Parties cannot stipulate to force the courts to resolve factual issues on cross motions for summary judgment in order to avoid a trial.

In Friends of Thayer Lake LLC v. Brown (May 10, 2016) http://bit.ly/1U3pzcf, plaintiffs own land abutting the state-owned William C. Whitney Wilderness Area in the Adirondacks.  The Wilderness Area encompasses in pertinent part a network of lakes, ponds, streams and canoe carries known as the Lila Traverse which permits canoe travel between Little Tupper Lake and Lake Lila.  More specifically, the Lila Traverse includes the Mud Pond Waterway, which is a two-mile-long system of ponds and streams that crosses plaintiffs’ property.  The State Department of Environmental Conservation created an eight-tenth-of-a-mile canoe carry to avoid the Mud Pond Waterway, but defendants maintain that the Mud Pond Waterway is “navigable in fact” and therefore a public highway freely accessible by the boating public.

[Per a N.Y. Attorney General press release dated February 24, 2011 (http://on.ny.gov/1ycl9cq), plaintiffs initially sued defendant Phil Brown for trespass for paddling the waterway in 2009.  The State of New York moved to intervene and counterclaimed against plaintiffs to require plaintiffs to remove intimidating signs, cameras, and steel cables that plaintiffs had placed across the waterway to prevent kayakers, canoeists, and other boaters from traveling across their property.]

The parties cross-moved for summary judgment seeking a ruling as a matter of law on whether the Mud Pond Waterway is navigable in fact and therefore open to public use.  The parties did not want a trial and jointly requested that Supreme Court rule as a matter of law on their respective motions, contending that the material facts were fully and accurately presented in the record and not significantly in dispute.   Both Supreme Court and the Third Department granted the parties’ request to resolve the dispute as a matter of law, stating that the parties in a civil dispute may chart their own course in litigation and may agree on the factual basis for the resolution of their controversy.

But the Court of Appeals ruled otherwise stating that the parties’ freedom to chart their own course in litigation must yield to certain practicalities, to wit, unresolved questions of fact: a motion for summary judgment requires the movant to demonstrate the absence of any material issues of facts.  Noting the absence of a stipulated statement of facts and an voluminous, detailed and expansive record (which included documents, maps, photographs, letters, articles, guidebooks, video footage, diaries, testimony, and affidavits), the Court of Appeals found conflicting or inconclusive evidence regarding many material facts including the waterway’s historical and prospective commercial utility, its historical accessibility to the public, the relative ease of passage by canoe, and the volume of historical and prospective travel on it.  Because of these questions of fact, the Court of Appeals denied summary judgment to all parties, expressly requiring a trier of fact to weigh the competing evidence, assess the credibility of witnesses, and reach the ultimate conclusion of navigability in fact.

Facts missing from a complaint were supplied by affidavit and should have been considered before dismissing the complaint.

Facts missing from a complaint that were supplied by affidavit in opposition to defendant carrier’s motion to dismiss cured the defect and should have been considered before dismissing the complaint. 

Plaintiff medical provider sued defendant no-fault carrier for treatments plaintiff had rendered to injured auto-accident victims, but the complaint failed to identify the patients treated or the policies under which plaintiff submitted claims for payment.  Defendant moved to dismiss the complaint for failure to state a cause of action under CPLR 3211(a)(7).  In opposition, plaintiff submitted an affidavit of its principal which supplied the missing information.  The First Department reversed the complaint’s dismissal and reinstated the complaint.

The First Department acknowledged that CPLR 3013 requires that a complaint be sufficiently particular to give the court and the parties notice of the transactions, occurrences, or series of transactions that form the basis of the complaint and the material elements of each cause of action.  The court further acknowledged the black-letter law that the factual allegations of the complaint are accepted as true and are afforded every possible favorable inference.  But it held, based on prior case law, that a court may freely consider plaintiff’s affidavits to remedy defects in the complaint.  The test is whether plaintiff has a cause of action, not whether plaintiff has stated one.  When such affidavits are considered, dismissal is appropriate only where a material fact claimed by the pleader is not a fact at all and there is no significant dispute regarding that fact.

