Summing Up, Personal Injury Newsletter from Attorneys Chelus, Herdzik, Speyer & Monte, P.C., Buffalo, New York Lawyers

The personal injury newsletter addressing issues facing insurance carriers and personal injury plaintiffs. Click on a date if you know the month of the issue you wish to see, or use your browser's Search function for a content based search.

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December 2004

THE COURT OF APPEALS HAS RULED THAT INSURANCE LAW ' 3420 REQUIRES ONE INJURED TO OBTAIN A JUDGMENT AGAINST A TORTFEASOR BEFORE A DECLARATORY JUDGMENT ACTION CAN BE COMMENCED AGAINST A LIABILITY INSURANCE CARRIER

In the recent Court of Appeals case of David Lang v. Hanover Insurance Company, (2004 WL 2607764 (N.Y.), 2004 N.Y. Slip Op. 08259), the plaintiff, Lang was injured while he was playing paintball at the home of John and Beth Dubin. Lang sustained injuries when he was struck in the eye by a paintball fired by Richard Bachman, who was a guest of the Dubins.

Coverage as to Bachman was disclaimed by the Dubin=s homeowners insurance carrier, defendant, Hanover Insurance Company, arguing that Bachman was not an Ainsured@ as the term is defined within the policy. Lang thereafter filed a personal injury action against Bachman. Before the merits of the case were adjudicated, Bachman filed for Chapter 7 bankruptcy.

Lang subsequently filed a declaratory judgment action against Hanover challenging its disclaimer of coverage. Lang sought a judgment from the Court declaring Bachman an insured under the policy and requiring Hanover to defend and indemnify Bachman. In response, Hanover argued that Lang lacked standing to sue pursuant to Insurance Law ' 3420 and moved for an order dismissing the complaint.

Insurance Law ' 3420 allows an injured party to bring an action directly against an insurance carrier for the purpose of satisfying a judgment that was obtained against the tortfeasor. Based on this provision, Hanover argued that Lang=s declaratory judgment action was premature due to Lang=s failure to first obtain a judgment against Bachman. Lang responded that because bankruptcy precludes recovery from the tortfeasor, Bachman=s bankruptcy filing should create an equitable exception to the statutory condition that a judgment be obtained.

The Trial Court disagreed with Hanover=s position and denied its motion to dismiss the complaint. However, in an unanimous decision rendered by the Appellate Division, Third Department, 309 A.D.2d 1123, 766 N.Y.S.2d 915,(3rd Dept. 2003) Lang=s complaint against Hanover was dismissed.

Upon further appeal, the Court of Appeals affirmed the Third Department=s decision thereby agreeing with Hanover=s analysis of Insurance Law ' 3420. The Court ruled that Lang=s declaratory judgment action against Hanover was premature for failure to first obtain a judgment against Bachman. The Court disagreed with Lang=s argument that the filing of bankruptcy by Bachman creates an exception to the letter of Insurance Law ' 3420 requiring that a judgment be obtained. In doing so, the Court noted that federal courts permit a plaintiff in a personal injury action to obtain a judgment against the bankrupt tortfeasor for the distinct purpose of commencing an action against the insurance carrier in accordance with the requirement of Insurance Law ' 3420.

The Court further commented that if an insurance carrier disclaims liability and requires the claimant to utilize the mechanics of Insurance Law ' 3420, the carrier will be precluded from relitigating the issues of liability and damages that were adjudicated in the underlying action against the tortfeasor. Consequently, the carrier will be limited to litigating only the validity of its disclaimer. The Court therefore suggested that a carrier initiate a declaratory judgment action affirming its disclaimer of coverage to afford itself an opportunity to defend its insured should the disclaimer be ruled improper.

Michele L. Laski

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November 2004

"PRIOR WRITTEN NOTICE"

IS SATISFIED BY A WRITING DONE

INTERNALLY BY A CITY AGENCY

In Bruni v. City of New York, 2 N.Y.3d 319, 778 N.Y.S.2d 757 (2004), a road defect was written up after an inspection by a branch of the city=s environmental protection department. Sometime after the written report, the plaintiff fell as a result of the defect. New York=s highest court held that this written notice was sufficient under the so-called Apot hole law@ which requires such notice as a prerequisite to recovery from a municipality. In reaching this decision, the Court of Appeals rejected the city=s argument that the prior written notice must come from an external, not an internal, source.

WORKERS= COMPENSATION RECOVERY

DOES NOT BAR TORT SUIT AGAINST

FELLOW EMPLOYEE FOR INTENTIONAL ACT

In Hanford v. Plaza Packing Corp., 2 N.Y.3d 348, 778 N.Y.S.2d 768 (2004), the New York Court of Appeals held that an action for an intentional tort against a co-employee is not barred by the plaintiff=s receipt of Workers= Compensation benefits. In Hanford, the plaintiff alleged that the defendant co-employee concealed a video camera in a locker room on the premises of the employer in an unsuccessful attempt to tape the plaintiff while she changed her clothes. The plaintiff applied for and received Workers= Compensation benefits arising out of the incident.

The plaintiff then sued the employer and the co-employee individually. The claim against the employer was dismissed on the basis of the exclusivity provisions of the Workers= Compensation Law '29. The Court of Appeals decided that the employee was not entitled to the same protection because Aan employee who commits an intentional tort outside the scope of his employment is not protected by Workers= Compensation Law '29.@ Hanford, 778 N.Y.S.2d at 769.

NEW YORK COURT OF APPEALS HOLDS

THAT DISCLOSURE OF A "COPY" OF

SURVEILLANCE VIDEOTAPE IS SUFFICIENT

In Zegarelli v. Hughes, 3 N.Y.3d 64, 781 N.Y.S.2d 488 (2004), the defendant turned over a copy of surveillance footage on VHS format. During the trial, the plaintiff=s lawyer objected to the admissibility of this tape claiming that he had not had an opportunity to see the original tape. The lower court precluded the tape despite the testimony of the defendant=s investigator that the tape had not been edited in the copying process. The Court of Appeals reversed holding that the defendant=s disclosure of a copy is sufficient so long as the original is available for the plaintiff=s inspection. In this case, the court noted that the plaintiff=s lawyer did have ample opportunity to inspect the original tape but did not do so.

John N. Philipps, Jr.

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OCTOBER 2004

COURT OF APPEALS UPHOLDS INSURER=S NOTICE REQUIREMENTS NOTWITHSTANDING CLAIMANT=S RELIANCE ON STRICT TIME LIMITS IMPOSED UPON INSUREDS BY THE VEHICLE AND TRAFFIC LAW

Well-settled principles of insurance law provide an insurer the right to demand, within the terms of its policy, that it be notified of any loss or accident covered under the policy and that it receive timely notice of a claimant=s commencement of litigation. These have long been recognized as rights which provide an insurer the opportunity to protect itself and to appear and defend against a claim or exercise its right to settle. Until a recent Court of Appeals decision, it appeared as if '370(4) of the Vehicle and Traffic Law might limit these rights for those claims arising out of the operation of vehicles for hire.

In American Transit Insurance Co. v. Anthony Sartor and Utica Taxi Center, Inc. 2004 WL 1472632 (July 1, 2004), the Court of Appeals was faced with the question of whether '370 of the Vehicle and Traffic Law requires the insurer of a taxicab to satisfy a default judgment entered against its= insured where the insurer was never notified that a legal proceeding had been commenced.

Sartor was injured in March, 2000 when the vehicle he was driving became involved in an accident with a taxicab owned by Utica Taxi Center, Inc., and insured by American Transit. Although, pursuant to '370(4) of the Vehicle and Traffic Law, a taxi operator is required to give written notice of an accident to its insurer within five days, American Transit was not informed of the collision until seven months after it occurred.

Sartor commenced litigation for personal injuries against Utica Taxi Center, Inc. in Federal District Court. Utica Taxi defaulted. Neither Utica Taxi nor Sartor provided notice of the litigation to American Transit.

