author: Pigott, J. Chief Judge Lippman (dissenting in part). Ciparick, J. (dissenting).

text:
    [946 NE2d 726, 921 NYS2d 628]
    The People of the State of New York, Appellant, v Freddy Rodriguez, Respondent.
    Argued February 10, 2011;
    decided March 24, 2011

      POINTS OF COUNSEL

      Robert T. Johnson, District Attorney, Bronx (Stanley R. Kaplan and Joseph N. Ferdenzi of counsel), for appellant.
    The majority opinion of the Appellate Division, First Department, erroneously required a “choice-of-evils” instruction pursuant to Penal Law § 35.05 (2), where defendant failed to offer evidence that he had engaged in any conduct that could constitute a “lesser evil” warranting justification of his conduct. (People v Craig, 78 NY2d 616; People v O’Neal, 172 AD2d 217; People v Cox, 92 NY2d 1002; People v Butts, 72 NY2d 746; People v Scarborough, 49 NY2d 364; People v Maher, 79 NY2d 978; People v Newman, 3 Misc 3d 361, 26 AD3d 589; People v Padgett, 60 NY2d 142; People v Huntley, 87 AD2d 488, 59 NY2d 868; People v Zona, 14 NY3d 488.)

      Yalkut & Israel, Bronx (Arlen S. Yalkut of counsel), for respondent.
    The Appellate Division’s majority opinion should be affirmed. The trial court’s failure to charge justification under Penal Law § 35.05 deprived defendant of a fair trial. The jury was prevented from considering this defense which would have constituted a complete defense to the major felony counts. (People v Newman, 3 Misc 3d 361; People v Rivera, 138 AD2d 169; People v Huntley, 87 AD2d 488; People v Torre, 42 NY2d 1036; People v Burnell, 84 AD2d 566; People v Petty, 7 NY3d 277; People v McManus, 67 NY2d 541; People v Watts, 57 NY2d 299; People v Maher, 79 NY2d 978; People v Musto, 243 AD2d 508.)
   OPINION OF THE COURT

Pigott, J.

The issue in this case is whether defendant was entitled to a charge of justification with respect to his conduct during a bizarre series of events that ended with the tragic death of one person and serious injury to two others. That defense, found in Penal Law § 35.05 (2), often referred to as the “choice-of-evils” defense, provides that conduct that would otherwise constitute an offense is justified when it:

“is necessary as an emergency measure to avoid an imminent public or private injury which is about to occur by reason of a situation occasioned or developed through no fault of the actor, and which is of such gravity that, according to ordinary standards of intelligence and morality, the desirability and urgency of avoiding such injury clearly outweigh the desirability of avoiding the injury sought to be prevented by the statute defining the offense in issue.”

Certain facts in this case are not in dispute. On August 1, 2005, one Francisco Rios double-parked his overloaded box truck, facing downhill, at 103-105 Mt. Eden Avenue in the Bronx. Rios placed the truck in reverse and turned the engine off, leaving the keys in the ignition before going into a store. Defendant, who was walking by, entered the truck. While defendant was inside, the truck descended Mt. Eden Avenue and struck several cars and three pedestrians, seriously injuring two and killing one. At trial, the People and defendant offered the jury markedly different stories as to how all of this occurred.

The People claimed that an intoxicated defendant, who admittedly knew Rios, wanted to play a trick on him by moving his truck to the bottom of the hill. This theory was supported by the testimony of an eyewitness, Carlos Montilla, who had known defendant for 10 years and witnessed the accident. Montilla testified that defendant exited the truck after the incident and asked him, “How many people did I kill?” Montilla, seeing three people laying in the road, responded, “[Y]ou killed three people,” to which defendant replied, “Oh, I was joking around with the truck. I was making a joke and look at what I’ve done.” A police officer, called to the scene, testified that defendant had “glassy” eyes and “slurred” speech. Evidence established that defendant had a blood alcohol content of .09% nearly four hours after the incident which, according to an expert called by the People, meant that his blood alcohol content at the time of the incident was between .13% and .17%, substantially above the “legal limit” of .08%.

Defendant had a different version of events. He testified that he had previously owned a supermarket on Mt. Eden Avenue and was familiar with Rios’s truck because Rios had delivered produce to his store. On this day as he was walking past the truck, he “saw a movement of the truck.” He ran between parked cars to get to the truck which, by this time, was descending the hill and approaching an intersection. Defendant opened the passenger side door, jumped inside, slid over behind the steering wheel and pumped the brakes, to no avail. He tried steering, but the wheel was hard to move. Despite his best efforts, the truck struck several pedestrians crossing the street. He exited the truck on the passenger’s side, and went to a nearby bodega. Defendant denied knowing Montilla or making any statement to him after the incident.

At the charge conference following the close of proof, defense counsel sought the justification charge in accordance with Penal Law § 35.05 (2). The court denied the request, stating that based upon its reading of the statute and case law, it failed to “see how a ^justification [cjharge would be warranted under these particular facts and circumstances.”

The jury found defendant guilty of manslaughter in the second degree (Penal Law § 125.15 [1]), two counts of assault in the second degree (Penal Law § 120.05 [4]), vehicular manslaughter in the second degree (Penal Law § 125.12), two counts of vehicular assault in the second degree (Penal Law § 120.03 [1]), and two counts of operating a motor vehicle while under the influence of alcohol (Vehicle and Traffic Law § 1192 [2], [3]).

The Appellate Division, in a 3-2 decision, reversed, holding that because there was “a reasonable view of the evidence that defendant unlawfully entered and operated the [truck] while intoxicated in an attempt to avoid injury while confronting a situation not of his making, he was entitled to a justification charge,” further stating that Supreme Court’s “unexplained omission” of the charge constituted reversible error (72 AD3d 238, 239 [1st Dept 2010]). The dissenting Justices would have affirmed the trial court. A Justice of that Court granted the People leave to appeal, and we now reverse.

Addressing the most serious felonies of which defendant was convicted—manslaughter in the second degree and assault in the second degree—we conclude that there was no reasonable view of the evidence that would have supported a justification charge relative to either of those crimes (see People v Cox, 92 NY2d 1002, 1004-1005 [1998]). Penal Law § 35.05 (2) is often referred to as the “choice-of-evils” defense, and properly so. To be entitled to such a charge there must be two “evils.” And here, even under defendant’s scenario, there was no “evil” on his part. According to defendant, he was not committing any offense when he jumped into a runaway vehicle to prevent it doing harm to others. So, as to the most serious charges, a justification charge was clearly unwarranted.

Supreme Court erred, however, in refusing to give a justification charge relative to the counts of operating a motor vehicle while intoxicated. If defendant elected to operate a motor vehicle, here the truck, while under the influence of alcohol, in an attempt to prevent injury, he faced the choice of two evils: drive while intoxicated or risk a runaway truck causing injury. Therefore, Supreme Court should have granted defendant’s request for a justification charge with respect to the operating a motor vehicle while intoxicated counts. However, any error was harmless as evidenced by the jury’s conviction of defendant of the second-degree manslaughter and assault counts. To find defendant guilty of those charges, the jury was required to conclude, beyond a reasonable doubt, that defendant caused the truck’s movement, i.e., that it was not moving before he entered it. Because the jury concluded that it was defendant who caused the truck to move, and not, as defendant contended, that the truck was already moving, the jury never would have considered his “choice-of-evils” defense on the charge of driving while intoxicated. As a result, the error of not giving the justification charge with respect to the vehicular manslaughter and vehicular assault counts, which include as an element the operation of a motor vehicle while intoxicated, was harmless, and defendant is not entitled to a new trial to correct the error.

