Dear Liability and Insurance Claims Professional,

Two very recent decisions by the NY Court of Appeals have altered the law of “bad faith” in New York, at least for certain first-party commercial coverage claims, but based upon principles that may not be limitable to such contexts.

Below my signature are brief synopses of these two companion cases, Bi-Economy Market, Inc. v. Harleysville Insurance Company of New York and Panasia Estates, Inc. v. Hudson Insurance Company, with hyperlinks to the full opinions both issued on February 19.

Bi-Economy and Panasia Estates hold that an insurer may be held liable for “consequential damages” caused by a bad-faith failure to promptly investigate and pay claims for business interruption coverage (Bi-Economy) and builder’s risk coverage (Panasia). ”Consequential damages” in the law of contracts are those damages not flowing directly from the breach but indirectly resulting from it. As Bi-Economy explains, to be recoverable “such unusual or extraordinary damages must have been brought within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting."

The consequential damages claimed in Bi-Economy were for future profits lost due to the insured’s inability to stay in business, allegedly as a result of a “bad faith” delay in payment. The Court held such damages to be recoverable as a matter of law because prompt payment of such coverage, allowing the insured to remain in business, is the very purpose of business interruption insurance (although the two dissenters expressed a reasonable differing view).

The consequential damages claimed in Panasia are not stated in the opinion, but the insured’s appeal brief claims that the insurer’s bad-faith disclaimer of coverage for interior water damage resulting from a leaking roof forced it to incur additional interest expenses and closing costs, and that it had also lost rents. The Court held that the record was not sufficient to determine whether such losses were contemplated by the parties and so remanded for further factual development.

The Bi-Economy opinion stresses both the delay in paying the business interruption coverage and the insurer’s alleged “bad faith” in causing that delay, as justifications for the claim for consequential damages. The insured in Panasia also complained about delay, but since the claim ultimately was denied mere delay played no part in causing the alleged consequential damages. Accordingly, in Panasia the Court explained its holding in Bi-Economy without mentioning any delay component:

“As we explained in Bi-Economy Market v Harleysville Ins. Co. [decided today], consequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages were "'within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.'”’ [Emphasis added.]

If a limiting principle can be deduced from these cases it may be that consequential damages for bad faith delays or disclaimers will only be awarded when the particular coverage, in the court’s view, has a clear purpose that is linked to foreseeable losses, in the event of a breach. As Bi-Economy states:

The dissent seeks to distinguish this case from the Kenford line of reasoning by grouping it with that separate class of contract actions involving pure "agreements to pay" — contracts for money only — where the only recoverable damage for breach is interest. This distinction is without basis. With agreements to pay money — for example, an agreement to pay sales commissions or a contract to pay a lender $12 tomorrow for $10 given today, the sole purpose of the contract is to pay for something given in exchange. In such cases, what the payee plans to do with the money is external and irrelevant to the contract itself. In the present case, however, the purpose of the agreement — what the insured planned to do with its payment — was at the very core of the contract itself. [Emphasis added.]

The plaintiff’s attorney in Bi-Economy had asked the court to treat insurers “like any other contracting party,” and as such liable for consequential damages when the facts support. However, although purporting to do exactly that the Court of Appeals apparently created a unique rule presumably applying only to insurers, that requires not only proof that indirect, consequential damages were contemplated by the parties, but also that the insurer acted in “bad faith” in either denying the claim; or, where the claim is ultimately paid, in failing to pay with the requisite promptness.

The dissenters point out that the majority offered no reason why “bad faith” should be required to impose consequential damages upon insurers but not upon other contracting parties. The reason would seem to be that “consequential damages” are awardable only against a breaching party, but when an insurance claim is paid there is no breach except, possibly, a breach of the implied covenant of good faith and fair dealing:

Within every contract is an implied covenant of good faith and fair dealing (see, Rowe v. Great Atlantic & Pacific Tea Co., 46 N.Y.2d 62). This covenant is breached when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement (see, Jaffe v. Paramount Communications, 222 A.D.2d 17, 22-23). For a complaint to state a cause of action alleging breach of an implied covenant of good faith and fair dealing, the plaintiff must allege facts which tend to show that the defendant sought to prevent performance of the contract or to withhold its benefits from the plaintiff (see, Dvoskin v. Prinz, 205 A.D.2d 661, 662; Holmes Protection of N.Y. v. Provident Loan Soc. of N.Y., 179 A.D.2d 400).

Aventine Invest. Mgt. v. Canadian Impl. Bank, 265 A.D.2d 513, 514[2d Dept 1999].

Thus proving “bad faith” is essential to the claim under Bi-Economy since the contract’s express terms were not breached but honored, albeit only after a delay; mere delay in paying, without more, will not support consequential damages. The decision merely allows the claim to go forward; the factual issue of whether the insurer acted in bad faith is still alive, as are such issues as causation and mitigation of damages.

In Panasia, since coverage was denied the allegations of “bad faith” would seem to be superfluous, under a conventional contract analysis, to the insured’s claim for consequential damages: if they were contemplated by the parties they are recoverable if the coverage denial was a breach of contract, regardless of “bad faith.” Nonetheless, Panasia clearly states that “bad faith” is required for the insured to recover consequential damages.

Much will surely be written about and many cases will ponder the meaning and impact of Bi-Economy and Panasia for years to come, and we will endeavor to keep you abreast of developments. If you would like copies of the appeal briefs, or have any questions about these cases as they may affect your claims, do not hesitate to call or email the undersigned.

Below the Bi-Economy and Panasia abstracts follows a roundup of significant recent decisions from New York’s appellate courts in the areas of:

• Premises Liability;

• Motor Vehicle and UM/SUM Liability including Serious Injury Threshold;

• NY Labor Law;

• Insurance Coverage;

• Municipal Liability; and

• Animal Liability,

all with hyperlinks to the full decisions. As always, do not hesitate to email, call or write me or my partner Phil Barth if you have a question about any case reported in this newsletter, about New York law and practice, or if we may otherwise be of assistance to you in your work.

Thank you for your continued trust and confidence in our services.

