Risk Transfer 101 – Contractual Additional Insured Terms (NJ)

Contractual risk transfer terms usually include indemnification and insurance clauses in tandem. A party agrees to indemnify another and, for good measure, agrees name the other in its insurance policy as an additional insured. New Jersey courts have recognized that this type of risk transfer will supersede any potential workers compensation bar to joining an employer in an action for injuries by a worker against a third party.

In Finnegan v. Inductotherm v. Greentree Food Management Inc. v. The Dunhour Insurance Agency, the full gamut of risk transfer issues played out.  The plaintiff cafeteria worker was injured in a slip and fall at work.  Greentree, the plaintiff’s employer, provided cafeteria services to Inductotherm, the building owner.

In addition to her worker’s compensation claim, the plaintiff sued Inductotherm. In turn, Inductothem brought a third-party action for breach of contract against the plaintiff’s employer, Greentree citing insurance terms requiring it to be named an additional insured.  (Curiously, there was no indemnification term.)  Greentree then filed a fourth party action against its insurance broker for professional malpractice for failing to obtain the appropriate coverage for Inductotherm.

At some point, Inductotherm settled with the plaintiff and pursued its defense and indemnification claims against Greentree.  After the trial court dismissed its claims, it turned to the appellate division.

Although the contract did not include an express indemnification term, it indisputably required the plaintiff’s employer to name it as an additional insured on its commercial general liability insurance policy. The parties did not contest that there was no such endorsement in the policy.  Thus, there really was no question as to breach of the contractual term.

Rather, the appellate division framed the question as to whether this breach resulted in damages to Inductotherm, i.e. if it had been named as an additional insured, would the policy have provided coverage for this particular claim. If so, it would have been entitled to defense and indemnification from the insurer. As a breaching party to the contract, the employer would be liable for these damages.

This ultimate question could not be answered on the basis of the record. As the court noted many additional insured endorsements contain terms that define or limit the scope of the coverage.  Without evidence of what sort of endorsement would have been provided, the appellate court could not render an opinion as to whether or what damages might be attributed to the breach of contract.  Given this, the matter was remanded for further development on these issues as well as the revival of what had been a dismissed claim as to the insurance broker.

Thanks to Ann Marie Murzin for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.


Charitable Immunity Prevails Even Where Non-Profit Rents to For-Profit Organization (NJ)

The New Jersey Charitable Immunity Act (CIA) bars negligence claims against  nonprofit corporations organized exclusively for religious, charitable, or educational purposes.  An entity qualifies for charitable immunity when it is formed for non-profit, educational, religious or charitable purpose, and was promoting such objectives and purposes at the time of the injury to a plaintiff who was a beneficiary of the organization’s works.

In Losado v. Princeton University, the court examined whether Princeton University, a non-profit educational organization, was entitled to Charitable Immunity when the plaintiff was injured on its campus. The key question was whether the University was engaged in its educational objectives when renting a pool on campus to an outside organization.

The plaintiff’s daughter participated in a swim meet hosted by the Princeton Tigers Aquatic Club, an organization not affiliated with the university other than pool rental.  The plaintiff was injured in a fall as she left the swim meet when she stepped into a depression adjacent to a walkway.

Princeton University filed a motion for summary judgment, arguing that they were immune from suit under the CIA.  The motion judge found that the plaintiff was a beneficiary of the University at the time of her injury, and therefore dismissed the claim under the CIA.  On appeal, the plaintiff argued that the Judge erred since the renting of a facility on the campus was not part of the “educational pursuits” that the University was organized to advance. Specifically, the plaintiff argued that youth sports by an outside organization was not an educational objective that Princeton was organized to advance. They further noted that the PTAC was not a charitable organization.

Per statutory requirement, the Appellate Court liberally construed the CIA to afford immunity to a non-profit entity even when renting facilities to members of the general public for social and recreational activities.  So long as the non-profit facility is not dominated by rentals of for-profit entities, the use of the facilities serves important social and recreational needs of the community.

Importantly, this case affirms once again that an organization is entitled to charitable immunity even when renting a portion of its property to a non-charitable organization.  These type of rental agreements are common between organizations, and will not prevent the non-profit entity from asserting and succeeding on a charitable immunity defense.

Thanks to Heather Aquino Obregon for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.


1st Party Replacement Cost Reimbursement Must Wait For Completion of All Repairs (NJ)

The adjustment of a first party claim for property damage resulted in a curious dispute between the homeowner and its insurer. In Hall v. Cumberland Insurance, the dispute arose out of windstorm damage to plaintiff’s home.  The homeowner submitted a claim to Cumberland, and both retained independent adjusters to estimate the repair costs.  Both adjusters agreed that the roof needed replacement and portions of the home’s interior repaired.

