Delaware Supreme Court en banc has construed New York law

Delaware Supreme Court en banc has construed New York law, which governed interpretation of certain excess policies, on the issue of triggers of excess coverage against multiple policy periods for claims of asbestos exposure.   In Re Viking Pump, Inc. and Warren Pumps, LLC Insurance Appeals, (Sup. Ct. DE Sept. 12, 2016)  Plaintiffs were successors in interest to a pump manufacturer that had purchased primary, umbrella, and excess policies.  Plaintiff sought coverage under the predecessor’s excess policies which contained non-cumulation and prior-insurance provisions.

Delaware Supreme Court had previously certified questions to the New York Court of Appeals’ as to (1) the proper method of allocation to be used (all sums versus pro rata) and (2) whether vertical or horizontal exhaustion applied when the underlying primary and umbrella insurance in the same policy period had been exhausted.   The New York Court of Appeals had ruled on the certified questions on May 3, 2016 that pro rata allocation is inconsistent with non-cumulation and non-cumulation/prior insurance provisions, that all sums allocation was appropriate for policies containing the provisions at issue, and that the excess policies were triggered by vertical exhaustion of the underlying available coverage within the same policy period.   In the Matter of Viking Pump, Inc. and Warren Pumps, LLC, Insurance Appeals , 52 N.E. 3d 1144 (May 3, 2016) .

In this 83-page opinion, the Delaware Supreme Court conducted a de novo review of Chancery Court’s grant of summary judgment and of Superior Court’s contract interpretations made at trial and held that

  • the excess policies had been validly assigned to the successors in interest,
  • the primary policies had be exhausted, and
  • the trigger of coverage under the excess policies was New York’s operative injury-in-fact trigger:

As to a person who ultimately develops lung cancer, mesothelioma, or nonmalignant asbestos-related disease, bodily injury first occurs, for policy purposes, upon cellular and molecular damage caused by asbestos inhalation, and such cellular and molecular damage occurs during each and every period of an asbestos claimant‘s significant exposure to asbestos and continues thereafter.  The duty to defend is based on the possibility of coverage, reflected in the pleadings‘ allegations. The duty to indemnify derives from whether the basis for Warren or Viking‘s liability to the injured claimant is actually covered by the policy.

In Re Viking Pump, Inc. and Warren Pumps, LLC Insurance Appeals, (Sup. Ct. DE Sept. 12, 2016)

Plaintiff stone mason’s motion for summary judgment on liability under Labor Law §240(1)

Plaintiff stone mason’s motion for summary judgment on liability under Labor Law §240(1) was properly denied because of inconsistencies in his description of how the accident happened.  Plaintiff was the sole witness to his accident.  Plaintiff fell when he was attempting to descend via a scaffold from the roof of the building where he had been building a parapet wall.  Questions of fact existed both as to whether he was a recalcitrant worker and as to whether plaintiff’s acts were the sole proximate cause of the accident.

Regarding “recalcitrant witness”, plaintiff testified that although he had his own harness, there were no safety ropes at the site to attach to the harness or to the scaffold and that he would have been fired if he had delayed the job until safety ropes were obtained.  Plaintiff’s foreman testified that

  • he (the foreman) had instructed all workers including plaintiff to wear safety equipment,
  • that he and plaintiff had worn attached harnesses while working together earlier that day,
  • that when he (the foreman) had left earlier in the day, he left plaintiff in charge of the work site and asked plaintiff to finish the job, and
  • he (the foreman) never told plaintiff that plaintiff was expected to work on the roof with a properly attached harness.

From the  concurring opinion, we learn that the foreman averred in his affidavit that on the day of the accident, when he and plaintiff stood on the pipe scaffold as they worked, they wore properly secured harnesses, and that photographs taken soon after the accident showed safety ropes were in fact present.

Held:  This conflicting testimony created a triable issue as to whether plaintiff recalcitrantly failed to use available equipment that he had been directed to use and that, if used, would have averted his injuries.

Regarding sole proximate cause (i.e, whether Labor Law §240(1) had been violated), there was a question of fact as to whether plaintiff fell because of movement of the scaffold or, alternatively, because plaintiff’s losing his footing was unaccompanied by any failure of the scaffold.  These two versions of how the accident happened, each given by plaintiff, the sole witness to the incident, were inconsistent with each other and created a question of fact as to whether plaintiff’s fall was caused by a failure of a safety device within the purview of §240(1).

