Contribution New York's Dram Shop Act by kws19363

VIEWS: 70 PAGES: 24

									                                                                                  2009 • Vol. 3




                                Contribution: New York's Dram Shop
                                Act

                                Coverage: The Phrase "Arising Out
                                Of" And Its Expanding Reach In the
                                Additional Insured Context

                                New Jersey Court Declines To Extend
                                Waiver of Subrogation Provision To
                                Insured's Deductible




   A summary of significant recent developments in the law focusing on substantive
issues of litigation and featuring analysis and commentary on special points of interest.
ARTICLES                                                 FEATURES
    CONTRIBUTION                                         16 On The Litigation Front
3   New York's Dram Shop Act: Motorist Who Injures       19 Case Notes
    Intoxicated Pedestrian Can Seek Contribution From
    Bar
    by Edward L. Soyka

    COVERAGE
                                                           REPORT STAFF
5   The Phrase "Arising Out Of" And Its Expanding          Editor-In-Chief
    Reach In The Additional Insured Context
                                                           Robert A. Stern
    by Daniel S. Valinoti
                                                           Associate Editor
    NOTICE OF CLAIM
                                                           Virginia M. Markovich
7   An Insured's Good Faith Belief That An Incident Is
    Not Covered By The Policy Does Not Excuse The          Contributing and
    Three-Year Delay In Notice Of Claim                    Featured Attorneys
    by Jennifer Shon                                       Edward L. Soyka
                                                           Daniel S. Valinoti
    STATUTE OF LIMITATIONS                                 Jennifer Shon
9   Claims Against A Doctor For Alleged Negligence         Edward M. Tobin
    In Performing An Independent Medical Examina-          Susan K. Slim
    tion (IME) Are Claims for Malpractice, Governed        Joseph W. Szalyga
    By New York's Two Year, Six Month Statute Of
    Limitations                                            Case Notes
    by Edward M. Tobin                                     Attorney
11 Court Exposes Law Firms To Increased Legal Mal-         Melinda S. Kollross
   practice Claims Under The Continuous Representa-
   tion Doctrine
    by Susan K. Slim

    SUBROGATION                                          The CM Report of Recent Decisions is provided
13 New Jersey Court Declines To Extend Waiver Of         as a general information source and is not intended,
                                                         nor should it be considered, the rendition of legal
   Subrogation Provision To Insured's Deductible
                                                         advice. Please contact us to discuss any particular
    by Joseph W. Szalyga                                 questions you may have.



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                                                                                  CONTRIBUTION

New York's Dram Shop Act:
Motorist Who Injures Intoxicated
Pedestrian Can Seek Contribution
From Bar
by Edward L. Soyka


In a matter of first impression, the      tortfeasor. Ordinarily liability for
Appellate Division, Second De-           contribution flows from a breach          Edward L. Soyka
partment held that a motorist can        of duty owed to the Plaintiff. See       is a senior associate, in the New
                                                                                  York office of Clausen Miller P.C.
seek contribution from a bar based       CPLR §1401. The Court in O’Gara          He focuses his practice in litigation
on the claim that the pedestrian         found that Plaintiff’s alleged in-       involving medical malpractice and
left the bar in an alcohol-induced       juries were caused in part by the        healthcare issues, premises and con-
                                                                                  struction litigation, business and com-
stupor and then tried to cross a         bar’s violation of the Dram Shop         mercial litigation and products liability.
highway when she was struck by           Act. However, the O’Gara Court           esoyka@clausen.com
a car. O’Gara v. Alacci, 2009 WL         noted that the bar could not be
3047886, 2009 N.Y. Slip Op. 06668        considered to have violated a duty
(2d Dep’t Sept.. 22, 2009). Under        owed to Plaintiff, the driver of the
New York’s current Dram Shop             automobile. O’Gara at *3. The
Act, General Obligations Law §           O’Gara Court reasoned that a seller
11-101(1), a bar owes a duty to the      of alcohol owes no duty to the con-
public not to sell alcohol to a person   sumer to protect the consumer from
who is visibly intoxicated. Here         the results of his or her involuntary
the Court found that a motorist is a     intoxication. O’Gara at *2. The
member of the public that the Act        Dram Shop Act does not give the
is designed to protect and therefore,    consumer a cause of action against
if the bar breached its duty when it     the seller to recover damages for
sold alcohol to the pedestrian, the      injuries the consumer suffered as a
motorist can seek contribution from      result of the Dram Shop Act viola-
the bar.                                 tion. O’Gara at *3

The driver of the automobile was         The O’Gara Court found that the
seeking contribution from the bar        Dram Shop Act intended to, among
based upon the alleged violation of      other things, protect the commu-
the Dram Shop Act, which makes           nity from the dangers intoxicated
it illegal for sellers of alcohol to     persons pose, and imposes a duty
sell alcohol to a visibly intoxicated    upon sellers of alcohol to protect the
person. Under New York’s Civil           public from such dangers. O’Gara
Practice Law and Rules (“CPLR”)          at *3. Therefore, the O’Gara Court
§ 1401, a joint tortfeasor who has       decided that where an intoxicated
paid more than his or her equitable      plaintiff is injured by a either an
share of damages to a plaintiff may      automobile or another person, and
recover the excess from the other        the circumstances support a find-




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    CONTRIBUTION

ing that an accident was caused,        Learning Point: Permitting contri-     sellers of alcoholic beverages must
in part, by selling or providing of     bution in such cases where a viola-    exercise greater care because they
alcohol to the plaintiff in violation   tion of New York’s Dram Shop           may now be exposed to liability, not
of the Dram Shop Act, the driver of     Act is alleged, could result in the    only for the actions of their direct
an automobile may properly seek         provider of alcoholic beverages be-    customers, but for legal actions
contribution from a bar based upon      ing held answerable in damages to      which their direct customers are
this violation. O’Gara at *3.           the alleged tortfeasor as opposed to   made a party.
                                        the intoxicated person. Therefore,




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                                                                                 COVERAGE

The Phrase "Arising Out Of" And Its
Expanding Reach In The Additional
Insured Context
by Daniel S. Valinoti


