Taveras v. American Tr. Ins. Co.

Full title: JESUS TAVERAS, AS ASSIGNEE OF THE RIGHTS OF MUHAMMAD A. AMIR, Plaintiff…

Court: Supreme Court of the State of New York, Kings County

Date published: Oct 17, 2011

2011 N.Y. Slip Op. 51831 (N.Y. Sup. Ct. 2011)

Opinion

24794/10.

Decided October 17, 2011.

Jeffrey Block, Esq., Block O'Toole Murphy, NY, NY, Plaintiff.

Richard M. Sands, Esq., Harvey Gladstein Partners, LLC, NY, NY, Defendant.

ARTHUR M. SCHACK, J.

In this insurance bad faith action the conduct of defendant AMERICAN TRANSIT INSURANCE COMPANY (AT) reminds the Court of the testimony given by Jack Nicholson's character, Marine Colonel Nathan Jessup, in the 1991 film, A Few Good Men. When examined by a defense attorney, the Tom Cruise character, Navy Lieutenant Daniel Kaffee, about whether Colonel Jessup ordered the hazing of a Marine, which went awry, at the Guantanamo Bay Naval Base, the lawyer and witness had the following colloquy:

Col. Jessup: You want answers?

Lt. Kaffee: I think I'm entitled to them.

Col. Jessup: You want answers?

Lt. Kaffee: I want the truth!

Col. Jessup: You can't handle the truth!

Defendant AT, in the instant action, refuses not only to acknowledge the truth, but to handle the truth!

Plaintiff JESUS TAVERAS (TAVERAS), AS ASSIGNEE OF THE RIGHTS OF MUHAMMAD A. AMIR (AMIR), moves for summary judgment, pursuant to CPLR Rule 3212, alleging defendant AT engaged in a reckless pattern of conduct, in that defendant AT: violated its own internal protocols; failed to properly investigate plaintiff's claims; knowingly ignored the probability that a jury would find in favor of plaintiff and render an excess verdict; abrogated its duty to its insured AMIR; and, failed to communicate to AMIR that plaintiff TAVERAS was willing to settle within the policy limits and the possibility of AMIR's exposure to an excess verdict.

Defendant AT opposes summary judgment and cross-moves, pursuant to CPLR Rule 3212, for summary judgment and dismissal of plaintiff 's complaint. AT alleges that its conduct did not amount to bad faith. TAVERAS, in the underlying May 3, 2002-accident, was a passenger in the cab driven by AMIR. The owner of the cab's medallion was THURSTON STEED (STEED). Moreover, AT learned in 2009 that STEED died in 2000, prior to the accident. AT now claims that the insurance for the STEED/AMIR taxi was not in effect on the date of the 2002 underlying accident. Plaintiff opposes the cross-motion, alleging that AT is estopped from presently disclaiming coverage because it undertook the defense in the underlying case, in reliance upon which AT's insured AMIR suffered the detriment of losing the right to control his own defense.

After hearing oral argument and conducting an extensive review of the exhibits, including the deposition admissions of AT's key employees, it is clear, as a matter of law, defendant AT engaged in a pattern of knowing and reckless disregard for the interests of its insured AMIR. Despite its protestations to the contrary, AT refuses to acknowledge its bad faith and now attempts to disclaim and throw AMIR "under the cab."

The truth, for the reasons to follow, mandates that the Court grant summary judgment to plaintiff TAVERAS to the extent of awarding him $2,250,000 plus interest from April 14, 2006 and deny defendant AT's cross-motion for summary judgment in its entirety.

Background

The instant bad faith action arises from a May 3, 2002-three-car motor vehicle accident, in Manhattan, on First Avenue near East Sixth Street. Vehicles No. 2 and # 3 were both insured by defendant AT. In the underlying action, plaintiff TAVERAS, a union banquet waiter, was a rear-seat passenger in a taxi driven by AMIR. The AMIR taxi stuck the rear of a rental car driven by EMERITO DE LEON (DE LEON) and owned by ELRAC, INC. (ELRAC), the parent of Enterprise Rent-A-Car. Subsequently, the AMIR taxi was struck in the rear by another taxi, driven by LAKWINDER SINGH (SINGH). Plaintiff TAVERAS suffered serious injuries to his neck, back and knee, requiring surgeries to his back and knee. He sued: the owner and operator of the taxi he was traveling in, STEED and AMIR; DE LEON, the operator of vehicle # 1 and its owner, ELRAC; and, SINGH the operator of vehicle #3 and its owner, PLATFORM TAXI, INC. (PLATFORM).

I presided, in April 2006, at the bifurcated jury trial of this action. At the conclusion of the liability portion of the trial, on April 14, 2006, the jury rendered a verdict exculpating vehicle # 1, the DE LEON/ELRAC car and apportioned liability between both AT insureds — 70% to vehicle # 2, the STEED/AMIR taxi, and 30% to vehicle # 3, the PLATFORM/SINGH taxi.

AT, which provided the defense for STEED/AMIR and PLATFORM/SINGH in the underlying action, could have settled the underlying action for the $100,000 policy limit for its insureds STEED/AMIR and the $100,000 policy limit for its insureds PLATFORM/ SINGH prior to the trial or after the jury rendered its liability verdict. Defendant AMIR was never informed by AT or counsel provided to him by AT about plaintiff TAVERAS' offers to settle the action within the policy limits. Prior to the opening on damages, plaintiff TAVERAS, on the record, was willing to settle for the combined policy limits of $200,000.

The jury, at the conclusion of the damages portion of the trial, rendered a verdict in favor of TAVERAS for $9,263,376 ($1,000,000 for past pain and suffering, $5,000,000 for future pain and suffering, $150,000 for past lost earning, $774,299 for future lost earnings and $2,339,077 for future medical expenses). The Appellate Division, in Taveras v Amir ( 57 AD3d 887 [2 Dept 2008]), unanimously affirmed my evidentiary rulings that were appealed and modified the judgment, by reducing it to $2,500,000.

Prior to the liability verdict, plaintiff TAVERAS and defendant DE LEON stipulated to a "high-low" agreement of $250,000 to $1,000,000, based upon percentages of liability. Subsequent to the liability verdict, self-insured ELRAC paid $250,000 to TAVERAS, pursuant to their prior high-low agreement. Thus, after the Appellate Division decision, TAVERAS faced an outstanding judgment amount of $2,250,000 plus interest from April 14, 2006.

AMIR, on September 23, 2010, assigned his bad faith claim against AT to TAVERAS. (Exhibit 2 of motion). Plaintiff TAVERAS, as assignee of AMIR, commenced the instant matter, with two causes of action, alleging that defendant AT breached its duty to settle the action within the policy limits and defendant AT violated its implied covenant of good faith and fair dealing. Plaintiff TAVERAS' counsel engaged in extensive discovery, including deposing key AT personnel.

During the pendency of the underlying action, plaintiff TAVERAS submitted six bills of particulars to defendants, which detailed his injuries and damages. (Exhibit 15 of motion). His injuries and damages far exceeded the limited insurance policies for AT's insureds. Also, plaintiff provided defendants with operative reports and narrative reports from Drs. Richard Radna and Ronald Krinick. (Exhibit 16 of motion). In the expert disclosure of plaintiff's economist, Dr. Ronald Missum, he estimated plaintiff's future medical needs to be $636,000 and his lost earnings at about $924,000. (Exhibit 17 of motion).

Prior to the trial of the underlying action, plaintiff TAVERAS stated a willingness to settle the action for the full tender of the AT policies — $100,000 each or a total of $200,000. AT never responded to TAVERAS' offer. Block, O'Toole and Murphy, LLP (BOM), counsel for plaintiff TAVERAS, sent a bad faith letter to AT, dated March 22, 2006 [exhibit 18 of motion], to the attention of Rick Persaud, the AT claims examiner assigned to both the STEED/AMIR and PLATFORM/SINGH claims. The bad faith letter reiterated plaintiff's injuries and his future medical expenses, which BOM intended to prove at trial.

The liability trial commenced on April 12, 2006 and plaintiff TAVERAS and defendants DE LEON/ELRAC entered into their above-mentioned high-low agreement. Two days later, on April 14, 2006, the jury rendered its liability verdict, with liability apportioned at 70% to the STEED/AMIR taxi and 30% to the PLATFORM/SINGH taxi. After the jury announced its verdict, and outside the presence of the jury, plaintiff TAVERAS' counsel, Jeffrey A. Block, Esq., of BOM, stated on the record [exhibit 1 of motion — Appellate Record (hereinafter "A"), A484, lines 16-20], "Now that liability is determined, clearly as against the tortfeasors Amir and Steed, Singh and Platform, plaintiff has a present willingness which will expire by the close of business today to accept the tender of both policies." Then, the following exchange took place, at A484, line 23 — A485, line 23:

MR. BLOCK: We have extended this offer to them weeks ago before they told us over the phone over our dead bodies will we have [to] pay you the $200,000 policy. That's all our expenses. We've talked to the managers, the claims people. We've talked to everyone that we could talk to; everybody over at American Transit.

THE COURT: Okay, you've spoken to numerous people.

MR. BLOCK: And according to the PJI in accordance with [the] General Accident case, in accordance with my own record of Schwarz v Allstate, being the only lawyer in the State of New York —

THE COURT: Get to the point.

MR. BLOCK: We will accept that tender of each $100,000 policy by the end of business today, or we will take a verdict and we will pursue whatever assets are available to us, and accept if need be an assignment of rights, and pursue American Transit Insurance Company for every dollar on the case.

THE COURT: So in other words, for a limited time only, you will take the tender of each of these policies in full settlement in satisfaction of your claim, or else in effect you're making a record now of bad faith and you'll go for the excess if necessary; is that correct?

MR. BLOCK: That is correct, your Honor.

Several minutes later during the proceedings, at A497, lines 8-13, Mr. Block asked the following question of counsel for the STEED/AMIR taxi, Thomas P. Murphy, Esq., of the Law Office of Phillip J. Rizzuto, P.C., who was retained by AT:

MR. BLOCK: On behalf of Plaintiff Taveras, my question to you, Sir — and this is on the record — I'd also like to ask on behalf of Mr. Murphy. Did you inform your clients of plaintiff's intent to pursue an excess verdict and take their assets?

MR. MURPHY: No.

The damages portion of the trial commenced on April 17, 2006. Plaintiff presented evidence that he sustained neck, back and knee injuries as a result of the May 3, 2002-accident, was totally disabled and unable to return to work. The evidence included the exacerbation of his degenerative back condition at L4-5 and L5-S1. Plaintiff testified that he underwent a laminotomy and facetectomy on March 26, 2004. (A765 — A856). Plaintiff's treating neurosurgeon, Dr. Richard Radna, testified that plaintiff has a preexisting back condition, exacerbated by the May 3, 2002-accident that would require future surgery to the lumbar spine. (A549 — A636). Plaintiff's expert neurologist, Dr. Aric Hausknecht, testified that plaintiff had significant neurological deficits and limitations, which required physical therapy and epidural injections for the cervical spine and lumbar spine. (A648 — A698). Both Dr. Radna and Dr. Hausknecht testified that plaintiff's condition was casually related to the underlying motor vehicle accident. (A549 — A636; A648 — A698). Plaintiff's treating orthopedist, Dr. Ronald Krinick, determined that plaintiff showed clear signs of traumatic left knee injury consistent with a rear-end accident. Plaintiff, on July 9, 2002, had arthroscopic left knee surgery. Dr. Krinick opined that plaintiff developed traumatic left knee arthritis that would require a total knee replacement. (A1187 — A1241). Dr. Ronald Nissum, plaintiff's expert economist, estimated that plaintiff's lost wages, benefits and future medical expenses at about $3.2 million. (A718 — A747).After plaintiff's experts testified, defendants finally offered the two $100,000 policies to settle the case. Plaintiff rejected this offer. (A988 — A992).

