In State Farm Fire & Cas. Co. v. Tamagawa, Index No. 510977/2021, 2023 N.Y. Misc. Lexis 5434, the Supreme Court of New York considered whether an insurance carrier can settle its property subrogation lawsuit with the defendant, and discontinue the lawsuit, while the carrier’s insured still had pending claims with the carrier and claims for uninsured losses against the defendant. The court held that the carrier’s claims for the amount paid are divisible and independent of the insured’s claims and that the carrier’s settlement did not affect the insured’s right to sue for any unreimbursed losses. The court’s decision reminds us that, in New York, a carrier can resolve its subrogation claim before the insured is made whole.
The insurer’s right of subrogation is equitable in nature, even if not based in contract. However, since the insurer steps into the shoes of its insured and is limited to the rights of its insured, an integral part of the investigation process is determining what rights the insured has. Whether or not the insured can settle with the tortfeasor and that whether the settlement would also apply to the subrogated carrier is a question the Supreme Court of New York, a trial court, recently addressed.
In Utica First Ins. Co. v. Homeport I LLC, et al., No. 150448/2022, 2023 N.Y. Misc. LEXIS 3087 (N.Y. Sup. Ct.), the plaintiff insurance carrier’s insured, SI Waterfront Management Inc. (SI Waterfront), owned and operated a restaurant called Wynwood at 24 Navy Pier Court in Staten Island, New York. The owner of the property was Homeport I LLC (Homeport). Significant construction work pertaining to plumbing and draining lines at the property was done by Ironstate Holdings, LLC (Ironstate), the plumbing portion of which was conducted by subcontractor Claire Construction Corp. (Claire). As a result of the construction work, on June 8, 2021, SI Waterfront allegedly sustained property damage from flooding.
The economic loss doctrine is a legal principle that has confused and frustrated subrogation practitioners since its inception. Unfortunately, once practitioners understand the basic theory, they realize how frustrating it can be. If there was any doubt about the doctrine’s effect in New York, the Appellate Division put that to rest in a recent ruling on a subrogation case in which it bolstered the economic loss doctrine defense. Continue reading
In Union Mut. Fire Ins. Co. v. Ace Caribbean Mkt., No. 21-2653,2023 U.S. App. LEXIS 8203 (2d Cir. Apr. 6, 2023), the United States Court of Appeals for the Second Circuit (Second Circuit) considered whether evidence that a fire may have originated in extension cords was sufficient to establish that: a) the owners/proprietors were negligent in their use of the extension cords; and b) their negligence was the cause of the fire. The Second Circuit held that the circumstantial evidence was not sufficient and affirmed summary judgment in favor of the defendant.
In Allstate Veh. & Prop. Ins. Co. v. Glitz Constr. Corp., 2023 N.Y. App. Div. LEXIS 1180, 2023 NY Slip Op 01171, the Supreme Court of New York, Appellate Division, Second Department (Appellate Court), considered whether a contractor could be found liable for its subcontractor’s alleged negligence in causing injury to a homeowner’s property. The homeowner’s insurer, as subrogee of the homeowner, sought to recover damages from the contractor despite an allegation that the subcontractor – an independent contractor – caused the injury to the homeowner’s property. Finding that there was no evidence that any of the exceptions to the non-liability rule related to hiring independent contractors applied, the Appellate Court affirmed the lower court’s decision granting judgment in favor of the contractor.
In this case, the homeowner hired the contractor (defendant) to convert her garage area into a bedroom and an office. The defendant later hired a subcontractor to perform the electrical rough-in work. At trial, the homeowner’s insurer (plaintiff) presented evidence that the subcontractor, who damaged an existing wire with a drill bit, caused an electrical failure that resulted in a fire. The defendant argued that it could not be held liable for the subcontractor’s alleged negligence because the subcontractor was an independent contractor and, on appeal, the Appellate Court agreed.
In Phila. Indem. Ins. Co., a/s/o Baldwin Real Estate Corp. v. Barker, 2021 U.S. Dist. LEXIS 87642 (N.D.N.Y. May 7, 2021), the United States District Court for the Northern District of New York considered whether the plaintiff, Philadelphia Indemnity Insurance Company (PIIC), a subrogating insurer, could prove its damages claim through the testimony of its adjuster, without an damages expert. The court held that, where the plaintiff’s damages proof was based on repair costs and the defendant offered no expert of its own related to the diminution in fair market value, the plaintiff could prove its damages using the adjuster’s testimony. Continue reading
New York has joined a growing number of jurisdictions ruling that Amazon can be liable for defective products sold by third-party sellers on its website. The rationale for New York’s recent ruling is based upon Amazon’s level of control over the sale of the product. There are three ways which products are sold on Amazon: (1) Amazon sells, processes and ships the product; (2) a third-party sells, processes and ships the product (i.e., Amazon does not take possession of the product); and (3) a third-party sells the product and Amazon “fulfills” the order by storing, processing and shipping the product through its “Fulfillment by Amazon” (FBA) logistical program. The FBA program has been the lynchpin in many of the recent decisions decided against Amazon, including a recent New York case. Under the FBA, the sellers store their inventory at Amazon’s warehouse until the product is purchased, at which time Amazon retrieves the product from its warehouse shelf, packages it, and ships it to the consumer. Accordingly, Amazon has significant control over products “fulfilled” through the FBA. Continue reading
Although there are times when both parties agree on the need to perform destructive tests on an object, when the parties disagree, the party seeking the destructive tests must justify its request. In Doerrer v. Schreiber Foods, Inc., et al., No. 2017-08582, 2019 N.Y. App. Div. LEXIS 4743, the Second Department of the Supreme Court of New York’s Appellate Division recently explained what a defendant moving to secure destructive testing needs to show in order to perform the testing it seeks. Continue reading
In New York Cent. Mut. Ins. Co. v. TopBuild Home Servs., Inc., 2019 U.S. Dist. LEXIS 69634 (April 24, 2019), the United States District Court for the Eastern District of New York recently held that the “lesser of two” doctrine applies to subrogation actions, thereby limiting property damages to the lesser of repair costs or the property’s diminution in value. Continue reading
In Rodriguez v. City of New York, 2018 N.Y. LEXIS 793, 2018 NY Slip Op. 02287 (Apr. 3, 2018), New York’s Court of Appeals, New York’s highest court, addressed the question of whether a plaintiff, in moving for summary judgment on the issue of the defendant’s liability, also needs to establish the absence of his or her own comparative negligence. In a 4-3 decision, a majority of the court held that, because the plaintiff’s comparative negligence is a matter of damages, not liability, the plaintiff does not bear that burden. Continue reading