In an insurer’s action for a declaration that it owed no duty to indemnify its insured for sums the latter paid to settle a civil-rights suit, the insurer defeated the insured’s motions to dismiss by raising questions of fact.

The Insurer insured a school district and its officials (“School District”) under a primary CGL and School-District-and-Educators-Legal-Liability policy and an umbrella CGL policy.  In the underlying action, students alleged that the School District had violated the students’ civil rights by the School District’s deliberate indifference to anti-Semitic harassment and discrimination perpetrated by other students against the students.  More specifically, the students alleged that

  • The School District deliberately ignored complaints and its own observations of student-on-student anti-Semitic harassment and discrimination, or responded in an unreasonable or inadequate manner to such complaints and observations;
  • There were repeated and frequent incidents of anti-Semitic harassment and discrimination against the students by other students, which were reported to the School District on many occasions and directly observed on other occasions, which gave rise to an inference that the School District “intended for the harassment to occur” based upon the School District’s practices, policies, and customs in dealing with reports and observations of anti-Semitic harassment and discrimination;
  • The School District “intentionally discriminated” against the students,
  • The School District’s conduct “aided and incited” unlawful discrimination; and
  • The School District’s acts and omissions were “undertaken recklessly and with the intent to engage in wrongful conduct.”

The Insurer defended the School District through the resolution of the underlying action but disclaimed any duty to indemnify the School District.  At mediation in the underlying action, the students and the School District settled the underlying action for $3,000,000 in compensatory damages and $1,480,000 for the students’ attorneys’ fees. A representative of the Insurer attended the mediation but the Insurer paid nothing toward the settlement.

Thereafter, the Insurer commenced the subject declaratory judgment action seeking a declaration that it owed the School District no indemnification for the settlement because (a) coverage for the claims in the underlying action were excluded by the Insurer’s exclusion for intentional discriminatory conduct and (b) the students’ claims were neither a covered “occurrence” nor “loss” as those terms were defined by the policies.

The School District moved to dismiss under CPLR 3211(a)(1) (defense founded on documentary evidence) and CPLR 3211(a)(7) (failure to state a cause of action) premised on the theory that intentional acts can have unintended consequences that constitute “accidents” which therefore must be covered “occurrences” or “losses” under the Insurer’s policies.

Policy exclusion for intentional discriminatory conduct exclusion.  The School District argued that because intentional acts can have unintended consequences that constitute covered “accidents”, the Insurer’s exclusions for intentional discriminatory conduct had to fail.  But the Second Department held that the insurance policies did not conclusively establish that the Insurer was obligated to indemnify the School District, and that unspecified “other evidence” submitted by the School District did not “utterly refute” the factual allegations set forth in the Insurer’s complaint.  Whether the incidents set forth in the students’ complaint were accidents was a “question of fact” that could not be determined on a motion to dismiss pursuant to CPLR 3211(a)(1) or (7)

A motion to dismiss pursuant to CPLR 3211(a)(1) (defense founded on documentary evidence) requires that the documentary evidence utterly refute plaintiff’s factual allegations, conclusively establish a defense as a matter of law, and be unambiguous and of undisputed authenticity.  Here, the insurance policies which the School District submitted as documentary evidence did not provide a complete defense to the Insurer’s claim that the Insurer owed no duty to indemnify the School District.

A motion to dismiss pursuant to CPLR 3211(a)(7) (failure to state a cause of action) requires the court to accept the facts alleged in the complaint as true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory.   Where, as here, evidentiary material was submitted and considered on a motion pursuant to CPLR 3211(a)(7) without the motion being converted to a motion for summary judgment, the question is whether the plaintiff has a cause of action, not whether the plaintiff has stated one.  Dismissal is warranted only where defendant shows that a claimed material fact is undisputedly not a fact at all.  Here, the insurance policies failed to show that plaintiff’s claims were invalid causes of action.

Covered “occurrence” or “loss”.  The CGL policy covered bodily injury caused by an “occurrence,” which was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The School-District-and-Educators-Legal-Liability policy covered a “loss,” which excluded matters that may be deemed uninsurable under the law.