Prior to trial, defendants PLATFORM/SINGH noticed two experts, Dr. Jay Zaretsky, an orthopedist, and Dr. Moshin Ali, a neurologist. Neither of their CPLR § 3101 (d) disclosures discussed causation. Subsequently, defendants attempted to adopt the CPLR § 3101 (d) disclosures of the former defendants DE LEON/ELRAC, after the DE LEON/ELRAC defendants were dismissed from the case by the liability verdict and after plaintiff's experts had testified in the damages portion of the trial. I precluded defendants STEED/AMIR and PLATFORM/SINGH from calling DE LEON/ELRAC's radiologist and neurologist from testifying because of the late CPLR § 3101 notices. The Appellate Division, Second Department, in Taveras v Amir at 888-889, unanimously affirmed my ruling, holding: The Supreme Court also did not improvidently exercise its discretion in precluding the testimony of two expert witnesses who had been retained by the defendants Emerito De Leon and Elrac, Inc. The plaintiff did not receive disclosure of these witnesses until the trial was already under way ( see CPLR 3101 [a]), and their testimony was not even offered on behalf of De Leon or Elrac, Inc., who had previously settled with the plaintiff, and who were dismissed from the action following the liability verdict ( see generally Fava v City of New York, 5 AD3d 724 [2d Dept 2004]).

Regardless, defendants claimed that plaintiff's injuries were not casually related to the May 3, 2002 underlying accident. They argued that plaintiff had a preexisting degenerative condition in his left knee and back caused by years of working as a banquet waiter, which required him to carry heavy trays. Defense counsel further contended that plaintiff's March 1999 MRI revealed plaintiff's degenerative disc disease, with herniations at L3-4, L4-5 and L5-S1. However, plaintiff TAVERAS conceded this condition in his damages opening statement. (A521 — A529). Defendants also attempted to minimize plaintiff's damages by pointing out that he was able to return to work within three days of the accident. However, defendants' expert neurologist, Dr. Moshin Ali, acknowledged on cross-examination that plaintiff's injuries satisfied the threshold requirements of Insurance Law § 5102, in that his injuries were severe, permanent and irreversible. (A1296 — A1340).

When I charged the jury on damages, I directed, that as a matter of law, plaintiff TAVERAS' injuries surpassed Insurance Law § 5102 threshold requirements. (A1360-1373; A1505 — A1506). The charge was affirmed by the Appellate Division, Second Department, in Taveras v Amir at 888, which held:

Contrary to the appellants' contention, the Supreme Court did not err in granting the motion of the plaintiff Jesus Taveras (hereinafter the plaintiff) for judgment as a matter of law on the issue of whether he sustained a serious injury in the subject motor vehicle accident. Viewing the evidence in the light most favorable to the defendants, as we must, we find that there is no rational process by which the trier of fact could conclude that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d) ( see Capo v Neary, :52 AD3d 1194 [4d Dept 2008]; Harwood v Hinds, 295 AD2d 949 [4d Dept 2002]).

The jury, on May 1, 2006, returned the damages verdict, which totaled $9,263,376. The Appellate Division, Second Department, in Taveras v Amir, modified the judgment by reducing it to $2,250,000.

Subsequently, as mentioned earlier, defendant AMIR in the underlying action, on September 23, 2010, assigned his bad faith claim to plaintiff TAVERAS, who commenced the instant action with the filing of the summons and complaint on October 7, 2010. Issue was joined via service of AT's answer on November 17, 2010. Six depositions were conducted in January 2011: the insured AMIR [exhibit 4 of motion]; Richard Carroll, Vice President and Treasurer of AT [exhibit 5 of motion]; Jay Ellenburg, Manager of AT's Bodily Injury Department at the time of the underlying trial [exhibit 6 of motion]; Michael Kreppin, Assistant Claims Manager of AT's Bodily Injury Department [exhibit 7 of motion]; Phyllis Toppin, a Claims Supervisor in AT's Bodily Injury Department [exhibit 8 of motion]; and, Rick Persaud, an AT Claims Examiner [exhibit 9 of motion]. Plaintiff's moving papers also include: a copy of AT's computerized claims notes for STEED/ AMIR [exhibit 10 of motion]; a copy of the unredacted cover sheet for the STEED/AMIR computerized claims notes [exhibit 11 of motion]; a copy of AT's computerized claims notes for PLATFORM/ SINGH [exhibit 12 of motion]; a copy of the unredacted cover sheet for the PLATFORM/ SINGH computerized claims notes [exhibit 13 of motion]; and, a copy of the stipulation of partial discontinuance with prejudice, dated January 26, 2011, against the individually named defendants — EDWARD T. McGETTIGAN, JR., RALPH A. BISCEGLIA, RICHARD T. CARROLL, STEVEN HAMILL, RICK PERSAUD AND IRIS HERNANDEZ.

Plaintiff's bad faith claim

A determination of whether an insurer acted in bad faith is measured against the standards established by the Court of Appeals in Pavia v State Farm Mut. Auto. Ins. Co. ( 82 NY2d 445). The Pavia Court, at 453-454, held:

in order to establish a prima facie case of bad faith, the plaintiff must establish that the insurer's conduct constituted a "gross disregard" of the insured's interests — that is, a deliberate or reckless failure to place on equal footing the interests of its insured with its own interests when considering a settlement offer ( see, Lozier v Auto Owners Ins, Co., 951 F2d 251 [9d Cir 1991]). In other words, a bad-faith plaintiff must establish that the defendant insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted.

Moreover, "bad faith requires an extraordinary showing of disingenuous or dishonest failure to carry out a contract." ( Gordon v Nationwide Mut. Ins., Co., 30 NY2d 427, 437). ( See CBL Path, Inc. v Lexington Ins. Co. , 73 AD3d 829 , 830 [2d Dept 2010]).

Courts, over the years, have established a multitude of factors to determine whether a defendant insurer acted with gross disregard in electing not to settle a claim. There are seven key factors, which are also discussed in the comments to PJI 4:67:

1. The probability, in light of the evidence that would be presented to the jury by plaintiff and defendant at trial, that the jury would find in favor of plaintiff and a verdict would be in excess of the policy. ( Knobloch v Royal Globe Ins, Co., 38 NY2d 471 [1976]).

2. Whether the insured lost an actual opportunity to settle the claim at a time when all serious doubts about the insured's liability were removed. ( Pavia, supra; St. Paul Fire Marine Ins. Co. v United States Fid. Guar. Co., 43 NY2d 977 [1978]).

3. Whether the insurer's investigatory efforts prevented it from making an informed evaluation of the risks of refusing settlement and probability of a verdict against the insured. ( Pavia, supra; Gordon v Nationwide, supra).

4. What if any attempts were made by insurer to settle plaintiff's claim and at what point during the underlying action those attempts were made. ( Knobloch, supra; Doherty v Merchant's Mut. Ins. Co., 74 AD3d 1870 [4d Dept 2010]; State v Merchants Ins. Co., 109 AD2d 935 [3d Dept 1985]).

5. Whether insurer informed insured of: an amount plaintiff was willing to settle for; the possibility of being exposed to any excess verdict for plaintiff; and, any negotiations conducted between plaintiff and the insurer. ( Smith v Gen. Acc. Ins. Co., 91 NY2d 648 [1998]).

6. Relative financial risk involved for insured if the settlement was not made compared with the risk to defendant insurer, in terms of the policy limit, if the settlement was not made. ( Pavia, supra; Vecchione v Amica Mut. Ins. Co., 274 AD2d 676 [2d Dept 2000]; Brockstein v Nationwide Mut. Ins. Co., 417 F2d 703 [2d Cir 1969]; Brown v U.S. Fidelity Guaranty Co., 314 F2d 703 [2d Cir 1963]).

7. Whether any other evidence tends to establish or negate the insurer's bad faith in refusing to settle. ( Smith v Gen. Acc., supra; Pavia, supra).

The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. ( See Alvarez v Prospect Hospital, 68 NY2d 320, 324; Zuckerman v City of New York, 49 NY2d 557, 562; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404). Failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers. ( Winegrad v New York University Medical Center, 64 NY2d 851; Qlisanr, LLC v Hollis Park Manor Nursing Home, Inc. , 51 AD3d 651 , 652 [2d Dept 2008]; Greenberg v Manlon Realty, 43 AD2d 968, 969 [2nd Dept 1974]).

CPLR 3212 (b) requires that for a court to grant summary judgment the court must determine if the movant's papers justify holding as a matter of law "that there is no defense to the cause of action or that the cause of action or defense has no merit." The evidence submitted in support of the movant must be viewed in the light most favorable to the non-movant. ( Boyd v Rome Realty Leasing Ltd. Partnership , 21 AD3d 920 , 921 [2d Dept 2005]; Marine Midland Bank, N.A. v Dino Artie's Automatic Transmission Co., 168 AD2d 610 [2d Dept 1990]). Summary judgment shall be granted only when there are no issues of material fact and the evidence requires the court to direct judgment in favor of the movant as a matter of law. ( Friends of Animals, Inc., v Associated Fur Mfrs., 46 NY2d 1065; Fotiatis v Cambridge Hall Tenants Corp. , 70 AD3d 631 , 632 [2d Dept 2010]).

Courts, in bad faith actions, are hesitant to grant summary judgment against defendant insurers because typically there are issues of fact with respect to whether the conduct of the defendant insurer constituted "gross disregard" of the insured's interests. However, courts are rarely presented, as in the instant action, with party admissions acknowledging that defendant AT's conduct was "reckless," demonstrating a pattern of behavior evincing a conscious or knowing indifference to its insured, AMIR. AT's employees admitted to AT's "reckless" conduct and one even deemed it "suicide" to go forward on damages, based upon the limited information maintained by AT and the lack of any colorable defense to plaintiff's damages. (Exhibit 9 of motion — Rick Persaud EBT, pp. 63-64, pp. 110-112, pp. 129-131, p. 142; exhibit 8 of motion — Phyllis Toppin EBT, pp. 66-70; exhibit 7 of motion — Michael Kreppin EBT, pp. 58-61; exhibit 6 of motion — Jay Ellenberg EBT, pp. 127-131; pp. 222-223; exhibit 5 of motion — Richard Carroll EBT, p. 150, p. 155). Despite the conclusions of AT's employees that AT's conduct was reckless, their EBT testimony proves that AT's conduct satisfies each element of a bad faith claim, as set forth in Pavia and its progeny, as well as in the comments to PJI 4:67.

Rick Persaud, AT's Claims Examiner in the underlying trial, was asked in his EBT about the lack of CPLR § 3101 notice to plaintiff's counsel by AT's counsel of the DE LEON/ELRAC experts prior to the damages portion of the trial. The following exchange took place in his EBT, at p. 110, line 4 — p. 112, line 16:

Q. If you had known that those reports [of the DE LEON/ELRAC experts] were not timely served by assigned defense counsel on plaintiff's counsel such that there was a likelihood that those Elrac witnesses would not be able to testify at trial, what would your position have been?

A. It would have been to settle.

Q. Because to not settle was crazy?

A. Yes.

Q. It would have been reckless not to settle at that point; right?

A. Right.

Q. It would have been absolutely insane for American Transit to let

this case go to trial; correct?

A. Correct.

Q. You would have never been protecting the rights of your insured; correct?

A. Correct.

Q. You would be exposing Amir to an unnecessary and quite an unreasonable risk; correct?

A. Right.

Q. You would not have been evaluating his relative economic risk to that of American Transit; correct?

A. Correct. [ Emphasis added]

Q. You wouldn't have been exposed to millions and millions of dollars of a claim; correct?

A. Correct.

Q. And American Transit only had exposure to the limits of its policy of $100,000; correct?

A. Correct.

Q. So, if those expert exchanges were not properly served by the assigned counsel, which is Phil Rizzuto, and you knew that, you would have told Toppin to settle the case; correct?

A. Correct.

Q. You would have told Ellenberg to settle the case; correct?

A. Correct.

Q. You would have told Dick Carroll to settle the case; correct?

A. Correct. [ Emphasis added]

Q. If you would have said, Hey, guys, we already established liability was likely to be assessed to both sets of insureds; correct?

A: Correct.

Q. There was no reasonable basis for American Transit Insurance Company at this point to not tender the policies; correct?

A. Correct. [ Emphasis added]

Q. And we also knew that if American Transit did not tender their policies based on the bad faith letter, that plaintiff's counsel said he would pursue an excess judgment against both sets of insureds; correct?

