Matter of EAN Holdings LLC v Joseph

[*1] Matter of EAN Holdings LLC v Joseph 2017 NY Slip Op 50260(U) Decided on February 23, 2017 Supreme Court, Nassau County Marber, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 23, 2017
Supreme Court, Nassau County

In the Matter of the Application of EAN Holdings, LLC to Stay the Arbitration sought to be had by, Petitioner,

against

Chrissler L. Joseph, Respondent.



603308/16



Tracy Reifer, Carman, Callahan & Ingam, LLP

Attorneys for the Petitioner

266 Main St.

Farmingdale, NY 11735

Ph: (516) 249-3450

Fax: (516) 843-6390

Pops & Associates

Attorneys for the Respondent

225 Broadway

New York, NY 10007

Ph: (212) 732-8844

Danielle M. Medeiros, Esq.

Assistant Law Clerk

100 Supreme Court Drive

Mineola, NY 11501 Ph: (516) 493-3219

Fax: (516) 493-3205

Email: dmedeiros@nycourts.gov
Randy Sue Marber, J.

Papers Submitted:

Notice of Motion

Affirmation in Opposition

Reply Affirmation

Upon the foregoing papers, the motion by the Respondent, CHRISSLER L. JOSEPH (hereinafter "Joseph"), pursuant to CPLR §2221, to reargue a prior decision of this Court granting the Petitioner's Petition to permanently stay arbitration, and upon reargument, denying the Petitioner's application, is decided as hereinafter provided.

This action involved an accident that occurred on April 21, 2010 on Sunrise Highway in the Town of Islip. The Respondent claimed that while driving a rented motor vehicle, a piece of concrete fell from a dump truck traveling in front of him, striking the windshield of the vehicle, piercing the windshield and striking him in the head (See Order with Notice of Entry annexed to Respondent's Motion as Exhibit "D"). The Petitioner, EAN Holdings, LLC ("EAN") filed a Petition to permanently stay the arbitration for uninsured motorist benefits which were sought by the Respondent on April 20, 2016, six (6) years after the accident. In pertinent part, EAN sought to permanently stay the arbitration on the grounds that the Respondent's demand for arbitration was untimely and that the accident lacks contact with an uninsured vehicle, a condition precedent to an arbitration based upon a hit-and-run accident involving an unidentified vehicle.

In its prior Order, this Court granted the Petition based upon the untimeliness of the claim for uninsured motorist benefits, an argument that the Respondent failed to rebut in his underlying opposition. Nor did the Respondent proffer any credible excuse for the six (6) year delay. Rather, the Respondent simply argued that (i) the arbitration proceeding was timely commenced within the applicable statute of limitations; and (ii) the case was taken over by another attorney in October 2013 who was "presumed" to have given timely notice of the claim. This Court relied upon the matter of Rekemeyer v. State Farm Mut. Auto Ins. Co., 4 NY3d 468 (2005), in finding that a delay of more than one year is unreasonable as a matter of law.

This Court also granted the underlying Petition on the grounds that the Respondent failed to address how the object, specifically the "chunk of cement", was an integral part of the unidentified vehicle (See Order at p. 5, annexed to Respondent's motion as Exhibit "D").

The Respondent now moves to reargue on the grounds that this Court misapplied the law and facts based in part on reliance of EAN's use of outdated law or a misinterpretation of current law. With regard to the untimeliness issue, the Respondent now argues for the first time, that he timely made a demand for no-fault benefits which was thereafter paid. Thus, the Respondent submits that EAN was on timely notice of the accident, even though no claim for underinsured motorist benefits was made until approximately six (6) years later. In support of his argument, the Respondent relies upon Insurance Law §3420(a)(5), effective January 17, 2009, which requires an insurer to show prejudice in order to disclaim coverage based on untimely notice.