Accordingly, the order of the Appellate Division should be reversed and the case remitted to the Appellate Division for consideration of the facts and issues raised but not determined on the appeal to that court.

Chief Judge Lippman (dissenting in part).

I agree with the majority that defendant was not entitled to a justification charge with respect to the crimes of manslaughter in the second degree and assault in the second degree. However, as to the remaining counts, viewing the evidence in the light most favorable to defendant, he was entitled to the benefit of a choice-of-evils defense. Since the error in failing to give the requested instruction was not harmless, I dissent in part.

“Justification is a defense—as opposed to an affirmative defense—and the [P]eople have the burden of disproving such defense beyond a reasonable doubt” (People v Steele, 26 NY2d 526, 528 [1970] [internal quotation marks and citation omitted]). “When evidence at trial viewed in the light most favorable to the accused, sufficiently supports a claimed defense, the court should instruct the jury as to the defense, and must when so requested. A failure by the court to charge the jury constitutes reversible error” (People v Watts, 57 NY2d 299, 301 [1982]).

Viewing the evidence in the light most favorable to defendant, he engaged in criminal conduct—driving while intoxicated—in an attempt to avoid the potentially greater harm that could result from an unattended truck rolling down a busy street in a densely populated area. There is no support for the conclusion that defendant recklessly caused death and serious physical injury to the victims in order to avoid greater harm. In other words, as the majority concludes as to the top two counts against him, defendant was not forced to choose between two evils (see majority op at 345). Defendant’s version of events does, however, clearly support the requested justification charge as to the counts of driving while intoxicated and the alcohol-related assault and manslaughter charges. It was therefore error for the court to refuse to charge the jury with the justification defense as to those counts.

This type of error will be considered harmless when there is overwhelming evidence refuting the justification defense and no reasonable possibility that the requested charge would have led to a different verdict (see People v Petty, 7 NY3d 277, 286 [2006]; People v Jones, 3 NY3d 491, 497 [2004]). It cannot be said that the People produced overwhelming proof disproving defendant’s claim of justification. One version of events may seem more likely than the other, but this presented a question of credibility for the jury to resolve. The absence of the charge certainly hurt the defense, depriving it of the judicial imprimatur of its perspective of the matter and the benefit of a favorable burden of proof. The majority’s reliance on the convictions obtained without the warranted charge hardly shows the lack of impact of the error. I would, therefore, modify to reinstate the convictions of manslaughter in the second degree and assault in the second degree, and otherwise affirm.

Ciparick, J. (dissenting).

Because I believe that Supreme Court erred in refusing to give a choice-of-evils justification instruction to the jury (Penal Law § 35.05 [2]), as requested by defendant, I respectfully dissent and would affirm the order of the Appellate Division.

It is well-settled that “a defendant is entitled to an instruction as to any recognized defense for which there exists evidence sufficient for a reasonable jury to find in his favor” (Mathews v United States, 485 US 58, 63 [1988]). In determining whether the evidence is sufficient, “[a] court must view the evidence adduced at trial in the light most favorable to the defendant” (People v Zona, 14 NY3d 488, 493 [2010]; see also People v Butts, 72 NY2d 746, 750 [1988]). A court’s failure to instruct a jury on an entitled defense, when requested, “constitutes reversible error” (Zona, 14 NY3d at 493, citing People v Watts, 57 NY2d 299, 301 [1982]).

Here, the evidence adduced at trial warranted a justification instruction. As the Appellate Division majority correctly concluded, “the jury could have inferred that defendant took the otherwise reckless risk of driving the truck while in an intoxicated condition in order to prevent the vehicle from causing imminent injury to others, there being no time to take any other action” (People v Rodriguez, 72 AD3d 238, 244 [1st Dept 2010]). The majority’s assertion that the jury must have concluded that “defendant caused the truck’s movement” (majority op at 345-346) to find him guilty of the second-degree manslaughter and assault charges has no bearing on whether defendant was entitled to his request to charge prior to the court’s submission of the case to the jury. Had the jurors been properly charged on justification, we do not know what they would have concluded (People v Tucker, 55 NY2d 1, 7 [1981] [it is not the function of this Court to “speculat(e) on how the jury (would have) perceived and weighed the evidence”]).

In sum, because a reasonable view of the evidence supports the theory that defendant unlawfully entered and operated the vehicle while intoxicated in an attempt to avoid injury— confronting a situation not of his own making—the refusal of Supreme Court to give a justification charge relative to all the counts in the indictment was error.

Judges Graffeo, Read, Smith and Jones concur with Judge Pigott; Chief Judge Lippman dissents in part and votes to modify in a separate opinion; Judge Ciparick dissents and votes to affirm in another opinion.

Order reversed, etc.


source: Caselaw Access Project

author: Chief Judge Lippman. Smith, J. (dissenting).

license: Public Domain

text:
    [947 NE2d 124, 922 NYS2d 233]
    State Farm Mutual Automobile Insurance Company, Respondent-Appellant, v John Robert Langan, as Administrator of the Estate of Neil Conrad Spicehandler, Deceased, Appellant-Respondent.
    Argued February 8, 2011;
    decided March 29, 2011

      POINTS OF COUNSEL

      Saiber, LLC, New York City (Jennine DiSomma of counsel), for appellant-respondent.
    I. Appellant is entitled to coverage and benefits under the subject insurance policy as Mr. Spice-handler’s injuries were “caused by an accident.” (Roche v United States Fid. & Guar. Co., 273 NY 473; Matter of Daniel

      [Motor Veh. Acc. Indem. Corp.], 181 Misc 2d 941; De Forte v Allstate Ins. Co., 81 AD2d 465; Michaels v City of Buffalo, 85 NY2d 754; Arthur A. Johnson Corp. v Indemnity Ins. Co. of N. Am., 7 NY2d 222; Miller v Continental Ins. Co., 40 NY2d 675; Agoado Realty Corp. v United Intl. Ins. Co., 95 NY2d 141; Siagha v National Union Fire Ins. Co. of Pittsburgh, Pa., 306 AD2d 60; ACE Fire Underwriters Ins. Co. v Orange-Ulster Bd. of Coop. Educ. Servs., 8 AD3d 593.) II. Public policy dictates that the term “accident” within the subject insurance policy be determined from the perspective of the insured and that Mr. Spicehandler’s injuries were therefore caused by an “accident” within the meaning of the subject policy. (McCarthy v Motor Veh. Acc. Indem. Corp., 12 NY2d 922; Milwaukee Mut. Ins. Co. v Butler, 615 F Supp 491.) III. Ronald Popadich’s guilty plea and subsequent criminal conviction are not determinative of the issue of appellant’s entitlement to coverage under his insurance policy. (Westchester Med. Ctr. v Travelers Prop. Cas. Ins. Co., 309 AD2d 927; Matter of Allstate Ins. Co. v Massre, 14 AD3d 610; Matter of Willer v New York State Bd. of Regents, 101 AD2d 937; Capital Tel. Co. v Pattersonville Tel. Co., 56 NY2d 11; D’Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659; Jeffreys v Griffin, 301 AD2d 232; New York Cent. Mut. Fire Ins. Co. v Wood, 36 AD3d 1048; People v Slaughter, 189 AD2d 157.) IV. Appellant is entitled to attorneys’ fees because an insured is allowed to recover attorneys’ fees if he successfully defends his insurance company’s action to disclaim coverage. (Mighty Midgets v Centennial Ins. Co., 47 NY2d 12.)