A. Correct.

Q. And that he'll pursue their personal assets; correct?

A. Correct.

Also, Mr. Persaud, in his EBT, testified that he was assigned both the STEED/ AMIR and PLATFORM/SINGH files as the claims representative, until March 24, 2006, when the PLATFORM/SINGH file was assigned to another claims representative, Steven Hamill. Further, Mr. Persaud testified, at p. 127 of his EBT, that after AT received the March 22, 2006-bad faith letter from BOM, the case file has a March 27, 2006 note from Mr. Hamill, stating "At this time, until we get a pre-trial report from defense counsel, we will make no offers" and "also, half of our file is not on premises. It was sent to outside counsel, therefore, I cannot do a complete review." Then, Mr. Persaud responded to the following questions, in his EBT, at p. 130, line 3 — p. 131, line 18:

Q. Is it fair to say, that as of that date [March 29, 2006], Hamill did not receive defense counsel's pre-trial report?

A. Correct.

Q. Hamill did not have the full claims file available to him; correct?

A. Correct.

Q. All Hamill had available to him was some pleadings; correct?

A. Correct.

Q. And Hamill could not make a full evaluation; correct?

A. It was, quote, suicide, closed quote, to go forward with the trial on damages given all that Hamill had up to that point in time. Correct. [ Emphasis added]

Q. It would never be in the best interest of the insured to go to trial when you didn't know or have the ability to form a full and fair evaluation; correct?

A. Right.

Q. And going to trial without performing a full and fair evaluation and knowing how to protect the rights and interests of your insured was reckless, correct?

A. Correct. [ Emphasis added]

Q. Now, 4/4/06 Hamill makes another note, "Received call from defense counsel Lubowitz [trial counsel for PLATFORM/SINGH]. She got this case and was instructed to prepare for trial and pick a jury"; correct?

A. Right.

Q. "She feels pretty strongly, and I agree," that's Hamill's note, "I" meaning Hamill, "agree that both of our insureds will be held in and the Elrac vehicle, which has deep pockets, will very likely be let out." See that?

A. Yes.

Mr. Persaud was asked about the effect of the Court's preclusion of the ELRAC experts from testifying in the damages portion of the underlying case. The following exchange took place, at p. 142, lines 5-17:

Q If those doctors were precluded from testifying, it's your testimony:

that American Transit had no valid basis of defending this case against the claims being brought by Taveras; correct?

A. Correct.

Q. Without having a valid basis to defend the case, American Transit would have acted recklessly by exposing their insured Amir, Singh and Platform to an unreasonable and unnecessary risk; correct?

A. Correct. [ Emphasis added]

Phyllis Toppin, the Claims Supervisor Mr. Persaud reported to, testified, in her EBT, at p. 68, line 20 — p. 69, line 11:

Q. By looking at Exhibit 3 [exhibit 10 of motion — AT's computerized claims notes for STEED/AMIR] and Exhibit 3 alone, my question is: Is it fair to say that based on only Exhibit 3, American Transit had no ability to evaluate the merits of the case being brought by Taveras against Steed and Amir?

A. Correct.

Q. And it was your obligation as an insurance company to protect the interests of Steed and Amir; correct?

A. Correct.

Q. And you could not protect the interests of Steed and Amir when

you could not evaluate the case being brought against them; correct?

A. From this notification, yes. [ Emphasis added]

Q. Just from that notification; correct?

A. Correct.

Michael Kreppin, AT's Assistant Claims Manager of the Bodily Injury Department, at the time of the underlying trial, gave the following testimony in his EBT, at p. 58, line 10 — p. 60, line 2:

Q. So, if there is a case like Taveras, there is a $100,000 claims reserve set on a case, there is a bad faith allegation containing more than a million dollars of economic losses, there's 3101 (d)s and supplemental BPs that support an allegation that there is a back surgery necessitated by the accident with plaintiff's doctors supporting those allegations and defense medical allegations not challenging those allegations, would you agree that in that case, American Transit should settle the case within the confines of its policy when it has the opportunity to do so?

A. Agreed.

Q. Because in that case American Transit would not to expose its insured to an unnecessary economic risk; correct?

A. Correct.

Q. In the case wherein liability has already been assessed such as by jury verdict, there's no question liability needs to be assessed, it's already been assessed against an American Transit insured, in that case when the economic damages are alleged to have exceeded $1.5 million dollars and there is a causal relationship alleged by plaintiff's doctors regarding the need for back surgery and knee surgery and future medical needs and that's supported by 3101s, supplemental BPs, 3122s and the defendant doctors do not opine about causal relationship, in that case would you agree that if American Transit has the opportunity to settle within the confines of its policy and plaintiff's counsel would be willing to accept that offer, American Transit was obligated to settle the case; correct?

A. Correct. [ Emphasis added]

Then, Mr. Kreppin testified as follows, at p. 61, lines 6-17.

Q. In what manner was American Transit in allowing the case to go forward protecting the rights of its insured?

A. The case should have been settled.

Q. Why?

A. Because there are too many factors against our defense. You have a liability trial and you have the IME doctors not mentioning anything with regard to causality. So, its safe to say that the case should settle. [ Emphasis added]

Jay Ellenberg, AT's Manager of the Bodily Injury Department, at the time of underlying trial, and to whom Ms. Toppin and Mr. Kreppin reported, agreed in his EBT, at pp. 127-128, that it was reckless for AT to allow the case to go to a damages verdict and expose its insureds to an excess verdict. He testified, in his EBT, at p. 130, lines 10-18:

Q. Would you agree that if American Transit Insurance Company did not have the ability to fully and evaluate the merits of the case, they had no way of determining the probability that a verdict rendered would likely be in excess of the limitations of their insured's policy?

A. Correct.

Further, at p. 131, lines 16 — p. 133, line 2, the following was asked of Mr. Ellenberg:

Q. Would you agree that failing to have the ability to evaluate the entire claim by American Transit Insurance Company is reckless?

A. Yes. [ Emphasis added]

Q. Did American Transit Insurance Company, prior to 4/27/06, ever discuss the evaluation of this case with its insured Steed; yes or no?

A. Not to my knowledge.

Q. Did American Transit Insurance Company, prior to 4/27/06, ever discuss the evaluation of their claim with their insured driver, Amir?

A. Not to my knowledge. [ Emphasis added]

Q. Is discussing the value of a case with an insured a good position or a bad position for an insurance company to have?

A. I would say it is a good thing to do.

Q. Did American Transit Insurance Company ever discuss what the risks were to Mr. Amir in the event the case went to a damage verdict?

A. Not to my knowledge.

Q. Is it reflected anywhere in the file that you reviewed whether American Transit Insurance Company or any person that worked for American Transit Insurance Company ever discussed the risks of the value of the case or what would happen if the case went to damage trial with Mr. Amir?

A. No. [ Emphasis added]

Further, Mr. Ellenberg testified about AT's failure to timely file the CPLR § 3101 disclosures for ELRAC's expert doctors, at p. 222, line 5 — p. 223, line 16:

Q. And if you knew that those experts reports were not properly and timely exchanged then it's your position that as the manager of American Transit Insurance Company you would demanded tender of both policies to protect the right of all of your insureds?

A. Yes.

Q. And that failing to tender both policies under that circumstance would be detrimental to the rights of your insured?

A. Yes.

Q. And failure to tender your policies under those circumstances would be exposing your insured to an unnecessary and unreasonable risk, correct?

A. I believe so. [ Emphasis added]

Q. Sir, would you agree with me that prior to the commencement of the damage portion of this case the jury rendered a liability verdict in favor of Taveras against all the American Transit insureds?

A. Yes.

Q. Would you agree with me, sir, that prior to the commencement of the liability, I am sorry, damage portion of this case, that if, in fact, the 3101s that you keep referencing, that were codefendants' doctors, were not properly and timely exchanged, that there existed the probability, in light of the evidence concerning damages, that a verdict would likely be rendered in favor of Taveras and be in the amount in excess of limitations of both policies maintained by American Transit Insurance Company?

A. Yes.

AT's Vice President and Treasurer, Richard Carroll, testified as follows, in his EBT, at p. 150, lines 18-23:

Q. And if you looked at Exhibit 3 [exhibit 10 of motion — AT's computerized claims notes for STEED/AMIR], would you agree that it would be reckless for American Transit Insurance Company to handle a claim in that manner, and let the case go to trial, only looking at Exhibit 3?

A: If you just looked at Exhibit 3, yes, I would say it would be the case.

[ Emphasis added]

When a claimant makes a claim against two of AT's insureds arising from the same accident, AT's procedure would have been to assign two separate claims examiners, one each to the claims made against each one of its insureds. This protocol is to avoid a conflict of interest between two insureds, because each insured may blame the other insured for the accident. Therefore, if one claims examiner or even one claims supervisor handles the claims for both sets of insureds involved in the same accident it creates a conflict of interest that fails to protect the rights of the insureds. (Michael Kreppin EBT, pp. 27-28; Richard Carroll EBT, p. 58).

However, in the underlying action, Mr. Persaud was assigned to handle both the STEED/AMIR and PLATFORM/SINGH claims, when AMIR was blaming SINGH for the accident. (Richard Carroll EBT, p. 144). Mr. Hamill was only assigned to the PLATFORM/SINGH claim on March 24, 2006, just days before the trial and only two days after BOM sent the bad faith letter to AT. Almost one year prior to trial, the unredacted computerized notes for the PLATFORM/SINGH file [exhibit 13 of motion] indicate that a reserve of $100,000 was set on April 21, 2005, the full policy limit, while the reserve set on the STEED/AMIR file was $50,000 according to the unredacted computerized claims notes for the STEED/AMIR file [exhibit 11 of motion]. Both reserves were set by one claims examiner, Mr. Persaud. Neither reserve was ever changed to reflect the April 14, 2006-liability verdict, which imposed the greater liability upon the STEED/AMIR cab.

The computerized claims notes, any cross-files, the hard copy of the claims file and any oral or written reports from defense counsel are the only items that AT relies upon to evaluate the risk of a case to its insureds. (Rick Persaud EBT, pp. 57-58; Phyllis Toppin EBT, p. 111, pp. 115-116; Richard Carroll EBT, pp. 61-62; p. 79). AT violated its own policy by not maintaining the hard copies of either claims files and only had its computerized claims notes available to evaluate the risks to its insured AMIR. (Rick Persaud EBT, p. 103, pp. 107-109; Phyllis Toppin EBT, p. 123, pp. 127-128). Moreover, AT's employees admitted that the computerized claims notes were inadequate and AT's Claims Examiner Persaud, Claims Supervisor Toppin, Manager Ellenberg and Vice President Carroll had no ability to evaluate the underlying action and no idea of the risks to their insured AMIR. (Rick Persaud EBT, pp. 41-42; Phyllis Toppin EBT, p. 66; Jay Ellenberg EBT, p. 82, p. 225; Richard Carroll EBT, pp. 149-150). Thus, as previously cited, it was reckless for AT to go forward with the damages trial against AMIR. (Rick Persaud EBT, pp. 63-64; Richard Carroll EBT, p. 150).

Probability of an excess verdict for plaintiff

In the underlying action, the probability in light of the evidence indicated that a jury would find in favor of plaintiff TAVERAS and return a verdict in excess of the policy limit. ( Knobloch, supra). TAVERAS was a rear-seat passenger in the taxi owned by STEED and driven by AMIR. As the taxi, traveling northbound on First Avenue in Manhattan, approached East Sixth Street, it struck the rear of the DE LEON/ELRAC car. Then, the STEED/AMIR taxi was struck in the rear by the PLATFORM/SINGH taxi. During the pendency of the action, TAVERAS' counsel provided AT with bills of particulars, medical records and expert disclosures to assist AT in its evaluation of TAVERAS' claim. (Exhibits 15, 16 and 17 of motion).

As the case neared trial, AT received the March 22, 2006-bad faith letter from BOM [exhibit 18 of motion; Rick Persaud EBT, p. 80], which stated that TAVERAS' combined economic damages, without considering pain and suffering, exceeded $1,500,000. (Rick Persaud EBT, p. 81; Phyllis Toppin EBT, pp. 102-103; Jay Ellenberg EBT, pp. 205-206). AT did nothing in response to the TAVERAS' bad faith letter. (Jay Ellenberg EBT, p. 214).

