Dissenting Opinions Highlight Split Among Exiting JudgesAugust 24, 2015
The Court of Appeals issued seven principal insurance law decisions this past term.1 Four decisions affirmed the rulings below, two reversed, and one modified. Five were in favor of insurance companies and two in favor of policyholders. Two of the seven were unanimous, one was decided by a vote of four-to-one, and four had at least two dissenting judges.
Looking at the four cases that divided the Court with at least two dissenting judges, one sees that the individual judges voted as follows:
• Judge Sheila Abdus Salaam: three (pro-insurer); one (pro-policyholder)
• Judge Susan P. Read: three (pro-insurer); one (pro-policyholder)
• Judge Leslie Stein: two (pro-insurer); zero (pro-policyholder)
• Judge Jenny Rivera: one (pro-insurer); one (pro-policyholder)
• Judge Victoria A. Graffeo: two (pro-insurer); zero (pro-policyholder)
• Jude Robert S. Smith: two (pro-insurer); zero (pro-policyholder)
• Judge Eugene F. Pigott: one (pro-insurer); three (pro-policyholder)
• Judge Eugene M. Fahey: zero (pro-insurer); two (pro-policyholder)
• Chief Judge Jonathan Lippman: zero (pro-insurer); four (pro-policyholder)
Although this is a relatively small sample, one thing stands out with respect to Chief Judge Lippman and Judge Read, both of whom will be leaving the Court: Chief Judge Lippman ruled in favor of policyholders in every one of these four cases and Judge Read ruled in favor of insurance companies in three of these four cases (all of which will be discussed in more detail below).
The tendency of Chief Judge Lippman and Judge Read to rule in favor of policyholders or insurance companies, respectively, is further seen from their votes in the six insurance law cases that divided the Court (i.e., with at least two judges dissenting) during the 2012-2014 terms: Chief Judge Lippman voted in favor of insurers one time and in favor of policyholders five times, while Judge Read was just the opposite, with five votes in favor of insurers and one in favor of policyholders.2
In fact, during the past four years in insurance law cases that divided the Court, Chief Judge Lippman was the judge who most voted in favor of policyholders (nine out of 10 cases) while Judge Read was the judge who most voted in favor of insurers (eight out of nine decisions in which she participated).3
The balance of this column will discuss the four insurance law cases that divided the Court this past term.
The first of the four cases chronologically, Strauss Painting v. Mt. Hawley Ins., arose after Strauss Painting/Creative Finishes contracted with the Metropolitan Opera Association to strip and repaint the rooftop steel carriage track for the opera house’s automated window-washing equipment.
A Creative employee who allegedly was injured while working at the site sued the Met. In subsequent litigation among Strauss, Mt. Hawley Insurance, and the Met, the Met sought a declaration that it was an additional insured on the commercial general liability (CGL) insurance policy issued by Mt. Hawley to Strauss, thereby requiring Mt. Hawley to defend and indemnify it in the lawsuit brought by the Creative employee.
In a per curiam decision, the Court decided that the Met was not an additional insured under the Mt. Hawley policy. It explained that, under the additional insured endorsement of the Mt. Hawley policy, whether the Met was an additional insured hinged on whether Strauss and the Met had “agreed in writing in a contract or agreement that [the Met] be added as an additional insured on [Strauss’] policy.” In connection with that requirement, the parties focused on the provision in the contract between Strauss/Creative and the Met that stated:
b. Owners and contractors protective liability insurance with a combined single limit of $5,000,000.00. Liability should add the Metropolitan Opera Association as an additional insured and should include contractual liability and completed operations coverage.
The Court found that the second sentence of this provision referred only to owners and contractors protective (OCP) liability insurance and not to Strauss’ CGL policy.
Interestingly, the two judges who dissented in this case were Judge Read and Chief Judge Lippman. They agreed that this provision should be read in favor of the Met, asserting that the second sentence did not only refer to OCP insurance but “clearly obligate[d] Strauss” to have in place a CGL policy protecting the Met as an additional insured.
Chief Judge Lippman and Judge Read were on opposite sides of the next three cases, beginning with Nesmith v. Allstate Ins., decided the day after Strauss Painting.
In September 1991, Allstate Insurance issued a liability insurance policy to the landlord of a two-family house in Rochester that contained a “non-cumulation clause” limiting Allstate’s total liability to one policy limit.4 The policy was renewed annually in September 1992 and September 1993.
Felicia Young and her children lived in one of the two apartments in the house from November 1992 until September 1993. In July 1993, the Department of Health (DOH) notified the landlord that one of the children had an elevated blood lead level and that several areas in the apartment were in violation of state regulations governing lead paint. The DOH listed the violations, the landlord made some repairs, and the DOH advised him in August 1993 that the violations had “been corrected.”
After the Young family moved out of the apartment in September 1993, Lorenzo Patterson, Sr., and Qyashitee Davis moved in with their two children. Again a child was found to have an elevated blood lead level, and the DOH sent another letter saying that violations had been found and instructing the landlord to correct them.