In Regal Constr. Corp., et al. v.       In March, 2001, LeClair slipped
National Union Fire Ins. Co. of         and fell on a freshly painted steel
Pittsburgh, PA, et al., 64 A.D.3d       floor joist while instructing a Regal
461 (1st Dep’t 2009), the First         subcontractor that a specific wall        Daniel S. Valinoti
                                                                                 is an associate in the New York office
Department provided additional          was to be demolished. Id. at 462.        of Clausen Miller P.C. He practices in
clarification on the expansive reach     LeClair later testified that it was       Business/Commercial Litigation, In-
of the phrase “arising out of” in the   his belief that a URS employee was       surance and Insurance Coverage.
                                                                                 dvalinotii@clausen.com
additional insured context. In this     responsible for painting the subject
declaratory judgment action, the        steel floor joist and for removing the
Appellate Division affirmed the         floor board covering the joist prior
trial court determination and held      to his accident. LeClair’s underly-
that, when analyzing an additional      ing personal injury action against
insured provision extending cover-      URS was filed in January, 2003.
age based on liability “arising out
of” a subcontractor’s operations,       Regal was insured for the Project
the focus is on the “general nature”    under a commercial general liabil-
of the subcontractor’s operation in     ity policy issued by The Insurance
which the claimant was injured.         Corporation of New York (“IN-
                                        SCORP”). In February, 2003, URS
This lawsuit stems from a construc-     wrote to Regal demanding defense
tion site accident occurring at the     and indemnification for LeClair’s
Rikers Island Renovation Project        personal injury claims, and/or that
(the “Project”). In March, 1999,        URS be an additional insured under
the City of New York retained URS       the INSCORP policy. This de-
Corporation (“URS”) to serve as         claratory judgment action was com-
the Project’s construction manager.     menced by Regal and INSCORP
URS then retained Regal Construc-       against URS and its insurer in April,
tion Corporation (“Regal”) as the       2007, seeking, among other relief, a
prime contractor for general con-       determination of URS’s additional
struction at the Project. Regal was     insured status under the INSCORP
required to perform, among other        policy. The trial court ruled in favor
things, demolition and renovation.      of URS and held that INSCORP
Regal, as part of its duty as prime     must defend and indemnify URS for
contractor, hired subcontractors to     the claims in LeClair’s bodily injury
perform portions of the demolition      action. The relevant issue before
and renovation work at the Project.     the Appellate Division was whether
Ronald LeClair (“LeClair”) was          URS was an additional insured un-
Regal’s project manager for the         der the INSCORP policy.
Project.


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         COVERAGE




The Appellate Division ruled that       jority opinion rejected a lengthy       sustained.” Id.
the INSCORP policy provided             argument supported by the dissent
additional insured coverage “only       -- that URS is not entitled to ad-      Learning Point: This case stands
with respect to liability arising out   ditional insured coverage because       for the proposition that the phrase
of [Regal’s] ongoing operations         LeClair’s personal injury complaint     “arising out of” will be given
performed for that [additional in-      did not contain any allegations of      expansive reach in the additional
sured].” Id. at 462. The Appellate      negligence against Regal, and that      insured context, and that the fo-
Division relied on Worth Constr.        LeClair’s accident did not arise out    cus of the analysis will be on the
Co., Inc. v. Admiral Ins. Co., 10       of Regal’s “operations performed        “general nature” of the named
N.Y.3d 411, 415 (2008), where           for that [additional insured].” Id.     insured’s operations, looking for a
the Court of Appeals held that          at 466. The dissent argued that a       mere “casual connection”, and not
the phrase “‘arising out of’ means      determination that URS is an addi-      on specific operations at the time of
‘originating from, incident to, or      tional insured under the INSCORP        the accident.
having connection with.’” The           policy is a windfall for URS’s own
Appellate Division, using Worth’s       insurance carrier. In rebutting the
analysis of “arising out of’ as a       dissent’s argument, the majority
guide, determined that because          stated, “generally, the absence of
Regal was the prime contractor for      negligence, by itself, is insufficient
demolition and construction work        to establish that an accident did
at the Project, that there was a ca-    not arise out of an insured’s op-
sual connection between LeClair’s       erations.” Id. at 463. Further, the
accident and Regal’s work as the        majority specified that “the focus
Project’s prime contractor, the risk    of a clause such as the additional
for which coverage was provided.        insured clause here is not on the
Regal Constr. Corp., at 463.            precise cause of the accident but the
                                        general nature of the operation in
In reaching this holding, the ma-       the course of which the injury was




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                                                                                 NOTICE OF CLAIM

An Insured's Good Faith Belief That
An Incident Is Not Covered By The
Policy Does Not Excuse The Three-
Year Delay In Notice Of Claim
by Jennifer Shon



The United States Court of Appeals      due to untimely notice of claim.
                                                                                 Jennifer Shon
for Second Circuit in Eastern Baby      Eastern Baby Stores appealed.            is a senior associate with Clausen
Stores, Inc., doing business as USA                                              Miller P.C.'s New York office. Ms. Shon
Baby v. Central Mutual Insurance        The United States Court of Appeals       defends hospitals, physicians practic-
                                                                                 es, physicians and related businesses
Company, 2009 U.S. App. LEXIS           for the Second Circuit held that the     in the health care field in health law
15190 (2009), addressed the issue       three-year delay was not reasonable      matters. Her practice also includes
of whether the insured’s three-year     and that the insured was not entitled    commercial and corporate litigation,
                                                                                 and arbitration involving both domestic
delay in submitting a notice of claim   to coverage. Id. This ruling was         and international corporations.
to the insurer was a delay that is      based on the fact that the insured       jshon@clausen.com
reasonable.                             failed to provide timely notice of
                                        a claim and that this untimely no-
Eastern Baby Stores learned of          tice of claim was not excused by a
an incident in one of its stores in     good faith belief in non-liability.
August, 2003, but did not inform        Id. at 2.
its insurer until June, 2006 when it
learned of a lawsuit. The insured       In its decision, the Court of Ap-
claimed that it did not submit a        peals relied upon New York law
notice of claim because it thought      which states that compliance with
the incident was not covered. The       a notice-of-occurrence provision in
insured’s belief of non-liability was   an insurance policy is a condition
based on the fact that the injured      precedent to an insurer’s liability
employee’s exclusive remedy was         under the policy. Id. Therefore, an
under the Workers’ Compensation         insured’s failure to provide timely
Law. Id. at 3. Additionally, the        notice of an occurrence vitiates an
insured did not provide notice of       insurance contract and permits the
the accident because it believed that   insurer to disclaim coverage regard-
coverage was unavailable based on       less of whether it was prejudiced. Id.
a policy exclusion for “bodily in-      The Court stated that where a policy
jury to an employee of the insured      of liability requires that notice of
arising out of and in the course        an occurrence be given as soon as
of employment by the insured or         practicable, such notice must be
performing duties related to the        accorded the carrier within a reason-
conduct of the insured’s business.”     able period of time. Id. Notwith-
Id. The district court found that the   standing the notice requirement, the
insured was not entitled to coverage    Court noted that New York courts