A fall from a scaffold or ladder in and of itself does not result in an award of damages to an injured party.  Rather, §240(1) liability depends upon the injury having resulted from the failure to use or the inadequacy of a device within the purview of the statute.  There is no liability under section 240(1) when there is no violation and the worker’s actions are the sole proximate cause of the accident.

Albino v. 221-223 West 82 Owners Corp., 2016 NY Slip Opn 05953 (1st Dep’t Sept. 8, 2016)

Parties’ stipulation to liability caused interest to run from the subsequent damages verdict.

Defendant stipulated to liability two and one-half years before the trial on damages.  In the stipulation conceding liability, plaintiff withdrew her claim for punitive damages and the parties agreed that the action would be on the issue of damages with recovery to be capped at a certain amount.  The stipulation contained no provision as to prejudgment interest on the verdict.

After the damages trial was held, Supreme Court computed interest from the date of the jury verdict on damages, not from the date of the stipulation, and the Second Department affirmed.

CPLR 5002, which applies to personal-injury actions, states:

Interest shall be recovered upon the total sum awarded, including interest to verdict, report or decision, in any action, from the date the verdict was rendered or the report or decision was made to the date of entry of final judgment. The amount of interest shall be computed by the clerk of the court and included in the judgment.

Emph. supplied.

When the determinations of liability and damages are made together, the computation of prejudgment interest under CPLR 5002 is straightforward. But when the determinations of liability and damages are bifurcated, prejudgment interest under CPLR 5002 runs from the date of the “verdict, report or decision” on liability, rather than from the date of the “verdict, report or decision” on damages.   But a stipulation between the parties does not constitute a “verdict, report or decision” because stipulations are not adjudications made by a third party.  They are voluntary agreements or contracts by which the parties themselves chart their own course.  Here the stipulation addressed not only the issue of liability but also the cause of action for punitive damages, and it imposed a cap on plaintiff’s recovery.

What does constitute a “verdict, report or decision”?  The determination of liability by an adjudicative body, such as a jury, a court, or an arbitrator such as decisions on motions for summary judgment; motions for leave to enter a default judgment and motions to strike a defendant’s answer; decisions on unopposed applications for a directed verdict on the issue of liability; and binding arbitrators’ awards .  When a court has ordered a referee to “hear and report with recommendations,” pre-judgment interest is computed not from the date of the referee’s report, but from the date on which a court has confirmed it and thus made it binding.  An appellate court’s order reversing the denial of a plaintiff’s motion for summary judgment on the issue of liability starts interest running from the date of the appellate court’s decision.

Plaintiff’s argument that the law favors stipulations was unavailing.  Had the Legislature intended CPLR 5002 to include stipulations, it could have included them, as it has in other statutes [citations omitted].

Here the two-and-one-half-year difference between the determinations of liability and damages amounted to prejudgment interest of $90,000, which difference would have been compounded because prejudgment interest is added to the total amount of the judgment, and post-judgment is computed on the total amount of the judgment including prejudgment interest.

Mahoney v. Brocklebank, 2016 NY Slip Op 05630 (2d Dep’t July 27, 2016)

For plaintiff’s willful spoliation of electronic evidence, the First Department awarded defendant an adverse inference charge at trial plus a $10,000 discovery sanction but did not dismiss plaintiff’s complaint.

Plaintiff/former client sued defendant/former attorney for legal malpractice regarding defendant’s representation of plaintiff in negotiating a construction loan to Developer/Borrower.  The loan closed on May 8, 2007 and Developer/Borrower defaulted in July of 2008.  In June of 2008, plaintiff retained counsel to sue defendant for legal malpractice.  Plaintiff commenced suit in 2011 alleging alleged that in 2007 defendant misadvised plaintiff about zoning issues that led to the revocation of building permits after a crane collapsed at the site, causing Developer to default.  Defendant countered the suit with defenses that plaintiff would have issued the loan regardless of any zoning issues and that plaintiff later assigned the loans and/or failed to mitigate its damages.

The decision states that plaintiff’s obligation to preserve evidence arose at least as early as June 2008 when it retained counsel to pursue defendant for legal malpractice.  But plaintiff waited until May of 2010 to issue a formal litigation hold, so that until May of 2010, plaintiff’s internal electronic record destruction policies continued the recycling of backup tapes, the deletion of employees’ emails stored in their inboxes and sent items folder, and the erasure of departing employees’ hard drives and emails accounts after the employees left the firm.  In addition, plaintiff’s CEO deleted his emails on regular basis during the pertinent time period so that only one of his emails from the relevant period was produced, and plaintiff produced no emails from its executive vice president of structured finance, who was involved in the transaction.