Sartor eventually obtained a default judgment and was awarded $100,000.00. Claiming that it had not been provided timely notice of the commencement of litigation or the application for a default judgment, American Transit disclaimed coverage and commenced a declaratory action seeking a judicial determination that its= disclaimer of coverage was proper.

According to '370(4) of the Vehicle and Traffic Law, A[e]very person operating a motor vehicle...as to which a bond or policy of insurance is required by this section, which is in any manner involved in an accident, shall within five days give written notice of the time and place of the accident to the surety or insurer. Failure to give notice of the accident as herein provided shall constitute a misdemeanor, but shall not affect the liability of the surety or insurer.@

The Appellate Division reversed the decision of the lower court and held that Utica Taxi=s failure to properly notify American Transit of the accident did not relieve American Transit of its obligation to Sartor as the injured party. Relying upon '370(4), the Appellate Division determined that even when, as in this case, an insured fails to properly notify its= insurer of an accident, the insurer=s liability to the injured party is not affected. Therefore, American Transit=s disclaimer of coverage was deemed improper and the company was ordered to pay the default judgment obtained by Sartor.

The Court of Appeals disagreed and concluded that a violation of '370(4) does not obviate the insurer=s right to notice. The Court noted that the claimant himself may provide notice to the insurer so as to protect his right to recovery. Therefore, American Transit was not obligated to satisfy the default judgment obtained by Sartor.

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SEPTEMBER 2004

EMPLOYEE=S SEXUAL ASSAULT ON CUSTOMER WAS AACCIDENT@ AND THEREFORE COVERED BY INSURANCE POLICY

A recent decision of the Court of Appeals holds that an alleged assault committed by an employee was considered an Aaccident@ and hence covered under the insured=s liability policy.

In RJC Realty Holding Corp. v. Republic Franklin Insurance Co., 2 N.Y.3d 158, 777 N.Y.S.2d 4 (April 1, 2004), a customer sued a beauty parlor (the insured) for a sexual assault allegedly committed by one of its masseurs. The Court of Appeals, using the reasoning from its 2000 Agoado decision (95 N.Y.2d 141, 711 N.Y.S.2d 141), held that the assault had to be gauged from the insured=s standpoint and not the assailant=s. Since the beauty parlor in RJC Realty did not intend the assault from its own viewpoint, the assault was an Aaccident@ and therefore was covered under its liability policy.

THIRD DEPARTMENT DISTINGUISHES BLAKE FROM CIRCUMSTANCES WHERE SAFETY IS COMPROMISED BY FACTORS UNRELATED TO PLAINTIFF=S CONDUCT

Eight months ago, the Court of Appeals attempted to clarify the so called AScaffold@ Law, i.e. Labor Law '240. The Blake v. Neighborhood Housing Services of New York City, Inc. decision (1 N.Y.3d 280, 771 N.Y.S.2d 484 [2003]), as discussed in our February 2004 issue of ASumming Up@, stated that while Labor Law '240 should be construed liberally, it is not a catchall for every elevation related action. In the Blake decision, the Court of Appeals specifically declined to expand '240 Liability to cover accidents where there are no safety violations and the accident was purely the fault of the plaintiff. In Blake, the plaintiff failed to secure the rungs of an extension ladder. The ladder collapsed.

In Gilbert v. Albany Medical Center, N.Y. Slip Op. 05824, 779 N.Y.S.2d 653, (3^rd Dept., July 8, 2004), the plaintiff, a worker who was standing on a ladder and removing asbestos from a pipe, was injured when the ladder slipped and collapsed. The plaintiff moved for partial summary judgment on his Labor Law '240 cause of action. The trial court denied his motion and plaintiff appealed.

The 3^rd Department, in considering the precedence established by Blake, was divided on the issue of whether the slipperiness of the floor could appropriately be considered a factor which compromised safety unrelated to the plaintiff=s conduct. The majority held that while under the Blake decision, if a plaintiff=s conduct alone causes an accident, there is no liability under Labor Law '240; if the accident was attributable in any degree to a deficiency other than the neglect of the employee, the Acomparative negligence@ of the employee is not a defense to Labor Law '240.

The Gilbert Court found that evidence showed that the ladder was placed on a slippery surface. This created a prima facie showing of a Labor Law '240 violation. The majority concluded that this violation alone resulted in strict liability, regardless of the plaintiff=s actions. The 3^rd Department overturned the trial court=s order and granted the plaintiff=s motion for partial summary judgment on his Labor Law '240 cause of action.

Michael M. Chelus

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AUGUST 2004

STRICT LIABILITY UNDER NEW YORK LABOR LAW APPLIED TO THE SPOUSE OF HOMEOWNER AFTER A WORKER IS INJURED DURING CONSTRUCTION OF HOME

IN A RECENT DECISION, THE STRICT LIABILITY OF NEW YORK LABOR LAW SECTIONS 240(1) AND 241(6) WAS HELD TO APPLY TO THE NON-TITLED SPOUSE OF A ONE-FAMILY DWELLING OWNER.

IN FISHER V. COGHLAN, ET AL, 2004 WL 1325775, 2004 N.Y SLIP.OP. 04890 (4TH DEPT. 2004), THE PLAINTIFF WAS INJURED WHEN A SCAFFOLD COLLAPSED BENEATH HIM. AT THE TIME OF HIS INJURY, THE PLAINTIFF WAS INSTALLING A ROOF ON A ONE-FAMILY DWELLING BEING CONSTRUCTED BY THE DEFENDANTS, SANDRA AND JEFFREY COGHLAN. JEFFREY COGHLAN, ALTHOUGH MARRIED TO THE PROPERTY OWNER, SANDRA COGHLAN, WAS NOT NAMED ON THE DEED. THE PLAINTIFF ASSERTED CAUSES OF ACTION BASED UPON COMMON LAW NEGLIGENCE, AS WELL AS ALLEGED VIOLATIONS OF LABOR LAW SECTIONS 200, 240(1) AND 241(6).

UNDER NEW YORK LABOR LAW SECTIONS 240(1) AND 241(6) ACONTRACTORS OR OWNERS AND THEIR AGENTS@ WHO ADIRECT OR CONTROL THE WORK@ ARE REQUIRED TO PROVIDE CERTAIN MEASURES OF SAFETY FOR WORKERS. A VIOLATION OF EITHER SECTION OF THE LABOR LAW THAT RESULTS IN AN INJURY TRIGGERS STRICT LIABILITY. HOWEVER, THE STATUTES EXEMPT FROM EXPOSURE OWNERS OF ONE OR TWO FAMILY DWELLINGS. UPON THIS EXEMPTION, THE DEFENDANTS MOVED FOR SUMMARY JUDGMENT.

WHILE SANDRA COGHLAN=S SUMMARY JUDGMENT MOTION WAS GRANTED, THE COURT DENIED THE SUMMARY JUDGMENT MOTION OF JEFFREY COGHLAN. THE COURT NOTED THAT MR. COGHLAN WAS NOT NAMED ON THE PROPERTY DEED.

IN AFFIRMING THE LOWER COURT=S DECISION, THE FOURTH DEPARTMENT AGREED THAT JEFFREY COGHLAN=S MARRIAGE TO THE PROPERTY OWNER DID NOT CHANGE THE FACT THAT HE WAS NOT AN AOWNER@ OF THE PROPERTY. THE COURT REASONED THAT THE EXEMPTIONS PROVIDED BY LABOR LAW SECTIONS 240(1) AND 241(6) APPLY ONLY TO TITLED PROPERTY OWNERS OF ONE OR TWO FAMILY DWELLINGS. THE COURT REASONED THAT THE FACT THAT THE DEFENDANT IS MARRIED TO THE PROPERTY OWNER IS IRRELEVANT. FURTHERMORE, THE COURT REFUSED TO EXTEND THE DEFINITION OF AOWNER@ IN ORDER TO INCLUDE NON-TITLED SPOUSES.

