The New York State Court of Appeals has weighed in again on the issue of "serious injury" within the meaning of the No-Fault Law. 

Ramkumar v Grand Style Transp. Enters. Inc. (2013 NY Slip Op 06638) decided on October 15, 2013 dealt with the issue of whether a plaintiff has offered "some reasonable explanation" for the cessation of physical therapy treatment for his injury, based on the 2005 decision of Pommells v Perez, 4 NY3d 566, 574 [2005].  

The Appellate Division in this case held that a "bare assertion that insurance coverage for medically required treatment was exhausted is unavailing without any documentary evidence of such or, at least, an indication as to whether an injured claimant can afford to pay for the treatment out of his or her own funds" (94 AD3d at 485). 

In swinging the pendulum back farther in the plaintiff's corner the Court noted, "The Appellate Division's requirement that plaintiff either offer documentary evidence to support his sworn statement that his no-fault benefits were cut off, or indicate that he could not afford to pay for his own treatment, is an unwarranted expansion of Pommells. 

Plaintiff testified at his deposition that "they" (which a reasonable juror could take to mean his no-fault insurer) cut him off, and that he did not have medical insurance at the time of the accident. While it would have been preferable for plaintiff to submit an affidavit in opposition to summary judgment explaining why the no-fault insurer terminated his benefits and that he did not have medical insurance to pay for further treatment, plaintiff has come forward with the bare minimum required to raise an issue regarding "some reasonable explanation for the cessation of physical therapy".

The "bare minimum" now appears to be a bold statement without the need for any documentary evidence.  Judge Smith, in his dissent stated: 

"In Pommells, we adopted a rule designed to make unjustifiable recoveries more difficult in so-called 'gap in treatment' cases. The rule is that "a plaintiff who terminates therapeutic measures following the accident, while claiming 'serious injury' must offer some reasonable explanation for having done so (4 NY3d at 574). Today the majority dilutes this rule, finding that plaintiff's ambiguous and self-serving statement at his deposition - 'they cut me off at like five months' - is a sufficient 'reasonable explanation'. We should demand more than this. 

If there is indeed a reasonable explanation for plaintiff's cessation of physical therapy, he should have had no trouble in offering much better proof of it. He could have submitted an affidavit in opposition to summary judgment, identifying his no-fault carrier, attaching a copy of the written communication, or describing the oral one, in which the carrier cut him off, and saying what, if any, reason the carrier gave. For all that appears in this record, the carrier might have refused to continue paying for therapy because it did not think plaintiff had an injury serious enough to justify it. Plaintiff could also have said in an affidavit, if he could truthfully do so, that he did not have other insurance or other resources that would cover the cost of treatment. 

In declining to impose these simple requirements - all of which a plaintiff with a real explanation for a gap in treatment should find easy to meet - the majority lowers the barriers that courts have erected against baseless no-fault claims. I therefore dissent. "

 Read decision here.

K2 Investment Group, LLC, v American Guarantee & Liability Insurance Company, decided on June 11, 2013, by the Court of Appeals (21 N.Y.3d 384) expanded the earlier holding of Lang v Hanover Ins. Co., (3 NY3d 350, 2004) with a ruling, 

"an insurance company that has  disclaimed its duty to defend 'may litigate only the validity of its disclaimer. If the disclaimer is found bad, the insurance company must indemnify its insured for the resulting judgment, even if policy exclusions would otherwise have negated the duty to indemnify. This rule will give insurers an incentive to defend the cases they are bound by law to defend, and thus to give insureds the full benefit of their bargain. It would be unfair to insureds, and would promote unnecessary and wasteful litigation, if an insurer, having wrongfully abandoned its insured's defense, could then require the insured to litigate the effect of policy exclusions on the duty to indemnify." 

Clearly a blow against policy defenses found in all standard insurance policies in New York.