      Rivkin Radler LLP, Uniondale (Evan H. Krinick, Cheryl F. Korman and Harris J. Zakarin of counsel), for respondent-appellant.
    I. John Robert Langan was not entitled to uninsured motorist benefits where Neil Conrad Spicehandler was the victim of a criminal assault and coverage for these benefits is only available for injuries sustained in an accident. (Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487; Buckner v Motor Veh. Acc. Indem. Corp., 66 NY2d 211; City of Albany v Standard Acc. Ins. Co., 7 NY2d 422; Morgan v Greater N.Y. Taxpayers Mut. Ins. Assn., 305 NY 243; McGroarty v Great Am. Ins. Co., 36 NY2d 358; Messersmith v American Fid. Co., 232 NY 161; Miller v Continental Ins. Co., 40 NY2d 675; Michaels v City of Buffalo, 85 NY2d 754; Beach Haven Apts., No. 6 v Allcity Ins. Co., 182 AD2d 658, 80 NY2d 761; Olin v Moore, 178 AD2d 517.) II. The Appellate Division erroneously concluded that State Farm Mutual Automobile Insurance Company was obligated to provide benefits pursuant to the policy’s mandatory personal injury protection endorsement and its death, dismemberment and loss of sight provisions. (McCarthy v Motor Veh. Acc. Indent. Corp., 16 AD2d 35, 12 NY2d 922; Matter of Knickerbocker Ins. Co. [Faison], 22 NY2d 554; Utica Mut. Ins. Co. v Timms, 293 AD2d 669; Eveready Ins. Co. v Asante, 153 AD2d 874; Matter of Michigan Millers Mut. Ins. Co. v Cullington, 59 AD2d 784; Nallan v Union Labor Life Ins. Co., 42 NY2d 884; Aetna Life & Cas. Co. v Nelson, 67 NY2d 169; Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196; Oberly v Bangs Ambulance, 96 NY2d 295; Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854.) III. John Robert Langan’s remaining miscellaneous arguments are without merit. (Fundamental Portfolio Advisors, Inc. v Tocqueville Asset Mgt., L.P., 7 NY3d 96; Nassau Trust Co. v Montrose Concrete Prods. Corp., 56 NY2d 175; Matter of Walls v Levin, 150 AD2d 873; Matter of E.F.S. Ventures Corp. v Foster, 71 NY2d 359; Triple Cities Constr. Co. v Maryland Cas. Co., 4 NY2d 443; Metropolitan Life Ins. Co. v Childs Co., 230 NY 285; Lynn v Lynn, 302 NY 193; City of New York v Welsbach Elec. Corp., 9 NY3d 124; Liss v Trans Auto Sys., 68 NY2d 15; Matter of Balcerak v County of Nassau, 94 NY2d 253.)
   OPINION OF THE COURT

Chief Judge Lippman.

At issue in this appeal is whether the insured decedent, the victim of an intentional crime, was injured as the result of an accident within the meaning of the uninsured motorist endorsement and certain other provisions of the insured’s policy. Since the occurrence must be viewed from the insured’s perspective, we conclude that it was indeed an accident and that the insured is entitled to benefits under the policy provisions at issue.

Decedent, Neil Conrad Spicehandler, was struck by a vehicle at 7th Avenue and 32nd Street in Manhattan on February 12, 2002. He sustained a compound fracture of his left lower leg, requiring surgery, and died from complications shortly after the operation. Decedent was one of many who were injured when the driver, Ronald Popadich, intentionally drove his vehicle into pedestrians. Popadich later pleaded guilty to second degree murder and admitted that he intended to cause Spicehandler’s death.

Decedent was an insured under an automobile liability policy purchased by defendant Langan through plaintiff State Farm. As the administrator of decedent’s estate, Langan made a claim seeking to recover benefits under the policy’s uninsured/ underinsured motorist (UM) endorsement, mandatory personal injury protection endorsement (PIP endorsement) and death, dismemberment and loss of sight endorsement (Coverage S). The policy’s UM endorsement provides that it

“will pay all sums that the insured or the insured’s legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by the insured, caused by an accident arising out of such uninsured motor vehicle’s ownership, maintenance or use”

subject to relevant policy exclusions. The PIP endorsement and Coverage S likewise state that they will pay benefits for injuries sustained as the result of “an accident.” These endorsements exclude coverage on several bases, but none specifically excludes coverage for an injury that results from intentional conduct. State Farm denied and disclaimed liability because it determined, as relevant here, that decedent’s death was caused not by an accident, but by the intentional conduct of the operator of the vehicle.

State Farm commenced this declaratory judgment action seeking a declaration that it was not obligated to provide benefits in connection with decedent’s death. Defendant answered and counterclaimed, requesting a declaration that State Farm was required to provide coverage under the policy. Plaintiffs motion and defendant’s cross motion for summary judgment were denied because the parties had not, at that point, provided the court with information regarding the outcome of the criminal action against Popadich, which the court deemed “essential” to determining whether decedent’s injuries were caused by an intentional act (2004 NY Slip Op 30243[U]). The Appellate Division upheld the portion of the Supreme Court order that denied summary judgment on the issue of whether the incident was covered by the policy, finding that there was insufficient proof to determine whether decedent had been the victim of an intentional crime, but that, if he had, the incident would not be covered (18 AD3d 860, 862 [2d Dept 2005]).

After Popadich was convicted of second degree murder, State Farm renewed its motion for summary judgment, again seeking a declaration that it was not required to provide benefits under the policy. Langan opposed the motion and cross-moved for summary judgment, urging that whether the incident was an accident within the meaning of the policy must be determined from the perspective of the insured. Supreme Court granted State Farm’s motion and denied Langan’s cross motion on the basis of Popadich’s conviction (2006 NY Slip Op 30400[U]).

On appeal, a majority of the Appellate Division modified to declare that State Farm was required to provide benefits under the mandatory PIP and Coverage S endorsements and, as so modified, affirmed (55 AD3d 281 [2d Dept 2008]). The Court determined that State Farm was not required to provide UM benefits because the purpose of statutorily required uninsured motorist coverage is to provide an individual with the same level of coverage he or she would be entitled to if injured in an accident with an insured motorist covered by an applicable policy. Since a standard liability policy would not have covered Popadich for his intentional criminal conduct, the Court found that Langan’s UM coverage was not applicable under the circumstances presented here. However, the Court determined that in other contexts it was appropriate to determine whether a particular event was an accident from the insured’s point of view, that the incident was clearly unexpected from decedent’s perspective and that, as a result, State Farm was required to provide coverage under the PIP and Coverage S endorsements.

Two Justices dissented in part and would have affirmed Supreme Court’s order declaring that State Farm was not required to provide coverage. The dissent agreed that Langan was not entitled to UM benefits under current law based on Popadich’s intentional conduct, but observed that there had been a recent national trend to allow for coverage in similar circumstances and that strong public policy considerations weighed in favor of coverage. The dissent would have denied PIP and Coverage S benefits based on the law of the case and, in any event, disagreed that the same term should be interpreted differently within the same policy. Both parties appeal pursuant to leave granted by the Appellate Division, which certified for our review the question of whether its order was properly made. We modify and answer the certified question in the negative.

