Firm News 4/11/2007

Business Interruption/Late Notice/Proof of Loss.  DECISION OF INTEREST.  Hewlett-Packard’s planned launch of a new server was delayed by the destruction of a database necessary to test the product.  The delay allowed IBM to launch its comparable product ahead of HP.  HP subsequently discovered that the database was destroyed by employee sabotage.  HP made a $130 million claim under its all-risks policy for its business interruption loss.  Court first rejects insurer’s motion for summary judgment seeking declaration that HP provided late notice.  Court finds HP was obligated to provide notice once sabotage was discovered, not when the database was destroyed.  Court observes that but for sabotage, destruction of the database would be excluded.  Court grants cross-motion declaring that notice was timely.  Court also rejects insurer’s motion seeking a declaration that a $50 million sublimit applies both to the property loss and the business loss.  Court reads submlimit provision in light of other sublimits, and also notes differences between the policy and the previous policy.  Court finds sublimit not applicable to business loss, and grants summary judgment on the issue to HP.  Court also rejects insurer’s motion seeking declaration that HP failed to submit proof of loss.  Court explores parties’ exchange of information to conclude HP provided complete loss information, including a sworn statement.  To the extent HP did not provide a sworn statement with respect to all parts of its claim, court finds insurer acquiesced.  Court also rejects insurer’s argument that loss was limited by provision relating to research and development, finding that the provision at issue pertained to losses caused in R&D not connected to products in preparation for market launch.  Hewlett-Packard Co. v. Factory Mut. Ins. Co., 2007 WL 983990 (S.D.N.Y. March 30, 2007).

Disability Notice.  Insured under two total disability policies sought recovery under both policies, even though policy 1 concededly lapsed for nonpayment prior to the insured’s claim, and insured concededly was paid full benefits under policy 2 following notice.  Insured’s theory in both cases was that he was incapable of paying premiums or providing notice due to his depression.  Assuming claimant could assert a claim given the lapse of policy 1 and full payment under policy 2, court finds insured failed to provide evidence of a sufficiently serious disability that might provide a reasonable excuse.  Court also finds claim under policy 1 time-barred, and claim under policy 2 partially time-barred.  Court grants insurer summary judgment and dismisses all claims.  Falco v. Unum Provident Corp., 2007 WL 1014568 (E.D.N.Y. March 30, 2007).

Late Notice/CGL Versus OCP Coverage.  Following a nonjury trial, court finds in favor of insurer in an action in which the New York City Housing Authority sued seeking a declaration of coverage under its contractor’s CGL policy and an OCP policy.  Underlying action involved a slip-and-fall at a NYCHA property.  NYCHA took 11 months to notify its contractor of the notice of claim.  Court rejects argument that bureaucratic obstacles within NYCHA excused its delay.  Court finds the notice untimely.  Court rejects NYCHA’s argument that its original notice to the contractor tendering NYCHA’s defense (which the contractor forwarded to the insurer) constituted notice under the OCP policy as well as the CGL policy.  Court finds nothing in the first tender gave any indication that NYCHA was seeking coverage under its own OCP policy, and court finds insurer was not obligated to investigate whether NYCHA had an OCP policy.  Court finds insurer’s 21-day delay in disclaiming under the OCP policy was reasonable based on its need to investigate.  United States Underwriters Ins. Co. v. Falcon Construction Corp., 2007 WL 1040028 (S.D.N.Y. April 4, 2007).

Direct Action Statute.  In a property damage action following a two-vehicle collision, court affirms small claims court’s dismissal of plaintiff’s claim against the defendant driver’s insurer as premature under Insurance Law § 3420.  Abizadeh v. Allstate, 2007 WL 1003893 (Sup. Ct. App. term March 28, 2007).

Excuse for Late Notice.  In insureds’ action seeking a declaration that insurer is obligated to defend and indemnify two underlying bodily injury actions, Second Department reverses denial of insurer’s motion for summary judgment.  Court finds six-month delay in providing notice of occurrence to be untimely as a matter of law.  Without recitation of the facts, court holds that insureds failed as a matter of law to prove a reasonable belief they could not be held liable sufficient to excuse late notice.  Natural Stone Industries, Inc. v. Utica National Assur. Co., 2007 WL 926405 (2d Dept. March 27, 2007).

Notice of Claim.  In an action seeking a declaration that insured was entitled to defense and indemnity in an underlying action, First Department reverses trial court’s denial of insurer’s motion for summary judgment where insurer showed that investigation was necessary to determine its right to disclaim for insured’s late notice of claim and suit.  On the date when insurer learned of the occurrence and underlying action, it did not know when its insured first learned of the accident and resulting lawsuit, information the insurer needed to made a good faith decision regarding the disclaimer.  Insured’s claim that disclaimer was untimely was without merit where thirty days of the thirty-eight day-delay were due to the insured’s failure to cooperate in insurer’s investigation.  Ace Packing Co. Inc. v. Campbell Solberg Associates, Inc., 2007 WL 1053354 (1st Dept. April 10, 2007).

Insured Location.  In an action by gas station property lessor against his homeowners and personal umbrella policy insurer seeking indemnification in underlying action for cleanup costs due to a petroleum spill, Third Department affirms dismissal of lessor’s complaint against insurer where gas station property did not fall within policy definition of “insured location,” gas station property was not identified in policy declarations, lessor never advised insurer that he purchased the gas station property, and lessor did not pay an additional premium to insure the property.  State v. Dennin, 2007 WL 1014080 (3d Dept. April 5, 2007).