Young, on behalf of her children, and Jannie Nesmith, on behalf of the Patterson children (her grandchildren), brought two separate actions against the landlord for personal injuries allegedly caused by lead paint exposure. Young’s action was settled for $350,000, which Allstate paid. Nesmith then settled her claim pursuant to a stipulation that reserved the issue of the applicable policy limit for future litigation. Allstate paid the $150,000 that it claimed was the remaining coverage and Nesmith sued Allstate, asserting that a separate $500,000 limit applied to each family’s claim and that her grandchildren, therefore, could recover up to an additional $350,000 from Allstate.
In a majority opinion by Judge Smith, the Court ruled in favor of Allstate. The majority rejected the argument that the alleged injuries to Young’s children and Nesmith’s grandchildren were separate losses. The majority reasoned that Young’s children and Nesmith’s grandchildren had been exposed “to the same hazard, lead paint, in the same apartment.” According to the majority, there was no basis for inferring that a new lead paint hazard had been introduced into the apartment after the landlord’s remedial efforts. The “only possible conclusion,” according to the majority, was that the landlord’s remedial efforts had not been wholly successful, and that the same general conditions continued to exist. The Court concluded that because Young’s children and Nesmith’s grandchildren allegedly had been injured by exposure to the same general conditions, their injuries were part of a single “accidental loss,” and only one policy limit was available to the two families.
Judge Pigott, in a dissent joined by Chief Judge Lippman, interpreted the non-cumulation clause to provide that the policy limit—$500,000 limit for “each occurrence”—applied to limit the liability for lead exposure of children in one family during the course of that family’s tenancy. Because the Nesmith children had moved into the apartment during the second renewal period and had lived in the apartment from September 1993 to September 1994, they were entitled to recover up to the full policy limits, the dissenting judges contended. Otherwise, they reasoned, when the landlord renewed his policy and paid his premium, “he procured less protection with respect to lead paint claims.” They concluded that if the insured knew that his later policies would not cover lead paint injuries occurring after his remediation efforts, “he surely would not have continued purchasing the insurance at essentially the same premium from the same insurer.”
‘Viviane Etienne Medical Care’
Viviane Etienne Medical Care v. Country-Wide Ins., arose when Alem Cardenas was treated at the office of Viviane Etienne Medical Care (VEMC) after an automobile accident. Cardenas, who was insured by Country-Wide Insurance Company, assigned his right to receive no-fault benefits to VEMC.
VEMC submitted eight verification of treatment forms to Country-Wide; the insurer denied payment on one claim in the amount of $139 but did not respond to any of the other claims.
VEMC sued Country-Wide to recover the no-fault insurance benefits it claimed it was owed. VEMC moved for summary judgment, arguing that it had met its prima facie burden of showing the fact and amount of loss sustained and that the payment of the benefits was overdue. As support, VEMC submitted the eight verification of treatment forms as proof of claim, along with seven mailing ledgers stamped by the U.S. Postal Service indicating the date the forms were mailed, and the denial of claim form. Additionally, VEMC submitted an affidavit of the president of a third-party billing company hired by VEMC that explained his procedures for billing insurers on behalf of VEMC.
The majority opinion, by Judge Abdus-Salaam, explained that where an insurer failed to pay or deny a claim within 30 days following its receipt of the claim, the insurer was precluded—on the basis of decisions by the Court itself—”from asserting a defense against payment of the claim” except where the insurer raised lack of coverage as a defense.
The majority then held that a summary judgment motion in a no-fault insurance case where benefits were overdue only required “proof that the statutory claim forms were mailed to and received by the insurer.” The majority concluded that VEMC had met this standard.
Judge Stein’s dissent, in which Judge Read joined, disagreed with the majority’s decision that a medical provider in a no-fault case established prima facie entitlement to summary judgment by demonstrating that the insurer was billed and failed to timely deny or pay the billed claim. The dissent argued that nothing in the statutory and regulatory no-fault scheme or in the Court-created preclusion doctrine obviated a medical provider’s burden to demonstrate its prima facie entitlement to benefits sought, as compared to only proof of billing and non-payment.
The dissent pointed out that although proof of billing and the absence of timely denial or payment may be required in order to invoke the preclusion rule, the Court had never held that such proof constituted a prima facie showing of entitlement to judgment in a no-fault plaintiff’s favor. The dissent warned that the practical effect of the majority’s holding was that courts lacked authority to verify that a no-fault plaintiff had established the basic facts supporting a claim prior to awarding judgment—increasing the risk that insurers will be required to pay out fraudulent claims.
The issue in the final case, State Farm Mutual Automobile Ins. v. Fitzgerald,5 was whether a police car was a “motor vehicle” for purposes of the New York insurance law provision requiring that all motor vehicle insurance policies must contain uninsured motorist coverage.
In this case, Police Officer Patrick Fitzgerald alleged that he was injured when he was riding in a police vehicle driven by Police Officer Michael Knauss that was struck by an intoxicated driver of an underinsured vehicle. At the time, Knauss maintained an automobile liability insurance policy issued by State Farm Mutual Automobile Insurance Company that included a supplementary uninsured/underinsured motorist (SUM) endorsement. In addition to covering Knauss as the named insured and his family, the SUM endorsement insured against injuries to “any other person while occupying” Knauss’ personal vehicle or “any other motor vehicle while being operated by [the named insured] or [the named insured’s] spouse.”