Very truly yours,

Laurence D. Behr

lbehr@barthbehr.com   

 

Barth Sullivan Behr                
“Defending Insurers, Their Insureds, and Municipalities Across Upstate NY Since 1928”
Web site:  www.barthbehr.com
43 Court St., Suite 600  
Buffalo NY 14202    
TEL: 716-856-1300   FAX: 716-856-1494 

Bi-Economy Market, Inc. v. Harleysville Insurance Company of New York - NY Court of Appeals - Decided 2/19/08.

NY COURT OF APPEALS ALLOWS CONSEQUENTIAL DAMAGES FOR BREACH OF INSURANCE CONTRACT FOR BUSINESS INTERRUPTION. The plaintiff insured, a wholesale and retail meat market, bought a “Deluxe Business Owner’s” policy from the defendant insurer that included business interruption insurance for one year. The insured suffered a major fire destroying its inventory and causing extensive damage to its building and equipment. The insurer disputed the claim and limited its advance payments. The insured eventually was awarded over $400,000 through the appraisal process, but allegedly because the insurer had paid only seven months of business interruption insurance, instead of the twelve months specified in the policy, the insured was forced out of business.

The insured then brought an action for bad faith claims handling, tortious interference with business relations and breach of contract seeking consequential damages for the loss of its business. The insurer moved for summary judgment dismissing the claim for consequential damages. Supreme Court granted the motion and the Appellate Division affirmed reasoning that because “consequential losses” were excluded from the policy, the parties did not contemplate “consequential damages” when the contract was made.

The Court of Appeals reversed (5-2) and reinstated the claim for consequential damages. The majority rejects the dissent’s argument that it had undone prior cases strictly limiting the availability of punitive damages for bad faith breaches of first-party coverages, stating that “consequential damages” are not punitive in nature. Unlike punitive damages, which are assessed as a punishment, consequential damages are measured by pecuniary loss suffered. “Here, the claim is that [defendant] failed to promptly adjust and pay the loss, resulting in the collapse of the business. When an insured in such a situation suffers additional damages as a result of an insurer’s excessive delay or improper denial, the insurance company should stand liable for these damages. This is not to punish the insurer, but to give the insured its bargained-for benefit …. We hold that [plaintiff’s] claim for consequential damages including the demise of its business, were reasonably foreseeable and contemplated by the parties, and thus cannot be dismissed on summary judgment.”

Also held, the policy exclusion for “consequential losses” is not a defense to the claim, as such exclusion clearly refers to damages from delays caused by third parties or by the “‘[s]uspension, lapse or cancellation of any license, lease or contract.’” Consequential ‘damages,’ on the other hand, refers to subsequent losses following upon a calamitous event such as a fire, and may included additional damages caused by a carrier’s injurious conduct — in this case, the insurer’s failure to timely investigate, adjust and pay the claim.”

Panasia Estates, Inc. v. Hudson Insurance Company - NY Court of Appeals - Decided 2/19/08.

NY COURT OF APPEALS ALLOWS CONSEQUENTIAL DAMAGES FOR BREACH OF INSURANCE CONTRACT FOR BUILDER’S RISK. In this companion case to Bi-Economy (supra), the insured’s policy included a “Builders Risk” endorsement covering damage to its property while undergoing renovation. During one such construction period, extensive rain damage allegedly occurred while the roof remained open. The insurer denied coverage on the grounds that the damage resulted from repeated water infiltration over time and wear and tear, rather than from the covered risk. The insured sued for breach of contract, claiming also that the defendant breached the implied covenant of good faith and fair dealing, and was thus liable for consequential damages. The insurer moved for partial summary judgment to dismiss plaintiff’s bad faith allegations and claim for consequential damages, arguing primarily that the policy excluded “[a]ny other consequential loss.” Supreme Court denied that part of defendant’s motion seeking to dismiss plaintiff’s claim for consequential damages. In affirming the denial, the Appellate Division stated that ‘[a]n insured may recover foreseeable damages, beyond the limits of its policy, for breach of a duty to investigate, bargain for and settle claims in good faith,” and also found that the exclusion for “consequential loss” did not encompass “consequential damages.”

The Court of Appeals affirms (5-2) finding, as it did in Bi-Economy, that “consequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.” However, because the record here was not developed on the issue of whether the consequential damages claimed by the insured actually were contemplated by the parties at the time of contracting it remanded the case for further factual development.

NY APPELLATE ROUNDUP

COURT OF APPEALS OF NEW YORK

INSURANCE. ADDITIONAL INSURED. DUTY TO DEFEND. TRIGGER. Fourth party plaintiff (HVAC subcontractor) brought action as an additional insured against its subcontractor’s carrier (fourth party defendant) for a declaration that it was entitled to a defense in the underlying action brought by an injured construction worker. Supreme Court granted additional insured’s motion for summary judgment declaring that it was entitled to a defense. Appellate Division (3-2) modified this decision by also finding that subcontractor’s carrier (fourth party defendant) was primary on indemnity, while fourth party plaintiff’s general liability carrier was excess. Court of Appeals reinstates order of Supreme Court. The trigger for providing a defense for an additional insured arises from the allegations in the underlying complaint, and the standard for determining whether a defense must be afforded is the same for both the insured and an additional insured. Such coverage, therefore, is not dependent on first determining the merits of a claim and whether the insured under the policy is liable. Here, a duty to defend was triggered because injured plaintiff’s amended complaint alleged that fourth party plaintiff’s subcontractor breached its duty to maintain a safe worksite and that the breach caused plaintiff’s injuries. However, because none of the parties submitted all of the policies necessary to determine primary/excess questions, Appellate Division’s order finding fourth party defendant primary was misplaced. BP Air Conditioning Corp. v. One Beacon Insurance Group.

HI-LO AGREEMENTS. NON-DISCLOSURE TO DEFENDANTS NOT PARTICIPATING IN HI-LO AGREEMENT REQUIRES REVERSAL OF JUDGMENT. Plaintiff entered into hi-lo agreement with one of two defendants. Neither the trial court nor plaintiff advised the remaining defendant about the agreement. Upon non-participating defendant learning of hi-lo agreement a few days after jury award of more than $3 million, with a finding that it was 60% at fault, defendant moved to set aside the verdict and for a new trial. Trial Court denied motion and entered judgment. Appellate Division affirmed (one dissent) because, absent evidence of collusion between plaintiff and hi-lo defendant, failure to disclose hi-lo agreement to remaining defendant was not prejudicial. Court of Appeals reverses, orders new trial, and holds that “whenever a plaintiff and a defendant enter into a high-low agreement in a multi-defendant action which requires the agreeing defendant to remain a party to the litigation, the parties must disclose the existence of that agreement and its terms to the court and the non-agreeing defendants(s).” Non-disclosure has the potential of prejudicing the non-agreeing defendant in its trial strategy, beginning with jury selection and the number of peremptory challenges to which it might be entitled, as well as the use of the hi-lo agreement in cross-examination and for other purposes, which would be the subject of evidentiary rulings. Matter of Eighth Judicial District Asbestos Litigation.

