New York CM Report of Recent Decisions (2005v3)
2005 Volume 3
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.
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Articles in this report
Although Insurer Provides Coverage for Malicious Prosecution, It Has No Obligation to Defend or Indemnify Alleged "Sham" Litigation
Courts often cite the maxim that the duty to defend is broader than the duty to indemnify. However, it is also a well-established principle that in defining the duty to defend, courts disregard outside facts and circumstances and look only to the allegations of the complaint issued against the insured. This latter principle was upheld in the recent New York Supreme Court case Purdue v. Steadfast Ins. Co., et al., 2005 WL 1662028 (N.Y. Sup. Ct. 2005).
Disappointed Expectations Are Not Subject to the Other Property Exception of the Economic Loss Doctrine
In determining whether damage by a defective product caused damage to other property, and thereby allowing recovery in a tort suit, Wisconsin courts will narrowly construe the definition of “other property.” The courts will look not only to the integrated system theory in deciding whether damage is to “other property,” but will also look to the “disappointed expectations” concept. If the damage from the defective product is merely a disappointed performance expectation or damage to a larger system in which the defective product is a component, the courts will find that this is not “other property,” that it is instead a purely economic loss, and will therefore bar recovery in a tort action.
Federal Court Holds That Subsidiary of Insured Parent Company Cannot Be Compelled to Arbitrate Pursuant to an Arbitration Clause in a Deductible Agreement It Did Not Execute
The Watts decision makes it clear that carriers seeking to enforce an arbitration clause against a named insured (subsidiary or otherwise) must insist that the insured sign any separate agreement containing the arbitration clause. Alternatively, the insurer may choose to include the arbitration clause in the actual policy of insurance under which the insured will seek to enforce its rights or derive a benefit. Insurers can no longer expect that subsidiaries that are named insureds under the principal company’s insurance policy will be bound to separate agreements, including arbitration clauses, that the principal has signed, but the subsidiary has not.
New York Federal Court Grants Insurer's Cross-Motion for Summary Judgment Regarding United Airlines' Alleged Business Interruption Loss Stemming from September 11, 2001 Terrorist Attacks
The U.S. District Court for the Southern District of New York held that the policy issued by the Insurance Company of the State of Pennsylvania (“ISOP”) to United Airlines (“UAL”) did not provide coverage for UAL’s claimed business interruption expenses allegedly caused by a “system-wide loss of revenue resulting from the September 11, 2001 terrorist attacks at the World Trade Center (‘WTC’) and the Pentagon.…” United Airlines, Inc. v. Insurance Co. of the State of Pennsylvania, slip op., No. 03 Civ. 5189(RMB), 2005 WL 756883 (S.D.N.Y., 2005).
New York Trial Court Holds That Administrative Findings are Admissible Evidence in Medical Malpractice Trials
According to Baragano, the administrative findings of the OPMC, the Department of Health and the FDA are relevant and discoverable in medical malpractice matters. However, the admissibility of such findings at the time of trial is a question for the trial judge. New York has open discovery as to medical malpractice matters and Judge Bransten, in a case that helps plaintiffs' attorneys, allowed the administrative findings of the Department of Health, OPMC and the FDA as discoverable in medical malpractice matters.
The Federal Public Transportation Act of 2005, Specifically ยง30106, Eliminates Vicarious Liability for Rental and Leasing Companies in New York
All suits brought under V.T.L. §388 on or before August 10, 2005 will be timely as this new law has no retroactive effect. The elimination of vicarious liability for rental and leasing companies will significantly reduce their financial exposure in New York. However, the language of 49 U.S.C. §30106(a)(2) states that an owner who is negligent in its decision to rent or lease a vehicle remains exposed under V.T.L. §388.