Insurance policies are to be construed according to the sense and meaning of the terms which the parties have used, and if they are clear and unambiguous the terms are to be taken and understood in their plain, ordinary and proper sense.   Whether an event or series of events qualifies as an accident is a question of fact, so that the issue of whether the incidents alleged by the students were accidents were “questions of fact” that could not be determined on a motion to dismiss pursuant to CPLR 3211(a)(1) or (7).

Graphic Arts Mut. Ins. Co. v Pine Bush Cent. Sch. Dist., 2018 NY Slip Op 01565

(2d Dep’t March 9, 2018)

Plaintiff store-customer was not entitled to add Security Company as a defendant in plaintiff’s action against Kmart because the proposed claim failed to state a cause of action.

Plaintiff store-customer was not entitled to add Security Company as a defendant in plaintiff’s action against Kmart because the proposed claim failed to state a cause of action.

Security Company hired by Kmart owed no duty to plaintiff, a Kmart customer who was injured in a fight with a Kmart employee inside a Kmart store.  First, plaintiff was not an intended third-party beneficiary under the contract between Kmart and Security Company because the contract contained a “No Third Party Beneficiaries” clause.

Second, plaintiff made no claim that he detrimentally relied on Security Company’s continued performance of its contract with Kmart.  Plaintiff’s affidavit said nothing about plaintiff’s knowledge of the contract or about plaintiff’s detrimental reliance on Security Company’s continued performance thereunder.

Third, Security Company did not “entirely displace” Kmart’s duty to protect its customers.  The written scope of Security Company’s services included “the protection of … customers … in the Premises,” but the deposition testimony of the loss prevention manager at the relevant Kmart store clarified that, in actual practice, Security Company’s services at that store were limited to deterring shoplifting.  In addition, Kmart retained supervisory authority over Security Company’s guards and required Security Company’s staff to complete training in accordance with Kmart’s safety policies and procedures.

Plaintiff’s motion to amend his complaint to add the Security Company hired by Kmart as a defendant was therefore denied for failure to state a cause of action.

Santiago v. K-Mart Corp., 2018 NY Slip Op 01296 (1st Dep’t Feb. 27, 2018)

Life insurer rescinded the policy – Plaintiff-widow followed with negligence cause of action against life insurance agent and agent’s employer(s).

Plaintiff-widow had negligence cause of action against life insurance agent, who was brother-in-law of decedent, and agent’s employer(s) after the life insurer rescinded the policy because of decedent’s misrepresentations on the application about his health.

Plaintiff’s husband (“Decedent”) had reached out to defendant Pontillo (“Agent”), who was Decedent’s brother-in-law and financial advisor, to obtain additional term life insurance coverage.  Agent acted as the writing agent in applying for a $5 million term life insurance policy from Life Insurer that named plaintiff as beneficiary.  Decedent completed a medical examination questionnaire as part of the application which contained misstatements of fact. The policy was issued in 2011.  Decedent died within the two-year contestable period.  Life Insurer denied plaintiff’s claim for the insurance proceeds because of Decedent’s failure to disclose his history of substance abuse treatment and cocaine use and rescinded the policy.

Plaintiff commenced this action in pertinent part against Agent and Agent’s alleged employers E-1 and E-2, alleging that Agent submitted an inaccurate insurance application to Life Insurer while representing to plaintiff that the policy issued upon it was valid. In lieu of answering, E-1 moved to dismiss for failure to state a cause of action and as being precluded by documentary evidence.  Agent and E-2 served an answer and then moved to dismiss the complaint on the same grounds as E-1’s motion.  (Plaintiff had also sued the Life Insurer whose motion to dismiss was granted and that decision was not appealed.)

E-1 argued unsuccessfully that Agent was not its employee, relying on a representative agreement in which Agent was categorized as an independent contractor.   The Third Department noted, however, that (a) such a portrayal does not settle the fact-specific question of whether an employer-employee relationship existed between E-1 and Agent and (b) plaintiff produced proof that Agent used office resources at E-1’s headquarters in contravention of the representative agreement, corresponded using E-1’s email address, and had E-1’s business cards and letterhead.

