Newsletter Winter 08 09

WINTER 2009 Volume 1 Issue 3 1000 Crossroads Building Telephone: (585) 454-2181

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THE INSURANCE DEFENSE UPDATE

ARTICLES IN THIS ISSUE


Receipt of NonMonetary Benefit Does Not Create Employment Relationship




Conditions in a State Permit Do Not Create a Non-delegable Duty




Insurers Must Now Show Prejudice




Court Of Appeals Upholds Claims For Partial Indemnification







Insurance Carrier Not Precluded From Relitigating Adverse Coverage Decision Where Not A Party Insured That Failed To Update Its Records With Secretary Of State Cannot Use That Failure As An Excuse For Late Notice




Defendant Unsuccessful on Motion for Summary Judgment On “Serious Injury” Issue




Defendant Successfully Moves for Summary Judgment On “Serious Injury” Issue

Receipt of Non-Monetary Benefit Does Not Create Employment Relationship Stringer v. Musacchia, 11 NY3d 212 (2008) In Stringer v. Musacchia, 11 NY3d 212 (2008), the Court of Appeals addressed the applicability of Labor Law § 240 to a plaintiff injured during the construction of a shed. The plaintiff, along with several other hunters, had been invited to stay on the defendant’s property and participate in a spring turkey hunt. In exchange for the opportunity to hunt, many of the guests were asked to do various chores around the property in the afternoons, following the morning hunts. The plaintiff, who had experience in the construction industry, agreed to help construct a shed on the property. However, while working on the shed, plaintiff fell from a ladder and ruptured his Achilles tendon. He then sued the property owner, asserting a claim under Labor Law § 240(1). The issue before the Court was whether the plaintiff qualified as a worker or employee for purposes of the statute, as it has long been held that the statute does not provide protections to volunteers. In this case, the plaintiff claimed that he was covered under the statute because he was receiving a tangible benefit in exchange for his services – the opportunity to hunt. The Court, however, disagreed, placing significant emphasis on the fact that plaintiff did not receive monetary compensation. Thus, a property owner does not become strictly liable simply because he or she provides “some ancillary, non-monetary benefit in return [for the work] and ... is relieved of having to pay someone to complete the task ....”

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Conditions in a State Permit Do Not Create a Non-Delegable Duty Brothers v. New York State Electric and Gas Co., 11 NY3d 251 (2008) In many cases, various types of activities require government authorization in the form of a permit. Such is the case for utility companies to perform maintenance, such as the trimming of tree branches, in public rights-of-way adjacent to highways. In Brothers v. New York State Electric and Gas Co., 11 NY3d 251 (2008), the defendant had obtained the necessary permit which, among other conditions, required compliance with various applicable state and federal safety regulations. NYSEG subcontracted the actual work to a company which employed the plaintiff. During the maintenance operations plaintiff was run over by a truck being driven by a co-worker. The truck had been operating in reverse without a back up alarm and without another employee serving as a spotter or flag person, in violation of the applicable safety regulations. Because he did not sustain a grave injury as defined by the Workers’ Compensation Law, plaintiff could not bring suit against his employer. Instead, he attempted to maintain a claim against NYSEG on the theory that it was vicariously liable for the negligence of its subcontractor and employee because the permit imposed a non-delegable duty upon NYSEG to ensure compliance with the safety regulations. Although the basic rule is that a party is not vicariously liable for the acts of an independent contractor which it retains, that rule is subject to several exceptions, including where there is a non-delegable duty. The Court of Appeals began by noting that there are no clearly defined criteria for determining whether a particular duty is non-delegable. Rather, it is a sui generis inquiry that “ultimately rests on policy considerations”. In this case, the Court noted that adopting plaintiff’s theory would extend a utility’s liability to a potentially large class of plaintiffs. The Court also downplayed the importance of the permit, noting that it was not a bargained for exchange, but rather a license which NYSEG was required to obtain for a nominal fee. While acknowledging that plaintiff’s ability to recover for his significant injury was limited by the Workers’ Compensation Law, the Court found that was insufficient to justify imposing liability on the defendant.

Insurers Must Now Show Prejudice Insurance Law § 3420 Effective January 17, 2009, an insurer attempting to disclaim coverage because the insured did not provide notice of the incident as required by the policy must establish that it suffered prejudice. This change in the law, which brings New York into alignment with the majority of other states, was the result of an amendment to Insurance Law § 3420.

By virtue of the amendments, Section 3420 now also provides a personal injury or wrongful death claimant with a direct cause of action against an insurer if the insurer has disclaimed on the basis of untimely notice. This prejudgment action, however, is limited to challenging the insurer’s denial of coverage based on untimely notice.

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Not only does the new statutory language require an insurer to establish that it suffered prejudice as a result of the untimely notice, but it specifically establishes that, in most cases, if notice is provided within two years of the time required by the policy, the burden of proof will rest upon the insurer to demonstrate that its ability to investigate or defend the claim has been “materially impaired”. After two years, the burden rests upon the insured to demonstrate that the insurer has not been prejudiced. However, if notice is given after a court or arbitrator has determined the insured’s liability, or if the insured has settled the claim, an irrebutable presumption of prejudice arises.