The Respondent further contends that notice of the accident was provided "almost immediately to EAN", which is, however, different than notice of his claim for underinsured motorist benefits. As both the owner and the self-insurer of the motor vehicle involved in the accident, the Respondent contends that EAN was on notice of the accident "almost from the date of the accident, and thus were provided an opportunity to investigate." [See Affirmation in Support at ¶14].

While the Respondent concedes that the Petitioner's untimely notice argument "may have been unrebutted" in the underlying Petition, he argues that pursuant to Insurance Law §3420(a)(5) and recent case law, EAN failed to make its prima facie case which would have shifted the burden to the Respondent requiring rebuttal. In other words, the Respondent claims that he was not required to proffer a rebuttal since EAN failed to affirmatively show that it was prejudiced. The Respondent also urges this Court to disregard the Petitioner's arguments concerning prejudice as they are raised for the first time on the instant application.

The second argument advanced by the Respondent in support of its motion to reargue is that the Court erred in finding that the Respondent provided conclusory allegations that did not address the Petitioner's factual assertions or that the chunk of cement was an integral part of the unknown vehicle. The Respondent's counsel provides a lengthy analysis of the two seminal Court of Appeals cases on the requirements of collision and physical contact as condition precedents to warrant UIM benefits: Smith v. Great Am. Ins. Co., 29 NY2d 116 (1971) and Allstate Ins. Co. v. Killakey, 78 NY2d 325 (1991). In sum, based on the Respondent's interpretation of Smith and Killakey, accidents caused by parts of a hit-and-run vehicle "or its load" are covered by the statute. To this end, the Respondent contends that the chunk of cement that caused the accident was either part of the construction vehicle the Respondent was following at the time or an item cast off from its load.

As to the first issue, the Petitioner submits that the Respondent, in his underlying opposition, "glossed over" the six-year delay in providing notice of the claim that his injury was caused by something which came from an unidentified truck. The Petitioner argues that the Respondent now attempts to proffer new arguments, including that EAN failed to show prejudice by the delay.

The Petitioner further argues that in any event, EAN's original Petition demonstrated sufficient prejudice caused by the Respondent's delay based on the only information that was provided at the time of the accident. In this regard, the Petitioner submits that the police report does not identify a second vehicle. The police report also provides that there were no witnesses as to where the chunk of cement which struck the Respondent came from. The gravamen of the Petitioner's opposition on this issue is that it was never made aware of the claimed involvement of the second vehicle until six-years later when the Respondent filed its demand for arbitration and claim for uninsured motorist benefits. The demand, annexed to the Petitioner's opposition as [*2]Exhibit "C", is when the Respondent first notifies EAN of the possible involvement of a "construction type vehicle" from which the chunk of cement may have fallen. EAN contends that had there been notice of the possible involvement of a construction vehicle, an investigation could have been conducted by review of surveillance on Sunrise Highway where the accident occurred to obtain such information. In this regard, EAN urges that it was in fact prejudiced by the Respondent's lengthy delay.

The Petitioner also refutes the Respondent's claim that EAN's knowledge of the accident through the Respondent's claim for no-fault benefits "cures" the Respondent's six-year delay in advising the Petitioner that an unidentified construction vehicle was involved in his accident. The Petitioner asserts that knowledge of the accident only provided EAN with knowledge that the Respondent was injured.

With regard to the physical contact requirement, the Petitioner maintains that the Respondent's accident was a "one-vehicle accident" which lacks physical contact with a second vehicle, a necessary condition precedent to seeking arbitration for uninsured motorist benefits.

Motions for reargument are addressed to the sound discretion of the court which decided the prior motion and may be granted upon a showing that the court overlooked or misapprehended the facts or law or for some other reason mistakenly arrived at its earlier decision (E.W. Howell Co., Inc. v. S.A.F. La Sala Corp., 36 AD3d 653, 654 [2007]; Carrillo v PM Realty Group, 16 AD3d 611 [2d Dept. 2005]).