E-1 also argued equally unsuccessfully that Agent could not have sold term life insurance under its banner and supplied its membership agreement with the Financial Industry Regulatory Authority which lacked the necessary authorization to sell term life insurance.  Plaintiff responded with E-1’s brochure which expressly proclaimed that E-1 offered term life insurance products and another brochure from E-1 referencing insurance sales through its “affiliated insurance agency” E-2.  Because of the conflicting documentary proof and the unclear relationship between E-1 and E-2, E-1 failed to show it had no connection to the Life Insurer’s policy.

Agent and E-2 claimed that only the decedent had standing to recover for any negligence in applying for the policy, citing black-letter law that where an insurance agent’s negligence causes an insured to be without coverage, the agent cannot be held liable for damages sustained by an injured third party as a consequence thereof if the third party is not in privity with the agent and is not an intended beneficiary of the insurance contract.  But the Third Department, held that plaintiff was indeed the intended beneficiary of Life Insurer’s policy from the moment that decedent applied for the policy.  Moreover, plaintiff alleged that she was linked to Agent by his status as a family member and trusted financial advisor and that Agent knew not only that the policy was intended to ensure plaintiff’s financial well-being in the event of Decedent’s death, but that plaintiff would rely upon Agent’s expertise in preparing a valid application for it.

The Third Department accepted plaintiff’s allegations as true and held that they showed Agent’s affirmative assumption of a duty of care to plaintiff for a specific purpose regardless of whether there was a contractual relationship.   Furthermore, plaintiff’s reliance was the end aim of the transaction and constituted a relationship close enough to privity as to create a duty of care toward her that permitted a negligence claim against Agent and his purported employers.

Plaintiff’s claim of negligent misrepresentation and concealment of material facts and her claim of fraud, however, were properly dismissed.  Plaintiff did not assert that Agent directly vouched for the policy’s validity but only that he delivered the application and policy documents to both decedent and to plaintiff as an assurance that it had been issued upon an accurate application and was valid. The court held that the most that could reasonably be taken from the act of delivery was that an application had been submitted to Life Insurer and that Life Insurer had issued a policy. The policy explicitly contained a two-year contestability clause which plaintiff (herself an attorney) could have discovered had she read the policy.

Plaintiff’s claim for breach of fiduciary duty was timely brought.  The applicable statute of limitations for the breach-of-fiduciary-duty claim at issue was three years and accrued when all elements of the tort could be truthfully alleged including when actual damage had been sustained.  Damages arose when Life Insurer determined that the policy had never been in force and denied plaintiff’s claim.  Because plaintiff’s action was commenced days after Life Insurer’s denial of her claim, her breach-of-fiduciary-duty claim was timely.

But plaintiff’s breach-of-contract claim against Defendants was properly dismissed.   Although plaintiff was a third-party beneficiary of the policy which gave her the same rights as Decedent, Decedent’s own misrepresentations on the application imperiled his purchase of the policy.  Because Decedent could not plausibly have claimed that Defendants breached the agreement as to him, plaintiff’s breach-of-contract claim was properly dismissed.

Vestal v. Pontillo, 018 NY Slip Op 01236 (3d Dep’t 2/22/18)

In a decision limited to the facts of the case, the Court of Appeals reversed a robbery conviction because the People failed to sufficiently authenticate an internet image purportedly of defendant holding gun that was “similar” to the one he used in the robbery.

The photograph had been printed out by a police detective from the website “”.  The photograph had been posted to a profile page several months before the robbery and showed an individual holding some cash and a gun.  The detective had found the photograph by searching defendant’s surname “Price” and, after scrolling through several pages of results containing approximately 50 internet profiles whose usernames incorporated the term “Price” into them, saw a public profile that contained several photographs of defendant with the username “Price_OneofKind.”  The public profile page contained no reference to defendant’s full name.  Although the detective testified that the profile page listed the purported user’s age and hometown, the detective did not testify as to whether any of that information matched defendant’s information, and none of the pages containing this information were introduced to connect defendant to the specific user of this website.