The First Department further held that plaintiff sufficiently alleged that plaintiff was the assignee of claims and that a question of fact existed as to whether plaintiff failed to appear for examinations under oath, which was a condition precedent to coverage.

High Definition MRI, P.C. v Travelers Cos., Inc., 2016 NY Slip Op 02027, 1st Dept 3-22-16

Insurer’s interpretation was the only reasonable interpretation of an otherwise unambiguous deductible clause in a commercial property insurance policy.

Plaintiff insured owned a fuel oil terminal on the East River in Port Morris, Bronx County. Defendant insurer issued a commercial property insurance policy to plaintiff which covered in pertinent part the Port Morris facility up to a policy limit of $2,500,000.

The policy provided that “2% of the total insurable values at risk per location subject to a minimum of $250,000” would be deducted from each adjusted claim arising out a flood “occurrence”. At issue in the case was the interpretation of the phrase “total insurable values at risk per location”.

The total value for the Port Morris facility was listed on the policy’s “Schedule of Locations Endorsement” as being $124,701,000. A note at the bottom of that endorsement stated that the values listed on the endorsement were for premium purposes only. A separate endorsement confirmed that plaintiff had provided the values listed on the “Schedule of Locations Endorsement”.

In October 2012, flooding from Superstorm Sandy damaged the Port Morris Terminal and plaintiff submitted a claim to defendant for $2,284.239.95. Defendant denied plaintiff’s claim as being less than the amount of the deductible of $2,494,020.

Plaintiff moved for summary judgment contending that the deductible was $250,000, being two percent of the $2.5 million dollar policy limit. Defendant opposed plaintiff’s motion and cross-moved for summary judgment dismissing the complaint, contending that the deductible was $2,494,020, i.e., 2% of the $124,701,000 valuation for the Port Morris terminal listed on the Schedule of Locations Endorsement. Under defendant’s calculation, there was only $5,980 of coverage between the amount of the deductible and the policy limit for the Port Morris facility. The Second Department granted defendant’s motion.
Applying standard rules of contract construction, the Second Department stated that it agreed with the parties that the deductible clause was unambiguous and held that defendant’s interpretation of the phrase ‘”total insurable value” was the only reasonable one. The Second Department stated that to an average insured , “risk” in the phrase “total insurable values at risk per location” means “risk of loss”. In deciding how much coverage to buy, the average insured is concerned with the value of what is at risk and takes into account the likelihood of significant loss and the cost of insurance. The amount of insurance that the average insured chooses to buy is not the same as the “total insurable values at risk”, so the average insured could not reasonably conclude that the “total insurable values at risk” referred to a limit of coverage that was less than the total amount at risk. Therefore, the only reasonable expectation as to the meaning of the phrase “total insurable values at risk” was the insured’s own risk of loss and damage.
The Second Department held that plaintiff’s interpretation was unreasonable, because it rendered the $250,000 minimum deductible superfluous, and likewise rejected plaintiff’s contention that the note on the Schedule (which stated that the listed values were for “premium purposes only”) precluded those values from being used as “total insurable values”. The Second Department stated that the reasonable interpretation of that note was that the values were being used only to determine the premiums, not to set policy limits. Therefore, the listed values could be used to calculate the applicable flood deductible (the deductible being relevant in determining the amount of the premium).
Castle Oil Corp. v ACE Am. Ins. Co., 2016 NY Slip Op 01632, 2nd Dept March 9, 2016

Defendant landscaper and its insurer were liable as a matter of law under Nav. Law article 12 for oil spill caused by Landscaper’s severing fuel oil lines to homeowners’ house.

Defendant landscaper and its insurer were liable as a matter of law under Nav. Law article 12 for oil spill caused by Landscaper’s severing fuel oil lines to homeowners’ house.

In the plaintiff-homeowners’ action for clean-up costs due to a fuel-oil spill, the Second Department affirmed summary judgment to plaintiff homeowners against defendants Landscaper and its Insurer.  The Landscaper’s employee had severed an underground fuel line to plaintiffs’ home while repairing a sprinkler system and shortly thereafter, plaintiffs began experiencing problems with their home heating system.  Plaintiffs called defendant Oil Company, which sent a technician who inspected the heating system and found no problem.  The Oil Company thereafter delivered 700 gallons of fuel oil to plaintiffs’ home which discharged into the ground.