On September 3, 2013, the Court of Appeals issued an extremely rare decision on a  motion to reargue in a one sentence order, "Motion for reargument granted and case set down for a future session of this Court."

The case will be heard in 2014. American Guarantee successfully argued on the motion for reargument that the "K2" decision was inapposite to the previously holding of the Court in 1985 in Servidone Constr. v. Security Ins., 64 NY2d 419. 

In Servidone, the Court of Appeals held that an insurer that refused to defend and subsequently lost a declaratory judgment action could still challenge its liability for indemnity based on exclusion for contractual liabilities. 

The Insurance Coverage bar eagerly anticipates the 2014 oral argument and subsequent order. Is an about face in the making?  

Andrew Carothers, M.D., P.C. v Progressive Insurance Company, decided on July 5, 2013  by the Appellate Term, Second Department (2013 NY Slip Op 23232) was the Appellate Term's review of an epic trial from 2010 before Judge Peter Sweeney in Richmond County between Andrew Carothers, M.D., P.C. and 53 insurers and self-insurers, with No-Fault benefits at stake of approximately $18 million. 

The defense in this case was plaintiff's ineligibility to recover no-fault benefits due to plaintiff's failure to comply with New York State's licensing requirements, based on State Farm Mutual Auto. Ins. Co. v Mallela (372 F3d 500, 501 [2d Cir 2004]). 

The Jury in the lower court found that the defense had proven by clear and convincing evidence both that Andrew Carothers, M.D., P.C. was "fraudulently incorporated" and that Dr. Carothers had not engaged in the practice of medicine during the time Andrew Carothers, M.D., P.C. was in business.

At trial, Judge Sweeney allowed the defendants to read deposition testimony from two non-party witnesses, Hillel Sher and Irina Vayman, who were respectively the landlord where Andrew Carothers, M.D., P.C. was located and the office manager of the practice. These two individuals, who were not physicians, also shared in the bulk of the profits from the medical practice. 

For example, one of the MRI machines was being leased to Andrew Carothers, M.D., P.C for $75,000 per month. Hillel Sher, through his company, was leasing this machine from another company at a rate of only

$5,950 per month. 

Another MRI machine, which had been  purchased  by Sher in April 2000 for $240,000, was being leased to the plaintiff four years later at an annual cost of $900,000. 

One expert testified that the total cost for all the equipment that the plaintiff used in its operations, including the cost of installation, would have been less than eight months of rental payments that the corporation had committed to pay to Sher's company for a single MRI machine. 

Indicative of the rental fees that Dr. Carothers had committed to paying Sher was a $500 monthly rental fee for a fax machine. 

When deposed both witnesses invoked their Fifth Amendment privilege not to answer questions posed. Judge Sweeney instructed the jury that they could draw an adverse inference from the failure of the two witnesses to answer questions propounded at the depositions. In a dramatic fashion, defense counsel read more than 100 questions to which each answer was the Fifth amendment privilege.

The Appellate Term decision indicated, 

"We agree with the dissent that it was an error for the Civil Court to permit the defense to read to the jury the deposition transcripts of non-parties Sher and Vayman, especially where each of the more than 100 questions asked yielded a response invoking the Fifth Amendment. The error was compounded by the repeated references to the non-parties' depositions in the defense summation to the jury, and in the decision of the court to charge an adverse inference."  

The error, however, was deemed harmless based on the mountain of evidence that Andrew Carothers, M.D., P.C., was fraudulently incorporated. 

The case is sure to have another round of appeals in the Second Department.

Read the decision here.

In the wake of Perl v Meher, 18 NY3d 208, decided by the Court of Appeals in 2011, motions for summary judgment on the grounds of failure to meet the Insurance Law threshold for serious injury under Section 5102(d) et sequitor, are more problematic for defendants. 

Consider Mackins v Javed, 971 N.Y.S.2d 215, and Cox v Sisti, (2013 NY Slip Op 6340) decided by the Appellate Division, Second Department on September 18, 2013 and October 2, 2013, respectively. 