THE FOURTH DEPARTMENT THEN DETERMINED THAT THERE WAS A TRIABLE ISSUE OF FACT AS TO WHETHER JEFFERY COGHLAN WAS ACTING AS A CONTRACTOR OR AGENT OF THE OWNER WHO EXERCISED DIRECTION OR CONTROL OVER THE PROJECT. IN SUPPORT OF THAT DECISION, THE COURT NOTED THAT JEFFREY COGHLAN WAS ACTIVELY INVOLVED IN DESIGNING THE PROJECT, HIRING AND PAYING VARIOUS SUBCONTRACTORS, AND FURNISHING MATERIAL AND EQUIPMENT. THE COURT WAS NOT PERSUADED BY COGHLAN=S ARGUMENT THAT THE SUBCONTRACTORS AND WORKERS AKNEW THAT HE WAS THE HOMEOWNER@ RATHER THAN A GENERAL CONTRACTOR.

IT IS CLEAR THAT THE FOURTH DEPARTMENT REQUIRES STRICT INTERPRETATION OF THE TERM AOWNER@ AS IT APPLIES TO LABOR LAW SECTIONS 240(1) AND 241(6). IT IS ALSO CLEAR THAT VERY LITTLE IS REQUIRED TO CREATE A QUESTION OF FACT AS TO THE ISSUE OF ADIRECTION OR SUPERVISION.@ AS A RESULT, POLICY HOLDERS SHOULD BE ADVISED TO KEEP ALL NON-TITLED FAMILY MEMBERS OUT OF THE PLANNING OR SUPERVISION OF A WORK PROJECT ON THEIR PROPERTY IN ORDER TO PREVENT THE UNFORTUNATE TURN OF EVENTS IN FISHER.

MICHAEL J. CHMIEL

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JULY 2004

I. CONFINEMENT AND BARKING WILL NOT SATISFY REQUIREMENT OF NOTICE OF DOG=S VICIOUS PROPENSITY

In the matter of Collier v. Zambito, 1 N.Y.3d 444, ___N.Y.S.2d___ (2004), the Court of Appeals addressed the issue of whether a dog=s confinement and barking operates to satisfy the requirement that an owner have notice of a dog=s vicious propensity. The dog in question was kept confined in the kitchen and was known by the owner to bark when guests were visiting.

The plaintiff, a twelve year old visiting the defendant=s home, had been to the defendant=s residence in the past. At the time of the incident in question, the dog was held by the owner on a leash. The owner then asked the plaintiff to approach the dog so that the dog could smell the plaintiff. Upon approaching the animal, the dog lunged and bit the plaintiff on the face.

In a 4-2 decision, the Court of Appeals held that neither the confinement nor the barking was sufficient to satisfy the notice requirement. The Court opined that Abarking and running around are what dogs do@. The dissenters conceded that all dogs run around and bark; however, they were of the opinion that not all dogs are kept away from visitors because they run around and bark.

II. A SLIP ON ICE ENDING IN A FALL INTO A TRENCH DOES NOT FALL WITHIN ' 240(1) OF THE LABOR LAW

A recent decision of the Fourth Department holds that a plaintiff worker=s slip on ice into a trench at the work site is not covered by ' 240 of the Labor Law. In Pursel v. Wellco, Inc. Et al., 6 A.D.2d 1096, 775 N.Y.S.2d 626 (4^th Dept., 2004), the plaintiff was injured when he slipped on snow and ice while walking along a footer and fell approximately six feet into an excavation.

The Fourth Department, in reversing the lower court=s denial of the defendants= motions for summary judgment held that Athe hazards contemplated by Labor Law ' 240(1) are those where safety devices are required because of a difference in elevation levels ... A worker who falls into a trench from the side is not covered by Labor Law ' 240(1) because such an injury results from the usual and ordinary dangers of a construction site.@

III. 31 DAY DELAY IN DISCLAIMING COVERAGE UNDER AN EXCLUSION WAS HELD TO BE REASONABLE AND VALID

Recently, in New York Central Mutual Fire Insurance Company v. Majid, et al., 5 A.D.3d 447, 773 N.Y.S.2d 429 (2^nd Dept. 2004), it was held that a 31 day delay in disclaiming coverage under a policy exclusion after the insurer learned of the insured=s use of a covered vehicle as a livery vehicle was not unreasonable.

Pursuant to Insurance Law ' 3420(d), an insurer is required to give written notice as soon as reasonably possible when disclaiming liability or denying coverage. The timeliness of disclaimer is measured from the point when the insurer first learns of the grounds for disclaimer of liability or denial of coverage. In this case, the insurer first learned of the grounds for disclaimer after a statement was taken of the insured by an investigator. Upon receipt of the investigator=s report, the insurer=s casualty examiner forwarded the file to counsel for review after which point, the disclaimer letters were issued. Thirty-one days had passed from the time the insurer first learned of the grounds for the disclaimer.

The Second Department ruled that given the facts before them, it was not unreasonable for the insurer to consult with counsel regarding the livery vehicle exclusion prior to issuing its disclaimer.

Anthony B. Targia

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JUNE 2004

I. PLAINTIFFS INVOLVED IN ACCIDENTS WITH TORTFEASORS WITH INSOLVENT INSURERS NOT ENTITLED TO AUM@ COVERAGE

In the matter of Eagle Insurance Company vs. Hamilton, 4 A.D.3rd 355, 773 N.Y.S.2d 68 (2^nd Dept., 2004), the Court addressed the issue of how a petitioner=s source of recovery is affected by insolvent insurance companies. In 1998, the petitioner Hamilton was injured in a motor vehicle accident. At the time, the petitioner was insured by Eagle. The petitioner=s policy contained the New York State Mandatory Uninsured Motorist=s Coverage (UM), which provides coverage in instances when a tortfeasor=s vehicle is uninsured. The petitioner did not possess, however, the optional ASupplemental Uninsured Motorist@ or ASUM@ coverage.

In Eagle the tortfeasor=s insurer Reliance National Indemnity Company, had recently declared insolvency. Its New York assets were in a state of receivership. As a result, the petitioner pursued recovery from the Public Motor Vehicle Liability Security Fund, established by New York State. In response to the petitioner=s request for benefits the Fund corresponded AAt this time, the PMV Fund is unable to provide either a defense to, or indemnification of this claim insofar as the PMV Fund is financially strained.@

The petitioner then sought arbitration against Eagle for UM benefits. Eagle argued that the tortfeasor=s vehicle was not uninsured at the time of the accident but rather was insured by Reliance. Eagle further argued that the petitioner=s UM coverage is only triggered when a tortfeasor=s insurer denies or disclaims coverage. The petitioner responded that Reliance=s insolvency was the equivalent of the tortfeasor being uninsured.

The Court agreed with Eagle and ruled that the petitioner was not entitled to UM benefits. Technically Reliance never denied or disclaimed coverage in this accident, it just went out of business. The petitioner could have pursued recovery through Eagle if he had purchased SUM coverage. SUM coverage specifically allows recovery when dealing with an insolvent insurer. As a result of the petitioner only having the mandatory UM coverage and not SUM, he was not entitled to recover from his insurance company and was faced with the bleak prospect of pursuing recovery through the state fund.

II. PROPERTY OWNER=S FAILURE TO SHOVEL SIDEWALK COULD BE A BASIS FOR LIABILITY EVEN IF INJURY OCCURS OFF PROPERTY

A recent decision of the Fourth Department upheld a lower Court=s ruling that a failure to shovel one=s sidewalk may be a basis for liability when a municipal ordinance requires it. In Di Natale vs. State Farm, 2004 N.Y. Slip. Op. 02079, the plaintiffs were forced to walk on Niagara Falls Boulevard, a busy highway, as a result of the defendants= failure to clear their respective sidewalks. Multiple plaintiffs were injured and one plaintiff lost her life as a result of being struck by a vehicle while on the Boulevard. The defendants moved for summary judgment arguing that no duty existed towards the plaintiffs since the accident occurred away from the defendants= premises.

The Fourth Department disagreed. In its decision, the Court pointed to a local ordinance of the town where this accident occurred which assigned liability to property owners who fail to keep their sidewalks clear. The defendants= apparent violation of the ordinance, which required Aany owner or occupant of any premises fronting or abutting on any street or highway to maintain any sidewalk abutting the premises by keeping it free and clear from snow and ice@, was enough to raise triable issues of fact as to whether the defendants breached a duty owed towards the plaintiffs and whether that breach was a proximate cause of the injuries and fatality.