The Second Department affirmed summary judgment to plaintiffs against the Landscaper and its Insurer under Nav. Law §181(1), which mandates strict liability for clean-up costs against a person who has “discharged petroleum”.  Under Navigation Law article 12, “discharge” includes “any intentional or unintentional action or omission resulting in the releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping of petroleum”, and plaintiff was entitled to sue not only the discharger but also the discharger’s insurer.

The Landscaper admitted that its employee severed the line, and the Insurer tacitly conceded insurance coverage for the incident.  Defendants failed to create an issue of fact by questioning the depth of the fuel lines and lack of warning signs, because there was no evidence of any leaks or defects with the heating system or fuel lines before the lines were severed.  Defendants’ contention that discovery was needed on those issues was speculative.

Bennett v. State Farm Fire & Cas. Co., 2016 NY Slip Op. 01452 (2d Dep’t March 2, 2016)
http://www.courts.state.ny.us/reporter/3dseries/2016/2016_01452.htm

Diagram of accident in police accident report should have been redacted before the report was admitted into evidence.

Diagram of accident in police accident report should have been redacted before the report was admitted into evidence, because the police officer did not see the accident, the eye witness who supplied the information was under no business duty to report the information to the officer, and the diagram bore directly on the issue of liability.

In an action for wrongful death and conscious pain and suffering action, the Second Department reversed plaintiff’s verdict and ordered a new trial on liability because the police accident report admitted into evidence contained an inadmissible diagram of the scene.  Plaintiff’s decedent was a pedestrian who was struck by a hit-and-run driver.  In the liability portion of the trial, an eye witness testified that he saw a motor vehicle strike the decedent, but he also testified that he did not see the decedent before the accident, did not see any vehicle come into contact with the decedent, and that the first time he saw the decedent he thought she had fallen out of the back window of an SUV.  Over MVAIC’s objection, the trial judge admitted into evident a police accident report without redacting a diagram showing the decedent crossing the street in front of the unidentified vehicle that allegedly struck decedent.  The liability-phase jury found the unidentified hit-and-run driver liable. During the damages phase of the trial, the jury rendered a verdict of $39,000 for wrongful death and $500,000 for conscious pain and suffering.

The Second Department reversed the verdict on liability and remanded for a new trial on liability, holding that the diagram because the information came from witnesses not engaged in police business when the diagram was drawn, and the information satisfied no other hearsay exception (there was no information that the eye witness was under a business duty to supply the information). The diagram was harmful error because it bore directly on the issue of liability, which was for the jury to decide.

Wynn v. Motor Veh. Acc. Indem. Corp, 2016 NY Slip Opn 10484 (2d Dep’t March 2, 2016)

http://www.courts.state.ny.us/reporter/3dseries/2016/2016_01484.htm

Fourth Department dismissed plaintiffs’ conclusory allegations of bad faith and alleged late disclaimer in a property damage case, and plaintiffs’ demand for punitive damages in connection with a withdrawn claim.

Plaintiff homeowners sued their homeowner-insurer Allstate for its denying and disclaiming plaintiffs’ property-damage claim.  After answering plaintiff’s complaint, Allstate moved to dismiss, under CPLR 3211(a)(7) (failure to state a cause of action), three of plaintiffs’ causes of action: for bad faith, for unfair claims practices, and for late disclaimer plus plaintiffs’  demand for punitive damages in connection with the bad-faith and unfair-claims-practices claims.  Plaintiffs withdrew their claim for unfair claims practices but not their demand for punitive damages related thereto.  Supreme Court denied Allstate’s motion, but the Fourth Department reversed and dismissed these claims and punitive-damages demands in their entirety.

In doing so, the Fourth Department expressly applied the standard for deciding a motion to dismiss for failure to state a cause of action under CPLR 3211(a)(7): the court accepted as true each of plaintiffs’ allegations and limited the court’s inquiry to the legal sufficiency of plaintiffs’ claims.   With regard to plaintiffs’ bad-faith claim, it failed to allege any conduct by Allstate that constituted the requisite gross disregard of the insured’s interests, and plaintiffs’ claim that “Allstate had no good-faith basis for denying coverage” was redundant of plaintiffs’ breach-of-contract claims and therefore failed to support an independent tort claim of bad faith.

