Category Archives: New York

NY-First Department Holds $286 Million SEC Disgorgement Is Not Covered

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In J.P. Morgan Sec., Inc. v Vigilant Ins. Co., the First Department held that the insurers of Bear Stearns were not required to pay for the $140 million disgorgement fine, and additional $146 million in statutory interest, resulting from the bank’s settlement with the SEC for improper profits acquired by third-party hedge fund customers.  The ruling represents the latest chapter in the costly, decade-old litigation between J.P. Morgan (into which Bear Stearns in 2008) and Bear Stearns’ insurers.

As background, in 2006, Bear Stearns paid out almost $215 million to the SEC as part of a settlement after the SEC brought proceedings for various trading violations.  Of the $215 million, $160 million was labeled a “disgorgement” and $90 million was labeled a “penalty.”  Bear Stearns’s insurance policies, which covered a “Loss,” provided that “Loss shall not include … fines or penalties imposed by law.”  When Bear Stearns sought reimbursement for $140 million of the $160 disgorgement from its insurers, the insurers disclaimed coverage on the basis that the $160 million payment was labeled “disgorgement”, and thus it did not represent a covered loss under the insurance policies.  In 2013, the New York Court of Appeals held that Bear Stearns was entitled to coverage, as the public policy rule against insuring “ill-gotten gains” “should apply only where the insured requests coverage for the disgorgement of its own illicit gains,” and that “the documentary evidence does not decisively repudiate Bear Stearns’ allegation that the SEC disgorgement payment amount was calculated in large measure on the profits of others. 21 N.Y.3d 324, 336.  Thus, because the disgorgement represented the gains of others, the public policy rationale was inapplicable.  On remand, the trial court granted summary judgment for J.P. Morgan, which included over $146 million of statutory interest, bringing the total amount to approximately $286 million.

In the present case, the First Department reversed the trial court in light of the United States Supreme Court’s 2017 decision in Kokesh v. Securities and Exchange Commission, 137 S.Ct. 1635 (2017).  Kokesh involved the application of a federal statute of limitations to any action for the “enforcement of any civil fine, penalty, or forfeiture.”  The Supreme Court held that SEC disgorgement was explicitly a penalty, and therefore the statute of limitations did not apply.  The First Department held that the Supreme Court’s “rationale at the nature of disgorgement … applies with equal force to the issue of whether the disgorgement … even if representing third-party gains, was a ‘Loss’ within the meaning of the policy.”  Because Kokesh established that disgorgement “punishes a public wrong, and its purpose is deterrence,” it was a penalty and not covered under the policy.

Given the amount at stake and significance of the claim, it is likely that the Court of Appeals will have a second crack this case.  On appeal, however, the argument will not focus on public policy rationales, as it had previously.  Rather, J.P. Morgan will attempt to argue that the Supreme Court’s holding in Kokesh is limited to its application to statutes of limitation, and should not be expanded to encompass language in an insurance policy.

Thanks to Douglas Giombarrese for his contribution to this post.

NY-  Third Circuit Untangles Coverage Web of Direct Versus Vicarious Liability

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Upstream litigants and their insurers often to push liability to the downstream contractors or insureds, but the policy terms of an upstream insurer, even an excess insurer, can frustrate expectations.

In United Financial Casualty Company v Princeton Excess and Surplus Lines Insurance., Princeton appealed the ruling by the Eastern District of New York that held it had a primary duty to provide coverage in a bodily injury claim for the direct liability of their named insured, Prestige Delivery Services, and Staples, Inc.  Prestige was hired to deliver goods by Staples.  Joseph Nice, who worked for Prestige, had to stop the delivery van for repairs.  In the process of repairs, the repairman, Plaintiff Ken Dunbar, was trapped and dragged under the vehicle, sustaining severe personal injuries.  Dunbar sued Nice for negligence, and asserted claims of vicarious liability (respondeat superior) and negligent hiring, supervision, and retention against Prestige and Staples.