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NOTICE OF CLAIM

 have held that an insured’s good          that other parties would bear the
 faith belief in non-liability may         ultimate responsibility for the in-
 excuse delay in notifying its insurer     cident is insufficient as a matter of
 of the occurrence. Id.                    law to excuse the three-year delay
                                           in giving notice. Id. The Court
 The Court of Appeals noted that           believed that the insured should
 the test for determining whether the      have conducted an inquiry into the
 notice provision was triggered is         circumstances of the accident, the
 whether the circumstances known to        extent of the employee’s injury, and
 the insured at that time would have       potential liability under its policy.
 suggested to a reasonable person the      Id.. Because the insured had not
 possibility of a claim. Id. For this      done this, the Court reasoned that
 analysis, the Court of Appeals stated     the insured’s belief that another
 that it was important to note whether     policy would cover the incident was
 and to what extent, the insured           not reasonable. Id.
 inquired into the circumstances of
 the accident or occurrence. Id. The       Learning Point: In New York, an
 insured has the burden of establish-      insured must provide its carrier with
 ing that its belief in non-liability      timely notice. If an insured fails to
 was reasonable. Id.                       provide timely notice to its carrier,
                                           the carrier may disclaim coverage
 The Court of Appeals stated that the      for late notice. However, if the
 burden of proving that the insured’s      insured can then prove certain ac-
 belief that its Workers’ Compensa-        cepted reasons for the delay, even
 tion policy would cover any liability     in the case of a three year delay,
 rested on the insured and that it         the carrier may then be required to
 failed to satisfy that burden. Id. at     cover the claim.
 3. The affidavit submitted by the
 insured stating its belief as to cover-
 age under the Workers’ Compensa-
 tion Law did not satisfy its burden.
 Id. Furthermore, the Court held
 that the insured’s belief that another
 insurance policy would cover the
 incident was not a reasonable basis
 for concluding that the accident was
 not an occurrence which may result
 in a claim. Id. Under the policy,
 the insured was required to notify
 Central Mutual Insurance Company
 of an “occurrence which may result
 in a claim.” Id.

 However, the Court of Appeals
 held that the insured’s assumption




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                                                                                  STATUTE OF
                                                                                  LIMITATIONS

Claims Against A Doctor For Alleged
Negligence In Performing An Inde-
pendent Medical Examination (IME)
Are Claims For Malpractice, Gov-
erned By New York's Two Year, Six
Month Statute Of Limitations
by Edward M. Tobin                                                                Edward M. Tobin
                                                                                  is an associate in the New York office
                                                                                  of Clausen Miller P.C. who focuses in
The New York Court of Appeals            his hands and forcefully rotated it      litigation involving medical malprac-
                                                                                  tice and health care issues, business
recently held in Bazakos v. Lewis, et    while simultaneously pulling.” The       and commercial litigation.
al., 12 N.Y.3d 631, 911 N.E.2d 847       trial court granted Dr. Lewis mo-        etobin@clausen.com
(2009), that an action for negligence    tion to dismiss on statute of limita-
against a physician who performed        tions grounds, ruling that the action
an Independent Medical Examina-          sounded in medical malpractice
tion (“IME”) in connection with a        and was thus time barred pursuant
previously filed lawsuit is a claim for   to CPLR § 214-(a)’s two year, six
medical malpractice and, according-      month statute of limitations. The
ly, is governed by New York’s Civil      Appellate Division, Second Depart-
Practice Law and Rules (“CPLR”) §        ment, with two justices dissenting,
214(a) which imposes a two year, six     reversed the trial court’s decision,
month statute of limitations.            holding that because Dr. Lewis and
                                         Plaintiff did not have a physician-pa-
Plaintiff Lewis Bazakos (“Bazakos”)      tient relationship, the action was not
was also the plaintiff in a previ-       founded in medical malpractice and
ously filed action arising out of an      was therefore governed by the three
automobile accident. Bazakos was         year statute of limitations applicable
required, pursuant to N.Y. CPLR §        to personal injury actions.
2121, to undergo a medical examina-
tion by a physician designated by the    The Court of Appeals agreed with
adverse party. The defendant in the      the dissenting justices in the Appel-
prior action designated Defendant        late Division and reversed, finding
in this action, Dr. Philip Lewis, to     that because a “limited” physician-
perform the examination. Dr. Lewis       patient relationship existed between
examined Plaintiff on November           the examining physician in an IME
27, 2001. On October 15, 2004,           and the person examined, the action
approximately two years and eleven       therefore sounds in medical mal-
months after the examination was         practice and is governed by the two
performed, Plaintiff commenced           year, six month statute of limita-
an action against Dr. Lewis, alleg-      tions. Id. at 633. The dissenting jus-
ing that Dr. Lewis injured Plaintiff     tices in the Appellate Division and
when he “took plaintiff’s head in        the Court of Appeals relied upon a