With regard to the punitive damages demand in connection with plaintiff’s now withdrawn claim for unfair claims practices, the court dismissed it because there was no viable substantive cause of action for it to attach to.  Plaintiffs’ conclusory allegation as to Allstate’s motive for its refusal to pay plaintiffs’ claim was insufficient to support plaintiffs’ otherwise disassociated demand for punitive damages.

Plaintiffs also failed to state a cause of action for untimely disclaimer.  Because the underlying claim arose out of a property damage claims and not out of an accident involving bodily injury or death, the notice-of-disclaimer provisions from Insurance Law § 3420(d) were inapplicable and, under the common-law rule, a delay in disclaiming coverage, even if unreasonable, does not estop the insurer from disclaiming unless the insured has suffered prejudice from the delay.  Plaintiffs’ conclusory allegation that they were “damaged and prejudiced” by the untimely disclaimer is insufficient to withstand this CPLR 3211(a)(7) motion to dismiss.

Miller v Allstate Indem. Co., 2015 NY Slip Op 07134, 4th Dept 10-2-15

Plaintiff-lender’s loan servicing company had a sufficient relationship with plaintiff to authenticate plaintiff’s business records.

The affidavit from an officer of plaintiff-lender’s loan servicing company established that plaintiff had acquired legal and physical possession of the promissory note before commencing the subject foreclosure proceeding. The original lender had assigned the note and mortgage to plaintiff, but the note had been endorsed in blank with not date. The note therefore did not establish the date that it was assigned to plaintiff. The affidavit of the loan servicing company’s officer stated that before the foreclosure action was commenced, plaintiff had sent the loan documents including the note to the loan servicing company which had scanned the documentation into its own records system and then returned the documents to plaintiff. Based on the dates of these events, the senior VP of the loan servicing company averred that the note had been assigned to plaintiff before plaintiff commenced the foreclosure action.

The Third Department that the loan servicing company’s status as servicer of the loan for plaintiff-assignee of a note and mortgage qualified the loan servicing company’s records as business records of plaintiff. The Third Department rejected defendant’s objection that the records were neither made in the loan servicing company’s regular course of business nor within the officer’s personal knowledge. The Third Department stated that while “the mere filing of papers received from other entities, even if they are retained in the regular course of business, is insufficient to qualify the documents as business records”, such records are nonetheless admissible if the recipient can establish personal knowledge of the maker’s business practices and procedures, or that the records provided by the maker were incorporated into the recipient’s own records or routinely relied upon the recipient in its business. To be admissible, these documents should carry the indicia of reliability ordinarily associated with business records.

Given the loan servicing company’s status as servicer of the loan for plaintiff, the loan servicing company’s records qualified as business records.

Deutsche Bank Natl. Trust Co. v Monica, 2015 Slip Op 06453, 3rd Dept 8-6-15

Chinese national whose return visa to the US was denied can present his videotaped trial testimony and be examined in China by defendants’ doctor.

Plaintiff Chinese citizen was injured while he was a passenger on a bus. Plaintiff appeared for his deposition which was not completed on that date and was adjourned to be completed at a later date. Plaintiff moved back to China before the deposition was completed. Plaintiff had been living in the United States by himself and moved back to China to be with his wife and child lived, allegedly due to his inability to care for himself.

Defendants moved pursuant to CPLR 3126 to dismiss plaintiff’s complaint for failure to continue his deposition or to appear for an IME, or alternatively to compel plaintiff to appear or be precluded from testifying at trial. Plaintiff cross-moved for a protective order directing that his deposition be conducted by remote electronic means and for leave to employ a video transcription of his deposition testimony at trial in lieu of appearing in person due to his inability to obtain a visa to enter the United States.
Held: Because plaintiff’s applications for a visa to return to the United States had been denied, plaintiff demonstrated that traveling from China to the United States for his deposition or independent medical examination would cause undue hardship. Plaintiff would therefore be permitted to present a video transcription of his deposition testimony at trial in lieu of appearing at trial to testify. Plaintiff met the criteria set forth in CPLR 3117(a)(3)(ii), (iv), and (v), to wit, that the witness (plaintiff himself) is more than 100 miles from the place of trial, that plaintiff is unable to procure his attendance at trial, and that such exceptional circumstances exist as to make the use of plaintiff’s videotaped testimony desirable in the interest of justice and with due regard to the importance of presenting his testimony orally in open court.
Although plaintiff would not be required to pay business class airfare and accommodations for defendants’ examining doctor to travel to China, plaintiff had consented to pay the reasonable cost of airfare and accommodations for the defendants’ doctor to conduct the independent medical examination in China.

