Courtroom Refines Tort Legal guidelines Making use of to Claimants, House owners and Insurers

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The Court of Appeals construed the ambit of multiple New York State statutes and a section of the New York City Administrative Code in the torts arena during its 2019-2020 term. In Colon v. Martin, 35 N.Y.3d 75 (2020), the court applied its customary method of statutory construction to General Municipal Law Section 50-h to determine whether a claimant has a right to observe a co-claimant’s testimony at a 50-h hearing.

Employing a similar method, the court in Xiang Fu He v. Troon Management, Inc., 34 N.Y.3d 167 (2019), considered whether New York City’s Sidewalk Law precludes a property owner in New York City from availing itself of the common law out-of-possession landlord exception to shift liability to a tenant.

Finally, in Plavin v. Group Health Inc., 35 N.Y.3d 1 (2020), the court interpreted its own precedent to decide whether a plaintiff sufficiently alleged consumer-oriented conduct under General Business Law Sections 349 and 350 in a dispute involving group health coverage.

Who Can Attend a 50-h Hearing?

In Colon, plaintiffs Wilfredo Colon and Ramona Cordero commenced a personal injury action against defendants the City of New York and the New York City Department of Environmental Protection after defendants’ employee rear-ended a vehicle occupied by plaintiffs. Following plaintiffs’ (at that time, claimants’) service of a joint notice of claim pursuant to General Municipal Law (GML) Section 50-e, defendants served separate notices pursuant to GML 50-h for plaintiffs to appear for oral examinations commonly known as “50-h hearings.” Although the notices called for plaintiffs to appear consecutively on the same day, separate hearings were scheduled for each plaintiff.

When plaintiffs appeared on the scheduled date, plaintiffs’ attorney refused to move forward unless defendants permitted each plaintiff to observe the other’s oral examination. Defendants’ attorney refused the demand and stated that defendants were not waiving their right to conduct the hearings. As the parties were unable to resolve the dispute, plaintiffs proceeded to file their complaint and litigate their claims without appearing for 50-h hearings.

When plaintiffs moved for summary judgment on the issue of liability, defendants cross-moved for summary judgment dismissing the complaint on the ground that plaintiffs failed to comply with their obligation to submit to oral examinations pursuant to GML 50-h. The Supreme Court granted defendants’ cross motion. The Appellate Division, Second Department, affirmed, holding that plaintiffs’ non-compliance barred them from commencing the action against defendants. Because two Second Department justices dissented, Plaintiffs filed an appeal as of right pursuant to CPLR 5601(a).

Applying what the Court of Appeals called its “well-established rules of statutory construction” to ascertain the Legislature’s intent, the court looked first to the terms of the statute, in this case GML 50-h (1), which provides:

[w]herever a notice of claim is filed against a city…the city…shall have the right to demand an examination of the claimant relative to the occurrence and extent of the injuries or damages for which claim is made, which examination shall be upon oral questions…and may include a physical examination of the claimant by a duly qualified physician. If the party to be examined desires, he or she is entitled to have such examination in the presence of his or her own personal physician and such relative or other person as he or she may elect. [Emphases added].

Plaintiffs argued on appeal that a claimant’s right under GML 50-h (1) to have present “such relative or other person” applied not only to the city’s “physical examination” of the claimant but also to its examination “upon oral questions.” In an opinion authored by Judge Paul Feinman, the court rejected plaintiffs’ argument and affirmed the Second Department’s order, holding that, based on the “unambiguous” terms of GML 50-h (1), a claimant’s right to be accompanied by “such relative or other person” applies only to a “physical examination.”

Under the “last antecedent rule of statutory construction,” the court explained, courts must construe “qualifying words or clauses” as applying only to those “words or phrases immediately preceding” them—particularly where the word “such” is employed (as it is here)—and must not construe them as applying to “more remote” words or phrases unless there is a “compelling reason” to interpret the statute otherwise.

