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)

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)


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