Feng Wang v A & W Travel, Inc., 2015 NY Slip Op 06312 (2d Dept July 29, 2015).

Fidelity bond covering “a fraudulent entry of Electronic Data or Computer Program” covers fraudulent entry into the system, not fraudulent data.

A rider in a fidelity bond for computer systems fraud that covered “a fraudulent entry of Electronic Data or Computer Program” unambiguously refers only to unauthorized access into plaintiff’s computer system and not to fraudulent content that was input by authorized users.   Universal Am. Corp. v National Union Fire Ins. Co. of Pittsburgh, PA., 2015 NY Slip Op 05516, CtApp 6-25-15

Plaintiff Universal Am. Corp. is a health insurer who offers Medicare Advantage plans to Medicare-eligible individuals who purchase Medicare coverage from private health insurers who in turn are reimbursed by the federal Centers for Medicare and Medicaid Services for health care services that are provided to the plans’ members.  Plaintiff’s computerized billing system allowed health care providers to submit claims directly into the system.   Plaintiff automatically processed, approved, and paid most of the claims without manual review.

Plaintiff suffered more than $18 million in losses from paying fraudulent claims for services that were never actually performed under its Medicare Advantage plans.  When plaintiff sought payment from defendant bonding company for plaintiff’s post-deductible losses, defendant denied coverage on the ground that the rider did not encompass losses for Medicare fraud, i.e., losses from payment for claims submitted by health care providers.

Plaintiff sued defendant for declaratory relief and moved for partial summary judgment on the issue of coverage, and defendant cross-moved for summary judgment dismissing the complaint.

The Court of Appeals affirmed dismissal of the complaint, holding that the rider unambiguously applies to losses incurred from unauthorized access to Universal’s computer system, and not to losses resulting from fraudulent content that authorized users input into the computer system.

The Court applied the “reasonable expectations of the average insured upon reading the policy” (from Mostow, 88 NY2d at 326-27).  The Court noted that the intentional word placement of “fraudulent” before “entry” and “change” manifests the parties’ intent to provide coverage for a violation of the integrity of the computer system through deceitful and dishonest access.  The Court also relied on other language in the rider that evinced defendant’s intent to cover only fraudulent access and not fraudulent input.

Business records exception and medical provider’s burden of proof on its motion for summary judgment for payment of services rendered to no-fault claimant

The Court of Appeals held that plaintiff medical provider was entitled to summary judgment for payment of no-fault benefits by showing that the payments were overdue, and that the provider’s claim, using the statutory billing form, had been mailed to and received by the defendant insurer.  With regard to the business -records exception to the hearsay rule, the affidavit of the president of plaintiff’s third-party billing company, which stated that he relied on the statutory billing forms generated by plaintiff, satisfied the business records exception.   With regard to the facts that a medical provider must establish:  because the carrier failed to respond in any fashion to plaintiff’s claim forms, the carrier waived all objections and defenses to those claims, and plaintiff  did not need to establish prima facie that the expenses arose out of a motor vehicle accident and were medically necessary to treat the injuries.  Viviane Etienne Med. Care v. Country-Wide Ins. Co., 2015 NY Slip Op 04787, Ct App 6-10-15.    NB:  This action was commenced in September 2005, before the adoption of the April 1, 2013 amendments to 11 NYCRR 65-3.5 and 11 NYCRR 65-3.8, which can be found at http://www.dfs.ny.gov/insurance/r_finala/2013/rf68ca4t.pdf.