The robbery occurred while the victim was standing outside a milk delivery truck conducting milk deliveries with the driver who was inside the truck.  The delivery truck driver testified that he noticed that someone holding a gun about a foot away from the chest of the victim and observed that the victim exchanged words with the gunman and threw a handful of cash from his pocket to the ground.  The driver then saw the gunman’s accomplice gather the money and the two robbers flee. The truck driver did not see the gunman’s face and was unable to identify defendant at trial as either of the perpetrators.

The People then made an offer of proof regarding the print-out of the photograph from the internet, to wit, that the victim thought that the gun on the photograph was similar to the gun that the robber had pointed at him and the detective thought that the individual in the photograph looked like defendant.  The trial court admitted the photograph into evidence.

The victim testified to the circumstances of the robbery, and he identified defendant as the gunman. The victim described the firearm used in the robbery as a 9-millimeter automatic with a silver rectangular feature on the top of the barrel, but the victim admitted that he had no prior familiarity with firearms. When shown the gun in the bottom portion of the internet photograph, the victim testified that the gun looked “similar” to the gun used in the robbery, but he could not identify the gun in the photograph as the one held by the robber.

The detective then testified that the individual in the photograph holding the handgun “look[ed] like” defendant. The detective explained that she had printed the photograph from the internet website, and she asserted that the printout was a true and accurate depiction of the photograph she observed on the website. But the detective did not know who took the photograph, when it was taken, where it was taken, or under what circumstances it was taken. Nor did she know whether the photograph had been altered or was a genuine depiction of that which it appeared to depict.

During summations, the People urged the jury to conclude that the photograph was taken from an internet profile page belonging to defendant, and emphasized that the victim “recognized” the gun depicted in the photograph as the one held by the gunman. Following deliberations, the jury found defendant guilty of the counts of robbery asserted against him.

Upon defendant’s appeal, the Second Department affirmed the judgment of conviction (127 AD3d 995, 996 (2d Dept 2015)), holding that the People laid a proper foundation for admission of the photograph, that the photo was relevant to the issue of the defendant’s identity as the gunman, and the photo’s probative value outweighed any prejudicial effect”. The Court of Appeals granted defendant leave to appeal.

All six judges of the Court of Appeals voted to reverse the conviction and ordered a new trial, but they split four to two on the rationale.  Judge Stein writing for the majority (which included Judges DiFiore, Fahey, and Wilson) recited black-letter-law principals of authenticating photographs as evidence and pronounced that the People had failed to authenticate the photograph, but then (in footnote 3) limited the holding to the facts of this case because the Court was not prepared to enunciate a general test of admissibility of photographs obtained from social media websites:

In our view, it is more prudent to proceed with caution in a new and unsettled area of law such as this. We prefer to allow the law to develop with input from the courts below and with a better understanding of the numerous factual variations that will undoubtedly be presented to the trial courts. Because we necessarily decide each case based on the facts presented therein, it would be premature to decide whether the People’s proffer would have been sufficient had the prosecution, hypothetically, established that the website was controlled by defendant. At this time, it is sufficient and appropriate for us to hold that, based on the proffer actually made, the photograph was not admissible.

In her concurring opinion which was joined by Judge Garcia, Judge Rivera chided the majority for failing to address head on the question of how to authenticate social media images – an evidentiary issue of growing concern given the proliferation and ubiquitousness of social media:

Contrary to the majority’s claim, when we decide an open question presented on appeal we do not act in haste (majority op at 10 n 3). Rather, we pronounce the law by which we reason an outcome. Given the pervasive use of social media, there is nothing premature about determining how law enforcement and prosecutors may use evidence obtained online

