Author: DMG

In Monday's New York Law Journal (and the online version now), Thomas F. Gleason discusses the recent amendments to CPLR § 3001 and § 3420 of the Insurance Law in his article, Loosening the Standing Barriers to Declaratory Relief.  Effective January 17th, 2009 CPLR § 3001 will allow a personal injury plaintiff to "confirm that there is a fund to pay the judgment before, not after, slogging through the underlying litigation," by initiating a declaratory judgment action against the insurance company that disclaims coverage.  He eventually concludes that "restricting declaratory relief to lack of notice disclaimers seems unfair"; that it is "contrary to the basic purpose of declaratory relief."  And  ultimately, that the amendment "did not go far enough."

Below you'll find some excerpts from the article.  I've moved some of the paragraphs around because it makes more sense to me this way.  If you want to read the article in its entirety and in the right order, please click on the link above or pick up the Law Journal on Monday.

This amendment, in part, overturns the standing impediment to such
declaratory relief established by the Court of Appeals in 2004 in Lang v. Hanover Insurance Co.

The change is significant because disclaimers for lack of notice are
common under liability insurance policies. Sometimes they result from
the insured mistakenly assuming no claim will be forthcoming, or
perhaps because the insured is reluctant to communicate information
that could result in increased premiums. In either event, the insured
is courting disaster, because a failure to give the insurer notice "as
soon as practicable" of an "occurrence" that might result in liability,
is a common "condition" of coverage. The consequences of noncompliance
are severe, for both the personal injury plaintiff and the defendant.

To some extent the Lang holding is paradoxical, because the
standing requirement has been recognized to prevent courts from
transgressing upon the legislative or executive realms, or rendering
advisory opinions.  Such defects in the "case and
controversy," requirement of CPLR 3001 destroy subject matter
jurisdiction. But if the insurer has disclaimed, and the defendant is
not sufficiently wealthy to pay the entire anticipated judgment, the
highly motivated tort plaintiff may be the only party in the position
to challenge the validity of the disclaimer. The Lang case
had established that the tort plaintiff has no standing to do so, but
the legislative granting of limited relief from the standing stricture
gives us pause to wonder: Why was CPLR 3001 so limited in the first
place?

At its core, the "case and controversy" requirement is constitutional
in nature, because it confines the proper exercise of judicial powers.
Perhaps then it may reasonably be argued that cases aggressively
limiting access to the court on grounds of standing may have overshot
the mark, while the amendment to fix the Lang problem
undershoots it. Why not let all tort plaintiffs interested enough in a
contract fight with an institutional adversary have a go at it? What is
to be gained by shutting the courthouse door? There seems to be little
risk of generalized pronouncements that affect nonparties to the
declaratory judgment litigation, as would be the case with true
advisory opinions.

The Court of Appeals in Lang noted that the carrier should
weigh the risk of the disclaimer carefully, because of a much higher
possible default liability if the disclaimer is tossed out after the
case proceeds to judgment. This should induce the insurer not to
disclaim unless they are very sure of the right to do so, but will not
address the problem of a fairly debatable disclaimer. If
there is a good reason to restrict a broader right to declaratory
relief, it does not seem to depend on the particular ground for the
disclaimer, or the assumptions by the insurer alone as to how sound
their disclaimer is.

Mr. Gleason briefly takes the reader through the legislative history of the the amendment:

As with most things legislative, this expansion of declaratory relief
under CPLR 3001 is a compromise, and the compromise bears directly on
that formerly harsh rule. In return for the partial removal of the
standing limitation recognized in Lang, the Legislature has tempered the previously clear right for a liability insurer to refuse coverage for lack of timely notice. Starting in January, the insurance company must support the disclaimer by proof that the delay was prejudicial.⁸

8. 

L 2008, ch 388 §4. The insurer will have the burden to prove prejudice
if the notice was provided    within two years of when required under the
policy. After two years, the burden shifts to the insured, and
prejudice is conclusively presumed after a liability determination or
settlement.