This appeal turns on whether decedent’s injuries were caused by an accident within the meaning of the policy. Although the endorsements at issue do not define the term “accident,” we have previously held that it is not to be “given a narrow, technical definition,” but should be interpreted according to how it would be understood by the average person (Miller v Continental Ins. Co., 40 NY2d 675, 676 [1976]). We have determined that, for purposes of automobile insurance policies, the term “accident” means an event typically involving violence or the application of external force (see Michaels v City of Buffalo, 85 NY2d 754, 758 [1995]). In order to determine whether a particular event was “ ‘accidental, it is customary to look at the casualty from the point of view of the insured, to see whether or not ... it was unexpected, unusual and unforeseen’ ” (Miller, 40 NY2d at 677 [citation omitted]). Although we have noted that the perspective of the injured victim should not be used to determine whether an accident has occurred, “ ‘[blecause an injury is always fortuitous to a non-consenting victim’ ” (Michaels, 85 NY2d at 759 [citation omitted]), here we have the situation where the victim is also the insured.

It is clear that, viewed from the insured’s perspective, the occurrence was an unexpected or unintended event—and therefore an “accident”—even though Popadich admittedly intended to strike decedent with the vehicle. The language of the policy also suggests that this type of situation would be covered as it was an accident caused by the use of a motor vehicle that did not have an applicable insurance policy. Significantly, Insurance Department regulations require that an automobile owner’s liability insurance policy contain a provision specifying “that assault and battery shall be deemed an accident unless committed by or at the direction of the insured” (11 NYCRR 60-1.1 [f]). Although the provisions at issue here do not involve liability coverage, the regulation is relevant to the understanding of the extent of coverage provided by the endorsements.

The argument against requiring coverage, advanced by State Farm and relied upon by the Appellate Division, is based on the general principle that mandatory uninsured motorist benefits are meant to provide coverage that is coextensive with, and not greater than, that afforded by a standard liability policy. They rely on our statement that the purpose of mandatory UM benefits is “ ‘to provide the insured with the same level of protection he or she would provide to others were the insured a tortfeasor in a bodily injury accident’ ” (Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196, 204 [2007], quoting Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 687 [1994]).

In support of its position, State Farm relies on McCarthy v Motor Veh. Acc. Indem. Corp. (16 AD2d 35 [4th Dept 1962], affd 12 NY2d 922 [1963]), a case where the plaintiff victim was injured when the insured motorist committed an intentional assault against her using his vehicle. After the insurer denied coverage because the occurrence was not an accident within the meaning of the policy, plaintiff sought to recover under the policy’s MVAIC endorsement—a statutorily required endorsement intended to afford coverage to a person injured by an uninsured or unidentified motorist, equal to that available to one injured by a motorist covered by an applicable liability policy (see McCarthy, 16 AD2d at 38). MVAIC is funded by assessments levied against all of the insurance companies licensed to conduct business in the state (see McCarthy, 16 AD2d at 39). McCarthy held that since an intentional assault committed by an insured motorist was not an accident subject to coverage under the standard liability policy, such an occurrence would likewise be excluded from coverage under the MVAIC endorsement (see 16 AD2d at 43). The Court also determined that allowing recovery under MVAIC would be inconsistent with the purpose for which the special fund had been established (see McCarthy, 16 AD2d at 44).

This case differs from McCarthy in two important respects. First, UM coverage, although required by statute, is part of the insured’s own policy—a policy that the insured selected and for which he pays premiums. Benefits received through coverage under the UM endorsement do not come out of a state fund. Second, the insured is the victim in this case, not the tortfeasor, and the public policy against providing coverage for an insured’s criminal acts is not implicated.

We hold that, consistent with the reasonable expectation of the insured under the policy and the stated purpose of the UM endorsement (to provide coverage against damage caused by uninsured motorists), the intentional assault of an innocent insured is an accident within the meaning of his or her own policy. The occurrence at issue was clearly an accident from the insured’s point of view and Langan is entitled to benefits under the UM endorsement.

This result is also in keeping with the national trend toward allowing innocent insureds to recover uninsured motorist benefits under their own policies when they have been injured through the intentional conduct of another (see e.g. American Family Mut. Ins. Co. v Petersen, 679 NW2d 571 [Iowa 2004]; Shaw v City of Jersey City, 174 NJ 567, 811 A2d 404 [2002]; Wendell v State Farm Mut. Auto. Ins. Co., 293 Mont 140, 974 P2d 623 [1999]). Although the above decisions are not binding on this Court, we are persuaded that the view that has been adopted by these jurisdictions is the better one.

For many of the same reasons, Langan is entitled to coverage under the PIP endorsement and Coverage S. The average insured’s understanding of the term “accident” is unlikely to vary from endorsement to endorsement within the same policy. The occurrence, from the insured’s perspective, was certainly unexpected and unforeseen and should be considered an accident subject to coverage. Contrary to State Farm’s argument, we perceive no danger that this result will frustrate efforts to fight fraud in the no-fault insurance system. Significantly, there is no allegation whatsoever of fraud in this case and it is patent that benefits should continue to be denied to those who intentionally cause their own injuries.

The argument that Langan is entitled to attorneys’ fees was not addressed by the courts below and should be remitted to Supreme Court for its determination in the first instance.

Accordingly, the order of the Appellate Division should be modified, without costs, by granting defendant judgment declaring in accordance with this opinion and remitting to Supreme Court for further proceedings in accordance with this opinion, and, as so modified, affirmed. The certified question should be answered in the negative.

Smith, J. (dissenting).

I would affirm the order of the Appellate Division.

As a general matter, it is true that whether a particular event is an “accident” should be viewed from the point of view of the insured. The insured here was Spicehandler, the event was an accident from his point of view, and his estate was therefore properly allowed to recover under the so-called PIP and Coverage S endorsements.

But uninsured/underinsured motorists (UM) coverage is different. Its purpose is to protect an insured who is injured by a tortfeasor without liability insurance—a purpose accomplished by putting the insured in the position that he would have been in if the tortfeasor had been insured. This requires a determination of whether the tortfeasor could have made a claim under a hypothetical policy of liability insurance—and the tortfeasor should thus be treated as the “insured” for purposes of analysis. Since Popadich drove his car into Spicehandler on purpose, the event was not an accident from Popadich’s point of view; Popadich could not have obtained indemnification from a liability insurer; and Spicehandler’s estate should not be permitted to recover under the UM endorsement.

This is essentially what we held when we affirmed the Appellate Division’s decision in McCarthy v Motor Veh. Acc. Indent. Corp. (16 AD2d 35 [4th Dept 1962], affd 12 NY2d 922 [1963]). The majority tries to distinguish McCarthy on what it calls two grounds, which seem really to be one—that UM coverage is “part of the insured’s own policy” and that “the insured is the victim in this case, not the tortfeasor” (majority op at 356). The distinction will not withstand analysis. The purpose of UM coverage is the same as the purpose of the MVAIC endorsement at issue in McCarthy: “to afford coverage,” as the majority puts it, “to a person injured by an uninsured or unidentified motorist, equal to that available to one injured by a motorist covered by an applicable liability policy” (majority op at 356). The essential rationale for McCarthy is that the victim of an uninsured motorist should not be in a better position than the victim of an insured one. That rationale was sound in McCarthy, and is sound here.