United, which insured Nice, assumed the defense of all parties, settled all claims, and then sued Princeton for (1) contribution on the vicariously liability claims, and (2) a declaratory judgment establishing Princeton had primary coverage duties with respect to the direct liability claims against Prestige and Staples.  The Eastern District of Pennsylvania ruled for United on both accounts, and Princeton appealed only from the latter.

The Third Circuit, however, rejected Princeton’s appeal on two grounds.  First, the Court held the United policy only insured Nice for claims arising directly from his conduct, and the direct liability at issue pertained to negligent hiring and supervision.  As the Court observed, Nice cannot supervise himself.  Second, although an excess form policy, the Princeton policy’s terms provided for primary level coverage for liability assumed in an “insured contract.”  Because Prestige agreed to hold harmless and indemnify Staples for any negligence attributable to Prestige, the Third Circuit affirmed the district court’s ruling.

Such cases are cautionary tales regarding resting on standard assumptions.  Often in such delivery or construction claims, liability flows down to the tortfeasor, who is contractually bound to indemnify those above and whose insurance is obligated to answer on a primary basis.  Excess policies rarely are obligated to assume primary level responsibilities, but most such policies have conditions and terms that would trigger primary coverage.  The details of the policy will trump standard business expectations every time, and the minutiae of the policy should be scrutinized at the outset of every claim as a result.

Thanks to Christopher Soverow for his contribution to this post.

 

Coming up Short – Second Circuit Appellate Court Requires Significant Elevation Difference for Labor Law §240(1)

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In Simmons v. City of New York, Plaintiff was injured while working as a plumber on a project for the City of New York. Plaintiff was using a pallet jack to move an air compressor weighing over 600 pounds. The compressor was lifted six inches off the ground and was only secured by two pieces of scrap wood wedged around the sides of the compressor. Plaintiff was pushing the compressor from behind when the pallet jack ran over concrete debris and stopped short causing the compressor to roll off onto plaintiff’s ankle.

The lower court granted summary judgment dismissing the Labor Law §240, §241(6), and §200 claims.  On appeal, the Second Department affirmed dismissal of the Labor Law §240 claim holding that it was not enough that the injury was caused by the application of gravity, there must be a significant elevation difference. A plaintiff must show that “at the time the object fell, it was being hoisted or secured, or that the falling object required securing for the purposes of the undertaking” and the object fell because the absence of a safety device.”

Notwithstanding the Labor Law §240 dismissal, the Second Department reinstated the §241(6), and §200 claims against the general contractor.

The Appellate Court’s decision with regards to Labor Law §240(1) could be impactful with how we analyze the “elevation related risks” required by the statute. When an object falls from a short height or tips over from the same level as the plaintiff, courts often look at the weight of the object to determine how much force it was able to generate during its fall. Here, the court did not analyze the weight or the force created by the object, but focused solely on the height it fell from and whether it was the type of activity which required a safety device as enumerate in Labor Law §240.

Thanks for Jesse Sussmane for his contribution to this post.

Skier Maneuvers Through Summary Judgment Minefield (NY)

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In ­­­­­­­­­­­Sopkovich v. Smith, Plaintiff commenced this action seeking damages for injuries sustained when he and defendant, a snowboarder, collided on a ski trail. Defendant moved for summary judgment under the theory of assumption of the risk and that defendant did not engage in any “reckless, intentional, or other risk-enhancing conduct not inherent in the activity.” The lower court dismissed this case and the plaintiff appealed.

The Appellate Division, Fourth Department reviewed the facts and ruled the lower court erred in its granting of summary judgment. Although there is an inherent danger in skiing and snowboarding, the other prong of the test was that the defendant was not reckless or engaged in conduct not inherent in the activity. Both plaintiff and defendant were veteran skiers/snowboarders.

Plaintiff testified that he was “slow[ly]” skiing down a beginner trail when defendant merged onto that trail from an intermediate trail and impacted plaintiff from the left.” By contrast, defendant, an “advanced” snowboarder who was familiar with the trails, testified that he had already safely merged onto the beginner trail at an “average” or “normal” speed, was further down the beginner trail than plaintiff and was “very close to a complete stop” at the time of the collision, having observed plaintiff “going fast” “down the hill in a straight line.”