AT's sole defense in the damages portion of the trial was based upon using ELRAC's expert physicians. (Rick Persaud EBT, p. 133). As mentioned earlier, AT's own experts did not offer any opinions as to the causation of TAVERAS' injuries. (Jay Ellenberg EBT, pp. 193-195). Without ELRAC's experts, AT had no basis to defend the damages portion of the trial. (Rick Persaud EBT, pp. 133-134, p. 140; Jay Ellenberg EBT, p. 200, pp. 203-204). AT did not direct its assigned defense counsel, Phillip Rizzuto for STEED/AMIR and Steven Lubowitz for PLATFORM/SINGH, to serve on BOM, TAVERAS' counsel, co-defendant ELRAC's CPLR § 3101 expert disclosures. Instead, AT relied upon Leslie Rabb, a clerk from Baker, McEvoy, Morrissey Moskovits, P.C., the attorney of record for PLATFORM/SINGH, to exchange ELRAC's expert witness disclosures and notify trial counsels Rizzuto and Lubowitz. (Rick Persaud EBT, p. 90, p. 92). However, there is no indication in the claims notes or the claims files that Baker, McEvoy sent out the notices to BOM. (Rick Persaud EBT, pp. 90-92; Jay Ellenberg EBT, p. 198).

The jury, on April 14, 2006, found the DE LEON/ELRAC vehicle not liable and the AT's insureds 100% responsible for the accident — 70% for STEED/AMIR and 30% for PLATFORM/SINGH. At the conclusion of the liability portion of the case and prior to the opening of the damages portion of the trial, despite the refusal of AT's assigned counsel on the record to settle TAVERAS' claims for the policy limits, there was a very high probability that the damages verdict would far exceed the policy limits. Jay Ellenberg conceded, in his EBT, that AT should have settled the case for the $200,000 policy limits had AT known prior to the damages trial that the ELRAC experts would be precluded. The following colloquy took place in Mr. Ellenberg's EBT, at p. 238, line 14 — p. 239, line 12:

Q. And failure to settle this case at a time that they could have done so and allowing this case to go forward to a damage verdict, in light of all of the other factors that we discussed today, showed an indifference to their insured, Amir, correct?

A. Well, I don't know indifference is a proper word. Had we known, in my opinion, had we known that the medical records of defendants' doctors would not be permitted in, by all means the case should have been settled up to the policy limits.

Q. Had you known that then, you would have been protecting the rights of your insured, correct?

A. Absolutely.

Q. Knowing now, if you knew then what you know now, if you knew then, at the end of liability portion of the trial, would you have settled the case with the two full $100,000 policies?

A. Absolutely.

Therefore, based upon its complete lack of an adequate damages defense it would have been detrimental to its insureds and reckless for AT to proceed to the damages trial because of the high probability of an excess verdict against its insureds. (Rick Persaud EBT, pp. 110-112; p. 142; Jay Ellenberg EBT, p. 222).

Defendant lost an actual opportunity to settle the claim after liability determined

In the underlying case, defendant AMIR lost an actual opportunity to settle plaintiff TAVERAS' claim at a time when all serious doubts about the insured's liability were removed. AT, as previously discussed, refused to settle the underlying case within the policy limits after the jury determined liability. Courts, in a bad faith action, have found it dispositive whether the insured lost an actual opportunity to settle the claim when all serious doubts about the insured's liability were removed. ( Pavia, supra; St. Paul Fire Marine, supra). In cases, such as the instant action, "where liability in the underlying action was clear, the only remaining issue is whether it was highly probable' that the severity of the injuries would result in a verdict in excess of the policy limits." ( DiBlasi v Aetna Life and Cas. Ins. Co., 147 AD2d 93, 99 [2d Dept 1989]). ( See St. Paul Fire Marine, supra; Vecchione v Amica, supra; New England Ins. Co. v Healthcare Underwriters Mut. Ins. Co., 295 F3d 232, 243 [2d Cir 2002]).

One year prior to trial, the unredacted computerized notes for the PLATFORM/ SINGH file reflect that the reserve was set, on April 21, 2005, at $100,000. (Exhibit 13 of motion). This demonstrated AT's evaluation of the risk to its insured, which it set at the full policy limit. (Rick Persaud EBT, p. 73; Michael Kreppin EBT, pp. 42-43; Richard Carroll EBT, pp. 52-53). However, on the same day, the reserve on the STEED/AMIR file was set at $50,000, as indicated in the unredacted computerized claims note for the STEED/AMIR file. (Exhibit 11 of motion). Rick Persaud set both reserves. Thus, AT's liability analysis had the STEED/AMIR taxi with a lesser probability of being held liable for the underlying accident.

However, immediately prior to the commencement of the trial, AT's assigned defense counsel for PLATFORM/SINGH, Susan Lubowitz, of the Law Office of Steven Lubowitz, communicated to AT that it was very likely that both the STEED/AMIR and the PLATFORM/SINGH vehicles would be found liable. (Exhibit 12 of motion). Ms. Lubowitz again asserted this to AT on April 12, 2006, the day that the liability phase of the trial opened. (Exhibit 12 of motion). Based upon the repeated warnings of defense counsel, AT was fully aware of the likelihood that both of its insured vehicles would be found liable. (Jay Ellenberg EBT, pp. 136-137).

AT understood the theory of joint and several tortfeasor liability. (Jay Ellenberg EBT, pp. 23-24, pp. 91-92; Michael Kreppin EBT, pp. 24-26; Richard Carroll EBT, pp. 55-56). Claims personnel with this knowledge should have realized that once liability was reasonably likely to be assessed against both of AT's insureds, the reserves on both files should have been matched and set at $100,000 each. (Rick Persaud EBT, pp. 67-68; Phyllis Toppin EBT, pp. 119-120; Richard Carroll EBT, p. 86, p. 161). However, the reserves for the STEED/AMIR vehicle were never changed to reflect these warnings and settlement offers were not made. (Rick Persaud EBT, pp. 100-102). Further, there are no notes in the STEED/AMIR claims file regarding when the liability portion of the trial began or the results of the liability verdict. (Rick Persaud EBT, p. 99). Thus, looking solely at the STEED/AMIR computerized claims notes, it was impossible for AT to fully and fairly evaluate TAVERAS' claim and reckless to allow the case to proceed to trial. (Rick Persaud EBT, pp. 41-42, pp. 63-64; Jay Ellenberg EBT, p. 82; Richard Carroll EBT, pp. 125-126, p. 150).

Even if AT ignored defense counsel's assessment that both insureds were likely to be held liable, it became a reality on April 14, 2006, when the jury rendered its liability verdict. At this point, based upon AT's own admissions, the reserves for both AT insured vehicles should have been matched and set at $100,000 each or $200,000. (Rick Persaud EBT, pp. 67-68; Phyllis Toppin EBT, pp. 119-120). This was not done. (Exhibits 11 and 13 of motion). If both reserves had been set at $100,000, there would not have been a good faith basis to ignore plaintiff TAVERAS' demand for the two policies at the conclusion of the liability portion of the trial. Thus, this is another example of AT's behavior, evincing a conscious and knowing indifference to the rights of its insured, AMIR.

It is clear that AMIR lost actual opportunities to settle the claims against him at pivotal points during the underlying action and before the commencement of the damages portion of the trial when: AT received BOM's bad faith letter; defense counsel informed AT of the likelihood of a negative liability verdict; and, the jury found AMIR 70% liable for the underlying accident. These lost opportunities occurred when plaintiff TAVERAS had a willingness to accept the two policies in full satisfaction of all claims against AT's insureds. Richard Carroll, in his EBT, at p. 258, lines 14-22, answered the following question:

Q. Was American Transit Insurance Company in the position to settle this case for the total of the $200,000 policies, before the damage potion of the trial commenced, at a time when Plaintiff was willing to accept the two $100,000 policies?

A. Yes, if we had offered the policies, they, you, plaintiff said they will accept the two hundred.

AT's disingenuous explanation for its failure to settle the claims against its insureds was that AT was waiting for a case assessment from defense counsel. (Rick Persaud EBT, p. 97; Phyllis Toppin EBT, pp. 122-123). Claims Examiner Steven Hamill's March 29, 2006 note, in the PLATFORM/SINGH computerized claims notes, shows that AT's position, two weeks prior to trial, was not to discuss settlement until AT received pre-trial reports from defense counsel. (Exhibit 12 of motion; Rick Persaud EBT, pp. 102-103). AT never received pre-trial reports from defense counsel prior to both the liability and damages portions of the trial and AT stipulated that no such reports existed in the claims files for either insured. (Exhibits 10 and 12 of motion; Rick Persaud EBT, p. 103; Phyllis Toppin EBT, p. 126; Richard Carroll EBT, p. 280). Without reports from defense counsel, the claims examiners, Persaud and Hamill, could not make an appropriate evaluation of the case or fully and fairly protect the rights of AT's insureds. (Rick Persaud EBT, p. 106; Phyllis Toppin EBT, pp. 122-123; Jay Ellenberg EBT, p. 169; Richard Carroll EBT, pp. 196-197).

Despite its reliance on defense counsel to provide an assessment of the case, AT had a duty to its insureds to evaluate the case on its own, which it clearly failed to do. (Rick Persaud EBT, pp. 55-56; Phyllis Toppin EBT, p 11, p. 22; Michael Kreppin EBT, pp. 50-51; Richard Carroll EBT, pp. 48-49). Rick Persaud admitted, in his EBT, as noted above, at p. 130, lines 15-16, that without the reports of defense counsel, "[i]t was, quote, suicide to go forward with the trial on damages." Meanwhile, AT recklessly went forward with the damages trial and demonstrated "a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted." ( Pavia at 453-454).

Defendant's failed investigatory efforts to make an informed risk evaluation

Another crucial factor in determining if an insurer acted in bad faith is whether the insurer's investigatory efforts prevented it from making an informed evaluation of the risks of refusing settlement and the probability of a verdict against its insured. ( Pavia, supra; Gordon v Nationwide, supra). AT's original claims files, as mentioned previously, contained numerous documents dealing with TAVERAS' damages. Despite this, Rick Persaud testified that he was not aware that TAVERAS claimed to have a pre-existing back injury exacerbated by the accident. (Rick Persaud EBT, pp. 126-127). Before the liability portion of the trial began: Claims Supervisor Phyllis Toppin did not evaluate the merits of the case; Bodily Injury Manager Jay Ellenberg was not aware that the case existed; and, Vice President Richard Carroll only learned of the case one month before trial and never reviewed the file himself. (Phyllis Toppin EBT, p. 38; Jay Ellenberg EBT, pp. 49-53, p. 101; Richard Carroll EBT, p. 72). This is surprising, because only Ms. Toppin, Mr. Ellenberg and Mr. Carroll had the authority to settle a case for more than $50,000. (Phyllis Toppin EBT, pp. 120-121; Jay Ellenberg EBT, pp. 31-33, p. 52, p. 71; Michael Kreppin EBT, pp. 19-20; Richard Carroll EBT, p. 17, p. 20). Also, Mr. Ellenberg and Mr. Carroll were the only AT personnel with the authority to set the reserve on a case at $100,000, which was done on the PLATFORM/SINGH file on April 21, 2005, one year before trial. (Exhibit 13 of motion; Richard Carroll EBT, pp. 20-21).

AT, in evaluating a claim, would utilize its computerized claims notes, any cross-files, the hard copy of the file and any oral or written reports from defense counsel. (Rick Persaud EBT, pp. 57-58, pp. 62-63; Phyllis Toppin EBT, p. 111, p. 115-116; Richard Carroll EBT, pp. 61-62, p. 79). However, on April 13, 2006, the first day of the liability portion of the trial, Mr. Hamill made a note in the PLATFORM/SINGH computerized notes that AT did not have a hard copy of the claims file. (Exhibit 12 of motion). Again, this demonstrated AT's pattern of conscious and knowing indifference to its insureds. Moreover, AT did not have defense counsels' pre-trial evaluations. (Exhibit 12 of motion; Rick Persaud EBT, p. 103; Phyllis Toppin EBT, p. 123).