"CPLR 1004, the exception to the real party in interest rule,
provides that an insured person who has executed a subrogation receipt
or other similar agreement may sue without joining the person for whose
interest the action is brought" (CNA Ins. Co. v Carl R. Cacioppo Elec. Contrs., 206
AD2d 399, 400). While an insurer also has the right to commence an
action on behalf of its insured even where there is a subrogation
agreement between the parties, "[n]either the case law nor the statute
require that the insurance company be substituted as the plaintiff
under such circumstances" (id. at 400; see generally Krieger v Insurance Co. of N. Am., 66 AD2d 1025; Point Tennis Co. v Urban Inds. Corp., 63 AD2d 967).

Here, pursuant to the release and trust agreement (hereinafter the release) executed [*2]by
the plaintiff upon receipt of the underinsured motorist benefits paid
to him by the nonparty-appellant (hereinafter the insurer), the
plaintiff agreed, inter alia, to "hold any moneys received as a result
of settlement or judgment in trust for the [insurer] to be paid to said
[insurer] immediately upon recovery thereof provided that any sum
received in excess of the amount paid by the [insurer] . . . shall be
retained by the [plaintiff]." "The meaning and coverage of a general
release necessarily depends upon the controversy being settled and upon
the purpose for which the release was given. A release may not be read
to cover matters which the parties did not intend to cover" (Gale v Citicorp, 278 AD2d 197; see generally Kaminsky v Gamache, 298 AD2d 361, 361-362).

The purpose of the release in this case was to protect the
insurer's subrogation claim while also protecting the right of the
plaintiff to retain any recovery in excess of the insurer's subrogation
claim. Thus, where, as here, the plaintiff seeks damages in excess of
the insurer's subrogation claim, the release cannot be interpreted to
require the substitutions requested by the insurer (cf. Faraino v Centennial Ins. Co., 103 AD2d 790; Skinner v Klein, 24 AD2d 433, 434).

The plaintiff commenced this action seeking, inter alia, to
impose a constructive trust in her favor on certain real property
formerly owned by her. She filed a notice of pendency on the property
on April 12, 2007. On or about May 1, 2007, the defendant Harvey Sorid
was served with four copies of the summons and complaint at the
business office of all of the defendants. On May 4, 2007, the plaintiff
mailed two copies of the summons and complaint to the business office,
addressed to each of the defendants Jay Sorid and Susan Sorid
(hereinafter together the appellants). The envelopes were marked
"privileged + confidential."

The appellants moved, inter alia, pursuant to CPLR 6514(a) to
cancel the notice of pendency and pursuant to CPLR 6514(c) for an award
of costs, arguing that Harvey Sorid did not have an ownership interest
in the premises and that service was not properly effectuated upon
either of them within the 30-day time limit of CPLR 6512. The
appellants did not challenge personal jurisdiction [*2]as
it was undisputed that service was effectuated upon them in June 2007.
The plaintiff opposed the motion, arguing that Harvey Sorid had an
equitable interest in the property and therefore service upon him was
sufficient to avoid cancellation of the notice of pendency, and that,
in any event, service had been effectuated on the appellants pursuant
to CPLR 308(2) within the statutory time period. In the order appealed
from, the Supreme Court, inter alia, denied those branches of the
appellants' motion which were pursuant to CPLR 6514(a) to cancel the
notice of pendency and pursuant to CPLR 6514(c) for an award of costs.
We affirm the order insofar as appealed from.

CPLR 6514(a) provides for mandatory cancellation of a notice of
pendency if service of a summons has not been completed within the time
period set forth in CPLR 6512, which is 30 days after filing of the
notice of pendency. In multi-defendant cases, service is sufficient for
purposes of CPLR 6514(a) if it is timely made on any one defendant with
an ownership interest in the subject property (see Merchants Bank of N.Y. v Rosenberg, 31 AD3d 507; Weiner v MKVII-Westchester, 292 AD2d 597; Rabinowitz v Larkfield Bldg. Corp., 231 AD2d 703; Slutsky v Blooming Grove Inn, 147 AD2d 208, 212).