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       STATUTE OF
       LIMITATIONS

prior decision in the Fourth Depart-       since there was no medical treatment      from an independent medical ex-
ment, Evangelista and Twitchell            rationale or application during the       amination are governed by the two
v. MacKay, 78 A.D.2d 125, 434              examination, Dr. Lewis’ conduct           year, six month statute of limitations
N.Y.S.2d 516 (4th Dep’t 1980), in          should not be described as medical        applicable to medical malpractice
determining that such a “limited”          malpractice within the meaning of         actions in New York.
physician-patient relationship exist-      N.Y. C.P.L.R. § 214-a. Id. at 637.
ed between Plaintiff and Dr. Lewis.        While Judge Lippman agreed with
In so-ruling, the Court of Appeals         the majority that Dr. Lewis assumed
confirmed that the relationship            a duty not to harm Plaintiff during
between a physician performing an          the examination, any alleged breach
IME and the person he is examin-           of said duty does not sound in mal-
ing may fairly be called a “limited        practice. Id. at 639. Judge Lippman
physician-patient relationship,” as        concluded by advising that the ma-
described in the American Medical          jority opinion, in essence, creates an
Association opinion describing the         arbitrary exception for a group of
ethical responsibilities of a physi-       practitioners who neither seek nor
cian performing an IME. See Coun-          are entitled to the protection properly
sel on Ethical and Judicial Affairs,       afforded and reserved to those physi-
American Medical Association,              cians engaged in the delivery of med-
Code of Medical Ethics: Current            ical care and treatment. Id. at 639.
Opinions, Opinion 10.03.
                                           Learning Point: While not all cases
The Court of Appeals concluded             involving the alleged mistreatment
that Plaintiff claimed in this action      of a person examined by a physician
that Dr. Lewis breached his duty “to       sounds in malpractice, the New York
perform the examination in a manner        Court of Appeals has concluded that
not to cause physical harm to the ex-      physicians performing an indepen-
aminee,” and, accordingly, is a claim      dent medical examination for the
for medical malpractice governed by        purpose of litigation are liable in
the two year, six month statute of         malpractice for injuries allegedly
limitations. Bazakos, at 635.              sustained during the performance
                                           of the examination, despite the lack
In a dissenting opinion, Chief Justice     of a traditional physician-patient
Lippman opined that although Dr.           relationship between the doctor
Lewis may have employed medical            and the examinee. Physicians who
techniques in examining Plaintiff,         perform independent medical exami-
it is plain that no medical treatment      nations for the purposes of litigation
was intended or in fact provided.          should be mindful that the Court will
Id. at 635. Judge Lippman stated           consider their relationship to the
that the examination was conducted         examinee to be a limited physician-
simply as a disclosure device in           patient relationship, thus allowing
litigation and one whose benefit           the examinee to sue the physician
inured not to Plaintiff, but Plaintiff’s   for malpractice for injuries allegedly
adversary in that action. Id. at 637.      sustained during the examination. In
Judge Lippman further opined that          addition, claims for injuries arising




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                                                                                 STATUTE OF
                                                                                 LIMITATIONS

Court Exposes Law Firms To
Increased Legal Malpractice Claims
Under The Continuous
Representation Doctrine
by Susan K. Slim

The New York State Appellate Di-         1998, through May, 2006, when
vision, First Department, recently       Plaintiff discharged Caruso and
held that the statute of limitations     Bracewell. Id.                          Susan K. Slim
in a legal malpractice action can be                                             is an associate with Clausen Miller,
tolled where an attorney continu-        In July, 2007, Plaintiff-investor       P.C.'s New York office who practices
                                                                                 primarily in the area of casualty/li-
ously represents the same client in      commenced an action against Ca-         ability defense, including premises
the same matter, even though the         ruso and his firm, Bracewell, with       liability, professional malpractice,
attorney switched firms twice dur-        claims “sound[ing] in legal mal-        employment law, real estate and
                                                                                 personal injury matters. sslim@
ing the course of that representation.   practice, breach of fiduciary duty,      clausen.com
See Waggoner v. Caruso, 2009 NY          fraud and conspiracy to commit
Slip Op. 06739 (1st Dep’t 2009).         fraud.” Id. In addition, Plaintiff
                                         named Caruso’s former law firms,
In 1998, Plaintiff retained Kenneth      Chadbourne and Pillsbury, as De-
A. Caruso (“Caruso”), then an at-        fendants. Id. Plaintiff alleged that,
torney with Pillsbury Winthrop           among other things, Caruso and his
Shaw Pittman, LLP (“Pillsbury”), to      employer law firms conspired in the
recover $10 million he invested into     theft of the $10 million investment
a purported high-yield investment        that Caruso was retained to recover.
program (the “Underlying Action”).       Id. at *4.
Id. at *2. Plaintiff’s investment was
immediately stolen upon its deposit      In September, 2008, Plaintiff’s legal
at Citibank. Id.                         malpractice lawsuit against Caruso
                                         and the aforementioned law firms
In November, 2001, Caruso and his        were dismissed by New York State
practice group left Pillsbury to join    Supreme Court, New York County
Chadbourne & Parke, LLP (“Chad-          Justice Bernard, J. Fried: (i) for
bourne”) and in January, 2002,           failure to state a cause of action as
Chadbourne replaced Pillsbury as         to all Defendants; and (ii) as time-
Plaintiff’s counsel in the Underly-      barred as to Pillsbury. Id. Although
ing Action. Id. at *4. Thereafter, in    the First Department upheld the
May, 2005, Caruso left Chadbourne        lower court’s dismissal, it “did not
to join Bracewell & Giuliani, LLP        do so on the ground that [the] legal
(“Bracewell”) as a partner; and          malpractice action against Pillsbury
Bracewell, in turn, replaced Chad-       [was] time-barred.” Id.
bourne as Plaintiff’s counsel in
the Underlying Action. Id. at *3.        New York’s Civil Practice Law
Caruso continuously represented          and Rules (“CPLR”) provides that
Plaintiff from the date the Under-       a legal malpractice action must be
lying Action was commenced in            commenced within three years of