Accordingly, AT's ability to evaluate TAVERAS' claim was completely limited to the information contained in the computerized claims notes. (Exhibit 12 of motion; Rick Persaud EBT, pp. 107-109; Phyllis Toppin EBT, p. 123). The computerized claim notes for the STEED/AMIR file failed to contain any liability or damage analysis or any indication of TAVERAS' injuries or economic loss. (Exhibit 10 of motion; Rick Persaud EBT, pp. 40-42; Phyllis Toppin EBT, pp. 55-56; Jay Ellenberg EBT, pp. 95-96, pp. 149-149; Richard Carroll EBT, pp. 125-126). Further, AT's employees admitted that the STEED/AMIR claims notes lacked pertinent information which made it impossible to evaluate the merits of the case based only upon these notes. (Rick Persaud EBT, pp. 41-42; Phyllis Toppin EBT, p. 66; Jay Ellenberg EBT, p. 82, p. 225; Richard Carroll EBT, pp. 149-150). Both Mr. Persaud and Mr. Carroll acknowledged, based solely upon a review of the STEED/AMIR notes, it was reckless to allow the case to go forward on damages against STEED/AMIR. (Rick Persaud EBT, pp. 63-64; Richard Carroll EBT, p. 150).

AT claimed that the STEED/AMIR claims file was cross-referenced with the PLATFORM/SINGH claims file. (Jay Ellenberg EBT, pp. 83-84). It follows that looking at the computerized notes of both files together would contain the entire universe of entries made by any AT personnel in reference to TAVERAS' claim. (Rick Persaud EBT, p. 88; Jay Ellenberg EBT, p. 149). However, upon review of both claims notes files, AT was still unable to fully evaluate TAVERAS' claim and could not protect the rights of its insureds. (Phyllis Toppin EBT, p. 114). Similar to the STEED/AMIR claims notes, the PLATFORM/SINGH claims notes have no reference to any economic losses by TAVERAS, whose claim far exceeded the policy limits. (Exhibits 15, 16, 17 and 18 of motion; Phyllis Toppin EBT, pp. 84-90; Jay Ellenberg EBT, p. 146; Richard Carroll EBT, pp. 152-153).

Thus, based upon the inadequate claims notes and copies of some of the pleadings, AT did not have the ability to provide an informed evaluation of the case and protect the rights of its insureds. (Rick Persaud EBT, p. 128; Jay Ellenberg EBT, p. 130). AT personnel repeatedly admitted that based solely upon the sparse information in the STEED/AMIR and PLATFORM/SINGH claims notes AT did not have the ability to properly evaluate the case and it was reckless to proceed to trial. (Rick Persaud EBT, p. 63, p. 110, pp. 130-131; Phyllis Toppin EBT, pp. 66-70; Jay Ellenberg EBT, p. 129, p. 131, p. 223; Richard Carroll EBT, p. 155).

AT cannot attempt to evade its responsibility by blaming its defense counsel. While AT was dependent upon defense counsel to provide pre-trial reports, which it would rely upon in evaluating the claim and any potential settlement offers, it never received pre-trial reports from its defense counsel. AT had an independent duty to investigate any claims against its insureds and make its own evaluation. In the underlying action, AT clearly failed in its investigatory efforts to make an informed evaluation of the risks in refusing to settle the underlying action and the probability of an excess verdict against AMIR, its insured. (Rick Persaud EBT, pp. 55-56; Phyllis Toppin EBT, p. 11, p. 22; Michael Kreppin EBT, pp. 50-51; Richard Carroll EBT, pp. 48-49; pp. 248-249).

Defendants' attempts to settle the underlying case

The fourth factor considered by courts in determining if an insurer acted in bad faith is what if any attempts were made by the insurer to settle plaintiff's claim and at what point during the underlying action those attempts were made. ( Knobloch, supra; Doherty v Merchant's Mut. Ins. Co., supra; State v Merchants Ins. Co. supra).

AT, as detailed in the record on appeal, did not offer to settle the case for the full policies, until after the jury found STEED/AMIR 70% liable and PLATFORM/SINGH 30% liable. After the jury rendered its liability verdict, on April 14, 2006, plaintiff TAVERAS stated a willingness to settle the case for the full tender of each AT policy, if AT would do this prior to the commencement of the damages portion of the trial. (A 484 — A485). AT did not do so.

Then, on April 26, 2006, twelve days later, during the damages portion of the trial, after plaintiff TAVERAS' experts testified, AT offered the two policies in full — $200,000 — to settle the case. Plaintiff TAVERAS rejected the offer. (A988 — A992). AT did not make this offer until after I precluded AT from offering testimony from ELRAC's experts, based upon AT's untimely CPLR § 3101 disclosures. The effect of this preclusion was to remove any possible defense that AT's insureds could offer to rebut plaintiff TAVERAS' claim of severe and permanent injuries that were causally related to the underlying motor vehicle accident. (Rick Persaud EBT, pp. 133-134; pp, 140-141; Jay Ellenburg EBT, p. 200, pp. 203-204). Defendant AT's attempts to finally settle plaintiff TAVERAS claim for both policies was too little and too late in the proceedings.

Defendant's failure to keep insured informed re: settlement demands and possible exposure to an excess verdict

The fifth factor for courts to consider in determining if an insurer engaged in bad faith is whether an insurer notified its insured of the possibility of being exposed to an excess verdict. "If an insurer acting in good faith would ordinarily keep its insured informed of settlement negotiations then the failure of an insurer to do so could raise the inference that the insurer is acting in bad faith by failing to provide its insured with settlement information." ( Smith v Gen. Acc. Ins. Co. at 654). Moreover, the Court of Appeals, in Smith v Gen. Acc. Ins. Co., held, at 654-655:

Plaintiffs in this case produced evidence showing that the practice in the insurance industry is for insurers to keep an insured abreast of settlement negotiations and that this particular insurer instructed its representatives to notify an insured of settlement negotiations when liability may exceed coverage. The failure by the insurer to follow an industry practice or its own standard is relevant to resolution of the bad faith issue. [ Emphasis added]

Defendant AT acknowledged that it has an obligation to defend its insureds and that part of that duty to defend included informing its insureds of the risks involved in the case, especially if there was a risk that the insured would be exposed to a damages verdict in excess of the policy limit. (Rick Persaud EBT, pp. 55-56; Michael Kreppin EBT, pp. 45-48, pp. 50-51; Richard Carroll EBT, p. 11, pp. 64-65). AMIR should have been informed of the risks to which he was exposed after the bad faith letter was received by AT, which reinforced the risk of AMIR being exposed to a judgment including economic loss in excess of $1,500,000. Assistant Claims Manager Michael Kreppin answered the following question in his EBT, at p. 53, lines 7-14:

Q. If a claims file was reserved at $100,000 and subsequent to that a bad faith letter came in setting forth economic losses exceeding a million dollars and subsequent to the setting of the reserves there were 3101 disclosures setting forth economic losses exceeding a million dollars, would that trigger notice to the insured?

A. Yes.

Despite the severe risk to its insured, AMIR, AT never communicated directly with AMIR because AT relied on its defense counsel to speak with the insured. (Rick Persaud EBT, p. 54; Richard Carroll EBT, pp. 129-130). Furthermore, defendant AT stipulated that the entire STEED/AMIR file does not contain any document that indicates that AT communicated any information whatsoever to its insured, AMIR, in writing or otherwise.(Richard Carroll EBT, pp. 175-176).

AMIR did not become aware of the underlying action against him until he received in 2004 a subpoena to appear for a deposition, two years after the subject accident. (Exhibit 4 of motion — AMIR EBT, p. 54, line 13 — p. 55, line 2). AMIR, from the information contained in the subpoena for his examination before trial, became aware that AT assigned counsel to defend him against the claims of plaintiff TAVERAS regarding the underlying accident. (AMIR EBT, p. 8, lines 4-17, p. 55, line 10-24). After appearing for his deposition, AMIR did not receive any subsequent communications from defense counsel or AT until he was served with a subpoena to testify at trial. (AMIR EBT, p. 8, line 18 — p. 10, line 9).

AMIR, after his receipt of the subpoena to testify, contacted Thomas Murphy, Esq. of the Law Office of Philip Rizzuto, AT's assigned counsel for his case, because he was under the mistaken impression that the case had been settled. AMIR testified in the following colloquy in his EBT, at p. 10, line 10 — p. 11, line 12:

Q. And did you then reach out to Mr. Rizzuto's office to speak to Mr. Murphy?

A. Yes, I did.

Q. Did you and Mr. Murphy have a conversation?

A. Yes. I spoke with him over the phone, and he asked me to come over the next day.

Q. When you spoke to him over the phone did you and Mr. Murphy discuss the content of what you were going to talk about?

A. It was going to be regarding my testimony in the trial.

Q. Other than setting the appointment to come to Mr. Murphy's office to discuss your testimony at trial did you discuss with Mr. Murphy the merits of the underlying lawsuit at that time over the phone?

A. He didn't discuss the merits, but I asked a question that before I was told by the old law firm that the case has been settled so I was under the impression the case had already been settled, but now I receive the subpoena that it is going to trial so what is exactly going on?

Q. What did Mr. Murphy respond?

A. He said no. It wasn't settled. "They must have misinformed you. We are going for the trial so you need to come in."

AMIR went to the offices of defense counsel to discuss his testimony, but defense counsel never discussed with AMIR: the merits of the case; the potential value of TAVERAS' injuries; the limitations of his coverage; and, what would happen if there was an excess verdict. AMIR testified as follows, in his EBT, at p. 12, line 6 — p. 15, line 2:

Q. Did you and Mr. Murphy sit down and discuss what was about to happen at trial?

A. He went over my deposition testimony with me, and during that I asked him that are you guys planning to settle the case? And his response is that he is not going to roll over.

Q. Not going to roll over?

A. Yes.

Q. So you met with Mr. Murphy. Did you and Mr. Murphy discuss how the accident occurred, not telling us what you did discuss with him but did you discuss that subject matter?

A. Yes. I mean, when he going through with my deposition testimony the subject matter came up, how the accident happened.

Q. And did you and Mr. Murphy discuss the value of Mr. Taveras' case?

A. No.

Q. Did Mr. Murphy ever advise you of the injuries that Mr. Taveras claims to have sustained resulting from the accident?

A. No.

Q. Did Mr. Murphy ever advise you of the limitations of coverage there was?

A. No.

Q. Did you know how much coverage there was?

A. No. At that point I didn't know.

Q. At some point in time thereafter did you learn how much coverage was afforded to you through American Transit Insurance Company?

A. Yes. Through the judgment I learned there was $100,000 and $300,000.

Q. Is that the first time that you learned how much coverage was available to you?

A. Yes.

Q. So that was after the judgment was entered?

A. That's correct.

Q. At any time before trial did Mr. Murphy or did anyone on behalf of American Transit Insurance Company advise you how much insurance coverage was available to protect you from a claim against Mr. Taveras?

A. No, I don't recall.

Q. Did Mr. Murphy ever tell you how much he evaluated the claim that Mr. Taveras was bringing?

A. No.

Q. Did he ever advise you of what American Transit evaluated the Taveras claim as being worth?

A. No.

Q. Did Mr. Murphy ever tell you what would happen to you in the event there was a judgment in excess of the coverage that was provided by American Transit Insurance Company?

A. Before the trial, no, but after the trial when you guys have the judgment against me I spoke with him, and he told me that it is going to be — they have an excess judgment that is more than that insurance is worth so what was going to happen of the money that did not cover that they have more that the insurance coverage, and he told me, "You might have to file a bankruptcy. If the case is not settled you might have to file a bankruptcy."

Further, with respect to neither Mr. Murphy nor anyone from AT informing AMIR prior to the opening of the trial of the possibility of an excess verdict, AMIR testified, in his EBT, at p. 27, line 14 — p. 29, line 7:

Q. Now at any time from the time that you testified at the liability portion of the trial up until you learned that there was a verdict against you did anyone from American Transit Insurance Company discuss with you settling the case against Mr. Taveras?

A. No.

Q. Before you testified at the liability trial, and this before you testified at the liability trial, did anyone from American Transit Insurance Company discuss with you settling the case brought by Mr. Taveras?

A. No. I mean, I brought it up with Thomas Murphy the first time I met with him about the settlement, and he said the insurance company is not going to roll over, and that was it.

Q. Did anyone from American Transit Insurance Company discuss with you the probability that you would be held liable for some percentage of fault for causing the accident?

A. No.

Q. Did anyone from Mr. Rizzuto's office ever discuss with you prior to the beginning of the liability trial the probability of you being held liable for some percentage of fault for causing the accident?