Initially, the Respondent argues that the Court relied upon old, outdated law in rendering its prior decision. Specifically, the Respondent alleges that it was error for this Court to rely on cases that predate the effective date of Insurance Law §3020(a), January 2009, which provides that an insurer must establish that it was prejudiced by the insured's delay in providing notice of the claim. The Respondent contends that he did not need to rebut the Petitioner's underlying arguments since the Petitioner failed to establish prejudice in the first instance. The Respondent urges that the burden rested with the Petitioner.

However, for the burden to rest with the insurer, the insured's notice must be provided within two years of the time required under the policy (Insurance Law §3420(c)(2)(A)). If the delay is more than two years, the burden shifts to the insured to establish "no prejudice".

The Respondent contends that this Court erred in relying on the Court of Appeals case of Rekemeyer v. State Farm Mut. Auto. Ins. Co., 4 NY3d 468 (2005), for the proposition that a delay of more than one year was found to be unreasonable. However, the Respondent overlooks the fact that there were two issues determined in Rekemeyer; the first was whether the timeliness of the notice was reasonable, and the second was whether the insurer was required to establish that it was prejudiced by the insured's untimely notice.

As to the first prong, in the SUM context, the phrase "as soon as practicable" means that "the insured must give notice with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured". [Rekemeyer, 4 NY3d at 474]. The requirement that the insured give notice as soon as practicable "contemplates elasticity and a case-by-case inquiry as to whether the timeliness of the notice was reasonable, taking all of the circumstances into account". Id. In Rekemeyer, the Court of Appeals found that the insured's notice of her SUM claim approximately six months after learning that the other driver was underinsured, was untimely and her delay was unreasonable. Accordingly, this Court did not err in finding a delay of six (6) years to be unreasonable as a matter of law.

As to the second prong, however, the Court of Appeals found persuasive the argument that the no-prejudice rule should be relaxed where the carrier is timely put on notice of the accident. In Rekeymeyer, the facts warranted a showing of prejudice by the carrier because there was evidence that the insured gave timely notice of the accident and made a claim for no-fault benefits soon thereafter. "That notice was sufficient to promote the valid policy objective of curbing fraud or collusion." Id. at 476. The record before the Rekeymeyer court also showed that plaintiff gave timely notice of the accident and made a claim for no-fault benefits soon thereafter. Such notice was found to be sufficient to promote the valid policy objective of curbing fraud or collusion. Id. at 475.

Contrary to the facts in Rekeymeyer, the Respondent in this case did not present any evidence or make any argument regarding timely notice of the accident and timely claim for no-fault benefits in his opposition to the underlying Petition. Rather, the sole argument submitted in opposition to the notice argument was as follows:

Regarding whether the Respondent gave proper notice, it is clear from page 2 of the Demand for Arbitration, Respondent was seeking UM arbitration Moreover, as being within a reasonable period of time, the Respondent commenced the arbitration proceeding within the required statute of limitations, and thus timely. Moreover, we took this case over from another attorney in or about October, 2013, and as such Respondent's attorneys were under the impression and had reason to believe that notice had been given by the prior attorney.

[See Respondent's Opposition at p. 10, annexed to Motion as Exhibit "B"]. Indeed, no evidence was presented in the Respondent's underlying opposition that showed timely notice of the accident or that a timely claim for no-fault benefits was made. These facts are being presented to this Court for the first time on reargument. In light of the Respondent's failure to present these relevant facts in the underlying opposition, there was no reason for the Court to turn to the line of cases that address late notice of a claim for UM benefits where the insurer was timely placed on notice of the accident and where the insurer investigated the underlying accident and paid no-fault benefits.

Moreover, the Respondent fails to proffer any excuse as to why these facts were not presented in the underlying opposition except that the burden was on the Petitioner to show prejudice. To the extent that the Respondent seeks to have this Court to consider his newly presented arguments, the Petitioner's arguments regarding prejudice shall also be considered. In this regard, the Respondent's motion to reargue is granted for the Court to consider the parties' arguments concerning prejudice to the insurer or lack thereof.

