Firm News 1/3/2007

UM Arbitration.  Fourth Department affirms a permanent stay of arbitration of UM benefits where insured’s injuries arose from being struck y a boat that slipped away from a trailer.  Court finds the that accident did not involve “physical contact” with an unidentified vehicle.  New York Central Mutual Fire Ins. Co. v. McLeary, 2006 WL 3760470 (4th Dept. December 22, 2006).

Duty to Defend/Assault Exclusion.  Without analysis of facts, First Department affirms trial court’s order that insurer is obligated to defend its insured in the underlying action until there is sufficient evidence in the underlying action to determine applicability of an assault and battery exclusion.  Love Picin, Inc. v. Certain Interested Underwriters at Lloyd’s, London, 2006 WL 3717688 (1st Dept. December 19, 2006).

No-Fault/Bad Faith.  Third Department affirms dismissal of bad faith, tort, and punitive damages claims by insured against her no-fault insurer where claims premised on insurer’s alleged failure to pay claims in breach of the policy.  Court notes no cause of action exists in tort for an insurer’s alleged bad faith in failing to perform contractual obligations.  Alexander v. GEICO Ins. Co., 2006 WL 362178 (3d Dept. December 14, 2006).

Material Misrepresentation.  Court denies summary judgment to insured seeking to dismiss insurer’s defense/counterclaim of material misrepresentation in action under a disability policy.  Court observes that policy and statute’s incontestability provisions excepts fraudulent misstatements, and that evidence of undisclosed preexisting conditions raises an issue of fact regarding whether insured made material misrepresentations sufficient to rescind the policy.  Court also notes that Insurance Law § 409, which requires insurers to establish a fraud prevention plan, does not create a private right of action in favor of insureds.  Court also denies insured summary judgment on his claim under General Business Law § 349, finding that collateral estoppel does not apply to previous reported decisions in which the insurer’s claim handling process was subject to bad faith findings.  Dwyer v. First Unum Life Ins. Co., 2006 WL 3615206 (Sup. Ct. New York Co. December 13, 2006).

First-Party Property.  Court grants summary judgment in favor of insurer dismissing insured’s claim for fire loss damages under a personal property/inland marine policy.  Court finds policy’s two-year limitations period for suits against the insurer is enforceable, citing Insurance Law § 3404(e).  Court finds insured failed to submit any evidence supporting tolling of the limitations period where insured submitted only hearsay evidence of delays by his own public adjuster in handling the claim.  Van Loan v. Hartford Accident and Indemnity Co., 2006 WL 3782709 (N.D.N.Y. December 22, 2006).

Contribution.  Court partially grants defendant insurer’s motion to dismiss claims brought by another insurer for contribution.  Plaintiff successfully defended the insured in an underlying copyright action under a publishing and advertising policy.  Defendant insured the insured under a director’s and officer’s policy.  Defendant retained defense counsel for certain officers of the insured, but not for the insured.  In an action for defense costs, the court finds defendant had an obligation to defend the corporate entity as well as the officers based on claims of unjust enrichment alternative to the copyright claims excluded under the D&O policy.  Court finds an issue of fact whether defendant’s retention of a law firm for the insured’s officers satisfied its duty to defend.  Court determines the action is properly one for contribution, and therefore dismisses plaintiff’s claims based on subrogation, third-party beneficiary status, unjust enrichment, and breach of oral contract.  National Cas. Co. v. Vigilant Ins. Co., 2006 WL 3749540 (S.D.N.Y. December 21, 2006).

Duty to Disclaim.  Court grants motion for summary judgment in favor of excess insurer in connection with an underlying auto accident claim, finding insurer had no duty to issue a disclaimer under Insurance Law § 3420(d) where party claiming insurance is not an insured under the policy.  The policy, part of a rental agreement, identifies the insured only as the individual renter of the vehicle at issue as an insured, and court finds no evidence that any other person is an insured.  The party claiming insured status was an allegedly unauthorized driver of the rented vehicle.  Court finds that the policy’s exclusion for unauthorized drivers does not make the unauthorized driver an insured entitled to a disclaimer, but instead applied to insureds for liability arising from unauthorized drivers.  Empire Fire and Marine Ins. Co. v. ELRAC, Inc., 2006 WL 3734308 (S.D.N.Y. December 18, 2006).

Discovery.  Court grants motion to compel allegedly privileged materials in connection with insurer’s suit against a broker for allegedly deleting certain loss-limiting language in a policy covering a retail company that suffered business interruption losses arising from the September 11 attack.  Court finds that work of law firm retained to help adjust and settle the claim is not privileged prior to time settlement of the claim.  Court also finds insurer failed to adequately support certain claims of privilege, and insurer and its subpoenaed outside law firm waived privileges by failing to submit a privilege log.  OneBeacon Ins. Co. v. Forman International, Ltd., 2006 WL 3771010 (S.D.N.Y. December 15, 2006).

Common Law Indemnification.  In a Labor Law action, Third Department affirms that part of trial court’s order dismissing owner’s cross-claim for indemnification against general contractor.  Court holds there was no allegation that general contractor was ever required to supervise, direct, or control work at the site.  Albert v. Williams Lubricants, Inc., 2006 WL 3800996 (3d Dept. December 28, 2006).