FIRST DEPARTMENT APPELLATE DIVISION

INSURANCE. LATE NOTICE TO CARRIER. GOOD FAITH BELIEF IN NONLIABILITY REJECTED. Plaintiff, a construction company, notified its liability carrier of underlying accident when it was served as a third-party defendant 5½ years after injury to plaintiff (its employee) in underlying action. Denial of plaintiff’s summary judgment motion for defense and indemnification, and granting of defendant’s summary judgment motion declaring that it was not obligated to defend or indemnify plaintiff, is affirmed. Although a good faith belief in non-liability may excuse late notice, it does not apply here because plaintiff did not conduct an investigation as to its possible liability for plaintiff’s accident. Of note also is that notice under a workers’ compensation policy is not deemed notice under a liability insurance policy. Sorbara Construction Corporation v. AIU Insurance Company.

SECURITY NEGLIGENCE. THIRD-PARTY ATTACK. Plaintiff was attacked in the lobby of his apartment building, alleging that the locks on the lobby doors were not functioning, which four tenants called by plaintiff at trial supported. In contrast, aside from the testimony of a principal of the defendant owner and the super, the court permitted the defendants to call only one tenant, who was equivocal on whether the locks were not functioning. Verdict for plaintiff reversed, new trial ordered as against corporate building owner, and complaint dismissed as against individual principals of corporate owner on ground that corporate veil had not been pierced. In view of number of witnesses plaintiff was permitted to call, Trial Court prejudicially limited the number of defense witnesses. Further, other errors, including plaintiff’s paucity of proof that it was more probable than not that the attacker was an intruder into the building, the admission of post-attack criminal activity in the building and plaintiff’s counsel’s remarks appealing to the jurors’ class bias, prejudice or passion, warrant reversal. Tehozol v. Anand Realty Corp.

SNOW AND ICE. SLIP AND FALL. GAS STATION. CONVENIENCE STORE. Plaintiff slipped and fell on a transparent, hard and dry patch of ice, six feet by three feet, located approximately six feet from the front entrance of a gas station’s convenience store. Denial of defendants’ summary judgment motion affirmed. Based upon meteorological records, the consistency of the ice, its size and proximity to the store’s entrance, and the absence of proof indicating that defendants performed any meaningful maintenance, it can reasonably be inferred that defendants should have discovered the condition and remedied it before plaintiff’s fall. Gonzalez v. American Oil Co.

ROADWAY. CRACKS. PROXIMATE CAUSE. Plaintiff allegedly fell while getting out of her car because of cracks in defendant’s private roadway. Granting of defendant’s summary judgment motion, on basis that plaintiff could not prove what caused her to fall, reversed, and complaint reinstated. Plaintiff testified at her deposition, in response to question about whether she knew what caused her to fall, that “[w]hen I stepped down, my ankle, because the blacktop was uneven where it was cracking, my ankle twisted and I fell forward and to the left.” This testimony is sufficient to establish causation. Further, because of the numerous cracks which existed in the area, plaintiff is not required to prove precisely which crack in the roadway caused her to fall. Cherry v. Daytop Village, Inc.

SLIP AND FALL. RESTAURANT. SERVICE BAR. Plaintiff slipped and fell twice near a service bar while being led to her table in defendant’s restaurant. Granting of defendant’s summary judgment motion reversed, and complaint reinstated. Area was heavily trafficked by defendant’s employees moving between the kitchen and dining area. Plaintiff and her husband described the area as “greasy,” “wet” and “shiny.” On this evidence, an inference can be drawn that defendant’s employees created the condition. Mete v. GMRI, Inc.

INSURANCE. RESCISSION OF POLICY. MATERIAL MISREPRESENTATION. FRAUD. Plaintiff (insured) brought action on disability policy against defendant (insurer) more than two years after policy was issued. Defendant claimed that plaintiff made material misrepresentations in his application by deliberately withholding information about his preexisting conditions. Denial of each party’s summary judgment motion modified, defendant’s motion to rescind the policy granted and complaint dismissed. To rescind a policy ab initio after more than two years from its date of issuance, a carrier must prove a material misrepresentation in the application that was intended to defraud the insurer [Insurance Law §§3105(b) and 3216(d)(1)(B)(I)]. Here, defendant established fraud as a matter of law by demonstrating through the affidavit of its chief underwriter, and its policy guidelines that, had it known about plaintiff’s preexisting conditions, it would not have issued the policy, and that plaintiff knew that the answers he was providing in his application were false. Dwyer v. First Unum Life Insurance Company.

STOPPED ELEVATOR. MALFUNCTION. ESCAPE. PROXIMATE CAUSE. Plaintiff, a porter in a building, became stuck in an elevator with two other passengers. While being in radio contact with super of building and elevator mechanic, plaintiff kept getting in and out of the stuck elevator through the ceiling hatch despite being instructed to remain in the elevator until power was restored. Plaintiff was injured when the power came back on and the elevator started moving while he was on the roof of the cab. Defendants (managing agent of building and elevator company) moved for summary judgment contending that plaintiff’s conduct constituted a superseding cause of his injuries. Denial of defendants’ motion affirmed. Because defendants were aware of plaintiff’s activity in getting in and out of the elevator, questions of fact exist as to proximate cause and plaintiff’s comparative negligence. Of note also is that determination by Unemployment Insurance Appeal Board that plaintiff was not entitled to benefits because of his misconduct, which justified his discharge, does not collaterally estop his plenary action, the issues of proximate cause and assumption of risk not being issues determined by the Board. Pelzer v. Transel Elevator & Electric Inc.