Contractual Indemnification/Common-Law Indemnification.  In a Labor Law action by injured worker, court denies construction site owner’s motion seeking contractual and common-law indemnification from two co-defendants allegedly involved in construction activities where material issues of fact existed regarding the respective roles and responsibilities of the co-defendants making any such determinations premature.  Gonzalez v. Southbay Commons, Inc., 2007 WL 1029000 (Sup. Ct. Richmond Co. March 30, 2007). 

Contractual Indemnification/General Obligations Law § 5-322.1.  In a personal injury action by subcontractor’s employee against general contractor, Second Department holds that trial court properly dismissed general contractor’s third-party claim against subcontractor for contractual indemnification where general contractor was found to be at fault and provision authorizing indemnification for general contractor’s own negligence is void and unenforceable.  Brooks v. Judlau Contracting, Inc., 2007 WL 1018429 (2d Dept. April 3, 2007). 

First-Party No-Fault.  In an action to recover assigned first-party no-fault benefits, court affirms trial court’s order denying summary judgment in favor of provider where insurer’s affidavit of third party administrator submitted in opposition to provider’s motion sufficiently established the timely mailing of IME requests.  A.B. Medical Services PLLC v. State-Wide Ins. Co., 2007 WL 987008 (Sup. Ct. App. Term March 28, 2007). 

First-Party No-Fault.  In an action to recover assigned first-party no-fault benefits, court reverses trial court’s order denying summary judgment in favor of provider where insurer’s affidavit submitted in opposition to provider’s motion did not describe in detail the standard office practice and procedure for ensuring proper mailing and addressing, and were insufficient to establish the timely mailing of EUO scheduling letters.  Mega Supply & Billing, Inc. v. AUI Ins. Co., 2007 WL 1004371 (Sup. Ct. App. Term April 2, 2007). 

First-Party No-Fault.  Court reverses that part of lower court’s denial of provider’s motion for summary judgment on a claim where defendant’s mere denial of receiving claims forms was insufficient to rebut the presumption of receipt.  With respect to other claims, court finds defendant’s peer review reports were sufficient to raise an issue of fact; however, with respect to other claims, court finds that peer review reports premised on lack of necessary information were insufficient to raise an issue of fact.  With respect to other claims, assertion that amounts billed exceeded the workers’ compensation fee schedule raised an issue of fact.  A.B. Medical Services, PLLC v. American Transit Ins. Co., 2007 WL 1003752 (Sup. Ct. App. Term March 28, 2007).

First-Party No-Fault.  Court affirms summary judgment in favor of provider.  Court observes that although defense of a fraudulent scheme was not precluded by untimely denials, insurer’s investigator’s affidavit was insufficient.  Bronx Expert Radiology, P.C. v. Allstate Ins. Co., 2007 WL 1004027 (Sup. Ct. App. Term March 28, 2007); Webster Diagnostic Medicine, P.C. v. State Farm Ins. Co., 2007 WL 1004244 (Sup. Ct. App. Term March 28, 2007).

First-Party No-Fault.  Summary judgment in favor of provider reversed where insurer’s papers adequately raised the nonwaivable defense of fraudulent incorporation.  Insurer’s motion to dismiss conditionally granted on provider’s failure to serve interrogatory responses and to produce witnesses for EBTs.  Crossbay Acupuncture, P.C. v. State Farm Mut. Auto. Ins., 2007 WL 1004310 (Sup. Ct. App. Term March 28, 2007).

First-Party No-Fault.  Denial of provider’s motion for summary judgment affirmed where affidavit submitted by provider’s corporate officer did not contain personal knowledge of provider’s practices and procedures to lay a foundation for the admission of provider’s documents as business records.  A.M. Medical Services, P.C. v. Progressive Cas. Ins. Co., 2007 WL 1004719 (Sup. Ct. App. Term March 28, 2007) Delta Diagnostic Radiology v. Statewide Ins. Co., 2007 WL 1003465 (Sup. Ct. App. Term March 28, 2007) (affirming order denying summary judgment); Colonia Medical, P.C. v. Allstate Ins. Co., 2007 WL 1003655 (Sup. Ct. App. Term March 28, 2007) (affirming order denying summary judgment); S.P. Medical Center v. Trumbull Ins. Co., 2007 WL 1004524 (Sup. Ct. App. Term April 3, 2007) (affirming order denying summary judgment and holding that trial court properly denied insurer’s cross-motion to dismiss the action for lack of subject matter jurisdiction where it was clear that all three of provider’s claims were separate and distinct and within the Civil Court’s monetary jurisdictional limit); Preferred Medical Imaging, P.C. v. Countrywide Ins. Co., 2007 WL 1004588 (Sup. Ct. App. Term April 3, 2007) (reversing order granting summary judgment); Preferred Medical Imaging, P.C. v. Hudson Ins. Co., 2007 WL 1004262 (Sup. Ct. App. Term April 2, 2007) (reversing order granting summary judgment); Vista Surgical Supplies, Inc. v. GEICO Ins. Co., 2007 WL 1004451 (Sup. Ct. App. Term April 2, 2007) (affirming order denying summary judgment).

First-Party No-Fault.  Provider’s appeal of order compelling examinations before trial dismissed as academic where provider failed to obtain stay and failed to produce witnesses for examination.  Delta Diagnostic Radiology, P.C. v. Allstate Ins. Co., 2007 WL 1004895 (Sup. Ct. App. Term March 28, 2007).

First-Party No-Fault.  Summary judgment in favor of provider affirmed.  Court finds insurer incorrectly argued that plaintiff’s prima facie case required provider to prove insurer’s denial was untimely.  Global Medical Equipment, Inc. v. Allstate Ins. Co., 2007 WL 1004967 (Sup. Ct. App. Term March 28, 2007).