With regard to prejudice, counsel for the Petitioner alleges that it was clearly prejudiced by the Respondent's delay based on the limited information it had concerning the accident. The police accident report was the only document that contained information regarding the accident which never referenced where the chunk of cement came from. The Petitioner submits, and the Respondent concedes, that no second vehicle was mentioned in the police accident report. The Court finds significant the Respondent's delay in notifying the Petitioner that the piece of concrete which struck the Respondent came from a construction vehicle until the demand for arbitration was made six years later.

The Respondent requests that, in the event the Court considers the Petitioner's arguments regarding prejudice, the Respondent should be permitted to submit new evidence to oppose the Petitioner's arguments. The gravamen of the Respondent's argument is that the Petitioner was fully aware that the cement came from a construction vehicle. In support, the Respondent [*3]submits the Affidavit of Ronald Batnick, the Claims Manager for Pops & Associates, attorneys for the Respondent, Joseph [FN1] [See Batnick Affidavit, annexed to Respondent's Reply]. Mr. Batnick attests that on October 8, 2013 — 3 ½ years post-accident — he spoke with a bodily injury claim representative from ELCO (third-party administrator for EAN) who confirmed that nothing was paid on the case other than no-fault benefits. Mr. Batnick also inquired about UM benefits to which the claims representative responded that no claim was submitted and that UM would not apply because the piece of concrete "wasn't an 'integral' part of the vehicle". [Id. at ¶3]. Mr. Batnick further attests that on October 2, 2014, he sent a letter to ELCO in which he asserted a claim under the applicable underinsurance/underinsured coverage." [Id. at ¶4]. The Respondent also submits a letter from the assigned claims representative, Jacqueline Pierre, dated May 21, 2015, in which the alleged UM claim was denied on the grounds that "there is no uninsured parties involved in this loss." As to the police report, the Respondent asserts that the Petitioner "conveniently overlooks the fact that the unconscious driver mentioned in the police report was also a witness". The Respondent also contends that the burden was on the Petitioner as the owner of the vehicle to try and determine the origin of the chunk of cement which caused its vehicle damage.

Based on the foregoing, Respondent urges that the Petitioner should be barred from claiming that it was not aware of the second vehicle and is now prejudiced due to the missed opportunity to investigate. The Court disagrees. The Respondent presents no evidence reflecting that the Petitioner was made aware of the purported second vehicle at or near the time of the accident. The demand for arbitration served six years after the accident is the first time the Respondent affirmatively makes a claim regarding a second vehicle. Further, Mr. Batnick's affidavit is insufficient to show that the Petitioner was timely notified of the existence of a possible second vehicle. Even assuming Mr. Batnick's affidavit could serve as proof that the Petitioner was made aware of the second vehicle, which it does not, the communications occurred more than three years after the accident. The record is completely devoid of any evidence showing that the Petitioner was timely notified of the specific facts underlying the Respondent's claim for UM benefits. Accordingly, upon reargument, this Court finds that the Respondent's delay was unreasonable, and that EAN was prejudiced by the delay.

The Court next addresses the Respondent's claim that the Court overlooked and/or misapprehended the law and facts concerning whether the required physical contact occurred between the Respondent's vehicle and the purported unidentified hit-and-run vehicle. In sum, the Respondent alleges that the Court misinterpreted and/or misapplied the seminal cases of Smith v. Great American Ins. Co., 29 NY2d 116 (1971) and Allstate Ins. Co. v. Killakey, 78 NY2d 325 (1991). In this regard, the Respondent claims that the Court erred by relying solely on a narrow view of Smith by trying to equate snow and ice falling from a tractor trailer with construction debris loaded into a back of a dump truck.