Contrary to the plaintiff's contention, the defendant Harvey Sorid did not have an ownership interest in the subject property (cf. Merchants Bank of N.Y. v Rosenberg, 31 AD3d 507). Accordingly, service upon him was insufficient to meet the requirements of the statute.

However, for the purposes of CPLR 6514, service upon the
appellants was timely effectuated pursuant to CPLR 308(2). While the
envelopes mailed to their business office erroneously bore the legend
"privileged + confidential" instead of "personal and confidential,"
under the circumstances of this case, where the defect does not
implicate personal jurisdiction and no prejudice resulted from the
mislabeling, the defect was properly disregarded pursuant to CPLR 2001 (see Patrician Plastic Corp. v Bernadel Realty Corp., 25 NY2d 599, 608; Matter of Perez v Villamil, 19 AD3d 501; Federal Loan Home Mtge. Corp v Torres, 238 AD2d 306, 307).

CPLR § 3101(c)  Attorney's work product. The work product of an attorney shall not be obtainable.

CPLR § 3101(d) Trial Preparation (2) Materials

People v. Kozlowski,
2008 NY Slip Op 07759, (Ct. App.)

Today's issue of the New York Law Journal contained a roundup of a few recent Court of Appeals decisions.  The article is authored by Roy L. Reardon and Mary Elizabeth McGarry, partners at Simpson Thacher & Barlett.  One of the decisions, People v. Kozlowski,
2008 NY Slip Op 07759, addressed the work product privilege and how the privilege can be overcome when a party is looking for "investigation materials."

Next, the Court discussed privilege and waiver. Our readers may find it
helpful to be reminded of New York's attorney privilege terminology,
which differs from that of some other jurisdictions. CPLR 3101(c)
provides that, "[t]he work product of an attorney shall not be
obtainable." The Court observed that the drafters of §3101(c)
apparently were attempting to protect attorney-client privileged
materials from disclosure in distinguishing absolutely privileged "work
product" from materials "prepared in anticipation of litigation or for
trial," which are only conditionally protected under CPLR 3101(d)(2).

None of the parties asserted that Boies Schiller's interview materials
were attorney-client privileged. The People maintained that they
constituted absolutely protected work product, while the defendants
argued that they constituted qualifiedly privileged trial preparation
materials. The Court of Appeals agreed with the trial court that the
factual portions of interview notes and memoranda were trial
preparation materials, observing that "the mere fact that a narrative
witness statement is transcribed by an attorney is not sufficient to
render the statement 'work product.'"


The trial court found that defendants had failed to meet their burden
of establishing the elements of the §3101(d)(2) test for overcoming the
conditional protection of trial preparation materials, i.e., a
"substantial need" because the defendants could not obtain the
"substantial equivalent of the materials" without "undue hardship." The
Court of Appeals affirmed, stating that it could not conclude that the
trial court had abused its discretion as a matter of law.

Between the lines of the decision, however, is the suggestion that, had
the judges decided the issue in the first instance, the outcome may
well have been different. The opinion took note of the fact that the
interviews of directors and employees are a common feature of internal
investigations, as are "consult[ation]" between prosecutors and a
corporation's counsel seeking to protect his or her client from
criminal sanctions. It recognized that such "collaboration" may have a
public benefit, but stated that it also "may come at the expense of the
proper safeguarding of the rights of individual corporate employees."
The Court instructed that these factors should be balanced in deciding
whether to grant a defendant access to trial preparation materials
under a claim of "substantial need."

The article discussed several other cases which are not mentioned here.  To read the rest of the article, click HERE.

The bold is mine.