Kevin E. Loftus

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MAY 2004

I. COURT OF APPEALS AFFIRMS DISMISSAL OF LABOR LAW 240(1) CLAIM ON GROUNDS THAT WORKER WAS NOT PERFORMING REPAIRS, BUT RATHER CONDUCTING ROUTINE MAINTENANCE.

The Court of Appeals has recently held that a worker engaging in routine maintenance at the time an injury occurred cannot recover under the scaffold law which requires owners to make demolition, construction, and excavation projects reasonably safe for workers. Esposito v. New York City Indus. Dev. Agency, 1 N.Y.3d 526, 770 N.Y.S.2d 682 (2003).

In Esposito, the plaintiff-worker was injured when he fell from a ladder while attempting to remove a cover from an air-conditioning unit on the 22^nd floor of a commercial building in Manhattan. At the time the fall occurred, the plaintiff was performing a monthly maintenance check of the air conditioning unit and was in the process of fixing the worn belts of the unit when the bottom of his ladder Akicked out@ causing him to fall.

The primary question in this case was whether the plaintiff was engaging in one of the covered activities as set forth in Labor Law 240(1) at the time of his fall. This issue turned on the fact that, although the plaintiff was performing Arepairs@ on the unit, the repairs were needed due to normal wear and tear. Accordingly, the Court of Appeals held that such work constituted routine maintenance rather than the otherwise covered activity of repairing.

II. DOCTRINE OF COLLATERAL ESTOPPEL NOT APPLICABLE TO BIND THE OWNER OF A VEHICLE WHEN A DEFAULT JUDGMENT IS TAKEN SOLELY AGAINST THE DRIVER.

In Chambers v. City of New York, 309 A.D.2d 81, 764 N.Y.S.2d 708 (2d Dept. 2003), the City of New York, as owner, and its employee, as driver, were sued for injuries the plaintiff allegedly sustained in a motor vehicle accident. For reasons not germane to this discussion, the City declined to defend and indemnify its employee-driver and, therefore, did not answer on its employee=s behalf. The plaintiff then obtained a default judgment against the driver and sought summary judgment against the City on the issue of liability.

The plaintiff=s motion was premised on the general rule in New York that default judgments are entitled to collateral estoppel effect. This, coupled with the applicability of Vehicle and Traffic Law 388, led plaintiff to argue that liability, as established by the default judgment, could be imputed to the City.

In affirming the denial of the plaintiff=s motion, the Second Department applied the full and fair opportunity test to determine whether it would be fundamentally fair to deny the City an opportunity to litigate the issue of the driver=s negligence. Upon applying that test, the Second Department ruled that in order for collateral estoppel to apply, the issue must have been previously litigated which, in this case, it was not. Moreover, the Court held that vicarious liability imposed as a result of Vehicle and Traffic Law 388 did not provide the necessary privity between the parties for purposes of collateral estoppel.

Although in Chambers default judgment was obtained against the non-appearing co-defendant, the rationale of the Court could be applicable in all instances where a purportedly vicariously liable party was not provided an opportunity to contest the liability of the underlying tort-feasor. Such a situation could arise from any number of procedural scenarios and underlying circumstances. As evidenced by the Court=s decision in Chambers, the doctrine of collateral estoppel does not in all instances resolve the liability of those vicariously responsible.

In Franchini v. Palmieri, 1 N.Y. 3d 536 (2003), the Court of Appeals recently upheld a Third Department decision dismissing plaintiff=s complaint on the "serious injury" threshold. The Court based its decision upon plaintiff=s chiropractor=s failure to identify any medical foundation or objective basis that plaintiff=s pre-existing conditions had resolved and that plaintiff=s alleged injuries were causally related to the subject motor vehicle accident. Although the Court of Appeals decision is not very informative, review of the lower court=s ruling is very instructive on this issue.

The facts as set out in Franchini v. Palmieri, 307 A.D.2d 1056, 763 N.Y.S.2d 381 (3rd Dept., 2003), are as follows: The defendant brought a summary judgment motion on the threshold issue of "serious injury." In support of her motion, the defendant submitted plaintiff=s medical records which showed numerous pre-existing conditions and injuries that caused and would be expected to cause the types of symptoms which the plaintiff was attributing to the subject motor vehicle accident. Significantly, the records reflected that the plaintiff had been treated for cervical spine arthritis, degenerative disc disease, headaches, spinal tenderness, muscle spasms and lower back pain for the seven years preceding the accident in question. Additionally, only seven months prior to the accident plaintiff presented with headaches, swelling over her spine and limited range of motion in her neck as the result of an assault by her husband. Finally, the defendant presented the reports of two physicians who opined that plaintiff=s symptoms had causes other than the subject accident, as well as an MRI report taken after the accident which was normal except for confirming plaintiff=s pre-existing degenerative disc disease.

In response to this evidence, plaintiff produced an affidavit of plaintiff=s treating chiropractor, wherein he diagnosed the plaintiff with "cervicocranial syndrome," "cervical intervertebral disc syndrome," "lumbar intervertebral disc syndrome" and "low back syndrome." He also opined that the plaintiff sustained limitations in her neck and lower back of 100 percent and that plaintiff=s injuries were separate and distinct from any pre-existing injuries.

Based upon this evidence, the Third Department found that the plaintiff failed to raise a question of fact to defeat the motion, explaining that the chiropractor failed to support his opinion upon any objective evidence that plaintiff=s pre-existing condition had resolved or explain the reasoning behind his causal relationship between plaintiff=s injuries and the subject motor vehicle accident. The Court stated that objective evidence is required to distinguish the aggravation of a pre-existing condition from the pre-existing condition itself, Franchini citing Lorthe v. Adeyeye, 306 A.D.2d 252, 760 N.Y.S.2d 530 (2003), and held that under these circumstances the plaintiff=s chiropractor=s opinion that her injuries were causally related to the accident was both speculative and conclusory.

DISCLAIMER OF INSURANCE COVERAGE MUST BE COMMUNICATED TO THE POLICYHOLDER IN WRITING AS SOON AS REASONABLY POSSIBLE.

The Court of Appeals has recently held that an insurer's 48-day delay in notifying a policy holder of denial of coverage is unreasonable as a matter of law under Insurance Law §3420(d). First Financial Insurance Company v. Jetco Contracting Corp., 1 N.Y.3d 64, 769 N.Y.S.2d 459 (2003).

In First Financial, the insurer's disclaimer of coverage, based on the timely notice exclusion, was made 48 days after receiving notice of the claim. The insurer attempted to excuse the late disclaimer by stating that it needed time to investigate whether the insured had additional insurance coverage. Since the insurer's eventual disclaimer was based on receiving late notice from its insured, the question of whether additional insurance coverage may be available for the claim had no bearing on the question of late notice.

As Insurance Law §3420(d) states that a disclaimer must being made in writing As soon as is reasonably possible@, the Court of Appeals held that the circumstances of each case must be analyzed individually with no arbitrary and universal time limitation. However, after ascertaining the facts in First Financial and reviewing other cases involving delays, the Court of Appeals held that 48 days was unreasonable as a matter of law since the insurer's excuse for the untimely disclaimer could not be a factor in the insurer's ultimate decision to deny coverage.

Keeping in mind that the letter of disclaimer must include all bases for denial of coverage, there is a lesson to be learned from First Financial. After quickly ascertaining all bases for a viable disclaimer, it is crucial for the insurer to communicate the disclaimer to the policyholder as soon as possible.

In Wilson v. Livingston; 305 A.D.2d 585, 762 N.Y.S.2d 408 (2nd Dept., 2003); a mother and infant commenced an action against the defendant landlord to recover for personal injuries sustained as the result of being bitten by a tenant's dog. It was undisputed that the tenant had prior knowledge of the dog's vicious propensities, as, on a prior occasion, the dog in question attacked the tenant's daughter.

