New York State Court of Claims

New York State Court of Claims

SILVERS v. THE STATE OF NEW YORK, #2007-030-521, Claim No. 110663, Motion Nos. M-72443, CM-72448


Synopsis


Cross-motions for summary judgment denied. Claimant is a New York State licensed insurance agency and brokerage, that obtained workers compensation insurance through the State Insurance Fund [SIF] for one of its clients that used roving installers throughout several states to install its alarm systems. Claimant alleges that SIF, through its responsible employee, negligently misrepresented that the policy with SIF covered these roving installers, and seeks contribution. Credibility issues, as well as issues of comparative fault, cannot be assessed summarily, and present triable issues fact

Case Information

UID:
2007-030-521
Claimant(s):
RALPH SILVERS, d/b/a RALPH SILVERS AGENCY
1 1.The caption has been amended to reflect the only proper defendant.
Claimant short name:
SILVERS
Footnote (claimant name) :

Defendant(s):
THE STATE OF NEW YORK
Footnote (defendant name) :
The caption has been amended to reflect the only proper defendant.
Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
110663
Motion number(s):
M-72443
Cross-motion number(s):
CM-72448
Judge:
THOMAS H. SCUCCIMARRA
Claimant’s attorney:
KENNETH COOPERSTEIN, ESQ.
Defendant’s attorney:
HON. ANDREW M CUOMO, NEW YORK STATE ATTORNEY GENERAL
BY: MICHAEL W. FRIEDMAN, ASSISTANT ATTORNEY GENERAL
Third-party defendant’s attorney:

Signature date:
March 26, 2007
City:
White Plains
Comments:

Official citation:

Appellate results:

See also (multicaptioned case)

.
Decision

The following papers were read and considered on Claimant’s motion for summary


judgment and on Defendant’s cross-motion for summary judgment:

1-3 Notice of Motion; Affirmation of Kenneth Cooperstein, Counsel for Claimant, and attached exhibits; Memorandum of Law

4, 5 Notice of Cross Motion; Affirmation in Opposition to Claimant’s Motion for Summary Judgment and in Support of Defendant’s Cross-Motion by Michael W. Friedman, Counsel for Defendant and attached exhibits

  1. Opposition and Reply Affirmation by Kenneth Cooperstein and attached exhibit
  1. Reply Affirmation by Michael W. Friedman and attached exhibits
  1. Sur-Reply Affirmation by Kenneth Cooperstein
9, 10 Filed Papers: Claim, Answer

Claimant is a New York State licensed insurance agency and brokerage, that obtained workers’ compensation insurance through the Defendant’s agent - the State Insurance Fund (hereafter SIF) - for one of its clients, Electronic Services International (hereafter ESI). ESI is in the business of installing alarm systems nationwide, and used so-called roving installers operating out of vans to do the installations at various customer sites. In its claim, the claimant alleges that SIF, through its employee Alvin Cooley, negligently misrepresented that the policy with SIF covered these roving installers, and seeks contribution.

ESI commenced an action in Queens County Supreme Court against claimant on or about March 5, 1991, seeking recovery for its potential expenses in settling a claim by an out-of-state employee in the amount of $96,821.91, and alleging claimant’s negligence in or about 1988 in obtaining the policy with SIF. [Affirmation by Kenneth Cooperstein, Exhibit D]. Issue was joined on or about June 23, 1993. [Ibid. Exhibit E]. In its answer therein, claimant asserted waiver and unjust enrichment, and also attempted to implead SIF in a third party action. [Ibid. Exhibits E and F]. The third party action against SIF was dismissed on April 26, 1995 based upon this Court’s exclusive subject matter jurisdiction over claims against the State of New York and its agents. [Ibid. Exhibit F].

The Queens County trial court dismissed the lawsuit by ESI against this claimant on or about March 2, 2000. [See ibid. Exhibit M]. On June 11, 2001, the Second Department reversed the trial court’s dismissal, awarded damages to ESI, and found that ESI had proven that this claimant negligently failed to obtain workers’ compensation coverage for ESI’s out-of-state employees from 1985 to 1989. [Ibid. Exhibit H]. Ultimately, the Court of Appeals denied leave to appeal lower court rulings on February 25, 2003, rendering ESI’s judgment against claimant final. [See ibid. Exhibit K]

A notice of intention to file a claim was served upon the Attorney General on or about May 23, 2003. [Ibid. Exhibit C]. Claimant avers that such service was timely as it was within six months of the payment into court on April 17, 2003 of moneys to stay enforcement of the judgment against it [ibid. Exhibit O], and within six months of the judgment against it having become final. [Ibid. Exhibit K]. In the interim, ESI was involved in bankruptcy proceedings, necessitating the involvement of the United States Bankruptcy Court, Eastern District of New York, in any resolution of the lawsuit. ESI’s trustee in bankruptcy and Claimant entered into a settlement agreement on October 15, 2003 providing for payment of $175,000.00 in full satisfaction. [Ibid. Exhibit P]. Payment of this sum was delivered by claimant’s attorney on January 30, 2004.