In June of 2014, on defendant’s original motion for sanctions for spoliation, defendant moved to dismiss plaintiff’s complaint.  Supreme Court ruled that plaintiff’s failure to preserve that evidence was ordinary negligence and granted defendant an adverse inference charge at trial under PJI 1:77.  Plaintiff did not appeal that order.

Six weeks later, plaintiff belatedly produced meeting minutes that identified eight more employees who were involved in the transaction and which further revealed the extent to which plaintiff failed to identify all of the key players in the transaction and failed to preserve their electronic records. Plaintiff claimed that its tardy disclosure of those meeting minutes was inadvertent.  Defendant renewed its spoliation motion via the motion at issue on this appeal as to the eight additional witnesses whose electronic evidence had likewise been destroyed either due to plaintiff’s failure to institute a timely litigation hold, or because of plaintiff’s deliberate destruction of the evidence.  Supreme Court held that plaintiff’s destruction of this additional evidence was at a minimum gross negligence, so the evidence was properly presumed to have been intentionally lost or destroyed, and Supreme Court dismissed plaintiff’s complaint as a sanction.

The First Department held that dismissal of the complaint was too drastic, stating that the sanction must reflect “an appropriate balancing under the circumstances” and that dismissal of the complaint is warranted only where the spoliated evidence constitutes “the sole means” by which the defendant can establish its defense, or where the defense was otherwise “fatally compromised”, or where defendant is rendered “prejudicially bereft” of its ability to defend as a result of the spoliation.

Here, defendant’s motion to renew did not support such a finding because of the massive amount of documents that had been produced and the availability of the fourteen key witnesses, including the additional eight upon whom defendant had yet to serve interrogatories and deposition notices.  Therefore the adverse-inference charge in favor of defendant on its defenses plus the monetary discovery sanction of $10,000 against plaintiff was sufficient.  But the First Department noted that this decision was without prejudice to defendant’s seeking dismissal or other sanctions should there be further revelations of plaintiff’s spoliation.

Arbor Realty Funding, LLC v. Herrick, Feinstein LLP, 2016 NY Slip Op 05065 (1st Dep’t June 28, 2016)

Plaintiff is entitled to an adverse-inference charge to the jury for defendant’s failure to preserve security video, which defendant had consented to a court order to preserve, but defendant’s answer and affirmative defenses would not be stricken.

Plaintiff slipped and fell on ice in defendant bank’s parking lot.  Before commencement of his action, plaintiff sought an order for pre-action disclosure and preservation of evidence. Defendant opposed the motion but represented to the motion judge that defendant had voluntarily preserved evidence including accident reports, photographs, and surveillance videotapes.  Defendant also consented to an order of preservation of those items.  During discovery after the action was commenced, plaintiff requested surveillance films related to the subject accident, and defendant responded that those materials had not been preserved.  (The dissenting opinion reveals that defendant’s business practice was to automatically overwrite the video footage after 90 days, and plaintiff’s motion and the resulting consent order were made more than a year after the accident).

The motion court granted plaintiff’s motion to strike defendant’s answer on the prong of CPLR 3126 that defendant had violated the court’s order of preservation.  The Fourth Department modified the sanction, holding under the alternate prong of CPLR 3126 that defendant’s failure to disclose was willful, but held that the motion court abused its discretion in striking defendant’s answer and affirmative defenses.  The Fourth Department instead gave plaintiff an adverse inference charge at trial with respect to the unavailable security surveillance footage.

The Hon. John M. Curran in dissent argued that willful failure to disclose was not raised below and further that the Fourth Department has excused alleged spoliation of evidence in other circumstances when the evidence was destroyed in good faith before litigation was pending, pursuant to normal business practices, and therefore could not have preserved it.  Justice Curran felt that defendant, however, had negligently destroyed the video because defendant was on notice of plaintiff’s claim before the tape was overwritten.  Justice Curran would have precluded defendant from introducing at trial evidence of the video’s content as part of its direct case.

Sarach v. M&T Bank Corp. 2016 NY Slip Op. 04820 (4th Dep’t June 17, 2016)

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