Some background: the plaintiff in Cornell alleged that throughout her occupancy of a co-op apartment, the co-op building's "basement was in a wet, damp, musty condition"; that the radiator in her apartment's living room "leaked on numerous occasions" and "continued to leak and also released steam into the Apartment" despite the co-op’s attempts at repair; that in July 2003 she first noticed and notified the co-op that "there was mold growing in the [apartment's] bathroom," but the co-op "ignored" this condition; and that beginning in the first week of October, 2003, the landlord and/or its contractor performed demolition and/or construction work in the basement of the co-op building, permitting noxious dust, dirt, mold and debris to be released, which infiltrated her first-floor apartment. What were her injuries? The Cornell plaintiff claimed that "[i]mmediately after" the landlord and/or its contractor performed the work in the basement, she became dizzy, disoriented, covered with rashes, unable to breathe, light-headed, congested, experienced tightness in her chest, had severe headaches, had shortness of breath, had a metallic taste in her mouth, and experienced other physical symptoms.
At the Frye hearing (brought on by defense motion), the defendants used an immunologist/epidemiologist who assessed plaintiff’s claim that "a significant portion of her physical and psychological problems is related to adverse reactions stemming from exposures to molds," and, after review of her medical records and the relevant science, opined with reasonable medical certainty that there was no relationship between the medical problems experienced by Ms. Cornell and exposures to molds (i.e., no specific causation). The defendants’ expert also opined that a causal relationship between indoor residential mold and Ms. Cornell’s injuries was not generally accepted in the medical community (i.e., no general causation).
Plaintiff’s medical expert opined to the contrary, and pointed to numerous studies that supported an association between indoor residential mold and illness. But as the Court of Appeals explained, “studies that show an association between a damp and moldy indoor environment and the medical conditions that [plaintiff's medical expert] attributes to Cornell's exposure to mold (bronchial-asthma, rhino-sinusitis, hypersensitivity reactions and irritation reactions of the skin and mucous membranes) do not establish that the relevant scientific community generally accepts that molds cause these adverse health effects.” (The causation/association battle line was explained in detail in our January 16 entry.)
The Court of Appeals could have ended its decision there (since without proof of general causation, plaintiff must be turned away), but it went further: even assuming that the plaintiff in Cornell demonstrated general causation, she did not show the necessary specific causation. (For a theory of causation to survive under Frye, both prongs of causation – general and specific – must be proved.) The Court of Appeals decision alludes to the fact plaintiff failed to show specific causation because she did not set forth “exposure to a toxin, that the toxin is capable of causing the particular illness and that plaintiff was exposed to sufficient levels of the toxin to cause the illness (specific causation)." The Cornell plaintiff’s expert had tried to prove specific causation by differential diagnosis. The Court of Appeals dismissed that attempt: “Differential diagnosis, of course, 'assumes general causation has been proven'". This last pronouncement is of incredible importance to the defense of toxic tort claims, as the number of clinicians who use differential diagnosis to support an opinion on causation is legion.
This Firm already has had opportunity to use the Cornell decision at the trial court level to our client’s advantage (see Benton v 80 Cranberry Street, in “Publications” above). Absent a major change in the science of mold illness, there is every reason to believe the next few years will see many more summary judgment decisions in favor of land owners and against mold plaintiffs.
In the case of a general contractor ("GC")insured, the procedure runs generally as follows: a GC that intends to develop land purchases a general liability insurance policy from an insurance carrier. As part of the insurance binder, the GC is obligated to meet with an attorney to review the subcontract agreements used by the GC, and to review the safety of its operations. (The carrier if it wishes can charge the GC a sum in addition to the premium to cover the cost of the meeting.) The meeting is then held between the attorney and the GC, during which subcontracts and insurance certificates are reviewed, and safety measures on the construction site are looked at (particularly those that might trigger New York State Labor Law liability). The attorney then makes suggestions to improve the GC's paperwork and its safety measures.
Rather than rewriting the insured's subcontracts entirely (an expensive, and likely vain pursuit), the attorney will want to leverage the time spent by focusing on three areas during the meeting with the insured: (1) the quality of the indemnity language in the insured's subcontracts; (2) the accuracy and proper wording of any insurance certificates from the subcontractors; and (3) the responsibility for safety on the construction site. It is these three areas that will pay the most dividends in the event of a loss.
In our experience conducting risk management meetings, not more than half of the contractor insureds we meet have both a valid indemnification provision in their favor, and a properly drafted insurance certificate from their subcontractors. Following a well run risk management meeting, however, the insured's subcontracts will have a valid and unambiguous indemnification clause running in favor of the insured, the insured's subcontractors will have made the insured an additional insured on the subcontractor's liability insurance policy, the insured will have received a tutorial on the strict safety rules applicable to owners and contractors on a construction site, and the carrier's adjustment of a future claim will be a matter of passing the defense and indemnity of the insured to the subcontractor and its insurance carrier.
