Motion-Secondary: Rosenbaum, Rosenfeld & Sonnenblick, Llp, R&R Properties Llc, Computerized Diagnostic Scanning Associates, P.C. v. Excalibur Group Na, Llc, A Superior Service And Repair Co. Inc., Home Systems Engineering, Inc., Philips Healthcare, Philips Medical Systems North America Company, Philips Electronics North America Corporation, Philips Medical Systems North America, Inc., Philips Healthcare Informatics, Inc., Estate Of Merle H. Eisenstein

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                                FILED:         NEW     YORK       COUNTY        CLERK        05/30/2014                                             INDEX    NO.   150083/2014
   NYSCEF     DOC.   NO.   63                                                                                 RECEIVED      NYSCEF:     05/30/2014

                  SUPREME COURT OF THE STATE OF NEW YORK
                  COUNTY OF NEW YORK
                  ROSENBAUM, ROSENFELD & SONNENBLICK, LLP
                  R&R PROPERTIES LLC AND COMPUTERIZED                                    Index No.: 150083/2014
                  DIAGNOSTIC SCANNING ASSOCIATES, P.C.

                                                      Plaintiff,

                           vs.

                  EXCALIBUR GROUP NA, LLC, A SUPERIOR SERVICE
                  AND REPAIR CO. INC., HOME SYSTEMS
                  ENGINEERING, INC., PHILIPS HEALTHCARE, PHILIPS
                  MEDICAL SYSTEMS NORTH AMERICA COMPANY,
                  PHILIPS ELECTRONICS NORTH AMERICA
                  CORPORATION, PHILIPS MEDICAL SYSTEMS NORTH
                  AMERICA, INC., PHILIPS HEALTHCARE
                  INFORMATICS, INC. and ESTATE OF MERLE H.
                  EISENSTEIN

                                                      Defendants.




                        PLAINTIFFS’ MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS’
                         PHILIPS HEALTHCARE, PHILIPS MEDICAL SYSTEMS NORTH AMERICA
                   COMPANY, PHILIPS ELECTRONICS NORTH AMERICA CORPORATION, PHILIPS
                           MEDICAL SYSTEMS NORTH AMERICA, INC., PHILIPS HEALTHCARE
                                             INFORMATICS (COLLECTIVELY “PHILIPS”)




                                                                        LIPSIUS-BENHAIM LAW, LLP
                                                                        Attorneys for Plaintiff
                                                                        80-02 Kew Gardens Road, Suite 1030
                                                                        Kew Gardens, New York 11415
                                                                        212-981-8440

                  Of Counsel

                      David BenHaim
                      Cheryl D. Lipsius
                                                            TABLE OF CONTENTS

                  PRELIMINARY STATEMENT .................................................................................................... 1
                  ARGUMENT .................................................................................................................................. 2
                  CONCLUSION ............................................................................................................................... 4




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                           Plaintiffs   Rosenbaum,       Rosenfeld      &   Sonneblick      LLP,    R&R     Properties     LLC     and

                  Computerized      Diagnostic    Scanning     Associates,    P.C.  respectfully    submit   this  memorandum       of

                  law in opposition to Philips motion to consolidate

                                                       PRELIMINARY STATEMENT

                           Plaintiffs   R&R      THIRD       PROPERTIES,          LLC,     ROSENBAUM,            ROSENFELD           &

                  SONNENBLICK, LLP and COMPUTERIZED DIAGNOSTIC SCANNING ASSOCIATES, PC

                  (collectively,   "Plaintiffs")   commenced      Action    No.  1  in April   2013   against   Greater   New    York

                  Mutual    Insurance    Company      ("GNY"),     Federal   Insurance    Company      ("Federal").   Travelers    and

                  The   Hartford    Steam    Boiler   Inspection    and   Insurance    Company       (the  "Insurer   Defendants").