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       STATUTE OF
       LIMITATIONS

accrual. See CPLR §216 (6); see         tation during the time Caruso repre-    Learning Point: The continuous
also CPLR §214(6). The First De-        sented Plaintiff in the [Underlying     representation doctrine is rooted in
partment recognized that Plaintiff’s    Action] while he was a partner at       public policy that a client cannot be
malpractice claim against Pillsbury     Chadbourne and Bracewell.” Id.          expected to jeopardize the attorney-
accrued in 2001 when Caruso left                                                client relationship during the course
the firm nearly six years before the     Specifically, the Court noted that       of representation. The Waggoner
malpractice action was commenced.       “[s]ound public policy consider-        Court’s application of the doctrine
Waggoner at *4. Nonetheless,            ations…support the tolling of the       exposes law firms and/or its insur-
the Court wrote that, “[u]nder the      statute of limitations with respect     ers to increased claims because the
doctrine of continuous representa-      to the legal malpractice claim          three-year statute of limitations in
tion…the statute of limitations is      against Pillsbury” because “[a]ny       which to bring legal malpractice
tolled while representation on the      suit brought by plaintiffs against      actions can be tolled long after the
same matter in which the malprac-       Pillsbury would have been based         firm ceases representation.
tice is alleged is ongoing.” Id.        upon Caruso’s acts of malpractice.”
                                        Id. Caruso, who was then still repre-
Stressing public policy consider-       senting Plaintiff in the same matter,
ations supporting the applicability     “would have thereby been exposed
of the doctrine of continuous rep-      to Pillsbury’s claims for contribu-
resentation, the Court held that “the   tion or indemnification” and their
statute of limitations was tolled by    continuing attorney-client relation-
the doctrine of continuous represen-    ship jeopardized. Id. at *4-*5.




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                                                                                 SUBROGATION

New Jersey Court Declines To Extend
Waiver of Subrogation Provision To
Insured's Deductible
by Joseph W. Szalyga


In Carlson Restaurants Worldwide,       Services International, Inc. (“Res-
Inc. v. Designline Construction         taurant Services”).
Services, Inc. et. al., 2009 WL
2833259 (2009), Plaintiff appealed      The waiver of subrogation provision      Joseph W. Szalyga
the trial court’s decision which        stated that the owner and contractor     is an associate in the New York office
granted Defendants’ motions for         waive all rights of recovery against     of Clausen Miller P.C. Mr. Szalyga’s
                                                                                 practice areas include subrogation
summary judgment due to a waiver        each other, their Subcontractors,        and liability insurance coverage.
of subrogation provision contained      Sub-subcontractors, the Architect,       jszalyga@clausen.com
within a construction contract. On      the Architect’s consultants, and
appeal, Plaintiff did not contest       separate contractors for damage
the enforceability of the waiver        caused by fire or other perils to
provision, but instead argued that      the extent covered by property
the trial court erred in dismissing     insurance. Id. at *1. Moreover, the
the insured’s claim for its sizeable    contract required plaintiff Carlson
deductible. After consideration of      to carry property damage insurance
New York and Connecticut case           with only a $25,000.00 deductible
law, the New Jersey Appellate           during the project. The contract
Division partially reversed the trial   further required Carlson to maintain
court and held that the waiver provi-   property insurance for the premises
sion did not extend to the insured’s    after completion of the work and
deductible.                             that subsequent policies must also
                                        waive subrogation rights. Id.
The lawsuit arose from a kitchen fire
at a TGI Fridays restaurant, owned      Relying on the New York decision
by Plaintiff Carlson Restaurants        of Gap, Inc. v. Red Apple Cos.,
Worldwide, Inc. (“Carlson”), which      Inc., 282 A.D.2d 119 (2d Dep’t
caused extensive property damage.       2001) and the Connecticut decision
The restaurant was constructed by       of Stop & Shop Supermarket Co.
Designline Construction Services,       v. ABCO Refrigeration & Supply
Inc. (“Designline”) and its subcon-     Corp., 842 A.2d 1194 (Conn. Super.
tractors. Carlson alleged that the      Ct. 2003), the New Jersey Appel-
fire was caused by a broiler table,      late Division partially reversed the
which was either defectively manu-      trial court’s decision and held that
factured or negligently installed.      Plaintiff may still pursue recovery
Plaintiff sued Designline; the in-      to the extent of its deductible. Id.
stallers of the broiler table, JMS      at *3-*4. Specifically, the Court
Services (“JMS”); the plumber, C.J.     stated: “Here Carlson acted as a self
Schmidt & Sons, Inc. (“Schmidt”);       insurer for the first $500,000 of their
and the manufacturer, Restaurant        losses resulting from the kitchen



www.clausen.com                                                                                                    13
     SUBROGATION

fire at the TGI Fridays restaurant.    reasoned that while the contract        Learning Point: The mere exis-
This $500,000 was not covered by      documents required a waiver of          tence of a waiver of subrogation
Carlson’s insurance policy, it was    subrogation and a specified maxi-        provision should not end with an
also not expressly included in the    mum deductible while the project        analysis of whether the waiver
waiver of subrogation provision,      was ongoing, the insurance re-          provision is enforceable in a spe-
which sought to bar Carlson from      quirements imposed upon Plaintiff       cific jurisdiction. Subrogation at-
recovering insured losses against     after final payment only required a      torneys must extend their analysis
defendants. To the contrary, the      waiver of subrogation provision be      to determine whether provable
waiver of subrogation provision is    included in the property policy and     deductible losses can be recovered.
limited ‘to the extent covered by     was silent as to the amount of the      In those situations, an insurer can
property insurance’.” Id. at *4.      deductible. Id. at 6. Applying ba-      then determine whether it wishes to
                                      sic rules of contract interpretation,   offer assistance to the insured with
Defendants argued that the waiver     the Court found that the insurance      recovery efforts, by way of inves-
provision encompassed the deduct-     requirements imposed upon Plain-        tigation or recommended counsel,
ible, and in the alternative, that    tiff during the project were not the    to better serve those insureds with
Plaintiff breached its contract by    same as those after the project, and    recoverable deductibles.
procuring property insurance with a   rejected Defendants’ argument that
deductible higher than $25,000.00.    Plaintiff’s claim should be limited
Id. at 5. The Appellate Division      to $25,000.00.




14                                                                                      www.clausen.com
www.clausen.com   15
           on the
LITIGATION FRONT

       THREE CLAUSEN MILLER ATTORNEYS HONORED AS
       NEW YORK SUPER LAWYERS

       Clausen Miller is pleased to announce that Tyler J. Lory, Gregory S. Smith,
       and Robert A. Stern were named New York Super Lawyers. New York has
       thousands of lawyers, but only the Top 5% of New York attorneys are named
       Super Lawyers.