So a proper risk management meeting will benefit both carrier and insured. For these reasons, all general liability insurance carriers should consider utilizing risk management meetings. Four points, however, should be kept in mind: (1) the insured is not always receptive to such meetings, even if the insurance binder requires it. Consequently, you will find that the meeting often takes place long after the insured starts work on the site; (2) you are counting on the insured taking the advice of the attorney. There is little recourse, however, if the insured does not do so (other than perhaps a non-renewal of the policy); (3) it is not a requirement that an attorney conduct these meetings -- an experienced adjuster can be just as effective; and (4) the average time to prepare for and conduct the meeting is six hours. The amount charged to the insured, if any, should reflect that anticipated cost.
Spoliation considerations arise often in premises liability and toxic tort cases. For example, if a plaintiff disposes of personal property that was damaged from a water leak, and the defendant has no other means of assessing the damage to that property, the court can dismiss the plaintiff's property damage claims. Similarly, if a plaintiff renovates or remediates his allegedly toxic apartment prior to giving the defendant an opportunity to test whether that apartment was truly toxic, then the court can dismiss plaintiff's claims relating to the toxic nature of the apartment. See, e.g., Theodoli v.170 E. 77th 1 LLC, 40 Misc. 3d 135(A)(N.Y. App. Term 2013).
In our experience, it is not uncommon that a plaintiff in a case we are defending disposed of her "moldy" clothes, or fixed her water-damaged walls, prior to bringing the lawsuit; but such actions leave the plaintiff open to spoliation penalties, possibly including the dismissal of the entire case.
A database search of reported New York State case law reveals 247 decisions from 2000 through 2006 that mentioned spoliation. In the next seven year period (2007 through 2013), the number of such decisions was 555. What accounts for the 225% increase in spoliation decisions? There are several reasons.
A motion for spoliation penalties is straightforward, can be made anytime -- pre-trial, in limine, or during trial, and has virtually no downside and significant potential upside. Further, and perhaps most relevant, courts in the First Department appear to be imposing stronger spoliation penalties more often than they have in the past.
Theodoli v.170 E. 77th 1 LLC, a case handled by this Firm, is illustrative of the trend toward stronger spoliation penalties. There, a tenant's mold and toxic tort claim was dismissed because he renovated his apartment prior to the defendants' environmental consultant gaining access to test the apartment. On motion, the environmental consultant testified that once an apartment is "cleaned", it is no longer possible to determine whether the apartment was previously toxic. So, because the tenant had destroyed crucial evidence and prevented the defendant from testing the apartment in its allegedly toxic state, his mold and toxic tort claim was dismissed. That decision came down in the Fall of 2013.
The start of 2014 saw the continuation of the judicial trend toward strong spoliation penalties. On January 9, 2014, the First Department came down with a spoliation decision in Malouf v. Equinox Holdings, 2014 N.Y. App. Div. LEXIS 163. Plaintiff Malouf injured herself on a Life Fitness treadmill at an Equinox gym. She sued the Equinox gym, which in turn sued the maker of the treadmill. Equinox, however, had disposed of the subject treadmill prior to the lawsuit; so no party was able to examine it. The court punished the Equinox for its spoliation by dismissing the Equinox's claim against the maker of the treadmill; the court also precluded the Equinox from arguing at trial that the treadmill in question worked properly -- a punishment which could be the functional equivalent of summary judgment for the plaintiff.
The trend in spoliation case law offers two simple lessons, one proactive and the other prophylactic. First, courts are more willing to entertain spoliation motions and less reluctant to impose strong spoliation penalties; therefore, counsel should be constantly mindful of the potential for making a spoliation motion, and should pursue diligently the discovery necessary to secure strong spoliation penalties against the adversary. Second, counsel should from the beginning advise the client on the need to avoid spoliation penalties, by preserving damaged property and by maintaining the status of any object, item, or environment that is crucial to the lawsuit.
By definition, condominium boards are not landowners. So if a passerby slips and falls on a sidewalk adjacent to a condominium building, who is the adjacent landowner for purposes of liability?
This Firm has seen plaintiff counsel sue the condominium itself, which we believe eventually results in a dismissal because the condominium is not a landowner and the NYC Administrative Code provision is interpreted strictly. So that leaves one other possibility on whom to impose liability for a sidewalk defect -- the owner of the particular condominium unit closest to the site of the trip and fall (occupied most likely by a ground floor commercial tenant of the unit owner).
In light of uncertain litigation with these quirky facts, ground floor condominium unit owners who rent out their unit should obligate the tenant to maintain and repair the sidewalk adjacent to the unit, and to defend and indemnify the unit owner (and the condominium board of managers) in the event of a lawsuit. We note that while many form leases obligate tenant to keep the adjacent sidewalk clean, they leave unclear the responsibility for sidewalk maintenance and repair.