In each case, the  defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law       § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955). 

The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine and shoulder did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) (see Staff v Yshua, 59 AD3d 614, 874 N.Y.S.2d 180) and that, in any event, any injuries to these areas were not caused by the subject accident

(see Frisch v Harris, 101 AD3d 941, 942, 957 N.Y.S.2d 235). 

In Mackins, the Court, citing Perl said, 

"In opposition, the plaintiff submitted evidence raising a triable issue of fact as to whether those alleged injuries constituted serious injuries under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d) and as to whether those injuries were caused by the subject accident...". 

In Cox , the opposite result was reached with the Court finding the plaintiff did not sustain their burden of showing a triable issue of fact.

More frequently now, after Perl, the Appellate Divisions of all four departments conclude the Defendants' own submissions in support of the motion raise triable issues of fact whether plaintiff sustained a serious injury under the permanent consequential limitation of use and significant limitation of use categories. 

A clear trend is the finding that the Defendants' examining Physician's report, after conducting a medical examination of the injured plaintiff, with a conclusion that the abnormalities in plaintiff's imaging studies are age-related and unrelated to the accident, is inconsistent with the Doctor's contemporaneous conclusion that plaintiff "has no medical condition not related to the accident" and is thus insufficient to establish defendants' entitlement  to judgment on the issue of causation. (see Summers v. Spada, 2013 NY Slip Op 6198 Fourth Department 9/27/13). 

The era of mass dismissals on threshold grounds is over, at least for now. 

Will the pendulum swing back towards the defense bar? We await another clarification from the Court of Appeals, which traditionally will occur on 4 to 5 year cycles.

Read Mackins Decision here.

Read Cox Decision here.

A novel case appeared in this month's news from Cortland County, New York, decided by Judge Phillip R. Rumsey, on September 24, 2013. 

Randall Courtney and his wife, Margaret Courtney, died on September 18, 2011, when the tractor they were riding on, operated by Randall, flipped over on their own property. George Courtney Sr., as Administrator, commenced a wrongful death action against the Estate of Randall. Dryden Mutual Insurance Company, the Courtney's insurer, disclaimed coverage and a Declaratory Judgment action was filed by the Administrator.

Dryden Mutual disclaimed coverage on the basis that the policy specifically excluded coverage for liability arising from bodily injuries sustained by a named insured, citing Cragg v Allstate Indem. Corp., 17 NY3d 118 (2011). The  Administrator contended that the exclusion for bodily injuries sustained by a named insured does not apply to wrongful death claims, because they are brought on behalf of a deceased insured's distributees, and not directly on behalf of an insured or his or her estate. 

The policy at issue in this case excluded coverage for liability "for bodily injury to you and, if residents of your household, your relatives, and any other person under the age of 21 in your care or in the care of your resident relatives".

In Cragg v Allstate Indem. Corp., the Court of Appeals noted that a wrongful death action belongs to the distributees, and that it is designed to compensate them for any pecuniary losses which they may suffer as a result of the wrongful act; therefore, any proceeds from a wrongful death action would accrue directly to the benefit of the distributees, and not to the benefit of the insured. The Court concluded that the exclusion at issue in Cragg - precluding coverage where any benefit would accrue directly or indirectly to an insured person - did not unambiguously bar payment to a noninsured party, including a party asserting a wrongful death claim.

Judge Rumsey concluded, 

"the statutory exclusion contained in Insurance Law § 3420(g) precludes coverage for liability for injuries or death. Inasmuch as it is well-settled that this statutory language excludes coverage for wrongful death claims, Insurance Law § 3420(g) provides an independent basis for concluding that defendant has no duty to defend or indemnify plaintiff in the underlying action (see Allstate Ins. Co. v Roberts, 299 AD2d 820 [2002]; Government Empls. Ins. Co. v Pagano, 251 AD2d 452 [1998])."

 Read the decision here.