New York Law Review

Tag: Empire Mutual Insurance Company

  • Matter of Empire Mut. Ins. Co., 39 N.Y.2d 720 (1976): Insurer’s Burden to Prove Non-Cooperation for Disclaimer

    Matter of Empire Mut. Ins. Co., 39 N.Y.2d 720 (1976)

    An insurer seeking to disclaim liability based on the insured’s non-cooperation bears a heavy burden to prove both diligent efforts to secure cooperation and a willfully obstructive attitude by the insured.

    Summary

    This case addresses the extent of an insurer’s responsibility to prove non-cooperation by its insured before disclaiming liability. Empire Mutual sought to avoid arbitration by disclaiming coverage, alleging non-cooperation. The court held that Empire Mutual failed to meet its heavy burden of proving that the insured willfully obstructed the investigation. The insurer’s efforts to contact the insured, while diligent, did not demonstrate the insured’s willful obstruction, as there was insufficient proof the insured received the insurer’s communications. The court emphasized that mere non-action is insufficient to establish non-cooperation unless the inference of non-cooperation is practically compelling.

    Facts

    The claimant was involved in an accident with an automobile insured by Boston Old Colony Insurance Company, which was later acquired by Empire Mutual Insurance Company. The claimant’s attorney notified Boston Old Colony of the accident. The insurer’s adjuster sent multiple letters to the owner and operator of the insured vehicle over five months, via regular and registered mail, but only the registered mail was returned undelivered. The adjuster also visited the insured’s known addresses, left cards, communicated with the insured’s broker, and contacted the Motor Vehicle Department. Independent investigators also located the address of both the owner and operator, made several trips to the address, and left messages; however, none of these efforts elicited a response from either the owner or the operator.

    Procedural History

    The initial court and the Appellate Division ruled against Empire Mutual, finding insufficient evidence of non-cooperation to justify disclaiming liability. Empire Mutual appealed to the New York Court of Appeals.

    Issue(s)

    Whether Empire Mutual, the insurer, presented sufficient evidence to demonstrate that its insureds willfully and avowedly obstructed the investigation of the accident, thereby justifying the insurer’s disclaimer of liability based on non-cooperation.

    Holding

    No, because the insurer failed to prove that the insureds received any post-accident communications and demonstrated a willful and avowed obstruction. The insurer’s efforts, while diligent, were insufficient to demonstrate the necessary level of obstruction by the insureds.

    Court’s Reasoning

    The Court of Appeals affirmed the Appellate Division’s order, holding that Empire Mutual failed to meet its burden of proving non-cooperation. The court emphasized that under New York Insurance Law § 167, subd. 5, the burden of proving failure or refusal to cooperate rests heavily on the insurer. The court cited Thrasher v. United States Liab. Ins. Co., stating that the insurer must demonstrate not only that it acted diligently to obtain the insured’s cooperation and that its efforts were reasonably calculated to do so, but also that the insured’s attitude was one of “willful and avowed obstruction.”

    The court found no evidence that the insureds acted or failed to act in a way that could support a finding of non-cooperation. While the return of registered mail might suggest receipt of regular mail, there was insufficient proof the insured received any post-accident communications from the insurer or claimant’s attorney. The court distinguished this case from Thrasher, where the insured’s nonactions were more significant.

    The court clarified that non-action could potentially evidence a lack of cooperation, but the inference of non-cooperation must be practically compelling. In this instance, the court deemed the evidence presented insufficient to meet this high standard.

    The court explicitly stated: “We find in this record no evidence of acts or omissions to act on the part of the insured on which could be predicated a finding of non-co-operation… This record discloses only nonaction on the part of the insureds. In our view this cannot be escalated in this case to non-co-operation; it was short even of the series of nonactions by the insured in the Thrasher case.”

    The court also noted that the assigned risk nature of the insurance policy did not relieve the insurer of its burden to prove the requisite failure or refusal to cooperate.

  • Matter of Empire Mutual Insurance Company, 27 N.Y.2d 146 (1970): Reimbursement from Special Disability Fund After Waiver of Lien

    Matter of Empire Mutual Insurance Company, 27 N.Y.2d 146 (1970)

    An insurance carrier that waives its lien on a third-party settlement as part of its contribution to the settlement cannot then seek reimbursement from the Special Disability Fund for payments made beyond the statutory retention period.

    Summary

    Empire Mutual, acting as both the workmen’s compensation carrier and the employer’s liability carrier, sought reimbursement from the Special Disability Fund for payments made to a claimant beyond 104 weeks after the claimant settled a third-party action. Empire Mutual had waived its compensation lien and contributed $29,000 towards the settlement. The court held that because Empire Mutual effectively received reimbursement for its compensation payments by reducing its liability carrier contribution, it was not entitled to reimbursement from the Special Disability Fund. Allowing such reimbursement would constitute a windfall.

    Facts

    In 1960, a claimant sustained severe injuries. The claimant had a pre-existing physical handicap due to a prior injury while working for the same employer. Empire Mutual Insurance Company was the workmen’s compensation carrier for the employer. Empire Mutual made compensation payments to the claimant for 186-4/5 weeks.

    Procedural History

    The Workmen’s Compensation Board directed the Special Fund to reimburse Empire Mutual for payments made beyond 104 weeks. The Appellate Division affirmed the Board’s decision. The Special Fund appealed to the New York Court of Appeals.

    Issue(s)

    Whether an insurance carrier, acting as both compensation and liability carrier, is entitled to reimbursement from the Special Disability Fund for payments made to a claimant beyond the statutory retention period, when the carrier waived its lien on the proceeds of a third-party settlement and contributed to the settlement as the employer’s liability carrier.

    Holding

    No, because the insurance carrier, in voluntarily waiving its lien for the total amount of the compensation paid to the claimant and contributing to the settlement, is effectively reimbursed for its compensation payments, making it ineligible for further reimbursement from the Special Disability Fund.

    Court’s Reasoning

    The court reasoned that generally, a carrier can exercise its statutory rights as a lienor to recover payments made to the claimant from a third-party recovery, and then turn to the Special Fund for any deficiency arising after the 104th week. However, in this case, Empire Mutual acted in dual capacities: as the workmen’s compensation carrier and as the employer’s liability carrier. Empire Mutual actively participated in the third-party settlement by contributing $29,000 and waiving its lien for compensation payments.

    The court found that Empire Mutual’s cash settlement as liability carrier was reduced by the amount of payments made previously as compensation carrier. If two separate carriers had been involved, the liability carrier would have had to contribute a greater amount to satisfy the compensation carrier’s lien. In effect, Empire Mutual was already reimbursed for its compensation payments by having its payments as liability carrier reduced.

    The court emphasized that allowing further reimbursement from the Special Disability Fund would constitute a windfall for Empire Mutual. The court stated, “Here, Empire Mutual, acting in dual capacities, was fully reimbursed for its compensation payments to claimant by having its payments as liability Carrier correspondingly reduced. To allow Empire Mutual reimbursement under such circumstances would be, in effect, a windfall.”

    The court reversed the Appellate Division’s order and dismissed the claim for reimbursement from the Special Disability Fund.