LABOR LAW. LADDER. LANDLORD. ABSENCE OF CONSENT. Plaintiff, a contractor hired by a tenant, fell when a ladder supplied by the tenant slipped. Because tenant breached its lease by failing to obtain the landlord’s consent for the work, or notify the landlord that it was altering the premises, the landlord did not have any knowledge of it. Granting of defendant landlord’s summary judgment motion, including §240(1) claim, and denial of plaintiff’s cross-motion for summary judgment against landlord under §240(1), affirmed. “Because the work was performed without landlord’s knowledge, and in violation of the lease requirement that tenant obtain prior consent, the landlord cannot be held liable under Labor Law §240(1).” For liability to be imposed against an out-of-possession owner there must be some nexus between the owner and worker. Morales v. D & A Food Service.

LABOR LAW. STATIONARY HOIST. OFF-LOADING. FLATBED TRUCK. Plaintiff, while standing on the ground, was hit by cinder blocks which became loose from a 4000 lb. load as it was being hoisted off a flatbed truck by a fork boom. Among other matters decided, denial of plaintiff’s summary judgment motion on §240(1) reversed, and summary judgment granted. This type of elevation risk is within the protections afforded under §240(1). As to §241(6), 12 NYCRR §§23-8, 23-1.7(a)(1) and 23-2.1(a) are not applicable to stationary hoists. Gonzalez v. Glenwood Mason Supply Co., Inc.

INSURANCE. DISCLAIMER. NOTICE. CONTENTS. In underlying case, plaintiff claimed that she was injured when she fell on steps constructed by defendant. Three years after finding that her default judgment against defendant was uncollectible, plaintiff notified underlying defendant’s carrier [defendant here] who then timely disclaimed by sending a notice to its insured (defendant in underlying case) with a copy to plaintiff. Denial of plaintiff’s summary judgment motion, and granting of defendant’s summary judgment motion, affirmed. That denial notice did not specifically include that plaintiff, as the injured party, failed to notify defendant timely is irrelevant where, as here, notice complied with Insurance Law §3420(d). Schlott v. Transcontinental Insurance Company, Inc. NB: Conflicts with Court of Appeals, which has held that when the injured party gave first notice, a disclaimer is insufficient if it does not specifically cite the injured party’s failure to give reasonably prompt notice, GENERAL ACCIDENT INSURANCE GROUP v. CIRUCCI, 46 N.Y.2d 862 (1979)

UM. NOTICE OF CANCELLATION. FILING WITH DMV. EVIDENCE. Petitioner (UM carrier) sought permanent stay against its insured and third-party’s carrier. During framed-issue hearing, respondent carrier offered as proof that it filed notice of cancellation that it sent to its insured with the DMV within 30 days of its becoming effective by offering into evidence an “insurance activity expansion,” which it downloaded from the DMV’s website. Denial of petition reversed, and permanent stay granted. Respondent did not have the downloaded file certified, pursuant to CPLR 4518(c), or otherwise establish through its regular course of business procedures that it properly filed the cancellation. Thus, respondent failed to prove that it filed the cancellation, which then became effective only against its insured and members of insured’s household. Court notes that respondent could have simply offered into evidence its DMV receipt for the filing, which would have constituted “conclusive evidence of such filing,” [Vehicle & Traffic Law §313(3)]. Matter of Progressive Classic Insurance Company v. Kitchen, et al.

SLIP AND FALL. FLOOR. SLIPPERINESS. Plaintiff alleged that she slipped and fell on a “shiny, slippery” floor in the Port Authority Bus Terminal. Although she didn’t see any water or debris, and the accident report noted that the floor was clean and dry, she stated in her affidavit in opposition to defendant’s motion for summary judgment that she felt wax on her clothing after she fell. Plaintiff also opposed defendant’s motion with an affidavit from her expert who stated that the floor was slippery because it was made of ceramic tile covered with a polyurethane coating, which he based on an inspection done one year after the accident. Denial of defendant’s motion reversed, motion granted and complaint dismissed. “Absent proof of the negligent application of wax or polish, the fact that a floor is slippery by reason of its smoothness or having been polished does not give rise to an inference of negligence.” Kudrov v. Laro Services Systems, Inc. [Editor’s comment: read dissent.]

SLIP AND FALL. STAIRCASE. RECURRING CONDITION. Plaintiff slipped and fell on oily substance on staircase in defendant’s building. Plaintiff and non-party witnesses testified in depositions that litter, garbage and refuse was a daily problem on the staircase, resulting from tenants bringing garbage bags down for disposal. Granting of defendant’s summary judgment motion reversed, motion denied and complaint reinstated. Plaintiff raised issues of fact as to whether staircase had a dangerous and frequently unremedied recurring condition, which relieves plaintiff from proving that defendant knew, or should have known, of the existence of the particular item of debris that caused her fall. Bido v. 876-882 Realty, LLC.

SECOND DEPARTMENT APPELLATE DIVISION

PERSONAL INJURY. VILLAGE. PLAYGROUND EQUIPMENT. PRIOR WRITTEN NOTICE. Village of Hempstead Code §39-1(B) requires prior written notice of defective or out of repair playground equipment. However, this is completely negated by General Municipal Law §50-e(4), which prohibits a village from requiring prior written notice of defects at municipal locations other than streets, highways, bridges, culverts, sidewalks or crosswalks. Denial of defendant’s summary judgment motion affirmed. Plaintiff raised issues of fact as to whether village created defect. White v. Incorporated Village of Hempstead.

 

PERSONAL INJURY. SLIP AND FALL. BROKEN STEPS. WATER ACCUMULATION. ICE. RECURRING CONDITION. NOTICE. Plaintiff slipped and fell because of ice which accumulated in missing portions of brick and mortar on steps leading to defendant’s home, where plaintiff had an apartment. Granting of defendants’ summary judgment motion reversed, motion denied and complaint reinstated. Issues of fact exist as to whether defendant had actual knowledge of recurring condition, and whether she may be charged with constructive notice of specific recurrence of condition. Because defendant did not establish that open and obvious condition of steps was not inherently dangerous, open and obvious condition of steps only raises issues of fact as to plaintiff’s comparative negligence. Sewitch v. LaFrese.

 

PERSONAL INJURY. GOVERNMENTAL IMMUNITY. PROPRIETARY FUNCTION. SNOW REMOVAL. Claimant slipped and fell in snow which had not been cleared from steps of building owned by the State of New York. Judgment dismissing claim in Court of Claims, on basis of governmental function immunity defense, reversed, claim reinstated and matter remitted for decision on merits of claim. Defendant’s snow removal operations are considered proprietary in nature, such that governmental immunity defense is inapplicable. McGowan v. State of New York.