The question in this case was whether the landlord knew or should have known of the dog's vicious propensities. This issue turned on the fact that the tenant maintained the landlord's property in exchange for a reduced rent. As such, it was held that the tenant was an agent of the landlord. The Court held that the tenant's knowledge of vicious propensities was therefore imputed to the landlord through the notion of agency. Accordingly, the landlord was vicariously liable for the tenant's negligence.

IN AN ACTION WITHIN WHICH WE REPRESENTED THE VILLAGE OF AKRON, THE APPELLATE DIVISION, FOURTH DEPARTMENT HELD THAT GENERAL OBLIGATIONS LAW §9-103 EXTENDS IMMUNITY TO THE MUNICIPAL MAINTENANCE OF SNOWMOBILE TRAILS.

In Blair, et al v. The Village of Akron, et al, 2003 WL 23097049, decided December 31, 2003, our office represented the Village of Akron. The plaintiffs in Blair initiated action against the Village of Akron as a result of injuries which were sustained in a snowmobile accident. On January 10, 1997, three individuals, while riding along a bike path located in the Village of Akron, collided with a guardrail adjacent to a bridge crossing. As a result, two of the snowmobilers died and one sustained serious injuries.

The Village of Akron, represented by Arthur A. Herdzik, of our office, moved for summary judgment on the applicability of General Obligations Law §9-103. The statute creates immunity for a landowner shielding him from liability for injuries occurring from the recreational use of undeveloped land. The statute was enacted to encourage property owners to permit persons to come on their property to engage in specified recreational activities without fear of liability for injuries suffered by the recreationists.

The plaintiffs opposed the motion arguing that the statute does not provide protection to municipalities which maintain and supervise parks and recreational facilities. Additionally, plaintiffs argued that the statute did not apply because the bike/jogging path located in the Village was not physically conducive to the activity of snowmobiling. The lower court denied the Village of Akron's motion for summary judgment on the basis that the statute does not provide immunity to the Village since the path which was open to the public could be deemed a public park.

First, the Fourth Department stated that the path was physically conducive for snowmobiling since the path had been used for years as a snowmobile trail. Second, the Fourth Department held that the plaintiff failed to raise a material issue of fact that the Village had supervised, maintained or controlled the path during the wintertime or that the bike/path located in the Village was a supervised park.

A RECENT COURT OF APPEALS DECISION NARROWS THE APPLICABILITY OF NEW YORK STATE LABOR LAW §240(1).

In Blake v. Neighborhood Housing Services of New York City, Inc., ____ N.Y.2d ____, 2003 WL 22998497, decided December 23, 2003, the Court of Appeals commented on two issues involving Labor Law §240(1). First, the Court addressed whether the plaintiff could recover under §240(1) when the underlying evidence established that he was the sole proximate cause of his injuries. Additionally, the Court analyzed whether the statute applied to a financial institution which provided funding for the homeowner's repairs.

In Blake, the plaintiff brought action under §240(1) for injuries he sustained when a ladder he was using retracted, causing injury to his ankle. Among the defendants was Neighborhood Housing Services. Plaintiff's theory was that as the underlying financial institution, it had control over the project. The statute imposes liability on an owner, contractor or agent who had “authority to direct, supervise and control,” the work.

On the first issue the Court affirmed dismissal of the plaintiff's claim noting that the jury concluded that the plaintiff's injuries were the result solely of his own negligence in failing to properly use the ladder. Furthermore, the Court held that the level of involvement and control held by Neighborhood Housing Services was minimal and did not rise to the statutory criteria necessary to impose liability.

The no-fault insurance law is designed to provide claimants prompt reimbursement for claims. Insurance Law § 5106 demands that payments of first party benefits and additional first party benefits shall be made as the loss is incurred. If payments are not made within thirty days after the claimant supplies proof of loss, the benefits are considered overdue. All overdue payments are subject to an interest rate of 2% per month. In addition, the plaintiff is entitled to recover fees, such as attorneys fees, for services performed in connection with securing payment of an overdue claim.

In Cardinell v. Allstate Insurance Co., 302 A.D. 2d 772, 754 N.Y.S.2d 777 (3rd Dept., 2003), an award of $41,150 grew to $389,434 after the application of interest. The plaintiff was injured in an automobile accident in April, 1989. In February, 1992, the plaintiff sought to recover lost wage benefits under an additional personal injury protection provision of his automobile policy with the defendant. The defendant disclaimed based on issues of notice, proof of disability and that the full extent of plaintiff's claim for lost wages was included within basic economic loss. The plaintiff brought suit.

The Supreme Court, St. Lawrence County, after a non-jury trial, ultimately determined that the plaintiff was entitled to $41,150 in additional personal injury protection benefits. Further, the plaintiff was entitled to interest at a compounded monthly rate of 2%.

During the pendency of this action, the plaintiff settled the underlying personal injury action for $50,000. The plaintiff did not preserve the defendant's subrogation rights. As such, the Court ruled that the defendant was entitled to a $50,000 setoff. After applying the setoff to the amount owed to the plaintiff, the Court determined that the plaintiff was entitled to a net recovery of $389,434.

The defendant appealed, arguing that the setoff should have been applied to the lost wage award of $41,150 before the calculation of interest. The Appellate Division, Third Department, affirmed the lower court's ruling. The Court stated that the plain language of Insurance Law § 5106 (a) and its underlying rationale clearly require the insurance company to pay benefits within 30 days or incur interest at the rate of 2% per month. Further, and, as the court states, more importantly, "the objective of the statute...is to assure prompt and full payment of economic claims." The interest rate is designed to serve as a penalty to insurers who do not pay claims promptly. The court reasons that applying a setoff before calculating interest would frustrate the purpose of the statute.

It is important to note that interest assessed on personal injury protection claims is no longer compounded. 11 NYCRR 65-3.9(a) has been revised since Cardinell to calculate interest pursuant to Insurance Law § 5106 at simple interest. The revision of the regulation was upheld in Medical Society of the State of New York v. Serio, 2003 WL 22387581 (N.Y.). The court determined that because Insurance Law § 5106 (a) is silent as to whether interest is simple or compounded, the revised regulation does not conflict with the statute. Even so, calculating simple interest on the award of $41,150 in Cardinell would have resulted in an award of around $140,000, prior to the setoff.

The lesson to be learned from Cardinell is to be diligent in a challenge to the denial of personal injury protection benefits. Be certain to deny claims promptly and according to the statute. This forces the claimant to take affirmative action to challenge the denial. Interest will not accrue if the claimant delays more than 30 days in challenging a proper denial. 11 NYCRR 65-3.9(c). If a claimant does challenge a denial, efforts should be made to ensure that the matter does not languish. For example, if appropriate, serve claimant with a 90 day demand to resume prosecution. Because 2% interest per month is a steep price to pay, prompt resolution of disputes is imperative.

In Primeau v. Town of Amherst, 303 A.D.2d 1035, 757 N.Y.S.2d 201 (4th Dept. 2003), the Appellate Division held that the defendant is not entitled to the plaintiff's entire no-fault claim file. Rather, the Court decided that the plaintiff only had to disclose medical and wage records contained in the no-fault file to the defendants.

In Bennett v. SDS Holdings, _____ A.D.2d _____, 764 N.Y.S.2d 763 (4th Dept. 2003), the Appellate Division, Fourth Department, dismissed the plaintiff's Labor Law §240(1) cause of action where the plaintiff was hit by a piece of a wall that he was demolishing. The court reasoned that Labor Law §240(1) did not apply because the object that hit the plaintiff was part of a wall which was at the same elevation as the plaintiff.

In Eberhard v. Alexander Cent. Sch. Dist., _____ A.D.2d _____, 765 N.Y.S.2d 289 (4th Dept. 2003), the plaintiff was hit by a brick which was used as a weight holding down a tarp. Although the plaintiff was hit by a falling object, the Fourth Department decided that Labor Law §240(1) did not apply because these facts did not present a situation where a hoisting or securing device of the kind enumerated in the statute would have been necessary or even expected.