In this case, the injured claimant had assigned to his medical provider his right to receive payment for no-fault medical benefits (i.e., payments for the the medical treatments his medical provider rendered to him for injuries he received in an auto accident.)  Plaintiff medical provider submitted eight verification-of-treatment forms (statutory NF-3 forms) to defendant no-fault insurer for the services rendered.  Defendant denied payment on one claim and failed to respond to the other seven.

Plaintiff sued, asserting that it had timely submitted bills and claims for payment to defendant but that defendant had failed to pay or deny the requests or ask for further verification of the claims. Plaintiff also requested interest and attorney’s fees under the Insurance Law.  Defendant answered and asserted as an affirmative defense that payment for plaintiff’s claims was not overdue because plaintiff failed to submit “proper proof of the fact and amount of the loss” as required by the Insurance Law.

Plaintiff then moved for summary judgment on its claims, submitting in pertinent part the seven verification-of-treatment forms as proof of claim and seven mailing ledgers stamped by the United States Postal Service showing the date the forms were mailed. Plaintiff also submitted the affidavit of the president of plaintiff’s third-party billing company, who detailed the billing company’s reliance on plaintiff’s NF-3 claim forms and stated that he personally mailed the NF-3’s to defendant within the statutory 30-day time limit.

Defendant opposed the motion, arguing that plaintiff failed to satisfy the business records exception to the hearsay rule because the affidavit of the billing company’s president merely stated that the bills were mailed but gave no details as to plaintiff’s generation of the NF-3 claim forms.

The Court of Appeals relied on no-fault regulation 11 NYCRR 65-3.5(b), which stated that within 15 days from receipt of the verification of treatment form, the insurer may seek further verification) and Insurance Law §5106, and 11 NYCRR 65-3.8(c), which stated that within 30 days after receiving the verification of treatment form, the insurer must pay or deny the claim.  As noted above, this action was commenced in September 2005, before the adoption of the April 1, 2013 amendments to 11 NYCRR 65-3.5 and 11 NYCRR 65-3.8, which can be found at http://www.dfs.ny.gov/insurance/r_finala/2013/rf68ca4t.pdf.

The Court of Appeals recited previous holdings to the effect that where an insurer fails to pay or deny a claim within the requisite 30 days after its receipt of the proof of claim, the insurer is precluded from asserting all defenses against payment of the claim except lack of coverage, and that although this preclusion requires carriers to pay claims that it might not have had to honor if it had timely denied the claim, the great convenience of prompt uncontested, first-party insurance benefits is part of the price paid to eliminate common-law contested lawsuits.

The Court of Appeals held that plaintiff met its prima facie burden of proving its entitlement to summary judgment because the documents submitted met the business records exception to the hearsay rule and that because plaintiff was able to demonstrate the billing and mailing practices,  the insurer was presumed to have received those claims.  And because defendant did not pay the seven claims, those claims were overdue and defendant’s failure to contest the claims waived its right to contest the claims as fraudulent.   [NB:  The amount at issue was about $6,000.  At the same time the Appellate Division certified this question to the Court of Appeals, it remanded to Supreme Court to determine whether plaintiff was entitled to attorneys’ fees and interest, which runs at two percent per month from the date the payments became “overdue”.]

Dissent: Judges Stein joined by Judge Reed dissented, stating that neither the statutory nor regulatory deadlines  obviated plaintiff’s burden to show prima facie that it was entitled to receive the benefits in the first place — i.e., that the loss arose from an automobile accident and that the expenses incurred were medically necessary.   Judge Stein noted that the State Insurance Department interpreted the interplay between summary judgment and the preclusion rule in that manner, i.e., although an insurer’s defense to payment of claim may be precluded under the preclusion cases,  the claimant must still meet the statutory requisite and make out a prima facie case of entitlement to benefits, which requires that reimbursable expenses must arise out of a motor vehicle accident and be medically necessary to treat the injuries.  Ops. Gen Counsel NY Ins Dept No. 00-01-02 [January 2000].

Moreover, Judge Stein noted that plaintiff failed to establish its claim forms as business records:  the billing company’s president had no personal knowledge of plaintiff’s procedures in creating the NF-3 claim forms, and that plaintiff should have been required to submit a proper affidavit as to the creation of the NF-3 forms.