I see no justification for departing from McCarthy. A more serious argument might be made—though it is not made here— for a more significant change in the law: modifying, in cases involving automobile liability policies required by statute, the general rule that liability insurance cannot cover intentional torts. As McCarthy mentions, a standard automobile liability policy provides coverage only for accidents, and thus would not cover “an assault and battery committed by the insured” (16 AD2d at 41; see also e.g. Matter of Travelers Indent. Co. v Richards-Campbell, 73 AD3d 1076 [2d Dept 2010]; Matter of Aetna Cas. & Sur. Co. v Perry, 220 AD2d 497 [2d Dept 1995]). This limitation seems to be derived from the long-established rule, based on public policy, that insurance may not indemnify a tortfeasor for intentional wrongdoing (Messersmith v American Fid. Co., 232 NY 161, 165 [1921]; Town of Massena v Healthcare Underwriters Mut. Ins. Co., 98 NY2d 435, 445 [2002]). Courts in some jurisdictions have made compulsory liability insurance an exception to this rule, reasoning that the purpose of liability insurance, to the extent that it is required by law, is to protect injured victims, not tortfeasors, and that victims should be protected no less against intentional than against negligent torts (e.g. Speros v Fricke, 98 P3d 28, 36-38 [Utah 2004]; Dotts v Taressa J.A., 182 W Va 586, 390 SE2d 568 [1990]; Wheeler v O’Connell, 297 Mass 549, 9 NE2d 544 [1937]). Whether such an exception is justified, and if so whether it should be created by judges or by legislators, are questions that we should not address until we have a case that presents them.

Judges Ciparick, Graffeo, Pigott and Jones concur with Chief Judge Lippman; Judge Smith dissents and votes to affirm in a separate opinion in which Judge Read concurs.

Order modified, etc.

       This action solely concerns claims made under Langan’s own policy—not the policy of either the driver or the vehicle.


author: Graffeo, J. Chief Judge Lippman (dissenting).

text:
    [947 NE2d 115, 922 NYS2d 224]
    In the Matter of National Fuel Gas Distribution Corporation, Respondent, v Public Service Commission of the State of New York, Appellant.
    Argued February 8, 2011;
    decided March 29, 2011

      POINTS OF COUNSEL

      Peter McGowan, General Counsel, Public Service Commission of the State of New York, Albany (Jonathan D. Feinberg, Anthony

      Belsito, Sean Mullany and John C. Graham of counsel), for appellant.
    I. The Appellate Division’s own weighing of the evidence does not comport with this Court’s precedent on the standard for review of a Public Service Commission decision. (Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 95 NY2d 40; 300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; Matter of Rochester Tel. Corp. v Public Serv. Commn. of State of N.Y., 201 AD2d 31, 87 NY2d 17; Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169; Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419; Matter of General Tel. Co. of Upstate N.Y. v Lundy, 17 NY2d 373; Matter of Long Is. Light Co. v Public Serv. Commn. of State of N.Y., 134 AD2d 135; Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 190 AD2d 217; Altsheler v Board of Educ. of Great Neck Union Free School Dist., 62 NY2d 656; Matter of Chemical Specialties Mfrs. Assn. v Jorling, 85 NY2d 382.) II. The Appellate Division made a key factual error and failed to follow this Court’s precedent with respect to Public Service Commission review of intercorporate allocations. (Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 95 NY2d 40; Matter of Rochester Tel. Corp. v Public Serv. Commn. of State of N.Y., 87 NY2d 17; Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 72 NY2d 419; Matter of Consolidated Edison Co. of N.Y. v Public Serv. Commn. of State of N.Y., 66 NY2d 369; Matter of Crescent Estates Water Co. v Public Serv. Commn. of State of N.Y., 77 NY2d 611; Matter of Niagara Mohawk Power Corp. v Public Serv. Commn. of State of N.Y., 69 NY2d 365; Matter of General Tel. Co. of Upstate N.Y. v Lundy, 17 NY2d 373; Matter of AT&T Communications of N.Y. v Public Serv. Commn. of State of N.Y., 231 AD2d 155, 91 NY2d 803.) III. The Appellate Division incorrectly rejected the Public Service Commission’s reliance on estimated liabilities. (Matter of New York State Council of Retail Merchants v Public Serv. Commn. of State of N.Y., 45 NY2d 661; Matter of Rochester Tel. Corp. v Public Serv. Commn. of State of N.Y., 87 NY2d 17; Matter of Niagara Mohawk Power Corp. v Public Serv. Commn. of State of N.Y., 66 NY2d 83; Matter of Abrams v Public Serv. Commn. of State of N.Y., 67 NY2d 205; Matter of St. Lawrence Gas Co. v Public Serv. Commn. of State of N.Y., 42 NY2d 461; Matter of Long Is. Light Co. v Public Serv. Commn. of State of N.Y., 134 AD2d 135; Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 72 NY2d 419; Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 190 AD2d 217.)

      Whiteman Osterman & Hanna LLP, Albany (Neil L. Levine, Alan J. Goldberg and Christopher M. McDonald of counsel), and Cullen & Dykman, LLP, Garden City (Bruce V. Miller of counsel), for respondent.
    I. National Fuel Gas Company’s 1999 allocation of insurance settlement proceeds cannot be nullified by the Public Service Commission absent a determination, supported by substantial evidence, that the allocation methodology employed by National Fuel Gas Company was imprudent. (Matter of Long Is. Light Co. v Public Serv. Commn. of State of N.Y, 134 AD2d 135; Matter of Rochester Tel. Corp. v Public Serv. Commn. of State of N.Y., 87 NY2d 17; Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 190 AD2d 217; Matter of New York City Hous. Auth. v Public Serv. Commn. of State of N.Y., 23 AD 2d 277, 17 NY2d 246; Missouri ex rel. Southwestern Bell Telephone Co. v Public Serv. Comm’n of Mo., 262 US 276; Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208; Matter of Abrams v Public Serv. Commn. of State of N.Y., 104 AD2d 135, 67 NY2d 205; Matter of Consumer Protection Bd. of State of N.Y. v Public Serv. Commn., 97 AD2d 320; Matter of Rochester Gas & Elec. Corp. v Maltbie, 258 App Div 682, 284 NY 626; People ex rel. Delaware & Hudson Co. v Stevens, 197 NY 1.) II. The Public Service Commission’s imprudence determination must be supported by substantial evidence, a standard which requires meaningful judicial review and consideration of the evidence cited by the Public Service Commission as the basis for the challenged determination. (Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222; Matter of Jennings v New York State Off. of Mental Health, 90 NY2d 227; Matter of Silberfarb v Board of Coop. Educ. Servs., Third Supervisory Dist., Suffolk County, 60 NY2d 979; Matter of Multiple Intervenors v Public Serv. Commn. of State of N.Y., 166 AD2d 140; 300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; People ex rel. Vega v Smith, 66 NY2d 130; Matter of Jason B. v Novello, 12 NY3d 107; Matter of Montauk Improvement v Proccacino, 41 NY2d 913; Matter of Barry v O’Connell, 303 NY 46; SEC v Chenery Corp., 332 US 194.) III. The Appellate Division judgment should be affirmed because the Public Service Commission’s conclusory finding of imprudence with respect to National Fuel Gas Company’s insurance settlement allocation was not supported by substantial evidence. (Matter of Long Is. Light Co. v Public Serv. Commn. of State of N.Y., 134 AD2d 135; H. P. Hood & Sons, Inc. v Du Mond, 336 US 525; Matter of Barry v O’Connell, 303 NY 46; West Ohio Gas

      Co. v Public Util. Comm’n of Ohio, 294 US 63; Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753; Matter of Montauk Improvement v Proccacino, 41 NY2d 913; 300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176; Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 95 NY2d 40; Matter of Rochester Tel. Corp. v Public Serv. Commn. of State of N.Y., 87 NY2d 17.)
   OPINION OF THE COURT

Graffeo, J.