                  (April 15, 2014 Affirmation of Daniel P. Mevorach, Esq. ("Mevorach Aff."), Exh. "C"                        annexed

                  thereto).   Plaintiffs seek recovery from the        Insurer Defendants for alleged property damage and

                  lost business income resulting from April 2001 water damage at the business premises located at

                  1421 Third Avenue, New York, New York (the "Premises").                    (Mevorach Aff., Exh. "C" thereto).

                  Plaintiffs  allege   breach   of  contract   against   the  Insurer   Defendants     i.e. breach   of  each  of  the

                  respective    insurance    contracts..    (Mevorach      Aff.,  Exh.    "C"   thereto).     Plaintiffs   reached    a

                  settlement    with  Greater   New    York    Mutual    Insurance    Company      ("GNY)     and  discontinued     all

                  claims against GNY in Action No.1 by executing and filing a stipulation of discontinuance with

                  prejudice   which    was   filed with   the  court  on  December      3, 2013.   (David    D.  Hess   Affirmation,

                  Exhibit “A” annexed thereto)

                           Thereafter, in January 2014, Plaintiffs commenced Action No. 2, suing Philips and other

                  entities  and   alleging,   among     other   things,  that   their  negligence    caused    the  damage     to  the

                  premises    and  asserting   breach    of contract   claims   against   Philips   related  to Plaintiffs'  lease  of

                  allegedly damaged equipment from Phillips. (Mevorach Aff., Exh. "A" thereto).

                           Now,    the Phillips   defendants    move    this Court   to seek   consolidation    of  the two   matters




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                  despite the fact that New York law clearly does not allow it in circumstances such as here where

                  one action is a direct action and the other action deals with insurance coverage matters and the

                  complicated issues such actions entail.

                                                                   ARGUMENT

                           CPLR § 603 provides that "to avoid prejudice the court may order a severance of claims,

                  or may order a separate trial of any claim, or of any separate issue."               The Court of Appeals has

                  held that, as a matter of law, an action against a defendant insurance company wherein coverage

                  is sought   must   be  served   from   an  ordinary    negligence    action  due   to the  extreme    prejudice   an

                  insurance company would be subjected to if an insurance coverage claim were to be tried before

                  the same jury as the negligence claim.          Kelly v. Yannotti, 4 N_Y.2d 603, 607, 152 N.E.2d 69, 72,

                  176 N.Y.S.2d 637, 641 (1958). As one commentator noted, under Kelly, an "insurer is entitled to

                  a severance of the [insurance] claim on demand."              D. Siegel, New York Practice § 160, at p. 270

                  (4th  ed.  2005).     Thus,   granting   a  motion    to  consolidate    actions,  where    one   contains   claims

                  subject to severance as a matter of law upon the coverage insurer's request, is clearly not within

                  the Court's or any parties' interest. The Court of Appeals mandate in Kelly has been consistently

                  and  strictly followed    by the   other  courts   of this state.  See  Burlington    Ins. Co.   v. Guma    Constr.

                  Corp.,   66  A.D.3d    622,  625,  887   N.Y.S.2d    177,  180   (2d  Dep't  2009);   TransAmerica      Ins.  Co.  v.

                  Tolls   Inn,  Inc.,  129   A.D.2d    512,   514   N.Y.S.2d    351   (1st  Dep't   1987)    (reversing   trial  court

                  decision to consolidate underlying property damage case with insurance coverage action, noting

                  it was an improvident exercise of discretion notwithstanding common questions of fact); D'Apice

                  v. Tishman    919   Corp.,   43  A.D2d    925,  925,  352   N.Y.S.2d    472,  473   (1st Dep't   1974)   (reversing

                  trial court's denial of severance motion and holding that "specific knowledge of the dispute over

                  insurance coverage would of necessity temper the thinking of the jury and unduly influence their

                  verdict.  The   prejudice   inherent   in this situation   should   be  avoided.");   Christensen    v.  Weeks,   15




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                  A.D.3d 330, 331-32,       790 N.Y.S.2d 153, 154-55          (2d Dep't 2005) (reversing denial of motion to

                  sever and holding that      "even where common facts exist, it is prejudicial to insurers to have the

                  issue  of  insurance   coverage    tried  before   the  jury  that considers    the  ultimate   liability claims");

                  TilconInc. v. Transcontinental Ins. Co., 261 A.D.2d 608, 690 N.Y.S.2d 724 (2d Dep't 1999).                         In

                  Kelly, the Court noted "[i]t is difficult for one to suppose that the ... insurance company ... would

                  not  be  subjected    to some    prejudice   if both   the  main   and   [coverage]    actions   were   to be  tried

                  before the same jury." 4 N.Y.2d at 607, 152 N.E.2d at 72, 176 N.Y.S.2d at 642. The Court stated,

                  that, when    a  jury  knows    from   a trial's start that  insurance    is involved,    one  example    of  likely

                  prejudice is that the "[t]he jury might be more disposed than otherwise ... to resolve the question

                  of  insurance    coverage    against   the  insurance   company      ..." Id. at  607,  152   N.E.2d    at 72,  176