A. No.

Q. Did anyone from American Transit Insurance Company discuss with you prior to the commencement of the liability trial the probability that the damages, if the case went forward to trial, that the damage verdict would like be in favor of Mr. Taveras in an amount in excess of the insurance provided to you by American Transit Insurance Company?

A. No.

Q. Did anyone from Mr. Rizzuto's office discuss with you the probability that the damages, if a verdict was taken by Mr. Taveras, would likely exceed the limitation of insurance provided by American Transit Insurance Company to you?

A. No.

Also, defense counsel and AT failed to inform its insured, AMIR, of any settlement negotiations or settlement offers made by plaintiff TAVERAS throughout the entirety of the underlying action. (AMIR EBT, pp. 31-32; pp. 37-40). Richard Carroll, AT's Vice President and Treasurer, confirmed this. He testified, in his EBT, at p. 190, lines 7-25:

Q. Is it fair to say that American Transit Insurance Company, did nothing to advise its insureds of how much Plaintiff was willing to settle his case for, at that time, correct?

A. Correct.

Q. And, is it fair to say that American Transit Insurance Company did nothing to advise its insureds that they could retain their own counsel, at any time to get involved in the settlement discussions, correct?

A. Correct.

Q. And, is it fair to say that American Transit Insurance Company, did nothing to advise its insureds that they can participate in the settlement of the case, at any time, correct?

A. Correct.

AMIR testified, in his EBT, at pp. 45-46, that if he had known that plaintiff TAVERAS was willing to settle the case for the policy limit that he would demanded that AT tender the policy.

When the liability phase of the trial began, AMIR was in Pakistan for his brother's wedding. He was contacted by Mr. Rizzuto's office, which requested that he return to New York to testify at the liability portion of the trial. (AMIR EBT, pp. 15-16). AT paid AMIR's air fare to fly to New York and then return to Pakistan for the wedding. (AMIR EBT, pp. 20-21; Rick Persaud EBT, pp. 98-99). When AMIR appeared to testify, neither defense counsel nor AT informed AMIR that: TAVERAS claimed to be totally disabled from the accident; and, TAVERAS was willing to settle the claim within the policy limits or that there had been any offer made by AT to settle the claim. (AMIR EBT, pp. 22-23). After he testified at the liability portion of the trial, AMIR was never contacted by AT or its assigned defense counsel. (AMIR EBT, pp. 14-15, pp. 23-24, p. 41).

As noted above, AMIR never knew the limitations of his insurance coverage until after the judgment had been rendered against him. Then, he learned of the verdict in excess of $9,000,000 and received Mr. Murphy's suggestion of filing for bankruptcy. As of the day of his deposition, on January 14, 2011, AMIR had not received any post judgment communications from AT. (AMIR EBT, p. 41).

AT's defense is that it sent as form notification letter, dated March 24, 2006, to its insured, AMIR. However, the letter was produced for the first time at Rick Persaud's EBT and Mr. Persaud admitted that there is no proof that the letter was ever mailed. The letter does not contain a signature, does not have a Bates stamp with a number like every other document in the original claim file and there is no return receipt confirming it was ever sent to the insured via certified mail. (Rick Persaud EBT, pp. 14-17). There is nothing in AT's records to demonstrate that AMIR was ever advised to have independent counsel or that he could contribute to the settlement of the TAVERAS case. (Jay Ellenberg EBT, p 226).

Thus, it is clear that insured AT's pattern of conduct in not keeping its insured AMIR informed about settlement negotiations or his right to obtain independent counsel or contribute to a possible settlement demonstrates one of the seven key factors in assessing AT's bad faith.

Financial risk to insured far outweighed comparative financial risk to defendant

The sixth factor for the Court to consider in evaluating whether a defendant insurer acted in bad faith is the relative financial risk involved for the insured, if the settlement was not made, compared with the risk to defendant insurer in terms of the policy limit, if the settlement was not made. ( Pavia, supra; Vecchione v Amica Mut. Ins. Co., supra; Brockstein v Nationwide Mut. Ins. Co., supra; Brown v U.S. Fidelity Guaranty Co., supra). In the underlying case, the risk to inured AMIR far outweighed the comparative risk to AT. AT's risk was limited to the two $100,000 polices of its insureds, STEED/ AMIR and PLATFORM/SINGH. (Richard Carroll EBT, p. 114). When weighing AT's risks against only AMIR's risk, AT was at risk to lose $100,000. In contrast, after the jury decided liability against AT's insured AMIR, AMIR became liable for the entire amount of any damages verdict that would be awarded plaintiff TAVERAS, under the theory of joint and several tortfeasor liability.

At the time of the trial in the underlying action, AMIR who had graduated from law school in Pakistan, had received an LLM degree in the United States and was eligible to take the New Your State bar examination. (AMIR EBT, pp. 16-17). After the judgment was rendered against him, in 2006, he was advised that he should not take the New York State bar examination because the outstanding judgment would preclude his bar admission. (AMIR EBT, pp. 17-18). Instead, he was told by defense counsel that he should consider filing for bankruptcy.

As mentioned previously, BOM, TAVERAS' counsel, sent the March 22, 2006 bad faith letter [exhibit 18 of motion] to AT, which put AT on notice that TAVERAS' combined economic damages, without considering pain and suffering, exceeded $1.5 million. Clearly, AMIR's exposure to an excess verdict of more than $1.5 million far outweighed the $100,000 financial risk to AT. This displays another element of AT's egregious conduct, demonstrating "that the defendant insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted." ( Pavia at 453-454).

The first time AT weighed the comparative risk to its insured AMIR was on April 26, 2006, after defendants had been precluded from offering the testimony of ELRAC's experts. (Jay Ellenberg EBT, pp. 86-87). AT admitted that it did not have the information necessary to evaluate the relative financial risk to its insured and failed to do so. (Jay Ellenberg EBT, p. 165, p. 169). Mr. Ellenberg testified that based upon the relative exposure of AMIR and AT, AT failed to put itself on equal footing with their insured at the time the damages phase of the trial commenced. (Jay Ellenberg EBT, p. 230).

Moreover, both Mr. Ellenberg and Mr. Carroll admitted that if they knew that AT's insured AMIR was a law student at the time of the accident, they would have done more to protect his interests. Mr. Ellenberg answered the following question in his EBT, at p. 227, lines 3-11:

Q. If I told you that Mr. Amir was a law student achieving an LLM degree at the time of the accident and he was already an attorney licensed to practice law in Pakistan, would that at all factored into your evaluation of how American Transit needed to protect the economic rights of Mr. Amir in this case?

A. I don't think that there is any question we should have done more to protect his rights.

Mr. Carroll testified in his EBT, at p. 269, lines 5-24:

Q. Do you know that Mr. Amir has an LLM degree, and is capable of sitting for the New York State bar exam?

A. No.

Q. Knowing that information, would you have taken further steps to protect his interest, such that he would not be subjected to a verdict or a judgment in excess of the limitations of the American Transit Insurance Company's policy afforded to him?

A. Not based on knowing those things. I mean, in other words, I cannot say personally what we did or did not do to protect his interest. Based on the note, obviously that doesn't describe that we did very much. But would I change my, um, orientation in the case, um yeah. I wish if I had the choice now, we would be out of the case entirely. But we are not, we are here.

Other evidence establishing defendant's bad faith in refusing to settle

The last factor courts will consider in evaluating a bad faith claim is whether any other evidence tends to establish or negate the insurer's bad faith in refusing to settle. ( Smith v Gen. Acc., supra; Pavia, supra). Any one of the previous six key factors enumerated above in assessing bad faith by an insurer, when taken alone, may not be enough for the Court to grant summary judgment against an insurer. However, in the instant action, when all of the bad faith factors are assessed as a whole with the admissions of AT's personnel, there is no doubt that plaintiff established a prima facie case of AT's bad faith refusal to settle TAVERAS' claim and plaintiff proved that AT acted with gross disregard for the interests of its insured, AMIR.

Plaintiff's motion for summary judgment granted

Defendant AT, in its opposition papers, fails to dispute the repeated admissions of AT employees that AT acted recklessly in failing to settle the underlying claims against its insured, AMIR. (Rick Persaud EBT, pp. 63-64, pp. 110-112, pp. 129-131, p. 142; Phyllis Toppin EBT, pp. 66-70; Michael Kreppin EBT, pp. 58-61; Jay Ellenberg EBT, pp. 127-131; pp. 222-223; Richard Carroll EBT, p. 150, p. 155). The admissions of AT's employees demonstrate AT engaged in a pattern of behavior in violation of its own internal protocols and exhibited a knowing indifference to the high probability that its insured, AMIR, would be held personally accountable for any excess judgment if a settlement offer within the policy limits was not accepted.

Defendant AT, in its opposition papers, attempts to manufacture an issue of fact by submitting the affidavit of an alleged expert, John J. Murphy, Jr. (Exhibit K of cross-motion and opposition to motion). Mr. Murphy claims, in ¶ 3 of his affidavit, that his resume is attached to his affidavit and he has 40 years of claims experience in the insurance industry. Despite his assertion that the resume is attached to his affidavit, his resume is not attached to the affidavit. Assuming he is an expert, his opinion that AT did not act in a reckless manner in the underlying action is specifically tailored to the facts and circumstances of the instant action. Mr. Murphy's opinions, if he is an expert and the Court has no idea if he is an expert or not, are limited to insurance industry practices. His conclusory opinions about the outcome of the prior trial based upon his version of the facts are improper and the Court may not consider it in a bad faith action. ( Kulak v Nationwide Mut. Ins. Co., 40 NY2d 140). Further, even if the Court considers Mr. Murphy's affidavit, his opinions deserve little weight. He states, in ¶ 20 (b) of his affidavit, that "[t]he file notes reviewed contain only limited information," but in his opinion AT "possessed the necessary information and experience to make reasonable decisions." However, as outlined above, AT only had the computerized claims notes to rely upon and AT's employees admitted in their EBT's that these claims notes did not enable AT to make a full and fair evaluation or "reasonable decisions." (Rick Persaud EBT, pp. 55-56; Phyllis Toppin EBT, p. 11, pp. 22; Michael Kreppin EBT, pp. 50-51; Richard Carroll EBT, pp. 48-49).

It is clear that defendant AT, in its opposition papers to plaintiff's motion for summary judgment, fails to raise an issue of fact or rebut plaintiff's prima facie showing of bad faith. Moreover, defendant AT fails to dispute the admissions of its employees, which establish that AT "engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted." ( Pavia at 453-454).

