New York Civil Law

New York Court of Appeals Holds Consequential Damages May Be Covered in First-Party Action Against Insurer

Were the New York Court of Appeals' decisions in Bi-Economy Market, Inc. v. Harleysville Ins. Co. of New York and Panasia Estates, Inc. v. Hudson Ins. Co. the bombshells that many thought they are? (see prior post on appeals here).  In both cases, the Court held that consequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages were "within the contemplation of the parties as the probable result of a breach at the time of or prior to the contracting."  The consequential damages analysis, now applied to insurance contracts, is a well-settled principle.  Why then is it so surprising that an insured can seek consequential damages in the insurance contract context?

In his dissent, Judge Smith points out that these appeals conflict with the Court's past holdings in Rocanova v. Equitable Life Assur. Socy. of U.S. and New York Univ. v. Continental Ins. Co., where the Court rejected the argument that a bad-faith failure by an insurer to pay a claim could, without more, justify a punitive damages award.

Aren't consequential damages, even in the insurance contract context, different than punitive damages?  If so, do Bi-Economy and Panasia Estates truly endanger the holdings in Rocanova and New York Univ.?

Here are two good analyses of the appeals by fellow New York blawgers: Kevin Merriman over at National Insurance Law Forum Blog wrote this post and Elizabeth Fitzpatrick over a We've Got You Covered wrote this post.

Here are several articles about the decisions: here at PRWeb.com; here at Business Insurance; and  here at the Insurance Journal.

New Certified Question Regarding Insurance Coverage

The United States Circuit Court of Appeals for the Second Circuit in Briggs Ave. L.L.C. v. Ins. Corp.  of Hanover recently certified the following question to the New York Court of Appeals:

When an injured party begins its suit against an insured by serving process on the Secretary of State, who, under New York corporate and limited liability company law, is the insured’s agent for such service, does this service suffice to trigger the provisions in the relevant insurance policy that require the insured to inform its insurer in a timely manner that a suit has been brought, where: (a) the insurance policy does not expressly refer to notice that a suit has been brought being given to an insured’s “representative” rather than the insured itself, and (b) the insured plausibly argues that – due to its failure to update its address with the Secretary of State – it had not received actual notice that the suit had been brought?

NYCL will keep you apprised as to whether the Court of Appeals accepts or declines the certified question.

Thank you to Sandy at Second Opinions for the head's up.

Recent Appellate Division, First Department Decision Regarding Labor Law sec. 240(1)

What happens when a ladder is inadequate for the task at one spot in the room, not because it is too short or lacked appropriate parts, but because when the ladder is placed in the only possible position at the location, its first rung is completely blocked and inaccessible?  The Appellate Division, First Department in Cohen v. Memorial Sloan-Kettering Cancer Ctr. recently addressed this Labor Law sec. 240(1) issue.  Writing for the Majority, Justice Saxe held that the owner and contractor violated sec. 240(1) even though the ladder provided was not defective.  The Majority discussed how the ladder was inappropriate for the injured plaintiff to ascend and descend in a safe manner given a certain obstruction in the room.

Justice Friedman dissented,  focusing on the lack of a defect in the ladder that the injured plaintiff used.  Justice Friedman also reasoned that the accident resulted from a separate hazard unrelated to the danger that brought about the need for the ladder in the first instance.

New Poll Regarding Citation of Blog Post in Legal Document or Scholarly Article

New York Civil Law's previous poll regarding the style of weblog posts was by no means a landslide.  The poll asked: How much content do you like in a legal weblog post?

60% of those persons answering the poll stated, "I prefer the newer style, where there are large quotations, more substance, and less hyperlinks."

40% of those persons answering the poll stated, "I prefer the old-style, where the content was minimal and the hyperlinks were plenty."

NYCL's posts kind of fall inbetween the two styles, leaning toward the old style.  For more pressing issues, NYCL will likely lean toward the new style of posts.

Vote now for NYCL's newest poll: "Would you cite a professor's or noted attorney's weblog post as persuasive authority in a legal document or scholarly article?"

2007 Insurance Coverage Retrospective

Lexis/Nexis' Insurance Law Center offers Randy Maniloff's commentary concerning the 10 most significant insurance law decisions in 2007.

Appellate Division, Second Department, Determines Transportation Equity Act of 2005 Is Constitutional

In Graham v. Dunkley, Queens County, Supreme Court (Polizzi, J.), held that the Transportation Equity Act of 2005 was unconstitutional.  The Act intends to preempt all state statutes to the extent that they hold those owners in the business of renting or leasing motor vehicles vicariously liable for the negligence of drivers, except when there is negligence or criminal wrongdoing on the part of the owner.  In New York, the Act implicates Vehicle and Traffic Law sec. 388.

Last week, the Appellate Division, Second Department reversed Justice Polizzi's holding, concluding that the Act is constitutional.  The Court noted that the Act aids in the regulation of the national market for leased and rented automobiles and motor vehicles are "the quintessential instrumentalities of modern interstate commerce."   The Court also observed that the Act constitutional as a regulation of an economic "class of activities" which, taken in the aggregate, substantially affect interstate commerce.

See the following posts for some background on this case: here, here, and here.

Appellate Division, Second Department Recent Reinstates Labor Law sec. 240(1) Claim -- New York's Scaffold Law

The Appellate Division, Second Department recently snatched victory away from the defendants in Castillo v. 62-25 30th Ave. Realty.  The Second Department reinstated the plaintiff's Labor Law sec. 240(1) claim after a jury verdict in the defendants' favor.

It is not clear from the facts, but it does not appear that the injured plaintiff was provided with a safety device.  The jury was presented with two different versions of how the accident occurred.  The plaintiff fell from a height while removing large, heavy metal racks from a wall. 

According to the deposition testimony of a coworker and eyewitness, the plaintiff fell from the elevated worksite when the metal rack he was working on suddenly came loose and, after he hit the floor, the metal piece he had been handling fell and hit him across the leg.   In contrast, after initially stating at his deposition that he had no recollection of how he got hurt, the plaintiff testified at his deposition that he was standing under the scaffold when a piece of the scaffold fell and hit him in the head.

The Court reasoned that under either version, the proximate cause of the plaintiff's injuries was a violation of Labor Law sec. 240(1).  The Court rejected the argument that the plaintiff's handling of the metal rack caused him to fall.  Because it appears that no safety device was provided, and the plaintiff was working at a height, the Court seemed to reason that the mishandling of the device could only have been a contributory factor to his fall (not a viable defense under sec. 240(1)).

Second, the Court held that falling piece of scaffold hitting the plaintiff also constituted a sec. 240(1) violation. 

NASA, The Beatles, and You -- "Across the Universe"

A bit off topic, but wanted to call your attention to this interesting news piece. 

For the first time ever, NASA will beam a song -- The Beatles' "Across the Universe" -- directly into deep space at 7 p.m. EST on Feb. 4.  Listen to the song here and read press release here.

The transmission over NASA's Deep Space Network will commemorate the 40th anniversary of the day The Beatles recorded the song, as well as the 50th anniversary of NASA's founding and the group's beginnings.

As part of the celebration, the public around the world has been invited to participate in the event by simultaneously playing the song at the same time it is transmitted by NASA,  so get your "Let It Be" album out tomorrow night and play along.