Judge Rivera states that the People had to satisfy two levels of authentication: (1) the print out was an accurate representation of the web page; and (2) that the page was defendant’s, meaning he had dominion and control over the page allowing him to post on it.  In her view, the People proved, through the detective’s testimony, that the printout was an accurate representation of the digital image viewed on the website. But the People failed to establish that the web page was defendant’s, either by direct or circumstantial evidence or with proof establishing reasonable inferential linkages that ordinarily supply foundational prerequisites.  The “tie-in effort” between the testimony relied on by the People and the purpose for which the printout was submitted was too tenuous and amorphous. In other words, the People did not submit proof by which a reasonable jury could conclude that the printout was an accurate representation of defendant’s profile page.   Judge Rivera therefore agreed with the majority’s conclusion that authentication could not be accomplished solely by proof that defendant’s surname and picture appears on the profile page.

Judge Rivera criticized the People for failing in their proffer to present the personal information posted on the web page which might have established the necessary link to defendant.  Other evidence arguably addressed the authentication of the web page, such as proof that the defendant posted or adopted the photograph, or knew of the photograph and allowed it to remain on the profile page without objection, but given the deficiency of the proof actually submitted, Judge Rivera agreed with the majority that the Court need not consider whether proof that the web page belonged to defendant could also establish that the image depicted was genuine.  Thus, since the People did not link defendant to the web page where the image was found, there was no need to consider on this appeal the requirement that there had been no tampering with the proffered evidence. And given the lack of adequate evidence connecting defendant to the web page, the Court had no reason to address the sufficiency of the victim’s identification of the gun.

People v Price, 2017 NY Slip Op 05174, CtApp 6-27-17

Queens resident had no long-arm jurisdiction in New York over a Virginia hotel for slip and fall, notwithstanding plaintiff’s having made the hotel reservation via the internet. 

A Queens, New York resident commenced suit in Queens County Supreme Court alleging that he was injured in a shower while he was a guest at a hotel in Virginia known as Homewood Suites by Hilton.  Plaintiff sued the management company Brantley Enterprises, Inc. (which did business under the assumed name of Brantley Hotel Group) and the hotel “Homewood Suites by Hilton”.  Plaintiff had made the hotel reservation via the internet, and premised jurisdiction over defendants on that fact.  The motion term judge granted defendants’ pre-answer motion to dismiss, and the Appellate Division Second Department affirmed.

In support of defendants’ motion to dismiss for lack of long-arm jurisdiction, defendants asserted that

  • Defendant Brantley Enterprises, Inc., doing business under the name of co-defendant Brantley Hotel Group, was the manager of co-defendant hotel “Homewood Suites by Hilton”.
  • The management company Brantley Enterprises, Inc., was a Virginia corporation with its principal office in Virginia; it conducted no business and maintained no offices outside Virginia; and it was not affiliated with any New York hotels.
  • The subject hotel was owned by nonparty Suite Venture Associates, LLC, which likewise was a Virginia limited liability company with its principal office in Virginia and which likewise conducted no business and maintained no offices outside Virginia and was not affiliated with any New York hotels.

Plaintiff countered that

  • There were other, separate hotels operating in New York under the licensed or franchised name Homewood Suites by Hilton, and
  • Defendants were involved in maintaining or operating a website that permitted consumers in New York to make reservations at the subject hotel in Virginia.

The Second Department held that plaintiff failed to demonstrate that defendants purposefully availed themselves of the privilege of conducting business in New York.  Plaintiff also failed to demonstrate any substantial relationship between the causes of action asserted in the complaint and any alleged transaction of business through the website that plaintiff used to make his reservation.  Plaintiff also failed to make a prima facie showing that personal jurisdiction existed based on ownership, use, or possession of any real property within New York State.

Lastly, plaintiff failed to make enough of a showing of jurisdiction to stay defendants’ motion to permit discovery on the issue of jurisdiction.  Because plaintiff alleged no facts that would support jurisdiction, plaintiff failed to show how further discovery might lead to evidence showing that personal jurisdiction existed.

NB: Plaintiff apparently did not sue the franchisor of “Homewood Suites by Hilton”.

Leuthner v Homewood Suites by Hilton, 2017 NY Slip Op 05212, 2nd Dept 6-28-17.

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