Court Covers Broad Range of Topics in Insurance Rulings

August 26, 2020 | Insurance Coverage

As unique as the past term of the New York Court of Appeals was – taking place in the midst of the COVID-19 pandemic, which led the Court to eliminate oral arguments in March, April, and May and to hear oral arguments in June via videoconferencing – there were some important similarities to prior terms.

Continuing its trend, the Court issued decisions in a wide variety of insurance cases; three of the Court’s four significant insurance rulings were unanimous; and two of those four reached the Court by certification from federal circuit courts (as did an increasing number of other non-insurance cases).

Moreover, the observation I made two years ago in this column – that there does not yet seem to be a consistent lineup of judges on the carrier or the policyholder side – still holds true.


Many insurance disputes between carriers have long been resolved by arbitrators rather than by courts. In some cases, insurance policies themselves contain arbitration clauses, as did the policies in American International Specialty Lines Ins. Co. v. Allied Capital Corp., No. 23 (N.Y. April 30, 2020). The Court, in an opinion by Judge Leslie Stein, unanimously upheld a determination by an arbitration panel to reconsider a partial final award.

Insurance Fraud

Perhaps none of the Court’s insurance decisions from this past term will have as important a practical impact as its ruling in Haar v. Nationwide Mutual Fire Ins. Co., 34 N.Y.3d 224 (2019).

The case arose when a surgeon, Dr. Robert Haar, treated four patients who had been injured in automobile accidents and who were insured by Nationwide Mutual Fire Insurance Company. Haar submitted claims to Nationwide, which the insurer either fully or partially denied.

Thereafter, Nationwide filed complaints with the Office of Professional Medical Conduct (OPMC) alleging insurance fraud. After an investigation, the OPMC declined to impose any discipline against Haar. He then sued Nationwide, asserting that the insurer’s complaints to the OPMC lacked a good faith basis in violation of Public Health Law § 230(11)(b). Section 230(11)(b) states that “[a]ny person, organization, institution, insurance company, osteopathic or medical society who reports or provides information to the [OPMC] in good faith, and without malice shall not be subject to an action for civil damages or other relief as the result of such report.”

Nationwide argued that Section 230(11)(b) did not provide Haar with the right to assert a bad faith claim. The case reached the U.S. Court of Appeals for the Second Circuit, which certified the following question to the Court:  Does New York Public Health Law Section 230(11)(b) create a private right of action for bad faith and malicious reporting to the OPMC?

The Court, in a unanimous decision by Judge Stein (with Judge Michael Garcia taking no part), answered the certified question in the negative, finding “no indication that the legislature intended to create a private right of action” in Section 230(11)(b). The Court stated that the text and legislative history of Section 230(11)(b) establish that, to encourage increased reporting of unprofessional conduct, “the legislature specifically sought to shield complainants from liability by imparting a limited immunity from civil actions commenced by regulated entities.”

The Court’s decision has important ramifications for all those who file reports with the OPMC, including insurance companies. Insurers are required by New York’s no-fault law and implementing regulations to report “patterns of overcharging, excessive treatment or other improper actions by a health provider.” Had the Court authorized bad faith lawsuits against insurers that file these reports, carriers likely would have faced a blizzard of lawsuits by physicians who are the subjects of these reports. The Court’s decision avoids that result, and allows the statutory procedures to work as the legislature intended.

General Business Law §§ 349, 350

Judge Stein was the author of yet another unanimous insurance decision: Plavin v. Group Health Inc., 35 N.Y.3d 1 (2020). This case reached the Court after the U.S. Court of Appeals for the Third Circuit asked it to decide whether the plaintiff, a retired New York City police officer, had sufficiently alleged consumer-oriented conduct to assert claims under General Business Law (GBL) Sections 349 and 350 for damages allegedly incurred due to materially misleading representations an insurance company allegedly made to New York City employees and retirees about the terms of its insurance plan to induce them to select it from among 11 health insurance plans.

GBL Section 349 makes unlawful any “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state.” Similarly, GBL Section 350 makes “[f]alse advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state” unlawful. To state a claim under these sections, a plaintiff must allege, among other things, that a defendant had engaged in “consumer-oriented conduct.”

In Plavin, the Court observed that, by providing a choice of 11 options, the city created a health insurance marketplace for its employees and retirees, and the insurer’s summary materials “contained the only information” provided to city employees and retirees when determining whether to select the insurer’s plan. Under these circumstances, the Court held, the complaint “adequately alleged consumer-oriented conduct.”

It remains to be seen if the Court’s decision in Plavin will help clarify the “consumer-oriented conduct” requirement or will help trial and appellate courts that continue to struggle with the standard. Consider that, just about one week after Plavin, the Court issued a memorandum opinion in Collazo v. Netherland Property Assets LLC, No. 5 (N.Y. April 2, 2020), reaching a different result than it reached in Plavin. The Court in Collazo upheld the dismissal of a GBL Section 349 claim, finding that the plaintiffs failed to allege more than “bare legal conclusions” regarding the existence of consumer-oriented, deceptive acts. Neither the Court’s memorandum decision, nor the partial dissent by Judge Jenny Rivera, cited Plavin.