Despite a dispute between the adjusters as to the replacement cost of the repairs, Hall agreed to the value placed by his insurer. Cumberland then deducted from the replacement cost depreciation and deductible.  The plaintiff signed a proof of loss, and his insurer issued a check for the balance.

Trouble came after the plaintiff had his roof repaired. At that point, he sought reimbursement for the replacement cost for just that component of his damages.  Based upon its policy language that would allow for such a payment but only after the actual repairs were complete for the damaged building, Cumberland declined.  Rather than completing all repairs and then seeking replacement cost reimbursement, the plaintiff filed suit.

The Court found that the homeowner’s policy was clear. The insurer was not required to make piecemeal payments each time a component of the home was repaired. Inasmuch as the plaintiff sought payment only for a portion of the adjusted repairs, the insurer had no obligation to make any further payment.

Both the lower court and appellate court took issue with the plaintiff’s lack of diligence in the litigation in general – missing deadlines and even failing to file opposition to Cumberland’s summary judgment motion. Only after the motion was granted did the plaintiff seek reconsideration.  This dilatory attitude after a premature turn to the courts over a dispute that was at best a total of $5,000 likely had an impact on the ultimate outcome of the decision.

Thanks to Sathima Jones for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

Credibility Issues Snag Defendant In Effort to Vacate Default Judgment (NY)

The Supreme Court, New York County, was recently faced with a motion to vacate a default judgment. To vacate judgment, a defendant must produce a reasonable excuse and a potentially meritorious defense.  If this burden is met, whether to vacate the default rests in the sound discretion of the Court.  In Hyman v. 400 West 152nd St. the Court found unpersuasive the many arguments raised by a defendant who sought to vacate a judgment that had already been partially executed upon by the City Marshall.

The claim arose out of an alleged slip and fall on ice on property owned by the defendant. Although the plaintiff served the complaint on the defendant and followed up with at least eight letters, the defendant claimed that it received no notice of the claim much less the litigation.  The defendant asserted that the mail was notoriously bad for the building and that a letter advising of the judgment was only found in the lobby after the City Marshall called regarding assets to be seized. The defendant produced no letters to the post office or other documentation that supported any previous issues with mail service.  The court found that the defendant was simply not credible given these facts.

The Court was also unpersuaded by defendant’s argument that it would have no reason to lie regarding lack of notice since it would have forwarded any lawsuit to its insurance carrier.  This theory was undercut by the plaintiff, who produced a disclaimer letter from plaintiff’s insurer for the claim.

The ruling of the Supreme Court provides an invaluable lesson to those seeking to set aside a default judgment. When preparing a motion to vacate a judgment, the defense needs to present a credible explanation of why it failed to timely answer a complaint.  An affidavit can do so, but it must be backed by facts of an objectively reasonable nature.

Thanks to Christopher Gioia for his contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

Rear-End Hit Not Necessarily Negligence (NY)

A rear end hit normally spells liability, but in that rarest of rare cases, a plaintiff just might not be entitled to summary judgment on this issue.

The plaintiff, in Greenidge v. UPS, was a passenger in a car rear ended by a UPS truck.  The UPS driver testified that the vehicle the plaintiff was in entered his lane suddenly and then braked suddenly, leaving the him with no time to react.  The lower court granted the plaintiff’s summary judgment motion, finding that a rear-end collision establishes a prima facie case of negligence. 

 The Second Department reversed the lower court’s decision because the testimony regarding the sudden lane change created triable issues of fact.  The court further noted that, even though the parties agreed that the vehicle the plaintiff was in was stopped when it was hit in the rear, the evidence of the sudden lane change and abrupt stop, called into question UPS’ negligence.

Thanks to Georgia Coats for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

Residential/Commercial Property Owner Gets By On Sidewalk Liability (NJ)

New Jersey distinguishes between commercial and residential property to determine the responsibility of an owner to those using public sidewalks. A purely residential property owner owes no duty to maintain a sidewalk unless a repair is negligently made.  On the other hand, a commercial property owner has a duty to take reasonable care to prevent foreseeable harm.  The gray area is where a residential property is not owner occupied but is used for commercial purposes.

The Appellate Division recently considered the proof required to establish that a property owner of a three family home was liable for a slip and fall on an uneven sidewalk. In Perez v. Fernandez, the three family home was not owner occupied but the owner’s parents lived in one unit and managed the other two.  In a footnote, the court made an assumption that the property was commercial in nature because it was not owner occupied despite the family member’s occupancy.  Once this assumption was made, the court evaluated the duty under the commercial property standard.