 

PERSONAL INJURY. ELEVATOR. RES IPSA LOQUITUR. Plaintiffs, passengers in an elevator in a residential building, were injured when it dropped from the third or fourth floor to just above the bottom of the shaft. In suit against building owner and maintenance company, Trial Court directed verdict against defendants based on res ipsa loquitur theory, although there was conflicting expert testimony as to the cause of the malfunction. Judgment reversed and new trial ordered. “Only in the rarest of cases, where the plaintiff’s circumstantial proof is so convincing and the defendant’s response so weak that the inference of defendant’s negligence is inescapable, may a plaintiff win a directed verdict by relying on the doctrine of res ipsa loquitur.” Because expert testimony raised issues on cause of accident, directed verdict on res ipsa loquitur was in error. Martinez v. Mullarkey.

 

PERSONAL INJURY. LABOR LAW. FLATBED TRUCK. STACKED PANELS. OFF-LOADING. In the process of getting ready to off-load stacked curtain wall panels from the bed of a flatbed truck, plaintiff slipped and fell while climbing to the top of them. Having not been given a ladder or other safety device to reach the top of the stacks, which were 10 feet above the bed of the truck, plaintiff climbed up the sides of cross bracing used to secure the stacked panels. Among other matters decided, granting of plaintiff’s summary judgment motion on §240(1) liability affirmed. Plaintiff’s activity falls within §240(1) protections. Because defendants failed to provide any safety device, liability is warranted as a matter of law. Ford v. HRH Construction Corp.

NO-FAULT. SERIOUS INJURY THRESHOLD. LIMITATIONS. CERVICAL RANGE OF MOTION. Denial of defendant’s summary judgment motion on “serious injury” threshold affirmed. Defendant failed to demonstrate prima facie entitlement to summary judgment. Affirmation of defendant’s examining neurologist indicated limitations in cervical range of motion in both plaintiffs. Tavarez v. Jackson.

 PERSONAL INJURY. SERIOUS INJURY THRESHOLD. GAP IN TREATMENT. Granting of defendant’s summary judgment motion on “serious injury” threshold reversed, and complaint reinstated. Plaintiff adequately explained four year gap in treatment with her chiropractor, whose opinions otherwise established “serious injury,” by testifying at her deposition, and stating in her affidavit in opposition to defendant’s motion, that she stopped chiropractic treatment because her no-fault insurance was cut off and she could not afford to pay for the treatment herself. Francovig v. Senekis Cab Corp.

CONTRACTUAL INDEMNIFICATION. After plaintiff’s verdict in construction accident case finding defendants at fault in varying percentages, granting of defendant Brooklyn Union Gas’ [BUG] oral application for contractual indemnification against one of the defendants is reversed, and contractual indemnification denied. Broadly worded clause for full indemnification BUG had with co-defendant violated GOL §5-322.1. Kalinsky v. Square.

BICYCLE RIDING. PRIVATE URBAN DIRT TRAIL. IMMUNITY STATUTE. PRIMARY ASSUMPTION OF RISK. Plaintiff was injured when he was thrown from his bike when its front wheel went into a hole on a dirt trail in defendant’s cooperative residential community. Denial of defendant’s summary judgment motion reversed, and complaint dismissed. General Obligations Law §9-103 [Recreational Use Statute] provides that “an owner… of premises … owes no duty to keep the premises safe for [among other things] entry or use by others for … bicycle riding … or to give warning of any hazardous condition or use of or structure or activity on such premises to persons entering for such … purpose.” Statute applies when: (1) plaintiff is engaged in one of the enumerated activities; and (2) plaintiff is recreating on land suitable for the activity. Here, defendant is entitled to immunity because plaintiff was engaged in one of the enumerated activities, and the dirt trail, 500 feet long and 10 feet wide, which was located in an undeveloped wooded area not designated for any other use, was suitable for bike riding. Even if immunity statute did not apply, defendant would still be entitled to summary judgment based on plaintiff’s primary assumption of inherent risks in riding a bike outdoors, including striking a hole and being thrown from the bike. Rivera v. Glen Oaks Village Owners, Inc.

 

LABOR LAW. CRANE DISASSEMBLY. Plaintiff, employed by a subcontractor, was injured during the disassembly of a crane. Granting of defendant GC’s summary judgment motion dismissing §§240(1) and 241(6) claims, but denying it with respect to §200 claim, modified by granting it in its entirety. For a GC to be liable under §200 and for common law negligence arising from the manner in which work is performed, it must be shown that the GC actually supervised and controlled the work. Here, the GC did not have authority to supervise or control the manner in which plaintiff disassembled the crane. McLeod v. Corporation of Presiding Bishop of Church of Jesus Christ of Latter Day Saints

 

NO-FAULT. SERIOUS INJURY THRESHOLD. ROTATOR CUFF. Plaintiff, 14 years old, suffered right shoulder tear of the supraspinatus tendon, cervical radiculitis at C3-4, cervical myofascial pain syndrome and cervical sprain. Denial of defendants’ summary judgment motion on “serious injury” threshold affirmed. Affirmation of treating physician, based on recent physical examination, which noted these injuries and quantified losses of ranges of motion with normal ranges sufficiently established “serious injury.” Grullon v. Perez.

SERIOUS INJURY THRESHOLD. LUMBAR. SHOULDER. Denial of defendants’ summary judgment motion on “serious injury” threshold affirmed. Plaintiff suffered confirmed MRI lumbar disc herniation with a 30% reduction in range of motion in lumbar extension, as well as significant left shoulder residual limitations. Britt v. Goodspeed Transit.

 

SLIP AND FALL. LOBBY FLOOR. RAIN. Plaintiff slipped and fell on wet lobby floor, which was captured on security videotape. Tape also showed that accident occurred during a heavy rainstorm, that people with umbrellas entered the lobby area minutes before plaintiff’s fall and that defendant mopped area every seven minutes. Granting of defendants’ summary judgment motions affirmed. As a matter of law, defendants did not have a sufficient opportunity to eliminate the hazard. Plaintiff’s claim that defendants were negligent for not having adequate floor mats could not be supported by submitted expert’s report, which was not sworn or notarized. Bernhard v. Bank of Montreal.

