In Warner v New York Cent. Mut. Fire Ins. Co. [3d Dept, July 26, 2012], the plaintiff sustained injuries in a two-car accident in January 2004. Warner then commenced litigation against the tortfeasor, and notified New York Central (plaintiff's insurer) that he would be claiming supplemental uninsured/underinsured motorist (SUM) coverage. Following a conversation in February 2006, plaintiff's counsel sent a confirming letter to New York Central advising that the tortfeasor's policy limit had not yet been offered, that trial was scheduled to commence in March 2006, and that the case may be arbitrated instead. The letter specifically stated New York Central had advised that "regardless of whether the [tortfeasor's] $25,000 policy limit is paid as a result of settlement, trial or arbitration, there would be no effect on [plaintiff's] right to pursue his SUM claim." New York Central did not respond to plaintiff's letter.

Soon thereafter, Warner and tortfeasor agreed to determine the amount of plaintiff's claim through a high/low arbitration. Plaintiff was to receive at least $7,500 regardless of arbitrator's decision. If the case was worth at least $25,000, the tortfeasor's carrier would tender their policy. In April 2006, an arbitrator determined that Warner's claim was worth "in excess of $25,000," without specifying the amount. Plaintiff then notified insurer (New York Central) of the decision and requested consent to settle plaintiff's claim against the tortfeasor. Instead defendant New York Central disclaimed coverage on the ground that plaintiff had violated the policy terms by entering into arbitration without defendant's written consent and by compromising defendant's subrogation rights. Plaintiff settled with the tortfeasor and sued New York Central, seeking a declaration that the insurer was obligated to provide SUM coverage. Plaintiff sought summary judgment, and defendant cross-moved seeking same. The trial court granted summary judgment for New York Central, and Warner appealed.

The Third Department determined that issues of fact precluded summary judgment for either party as it was unclear whether plaintiff agreed that the arbitration was binding and whether the conversation in February 2006 considered the effect of binding arbitration. If plaintiff was not so bound, then the arbitration proceeding did not impair defendant's subrogation rights. Upon receiving the policy limit offer, plaintiff duly notified defendant, as required. At that point New York Central could have denied permission to settle and front its own $25,000 for the right to proceed against the tortfeasor as a subrogee of its insured. A trial should be held to determine the understanding of the previously discussed oral agreement as to the effect of binding arbitration.

In the declaratory judgment action Utica Mut. Ins. Co. v GEICO [2d Dept, Aug 1, 2012], both Utica Mutual and GEICO had issued umbrella policies to the defendant in the underlying personal injury action. An initial dispute occurred whether coverage arose out of GEICO's policy, and if so, what was the priority of coverage in relation to Utica Mutual's policy.

Defendant GEICO sought to disclaim coverage under the "business pursuits" provision of its policy, which is an exclusion. The trial court held that GEICO's disclaimer, issued 21 months after receipt, was not issued as soon as was reasonably possible. It was held that GEICO was not entitled to rely on the "business pursuits" exclusion of its policy because pursuant to Insurance Law §3420(d)(2), an insurer seeking to deny coverage of a claim involving death or bodily injury must give written notice "as soon as is reasonably possible" unless the claim does not fall within the coverage terms of an insurance policy. Timely disclaimer is required when a claim falls within the coverage terms but is denied based on a policy exclusion. The Appellate Division affirmed the trial court decision that GEICO had a duty to timely disclaim coverage, which it failed to do.

Once it was determined that GEICO's umbrella policy applied, the Second Department affirmed the lower Court's determination that an umbrella policy of insurance issued by Utica Mutual was excess to GEICO's umbrella policy. GEICO's policy states that it is "excess over any insurance," without any reference to contribution, whereas the Utica policy states that it "is excess over, and shall not contribute with any of the other insurance." Since Utica Mutual's policy expressly negates contribution and GEICO's policy does not, GEICO's policy must be exhausted first.

In Tinyanoff v Kuna, [2d Dept, Aug. 1, 2012], a personal injury action, the Appellate Division reversed the trial court and granted defendants summary judgment that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). Defendants met their burden of showing that the plaintiff did not sustain injuries to his cervical spine by providing competent medical evidence. Plaintiffs failed to raise a triable issue of fact. The affidavit of plaintiff's treating chiropractor failed to quantify, on the basis of objective testing, the limitations which he found in the injured plaintiff's cervical spine and failed to compare those limitations to what would be considered normal. Defendants established that plaintiff did not sustain qualifying injuries under 90/180 provision of the Insurance Law by submitting evidence which included evidence that plaintiff missed only three days of school as a result of the subject accident.

In Reyes v Post & Broadway, Inc., [2d Dept, July 25, 2012], plaintiff was injured when he fell from a scaffold while performing exterior stucco renovations on premises owned by defendant Post & Broadway, Inc. and managed by defendant OK Management, Inc. Defendants commenced a third-party action against plaintiff's employer TNT K Construction Corp. seeking contractual indemnification under the construction contract. Plaintiff settled the Labor Law §§ 240(1) and 240(2) causes of action with defendants for $3.4 million. Then a nonjury trial was conducted regarding the defendants' third-party action against plaintiff's employer.

The parties in the third-party action stipulated at trial that the defendants/third-party plaintiffs were not negligent. Prior to the work beginning on the property, TNT K Construction Corp. agreed with defendants to assume all responsibilities for any accidents at the work site. Defendants drafted a contract on a blank form stating as much. The subject contract stated the "contractor (TNT K) assumes all liabilities." There was unrebutted testimony to these facts. Judgment was entered in favor of defendants and against TNT K in the amount of the settlement agreement, as well as the sum of $148,340.17 for attorney's fees, litigation costs and litigation expenses incurred in the third-party action.

TNT K appealed arguing defendants were not entitled to contractual indemnification, as well as litigation costs and expenses, and attorneys fees. The Appellate Division held "a contractual indemnification provision must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed." The judgment for contractual indemnification was upheld, but the attorney's fees, litigation costs and litigation expenses were deleted from the judgment since defendants' entitlement to such was never adjudicated at trial.

Prepared by Christopher R. Poole