Despite this classification, the court seemed to scrutinize plaintiff’s proofs giving the defense the benefit of the doubt. In part this may be due to the plaintiffs’ development of the case.  The plaintiff, Frictiana Perez fell on the sidewalk near ongoing construction in the street. Initially they took an alternative approach and had two engineering reports prepared. One pointed to the construction activities that may have caused damage to the sidewalk, and the other faulted the abutting property owner.

During discovery, the plaintiffs served the liability expert report identifying the construction contractors the responsible party. After the close of discovery, plaintiff’s counsel said the report had been served by mistake.  Plaintiff then served the second expert report concluding that the displaced sidewalk caused plaintiff’s fall and placed the liability on the defendant homeowner for negligent maintenance.  The Court barred the late served report, granted the defendants’ motion for summary judgment, and then denied plaintiffs’ motion for reconsideration.

In affirming the trial court’s dismissal in favor of the defendants, the Court explained: “[P]laintiffs needed to show that defendants had breached their duty owed to those walking on the sidewalk abutting their property.” It is well established that “commercial property owners would be liable for injuries on the sidewalks abutting their property that are caused by their negligent failure to maintain the sidewalk in reasonably good condition.” In its analysis, the Court held that the Fernandez family’s duty was to prevent “foreseeable harm.”  In other words, plaintiffs must prove that the defendants had actual or constructive notice of the dangerous condition that caused the injury, in this case, the displaced sidewalk.

Without an expert report, the Court ruled that the plaintiffs could not meet this burden. The  defendants denied any awareness of the raised sidewalk slab.  The Court found no evidence that the defendants should have known about the problem with the sidewalk.  “To make such a showing, plaintiffs needed evidence of how the slab was damaged and how long the slab was damaged. In the absence of expert testimony, there was no competent evidence to show defendants were negligent.”

The appellate court held that the trial court properly granted summary judgment to the defendants. Specifically, plaintiffs could not establish negligence as a matter of law without an expert to testify how and when the sidewalk had been damaged.  In a questionable liability case that lacks proof of the defendants’ actual notice of a hazardous or defective condition, the lack of an expert report confirming the defendants’ constructive notice of the condition may be the hook a motion judge needs to dismiss a complaint.

Thanks to Ann Marie Murzin for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.


Sand traps and Other Litigation Hazards (NY)

John MacIsaac was walking from the 12th green to the 13th tee box on a public golf course at Eisenhower Park when he  tripped on a sprinkler system coupling valve in a grass-covered hole, causing him to fall to the ground and sustain injuries which ultimately led to his death. In the ensuing wrongful death litigation, MacIsaac v. Nassau County, the question became whether MacIsaac had assumed the risk of a participant in a recreational sporting contest.

A party is deemed to have assumed the risk associated with an activity when engaging in sport or recreation, but only with respect to the commonly appreciated risks inherent in and arising out of the nature of the sport generally. This assumption of risk would apply to risks involved in the playing surface and open and obvious conditions.  However, if there were a concealed condition on the golf course or the inherent risks of golf were somehow unreasonably increased, the doctrine would not apply.

The County of Nassau sought summary judgment on the basis of this legal theory. In granting this motion, the judge rejected evidence submitted by plaintiff to oppose the motion, including plaintiff’s photographs, due to a purported violation of CPLR 3101, i.e. failure to disclose an authenticating witness.  Likewise, the plaintiff’s expert was disqualified as he relied upon the photographs.

The Second Department considered the admissibility of the supporting evidence in opposition, as well as the underlying theory of the case in overturning the dismissal of plaintiff’s case. The court found that authenticating information for the photographs was not necessary and that the expert opinion should have been considered.  After considering all of the evidence, the higher court held that plaintiff raised a triable issue of fact as to whether the subject condition was concealed or unreasonably increased the risks inherent in the golf course.

Thanks to Vincent Terrasi for his contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

Insured’s Word of Cash Payment for Policy Premium Not Good Enough (NJ)

In Wayne Savage v. Progressive Insurance, the plaintiff, Wayne Savage, found out firsthand the value of keeping a receipt. On 12/10/13, Mr. Savage went to Rallye Motors to purchase insurance for his car.  He spoke with a gentleman identified as A.T.  A.T. contacted Progressive, which provided a quote for Mr. Savage in the amount of $2700 to be paid in installments after an initial payment of $593.  Mr. Savage then gave A.T. $593 in cash with the remaining payments to be withdrawn from Mr. Savage’s bank account electronically.  Mr. Savage subsequently received a “welcome package” from Progressive in the mail.  The package contained an application for insurance.  The application stated that the policy term was 12/10/13 to 6/10/14 with a total premium of $2967 to be paid in five installments.  The application also provided that this first payment would be made with funds transferred from Mr. Savage’s bank account.  Mr. Savage read only the first page of the mailing and did not follow through with authorization for the direct funds transfer.