Court Of Appeals Upholds Claims For Partial Indemnification Brooks v. Judlau Construction, Inc., 11 NY3d 204 (2008) In the matter of Brooks v. Judlau Construction, Inc., 11 NY3d 204 (2008), the plaintiff was injured as a result of a workplace fall, and he thereafter commenced an action under Labor Law § 240(1) against the project’s general contractor, Judlau Construction, Inc. (“Judlau”). Judlau thereafter initiated a third-party action against Brooks’ employer for contractual indemnification. The contract between Judlau and Brooks’ employer contained an indemnification clause which stated that the subcontractor shall “to the fullest extent permitted by law” hold Judlau harmless. Brooks’ employer maintained that this indemnification clause required that Judlau be indemnified for losses arising out of its own negligence in violation of General Obligations Law § 5-322. Upon examination of this issue, the Court stated that the “fullest extent permitted by law” language requires that a party is entitled to partial indemnity for any percentage of liability that was not attributable to the direct negligence of the party seeking indemnification. The Court found that the contract basically made Brooks’ employer responsible for all of its own work, not that of others. The Court’s reasoning in this matter firms up its earlier decision in ITRI Brick & Concrete Corp. v. Aetna Cas. & Sur. Co., 89 NY2d 786 (1997), where it left open the issue of whether a contract would be enforceable if it does not specifically purport to indemnify a contractor for his own negligence. The question has now been answered in the affirmative: so long as a contract does not purport to make a subcontractor liable for the negligence of others, it is enforceable.

Carrier Not Precluded From Re-litigating Adverse Coverage Decision Where Not A Party Gaston v. American Transit Insurance Company, 2008 NY Slip Op 09853 (2008) The plaintiff in Gaston brought an action against American Transit to recover the amount of an unsatisfied default judgment against its insureds. American Transit was not a party to the underlying action, and maintained that it was entitled to litigate the issue of whether the car that collided with the vehicle in which the plaintiffs were traveling was in fact covered on the date of the accident. After the trial court granted the plaintiff’s motion for summary judgment against American Transit, the defendant appealed. The Court of Appeals ultimately concluded that American Transit was not collaterally estopped from reopening and re-litigating that coverage question in a direct action. Where the insurer was not a party to the underlying action and had separate and distinct interests from its insured, the insurer should not be bound by an adverse coverage decision where it had no one representing its interests in court.

Insured That Failed To Update Its Records With Secretary Of State Cannot Use That Failure As An Excuse For Late Notice Briggs Avenue LLC, v. Insurance Corporation of Hannover, 2008 NY Slip Op 09004 (2008)

TCSA

When Briggs Avenue LLC (“Briggs”) was incorporated in 1999, it designated the Secretary of State as its agent for the service of process and identified its then address on its Articles of Incorporation. The company thereafter moved and never notified the Secretary of State of its address change. Four years later, Briggs was sued and the Secretary of State served it at its old address. An application for default judgment was thereafter personally served on Briggs about a year later, at which time Briggs notified its insurance carrier of the suit. Upon notice of this claim, Insurance Corporation of Hannover (“Hanover”) disclaimed coverage under the policy based on the fact that notice of the suit was untimely.

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In the matter of Briggs Avenue LLC, v. Insurance Corporation of Hannover, 2008 NY Slip Op 09004, the New York State Court of Appeals heard a certified question from the Second Circuit Court of Appeals on the issue of whether an insured, which failed to update its contact information with the NY Secretary of State, can assert the fact that it was unaware that an action had been started against it as a reasonable excuse for its failure to place its insurance carrier on timely notice of the suit.

When the Court of Appeals considered this issue, it determined that Brigg’s excuse for giving late notice, namely that it did not know it was required to keep its information current with the Secretary of State, was insufficient. Notice was not given as soon as practicable as required by the policy. The Court went on to state that, "Briggs's argument is essentially that its mistake was understandable; that it caused no prejudice to the insurer; and that the loss of insurance coverage is a harsh result. All this may be true, but it is irrelevant."

Defendant Unsuccessful on Motion for Summary Judgment On “Serious Injury” Issue Jules v. Barbecho, 55 AD3d 548 (2d Dept 2008) In a recent Second Department case , the defendant insurer appealed based upon the lower court’s denial of its motion for summary judgment, which alleged that the plaintiff failed to demonstrate a triable issue concerning a “serious injury” she suffered in an automobile accident. The plaintiff in this case failed to seek medical treatment for four to five months after her accident. Under such circumstances, New York courts require an “adequate explanation” for any significant lapse in time of medical treatment when alleging a serious injury. Here, the Court held that the plaintiff, in a sworn affidavit, adequately explained the significant gap in her treatment history for the reason that, because her no-fault insurance had been cut off, she could not afford to personally pay for further treatment. The lower court’s denial of the Defendant’s motion for summary judgment was affirmed.

Defendant Successfully Moves for Summary Judgment On “Serious Injury” Issue Dann v. Yeh, 865 AD3d 1439 (4th Dept 2008) In a recent Fourth Department case, the defendant insurer successfully demonstrated that the plaintiff failed to offer any evidence of having sustained a “serious injury.” In particular, the plaintiff failed to overcome the defendant’s motion relative to the loss he claimed under the “significant limitation” category due to the fact that the affirmations of his treating neurologist and physician did not specify which tests were conducted and whether the tests were objective. The plaintiff’s neurologist also failed to provide either a numeric percentage of plaintiff’s loss of range of motion, or a qualitative assessment of his condition. He also failed to compare the plaintiff’s limitations to the normal function, purpose and use of the affected body organ, member, function or system. The plaintiff’s treating physician’s affirmation failed not only because his conclusions appeared to have been based upon his review of unsworn MRI and CT scan reports, but because his conclusions were based on the plaintiff’s own subjective complaints of pain. The affirmation also failed because the physician’s own notes were replete with statements that the plaintiff had full range of motion with no objective evidence of neck or back injury. The defendant also successfully demonstrated that the plaintiff’s alleged injury did not qualify for the 90/180 category based upon plaintiff’s own deposition testimony that admitted that he was disabled for only 85 days of work. The Court held that in the absence of a physician’s affidavit substantiating the existence of a medically determined injury that caused the limitation of his activities, the plaintiff’s own self-serving affidavit was insufficient to raise a triable issue of fact.