 

SLIP AND FALL. LOBBY FLOOR. INHERENT SLIPPERINESS. Plaintiff slipped and fell on floor in office building’s lobby. Granting of summary judgment motion by building owner and maintenance contractor affirmed. Inherently slippery condition of floor was just as apparent to plaintiff as it was to defendants. Cause of action for slippery floor does not lie unless condition other than inherent slipperiness causes fall. DeMartini v. Trump 767 5^th Avenue, LLC. 

SCHOOL. NEGLIGENT SUPERVISION. While in a hallway without any teacher or security guard present, infant plaintiff was punched in her left eye three times by a fellow seventh grader after dismissal from their last class. Infant and her mother had previously complained to school personnel about the other student, who had just completed a suspension for similar behavior before the incident with the infant plaintiff. Granting of defendant’s summary judgment motion reversed, and complaint reinstated. To establish liability against a school district for negligent supervision, it must be demonstrated that the school authorities had “sufficiently specific knowledge or notice of the dangerous conduct which caused the injury; that is, that the third-party acts could reasonably have been anticipated.” Here, there are issues of fact as to whether school district had such knowledge based on complaints by infant plaintiff and her mother, and other recent similar instances involving other student. Smith v. Poughkeepsie City School District.

 

ROADWAY DEFECT. BUS STOP. Plaintiff tripped and fell on a raised and mounded area of roadway which comprised a bus stop, claiming that NYCTA made a special use of the roadway by having a bus stop at the location, and that the weight of its buses traveling on the road surface created the defect. Denial of NYCTA’s summary judgment motion reversed, and complaint dismissed as to it. Bus lanes do not constitute a special use of the street. Further, the maintenance, repair and creation of City roadways is the responsibility of the City of New York. Tanzer v. City of New York, et al.

 

DOG BITE. EVIDENCE. VICIOUS PROPENSITIES. Granting of defendants’ summary judgment motion affirmed. Strict liability for a dog attack requires proof that the dog had vicious propensities and that the owner knew, or should have known, of them. Evidence of vicious propensities can include a prior attack, growling, snapping, baring of teeth, manner by which dog is restrained, use of dog as a guard dog and a proclivity to act in a way that puts others at risk of harm. Mere fact that dog was taken to an animal shelter because it did not get along with another dog in owner’s household does not establish vicious propensities. Galgano v. Town of North Hempstead, et al.

 

LABOR LAW. “FALLING WORKER” THEORY. “FALLING OBJECT” THEORY. Plaintiff and his partner were on the 20^th floor of a building during the course of their removing a horizontal 250 pound beam, just above their heads, from a temporary elevator which was being dismantled. Although losing his balance when the beam dropped onto his shoulder and arm, fracturing his elbow, plaintiff was able to keep from falling by bracing himself against a piece of metal, which caused him to strike his head against a metal column and suffer a head injury. Denial of defendants’ summary judgment motion to dismiss §240(1) claim affirmed. An issue of fact exists as to the “falling worker” theory based on plaintiff’s testimony that he was not given a safety harness, although controverted by his foreman, and because a §240(1) claim exists where a worker is injured while preventing himself from falling further. However, Motion Court properly granted summary judgment dismissing §240(1) claim on “falling object” theory because: (1) beam which plaintiff and his partner were removing fell from a miniscule height; and (2) beam did not fall because of the absence of an enumerated safety device while being hoisted or secured. Ienco v. RFD Second Avenue, LLC.

MUNICIPALITY. PRIOR WRITTEN NOTICE. EXCEPTION. Defendant municipality hired contractor for sewer installation work. Granting of defendant City’s summary judgment motion, on ground that it did not have prior written notice of claimed hazard, reversed, with complaint reinstated as to City. An exception to the prior written notice rule applies where a municipality creates a defect through an affirmative act of negligence. Here, there is an issue of fact as to whether sewer contractor, acting as City’s agent, created defect during course of sewer work. Tumminia v. Cruz Construction Corp., et al.

“SERIOUS INJURY.” TENDON TEAR. TENDONOPATHY. Denial of defendants’ summary judgment motion on “serious injury” threshold reversed, and complaint dismissed. MRI evidence of a tear of the supraspinatus tendon of the right shoulder and tendonopathy of the left shoulder does not qualifty as a “serious injury” without objective evidence of the extent and duration of physical limitations resulting from the injuries, which plaintiff failed to offer. Tobias v. Chupenko.

 

UM. PERMANENT STAY. COOPERATION OF INSURED. CONDITION PRECEDENT. Insureds repeatedly failed to comply with carrier’s disclosure demands, including depositions, physicals and the exchange of medical record authorizations. Granting of permanent stay of arbitration affirmed. Insureds’ unexcused and willful refusals to comply with disclosure requirements of UM policy constitute a breach of policy’s cooperation clause, a condition precedent for coverage, which precludes recovery. Matter of New York Central Mutual Fire Insurance Company v. Rafailov, et al.

MOTOCROSS. RELEASE. IMPLIED ASSUMPTION OF RISK. Plaintiff was injured during a motocross practice session on defendants’ track where, for the first time to plaintiff’s knowledge, all-terrain vehicles (ATV) were permitted to practice simultaneously with those doing motocross. Denial of defendants’ summary judgment motion, based on release and assumption of risk, affirmed. Release was unenforceable under GOL §5-326. Further, implied assumption of risk does not apply because plaintiff demonstrated, by his expert, that the inherent risks associated with motocrossing were unreasonably increased because of defendants’ negligence in permitting ATVs to practice on the same track simultaneously with those doing motocross. Sisino v. Island Motocross of N.Y., Inc., et al.

 

SERIOUS INJURY. NO-FAULT. Granting of defendants’ summary judgment motions reversed, and complaint reinstated. Plaintiff raised issues of fact by submitting in opposition the affirmed MRI report of a radiologist stating that plaintiff had sustained herniated cervical discs and the affidavit of his chiropractor stating that he had significant limitations in his cervical ranges of motion, as quantified in the affidavit. Paz v. Wydrzynski, et al.