Summarizing AT's pattern of behavior, which evinced a conscious or knowing indifference to the rights of its insured AMIR, it is clear that defendant AT engaged in the following acts of recklessness against the interests of its insured, AMIR:

a. AT violated its own internal protocol by having Claims Examiner Rick Persaud handle the claims files of both AT insureds, STEED/AMIR and PLATFORM/SINGH, despite the obvious and admitted conflict of interest;

b. AT failed to adhere to its own internal protocols in properly documenting the claims files of both AT insureds, STEED/AMIR and PLATFORM/SINGH, which should have noted documents received, such as medical records, bills of particulars, operative reports, conversations with defense counsel, meetings with claims supervisors or claims managers, periodic claims evaluations and bad faith letters;

c. Bodily Injury Manager Jay Ellenberg admitted that not only was he aware of AT's failure to properly document all pertinent information in its claims notes for its insureds, but he allowed the violation to occur;

d. Plaintiff TAVERAS in the underlying action made an economic claim in excess of $1,500,000, but no such reference was made in the computerized claims notes;

e. AT violated its own protocol of maintaining the hard copies of the claims file regarding the claims against its insured, AMIR, and at the time of trial AT only had its computerized claims notes available to evaluate the risks to its insured, AMIR;

f. Based upon the computerized claims notes, which were the only sources of information for AT during the trial, AT's Claims Examiner Rick Persaud, Claims Supervisor Phyllis Toppin, Bodily Injury Manager Jay Ellenberg and Vice President Richard Carroll had no ability to evaluate the underlying action and they had no idea of the risks to their insured, AMIR;

g. Based upon the inadequate claims notes and copies of only some, but not all, pleadings AT did not have the ability to provide a fair and adequate evaluation of the case to protect the rights of its insureds and AT's employees repeatedly admitted that just using the claims notes they did have the ability to evaluate the case and it was reckless to proceed to trial;

h. Bodily Injury Department Manager Jay Ellenberg, based upon his admission that there was insufficient information in the claims file to fully and fairly evaluate the merits of the case and proceed to trial, conceded that AT could not protect the rights and interests of its insureds in the underlying action;

i. AT never communicated directed with its insured AMIR, because AT relied on defense counsel to speak with the insured and defendant AT stipulated that there is no document in the STEED/AMIR claims file that indicates that AT communicated any information whatsoever to its insured AMIR, in writing or otherwise;

j. Defense counsel and AT also failed to inform AMIR of any settlement negotiations or settlement offers made by plaintiff TAVERAS throughout the entirety of the underlying action;

k. Bodily Injury Department Manager Ellenberg testified that based upon the relative exposure of AMIR and AT, AT failed to put itself on equal footing with their insured at the time the damages phase of the trial commenced;

l. AT refused to settle the underlying action without receiving the pre-trial reports from defense counsel, which it never received prior to the conclusion of the trial, despite AT's separate and non-delegable duty to evaluate the risk to its insureds;

m. Before the liability phase of the trial began and also before the damages phase of the trial commenced, Claims Supervisor Phyllis Toppin, Bodily Injury Manager Jay Ellenberg and Vice President Richard Carroll, the only AT personnel with the authority to settle a case for more than $50,000, never reviewed the STEED/AMIR file or even knew that the case was going to trial or allowed the case to proceed to trial;

n. AT lost an actual opportunity to settle the TAVERAS claim at a time when all serious doubts about the insured AMIR's liability were removed, because the jury found AT insureds STEED/AMIR 70% liable and PLATFORM/ SINGH 30% liable for the accident, and based upon its own reserves and evaluation of the risks to the insureds at that time AT should have matched the STEED/AMIR reserves with the $100,000 reserve set for PLATFORM/SINGH and tendered both policies; and,

o. AT failed to timely disclose, pursuant to CPLR § 3101, the ELRAC expert physicians, which resulted in their preclusion from testifying during the damages portion of the trial and which prevented AT from challenging the issue of injury causation.

All of these factors, when taken as a whole, with the admissions of AT's personnel, demonstrate that AT acted with a knowing and reckless disregard for the interests of its insured, AMIR. Therefore, with defendant AT failing to raise any genuine material issues of fact, plaintiff's instant motion for summary judgment is granted.

Defendant's cross-motion for summary judgment and dismissal of complaint denied

Defendant AT, in its cross-motion for summary judgment and dismissal of plaintiff's complaint, fails in its arguments that: its conduct was not reckless in failing to settle TAVERAS' claim before the liability verdict was rendered; it had a good faith basis to proceed to the damages phase of the trial and defend on the issue of causation because of its anticipated testimony from ELRAC's experts, who were subsequently precluded from testifying by the Court because of AT's late CPLR § 3101 notices; and, its actions during the underlying trial did not rise to the level of reckless disregard for the interests of its insured, AMIR.

Further, defendant AT's major argument in its instant cross-motion is based upon the January 17, 2000 death of STEED, the medallion owner of the cab driven by AMIR in the May 3, 2002-accident. (Exhibit E of cross-motion — STEED's certified death certificate). Defendant AT's counsel, Richard M. Sands, Esq., of the Law Offices of Harvey Gladstein Partners LLC, argues, in ¶ 3 (a) and (b) of his affirmation in support of cross-motion:

Since the deceased insured's legal representatives failed to notify AMERICAN TRANSIT of the insured's death within thirty (30) days of death, as is expressly required under the terms of the policy, any coverage under the policy terminated at the expiration of the thirty-day period. Accordingly, since there was no contract of insurance, AMERICAN TRANSIT cannot be liable on the basis of bad faith arising from the policy.

(b)The Power of Attorney held by the management company for the medallion owned by Steed for the subject taxi expired on Steed's death in 2000. Accordingly, the policy, as renewed in 2002, was improperly and/or fraudulently obtained without authority and was void ab initio. Thus, on the date of the subject accident, there was no insurance policy in effect and no coverage for Thurston Steed or the driver of the subject vehicle, Plaintiff's assignor AMIR.

Defendant AT's attempt to deny coverage to its insured, AMIR, after representing him for more than nine years — defending him from the time of the accident in 2002, representing him during the underlying trial in 2006, representing him throughout the subsequent appeal and admitting that AMIR is its insured repeatedly during the pendency of the instant bad faith action, until the instant cross-motion, dated June 13, 2011, was made — is nothing more than a disingenuous attempt to avoid its responsibility to its insured, AMIR. AT is estopped from disclaiming AMIR as its insured and AMIR's use of the cab he was driving at the time of the underlying accident was covered by AT's policy of insurance. This flows from AT's representation of AMIR during the entire underlying action, prior to AT's discovery in 2009 of STEED's death, and AT's admissions in the instant bad faith action that it insured AMIR, until the making of the instant cross-motion, dated June 13, 2011.

The affidavit of Malcolm Rattner [exhibit J of cross-motion] who at all relevant times was the President of 74 6th Avenue Leasing Corp., a corporation managing New York City taxi medallions for their owners, explains that Mr. Rattner, on behalf of 74 6th Avenue Leasing Corp., executed, on December 18, 1995, a Management Agreement [exhibit C of cross-motion] with STEED, the owner of New York City Taxi Medallion # 1A16. Pursuant to the Management Agreement and STEED's limited power of attorney to Mr. Rattner, as President of 74 6th Avenue Leasing Corp. [exhibit D of cross-motion], also executed on December 18, 1995, STEED authorized Mr. Rattner, as his agent, to purchase a vehicle to be used as a New York City taxi, purchase insurance for said vehicle and contract with drivers for the vehicle. Mr. Rattner admitted that his management company purchased vehicles to be used with STEED's medallion, # 1A16, procured and then renewed insurance from defendant AT for each vehicle which used medallion # 1A16 and assigned AMIR as the driver of the 2000 Ford that had medallion # 1A16 on the day of the accident.

Additionally, Mr. Rattner stated, in ¶ 5 of his affidavit, that "[s]ome time in 1998, Mr. Steed requested that the income from the operation of his medallion be remitted directly to his daughters. I had no contact with Thurston Steed after 1998. Per Mr. Steed's request, 74 6th Avenue Leasing Corp. began sending all checks to Mr. Steed's daughters." Further, Mr. Rattner states, in ¶ 6 of his affidavit, "I was unaware that Thurston Steed had died prior to the accident."

The STEED/AMIR vehicle, at the time of the May 3, 2002-accident, was covered by an AT insurance policy, with $100,000/$300,000 coverage for bodily injury, for the period March 1, 2002 to March 1, 2003. The annual premium was $9,165.40. (Exhibit B of cross-motion). The policy listed Thurston Steed as the insured with his address as 374 4th Avenue, Brooklyn, NY 11215. This is the same address as the garage used by 74 6th Avenue Leasing Corp. The broker for the policy was Susan Lammey Brokerage, Inc., whose address is also 374 4th Avenue, Brooklyn, NY 11215. Also, Ms. Lammey was the notary public who took the signatures of Mr. Rattner and STEED in the December 18, 1995 Management Agreement and STEED in the December 18, 1995 limited power of attorney, from STEED to Mr. Rattner.

Pursuant to the Management Agreement, and reflected in the New York State Department of Motor Vehicles' Abstract of Title Record, the title for the 2000 Ford bearing medallion # 1A16, with New York plate 1A16-A, lists Faithful Leasing, also located at 374 4th Avenue, Brooklyn, NY 11215 and one of Mr. Rattner's companies, as having title to the vehicle and STEED as the registrant. (Exhibit E of cross-motion). Vehicle and Traffic Law (VTL) § 388, "Negligence in use or operation of vehicle attributable to owner," states:

1. Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner . . .

3. As used in this section, "owner" shall be as defined in section one hundred twenty-eight of this chapter and their liability under this section shall be joint and several.

VTL § 128, "Owner," states:

A person, other than a lien holder, having the property in or title to a vehicle or vessel. The term includes a person entitled to the use and possession of a vehicle or vessel subject to a security interest in another person and also includes any lessee or bailee of a motor vehicle or vessel having the exclusive use thereof, under a lease or otherwise, for a period greater than thirty days. [ Emphasis added]

Therefore, Mr. Rattner's management company was an "owner," pursuant to VTL § 128. Defendant AT's counsel, Mr. Sands, admits, in ¶ 8 of his affirmation in support of the cross-motion, "AMIR, who was driving the vehicle on the date of the accident, was hired by Mr. Rattner's company." Accordingly, AMIR was the permissive operator of the subject taxi at the time of the accident, since he was hired by Mr. Rattner's management company, the vehicle's "owner."

Moreover, during the underlying action, and more than two years prior to trial, BOM, TAVERAS' counsel, served a notice to admit, dated March 16, 2004 [exhibit 1 of affirmation in opposition to cross-motion], upon Richard A. Reinstein, Esq., then defense counsel for STEED/AMIR. Mr. Reinstein did not respond within the requisite twenty days, as required by CPLR § 3123. Therefore, defense counsel for STEED/AMIR, retained by defendant AT, admitted that: STEED owned a 2000 Ford motor vehicle with New York license plate 1A16-A; and, AMIR had permissive use of the 2000 Ford motor vehicle, New York license plate 1A16-A, with the knowledge and consent of STEED. Defendant AT's incredible argument, more than nine years after the subject accident, that AMIR is not its insured and AMIR did not have permissive use of the vehicle clearly lacks candor and veracity. It further demonstrates that defendant AT can't handle the truth.

At no time prior to its making the instant cross-motion, dated June 13, 2011, did AT send AMIR a reservation of rights, attempt to disclaim coverage or refund the insurance policy premiums. Defendant AT's conduct ratified the insurance policy for the STEED/AMIR vehicle. Thus, AT is estopped from denying coverage to AMIR. Further, Richard A. Reinstein, Esq.'s failure to respond to BOM's March 16, 2004 notice to admit, had AT admitting that on the day of the accident, May 3, 2002, AMIR had permissive use of the defendant vehicle. Subsequently, AT retained Phillip J. Rizzuto, P.C. to represent AMIR in the April 2006 bifurcated trial. AT paid AMIR to fly from Pakistan to New York to testify during the liability portion of the trial. Defendant AT made an offer of settlement during the damages portion of the trial on behalf of its insured, AMIR, as stated on the record by defense counsel Thomas Murphy, Esq., of Mr. Rizzuto's firm. (A905-961; A988). AT defended AMIR throughout the underlying trial, post trial motions, judgment and appeal.

Defendant AT, even after learning in 2009 that STEED had died in 2000, continued to hold itself out as the insurer of AMIR. In its answer to the instant complaint, dated November 17, 2010, defendant AT admitted: AMIR was covered as an insured under the insurance policy that covered the vehicle owned by STEED [¶ 9 of complaint and corresponding ¶ 9 of answer]; the insurance policy remained in full force and effect at all times hereinafter mentioned including the date of the subject accident, May 3, 2002 [¶ 12 of complaint and corresponding ¶ 12 of answer]; pursuant to the terms of the insurance policy, AT undertook the defense of STEED and AMIR in the underlying action [¶ 54 of complaint and corresponding ¶ 54 of answer]; pursuant to the terms of the insurance policy, AT undertook the defense of STEED and AMIR and provided trial counsel to handle the defense of the underlying action [¶ 55 of complaint and corresponding ¶ 55 of answer]; pursuant to the terms of the insurance policy, AT undertook the defense of their insureds, STEED and AMIR, and employed the Law Offices of Phillip J. Rizzuto, Esq., with Thomas Murphy, Esq., appearing as trial counsel to handle said defense [¶ 56 of complaint and corresponding ¶ 56 of answer]; on or about March 22, 2006, plaintiff TAVERAS through his attorney made a settlement demand of defendant AT in the amount of $200,000 to resolve the claims against both sets of AT's insureds, STEED/ AMIR and PLATFORM/SINGH [¶ 74 of complaint and corresponding ¶ 74 of answer]; AT did not know that STEED died prior to the accident [¶ 84 of complaint and corresponding ¶ 84 of answer]; and, on or about the afternoon of April 26, 2006, defendants by their assigned attorney Thomas Murphy offered to tender all of their insurance coverage, $100,000, in settlement of the case against their insured/driver STEED/AMIR [¶ 126 of complaint and corresponding ¶ 126 of answer].