In this appeal, we consider the legal standards that apply when a utility company seeks permission from the Public Service Commission (PSC) to recoup from ratepayers certain environmental remediation costs it has incurred. We hold that when the PSC reviews a management decision of a utility to assess its prudence, the Department of Public Service (DPS) bears the initial burden of showing that the utility may have acted imprudently based on what was known at the time the challenged decision was made. Furthermore, there must be a rational basis in the record evidence to support the grounds cited in a PSC order for a finding of imprudence.

I

Petitioner National Fuel Gas Distribution Corp. (NFG Distribution) is a natural gas delivery utility that operates in western New York and is regulated by the PSC under article 4 of the Public Service Law. NFG Distribution is a subsidiary of National Fuel Gas Company (National Fuel) and has a number of corporate affiliates.

In the 1990s, National Fuel (the parent company) began pursuing insurance coverage for potential environmental cleanup costs at its former manufactured natural gas plants. National Fuel had commissioned an environmental report (the IES report), issued in 1996, which estimated that site investigation and remediation (SIR) expenses at the former plants would be approximately $300 million. The IES report further attributed 64% of the potential SIR liabilities to NFG Distribution. To determine the extent of its insurance coverage for these estimated remediation expenses, National Fuel filed notices of potential claims with its general liability insurance companies and provided copies of the IES report to its insurers. All of the insurance carriers initially denied coverage.

Eventually, the insurers and National Fuel reached two separate settlements in 1999, totaling approximately $37 million. All but one of the insurers settled with National Fuel for about $16 million. Additionally, AEGIS insurance agreed to issue a replacement policy providing $20.8 million in future SIR coverage. Since the estimated SIR liability of just one of National Fuel’s subsidiaries (such as NFG Supply) could have exceeded the total amount of the settlements, it was conceivable at the time the parties entered into the agreements that one environmental remediation claim by a single subsidiary could exhaust the entire settlement fund to the detriment of the other subsidiaries and their ratepayers.

National Fuel therefore decided to allocate the proceeds of the settlements among its subsidiaries that had been covered by the insurance policies through the use of a “premiums paid” formula of allocation. Under this approach, each subsidiary received an amount from the settlements proportionate to its share of the insurance premiums paid and its contribution to the costs incurred in obtaining the settlements. As a result, NFG Distribution received almost 46% of the settlement proceeds—approximately $8.3 million (about 52% of the cash settlement) and approximately $8.5 million in future coverage under the AEGIS policy (about 41% of the new SIR insurance). A similar percentage of the total recovery was allotted to two other regulated National Fuel subsidiaries (NFG Supply and Pennsylvania NFG Distribution). The unregulated subsidiaries received approximately 7% of the total settlement, but their share apparently did not consist of cash proceeds, just future SIR coverage under the AEGIS policy.

Between 1998 and 2006, NFG Distribution incurred actual SIR expenses of almost $27 million—85% of National Fuel's aggregate environmental remediation costs during that period— which depleted the company’s proceeds of the monetary settlement and its share of coverage under the AEGIS policy. As a result, in 2007, NFG Distribution petitioned the PSC for tariff amendments to increase its rates in order to pass its uninsured SIR costs to its customer base. At that time, NFG Distribution was collecting $600,000 per year for SIR expenses from ratepayers. The tariff request sought to increase that amount to $1.7 million.

DPS challenged the requested increase, arguing that it had been unreasonable for National Fuel to use the premiums paid methodology to allocate the settlements because the percentage of premiums paid by each subsidiary bore no relation to the amount of the settlement funds. According to DPS, the settlements should have been distributed to the subsidiaries based on the actual SIR expenses incurred. DPS requested that the PSC impute approximately 85% of the total settlement to NFG Distribution, thereby reducing the proposed tariff request accordingly. NFG Distribution countered that National Fuel chose the premiums paid methodology in 1999 because the IES report provided only preliminary estimates of potential SIR expenses as of 1996; that not all of National Fuel’s former manufactured natural gas sites were included in the report; and it would have been too speculative to attempt to determine the actual SIR costs that each subsidiary would ultimately incur. Consequently, NFG Distribution urged that it was reasonable for its corporate parent to utilize the premiums paid formula at the time the settlements were disbursed in 1999.

The administrative law judge (ALJ) ruled in NFG Distribution’s favor, concluding that the premiums paid formula was “not unreasonable on its face” since DPS had failed to demonstrate that some other settlement distribution method would have been reasonable at the time the corporate decision was made. The recommended decision determined that no additional portion of the settlements beyond the 46% that NFG Distribution actually received should be imputed to the company. The ALJ recommended that NFG Distribution be permitted to increase its rates to collect $1.7 million annually for environmental remediation expenses, the amount requested by NFG Distribution.

Exceptions were filed to the ALJ’s decision and the matter was brought before the PSC. DPS continued to assert that it was unreasonable for National Fuel to have employed the premiums paid method and asked the PSC to impute 85% of the settlements to NFG Distribution. In the alternative, DPS argued that the settlements should have been distributed to the subsidiaries based on the percentage of SIR costs that were attributable to them in the IES report, which method would have resulted in 64% of the settlement proceeds directed to NFG Distribution. During the evidentiary hearing, a DPS employee testified that it had been unreasonable to allocate the settlements based on premiums paid because the claims that were presented to the insurance carriers were premised on costs associated with specific sites and the amount of settlement proceeds “was not related in anyway [sic] to the insurance premiums paid.” According to the DPS employee, the settlements were “based on the estimated remediation costs, and presumably other litigation factors, which had no relation to the amount of insurance premiums paid.”

The PSC concluded that National Fuel had acted imprudently, finding that “the 46% allocation of the insurance proceeds was unjust and unreasonable at the time it was made” because National Fuel “should have taken into account the estimates that were available at the time of the liabilities that each subsidiary company was facing.” The PSC determined that the proper allocation to NFG Distribution in 1999 should have been 64% of the settlements and ordered that the company be imputed with an additional 18% of the settlements in developing the proper rate structure.

NFG Distribution then commenced this CPLR article 78 proceeding to contest the PSC’s determination. The case was transferred to the Appellate Division, which annulled the PSC’s imputation of additional settlement proceeds to NFG Distribution (71 AD3d 62 [3d Dept 2009]). The court held that it was reasonable for National Fuel to use the premiums paid formula in 1999, reasoning that the IES report contained only preliminary estimates of SIR costs, it did not address every potential claim of former manufactured gas sites and there was no evidence in the record to demonstrate that the report was intended to reflect all accurate SIR claims when it was drafted in 1996 or when the settlements were allocated in 1999. The Appellate Division also observed that the premiums paid formula allowed National Fuel to reasonably compute each subsidiary’s share of the insurance premiums and the methodology assured that each subsidiary and its ratepayers would receive the benefit of the settlements in proportion to what each subsidiary had paid for insurance coverage. Although the court agreed with the PSC that it would have been a reasonable alternative for National Fuel to have allocated the settlements in 1999 using the potential claims that were listed in the IES report, the Appellate Division determined that the record did not support the PSC’s finding that the premiums paid formula was unreasonable. The Appellate Division therefore concluded that the PSC erred by imputing additional settlement proceeds to NFG Distribution beyond the 46% that it actually received.