Relative Exposure Rule.  In an action commenced by a law firm challenging its insurer’s allocation of amounts the firm paid pursuant to a settlement agreement under a Management Liability & Company Reimbursement insurance policy, court denies the firm’s summary judgment motion on its cause of action for breach of contract.  The firm entered the settlement agreement to settle claims against it and an attorney that had defected from the underlying plaintiff’s firm.  The law firm’s insurer paid the firm 40% of the total paid under the settlement, allocating the remainder of the amount as uncovered loss and asserting that legal fees in excess of the policy retention were allocable to the defecting attorney, an uninsured party.  Court determines that the law firm was not entitled to summary judgment on the issue of whether the allocation constituted a breach of contract where the policy contained a provision calling for allocation by the “relative exposure rule,” a fact-based analysis that raises issues of fact that cannot be determined from the papers submitted in connection with the motion for summary judgment.  Clifford Chance Ltd. Liability Partnership v. Indian Harbor Ins. Co., 2006 WL 3821841 (Sup. Ct. New York Co. December 27, 2006).

Insurance Law § 3420(d).  In an action for a judgment declaring that insurer is not obligated to defend or indemnify contractors based on contractors’ lack of cooperation, Second Department reverses the trial court’s order denying insurer’s motion for leave to enter a default judgment where insurer established its entitlement to default judgment based on contractors’ failure to appear.  The trial court erred in finding that the insurer failed to comply with Insurance Law § 3420(d) where insurer commenced its declaratory judgment action within one week of its last efforts to gain contractors’ cooperation.  Travelers Indem. Co. of America v. Pullini Water Services, Inc., 2006 WL 3800077 (2d Dept. December 26, 2006).

Contractual Indemnification/

Common Law Indemnification.  After a subcontractor settled with plaintiff in a construction injury action which resulted in the discontinuance of plaintiff’s action against all defendants, subcontractor brought a third-party complaint against plaintiff’s employer seeking common law and contractual indemnification and plaintiff’s employer sought to dismiss the third-party complaint.  Second Department affirms the trial court’s order denying plaintiff’s employer’s motion for dismissal where issue of fact existed regarding whether purchase order between subcontractor and plaintiff’s employer contained indemnification clause and no basis existed to dismiss the subcontractor’s claim for common law indemnification where employer’s workers compensation insurance only afforded coverage for accidents in New Jersey, not those occurring in New York.  Sarmientor v. Klar Realty Corp., 2006 WL 3801538 (2d Dept. December 26, 2006).

Insurance Law § 3420(d)/Excess Coverage.  In an action for a judgment declaring that excess insurer is obligated to provide excess coverage in connection with an underlying personal injury action, Second Department reverses the trial court’s order and grants insured’s motion for summary judgment declaring that excess insurer is obligated to provide coverage where excess insurer disclaimed coverage on grounds that the driver of the automobile was an unauthorized driver fifty days after learning of this ground by receipt of the police accident report and excess insurer offered no excuse for its delay.  Reyes v. Diamond State Insurance Co., 2006 WL 3801939 (2d Dept. December 26, 2006).

Number of Occurrences/Dental Malpractice.  In an action by insurer against its insured dentist seeking a judgment declaring that the dentist’s alleged failure to diagnose and properly treat a cancerous cyst in underlying plaintiff’s jaw constituted one “dental incident,” Second Department dismisses dentist’s appeal of trial court’s determination that the continued misdiagnosis constituted one dental incident where all of the alleged departures in care, when viewed in their entirety, were the “same, related, repeated or continued” acts as described by the policy.  Connecticut indemnity Co. v. Schindler, 2006 WL 3803486 (2d Dept. December 26, 2006).

Contractual Indemnification.  In an action for property damages resulting from the discharge of petroleum, Second Department affirms trial court’s order granting co-defendant and its insurer’s motion for summary judgment awarding indemnification running against defendant in favor of co-defendant where the agreement between the parties unambiguously required defendant to indemnify the co-defendant even if co-defendant was negligent and, regardless, co-defendant was not negligent in giving rise to plaintiff’s claim.  237 W. 230 Street Realty Corp. v. Castle Oil Corp., 2006 WL 3803877 (2d Dept. December 26, 2006).

Broker Liability.  In an action for breach of contract and negligence based on insurance broker’s failure to procure a liability policy, Fourth Department affirms trial court’s order refusing to dismiss insured’s claim as time-barred and denying broker’s pre-answer motion to dismiss.  The trial court properly rejected broker’s assertions that insured’s claims were time-barred where discussions and further alleged acts of malpractice on the part of the broker occurred subsequent to the original issuance of the policy.  Tucker v. M&T Ins. Agency, Inc., 2006 WL 3759319 (4th Dept. December 22, 2006).

Contractual Indemnification/

Common Law Indemnification.  In a Labor Law and negligence action commenced by a drywall subcontractor against the worksite owner and an electrical subcontractor, Fourth Department determines that the trial court properly denied the owner’s motion for summary judgment on its cross-claim for contractual indemnification against the electrical subcontractor where indemnification provision is triggered only after a finding of negligence on the part of the electrical subcontractor. Fourth Department rules that the trial court properly denied the owner’s motion for summary judgment on its cross-claim for common law indemnification against the electrical subcontractor where there are issues of material fact concerning the precise degree of fault attributable to each party.   Arenas v. Bon-Ton Department Stores, Inc., 2006 WL 3759638 (4th Dept. December 22, 2006).

False Pretense Coverage.  In a breach of contract action based upon insurer’s alleged wrongful denial of insurance coverage to auto dealer, auto dealer alleged that the seller of seven automobiles warranted to the dealer that the vehicles met all regulatory requirements.  Insurer denied dealer’s claim after a federal investigation revealed that none of the regulatory requirements were met.  Fourth Department holds that the trial court erred in dismissing dealer’s complaint on the ground that the loss was not covered by the “False Pretense Coverage” of the policy that applied to losses caused by the acquisition of a vehicle from a seller that did not have proper title where insurer failed to submit evidence showing that the seller had legal title to the vehicles.  Village of Import Auto Sales & Service v. Motors Ins. Co., 2006 WL 3759708 (4th Dept. December 22, 2006).