 

SNOW AND ICE. SLIP AND FALL. SNOW REMOVAL CONTRACT. After a snowstorm and defendant snow remover’s clearing of the snow, plaintiff slipped and fell on ice on her driveway in her condominium development. Although snow removal company previously salted after clearing snow, it did not do so this time. Among other matters decided, denial of snow removal company’s summary judgment motion reversed, and complaint dismissed as to it. First, because snow removal company’s contract with condominium was not a comprehensive and exclusive property maintenance obligation intended to displace the condominium’s general duty, as the owner, to keep its property in a safe condition, snow removal company owed no duty to plaintiff based solely on the contract. Second, plaintiff did not demonstrate that she relied on snow removal company’s continued performance of its contact because she testified in her deposition that she did not have any knowledge of it. Third, no evidence was submitted indicating that the snow removal company created or exacerbated a hazardous condition. Plaintiff’s contention that defendant negligently removed the snow, as supported by her expert, failed to establish how the particular ice which caused plaintiff’s fall was created. Castro v. Maple Run Condominium Association, et al.

THIRD DEPARTMENT APPELLATE DIVISION

LABOR LAW. MODULAR HOME FALL. STAIRCASE COLLAPSE. Plaintiff, while going up a staircase during the installation/construction of a two story modular home, was injured when the staircase collapsed and he fell through an open hole in the first floor to the basement. Plaintiff brought action against owner of home, seller/broker of modular home and manufacturer of modular home. Plaintiff did not oppose owner’s motion for summary judgment. Granting of manufacturer’s summary judgment motion affirmed, there being no evidence that manufacturer was negligent. As to seller/broker, granting of its summary judgment motion on §240(1) claim, and denial of it on §241(6) claim, affirmed. First, seller/broker is considered a “contractor” because it had general responsibility for erecting the modular home, including the authority to hire subcontractors, which it did. Second, as to §240(1) claim, Motion Court correctly found invalid plaintiff’s contention that the staircase was the “functional equivalent” of a ladder. Because it was uncontested that the staircase was “permanent,” it cannot be considered a “device” for §240(1) purposes. As to §241(6) claim, although it was undisputed that defendant violated 12 NYCRR 23-1.7(b)(1)(i) [hazardous openings into which a person may step or fall shall be guarded], summary judgment was properly denied because of issues of fact on proximate cause and plaintiff’s comparative negligence. Milanese v. Kellerman, et al.

MALICIOUS PROSECUTION. PROBABLE CAUSE. Plaintiff, defendant Village’s Police Chief, was brought up on 19 administrative charges, which the Village Board dismissed on the recommendation of a Hearing Officer. Contending that there was no probable cause for the charges, plaintiff brought malicious prosecution case against the Village and a private firm that it hired to investigate the charges. Denial of defendants’ summary judgment motion reversed, and complaint dismissed. An action for malicious prosecution arises from the “wrongful initiation, procurement or continuation of a legal proceeding.” A plaintiff must prove that: (1) defendant initiated a proceeding that terminated in plaintiff’s favor; (2) “an entire lack of probable cause in the prior proceeding”; (3) malice; and (4) special injury. The Motion Court found that, because issues of fact existed as to whether there was probable cause on 3 of the 19 charges, summary judgment was not warranted. However, where probable cause exists for a prosecution as a whole, dismissal of a malicious prosecution claim on that basis should be granted. Here, the proceeding as a whole was justified because there was probable cause for 16 of the 19 charges. Perryman v. Village of Saranac Lake.

 

PERSONAL INJURY. SLIP AND FALL. MELTING SNOW. SCHOOL HALLWAY. Infant plaintiff, a sixth grader, slipped and fell in school hallway while returning a cart filled with sports equipment as directed by a school aide. Denial of defendant’s summary judgment motion affirmed. Plaintiff claimed that hallway where he fell became wet from melting snow on students’ boots which were lined up against the hallway walls, outside of the classrooms, as a matter of school policy. Although this proof fails to demonstrate that defendant had actual or constructive notice of the condition, it constitutes prima facie proof that school’s policy created the alleged hazardous condition when combined with infant’s testimony that he saw “a puddle of water underneath the boots and it started to come along the floor.” Gerfin v. North Colonie Central School District.

HIGHWAY DESIGN. GOVERNMENTAL QUALIFIED IMMUNITY. Plaintiff’s decedent, a passenger in a car, was killed with the driver when vehicle crashed into a b PERSONAL INJURY. STOPPED ELEVATOR. MALFUNCTION. ESCAPE. PROXIMATE CAUSE. Plaintiff, a porter in a building, became stuck in an elevator with two other passengers. While being in radio contact with super of building and elevator mechanic, plaintiff kept getting in and out of the stuck elevator through the ceiling hatch despite being instructed to remain in the elevator until power was restored. Plaintiff was injured when the power came back on and the elevator started moving while he was on the roof of the cab. Defendants (managing agent of building and elevator company) moved for summary judgment contending that plaintiff’s conduct constituted a superseding cause of his injuries. Denial of defendants’ motion affirmed. Because defendants were aware of plaintiff’s activity in getting in and out of the elevator, questions of fact exist as to proximate cause and plaintiff’s comparative negligence. Of note also is that determination by Unemployment Insurance Appeal Board that plaintiff was not entitled to benefits because of his misconduct, which justified his discharge, does not collaterally estop his plenary action, the issues of proximate cause and assumption of risk not being issues determined by the Board. Pelzer v. Transel Elevator & Electric Inc. ridge abutment after knocking down a concrete guidepost on the approach to the bridge. Plaintiff’s decedent brought action against host driver and County, claiming against the County that it negligently employed a concrete barrier system on the bridge approach. Granting of County’s summary judgment motion dismissing the complaint as to it, on the ground that County was entitled to qualified immunity as a result of its highway planning decision, is affirmed. County demonstrated that its decision to keep the concrete guidepost barrier system “was the product of a deliberative decision-making process of the type afforded immunity from judicial interference,” which included facts that approach to bridge was flat and straight, and that there had not been any reported accidents on or near the bridge. Smythe v. Woods.