In Striegel v. Hillcrest Heights Development Corp., 2003 W L 22387625, 2003 N.Y. Slip. Op. 17548 (Oct. 21, 2003), the Court of Appeals held that a worker tumbling down a slanted roof onto an adjacent eave was covered by Labor Law §240(1).

In Hanzilian v. Bob Evans Farms, Inc., (01-CV-22S, 9/30/03), the United States District Court, Western District, granted the defendant's motion for summary judgment dismissing the plaintiff's claims under New York Labor Law §240(1) on the grounds that the plaintiff was performing maintenance work while he was replacing a transformer in a sign. New York Labor Law §240(1) does not cover routine maintenance done outside the context of construction work.

The Court of Appeals has held that a plaintiff's fall from a ladder while conducting an inspection of alteration work fell within the purview of New York Labor Law §240(1). Prats v. Port Authority of New York and New Jersey, 2003 W L 22387602, 2003 N.Y. Slip. Op. 17547 (Oct. 21, 2003). In reaching this decision, the Court of Appeals concluded that the inspection in this case was part of the alteration work and, therefore, covered by Labor Law §240(1).

In the March 2002 edition of our newsletter, we reported on the matter of Medical Society of the State of New York v. Serio, 298 A.D.2d 255, 749 N.Y.S.2d 227 (1^st Dept. 2002). This matter dealt with shorter deadlines for filing claims under New York's no-fault law. At the time we last examined this matter, the Supreme Court, New York County upheld the regulations. In October 2002, the Appellate Division affirmed. We have since monitored this matter closely.

On October 21, 2003, the Court of Appeals, in a unanimous decision, held that the filing regulations issued as an anti-fraud measure by the New York State Insurance Superintendent were valid. See Medical Society, __N.Y.2d__, (2003 WL 22387581). This marks an enormous victory for the insurance industry.

The filing regulations imposed by the Superintendent reduced the time limit within which an injured party must file a claim for no-fault benefits with an insurer from 90 to 30 days. Additionally, the time limitation for the submission of claims for medical expenses were decreased from 180 to 45 days.

LACK OF NOTIFICATION DID NOT RELIEVE INSURER FROM OBLIGATIONS TO INJURED PARTY

Of course, most liability policies contain a clause conditioning coverage upon written notice of an accident from an insured as soon as possible. Also as to those injured, New York State Insurance Law 3420 (a) (3) requires that every liability policy contain "...a provision that... written notice by or on behalf of the injured party...shall be deemed notice to the insurer".

A recent decision by the Appellate Division First Department suggests that where a claim is asserted by one injured through the operation of a motor vehicle transporting passengers for hire, no notice at all is required.

In American Transit Insurance Company v. Sartor et al., 305 A.D.2d 205, 762 N.Y.S.2d 340 (1^st Dept., 2003), Sartor, asserting a personal injury claim, obtained default judgment against Utica Taxi. Utica's insurer, American Transit, in a declaratory judgment action, obtained summary judgment declaring that its disclaimer of coverage for lack of notice was proper. Upon appeal, the Appellate Division First Department reversed holding notice irrelevant. American Transit was directed by the Appellate Court to satisfy the $100,000 default judgment obtained by Sartor and to also pay Sartor the statutory 9% annual interest which accrued over the two years since the default judgment was obtained. Although the fact was not reported within the Court's decision, we consulted with counsel involved in the appeal and learned that American Transit was not advised by either Utica Taxi or Sartor of the accident or the subsequent bodily injury claim until after default judgment was granted. In support of its ruling, the Appellate Court noted that Vehicle and Traffic Law 370 (4) which relates to private entities engaged in the business of transporting passengers for hire, provides that an insurer's liability to an injured party will not be affected by the insured's failure to provide notice of an accident to the insurer. As an apparent consolation to American Transit, the Court recognized language within the policy entitling American Transit to reimbursement from Utica Taxi if the loss paid by American Transit was "due directly or indirectly" to Utica Taxi's breach of policy conditions. Not surprisingly, the Appellate Court did not attempt to resolve whether such policy language was applicable to the facts before it.

1. OBTAINING COMPLETE MEDICAL RECORDS BECOMES MUCH MORE DIFFICULT ON SEPTEMBER 1, 2003, THE EFFECTIVE DATE OF CPLR 3122(a)

On September 1, 2003, an amendment to CPLR 3122(a) will become effective in relation to the production of non-party business records. The purpose of this amendment is to simplify methods for obtaining discovery of documents from non-party witnesses and procuring their admission into evidence. According to the state legislature, by doing so it should alleviate burdens upon the litigants, non-party witnesses and the courts.

What this new amendment does, however, is significantly restrict an attorney’s power to obtain, by means of trial subpoenas, complete medical records of a plaintiff. As amended, CPLR 3122(a) will provide, in pertinent part, as follows:

The amendment to CPLR 3122(a) is the second recent statutory enactment restricting the opportunities of defense counsel to obtain pertinent medical records. As we had informed you in our May, 2003 edition of Summing Up, the requirements of HIPAA (Health Insurance Portability and Accountability Act), enacted by Congress, permits plaintiff’s counsel to impose severe restrictions within medical authorizations. Prior to the amendment to CPLR 3122, restrictive authorizations from plaintiff’s counsel limiting the scope of medical records available to the defendant were, in some instances, tolerable. This was true given the fact that, ultimately, a complete set of medical records could be subpoenaed to court at the time of trial. Now, with the amendment of CPLR 3122(a), subpoenaing a complete set of a plaintiff’s medical records to court at the time of trial becomes more difficult as well.

Although even before the amendment to CPLR 3122(a) one would be ill-advised to overlook restrictive authorizations, it has now become more important than ever to ensure that a complete set of medical records be obtained. This effort should be undertaken early in the litigation process during the discovery phase rather than at the time of trial. If court intervention is necessary, it should be immediately pursued. Also, when court intervention is sought, care should be taken to create an appropriate record for appellate review.

I. REMOVING AIR UNITS FROM A BUILDING QUALIFIES AS “ALTERING” UNDER SECTION 240(1) OF THE LABOR LAW.

The Court of Appeals has recently held in Panek v. County of Albany, 99 N.Y.2d 452, 758 N.Y.S.2d 267 (2003) that removing air units from a building slated for demolition, while not in and of itself a “demolition” under §240(1) of the Labor Law, does qualify as “altering” a building and covers workers for injuries arising out of such activity. In Panek, the plaintiff was on a ladder removing two large air units from the old traffic control tower at Albany Airport when he fell and was injured. The tower had been slated for demolition, but the demolition project had not yet begun. For this reason, the Court held that the plaintiff’s activity did not qualify under the demolition category in the Labor Law. Nonetheless, the Court found that such activity qualified as the process of “altering” a building and since it occurred while the plaintiff was working on a ladder, it qualified as an elevation related risk and successfully invoked §240(1). In their decision, the Court stated that the plaintiff’s work constituted modification of the building and whether the building was scheduled for demolition or slated for continued use does not change the nature of the work project at the time of the accident.

II.AN INSURANCE AGENT DOES NOT HAVE A CONTINUING DUTY TO ADVISE OR DIRECT A CLIENT TO OBTAIN ADDITIONAL COVERAGE ABSENT SUCH SPECIFIC REQUEST.

The Fourth Department has recently held that a general request for insurance does not impose upon the insurance agent a duty to recommend coverage for every possible scenario nor does it require the agent to advise, guide or direct a client to obtain certain insurance coverage. Frost v. Mayville Tremaine, Inc., 299 A.D. 2d 839, 750 N.Y.S.2d 398 (4^th Dept., 2002). In Frost, the plaintiff, a business owner, sued his insurance agent alleging that he had relied upon the defendant’s representations that the insurance policy purchased by the plaintiff would cover losses for damage to property under control of the plaintiff regardless of the property ownership. In this case, the plaintiff sold a mobile home and delivered title to and possession of the home after the buyers obtained financing. Subsequently, after the transfer of title and possession, plaintiff’s contractors improperly connected the utilities to the mobile home causing substantial water damage.

