambiguous under the facts here.  The Court thus affirmed the denial of summary judgment to Tower in a 4-3 decision.

The Deans’ home insurance policy at issue was to become effective at the time they closed on their house.  But, the Deans could not move in as they discovered extensive termite damage.  As a result, the Deans continued to live at their old home while they performed substantial repairs over the next 12 months.  This included performing repairs at the new home at least five days a week after work and often eating meals and staying late into the night or early morning, but not sleeping over.  The house was then destroyed by fire approximately one year after the closing, when the renovations were substantially complete.

The majority of the Court of Appeals quoted language from earlier Appellate Division cases which indicate that residency requires “something more than temporary or physical presence and requires at least some degree of permanence and intention to remain.”  Through this lens, the majority found that issues of fact remained as to whether the Deans satisfied the insurance policy’s “residence premises” language.  The majority further noted that the ambiguity makes it arguable whether the “reasonable expectations of an average insured” would be that mere “occupancy” of the premises was sufficient to satisfy the policy requirements, and that Mr. Dean's presence in the home for working purposes could be considered such an "occupancy."  

In dissent, three Judges argued that the term “reside” should simply be given its plain definition or plain meaning and would grant summary judgment for Tower.  The dissent argued that the Deans failed to “reside” at their new home because they continued to live at their old home while they performed the repairs.  Consequently, although they may have shown “recurrent presence for the purpose of renovation,” the dissent argued that the Deans did not show “the necessary ‘degree of permanence’ to establish a residence.”

Court of Appeals Finds Amended Exclusion In Insurance Policy No Longer Ambiguous

In Bentoria Holdings, Inc. v. Travelers Indemnity Co., an insurance coverage action to determine whether the insurer properly denied coverage for building damage that was caused by excavation on the lot next to the insured building, Travelers based its denial on an exclusion for “Earth Movement” contained in its policy.   Notably, a nearly identical earth movement clause was reviewed in the 2009 Court of Appeals' decision Pioneer Tower Owners Assn. v.State Farm Fire & Cas. Co. and there the Court denied summary judgment to the insurer.  In Pioneer, the Court concluded that the clause “did not unambiguously remove” human excavation from coverage.  Here, however, the Court of Appeals was satisfied that human excavation was excluded from policy coverage and granted Travelers’ motion for summary judgment.

The difference between the policies at issue in Bentoria and Pioneer was an additional sentence in the Bentoria policy that specifically excluded earth movement “whether naturally occurring or due to man made or other artificial causes” (emphasis added).  The Court of Appeals held that the latter part of the additional sentence eliminated the ambiguity argument that was available in Pioneer.  Consequently, the Bentoria policy could not “reasonably be read to cover the damage on which plaintiff’s claim is based.” 

Court of Appeals Broadly Interprets “Necessarily Affects” Requirement Applicable to Prior Nonfinal Orders and Judgments

In Strauss, Inc. v. East 149th Realty Corp., the Appellate Division declined to review, on an appeal from a final judgment, an earlier order dismissing appellant’s counterclaims and third-party claims.  The Court of Appeals, however, granted leave and reversed, holding that, contrary to the Appellate Division’s determination, the order dismissing appellant’s counterclaims and third-party claim does “necessarily affect” the final judgment within the meaning of CPLR 5501(a)(1).

 

By way of background, CPLR 5501(a)(1) provides that “[a]n appeal from a final judgment brings up for review ... any non-final judgment or order which necessarily affects the final judgment.”  For purposes of CPLR 5501(a)(1), “a final order is one that disposes of all causes of action between the parties in an action or proceeding and leaves nothing for further judicial action apart from mere ministerial matters” (Town of Coeymans v. Malphrus, 252 A.D.2d 874, 875 [3d Dept. 1998]).  Further, an order has been said to “necessarily affect” a final judgment if its reversal would overturn the judgment (Siegel, NY Prac § 530, at 940 [5th ed]).  Applying this test, the Appellate Division found in Strauss, that the order dismissing the counterclaims and third-party claim did not “necessarily affect” the judgment because, if the order were reversed, it would not require a reversal or modification of the final judgment.  Rather, it would mean only that the counterclaims and third-party claim would be reinstated and appellant would be permitted to pursue those claims.

 

But the Court of Appeals disagreed, holding that the Appellate Division erred in ruling that the order dismissing the counterclaims and third-party claim did not necessarily affect the final judgment, explaining that, “this Court has not applied a definition of ‘necessarily affects’ as narrow as that employed by the Appellate Division in this case.  To satisfy ‘necessarily affects’ in this context, it is not required, as the Appellate Division held, for the reinstatement of the ... counterclaim upon a reversal or modification to overturn completely the judgment.”  Instead, the Court of Appeals held that because the order dismissing the counterclaims and third-party claim “necessarily removed that legal issue from the case (i.e., there was no further opportunity during the litigation to raise the question decided by the prior non-final order), that order necessarily affected the final judgment.”

 

On its face, this holding may leave some scratching their heads wondering why does it matter that the order dismissing the counterclaims and third-party claim “necessarily removed that legal issue from the case” in determining whether the order “necessarily affects” the final judgment.  To the contrary, intuitively an order that removes completely a “legal issue from the case” would be a “final” order, which would not be brought up for review by the judgment.  An answer can be found in Burke v. Crosson (85 N.Y.2d 10 [1995]).  There, the Court of Appeals held that “an order or judgment that disposes of some but not all of the substantive and monetary disputes between the same parties is, in most cases, nonfinal.  Thus, a nonfinal order or judgment results when a court decides one or more but not all causes of action in the complaint against a particular defendant or where the court disposes of a counterclaim or affirmative defense but leaves other causes of action between the same parties for resolution in further judicial proceedings” (id. at 16). 

Court of Appeals Watch: Dupree v Giugliano

Dupree v. Giugliano - In this action claiming medical malpractice, the plaintiff seeks to recover for a consensual sexual relationship with her family practitioner physician that allegedly led to her divorce, emotional injuries, and loss of marital financial support.  Principally at issue will be whether the sexual relationship constitutes medical malpractice.

The Appellate Division, Second Department, concluded it did in its 3-1 decision.  The majority noted that the physician gave advice concerning plaintiff’s panic attacks, prescribed an antidepressant for depression, recommended plaintiff see a psychiatrist or psychologist, and discussed “mental health issues” at least partially related to problems with her marriage, which was characterized as “talk therapy.”   In the Court's opinion, these actions constituted mental health services subjecting the physician to the standards of a mental health provider.  Under those standards, a sexual relationship with the patient would be a departure from the standard of care.

In dissent, Justice Skelos argued that a physician’s conduct can be medical malpractice only when it is “medical treatment or bears a substantial relationship to the rendition of medical treatment.” According to Judge Skelos, here, the physician's actions did not constitute medical treatment.  In particular he pointed to the plaintiff’s admission that the relationship was “not ‘part of the treatment’” and reasoned that the consensual relationship would be intentional conduct extraneous to treatment and should not be considered medical malpractice.

Oral argument will be this Wednesday, October 17, 2012. The Court streams oral arguments live online.  To watch them live, you can visit the New York Court of Appeals website on Wednesday after 2:30 p.m. and click on the “Oral Arguments Webcast” link on the right-hand side of the screen.

Appellate Division News

As reported in today's Law Journal, Governor Cuomo has named Justice Randall Eng as the new Presiding Justice of the Appellate Division, Second Department. The governor also announced the appointments of Justices Judith Gische, Darcel Clark, and Paul Feinman for the First Department; Justice Sylvia Hinds-Radix for the Second Department; and Justices Joseph Valentino and Gerald Whalen for the Fourth Department.