Plaintiff submitted an affidavit from an emergency room physician who was also an 11–year veteran of the National Ski Patrol. Based on his review of the depositions and other records related to the case, the expert opined that, given the nature and extent of plaintiff’s injuries, “there [was] no question [that] the force with which [defendant] impacted [plaintiff’s] left side and back was immense” and that plaintiff’s injuries were “not consistent with [defendant’s] deposition testimony” that he had come to or nearly come to a complete stop. The expert thus concluded that defendant had “unreasonably increased the risk of harm” to plaintiff.

The Appellate Division concluded that plaintiffs raised triable issues of fact whether defendant engaged in reckless conduct. As the record established that the collision was exceedingly violent there is “at least a question of fact … whether … defendant’s speed in the vicinity and overall conduct was reckless.”  As such, the expert testimony contradicted the defendant, thus creating a question of fact.  A fine maneuver by the plaintiff and a reminder that summary judgment will rarely be upheld if there is credible expert testimony sufficient to take the case before a jury.

Thanks to Paul Vitale for his contribution to this post.

 

Supplemental Bill of Particulars Not an Unusual or Unanticipated Circumstance (NY)

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In Drapper v Horan, 2018 WL 4623041, 2016 N.Y. Slip Op. 06330 (1st Dep’t September 27, 2018), the First Department affirmed a lower Court’s denial of a motion to vacate a note of issue and compel a medical examination of an injured plaintiff despite the service of a supplemental bill of particulars for new treatment relative to a traumatic brain injury.

Plaintiff in this matter stated that he suffered injuries, including a traumatic brain injury, when the car he was driving was rear-ended by the defendants.  Following plaintiff’s disclosures that he was suffering headaches and that an MRI of his head revealed traumatic injury, plaintiff filed a note of issue.  Defendants, thereafter failed to notice a physical examination, and then filed an untimely motion to vacate, which was denied.

Prior to trial, plaintiff filed a supplemental bill of particular that stated plaintiff received additional medical treatment for his traumatic brain injury.  Thereafter, defendants renewed their motion to vacate and compel plaintiff to appear for a medical examination.

The defendants failed to offer an excuse why they originally failed to notice a medical examination before the note of issue was filed, and also failed to demonstrate how the additional treatment was an “unusual or unanticipated circumstance” to warrant vacatur and a medical examination. As such, the 1st Department affirmed the lower court’s denial of a motion to vacate a note of issue and compel a medical examination of an injured plaintiff.

Although this case leaves open the possibility of further discovery after a supplemental bill of particulars is made prior to trial, this case is also an example of why experienced defense counsel do not rely on curing their missed deadlines based on later filings, but make sure to adhere to discovery and motion deadlines.  Both, failing to timely notice a medical examination and timely file a motion to vacate a note of issue can be detrimental to defending the case and difficult, if not impossible, to cure prior to trial.

Thanks to Jonathan J. Pincus for his contribution to this post.

No Picnic for Plaintiff – Tree Roots are Open and Obvious (NY)

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In Ibragimov v Town of N. Hempstead, the plaintiff, while at a picnic at Whitney Pond Park in Nassau County New York, tripped on an exposed tree root and fell after getting up from a picnic table.  He filed a lawsuit in Nassau County Supreme Court against the Town of North Hempstead claiming the Town was negligent in the maintenance of the picnic area and the tree root was dangerous.

The Town filed a motion for summary judgment, arguing that the lawsuit should be dismissed because exposed tree root was an open and obvious condition which was inherent or incidental to the nature of the property; and that the exposed tree root was not inherently dangerous.  The Supreme Court agreed with the Town of North Hempstead and granted the motion, dismissing the case.

The plaintiff appealed the dismissal, and the Appellate Division, Second Department, reviewed the case.  The Appellate Division affirmed that a landowner has a duty to exercise reasonable care in maintaining its property in a safe condition under all of the circumstances, including the likelihood of injury to others, the seriousness of the potential injuries, the burden of avoiding the risk, and the foreseeability of a potential plaintiff’s presence on the property.  However a landowner has no duty to protect or warn against an open and obvious condition that is inherent or incidental to the nature of the property, and that could be reasonably anticipated by those using it.  The Court ruled that the tree root fell within this principle, known as the “open and obvious” rule.   The Appellate Division agreed with the Supreme Court’s decision and affirmed the dismissal of the lawsuit based upon the open and obvious nature of the tree root in the picnic area of the park.