We granted leave to appeal (14 NY3d 709 [2010]) and now affirm.

II

Generally, a deferential standard of review applies to PSC orders because establishing utility rates is a “highly technical” matter (Matter of Abrams v Public Serv. Commn. of State of N.Y., 67 NY2d 205, 211-212 [1986]) and the PSC possesses specialized knowledge and expertise in ratesetting matters (see Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 95 NY2d 40, 48 [2000]). Judicial review is therefore limited to determining whether record evidence provides a rational basis for a PSC order (see Matter of Rochester Tel. Corp., 87 NY2d at 28-29).

But it is also a bedrock principle of administrative law that a “ ‘court, in dealing with a determination . . . which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency’ ” (Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753, 758 [1991], quoting Matter of Montauk Improvement v Proccacino, 41 NY2d 913, 913 [1977]; see e.g. Matter of Consolidated Edison Co. of N.Y. v Public Serv. Commn., 63 NY2d 424, 441 [1984]). If the reasons an agency relies on do not reasonably support its determination, the administrative order must be overturned and it cannot be affirmed on an alternative ground that would have been adequate if cited by the agency (see Matter of Scherbyn, 77 NY2d at 758).

Although both of these principles are relevant here, this case is not the typical appeal of a PSC order. In assessing the requested tariff amendments to increase NFG Distribution’s rates, the PSC first had to consider whether National Fuel’s settlement distribution formula was “prudent” when it was devised in 1999 (see Matter of Crescent Estates Water Co. v Public Serv. Commn. of State of N.Y., 77 NY2d 611, 617 [1991]). A utility’s decision is prudent if it acted reasonably based on the information that it had and the circumstances that existed at the time (see Matter of Long Is. Light Co. v Public Serv. Commn. of State of N.Y., 134 AD2d 135, 143-144 [3d Dept 1987]). A decision may be viewed as prudent even though a different course of action would ultimately have been more advantageous to the utility or its ratepayers. In this regard, hindsight is irrelevant to a prudence analysis because the utility must make a determination that addresses its business prospectively. Thus, if more than one course of action was reasonable at the time of decision making, the utility may choose among them. The PSC cannot overturn a prudent decision by a utility because it believes that another course of action would have been preferable.

The usual burdens of proof are also slightly different in this case. A utility company seeking a rate change has the burden of proving that the requested regulatory action is “just and reasonable” (Public Service Law § 66 [12] [i]; see id. § 72; 16 NYCRR 61.1; Matter of St. Lawrence Gas Co. v Public Serv. Commn. of State of N.Y., 42 NY2d 461, 464 [1977]). However, a utility’s decision to expend monetary resources is presumed to have been made in the exercise of reasonable managerial judgment (see Matter of Long Is. Light Co., 134 AD2d at 144). DPS carries the initial burden of providing a rational basis to infer that the utility may have acted imprudently before the burden shifts to the utility to demonstrate that its decision was prudent when made (see Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 190 AD2d 217, 221 [3d Dept 1993]; Matter of Long Is. Light Co., 134 AD2d at 144).

Based on these principles, the issue before us distills to whether DPS adequately raised a reasonable inference of imprudence and, if so, whether there is a rational basis in the record to support the grounds cited by the PSC for its conclusion that National Fuel acted imprudently when it used the premiums paid formula for the distribution of the settlement proceeds in 1999.

We conclude that DPS failed to meet its initial burden of rebutting the presumption of prudence. The only DPS employee to testify—a public utility accountant—opined that the premiums paid formula was unreasonable because the settlements were not procured in relation to the amount of premiums paid. In our view, this testimony did not provide a rational basis to infer that National Fuel acted imprudently or sought to maximize future recovery from utility rates. The record does not reveal what factors prompted the insurers to settle, nor does it definitively exclude as a relevant factor the amount of premiums collected from each subsidiary. In deciding to settle, the insurers may have factored in the total amount of premiums that they had been paid in conjunction with their maximum financial exposure, along with the likelihood that a court might have concluded that the terms of the policies extended coverage to environmental remediation costs. The DPS employee also did not explain why the factors that led the insurers to settle should have dictated National Fuel’s allocation method. In light of the uncertainty of coverage under the policies and the lack of definitive information pertaining to all potential SIR claims, we view the testimony of the DPS employee as too conclusory to call into question the prudence of National Fuel’s allocation decision or to shift the burden of proof to the utility.

We also note that the only ground cited by the PSC was that the premiums paid methodology was unjust and unreasonable because National Fuel could have used the IES report’s estimate of SIR subsidiary liabilities. But there are often multiple ways to reasonably address an issue that arises in a business setting and the fact that it may have been prudent for National Fuel to use the estimated liabilities method did not, standing alone, make the use of the premiums paid approach imprudent.

In addition, the 1996 IES report supplied only preliminary estimates of potential SIR liabilities and was prepared as part of the effort to convince the various insurers to settle and maximize National Fuel’s recovery. Simply put, its purpose was to persuade the insurers to avoid litigation, not to determine the extent of environmental contamination with scientific certitude. Nor does the record reveal that the IES report addressed every potential SIR site and, for the sites that were reviewed, the report was not designed to definitively assess the costs of individual SIR claims. Hence, the figures included in the IES report were estimations, whereas each subsidiary’s share of the premium payments could be accurately tallied. As a result, the IES report was not the sole rational means for reasonably allocating the proceeds of the settlements.

In sum, there was no evidentiary foundation to infer that National Fuel may have acted imprudently in 1999 when it decided to use the premiums paid formula. We therefore conclude that the PSC’s finding of imprudence was erroneous as a matter of law.

Accordingly, the judgment of the Appellate Division should be affirmed, with costs.

Chief Judge Lippman (dissenting).

The Public Service Commission (PSC) found that National Fuel’s allocation of the insurance settlement proceeds based on the premiums paid by each of its subsidiaries “was unjust and unreasonable at the time it was made” and that the proceeds should have been apportioned, instead, based upon the potential liabilities each subsidiary faced for certain environmental remediation expenses. Since there is substantial evidence to support the PSC’s conclusion, I would reverse.

Among the general powers accorded to the PSC by statute is the authority to evaluate proposed utility rate changes and to set just and reasonable rates (see Public Service Law § 66 [12] [f]; § 72). “Indeed, it has been recognized that when it comes to setting rates for [gas and electric] service the Commission has been granted ‘the very broadest of powers,’ the Legislature mandating only that the rates fixed be ‘just and reasonable’ ” (Matter of Niagara Mohawk Power Corp. v Public Serv. Commn. of State of N.Y., 69 NY2d 365, 369 [1987] [citations omitted]). The burden of proving that any proposed rate change is just and reasonable rests with the utility (see Public Service Law § 66 [12] [i]).