In this instance, the Legislature included the term “such examination” immediately prior to the language in the statute that permits a claimant to elect to be accompanied by a “personal physician and such … other person,” which evinces its intent to limit the scope of the right to the subject appearing in the last antecedent: in this case, a claimant’s physical examination. In the absence of a “compelling reason” to disregard the last antecedent rule, the court rejected plaintiffs’ contention that the right should be interpreted to allow attendance by a person other than a claimant to extend to the more remotely referenced examination “upon oral questions.”

The court also recognized that, when interpreting a statute, a particular statutory section cannot be viewed in isolation. Rather, “a statute must be construed as a whole and…its various sections must be considered together and with reference to each other.”

Thus, the court further analyzed other subsections of GML 50-h (1) and applied the expressio unius est exclusio alterius canon of construction (which postulates that a list’s expression of one applicable act creates an “irrefutable inference” that other acts are intentionally excluded from that list), thereby finding further support of the Legislature’s intent to limit a claimant’s right to have present a “relative or other person” to physical examinations only.

Whereas GML 50-h (1) “sets forth the broad category of persons” a claimant is entitled to bring to a physical examination, it is silent as to who may accompany a claimant to an oral examination. However, GML 50-h (3) expressly provides that a claimant is entitled “to be represented by an attorney” at “any” examination, thereby identifying which party a claimant may bring to an oral examination. Viewing these subsections in juxtaposition, the court determined that the Legislature’s inclusion of the right to have “attorneys attend oral examinations” under GML 50-h (3) and its omission of “a similar right” from either subsection reflected its intent “to exclude co-claimants” from those entitled to attend oral examinations. Therefore, the court was unwilling to engraft an “unexpressed right for coclaimants to attend… oral examinations” because the Legislature “would have said so in the statute” if it so intended.

The court likewise found support for its interpretation in the statute’s legislative history. As originally enacted, GML 50-h permitted only a female to elect “to have such examination in the presence of her own personal physician and such relative or other person.” In 1976, the Legislature amended GML 50-h to afford males the same right. According to a memorandum prepared by The Law Revision Commission, the purpose of the amendment was to afford males identical rights at “physical examinations.”

As the legislative history made no reference to oral examinations, the court reasoned that the Legislature “intended the oral and physical examinations to be separate undertakings at which claimants are afforded different rights.”

In a concurring opinion, Judge Eugene Fahey agreed that the court’s statutory interpretation coincided with the legislative purpose of the statute to provide municipal defendants, which have waived their sovereign immunity, procedural protections superior to private defendants, including the right to promptly investigate a claim by conducting a 50-h hearing. Notably, Judge Fahey also rejected the Appellate Division justices’ reliance on CPLR provisions governing depositions to illuminate the procedures that pertain to examinations conducted pursuant to GML 50-h. Judge Fahey observed that the policies that inform how one might construe the CPLR do not apply to 50-h hearings, noting that such “hearings are conducted before an action is commenced” and, therefore, prior to when “any ‘parties’ to an ‘action’ yet exist.”

A Local Law’s Reach to Non-Local Property Owners

In Xiang Fu He v. Troon Management, Inc., the court similarly employed traditional principles of statutory construction to decide whether the common law out-of-possession landlord exception that generally applies in premises liability cases also applies when Section 7-210 of the New York City Administration Code is in play. With the exception of certain owner-occupied residential properties, section 7-210 requires property owners “to maintain the sidewalk abutting their property in a reasonably safe condition” and imposes liability upon property owners “for personal injury that is proximately caused by such failure.”

This local law, however, co-exists with the common law out-of-possession landlord exception, which provides that “landowners who have contracted out the responsibility for maintenance of their property do not assume liability for breach of that duty.”

Plaintiff in Xiang Fu He commenced an action for personal injuries against, inter alia, the owners of a premises located in New York City after he slipped and fell on ice on the sidewalk abutting their property. Prior to the incident, defendants had leased the premises to plaintiff’s employer, which agreed as the tenant under the lease to maintain the sidewalk.