The plaintiff attempted to make a claim under his insurance policy for the damage caused to the home only to learn that because the plaintiff did not have “Garage Keepers’ Coverage”, the plaintiff’s insurance company would not provide coverage for this damage. The reason given was that the plaintiff was no longer owner of the home. Through plaintiff’s deposition testimony, the agent established that the plaintiff did not request such coverage during a meeting with the insurance agent. The Fourth Department affirmed the trial court’s dismissal of the case noting that absent a specific request to advise or act, an insurance agent does not have a continuing duty to guide or direct the client to obtain additional coverage. The agent’s duty is defined simply by the nature of the request of the customer. Since the plaintiff in this case, made a general request for insurance, the agent cannot be liable for not providing the specific coverage that the insured eventually needed.

AN EMPLOYER/OWNER OF A VEHICLE MAY AVOID LIABILITY THROUGH THE USE OF RESTRICTIONS WHEN ALLOWING AN EMPLOYEE TO OPERATE THE VEHICLE.

In New York, a driver's negligence in the operation of the motor vehicle is imputed to the owner thus making the owner liable for injuries inflicted by the driver's fault. In many cases, this allows the injured plaintiff to have a solvent source to look to if a personal injury action arises. However, in Murdza v. Zimmerman, 99 N.Y.2d 375, 756 N.Y.S.2d 505 (2003), the Court of Appeals has recently narrowed this long standing policy.

In Murdza, the employer allowed one of its employees to drive the employer's leased vehicle with instructions that only the employee or the employee's spouse could drive the vehicle. However, in violation of that instruction, the employee allowed her boyfriend to operate the vehicle. The operator of the vehicle was then involved in an accident injuring the plaintiff. Predictably, the plaintiff sued the driver, employer and the rental agency that owned the vehicle and leased it to the employer. Under Vehicle and Traffic Law 388, the vicarious liability statute that imputes the driver's negligence to the owner, the plaintiff argued that the employer and leasing company where liable due to the driver's negligence. Not so holds the Court.

In an unanimous decision, the Court of Appeals held that while the rental agency that leased the vehicle to the employer can certainly be vicariously liable to the plaintiff, the employer is not. This is as a result of the Court of Appeals' construction of "permission" as defined under Vehicle and Traffic Law 388. The liability of a rental agency is treated differently than the employer's potential liability as the rental agency must be constructively deemed to have given permission to a third-party's use of the car even if a lease provision restricts the use of the vehicle to the lessee and his immediate family. This was a holding, largely made on public policy grounds, in Motor Vehicle Acc. Ind. Court v. Continental Net. Amer. Group Co., 35 N.Y.2d 260, 360 N.Y.S.2d 859 (1974). However, the same broad notion does not apply to the employers who, as the Court perceives it, are in a better position to expect an employee to comply with the restrictions of use of the vehicle. As such, if the driver of the employer's vehicle is operating it outside of the restrictions imposed by the employer, the employer can now be free from any vicarious liability which otherwise would attach.

Since this holding drastically changes the scope of vicarious liability as it impacts employers, it is time to consider summary judgment motions in appropriate cases. Likewise, for employers, it may be time to place express restrictions on its employees with reference to the operation of the employer's vehicles to attempt to lessen the potential vicarious liability.

I. IN AN APIP SUBROGATION ACTION, THE STATUTE OF LIMITATIONS BEGINS TO RUN FROM THE DATE OF THE ACCIDENT.

In Walker v. Stein, __ A.D.2d ___, 2003 WL 2008172 (N.Y.A.D. 4th Dept.), a case wherein Gregory Pajak from our office represented the insurer, the issue presented to the Appellate Division, Fourth Department, was whether the APIP subrogation action of the no-fault carrier was barred by a three-year statute of limitations applicable to recovery for damages arising from a bodily injury negligence claim. Significantly, in Walker, the insurer did not begin making APIP payments to the plaintiff's subrogee until more than three years following the accident.

The lower court denied the motion of the tort-feasor to dismiss the subrogation action as time barred.

On appeal, the Appellate Division, Fourth Department, by a 3-2 majority, reversed, dismissing the claim. The Appellate Division majority relied upon precedent that an insurance carrier, i.e. subrogee, possesses only such rights as are possessed by the insurer, i.e. subrogor. The majority concluded that since the rights of the subrogor are limited by a three-year statute of limitations the rights of a subrogee should be similarly limited. The majority held the APIP subrogation action of the insurer must be dismissed as time barred by a three-year statute of limitations.

In Walker, the majority opinion, in response to the fact that APIP payments did not begin until more than three years following the accident, rationalized that the insurer could have insisted that its subrogation rights be resolved against the tort-feasor as part of a global settlement of the personal injury claims. Yet, the majority in Walker does not address the dilemma which would occur if the insured did not commence a personal injury action prior to the expiration of a three-year statute of limitations.

Since the Appellate Division Decision in Walker was 3-2, the appellant-insurer is entitled to appeal as a matter of right to the New York State Court of Appeals. We, on behalf of the appellant-insurer, will pursue an appeal of the Walker decision to the New York State Court of Appeals. Of course we will advise of the outcome of the appeal to the Court of Appeals.

II. A CAUSE OF ACTION ASSERTED IN "INDEMNIFICATION" WILL NOT CIRCUMVENT THE THREE-YEAR STATUTE OF LIMITATIONS APPLIED IN WALKER V. STEIN.

In Liberty Mutual Insurance Company v. Clark, 296 A.D.2d 442, 745 N.Y.S.2d 64 (2nd Dept. 2001), a Liberty Mutual insured was injured as a result of a motor vehicle accident. Liberty's insured never sued the tort-feasor. Instead, she sought arbitration against Liberty seeking uninsured motorist benefits. Although Liberty was aware of the identity of the tort-feasor and the tort-feasor's insurance carrier, Liberty never petitioned to stay arbitration. As against Liberty, the Liberty insured received an arbitration award in the amount of $35,000.00. The arbitration award came six years after the accident.

In an attempt to recoup the award Liberty's insured received, Liberty brought action against the tort-feasor. Liberty styled its cause of action as one of indemnity rather than subrogation to avoid the applicable three-year statute of limitations applied in negligence actions. (See above comment.) The lower court granted the tort-feasor's motion to dismiss. The Appellate Division affirmed holding that no express or implied duty to indemnify extended from the tort-feasor to Liberty and that indemnification was not an appropriate cause of action.

In short, the Liberty case confirms that an "indemnification" cause of action which is founded in contract and which is subject to a six-year statute of limitations cannot be utilized to circumvent the three-year tort statute of limitations applicable to negligence actions. The potential dilemma raised in the Walker decision discussed above remains unresolved.

AUTHORIZATIONS FOR MEDICAL RECORDS MUST NOW COMPLY WITH THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT

In 1996, Congress passed the Health Insurance Portability and Accountability Act (AHIPAA). One function of HIPAA is to protect a patient's private medical information from being utilized against his or her will. While HIPAA's impact is mostly felt by healthcare and patient information providers, its effect is also felt in the insurance defense community. Covered entities, which include doctors, hospitals and other providers of patient medical information, were required to comply with HIPAA privacy regulations by April 14, 2003.

Of course, a critical aspect in successfully responding to a bodily injury claim is securing a complete set of medical records directly from healthcare providers. The increased privacy regulations will require that authorizations utilized by insurers and defense counsel be HIPAA compliant.

Authorizations received from plaintiffs should be examined for these minimum requirements. Authorizations not meeting these minimum requirements should be returned and exchanged for authorizations which do meet these requirements. Submitting a non-compliant authorization to a provider of medical records will only delay the discovery process.

In addition to the minimum criteria specified above, authorizations which permit the disclosure of certain more sensitive information, such as records of alcohol and/or drug abuse, sexually transmitted disease information, psychiatric records or HIV/AIDS information, should specifically state that the authorization applies to this information. Further, references within authorizations to this more sensitive information should be initialed by the plaintiff so that the plaintiff clearly understands and requests that this information be released.