   Tyler J. Lory                                 Gregory S. Smith
   is a partner in the New York office of        is a partner in the New York office of
   Clausen Miller P.C.                           Clausen Miller P.C.
   tlory@clausen.com                             gsmith@clausen.com




   Robert A. Stern
   is a partner in the New York office of
   Clausen Miller P.C.
   rstern@clausen.com




  16                                                                                      www.clausen.com
                                                                                         on the
                                                                                         LITIGATION FRONT

Subrogation Group's Success Continues In
Massachusetts
Clausen Miller’s client’s Insured        interior of the store. There would
operated a pizzeria in strip mall in     have been no fire, water or smoke
West Boylston, Massachusetts. A          spread to the Insured’s space.”
fire ensued in another tenant’s space
within the strip mall. The fire and       Despite the lease provisions, be-
smoke spread to the Pizzeria. The        cause of the well drafted Report, the
Insured actually suffered the worst      client authorized our recommenda-
damage of any of the tenants.            tion to seek recovery from the Land-
                                         lord. We attempted an amicable
Subrogation Partner Robert Stern         resolution of this six figure loss, but
(New York and New Jersey, also           were unsuccessful. The parties then
a licensed Massachusetts attorney)       agreed to save costs/expenses and
                                                                                  Robert A. Stern
and subrogation associate Virginia       have the dispute Arbitrated.             is a partner in the New York and New
Markovich (New York), were re-                                                    Jersey offices of Clausen Miller P.C.
tained to investigate the fire. They      Although we were unsuccessful            rstern@clausen.com

retained a local origin and cause        during the original Arbitration, hav-
expert. The expert determined the        ing confidence in the claims against
fire originated on the outside of one     the Landlord, the client authorized
of the other stores in the strip mall,   our appeal of the Decision (there
possibly near a neon sign. The ex-       was a procedure in place). Not
pert could not determine the cause       only did the Appellate Panel hold
of the fire; however, he determined       that CM proved the claims against
that the roof/attic area of the neigh-   the Landlord, but disregarded the
boring store was not sprinklered and     Lease provisions and other defense
thus, led to the spread of the fire to    arguments. The Appellate Panel
the Pizzeria. The expert further         awarded CM’s client and Insured
stated that the failure to sprinkler     100% of their losses.
the roof/attic area violated Section
                                                                                  Virginia M. Markovich
1202.0 of 780 CMR Massachusetts          If you would like to learn more          is an associate in the New York office
State Building Code.                     about Subrogation and/or Arbitra-        of Clausen Miller P.C.
                                                                                  vmarkovich@clausen.com
                                         tions, please feel free to contact
Mr. Stern and Ms. Markovich              Robert A. Stern (rstern@clausen.
worked with the expert to craft an       com) or Virginia Markovich (vmar-
Expert Report. The Report dis-           kovich@clausen.com), or call them
cussed the Code Violation and con-       at 212/805-3900.
cluded: “If automatic sprinklers had
been installed the fire would have
been controlled or suppressed with
2 sprinklers or less. The fire dam-
age would have been limited to the
combustible concealed space over
the neighboring store with moder-
ate smoke and water damage to the


    www.clausen.com                                                                                                        17
           on the
LITIGATION FRONT

      Subrogation Group's Success Continues In
      New Jersey

      A fire ensued within a strip mall         over the matter personally selected
      in Linwood, New Jersey. Clausen          the Arbitrators who were familiar
      Miller’s clients (the insurers) in-      with subrogation fire cases. Mr.
      sured several retail spaces within       Stern and Clausen Miller Associate
      the mall. Clausen Miller Partner         Virginia Markovich (New York)
      Robert A. Stern (New York/New            prepared the Arbitration briefs.
      Jersey) was retained to pursue the       Mrs. Markovich handled the Ar-
      clients’ subrogation rights. Origin      bitration.
      and cause, and electrical experts
      were retained.                           Mrs. Markovich presented our cli-
                                               ents’ case to the Arbitrators. She
      The experts concluded that the           was extensively questioned, espe-        Robert A. Stern
      fire originated within one of the        cially in light of the adversary’s ar-   is a partner in the New York and New
      other retail spaces in the strip mall,   guments which were diametrically         Jersey offices of Clausen Miller P.C.
                                                                                        rstern@clausen.com
      specifically in the area of heat gun      opposed to our experts’ positions.
      used to shrink wrap gift baskets.        In the end, the Arbitrators unani-
      The Local Officials concurred in          mously ruled in our clients’ favor
      this opinion.                            and awarded our clients 100% of
                                               their damages. The Arbitrators
      Clausen Miller, with our clients’        stated that prior to the Arbitration,
      permission, filed suit against the        they were skeptical that the heat gun
      Origin Tenant. During discovery,         caused the fire. However, in light
      our electrical expert performed a        of Mrs. Markovich’s presentation,
      destructive examination of the heat      the Arbitrators were now convinced
      gun. The expert concluded that the       that the fire originated and was
      heat gun was “on” at the time of the     caused as set forth by our experts.
      fire and was improperly left near
      combustibles (the fire occurred after     If you would like to learn more          Virginia M. Markovich
      hours). The Origin Tenant’s expert       about Subrogation and/or Arbitra-        is an associate in the New York office
                                                                                        of Clausen Miller P.C.
      provided opinions which contra-          tions, please feel free to contact       vmarkovich@clausen.com
      dicted all of our experts’ opinions.     Robert A. Stern (rstern@clausen.
      For example, the Origin Tenant’s         com) or Virginia Markovich (vmar-
      expert opined that the heat gun was      kovich@clausen.com), or call them
      turned off at the end of the work        at 212/805-3900.
      day; also, the origin was below the
      work bench, not on the work bench
      near the heat gun. Thus, this matter
      was a battle of the experts.

