author:
Ciparick, J.
      Pigott, J.

text:
    [958 NE2d 77, 934 NYS2d 43]
    Greenberg, Trager & Herbst, LLP, Appellant, v HSBC Bank USA et al., Respondents. (And a Third-Party Action.)
    Argued September 7, 2011;
    decided October 13, 2011

      POINTS OF COUNSEL

      Greenberg, Trager & Herbst, LLP, New York City (Kalvin Kamien, Richard J. Lambert and Paul V. Lucas of counsel), for appellant.
    I. The First Department committed reversible error in holding that Citibank, N.A. has no obligation to have a reasonable procedure for the detection of counterfeit Citibank bank checks and that Citibank has absolute immunity for negligence in failing to detect counterfeit bank checks. (Putnam Rolling Ladder Co. v Manufacturers Hanover Trust Co., 74 NY2d 340; Monreal v Fleet Bank, 95 NY2d 204; JP Morgan Chase Bank, N.A. v Pinzler, 28 Misc 3d 1214[A], 2010 NY Slip Op 51324[U].) II. Since Citibank was in the best position to detect that the Citibank check was counterfeit, and Citibank’s negligence in failing to detect the counterfeit check caused Greenberg, Trager & Herbst, LLP’s (GTH) loss, the First Department should have ruled that Citibank is liable to GTH for GTH’s loss on principles of equity and estoppel. (Swiss Credit Bank v Chemical Bank, 422 F Supp 1305; Bunge Corp. v Manufacturers Hanover Trust Co., 31 NY2d 223; Fireman’s Fund Ins. Co. v Bank of NY., 146 AD2d 95; Banco Mercantil de Sao Paulo v Nava, 120 Misc 2d 517; Marine Midland Bank v Umber, 96 Misc 2d 835; Hall v Bank of Blasdell, 306 NY 336; Chemical Bank of Rochester v Haskell, 51 NY2d 85; JP Morgan Chase Bank, N.A. v Pinzler, 28 Misc 3d 1214[A], 2010 NY Slip Op 51324[U].) III. HSBC Bank USA was grossly negligent and/or negligent in failing to advise Greenberg, Trager & Herbst, LLP that the Citibank check had been dishonored and returned by Citibank, N.A. (Dobroshi v Bank of Am., N.A., 65 AD3d 882; Cristallina v Christie, Manson & Woods Intl., 117 AD2d 284; American Motorists Ins. Co. v Keep Servs., Inc., 63 AD3d 865; Putnam Rolling Ladder Co. v Manufacturers Hanover Trust Co., 74 NY2d 340; Monreal v Fleet Bank, 95 NY2d 204; Aikens Constr. of Rome v Simons, 284 AD2d 946; Herzog, Engstrom & Koplovitz v Union Natl. Bank, 226 AD2d 1004; New York Credit Men’s Adj. Bur. v Manufacturers Hanover Trust Co., 41 AD2d 912; Broadway Natl. Bank v Barton-Russell Corp., 154 Misc 2d 181; JP Morgan Chase Bank, N.A. v Pinzler, 28 Misc 3d 1214[A], 2010 NY Slip Op 51324[U].) IV. Since HSBC Bank USA committed multiple acts of negligence and malfeasance in failing to notify Green-berg, Trager & Herbst, LLP (GTH) of the returned Citibank check, HSBC is liable to GTH for GTH’s loss on principles of equity and estoppel. (Bunge Corp. v Manufacturers Hanover Trust Co., 31 NY2d 223; Fireman’s Fund Ins. Co. v Bank of N.Y., 146 AD2d 95; Swiss Credit Bank v Chemical Bank, 422 F Supp 1305; Hall v Bank of Blasdell, 306 NY 336; Chemical Bank of Rochester v Haskell, 51 NY2d 85; Banco Mercantil de Sao Paulo v Nava, 120 Misc 2d 517; Putnam Rolling Ladder Co. v Manufacturers Hanover Trust Co., 74 NY2d 340; Monreal v Fleet Bank, 95 NY2d 204.) V. The First Department improperly amended the UCC by judicial fiat in holding that a bank may allege an “administrative return” (a concept not recognized by the UCC) to avoid its statutory duty under the UCC to advise a depositor by the midnight deadline that a check has been dishonored and returned in order to have the right to charge back the check amount to the customer’s account. (Bright Homes v Wright, 8 NY2d 157; Davis v Davis, 71 AD3d 13; Manufacturers Hanover Trust Co. v Akpan, 91 Misc 2d 622.)