Chelus, Herdzik, Speyer, Monte & Pajak, P.C., has updated its authorizations to be HIPAA compliant. The attorneys review all incoming authorizations from plaintiffs to ensure HIPAA compliance.

FOURTH DEPARTMENT HOLDS THAT COLLATERAL SOURCE OFFSET PURSUANT TO CPLR 4545 MUST BE PLED AS AN AFFIRMATIVE DEFENSE.

CPLR 4545 provides that an award for damages for past or future economic cost or expense (like medical bills or lost wages) may be reduced by the amount of any collateral source (like insurance). This statute abrogated the common law rule which precluded the reduction of a personal injury award by payments received by a claimant from other sources. The purpose of the statutory change was to eliminate "double recoveries."

A timely application for a collateral source offset is made after damages are awarded but before a judgment has been entered.

The Fourth Department recently held that an application for collateral source offset pursuant to CPLR 4545 is an affirmative defense which must be pled pursuant to CPLR 3018(b). Wooten v. State of New York, 2002 WL 31888141 (4th Dept. December 30, 2002). Wooten involved a wrongful death action where the plaintiff brought an action against the State of New York for negligence and medical malpractice. Following a bench trial, the Court of Claims found the State liable and awarded the plaintiff damages. The State applied for an application for a collateral source offset pursuant to CPLR 4545 for an offset of social security benefits. The defendant did not raise collateral sources as an affirmative defense in their answer. The Wooten Court decided that the collateral source offset is an affirmative defense which must be pled.

The Court reasoned that CPLR 3018(b) requires that "[a] party shall plead all matters which, if not pleaded would be likely to take the adverse party by surprise or would raise issues of fact not appearing on the face of a prior pleading." Id. The Court further pointed out that under this section of the CPLR, Courts have held that partial defenses and matters that tend to mitigate damages must also be plead affirmatively. The Wooten Court further reasoned that the collateral source offset is similar to the settlement offsets found in General Obligations Law 15-108 because both invoked a statute-based reduction in the verdict and both are presented to and determined by the Court after the verdict is rendered rather than during trial. Since the offset for General Obligation Law 15-108 has been previously held to be an affirmative defense which must be pled, the Court concluded that the collateral source offset must also be pled as an affirmative defense.

Although the defendant in Wooten did not plead collateral sources as an affirmative defense, the Court did allow the defendant to amend its answer to assert this defense citing authority which have allowed courts to sua sponte amend answers to conform to the evidence at trial.

Two of the five justices dissented in part stating that they did not believe that CPLR 3018(b) required collateral sources to be pled as an affirmative defense. The dissenters reasoned that the purpose of pleading affirmative defenses is to "eliminate surprise and prevent the [claimant] to know (sic) what contentions will be interjected by way of defense to his claim." Id. The dissenters in Wooten, reasoned that the collateral source defense was no surprise to the plaintiff because the defendant had served discovery demands regarding the payment of collateral sources and had adduced evidence at trial relating to the plaintiff's receipt of social security payments.

This Appellate Division makes clear that in order for a defendant to reserve his rights for a collateral source offset, it must be pled as an affirmative defense. No longer is a request for collateral source information and an application after judgment sufficient to reserve a defendant's right for these collateral source offsets. Fortunately, the Wooten court has also provided authority which allows defendants to amend their answers to assert this defense.

I. APPELLATE DIVISION AFFIRMS ORDER GRANTING SUMMARY JUDGMENT BASED UPON DOCTRINE OF PRIMARY ASSUMPTION OF RISK.

Recently, Gregory V. Pajak of our office represented the defendants in Cook v. Komorowski, 752 N.Y.S.2d 475 (App.Div. 4th Dept., 2002). In Cook, the plaintiff sought damages for an eye injury sustained during a game of splatball. The plaintiff was injured by a paint pellet fired by our client, Jeffrey Komorowski.

The lower court granted our motion for summary judgment which was based on the doctrine of primary assumption of risk. This doctrine essentially holds that when an individual engages in a sport or other recreational activity, that individual thereby consents to the commonly appreciated risks which are associated with and arise from the activity in question. The lower court in granting our motion for summary judgment, ruled that we had met our burden in establishing that the activity of splatball inherently involves the risk of eye injury and that the plaintiff was aware of that risk.

On appeal, the Appellate Division, Fourth Department adopted our argument. The plaintiff contended that the assumption of risk defense did not apply since being shot by a splatball in the eye was not a commonly appreciated risk. The Appellate Court dismissed the plaintiff's contention holding that a jury could not reasonably accept the plaintiff's argument. The Appellate Division opined that it is not necessary for the defendants to establish that the plaintiff foresaw the precise manner in which the injury occurred.

Furthermore, the Appellate Division held that nothing in the record demonstrated that the defendant's conduct was reckless, which would have rendered the doctrine of assumption of risk inapplicable.

II. COVERAGE FOR AN ADDITIONAL INSURED IS PRIMARY UNLESS UNAMBIGUOUSLY STATED OTHERWISE.

Pecker Iron Works of New York, Inc. v. Traveler's Insurance Company, ___ N.Y.2d ___ [2003], decided by the Court of Appeals of New York on February 13, 2003, establishes the basis upon which an additional insured's coverage is primary or excess insurance coverage.

Pecker Iron Works, a subcontractor, retained the services of Upfront Enterprises as a sub-subcontractor to provide labor, materials and equipment. Upfront provided Pecker Iron Works with certificates of insurance for liability and workers' compensation coverage, naming Pecker Iron Works as an additional insured. The defendant, Travelers Indemnity Co., was the carrier for Upfront and provided coverage for Upfront and any additional insureds designated by Upfront. The Traveler's policy indicated that coverage for additional insureds would be excess unless Upfront provided for the coverage to be primary in a written contract between Upfront and the additional insured.

An injured Upfront worker brought suit against the property owner and general contractor. These individuals then commenced a third party action against Pecker Iron Works, as the general contractor for Upfront. Pecker Iron Works made a claim with Traveler's Indemnity Co. based upon its status as an additional insured under Upfront's policy. Traveler's disclaimed coverage, taking the position that the coverage provided to Pecker Iron Works as an additional insured was excess. Pecker Iron Works then commenced a declaratory judgment action against Traveler's Indemnity Co.

Initially, the Supreme Court granted Traveler's motion to dismiss on the theory that the policy provided only excess coverage and that the contract between Pecker Iron Works and Upfront did not specifically designate the coverage to Pecker Iron Works as primary.

The Appellate Division reversed, holding that the designation of Pecker Iron Works as an additional insured in the contract with Upfront did not indicate that Pecker Iron Works would receive only excess coverage.

The Court of Appeals in affirming the decision of the Appellate Division held that coverage for additional insureds is primary coverage unless it is unambiguously stated otherwise. The Court of Appeals reasoned that an additional insured is an entity afforded the same coverage as the named insured.

On December 9, 2002, a new subdivision was added to New York CPLR 4545 also known as the collateral source rule. The rule has always required that whenever an injured plaintiff received compensation from an outside source (usually insurance) those proceeds would be offset against future losses and would apply to personal injury, property damage and wrongful death claims. The legislative intent behind this statute was basically to eliminate windfalls and double recoveries for the same loss. The new subdivision - CPLR 4545(d), which took effect immediately, states "voluntary charitable contributions received by an injured party shall not be considered to be a collateral source of payment that is admissible in evidence to reduce the amount of any award, judgment or settlement."

Now, if an injured plaintiff receives compensation from a charitable source, the defend

THE COURT OF APPEALS HAS RULED THAT INSURANCE LAW ' 3420 REQUIRES ONE INJURED TO OBTAIN A JUDGMENT AGAINST A TORTFEASOR BEFORE A DECLARATORY JUDGMENT ACTION CAN BE COMMENCED AGAINST A LIABILITY INSURANCE CARRIER

CONCLUSORY ASSERTIONS BY PLAINTIFF=S PHYSICIAN THAT PRE-EXISTING CONDITION HAD RESOLVED IS INSUFFICIENT TO DEFEAT SUMMARY JUDGMENT MOTION ON "SERIOUS INJURY."