      Once discovery was completed,
      the Court ordered the case to Ar-
      bitration. The Judge presiding



 18                                                                                          www.clausen.com
                                                                                          CASE NOTES

Appeal                                   fees is not substantively unconscio-
                                         nable. She had the opportunity to
                                                                                 expert opined that vaccines con-
                                                                                 taining thimerosal were linked to
FAILURE TO MAIL NOTICE                   reject the waiver. The nursing home     autism. Held: Expert’s testimony
                                         gave up similar rights.                 was inadmissible due to analytical
OF APPEAL WITHIN NEW
                                                                                 gap and trial court did not abuse its
YORK FATAL
                                                                                 discretion by precluding expert’s
                                         Evidence                                testimony due to his lack of quali-
M Entertainment, Inc. v. Leydier,
880 N.Y.S.2d 40 (N.Y. App. Div.                                                  fications in the field of epidemiol-
                                  MEDICAL EXAMINERS                              ogy.
1st Dep’t)
                                  UNAFFECTED BY EVIDEN-
Plaintiff attempted to appeal the TIARY PRESUMPTION                              First Party Prop-
dismissal of its Complaint. Plain-
tiff elected to serve its Notice of      Infante v. Dignan, 12 N.Y.3d 336
                                         (N.Y.)
                                                                                 erty Insurance
Appeal on Defendant by mail and
deposited the papers in a mailbox                                                "EARTH MOVEMENT"
located outside of New York. New         Decedent’s administrator brought
                                         action against medical examiner,
                                                                                 EXCLUSION AMBIGUOUS
York statutory law calls for deposit                                             AS CONCERNS EXCAVA-
of such papers in a post office or        demanding alteration of examiner’s
                                         classification of decedent’s death as    TIONS
depository within the State. Held:
The Notice of Appeal is of no effect     a suicide. Appellate Division found
                                         the evidence before the examiner        Pioneer Tower Owners Assoc. v.
since service did not comply with                                                State Farm Fire & Cas. Co., 12
statutory law. Such failure is a fatal   “insufficient to rebut the presump-
                                         tion against suicide” and ruled the     N.Y.3d 302 (N.Y.)
jurisdictional defect and the appeal
is dismissed.                            classification arbitrary requiring
                                         alteration. Appeal was taken to the     Plaintiff submitted claim for build-
                                         Court of Appeals. Held: Reversed.       ing damage caused by excavation
Contracts                                The evidentiary rule creating a pre-    work on lot next door. Insurer ar-
                                         sumption against suicide is a rule of   gued “earth movement” exclusion
ARBITRATION AGREE-                       litigation and is not to be extended    in policy excluded coverage and
MENT WITH NURSING                        to medical examiners in the perfor-     Plaintiff argued the provision was
HOME RESIDENT VALID                      mance of their jobs as it might harm    ambiguous as concerns excavation
                                         the scientific quality of their work.    work. The policy listed specific ex-
Hayes v. Oakridge Home, 908              There is evidentiary support for the    amples of excluded events including
N.E.2d 408 (Ohio)                        medical examiner’s determination;       earthquake, landslide and erosion.
                                         therefore, the examiner’s determi-      Supreme Court and Appellate Di-
At the time of her admission, 95         nation was not arbitrary.               vision ruled in favor of plaintiff.
year-old patient signed arbitra-                                                 Held: Affirmed. When specific
tion agreement regarding future          EXPERT TESTIMONY                        examples of excluded events are
                                                                                 mentioned, those not mentioned but
malpractice claims against nursing       LINKING VACCINES TO
home. Held: Arbitration agreement                                                still excluded should be understood
                                         AUTISM PROPERLY EX-
is not procedurally unconscionable                                               to be things of the same kind. If
                                         CLUDED                                  excavation work was intended to
by reason of a resident’s advanced
age unless signed as a precondition                                              be excluded why was it not listed
                                         Blackwell v. Wyeth, 971 A.2d 235        while dissimilar rarer events were
to admission. Resident acknowl-          (Md.)
edged in writing that she freely and                                             listed?
knowingly signed the agreement.          Parents of an autistic child brought
Resident’s waiver of right to trial,     a products liability action against a
punitive damages, and attorneys’         vaccine manufacturer. The parents’


    www.clausen.com                                                                                                      19
       CASE NOTES


     Fraud                                    Liability Insur-                        evidence. Held: Reversed. Pre-
                                                                                      sumption against suicide is a guide
     SURGEON NOT LIABLE                       ance Coverage                           for the factfinder, not a rule that
                                                                                      compels a result. Factfinder could
     FOR ALLEGEDLY UNNEC-
                                              TWO MONTH DELAY IN                      have reasonably found suicide here
     ESSARY GALL BLADDER
                                              NOTIFYING INSURER OF                    even given the presumption against
     SURGERY                                                                          suicide.
                                              CLAIM WAS UNREASON-
     Kelley v. Ruf, 909 N.E.2d 714            ABLE
     (Ohio App.)
                                              Juvenex, Ltd. v. The Burlington Ins.
                                                                                      Medical
     Patient claimed that surgeon unnec-      Co., 882 N.Y.S.2d 47 (N.Y. App.         Malpractice
     essarily removed her gall bladder        Div. 1st Dep’t)
     and sexually assaulted her during                                                CONTINUOUS TREAT-
     surgery. Held: Although gall blad-       Plaintiff notified its insurance car-    MENT DOCTRINE RAISES
     der was normal, sufficient evidence       rier of an accident two months after    A QUESTION OF FACT
     existed to support its removal. Also     it occurred. Held: Two month delay
     held in a split decision: Hospital       in notifying its insurer of the claim   Adams v. Black, 883 N.Y.S.2d 628
     not liable for negligent credentialing   was unreasonable as a matter of law.    (N.Y. App. Div. 3d Dep’t)
     of surgeon. Patient failed to show       Notice to insured’s broker did not
     that surgeon’s treatment of her was      constitute notice to insurer.           Plaintiff’s decedent was a patient
     false, fraudulent or fictitious.                                                  of Defendants from 1997 to 2005.
                                              Life Insurance                          During that time, the decedent
                                                                                      had a history of smoking and was
     Government/                                                                      treated for repeated upper respira-
                                              PRESUMPTION AGAINST
     Constitutional                           SUICIDE IS GUIDE FOR
                                                                                      tory infections, sputum-producing
                                                                                      coughs, wheezing, hoarseness and
                                              COURT, NOT MANDATE
                                                                                      bronchitis. She died of lung cancer
     RED LIGHT CAMERA EN-
                                                                                      on December 27, 2006. Held: Fact
     FORCEMENT ORDINANCE                      Green v. William Penn Life Ins. Co.
                                                                                      issue as to the continuous treatment
     DOES NOT VIOLATE DUE                     of N.Y., 12 N.Y.3d 342 (N.Y.)
                                                                                      doctrine precluded summary judg-
     PROCESS                                                                          ment on malpractice claims arising
                                              Plaintiff, decedent’s wife, brought
                                                                                      out of treatment prior to June 27,
     City of Knoxville v. Brown, 284          claim for face amount of life insur-
                                                                                      2004.
     S.W.3d 330 (Tenn. Ct. App.)              ance policy and insurer rejected
                                              claim, asserting death by suicide.
     After a motor vehicle was photo-         Decedent was found in bed next to       Negligence
     graphed running a red light, the         empty pain pill bottles. Decedent
     owner of the vehicle received a          saw doctor day before death and         HOSPITAL OWES NO
     ticket. The owner challenged the         was found to be in good health.         DUTY TO POLICE OFFI-
     city ordinance which established a       Doctor recorded decedent both as        CER FOR OFF-PREMISES
     red light camera enforcement pro-        having suicidal thoughts and as not     ACCIDENT
     gram. Held: Red light camera or-         having plans to commit suicide.
     dinance did not violate due process      Appellate Division, noting legal        Leavitt v. Brockton Hospital, Inc.,
     by creating a presumption that the       presumption against suicide, held       907 N.E.2d 213 (Mass.)
     owner was the guilty party.              that allegations of death by suicide
                                              must fail unless suicide is the only    Police officer was injured respond-
                                              reasonable finding permitted by the      ing to pedestrian-vehicle accident