ASSUMPTION OF RISK. ICE-SKATING RINK. Plaintiff was injured while ice-skating in defendant’s rink during an open skate of approximately 200 skaters when she collided with a young boy who had been intentionally tripped by another young boy, both of whom were in a group of “unruly [and] unsupervised” 6 to 10 year old boys. Denial of defendants’ summary judgment motion affirmed. Although an ice-skater assumes the risk of accidentally colliding with another skater, a skater ordinarily does not assume the risk of reckless or intentional conduct by other skaters. Here, questions of fact exist as to whether defendants were negligent in their supervision and control of the skaters, thus breaching their “duty to exercise care to make the conditions as safe as they appear to be.” Factual questions also exist as to whether plaintiff assumed the risk of injury by electing to continue skating in the presence of the unruly boys. Ballan v. Arena Management Group, LLC.

FOURTH DEPARTMENT APPELLATE DIVISION

SERIOUS INJURY THRESHOLD. Granting of plaintiff’s motion to set aside jury verdict that plaintiff did not sustain a permanent consequential loss of use of her ear, reversed, and jury verdict reinstated. Undisputed evidence that plaintiff suffers from permanent nerve damage that causes her ear to have increased sensitivity to cold, heat and pressure, which is intermittent, is not significant within the meaning of Insurance Law §5102(d). Pecora v. Lawrence.

SLIP AND FALL. ICE. PARKING LOT. CONSTRUCTIVE NOTICE. Plaintiff slipped and fell on ice in restaurant parking lot owned by one of the defendants, who salted the lot four hours before plaintiff fell. Granting of summary judgment by all defendants modified to extent of reinstating complaint against owner solely on theory of constructive notice. Defendant owner’s prima facie proof that it salted four hours before plaintiff fell and inspected lot every few hours is not sufficient to find, as a matter of law, that ice formed so close in time to plaintiff’s fall that it could not have noticed and corrected condition before plaintiff’s fall. Conklin v. Ulm.

LABOR LAW. SINGLE FAMILY HOME. OWNER LIABILITY. OWNER SOLE SHAREHOLDER OF CORPORATION DEVELOPER. Plaintiff fell off the roof of a house under construction in a subdivision. Plaintiff’s employer was hired by the intended owner of the single-family home, who was also the sole shareholder of the corporation developing the entire subdivision of 35 homes. Granting of defendants’ summary judgment motion modified by reinstating the §§240(1) and 241(6) causes of action against corporate builder, there being issues of fact as to whether it was the general contractor. Individual owner defendant was entitled to §§240(1) and 241(6) exemption for owners of one and two family dwellings because evidence established that he did not supervise the method or manner of plaintiff’s work. However, issues of fact exist as to whether corporate developer was general contractor, based on blueprints, invoices and building permits indicating that it was, and supervisory activities of individual defendant owner as sole shareholder of corporate developer. Burnett v. Waterford Custom Homes, Inc.

 

LABOR LAW. ELECTRICAL CONDUITS. TRIP AND FALL. Plaintiff tripped and fell over electrical conduits protruding approximately one foot from the floor of a building under construction. Denial of GC’s and electrical sub-contractor’s summary judgment motions on §§200 and 241(6) claims modified by granting GC’s motion as to §200 claim, and granting both defendants’ motion as to certain claimed violations of the industrial code. As to §200 claim against electrical sub-contractor, this defendant did not present prima facie evidence that it did not create, or have actual or constructive notice of, the conditions which caused plaintiff’s fall. As to §241(6) against both defendants, claimed violations of 12 NYCRR 23-1.7(e)(1) and (2) are inapplicable because the electrical conduits were an integral part of the work in a large open area, not a passageway, and otherwise did not constitute “dirt and debris” or “scattered tools and materials.” However, summary judgment was properly denied as to the claimed violation of 12 NYCRR 23-1.30 because, based on plaintiff’s testimony that it was so dark that a person “wouldn’t be able to read the newspaper,” issues of fact exist as to whether the lighting conditions fell below the regulatory standard of 10 foot candles of illumination required by the regulation. Verel v. Ferguson Electrical Construction Company, Inc.

 

LABOR LAW. CONSTRUCTION MANAGER. STATUTORY AGENT OF OWNER. Plaintiff, a plumber, fell off a ladder when pipes he was installing struck it. Plaintiff brought §§240(1), 241(6) and 200 actions against owner (school district) and “construction manager.” Granting of defendant construction manager’s summary judgment motion dismissing all Labor Law claims on the ground that it was not the statutory agent of the owner, reversed, and complaint reinstated as to it. Issues of fact exist as to whether “construction manager” was general contractor or statutory agent of owner because, pursuant to its contract with owner, it was responsible for overseeing the construction site, had full-time employees on the site, conducted bi-weekly progress meetings and had the authority to supervise the activities of the contractors and to stop unsafe work practices. Sheridan v. Albion Central School District, et al.

 

LABOR LAW. AERIAL BASKET. DRAINAGE DITCH. Plaintiff, a telephone field technician, was injured when he stepped out of an aerial bucket and fell into a three-foot-deep drainage ditch that was overgrown with grass and weeds. Among other matters decided, partial denial of utility pole owner’s summary motion modified by granting it in its entirety. §240(1) claim was properly dismissed because the height risk to which plaintiff was exposed in his aerial bucket related to those times when he was working above the ground while in the bucket, not when he was getting out of the bucket when he was on the ground. Plaintiff’s fall into the ditch resulted from “the usual and ordinary dangers” encountered at a work site, not from a true elevation-related risk. §241(6) claim should also have been dismissed because neither of the regulations claimed to have been violated are applicable. 12 NYCRR 23-1.7(b) [hazardous openings] does not apply to an old drainage ditch, overgrown with grass and weeds, which was wholly unrelated to the demolition project in which plaintiff was involved. 12 NYCRR 23-9.6(e) [aerial basket operations], although relevant, was not shown to be a proximate cause of the accident. Kaleta v. New York State Electric & Gas Corporation, et al.

UM/SUM. MANDATORY ARBITRATION. THIRD-PARTY BENIFICIARY OF POLICY. Plaintiff, a passenger in a car driven off the road by an unidentified vehicle, commenced plenary action against host-driver’s carrier for SUM coverage. Granting of defendant carrier’s motion to dismiss affirmed. As a third-party beneficiary of the insurance contract obtained by the host-driver, plaintiff’s rights are the same as the named insured’s, thus subjecting plaintiff to the policy’s mandatory UM/SUM arbitration provisions. Williams v. Progressive Northeastern Insurance Company.’

Barth Sullivan Behr                
“Defending Insurers, Their Insureds, and Municipalities Across Upstate NY Since 1928”
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