Thanks to George Parpas for his contribution to this post.

Bronx Jury’s Verdict Underscores the Value of Independent Medical Examinations (NY)

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In a recent decision by the First Department, the Appellate Division took up the issue of whether it was proper for a Bronx jury to have declined to award any pain and suffering damages in a motor vehicle accident case where the plaintiff had already been granted summary judgment on the issue damages.

In Stanford v. Rideway Corp, 2018 NY Slip Op 03453, plaintiff was a rear-seated passenger in a taxi which was involved in a two-car accident on Manhattan’s FDR Drive. Plaintiff thereafter commenced a lawsuit against the drivers of both vehicles, alleging serious injuries to her cervical and lumbar spine. Plaintiff ultimately moved for summary judgment on the issue of whether she sustained a serious injury under Insurance Law Section 5102. The Court granted plaintiff’s motion, and at the time of trial, the jury was instructed that as a matter of law, plaintiff had “sustained a non-permanent medically determined injury that prevented [her] from performing her usual and customary activities for 90 out of the 180 days immediately after the accident.” In spite of that instruction, defendants claimed that plaintiff’s injuries were minimal and were unrelated to the accident, relying on the testimony of their expert orthopedic surgeon, who had performed an independent medical examination of the plaintiff. Contrary to the Court’s instruction, defendant’s expert had failed to find any objective evidence of injury to plaintiff’s neck or back, concluding that her lumbar and cervical spine were normal, and that she was not prevented from taking part in any activities.

After deliberating, the jury elected to award no damages at all for pain and suffering. That verdict was upheld by the Appellate Division, which determined that plaintiff’s evidence as to her pain and suffering was “not compelling,” and that a jury could reasonably have found that plaintiff’s claims were inconsistent with the objective medical findings of defendant’s expert orthopedic surgeon.

The court found that plaintiff’s counsel, apparently very creative at the summary judgment stage of the litigation, waived any argument that the jury’s verdict was inconsistent when counsel failed to object to the contents of the jury’s verdict sheet during the charge conference.  Had it not been for the defense’s expert presentation, the science would have gone unopposed and a pain and suffering award would have been awarded.

Thanks to Tyler Rossworn for his contribution to this post.

WCM Wins Summary Judgment on Premises Case in Queens

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This past week, Wade Clark Mulcahy was victorious in its motion for summary judgment, absolving two homeowners of exposure in a sidewalk trip and fall case. Brian Gibbons and Chris Gioia prepared the motion, and Chris argued the motion before Hon. Ernest F. Hart of Queens County Supreme Court.

In, Calle-Gonzalez v. Borukhov, the Court ruled that our clients, homeowners in Queens, were entitled to summary judgment for a trip and fall which occurred on the sidewalk in front of their single family home.  Under New York City Administrative Code’s Section 7-210, liability for sidewalk defects is placed upon owners of the adjacent property.  However, Section 7-210 also provides for an exception of one-two or three family homes.

Judge Hart ruled that we demonstrated that unit was a single family, owner-occupied dwelling.  Additionally, the Court found that the owners had not made negligent repairs, nor had they utilized the sidewalk for a ‘special use’, two exceptions which would deny summary judgment.   Plaintiff’s claims will continue against the City of New York, and will focus on the issue of notice.  But, barring any appellate practice, our clients are out of this case permanently.

The tricky aspect of motions like this one involves plugging up any potential holes that could create a “triable issue of fact,” which could prompt SJ denial.  At argument, Chris Gioia left no doubt that our clients were not liable here, and the Court agreed.  Please email Brian Gibbons with any questions, or contact me on Twitter @bgibbons35.