20                                                                                           www.clausen.com
                                                                                           CASE NOTES

involving a discharged patient still     able for pedestrian’s injuries. Had      of failure to warn claims affirmed.
under the influence of narcotics.         the pedestrian, who was 16 years         There is no duty to warn of an open
Held: Hospital owed no duty to           old, not entered the street without      and obvious danger of which the
officer under general negligence         warning, there would have been no        product user is actually aware or
principles or a special-relationship     accident.                                should be aware as a result of ordi-
theory. No claim was raised that                                                  nary observation or as a matter of
hospital failed to warn patient of                                                common sense.
the dangers of leaving without an        Premises Liability
escort. No duty is owed to a third
person arising out of a special-re-      NO DUTY TO WARN OF                       Respondeat
                                         AN OPEN AND OBVIOUS
lationship between medical profes-
sional and patient. Hospital neither     CONDITION
                                                                                  Superior
owed duty to control patient nor                                                  EMPLOYER NOT LIABLE
voluntarily assumed a duty to the        Stern v. Costco Wholesale, 882
                                         N.Y.S.2d 267 (N.Y. App. Div. 2d          FOR EMPLOYEE'S DRINK-
officer. Hospital did not cause the
                                         Dep’t)                                   ING
injury because it was unforesee-
able.
                                         Customer tripped and fell over a         Lev v. Beverly Enterprises-Mas-
                                         flatbed shopping cart in one of the       sachusetts, Inc., 907 N.E.2d 1114
SLIPPED SADDLE INSUF-                                                             (Mass. App.)
FICIENT PROOF OF NEG-                    aisles of Defendant’s store. The
LIGENCE                                  cart was painted bright orange and
                                         was approximately four feet long         After leaving restaurant where he
                                         and two to three feet wide, with a       drank with a supervisor, intoxicated
Pinto v. Revere-Saugus Riding Acade-                                              employee injured a pedestrian.
my, Inc., 907 N.E.2d 259 (Mass. App.)    handle. Held: Business was not
                                         liable to Plaintiff for injuries al-     Held: No employer-host liability
                                         legedly sustained by falling over        exists unless employer furnishes
Rider was injured in jump from                                                    and controls alcohol consumed by
horse after saddle slid. Held: In-       the shopping cart, which was “both
                                         open and obvious and not inherently      employee. Employer policy pro-
sufficient evidence existed that the                                               hibiting drinking while conducting
equipment was faulty or the horse        dangerous.”
                                                                                  company business off company
was negligently tacked. Genuine is-                                               premises did not establish sufficient
sue of fact existed whether academy      Products Liability                       control to impose duty of care. Em-
failed to select appropriate horse for                                            ployer was not liable under respon-
rider. The horse was high spirited;      NO DUTY TO WARN OF                       deat superior doctrine. Travel to and
the rider was a beginner.                SIRENS' OPEN AND OBVI-                   from home is not within normal
                                         OUS DANGERS                              scope of employment.
DRIVER NOT LIABLE FOR
PEDESTRIAN'S INJURIES                    Fitzgerald v. Federal Signal Corp.,
                                         883 N.Y.S.2d 67 (N.Y. App. 2d
                                                                                  Trial
DeJesus v. Alba, 882 N.Y.S.2d 12         Dep’t 2009)
(N.Y. App. Div. 1st Dep’t)                                            INSTRUCTION ALLOWING
                                  Firefighters brought strict products DELIBERATIONS DURING
Pedestrian was struck by motorist liability suit against the manufac- TRIAL IMPROPER
when she entered the street, without     turer of sirens installed on their fire
looking, outside of a crosswalk.         trucks. Firefighters claimed that         Kelly v. Foxboro Realty Associates,
Held: Motorist, who was driving          they sustained permanent hearing         L.L.C., 909 N.E.2d 523 (Mass.)
approximately 10 m.p.h. at the           damage as a result of repeated expo-
time of the accident, was not li-        sure to the sirens. Held: Dismissal      Over defense objection, court


    www.clausen.com                                                                                                       21
       CASE NOTES


instructed jurors that they could discuss
evidence during trial. Held: Absent
agreement of all parties in civil trial, the in-
struction is improper. It may affect jurors’
ability to keep an open mind until end of
case. The error was not prejudicial. The
trial judge strictly limited deliberations,
and nothing suggested that the jurors pre-
maturely deliberated critical issues. Most
evidence was uncontested, and jury may
have skipped early deliberations entirely.




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