On defendants’ motion for summary judgment, the trial court rejected defendants’ argument that they could not be held liable under section 7-210 because they were out-of-possession landowners and had contractually delegated the responsibility to maintain the abutting sidewalks to plaintiff’s employer. On appeal, the Appellate Division, First Department, reversed, holding in pertinent part that the owners could not be held liable as out-of-possession landowners with no contractual obligation to maintain sidewalks.

The Court of Appeals, in a unanimous opinion by Judge Jenny Rivera, reversed the order of the First Department, holding that the clear and unambiguous language of section 7-210 imposes a non-delegable duty on non-exempt property owners such as defendants to maintain the abutting sidewalk in a safe condition. Accordingly, a property owner subject to section 7-210 cannot avail itself of the out-of-possession landlord exception to escape liability.

Rejecting the owners’ argument that the out-of-possession landlord exception applies, the court invoked the “first-order rule that the text is the clearest indicator of legislative intent” and that “courts should construe unambiguous language to give effect to its plain meaning.” Whereas the Legislature excluded in the text of section 7-210 “certain owner-occupied properties from its reach,” it did not otherwise distinguish between owners that retain possession and those that are out of possession.

By explicitly excluding only certain types of property in the text of the local law, the Legislature demonstrated its capacity “to exclude a class of owners” from the ambit of section 7-210. That out-of-possession landlords were not expressly excluded, therefore, reflects the Legislature’s intent to impose liability regardless of such status, which rendered defendants’ interpretation “untenable.”

The court also looked to related sections of the New York City Administrative Code in concluding that in-possession and out-of-possession owners alike are “owners” for purposes of the liability imposed by section 7-210. Section 7-211, enacted on the same date as section 7-210, requires owners of real property subject to liability under section 7-210(b) to maintain liability insurance for injuries caused by a violation of section 7-210(a) and explicitly exempts the City of New York from liability where an owner fails to maintain the required insurance. As the court explained, if the City Council intended to allow owners to shift liability to non-owners, those non-owners would have been subjected to the “insurance mandate in section 7–211.”

The City Council’s enactment of Administrative Code Section 16-123—imposing fines for the failure to remove snow and ice—likewise showed that the Legislature was aware that parties in addition to an owner might have responsibility for maintaining sidewalks but nevertheless deliberately decided to impose both “broader maintenance obligations and tort liability” on property owners.

“Consumer-Oriented” Conduct

In Plavin v. Group Health Inc., a retired New York City police officer commenced an action against defendant Group Health Inc. (“Group Health”) in the U.S. District Court for the Middle District of Pennsylvania, asserting that Group Health violated New York General Business Law (“GBL”) Sections 349 and 350 by engaging in deceptive practices that induced him to select its health insurance plan.

Beginning in 1984, plaintiff procured health insurance and an optional rider annually from Group Health, which he selected from a pool of eleven packages available to employees and retirees of the City of New York. The City, which paid for the insurance plan selected by each employee or retiree, negotiated the terms of the eleven plans with both the insurance carriers, including Group Health, and the New York City Municipal Labor Committee.

Plaintiff alleged that, once the terms of the plans were incorporated into a contract between the City and the insurers, the City distributed a “summary program description,” which was prepared by the insurers, describing each insurer’s health plan to the employees and retirees. Neither the City nor the Labor Committee reviewed the document prior to its distribution. Plaintiff further alleged that Group Health created its own online summary of the benefits and coverage under its health plan, which employees and retirees could access on Group Health’s website. Plaintiff averred that Group Health misrepresented in both the summary program description and the online summary the benefits and scope of coverage available under its health insurance plan and optional rider, which induced plaintiff and others similarly situated to choose Group Health’s plan.

Group Health moved to dismiss plaintiff’s complaint on the ground that, inter alia, plaintiff failed to sufficiently plead that Group Health engaged in consumer-oriented conduct as required to state claims under GBL 349 and 350. The District Court granted Group Health’s motion, holding that plaintiff failed to allege consumer-oriented conduct because: (1) the alleged misrepresentations stemmed from a private contract entered into between the City and Group Health, which are both “sophisticated institutions”; and (2) although the plan materials were made available to approximately 600,000 City employees and retirees, the large size of the affected class “did not automatically transform the plan into something that has a broader impact on consumers at large.”