The Court declines to grant reargument on this issue as the Respondent fails to present any law or facts that were overlooked or misapplied. The Killakey court clarified a governing principle originating out of Smith concerning certain instances where negligently caused [*4]accidents by hit-and-run vehicles would be excluded from coverage. The language from Smith to which the Killakey court referred provided:

Good examples of such negligently caused accidents, and yet not covered by the statute would be those caused by objects cast off or falling from a speeding or insecurely laden hit-and-run vehicle itself, such as parts of the vehicle or its load. [Killakey, 78 NY2d at 328-329, citing Smith, supra at 120].

Contrary to the Respondent's arguments, the Court of Appeals in Killakey clarified the dicta from Smith to address the confusion regarding the importance of requiring "collision" as a prerequisite to finding of "physical contact". Specifically, the Killakey court clarified the rule as follows: " 'physical contact' occurs within the meaning of the statute, when the accident originates in collision with an unidentified vehicle, or an integral part of an unidentified vehicle." Of particular import here is the Court of Appeal's exclusion of the phrase "or its load" from the rule as clarified. In other words, the Court of Appeals made a clear distinction between "integral parts of a vehicle", such as the detached tire at issue in Killakey, and insecurely laden loads.

The Respondent stresses the inclusion of the phrase "or its load" from the Smith case and urges this Court to read the Killakey and Smith cases together in order to change our prior determination. We decline to do so. The chunk of cement, assuming such had dislodged from an unidentified construction vehicle, is not an "integral part of the vehicle." The Petitioner correctly cites a number of cases following Killakey that support this Court's conclusion.

Finally, the Respondent's reliance on Bajrami v. Gen. Accident Ins. Co., 206 AD2d 527 (2d Dept. 1994) is misplaced. In that case, the claimant alleged that he was injured in a motor vehicle accident caused by debris which fell from the back of an unidentified dump truck. The Appellate Division reversed the Supreme Court's denial of the insurer's petition to stay arbitration on the grounds that "a preliminary factual question exists regarding whether the vehicle which struck the insured's automobile was itself struck by debris from the dump truck." [Id. at 528]. The appellate court further instructed that "[s]hould the court determine that the contact did occur and in fact caused the collision, the court should then determine whether that contact satisfies the requirements of 'physical contact' for the purpose of uninsured motorist coverage in accordance with the principles set forth in Matter of Allstate Ins. Co. v. Killakey, 78 NY2d 325, 327".

Here, the Respondent failed to raise an issue of fact as to whether the piece of concrete fell from an unidentified construction vehicle. As found by the Court of Appeals, "[t]he burden of proving a claim when only a part of a vehicle is involved, however, is necessarily substantial; to establish that the claim originated in collision, as Matter of Smith (supra) requires, the claimant must prove that the detached part, in an unbroken chain of events, caused the accident." Killakey, 78 NY2d at 329. In Killakey, while the evidence was circumstantial, it was strong. There were five independent witnesses who recounted the various details to establish that an unidentified vehicle lost its tire on the roadway which then struck the claimant's vehicle causing injury. To the contrary, here, the only conscious witness was the passenger of the Respondent's vehicle who reported to the police that she did not know where the piece of cement came from. The Respondent's belated recanting of the events, in and of itself, does not satisfy the requirements of Smith and Killakey. The piece of cement could have just as likely been cast off the roadway by some other means.

Accordingly, it is hereby

ORDERED, the motion by the Respondent, CHRISSLER L. JOSEPH pursuant to CPLR §2221, to reargue a prior decision of this Court granting the Petitioner's Petition to permanently stay arbitration, is GRANTED, and it is further

ORDERED, that upon reargument, the Respondent's application seeking denial of the underlying Petition, is DENIED, and the Court adheres to its prior determination.

This constitutes the decision and order of this Court.

DATED:Mineola, New York

February 23, 2017 Footnotes

Footnote 1:The Court notes that this Affidavit is being submitted for the first time on Reply. The arguments and facts contained therein were never presented in the underlying opposition, nor were they presented as part of the Respondent's moving papers.