                  N.Y.S.2d    at 641.   The  principle   behind   Kelly,  which    involved   third-party (liability)   coverage,    is

                  applicable here. As one court held, the "injection of the issue of insurance in [a] negligence case

                  ...is  inherently   prejudicial   and  should    be  avoided."   Krieger    v. Ins. Co.   of N.  Am.,   66  A.D.2d

                  1025, 1026, 411 N.Y.S.2d 730, 731 (4th Dep't 1978).

                           Plaintiffs  dispute    that the   cases  involve    the  same   underlying     facts.  (Mevorach     Aff.).

                  Plaintiffs' claims against the non-insurer defendants generally focus on whether they negligently

                  caused    damage    to  Plaintiffs'  business    and   whether    there  was    a breach    of  contract   between

                  defendants    and   plaintiffs.  In contrast,   Plaintiffs'  claims   against  the  insurers   in  the April   2013

                  action turns on specific insurance coverage issues. While there likely would be some overlapping

                  witnesses, the claims are not coterminous to any extent that would trump the principles espoused

                  in Kelly.

                           In  order  to  avoid   additional   expense    and   duplication,   Plaintiffs   do  not  object   to joint

                  discovery    and  joint  motion    practice  in  the  two   actions  but  object   to  consolidation    of  the two

                  actions   or joint  trial of Plaintiffs’  negligence    and   breach   of contract   claims   against  Philips   and




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                  the  other  defendants    in  the  second   action   with  that  of  the  first action  for  insurance   coverage.

                  Consolidation or a joint trial of Plaintiffs' negligence          and  contractual    claims   against Philips, et.

                  al., together with the coverage claims asserted by Plaintiffs' against the Insurer Defendants would

                  necessarily indicate from the start that insurance was involved with the case.

                           In a trial where the jury is both advised of the existence of insurance and called upon to

                  determine a defendant's liability for alleged damages, the jury would also be asked to determine

                  the   insurance     defendant's     liability  with    respect    to   insurance     coverage.       Under     these

                  circumstances, the prejudice to the insurers must be avoided.

                                                                  CONCLUSION

                           For the reasons set forth herein, it is respectfully requested that the motion to consolidate

                  or for a joint trial be denied,

                  Dated: New York, New York
                           May 30, 2014



                                                                        LIPSIUS-BENHAIM LAW, LLP
                                                                        Attorneys for Plaintiffs



                                                                        By:   _______________________________
                                                                                 Cheryl D. Lipsius, Esq.
                                                                        80-02 Kew Gardens Road, Suite 1030
                                                                        Kew Gardens, New York 11415
                                                                        212-981-8440




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                  INDEX NO. 150083/2014
                  SUPREME COURT OF THE STATE OF NEW YORK
                  COUNTY OF NEW YORK
                  ------------------------------------------------------------------X
                  ROSENBAUM, ROSENFELD & SONNENBLICK, LLP
                  R&R PROPERTIES LLC AND COMPUTERIZED
                  DIAGNOSTIC SCANNING ASSOCIATES, P.C.

                                                      Plaintiff,

                           vs.

                  EXCALIBUR GROUP NA, LLC, A SUPERIOR SERVICE AND REPAIR CO. INC., HOME SYSTEMS
                  ENGINEERING, INC., PHILIPS HEALTHCARE, PHILIPS MEDICAL SYSTEMS NORTH AMERICA
                  COMPANY, PHILIPS ELECTRONICS NORTH AMERICA CORPORATION, PHILIPS MEDICAL
                  SYSTEMS NORTH AMERICA, INC., PHILIPS HEALTHCARE INFORMATICS, INC. and ESTATE OF
                  MERLE H. EISENSTEIN

                                                      Defendants.
                  ------------------------------------------------------------------X



                                                          LIPSIUS-BENHAIM LAW, LLP
                                                              Attorneys for Plaintiffs
                                                     80-02 Kew Gardens Road, Suite 1030
                                                          Kew Gardens, New York 11415
                                                                    212-981-8440




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