Plaintiff appealed and the U.S. Court of Appeals for the Third Circuit certified two questions to the Court of Appeals, asking the court, in essence, whether Group Health’s conduct was consumer-oriented.

At the outset, the Court of Appeals reviewed precedent that focused on the types of activity that constitute consumer-oriented conduct under the GBL. The court first turned to its decision in Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, in which plaintiffs alleged that a bank engaged in deceptive acts in furnishing information and materials to plaintiffs seeking to open savings accounts with the bank. The court held that the bank’s conduct was consumer-oriented, and therefore within the ambit of GBL 349, because the bank interacted “with plaintiffs’ representative as any customer entering the bank” and merely provided “standard documents” that it would provide to any other customer. The court also noted that the underlying transactions were neither “private in nature” nor a “single shot” deal.

The Court of Appeals likewise held that an insurance company engaged in consumer-oriented conduct in Gaidon v. Guardian Life Ins. Co. of America, in which the insurance company gave “the plaintiffs a standard marketing presentation and prepared for each of them a personalized illustration demonstrating that the life insurance policy…offered eventually would result in a vanishing premium.”

The court explained that, unlike in “a private contract dispute as to policy coverage,” the insurance company’s conduct “involved an extensive marketing scheme” causing “a broader impact on consumers at large.”

However, in New York Univ. v. Continental Ins. Co. (NYU), the Court of Appeals held that New York University failed to state a cognizable claim under the GBL where it alleged that an insurance company and the insurance company’s claims servicing agent engaged in bad faith in investigating and denying New York University’s claim for insurance coverage. The court held that the transaction giving rise to the claim amounted to nothing more than “a private contract dispute over policy coverage and the processing of a claim,” which affected only the rights of the contracting parties and not “the consuming public at large.”

In further support of its conclusion in NYU, the court cited the sophisticated nature of the parties—which included “a major university” and “a large national insurance company”—and the sizeable nature of the contract, which did not implicate “the modest type of transaction the statute was primarily intended to reach.” In this regard, the court noted that the facts in NYU were distinguishable from those in Oswego, which involved both materials distributed to “the consuming public” and “disparate bargaining” power between the parties.

Applying the principles distilled from these earlier decisions, the court held that plaintiff in the instant action satisfied the threshold burden of pleading consumer-oriented conduct. Crucially, the Court of Appeals did not view the alleged deception as arising from the terms of the underlying insurance agreement. Rather, the alleged deceptive practices arose from the dissemination of the summary plan description and online summary during the enrollment period. The court explained that, during the enrollment period, the insurance companies “were able to market their health care plans directly to the employees and retirees” in a setting akin to “a traditional consumer sales environment,” which was “characterized by groups of similarly-situated consumers subjected to the competitive tactics of a relatively more powerful business.”

Having distinguished Group Health’s allegedly deceptive conduct in the open enrollment period from its conduct in negotiating and entering into the underlying contract, the court concluded that Group Health’s marketing activities were “consumer-oriented in the sense that they potentially affect similarly situated consumers” and implicated “the sort of sales marketplace…that GBL claims were intended to address.”

The court explained that, even though sophisticated parties negotiated the underlying insurance contract, the much larger and less sophisticated class of individuals affected by the alleged deception did not participate in the contract negotiations or even receive copies of the agreement. The court also noted that consumer-oriented conduct under GBL 349 and 350 need not “be directed to all members of the public.”

In the instant case, it was sufficient for purposes of alleging consumer-oriented conduct that “the city created a health insurance marketplace for its approximately 600,000 employees and retirees, who were not direct parties to the contracts negotiated between the city and insurance vendors.”

Thus, the court held that the District Court improperly dismissed plaintiff’s GBL claims for failing to sufficiently allege consumer-oriented conduct and answered the certified questions posed by the Third Circuit in the affirmative.

Jeffrey S. Lichtman is a partner at O’Hare Parnagian. Thomas Cummings, an associate at the firm, assisted with the preparation of this article.




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