On 1/8/14, Mr. Savage was involved in a car accident.  The police officer that responded to the accident contacted Progressive to ensure that Mr. Savage had coverage.  The officer was informed that Mr. Savage did not have coverage, and the officer subsequently issued Mr. Savage a ticket.  Mr. Savage then filed suit against Progressive under the Consumer Fraud Act based on Progressive’s alleged wrongful rescission of an automobile policy.  Following a bench trial, a verdict was rendered in favor of Progressive.  On appeal Mr. Savage argued that the trial court erred because (1) he made his initial payment to Progressive and (2) Progressive failed to cancel his policy in accordance with N.J.S.A. 17:29C-10.

In regard to his first issue, Mr. Savage argued that his payment to A.T. and his receipt of the “welcome package” was verification that he paid the first installment and had a valid policy.  The court rejected these arguments because Mr. Savage provided no evidence besides his own testimony that he made the payment to A.T as he had not retained his payment receipt.  Second, Mr. Savage admitted that he only read the first page of the “welcome package” and did not read the remaining pages that explicitly stated that the first payment would be transferred from his bank account. On the other hand, Progressive provided testimony that it did not accept cash payments.  Progressive tried to transfer the funds electronically but the transfer was declined by Mr. Savage’s bank.

In turning to Mr. Savage’s last issue, the court held as an initial matter that N.J.S.A. 17:29C-10 did not apply because the issue was one for recession rather than cancellation of a policy.  Thus, the court held that an insurer is within its right to declare a policy void from inception if the initial payment is never received.  However, the court nonetheless stated that had this been a cancellation of a policy, Progressive would have still been incompliance with N.J.S.A. 17:29C-10, which provides in pertinent part that:

“No written notice of cancellation or of intention not to renew sent by an insurer to an insured in accordance with the provisions of an automobile insurance policy shall be effective unless… at the time of the mailing of said notice, by regular mail, the insurer has obtained from the Post Office Department a date stamped proof of mailing showing the name and address of the insured and the insurer has retained a duplicate copy of the mailed notice which is certified to be a true copy.”

Progressive produced evidence that it mailed a recession notice to Mr. Savage on 12/16/13 and that it also retained a duplicate copy. Therefore, it satisfied the requirements of N.J.S.A. 17:29C-10.

Thanks to Marcus Washington for his contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

Now You See It… Now You Don’t … A Tale of Two Trivial Defects (NY)

Property owners have a duty to keep their premises safe, and to protect passersby from dangerous or defective conditions. While courts will generally let a jury decide whether a dangerous or defective condition exists, property owners may be entitled to move for summary judgment where they can show, as a matter of law, that the alleged dangerous or defective condition was “trivial.” How a landowner demonstrates that a defect is “trivial,” however, may affect whether they receive summary judgment.

Two recent Second Department decisions, Kavanagh v. Archdiocese of the City of New York and Chojnacki v Old Westbury Gardens, Inc, demonstrate why landowners must take care to show, rather than tell, the court why an alleged defect is “trivial.” In Kavanaugh, plaintiff allegedly tripped and fell on an interior hallway tile while exiting a church owned by defendant. The Archdiocese moved for summary judgment, claiming that the alleged tile defect was trivial as a matter of law. In support of its motion, the Archdiocese submitted photographs of the alleged defect, measurements of the tile (which demonstrated that the defect involved, at most, a one-eighth inch height difference), and plaintiff’s own testimony of the time, place, and circumstances surrounding her injury. The trial court denied the Archdiocese’s motion, finding that an issue of fact existed as to whether the defect was “trivial.”

The Second Department reversed the trial court on appeal and granted summary judgment to the Archdiocese. The court first noted that while there is no specific “dimension test” to determine whether a defect is “trivial,” the court should look the individual facts of the case, such as the measurements and appearance of the defect and the circumstances surrounding plaintiff’s injury, to determine whether the defect is “trivial” or actionable. The court then determined that the Archdiocese, via its photographic evidence and plaintiff’s testimony” met its burden of proof to show that the defect itself was insignificant, and that there was nothing about the defect itself or the surrounding area that would increase the risk of injury to people as they walked by the defect.