Our review of PSC determinations involving ratesetting has always been deferential. We have emphasized that the standard of review is meant to be flexible and that the determinations “ ‘may not be set aside unless they are without rational basis or without reasonable support in the record’ ” (Matter of New York Tel. Co. v Public Serv. Commn. of State of N.Y., 95 NY2d 40, 48 [2000], quoting Matter of Rochester Tel. Corp. v Public Serv. Commn. of State of N.Y., 87 NY2d 17, 29 [1995]). It is well settled that “substantial evidence consists of proof within the whole record of such quality and quantity as to generate conviction in and persuade a fair and detached fact finder that, from that proof as a premise, a conclusion or ultimate fact may be extracted reasonably—probatively and logically” (300 Gramatan Ave. Assoc. v State Div. of Human Rights, 45 NY2d 176, 181 [1978]). Such deference is appropriate since ratesetting “presents ‘problems of a highly technical nature,’ ” which are well within the particular expertise of the PSC (see New York Tel. Co., 95 NY2d at 48, quoting Matter of Abrams v Public Serv. Commn. of State of N.Y., 67 NY2d 205, 211-212 [1986]).

The determination of whether a utility acted prudently is made by assessing whether its actions were reasonable under the circumstances existing at the time they were made, without the benefit of hindsight (see Matter of Long Is. Light Co. v Public Serv. Commn. of State of N.Y., 134 AD2d 135, 143-144 [3d Dept 1987]). Significantly, “the PSC’s broad rate-making powers . . . are sufficient to allow it generally to assess the prudence of a utility’s actions as those actions impact upon the ratepayers. Indeed, a specific function of the rate-making power is to protect the utility’s ratepayers” (Matter of Crescent Estates Water Co. v Public Serv. Commn. of State of N.Y., 77 NY2d 611, 617 [1991]). Through this power, the Commission ensures that unreasonable or excessive rates are not inflicted upon the utility’s customers (see e.g. Matter of General Tel. Co. of Upstate N.Y. v Lundy, 17 NY2d 373, 381 n 3 [1966]).

Even assuming that our traditional deference to the PSC is skewed toward the utility for the purpose of prudence determinations (see majority op at 368-369), the PSC has provided a rational basis for its determination that National Fuel acted imprudently.

The PSC order notes that, at the time the insurance proceeds were distributed, National Fuel was aware of the projected liability for environmental remediation faced by its subsidiaries, including that NFG Distribution’s potential liability accounted for 64% of the total estimated liability. Instead, only 46% of the proceeds were allocated to NFG Distribution based on its proportionate share of the premiums paid for the subject general liability insurance policies. By use of this allocation method, a portion of the settlement proceeds was distributed to National Fuel’s nonregulated affiliated companies. The PSC concluded that National Fuel should have taken into account the available estimates of potential environmental liability for each subsidiary that were available at the time the proceeds were allocated and that the appropriate distribution should have been made in proportion to that prospective liability. The PSC therefore determined that the 46% allocation to NFG Distribution was “unjust and unreasonable.”

A review of the record as a whole provides ample basis for the PSC’s conclusion. PSC’s expert testified that the allocation of proceeds on the basis of insurance premiums paid was “not accurate and [made] no sense.” He concluded that the settlements were reached on the basis of projected environmental liabilities and “had no relation to the amount of insurance premiums paid.” PSC’s expert relied, in part, on the answers to interrogatories that were provided by National Fuel. It was clear from this evidence that National Fuel sought coverage for its environmental liabilities under its general liability insurance policies. After those carriers initially denied the claims, National Fuel retained environmental consultants to estimate the potential environmental site investigation and remediation costs. The attorney who represented National Fuel in the settlement negotiations submitted an affidavit, affirming that the environmental report was prepared “explicitly for insurance settlement negotiation purposes only, in order to identify actual and potential environmental risks” and that counsel used the report “to present settlement demands” to the insurance companies. Although the insurers asserted that the policies did not apply to environmental liability, they ultimately settled.

The evidence in the record therefore establishes that the insurance proceeds were pursued and obtained for the specific purpose of dealing with potential environmental liability. Given that the policies at issue were general, and not environmental, liability policies, the proportion of premiums paid by the various entities was completely unrelated to the settlement proceeds. The IES report was at least related to the subject of the settlement—environmental liability. The methodology the majority embraces as beyond the reach of the PSC has no demonstrated relationship to that issue, the settlement negotiations or the settlement proceeds. We simply are not confronted with a choice of two prudent methodologies.

The idea of dividing insurance proceeds among insureds in proportion to premiums is strange at best. The reason for buying insurance is to protect against unforeseen losses, not to get a return on premiums paid. The “premiums paid” methodology, as applied in this case, gives “protection” against environmental liabilities to companies that suffered no environmental loss, including some that may never have had any environmental risk. If a utility had negotiated such an allocation at arm’s length with independent coinsureds, the agreement would raise a serious question of prudence. Here, where the allocation of insurance proceeds was among affiliated companies, whose management had an obvious interest in maximizing the burden on the ratepayers in order to minimize cost to the shareholders, the PSC was all the more justified in looking at that allocation with a skeptical eye.

In these circumstances, the PSC clearly had a rational basis to conclude that the allocation of proceeds to National Fuel’s subsidiaries based on premiums paid was imprudent. There is substantial evidence to support the PSC’s determination and therefore the Appellate Division judgment should be reversed.

Judges Ciparick, Read and Jones concur with Judge Graffeo; Chief Judge Lippman dissents and votes to reverse in a separate opinion in which Judges Smith and Pigott concur.

Judgment affirmed, with costs.

      . In New York, utility rates are set by the PSC so that a company may earn a reasonable return on its investment (see e.g. Matter of Rochester Tel. Corp. v Public Serv. Commn. of State of N.Y., 87 NY2d 17, 29 [1995]). Normal operating costs that are incurred by a utility are usually passed along in the rates charged to the utility’s customers.

      . The settlement distribution issue was only one of many issues that were before the administrative law judge. Because those other issues are not raised in this appeal, we do not address them.

      . As with the ALJ’s decision, this was one component of the PSC’s determination, which addressed a host of other issues that are not before us.

      . At the time of the settlements, the coverage issue was an open question of law. After the settlements were reached, the availability of SIR coverage under general liability insurance policies was restricted in New York by our holding in Consolidated Edison Co. of N.Y. v Allstate Ins. Co. (98 NY2d 208 [2002]), where we ruled that the insured bears the burden of proving that environmental pollution was caused by a “fortuitous” event. National Fuel’s decision to settle its claims, rather than litigate, therefore provided its ratepayers with a benefit—almost $37 million in SIR resources that otherwise might have been unavailable.

      . Our dissenting colleagues attempt to justify the PSC’s finding of imprudence on the alternative ground that the amount of premiums paid was irrelevant because the insurance provided general liability, rather than environmental, coverage (see dissenting op at 373). Because the PSC did not rely on this distinction, the order cannot be upheld on this basis (see Matter of Scherbyn, 77 NY2d at 758). Thus, the dissent overlooks the fundamental principle of administrative law that the propriety of an agency’s action is judged solely by the grounds that were invoked by it (see e.g. Matter of Consolidated Edison Co. of N.Y. v Public Serv. Commn., 63 NY2d at 441). In any event, we question the dissent’s underlying premise that the premiums paid were “completely unrelated” to the settlement proceeds (dissenting op at 373) since the premiums were used to secure coverage that ultimately funded the settlements.