Who’s Gonna Ride Your (Domesticated) Horses (NY)

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In Brinkman v Marshall Field VI, the Appellate Division, Second Department affirmed a lower court ruling granting defendant’s motion for summary judgment.  In Brinkman, plaintiff was allegedly injured while grooming a stallion in the barn at Hidden Brook Farm.  She claimed that while she was grooming, three horses, who had escaped from their paddocks, galloped unaccompanied into the barn, startling the stallion who side-stepped and pinned her against the wall.  She commenced an action based on common-law negligence against the farm.

The Court found that the farm established its prima facie entitlement to judgment as a matter of law because the stallion and escaped horses were domesticated animals and plaintiff failed to allege that any of them had vicious propensities.  New York does not recognize a common-law negligence cause of action to recover damages for injuries caused by domestic animals and an owner can only be held liable if they know or should have known of the animal’s vicious propensities.

The plaintiff tried to claim an exception set forth in Hastings v. Suave which dealt with a farm animal that strays from the place where it is kept onto a public road or other property.  In carving out that exception, the Court of Appeals recognized the unique peril that arises from allowing farm animals to wander off a farm unsupervised and unconfined.  People generally don’t expect a 1500lb cow or 400lb pig or unruly goat to wander freely into traffic or onto a neighbor’s yard mangling people and property.  That exception is inapplicable here as the presence of horses in a barn is not unexpected.

Without the exception, plaintiff was unable to prevail on her claim.  While the rule about domestic animals has been extended past dogs, it is extremely important that vicious propensity be pleaded and established, or the defendants may be able to obtain summary judgment.  Thanks to Mehreen Hayat for her contribution to this post.  Please contact Brian Gibbons by email or on Twitter (bgibbons@35) with any questions.

A “Threshold” Motion and Doctor Affidavit Needs Specifics, even for a De Minimis Injury (NY)

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If you are a Defendant in a motor vehicle injury case, and move for summary judgement on the “threshold”  grounds (that plaintiff did not sustain a “serious injury” under the New York Insurance Law) a proper expert report is critical to make a prima facie showing that the Plaintiff did not sustain a serious injury. Sometimes, defendants learn the hard way.

In Cabrera-Verduzo v. Shortis, a case concerning a chain-reaction, rear-end motor vehicle accident, all the defendants moved for summary judgement claiming that both Plaintiffs did not sustain serious injuries. The courts in New York have been clear that when filing summary judgement motions the defendants bear the burden of showing that the Plaintiff did not sustain a “serious injury” under New York Insurance Law §5120(d). In the case at bar, the court concluded that the defendants failed to make a prima facie showing that both of the Plaintiffs did not sustain a serious injury.

First up was the Plaintiff, Maria Cabrea Verduzo. Specifically, this Plaintiff claimed to have injured her right knee. She claimed in her bill of particulars that she was confined to her home for approximately four months and that during that time period she was totally incapacitated. Cabrera-Verduzo also testified at her deposition that she missed approximately four and a half to five months of work. Dr. David Weissberg, defendants’ examining orthopedist, examined this Plaintiff approximately five years after the accident and did not say that any of his findings were related to the time period immediately after the subject accident.  The court said that the defendants failed to meet their initial burden by failing to negate the issue of fact as to the 90/180 claim. Therefore, the motion was denied.

As for the second Plaintiff, Mr. Montenegro, the court came to the same conclusion. Mr. Montenegro claimed to have injured his right knee and that he suffered appendicitis as a result of the motor vehicle accident. The defendants had two medical experts examine this Plaintiff. Dr. Raymond Shebairo, an orthopedist, did many tests regarding Mr. Montenegro’s right knee, but failed to effectively discuss Plaintiff’s claim of appendicitis. Dr. Ilan Weisberg, a gastroenterologist, concluded that it is “more likely to be coincidental to, rather than caused by the subject accident.” However, he does not back that claim up with any actual evidence. The court stated that this conclusion was extremely speculative. Therefore, they denied this part of the motion as well.

This case illustrates that defendants and their clients should take a second look at their expert medical reports, particularly before moving for SJ on “threshold” grounds. If the reports cannot meet the initial burden, the motion may not be worth the paper its written on.  Thanks to Marc Schauer for his contribution to this post.  Please contact Brian Gibbons by email or on Twitter @bgibbons35 with any questions.