Of course, the condominium unit owner should also insist on proof that the tenant has adequate liability insurance and has named the unit owner (and, of course, the board of managers) as additional insureds on the insurance policy.
Sounds great, right? Except that sometimes it’s the shareholder-tenant who sues the Co-op (e.g., on a claim that the Co-op has breached the warranty of habitability), and by operation of the Real Property Law it is the shareholder-tenant who will be owed the reasonable attorneys fees if he or she prevails. These shareholder initiated lawsuits usually are plenary actions in Supreme Court, take years to litigate, and the attorneys fees in question can be substantial. Our Firm's experience is that most Co-ops are willing to take that risk; thus, the boilerplate legal fees provision remains, well, boilerplate in most proprietary leases.
We believe however that serious consideration should be given to removal or modification of the legal fees provision in proprietary leases. Here is why. Assume a shareholder-tenant’s apartment is flooded due to a burst pipe from inside a wall. For whatever reason (inattentive Board, inexperienced managing agent), the apartment is not repaired for several months, and the shareholder-tenant relocates to a hotel. Disillusioned with the slow pace of repair, the shareholder-tenant repairs the apartment herself and sues the Co-op in Supreme Court for out-of-pocket expenses (the hotel bills, dry cleaning cost), the cost of repair (putting up new walls and ceiling), the damage to her personal property (furniture, artwork), a refund of maintenance payments for the period in question, and attorneys fees under the proprietary lease. The shareholder-tenant's lawsuit is based, in part, on the allegation that the Co-op breached the proprietary lease. If the shareholder-tenant prevails on her claim, she is likely entitled to attorneys fees, and the amount will be far more than the typical amount generated in the usual summary proceeding. That is because a fully litigated plenary action almost always generates significantly more legal fees than a summary proceeding generates. Worse for the Co-op, the award of attorneys fees to the shareholder-tenant (and for that matter, any award refunding maintenance payments) is almost never covered by the Co-op’s general liability insurance policy. Thus, a Co-op that has the boilerplate legal fees provisions in its proprietary lease and loses such a case will, (a) have to pay with out-of-pocket, non-insurance dollars, and (b) have to explain to its shareholders the reason for the hit to the Co-op's finances.
With no attorneys fees provision in the proprietary lease, the Co-op never faces this scenario; but must a Co-op forgo entirely the right to collect attorneys fees in all cases involving shareholder-tenants? Maybe not. Consider this: a proprietary lease that allows recovery of legal fees but only up to a specified dollar amount, say $15,000.00. In the majority of non-payment proceedings against shareholder-tenants, the Co-op will in most instances be made whole, as the legal fees generated will not exceed the specified dollar amount (i.e., $15,000.00). On the other hand, the maximum exposure the Co-op would face in Supreme Court if a shareholder-tenant prevailed would similarly be limited to $15,000.00, and most likely result in a “savings” of tens of thousands of dollars. In this light, a modified attorneys fees provision can be considered an additional insurance policy for the Co-op. We are unaware of any reported case addressing the validity of such a modified attorneys fees provision, but there is no good reason why a well-drafted limited attorneys fees provision wouldn’t be enforced in accordance with ordinary contract principles.
Co-ops are landlords, so by law they are deemed to have warranted to tenants that the premises are habitable. An unreasonably loud building obviously can make an apartment uninhabitable. But what if the ‘noise’ complained of is caused by another shareholder-tenant? Further, what if the noise is sporadic, or difficult to record or measure objectively? Such cases pose nettlesome problems for co-ops, managing agents, and their carriers, because money damages are often not the primary goal of the plaintiff. How do you resolve a claim where the plaintiff wants peace and quiet, the defendant-tenant argues that the noise is the natural by-product of a happy, busy family life, and the Co-op cannot control the noise or the plaintiff’s reaction to it?
In our practice, we have seen or suggested several, non-orthodox settlement possibilities: (1) The Co-op can pass and enforce more stringent carpeting and padding rules; (2) Subject to cost, the Co-op can invest in soundproofing materials at the ceiling, floor, or wall interfaces; (3) The parties can explore an apartment swap, or a buyout/sale; (4) The Co-op can monitor noise (via a property manager or superintendent) and assess reasonable fines based on violations of a well-defined noise policy; and (5) If warranted and authorized under the proprietary lease, the Co-op can attempt a dispossess proceeding based on the offending tenant creating a nuisance. See, e.g., Domen v. Aranovich, 1 N.Y.3d 117 (2003). Failing resolution, a strong summary judgment motion on behalf of the Co-op is imperative, keeping in mind that as recently as a few days ago the First Department kept a Co-op in a lawsuit while dismissing the offending, noisy tenant from the case! Brown v Blennerhasset Corp., 2014 N.Y. App. Div. LEXIS 188, 1-3 (1st Dept. Jan. 14, 2014).