New York has no bad faith statute providing a private right of action. In its stead, GBL Section 349 has been utilized and continues to be a source of litigation as to its scope and applicability.

Unemployment Insurance

The Court decided an interesting workplace-related insurance case this past term, involving the question of deference to an administrative agency.

The issue before the Court in Matter of Vega, No. 13 (N.Y. March 26, 2020), was whether there was substantial evidence supporting the decision of the Unemployment Insurance Appeals Board that Luis Vega, a former courier for the delivery business Postmates, Inc., and others similarly-situated were employees for whom Postmates was required to make contributions to the unemployment insurance fund.

The New York State Department of Labor initially determined that Vega was an employee of Postmates, requiring that Postmates pay unemployment insurance contributions on Vega’s earnings as well as on the earnings of “all other persons similarly employed.” An administrative law judge sustained Postmates’ objection, concluding that Vega was an independent contractor and reasoning that Postmates had not exercised sufficient supervision, direction, and control over Vega to establish an employer-employee relationship.

The board reversed, overruled Postmates’ objection, and sustained the department’s initial determination that Vega was an employee.

Postmates appealed to the Appellate Division, Third Department, which reversed the board’s determination. The Third Department concluded that “[w]hile proof was submitted with respect to Postmates’ incidental control over the couriers,” the proof “d[id] not constitute substantial evidence of an employer-employee relationship to the extent that it fail[ed] to provide sufficient indicia of Postmates’ control over the means by which these couriers perform their work.” Two dissenting justices would have confirmed the board decision, concluding that there was substantial evidence supporting its determination that Vega was an employee of Postmates.

The Court, in an opinion by Chief Judge Janet DiFiore, in which Judges Stein, Eugene M. Fahey, and Paul G. Feinman concurred, explained that the board traditionally considers a number of factors in determining whether a worker is an employee or an independent contractor, but that the “touchstone of the analysis” is whether the employer exercised control over the results produced by the worker or the means used to achieve the results.

The Court noted that a determination by the board, “if supported by substantial evidence on the record as a whole,” was beyond further judicial review even though there might be evidence in the record supporting a contrary conclusion. Moreover, the Court added, substantial evidence was a “minimal standard” requiring “less than a preponderance of the evidence.”

The Court rejected the contention put forth by Judge Rivera in a separate opinion concurring in the result and by Judge Rowan D. Wilson in a dissenting opinion, in which Judge Garcia concurred, that the Court should devise a different test for analyzing whether a worker is an employee or independent contractor. Among other things, the Court said that whether a different definition or test should apply to employees generally, or to couriers in particular, was a policy question for the legislature.

The Court then found that the board’s determination that the couriers were employees was supported by “substantial evidence” in the record. Accordingly, the Court reversed the Third Department and reinstated the board’s decision.

Setting the Stage

Finally, the Court already has agreed to hear two important insurance coverage cases in its next term.

At the end of March, the Court again agreed to hear an appeal in J.P. Morgan Securities, Inc. v. Vigilant Ins. Co., 166 A.D.3d 1 (1st Dep’t 2018). This is the second time the case has reached the Court. J.P. Morgan Securities, Inc. v. Vigilant Ins. Co., 21 N.Y.3d 324 (2013).

The dispute arose out of the insured’s settlement of a Securities and Exchange Commission (SEC) proceeding and related private litigation predicated on the insured’s alleged violations of federal securities laws. The Appellate Division, First Department, concluded that the insurers did not have to cover the $140 million portion of the SEC settlement that amounted to “disgorging” allegedly improper profits acquired by third-party hedge fund customers. (The insured did not seek coverage for the $20 million portion representing its own allegedly ill-gotten gains.) The First Department held that the SEC disgorgement was an “uninsurable penalty” and not a “loss” covered by the insured’s policies – which now is an issue squarely before the Court.

Then, in early May, the Court accepted certification from the Second Circuit in Brooklyn Center for Psychotherapy, Inc. v. Philadelphia Indemnity Ins. Co., 955 F.3d 305 (2d Cir. 2020), involving a dispute over the scope of a commercial general liability insurance policy.

In this case, a hearing impaired woman sued Brooklyn Center for Psychotherapy, Inc., for allegedly failing to accommodate her disability. Brooklyn Center sought defense costs for that lawsuit from its insurer. The insurer denied coverage and Brooklyn Center sued.

The case reached the Second Circuit, which explained that the question it had to decide was whether Brooklyn Center’s alleged failure to accommodate the woman’s disability constituted an “occurrence” under Brooklyn Center’s insurance policy. Finding that the New York Court of Appeals had not directly addressed that subject, it certified the following question to the Court:

Must a general liability insurance carrier defend an insured in an action alleging discrimination under a failure-to-accommodate theory?


Just days ago, the Court changed argument dates for its September and October sessions and released its calendar of sessions for 2021. All members of the bench and bar are hopeful that the next term of the Court will see a return to its normal practices.

This article is reprinted with permission from the August 26, 2020 issue of the New York Law Journal. Copyright ALM Properties, Inc. Further duplication without permission is prohibited. All rights reserved.

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  • Evan H. Krinick

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