Moreover, in defendant AT's April 6, 2011 motion to disqualify BOM as plaintiff's counsel [denied in my June 27, 2011 short form order], prior defense counsel conceded, in ¶ 4 of his affidavit in support of motion [exhibit 2 of affirmation in opposition to cross-motion], that "Steed's vehicle was covered under an insurance policy issued by American Transit, with liability coverage in the amount of $100,000 per person and $300,000 per accident."

Then, in defendant AT's May 12, 2011 motion for my recusal [denied in my June 13, 2011 short form order], AT's present counsel, Mr. Sands, admitted "under penalties of perjury," in ¶ 7 of his affirmation in support of the motion [exhibit 3 of affirmation in opposition to cross-motion], that with respect to the May 3, 2002-accident, "One of those vehicles was owned by THURSTON STEED and operated by MUHAMMAD A. AMIR and was insured under a policy issued by AMERICAN TRANSIT." However, this is the very same Mr. Sands, who subsequently "affirms under penalties of perjury," on June 13, 2011, in ¶ 3 (b) of his affirmation in support of the instant cross-motion, that "on the date of the subject accident, there was no insurance policy in effect and no coverage for Thurston Steed or the driver of the subject vehicle, Plaintiff's assignor AMIR." The Court is perplexed why, one month later on June 13, 2011, Mr. Sands totally reversed his position and "affirms under penalties of perjury" that AMIR is not an AT insured, after affirming on May 12, 2011 that he was an AT insured. Mr. Sands must realize that his May 12, 2011 admission binds AT, his client, to the admission of insurance coverage for AMIR.

Moreover, AT's employees testified in their depositions in the instant bad faith action that AMIR has been AT's insured and AT had an independent obligation to protect the rights of AMIR, its insured. (Richard Carroll, EBT, p. 58, p. 125, pp. 129-130; pp. 149-150, p. 176, p. 248; Jay Ellenberg EBT, pp. 14-15, p. 67, p. 69, p. 75, p. 83, p. 96, p. 98, pp. 131-132, p. 169, pp. 188-190, p. 238; Rick Persaud EBT, p. 32, p. 36, pp. 38-39, pp. 41-42, p. 55, p. 63, p. 67, p. 71, p. 75, pp. 84-85, p. 89, p. 95, p. 110, p. 123).

Clearly, at all times prior to the making of defendant AT's instant cross-motion AT acted as AMIR's insurer and continued to admit that AMIR was AT's insured on the May 2, 2002 accident day. Moreover, AMIR relied on AT's representation to his detriment, surrendering his ability to control his defense. Thus, it is preposterous to suggest that more than nine years later, despite AT's own admissions, its acceptance of insurance premiums and failure to timely disclaim coverage, that AMIR is not AT's insured. For the Court to hold otherwise would be a suspension of reality.

Therefore, defendant AT, pursuant to the doctrine of equitable estoppel, is precluded or estopped from denying that a policy of insurance does not exist for the STEED/AMIR vehicle or that AMIR is not AT's insured. "Where facts cry out for relief the court should do what it can, and equitable estoppel, where appropriate, is then one of its most useful tools." ( Sassower v Barone, 85 AD2d 81, 88 [2d Dept 1982]). The Court of Appeals, in Shondel J. v Mark D. ( 7 NY3d 320), instructed, at 326:

The purpose of equitable estoppel is to preclude a person from asserting a right after having led another to form the reasonable belief that the right would not be asserted, and loss or prejudice to the other would result if the right were asserted. The law imposes the doctrine as a matter of fairness. Its purpose is to prevent someone from enforcing rights that would work injustice on the person against whom enforcement is sought.

In Nassau Trust Co. v Montrose Concrete Products, Corp. ( 56 NY2d 175), the Court held, at 184:

An estoppel "rests upon the word or deed of one party upon which another rightfully relies and so relying changes his position to his injury'" ( Triple Cities Constr. Co. v Maryland Cas. Co., 4 NY2d 443, 448 [1988]; Lynn v Lynn, 302 NY 193, 205 [1951]; Metropolitan Life Ins. Co. v Childs Co., 230 NY 285, 292 [1921]). It is imposed by law in the interest of fairness to prevent the enforcement of rights which would work fraud or injustice upon the person against whom enforcement is sought and who, in justifiable reliance upon the opposing party's words or conduct, has been misled into acting upon the belief that such enforcement would not be sought ( White v La Due Fitch, 303 NY 122, 128 [1951).

Thus, "[an] estoppel defense may . . . be invoked where the failure to promptly assert a right has given rise to circumstances rendering it inequitable to permit the exercise of that right." ( John Robert P. v Vito C. , 23 AD3d 659 , 661[2d Dept 2005]). ( See First Union Nat. Bank v Tecklenburg , 2 AD3d 575 , 577 [2d Dept 2003]; Charles v Charles, 296 AD2d 547 548-549 [2d Dept 2002]; Ettore I. v Angela D., 127 AD2d 6, 12 [2d Dept 1987]).

Equitable estoppel generally cannot create insurance coverage when it doesn't exist under the policy. Despite STEED's death more than two years prior to the accident, there is an exception to this rule that applies to AMIR, when, as in the instant action, "an insurer, though in fact not obligated to provide coverage, without asserting policy defenses or reserving the privilege to do so, undertakes the defense of the case, in reliance upon which the insured suffers the detriment of losing the right to control its own defense." ( Albert J. Schiff Associates, Inc. v Flack, 51 NY2d 692, 699). Stated another way, equitable estoppel precludes an insurer from asserting lack of coverage when the insurer "undertook the defense of the underlying action . . . without reserving their right to assert noncoverage, and defendant [insured] as a result lost control of its own defense." ( General Acc. Ins. Co. of America v Meropolitan Steel Industries, Inc., 9 AD3d 254 [1d Dept 2004). ( See PJI 4:79).

Thus, an insurer's "right to disclaim coverage based on a policy exclusion can be defeated only be estoppel." ( New York University v Continental Ins. Co., 87 NY2d 308, 323). AT has been equitably estopped in prior cases from disclaiming coverage. For example, in American Transit Ins. Co. v Mendon Leasing Corp. ( 241 AD2d 436, 437 [1d Dept 1997]), the Court equitably estopped AT's denial of coverage because AT "assumed defendant Mendon's defense for four years, without reserving the right to disclaim coverage." In American Transit Ins. Co. v Wilfred ( 296 AD2d 360 [1d Dept 2002]), citing American Transit Ins. Co. v Mendon, the Court instructed, at 361:

We would, in any event, have found that American Transit was obligated to defend and indemnify McMaroro and Wilfred, even though it claims its coverage did not begin until after the accident occurred, because of its representation of the insureds in the two underlying personal injury actions for more than two years before disclaiming coverage, as well as the resulting prejudice to the insureds were plaintiff allowed to withdraw.

"As a general rule, where an insurer defends an action on behalf of its insured with knowledge of a defense to the coverage, it is thereafter estopped from asserting that the policy does not cover the claim." ( Corcoran v Abbott Sommers, Inc., 143 AD2d 874, 876 [2d Dept 1988]). In Indemnity Ins. Co. of N. Am. v Charter Oak Ins. Co. ( 235 AD2d 521, 522 [2d Dept 1997]), the insurer was estopped from denying coverage on the basis that the accident occurred outside of the policy period because the insurer assumed the defense of the action for three years without reserving its right to disclaim coverage. In National Indem. Co. v Ryder Truck Rental, Inc. ( 230 AD2d 720, 721 [2d Dept 1996]), the estopped argument was allowed against an insurer who defended the insured for three years before disclaiming coverage on the grounds that the vehicle was not covered. In another case, the insurer was estopped from disclaiming coverage because the insurer provided the insured a defense without any reservation of rights for two years and then sought to disclaim coverage on the eve of trial because it alleged that liability occurred outside the policy period. ( Hartford Ins. Group v Mello, 81 AD2d 577, 578 [2d Dept 1981]).

Moreover, "[i]f an insurer assumes the defense of an action and controls its defense on behalf of an insured with knowledge of facts constituting a defense to the coverage of the policy without reserving its right to deny coverage, the insurer is estopped from denying coverage at a later time, even if mistaken on the requirement of coverage."

( Utica Mut. Ins. Co. v 215 West 91st Street Corp., 293 AD2d 421, 422-423 [2d Dept 2001]). ( See Daimler Chrysler Ins. Co. v Zurich Ins. Co. , 72 AD3d 730 , 732 [2d Dept 2010]; Fireman's Fund Ins. Co. v Zurich American Ins. Co. , 37 AD3d 521 [2d Dept 2007]; Wise v McCalla , 24 AD3d 435 , 437 [2d Dept 2005]). An insurer was equitably estopped when it undertook the defense of a medical malpractice action for more than eleven years, and attempted to disclaim upon the eve of trial, despite having "notice of facts which would have revealed that it did not cover the claim against the hospital . . . when the bill of particulars in the underlying malpractice action was served." ( Brooklyn Hosp. Center v Centennial Ins. Co. 258 AD2d 491, 492 [2d Dept 1999]). ( See State Farm Mut. Auto Ins. v Vitello, 289 AD2d 393 [2d Dept 2001]).

Therefore, based upon applicable case law and AT's own admissions, AT is estopped from denying that AMIR is its insured. Defendant AT has absolutely no good faith basis to deny AMIR is its insured. It is perfectly clear that AT represented and defended AMIR for nine years. Even after becoming aware, in 2009, of STEED's death, AT did nothing to disclaim coverage and on a number of occasions admitted that AMIR is its insured. Further, it is disingenuous for AT to claim that it did not know STEED was dead while it actively represented him and assigned defense counsel to him. This is yet another example of AT's pattern of gross disregard for the interests of its insureds. Obviously, AT would have learned of STEED's death if AT fulfilled its obligation to communicate with its insureds at any point during the pendency of the underlying action.

Further, defendant AT, in its instant cross-motion, in a deliberate attempt to deceive the Court and harm its insured, AMIR, takes the absurd position that only the $100,000 PLATFORM/SINGH policy existed and was available to TAVERAS' claim. This is an outrageous mischaracterization of the actual facts and another failure to handle the truth. Defendant AT's counsel manufactured for the instant cross-motion the fiction that AT's $100,000 settlement offer during the damages portion of the underlying trial was actually an offer of the entire coverage available. This is false and cannot be countenanced by the Court. The actual record of the underlying trial makes it clear that at no time during the trial did AT ever disclaim coverage for AMIR or limit their settlement discussion to only the $100,000 PLATFORM/SINGH policy. Both AT's Vice President and Treasurer Richard Carroll and AT's Claims Examiner Rick Persaud, in their sworn depositions, admit that the $100,000 offer to settle the underlying action, which Mr. Sands, in ¶ 's 3 (d) and 26 of his affirmation in support of cross-motion, asserts was only the $100,000 PLATFORM/ SINGH policy, was in reality an offer of $50,000 each from the STEED/AMIR and the PLATFORM/SINGH policies. (Rick Persaud EBT, pp. 116-117; Richard Carroll EBT, p. 162). Accordingly, the $100,000 offered was not the total amount of available coverage. AT offered half of each of the two available policies. This proved to be inadequate, in light of AT's own evaluation of the risks to its insureds and the economic damages presented in excess of $1,500,000 on behalf of TAVERAS. Therefore, in the absence of triable issues of fact, the Court denies defendant AT's cross-motion for summary judgment and dismissal of plaintiff's complaint.

Conclusion

Accordingly, it is

ORDERED, that the instant motion by plaintiff, JESUS TAVERAS, AS ASSIGNEE OF THE RIGHTS OF MUHAMMAD A. AMIR, for summary judgment, pursuant to CPLR Rule 3212, is granted to the extent of awarding him $2,250,000 plus interest from April 14, 2006; and it is further

ORDERED, that the instant cross-motion by defendant, AMERICAN TRANSIT INSURANCE COMPANY, pursuant to CPLR Rule 3212, for summary judgment and dismissal of plaintiff 's complaint, is denied in its entirety.

This constitutes the Decision and Order of the Court.