On October 22, 2009, Judge Eileen Bransten dismissed a complaint by a disgruntled art dealer, charging another art dealer with fraud, negligent misrepresentation, and unjust enrichment.

Plaintiff Seung, a Korean art dealer, claimed that New York art dealer Mary Dinaburg represented that a work by Julian Schnabel was worth at least $500,000. On that basis, Seung purchased the work for $380,000. But, soon after concluding the purchase, Seung began to do her own due diligence as to the Schnabel’s worth. Seung discovered that some months earlier the work sold at Philips de Pury for $156,000 (against estimates of between $60,000 and $80,000) and that the likely market value was no more than $110,000.

Understandably unhappy, Seung charged Dinaburg with fraud and related theories of misrepresentation. But Judge Bransten saw things differently: “In the context of an arm’s length transaction, Seung’s blind reliance on Dinaburg’s alleged statements of the painting’s value is not reasonable as a matter of law.”

In dismissing the charge of negligent misrepresentation, Judge Bransten held that art dealers, unlike professionals such as lawyers and engineers — absent special circumstances — do not owe a special duty of care to their clients.

While Judge Bransten carefully reviewed existing case law on the distinction between “puffery” and actionable misrepresentations, it seems clear that the court placed great weight on the fact that Seung, a sophisticated buyer, failed to conduct any of her own due diligence before agreeing to the purchase.

http://www.nylj.com/nylawyer/adgifs/decisions/102709bransten.pdf

In QBE Insurance Corp. v. Gangi Contracting Corp., QBE denied coverage for an injury to a worker of the insured’s subcontractor for late notice. Notice was not provided until three years after the accident. The policy stated that knowledge of the loss by the insured’s “agent, servant of employee” is not knowledge by the company unless the insured’s Risk Manager received notice of the occurrence. The insured argued that, because its Risk Manager did not have notice of the loss, any delay was excused.

The New York Appellate Division, First Department rejected this argument. The Court noted that the Mr. Gangichiodo, the insured’s president, vice-president, secretary and sole-shareholder, was aware of the accident and the severity of the injuries when the accident occurred. Mr. Gangichiodo was not the insured’s “agent, servant or employee” but an executive officer of the insured. Therefore, his knowledge was imputed to the insured, and triggered the insured’s duty to notify QBE of the accident.

http://www.nycourts.gov/courts/ad1/calendar/appsmots/2009/October/2009_10_29_dec.pdf

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In Cortes v. McGuiness Condo,LLC, the plaintiff, a construction worker in New York, was injured when a brick that was being hoisted fell from above and struck the plaintiff on the hard hat, causing injury.

The plaintiff moved for summary judgment on his Labor Law 240 (1) claim against the defendants. In order to recover on the Labor Law 240 (1) claim, the plaintiff must prove that the defendants breached a statutory duty to provide adequate safety devices and that the breach was a proximate cause of the injury. Justice Schneier sitting in Supreme Court, Kings County held that the plaintiff met this burden.

In opposition, the defendants argued that the plaintiff was the sole proximate cause of his injury and was a recalcitrant worker. To support this argument, the defendants claimed that the plaintiff was directed to leave the area while the bricks were hoisted. However, the court held that the finding that the defendants failed to provide an adequate safety device precluded a finding that the plaintiff was the sole proximate cause.

Moreover, the recalcitrant worker defense requires the defendants to show that the plaintiff refused safety devices provided by the owner or employer. In this case, there was no showing that such devices were offered to the plaintiff. In fact, evidence of instructions to the plaintiff to leave the area were insufficient to support the recalcitrant worker defense.

Maju Varghese contributed to this post.

http://www.courts.state.ny.us/reporter/3dseries/2009/2009_52021.htm

In Acri v. Hilton, the Appellate Division reversed summary judgment to several defendants who had served alcohol to the underage plaintiff. The trial court had found that the evidence would not support a finding of proximate cause between plaintiff’s intoxication and her accident when she fell off the back of an ATV. On appeal , plaintiff argued that she would not have hopped on the back of the ATV at age 16 unless she was drunk. As proof, she admitted that she had done so on several earlier occaisions, but never when she was sober. The Appellate Division found that the proximate cause issue was a question for the jury.

http://www.judiciary.state.nj.us/opinions/a1969-08.pdf

The Yankees don’t win everything. Security Guard 1 – Yanks 0.

In Correa v. City of NY, NY Yankees, and ESPN, the plaintiff was a security guard assigned to sit in the stands directly behind home plate. While that area was protected by a net, ESPN had created a hole or window in the net for its camera. A ball came through that hole, striking and fracturing the plaintiff’s hand.

The Yanks moved for summary judgment but their motion was denied. The court ruled that while the risk of being hit by a ball is assumed by spectators at ball games, the plaintiff here did not assume the risk that the Yankees would fail to comply with the requisite standard of care, to wit, an adequate net in the area behind home plate. The court ruled that the Yankees had not shown in their motion that they had provided adequate protection to spectators and employees seated in the stands behind home plate.

Posted by Georgia Stagias.

http://www.courts.state.ny.us/reporter/3dseries/2009/2009_07512.htm

In Beebe v. New York Times, 09-cv-1090, New York Eastern District Judge Weinstein dismissed an age discrimination claim against the New York Times by two workers who were denied a promotion, allegedly bades upon their age. The main problem with their case, however, was that they never applied for the promotion.