On March 22, 2005 the verified claim filed in this court was served upon the Attorney General’s office. [Ibid. Exhibit A]. In it, claimant seeks recovery of its out-of-pocket expenses incurred in litigating and settling the Queens County Supreme Court action, including the $175,000.00 payment to ESI and $115,000.00 attorney’s fees. In addition to general denials, the State’s answer asserts seven defenses, including a lack of personal and subject matter jurisdiction due to service of the claim more than ninety (90) days after its accrual, the culpable conduct of claimant and others for whom the state would not be responsible, failure to state a cause of action, absolute or qualified immunity, statute of limitations, and statute of frauds.

In addition to the procedural history, there appear to be some uncontroverted facts, and others that are yet in controversy, despite both parties’ representation that the matter may be resolved as a matter of law. The first disputed fact is whether Alvin Cooley actually told Lon Silvers, one of the principals of claimant, in or about 1985, that the SIF workers’ compensation policy would cover the installers for ESI who operated out-of-state. It is unclear whether the alleged conversations between the accounting department of ESI and claimant - during which ESI questioned the coverage, claimant “confirmed” same with SIF, and then relayed the information to ESI - occurred prior to or after the payment of any premiums. In any event, ESI purchased such workers’ compensation insurance.

In 1987 SIF performed an audit of ESI, delivering papers concerning same to ESI, reflecting the fact that it would not pay certain workers’ compensation claims, and crediting ESI for any excess premiums paid for out-of-state employees. Claimant asserts it was unaware that SIF had performed the audit and/or the basis for it. In April and July 1988 workers’ compensation claims for two out-of-state ESI employees were paid by SIF.

On September 6, 1988, Bruce Monroe, an ESI employee working in Massachusetts injured himself and filed a workers’ compensation claim. By letter dated July 11, 1989 SIF disclaimed coverage.

Civil Practice Law and Rules §3212(b) provides in pertinent part:
. . . A motion for summary judgment shall be supported by affidavit, by a copy of the pleadings and by other available proof, such as depositions and written admissions. The affidavit shall be by a person having knowledge of the facts; it shall recite all the material facts; and it shall show that there is no defense to the cause of action or that the cause of action or defense has no merit. The motion shall be granted if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party . . . the motion shall be denied if any party shall show facts sufficient to require a trial of any issue of fact.
Assuming a movant has made a prima facie showing of entitlement to judgment as a matter of law by proffering sufficient evidence to eliminate any genuine, material issues of fact, the party in opposition to the motion for summary judgment must tender evidentiary proof in admissible form to establish the existence of material issues which require a trial. Winegrad v New York University Medical Center, 64 NY2d 851 (1985); Zuckerman v City of New York, 49 NY2d 557 (1980). While it is not the best practice, the use of an attorney’s affirmation appending pertinent deposition testimony, documentary evidence, and a verified pleading reciting material facts, is not a fatal procedural flaw in a presentation. Alvarez v Prospect Hospital, 68 NY2d 320, 325 (1986).[2]

Additionally, Civil Practice Law and Rules §105(u) indicates that “. . . [a] ‘verified pleading’ may be utilized as an affidavit whenever the latter is required.” The use of the Claimant’s own sworn statements contained in his verified pleading may suffice here, accompanied as they are by other evidence. Alvarez v Prospect Hospital, supra.

The defendant argues that claimant has not demonstrated that the statements attributable to Alvin Cooley were ever made, because the only proof of same presented are the references to the alleged conversation by Lon Silvers, one of the principals of claimant. Nonetheless, and as pointed out by claimant, a statement to the effect that there was coverage of the roving installers by SIF’s policy would not be offered for the truth of the matter asserted, since it is, rather, a classic “non-hearsay” statement offered as a verbal act. Ferrara v Galluchio, 5 NY2d 16, 19-20 (1958); see also Bayne v City of New York, 29 AD3d 924, 925-926 (2d Dept 2006); Grossjahann v George B. Wilkins & Sons, Inc., 244 AD2d 808, 810 (3d Dept 1997); DeLuca v Ricci, 194 AD2d 457, 458 (1st Dept 1993).

Negligent misrepresentation - the theory of liability propounded by Claimant - requires showing (1) that the maker of the statement was aware it would be used for a particular purpose, (2) there was justifiable and reasonable reliance by a known party on the statement in furtherance of that purpose, and (3) some conduct by the maker of the statement linking it to the relying party and evincing its understanding of that reliance. Kimmell v Schaefer, 89 NY2d 257 (1996); Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536, 551 (1985). Subsumed within these general elements are issues concerning whether Mr. Cooley had authority - actual or apparent[3] - to bind his principal the SIF, and whether any special relationship existed between Cooley and claimant such that there was a duty to relay correct information. A special relationship, such as a fiduciary relationship, or other analogous relationship of confidence and trust, may be created by privity of contract or “near privity.”