State Farm rejected Fitzgerald’s demand for underinsured motorist arbitration under the SUM endorsement of Knauss’ policy on the ground that he had occupied a police vehicle, which was not a covered “motor vehicle” within the meaning of the endorsement.
The majority, in a decision by Judge Abdus-Salaam, held that a SUM endorsement prescribed by Insurance Law §3420(f)(2)(A) exempted police vehicles from its definition of the term “motor vehicle” absent a specific provision to the contrary in a given SUM endorsement. Because there was no contrary provision in the State Farm SUM endorsement, the majority held that it did not cover liability for injuries arising from the use of a police vehicle of the sort occupied by Fitzgerald during his accident.
Judge Pigott’s dissent, in which Chief Judge Lippman and Judge Fahey concurred, asserted that Fitzgerald was entitled to coverage under Knauss’ SUM endorsement. The dissent’s view was that the legislature had intended to make compensation available in cases in which insured persons suffered automobile accident injuries at the hands of financially irresponsible motorists. Judge Pigott concluded that the legislature had “specifically declared its grave concern that motorists who use the public highways be financially responsible to ensure that innocent victims of motor vehicle accidents be recompensed for their injuries and losses,” warning that under the majority holding, Fitzgerald was left “without uninsured motorist coverage altogether.”
Of course, it is difficult to predict how individual judges will decide particular cases. Moreover, most of the insurance cases resolved by the Court are decided by unanimous or near unanimous rulings. Nevertheless, for those cases in which the Court is divided, insurers and policyholders may want to pay particular attention to the replacements for Chief Judge Lippman and Judge Read, as the new judges could affect their interests in future cases before the Court.
1. Sierra v. 4401 Sunset Park, 24 N.Y.3d 514 (2014); Nesmith v. Allstate Ins., 24 N.Y.3d 520 (2014) (the author and his firm represented Allstate Insurance in this case); Strauss Painting v. Mt. Hawley Ins., 24 N.Y.3d 578 (2014); Platek v. Town of Hamburg, 24 N.Y.3d 688 (2015); Viviane Etienne Medical Care v. Country-Wide Ins., No. 75 (N.Y. June 10, 2015); Universal American v. National Union Fire Ins. of Pittsburgh, PA., No. 95 (N.Y. June 25, 2015); and Matter of State Farm Mutual Automobile Ins. v. Fitzgerald, No. 119 (N.Y. July 1, 2015) (the author and his firm represented State Farm Mutual Automobile Insurance in this case).
2. Hahn Automotive Warehouse v. American Zurich Ins., 18 N.Y.3d 765 (2012) (Judges Read, Smith, and Pigott dissent from pro-policyholder decision); Dean v. Tower Ins. of N.Y., 19 N.Y.3d 704 (2012) (Judges Jones, Read, and Smith dissent from pro-policyholder decision); American Building Supply v. Petrocelli Group, 19 N.Y.3d 730 (2012) (Judges Pigott and Graffeo dissent from ruling against insurance broker); K2 Investment Group v. American Guaranty & Liability Ins., 22 N.Y.3d 578 (2014) (Judges Graffeo and Pigott dissent from pro-insurer ruling); Voss v. Netherlands Ins., 22 N.Y.3d 728 (2014) (Judges Smith, Read, and Pigott dissent from ruling against insurance broker); and QBE Ins. v. Jinx-Proof, 22 N.Y.3d 1105 (2014) (Judge Pigott and Chief Judge Lippman dissent from pro-insurer decision).
3. The combined tally for the other judges is as follows:
• Judge Smith: five (insurer); one (policyholder)
• Judge Abdus Salaam: four (insurer); two (policyholder)
• Judge Stein: two (insurer); zero (policyholder)
• Judge Graffeo: four (insurer); four (policyholder)
• Judge Rivera: three (insurer); two (policyholder)
• Judge Pigott: four (insurer); six (policyholder)
• Judge Fahey: zero (insurer); two (policyholder)
4. The policy’s noncumulation clause provided:
Regardless of the number of insured persons, injured persons, claims, claimants or policies involved, our total liability under the Family Liability Protection coverage for damages resulting from one accidental loss will not exceed the limit shown on the declarations page. All bodily injury and property damage resulting from one accidental loss or from continuous or repeated exposure to the same general conditions is considered the result of one accidental loss.
5. The Court ordered reargument in this case, Matter of State Farm Mutual Automobile Ins. v. Fitzgerald, 2015 N.Y. Slip Op. 02673 (March 31, 2015), and issued its decision on July 1 with Judge Rivera taking no part and with Presiding Justice Luis A. Gonzalez of the Appellate Division, First Department, participating.
Reprinted with permission from the August 24, 2015 edition of the New York Law Journal © 2015 ALM Media Properties, LLC. All rights reserved.