Judge Weinstein noted that required element of discrimination against an employer. One element is that the plaintiff applied for the job. In the case, neither employee applied for the promotion, even though each saw the job announcement. Therefore, the complaint for discrimination was dismissed.

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Construction defect litigation is the bane of commercial general liability policy insurers. Given that the duty to defend is far broader than the duty to indemnify, insurers often find themselves defending very expensive cases where “negligence” is alleged, even though the actual damage in the case is defective work product. To date, New York, with its old housing stock, has been immune to this phenomenon. However, as a result of a construction boom over the past few years, some are predicting that defective workmanship claims are set to hit New York. Claims against insurers and expensive litigation will follow. As if New York’s Labor Law wasn’t enough to worry about!

http://www.nytimes.com/2009/10/25/realestate/25cov.html?_r=1

On an unrelated construction defect matter (on which we previously reported), Chinese drywall is a major source of claims. The search for a causal linkage between the drywall and the claimed injuries/damages continues.

http://www.nytimes.com/2009/10/30/business/30drywall.html?_r=1&scp=1&sq=chinese%20drywall&st=cse

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The last few years have not been kind to insurers and the market has remained soft. A new study suggests that these soft market blues will continue into at least 2010 as excess capacity and recessionary economic conditions continue.

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http://www.businessinsurance.com/article/20091021/NEWS/910219997

Claims-made policies are the most common form of coverage available for professional liability. These policies provide coverage to professionals for claims made during the life of the policy irrespective of the date of the acts or omissions giving rise to the claim. Given the focus on when a claim is actually made, insurers seek to avoid the moral hazard of an uninsured professional running out to buy claims-made coverage once it becomes aware of an act or omission that may give rise to a claim in the future. Insurers seek to avoid this problem by requiring specific representations in the application for insurance about the insured’s knowledge of any potential claims or through an exclusion barring coverage for claims based on any prior acts known by an insured that could give rise to a claim. Although there are several ways for professionals to preserve coverage when it obtains such information, this post will focus on the “prior knowledge” exclusion contained in the policy in question.

In Executive Risk v. Pepper Hamilton LLP, a law firm represented a student loan servicer that allegedly misrepresented information that made certificates backed by the underlying loans more attractive to potential investors. The law firm became aware of this fraud as well as two lawsuits filed against its client, the loan servicer, several months before it applied for the policy in question. The law firm did not disclose this information to any of its professional liability insurers.

The primary claims-made policy contained a “prior knowledge” exclusion “for any act, error, omission, circumstance….occurring prior to the effective date of the policy if any insured at the effective date knew or could have reasonably forseen that [it] might be the basis of a claim.” The lower court held that the insured’s subjective belief that it might be sued was not sufficient to trigger the exclusion in the absence of some actual wrongdoing by the firm.

In an interesting procedural twist, the New York Court of Appeals, the state’s highest court, interpreted the policy according to Pennsylvania law. It rejected the “subjective” analysis made by the lower court and held as a matter of law that the law firm knew of acts that occurred before the policy’s effective date “which they could have forseen to be the basis of a claim.” In addition, the court rejected the suggestion that this “prior knowledge” exclusion required that the known act involve actual wrongful conduct on the part of the insured. Instead, the key inquiry is whether that insured knew of acts that could form the basis of a claim. The bottom line is that the excess carrier successfully argued that the “prior knowledge”exclusion contained in the primary policy barred coverage, a point seemingly never pressed by the primary insurer in the first instance!

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http://www.courts.state.ny.us/reporter/3dseries/2009/2009_07453.htm

The Supreme Court has ruled that a defendant may never be awarded fees pursuant to an Offer of Judgment in a case involving a claim based upon a fee-shifting statute such as, for example, the Conscientious Employee Protection Act (“CEPA”) or Prevailing Wage Act (“PWA”). In Best v. C & M Door Controls, Inc., — N.J. – (2009), (A-57-08), the plaintiff sued his employer for retaliation after he complained that he had been underpaid. The plaintiff rejected two offers of judgment in the sums of $15,000 and $25,000. A jury awarded the plaintiff $2,600 on the PWA claim and nothing on the CEPA claim.

While the Supreme Court held that a defendant can never be awarded attorneys’ fees in a case involving a statutory fee shift, it noted that the offer can be considered with respect to the reasonableness of any counsel fees sought by a plaintiff. In Best, the trial judge reduced plaintiff’s attorneys’ fees from $122,000 to $62,000 for work conducted after the unreasonable rejection of the defendant’s offer. The Supreme Court made clear though that any offer should break down the amount offered for the plaintiff’s damages and the attorneys’ fees. It remanded the case to determine whether, in light of the attorneys’ fees and costs of suit, the offer was reasonable and whether it was rejected without cause.

Notwithstanding the fact that such defendants will not be able to recover counsel fees when an offer is unreasonably rejected, the Court suggested that an Offer of Judgment will still be an effective tool for defendants who may have an incentive to file offers early on in litigation before attorneys’ fees mount.

http://www.judiciary.state.nj.us/opinions/supreme/A-57-08BestvCMDoors.pdf

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