On the same day that the Second Department granted summary judgment in Kavanaugh, it reversed summary judgment to the defendant landowner in Chojnacki, holding that the landowner had failed to establish that the alleged defect, a raised brick on a pathway, was “trivial” as a matter of law. The landowner submitted an expert affidavit and photographic evidence from the plaintiff depicting her on the ground shortly after she fell.  However,  the court noted that it could not see the raised brick on which she allegedly fell in the submitted photographs, and therefore could not tell whether the defect was in fact “trivial” or not.

When it comes to demonstrating that a defect is “trivial,” more evidence is better! High-quality photographs of the alleged defect and the surrounding area—with measurements—will go a long way towards showing the court why the alleged defect is not actionable. Absence of such evidence is noticeable, and likely fatal to any summary judgment motion.

Thanks to Peter Luccarelli for his contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

Financial Advisor Owed No Fiduciary Duty (PA)

The Pennsylvania Supreme Court recently considered whether a fiduciary duty arises when a person with superior knowledge advises another with respect to financial products. In Yenchi v. Ameriprise Financial, Inc., the court found no fiduciary duty where the clients made the ultimate investment decisions in the absence of a traditional controlling and overmastering relationship.

Bryan Holland made an unsolicited cold call to Eugene and Roth Yenchi in 1995, asking to meet them regarding their “financial stuff”. At the initial meeting, Yenchi informed Holland that he had a long term disability policy, which Holland later reviewed and asked Yenchi to keep because he couldn’t offer a comparable product.

Subsequently, Holland presented the Yenchis with a financial management proposal, which contained a notice that it had been prepared by “your American Express financial advisor” (Holland) and that “at your request, your American Express financial advisor can recommend products distributed by American Express Financial Advisors and its affiliates as investment alternatives for existing securities.” The Proposal offered the Yenchis a number of general recommendations, including that they monitor monthly expenses, consolidate their debt, consider various savings plans, consolidate current life insurance policies into one policy, review long-term care coverage, keep accurate records for tax purposes (medical expenses and charitable contributions), transfer 401(k) funds into mutual funds, and continue estate planning with an attorney and their financial advisor. The Yenchis implemented some of these recommendations, saving money in an investment certificate and opening an IRA account.

Additionally, the Yenchis purchased a whole life insurance policy with an initial death benefit of $100,000 plus a $25,000 rider for Ms. Yenchi, paying for it by cashing out Yenchi’s five MetLife policies to make the initial payment. In 1997, Ms. Yenchi used the proceeds from her two MetLife policies to purchase a deferred variable annuity. In 1998, Holland proposed that Yenchis increase their coverage to $300,000 but they rejected Holland’s advice.

In 2000, the Yenchis had their portfolio independently reviewed and were advised that their financial portfolio was not as Holland represented- the 1996 policy was underfunded, destined to lapse and additional premium rates would have to be paid over time. Additionally, Ms. Yenchi’s deferred variable annuity would not mature until 2025 when she was eight-four.

The Yenchis initiated suit in April 2001 against American Express and Holland, alleging claims of negligence/willful disregard, fraudulent misrepresentation, violation of the Uniform Trade Practices and Consumer Protection Law (“UTPCPL”), 73 P.S. §§ 201-1-201-9.3, bad faith, negligent supervision, and breach of fiduciary duty. Among other things, the Yenchis claimed that a confidential relationship existed with Holland because he held a “vastly superior” position in terms of knowledge- highlighting that they were only high school educated while Holland is college educated with a CPA and securities and insurance licenses.

The Supreme Court of the Western District robustly analyzed the different scenarios in which a fiduciary relationship could be created- specifically requiring a relationship of confidence in which the client cedes decision-making control to the other party. Conversely, even where special vulnerabilities exist, this Court has not recognized the existence of a confidential relationship if the person continued to act on his or her own behalf and did not succumb to “overmastering influence” of another.

The Court concluded that the record fell short of establishing a fiduciary relationship with Holland because fiduciary duties “do not arise merely because one party relies on and pays for the specialized skill of the other party. Its just not enough. The superior knowledge or expertise does not impose a fiduciary duty or otherwise convert an arms length transaction into a confidential relationship. “[T]he critical question is whether the relationship goes beyond mere reliance on superior skill, and into a relationship characterized by ‘overmastering influence’ on one side or ‘weakness, dependence, or trust, justifiably reposed’ on the other side,” which results in the effective ceding of control over decision -making by the party whose property is being taken. The court concluded that the case at bar presets an arms length transaction in which the Yenchis accepted Holland’s advice with respect to the purchase of the policy and decided to reject other products.

Thanks to Sathima Jones for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.