As the Court of Appeals explained :
“. . . [L]iability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified. Professionals, such as lawyers and engineers, by virtue of their training and expertise, may have special relationships of confidence and trust with their clients, and in certain situations we have imposed liability for negligent misrepresentation when they have failed to speak with care . . . (citations omitted). The analysis in a commercial case . . . is necessarily different . . . because of the absence of obligations arising from the speaker’s professional status. In order to impose tort liability . . . there must be some identifiable source of a special duty of care . . . Whether the nature and caliber of the relationship between the parties is such that the injured party’s reliance on a negligent misrepresentation is justified generally raises an issue of fact. Kimmell v Schaefer, supra at 263-264.[4]

Claimant argues that the negligent misstatement of Alvin Cooley - as an authorized employee of SIF - renders the State liable to Claimant for indemnification and contribution, for the payments it made to ESI as a defendant in the state court action. Mixed questions of law and fact abound. For example, even assuming Mr. Cooley made the statements attributed to him - an issue of fact in itself - and that he had actual or apparent authority under agency principles to bind SIF, whether indeed claimant reasonably and justifiably relied on such statements cannot be resolved summarily. Indeed, “. . . no liability arises . . . when the statements are made in circumstances where reliance is unforeseeable or unjustified . . . [O]ur cases make clear that the determination of whether defendant, by negligent misrepresentation, breached a duty to plaintiff and proximately caused the injury turns on the reasonableness of both parties’ conduct. Defendant must have imparted the information under circumstances and in such a way that it would be reasonable to believe plaintiff will rely upon it; plaintiff must rely upon it in the reasonable belief that such reliance is warranted . . . (citation omitted).” Heard v City of New York, 82 NY2d 66, 74-75 (1993).
The credibility of Mr. Cooley and Mr. Lon Silvers cannot be assessed summarily. Defendant notes that the sworn statements in the claim are at odds with testimony given by Mr. Silvers at trial: begging the credibility issue. The very words “reasonable” and “justifiable” as elements of a cause of action necessarily imply triable issues of fact. Additionally, triable issues of comparative fault, as raised in Defendant’s answer but not discussed in its motion, abound as well. Whether it was reasonable for ESI to maintain its workers’ compensation policy with SIF after the audit in 1987; and claimant’s failure to further investigate the policy it recommended for its client, particularly in light of contract provisions clearly limiting responsibility in out-of-state contexts[5], are certainly triable issues of fact, pertinent to comparative fault.

Accordingly, claimant’s motion for summary judgment [M-72443] and defendant’s cross-motion for summary judgment [CM-72448] are hereby in all respects denied.

March 26, 2007
White Plains, New York

HON. THOMAS H. SCUCCIMARRA
Judge of the Court of Claims



[2].“A fair reading of the attorney’s affirmation, the hospital records and the defendant’s deposition testimony compel the conclusion that no material triable issues of fact exist as to the claims of malpractice asserted against the defendant in the amended complaint as amplified by the bill of particulars. The fact that defendant’s supporting proof was placed before the court by way of an attorney’s affirmation annexing deposition testimony and other proof, rather than affidavits of fact on personal knowledge, is not fatal to the motion . . . (citations omitted).”
[3].Presenting a job description, or an affidavit by Mr. Cooley’s superior indicating the limits of his authority, does not control whether an individual has actual authority or, more significantly, apparent authority. See Opposition and Reply Affirmation of Kenneth Cooperstein, Exhibit Q; Affirmation in Opposition to Claimant’s Motion for Summary Judgment and in Support of the Defendant’s Cross-Motion for Summary Judgment by Michael W. Friedman, Exhibit D]. It is an issue of fact.
[4].Interestingly, direct responsibility as between an insurance agent and a long standing commercial customer has been specifically excluded as triggering a special duty to keep his client apprised of appropriate or additional automobile insurance coverage, when the commercial plaintiff sued its insurance agent in order to recover sums paid personally due to insufficient policy limits after a serious automobile accident. See Murphy v Kuhn, 90 NY2d 266 (1997).
[5]. A sample workers’ compensation contract, purportedly applicable at the time, provides among other things that New York State Workers’ Compensation Laws control the terms, and that the policy is with “. . . respect to all business operations and locations conducted by this employer in New York State.” [see Affirmation in Opposition to Claimant’s Motion for Summary Judgment and in Support of the Defendant’s Cross-Motion for Summary Judgment by Michael W. Friedman, Exhibit C].