      Phillips Lytle LLP, Buffalo (Preston L. Zarlock and Patricia A. Mancabelli of counsel), and Michael R. Mendola for HSBC Bank USA, respondent.
    I. HSBC Bank. USA had an absolute right to revoke the provisional credit and charge-back appellant’s account. (Gluck v JPMorgan Chase Bank, 12 AD3d 305; Peter Marino, Ltd. v Bank of N.Y., 250 AD2d 485; Josephs v

      Bank of N.Y., 302 AD2d 318; Mahopac Natl. Bank v Gelardi, 299 AD2d 460; Hanna v First Natl. Bank of Rochester, 87 NY2d 107; Call v Ellenville Natl. Bank, 5 AD3d 521; Allen v Carver Fed. Sav. & Loan Assn., 123 Misc 2d 704; Commerce Bank, N.A. v Jones, 19 Misc 3d 1131 [A], 2008 NY Slip Op 50972[U]; Ridge-wood Sav. Bank v Grubb, 11 Misc 3d 1093[A], 2006 NY Slip Op 50835[U]; Chase v Morgan Guar. Trust Co., 590 F Supp 1137.) II. HSBC Bank USA did not violate any notice obligation to appellant following the Federal Reserve Bank’s misrouting of the counterfeit check. (Hanna v First Natl. Bank of Rochester, 87 NY2d 107; Manufacturers Hanover Trust Co. v Akpan, 91 Misc 2d 622; Bank of N.Y. v Asati, Inc., 184 AD2d 443; Broadway Natl. Bank v Barton-Russell Corp., 154 Misc 2d 181; Northpark Natl. Bank v Bankers Trust Co., 572 F Supp 524; Snyder v Wetzler, 84 NY2d 941; Bingham v New York City Tr. Auth., 99 NY2d 355; United States Fid. & Guar. Co. v Federal Reserve Bank of N.Y., 590 F Supp 486, 786 F2d 77.) III. Appellant cannot shift the risk of loss to HSBC Bank USA. (Allen v Carver Fed. Sav. & Loan Assn., 123 Misc 2d 704; Chase v Morgan Guar. Trust Co., 590 F Supp 1137; United States Fid. & Guar. Co. v Federal Reserve Bank of N.Y., 590 F Supp 486, 786 F2d 77; Isaacs v Chartered New England Corp., 378 F Supp 370; Call v Ellenville Natl. Bank, 5 AD3d 521; Moughrabie v Citibank, N.A., 20 Misc 3d 136[A], 2008 NY Slip Op 51528[U]; Dobroshi v Bank of Am., N.A., 65 AD3d 882, 14 NY3d 785; Bennice v Lakeshore Sav. & Loan Assn., 254 AD2d 731; Kings Premium Serv. Corp. v Manufacturers Hanover Trust Co., 115 AD2d 707; Aaron Ferer & Sons Ltd. v Chase Manhattan Bank, N.A., 731 F2d 112.) IV. The First Department correctly held that appellant raised no triable issue of fact regarding its negligence claim. (Sheila C. v Povich, 11 AD3d 120; Clementoni v Consolidated Rail Corp., 30 AD3d 986, 8 NY3d 963; Pulka v Edelman, 40 NY2d 781; Tevdorachvili v Chase Manhattan Bank, 103 F Supp 2d 632; Calisch Assoc. v Manufacturers Hanover Trust Co., 151 AD2d 446; Polzer v TRW, Inc., 256 AD2d 248; Quail Ridge Assoc. v Chemical Bank, 162 AD2d 917; Wexselblatt v Bank of Boston Intl., 666 F Supp 513; Luxonomy Cars v Citibank, N.A., 65 AD2d 549; Putnam Rolling Ladder Co. v Manufacturers Hanover Trust Co., 74 NY2d 340.) V. The First Department correctly determined that appellant was in the best position to avoid the loss. (Bunge Corp. v Manufacturers Hanover Trust Co., 31 NY2d 223; Swiss Credit Bank v Chemical Bank, 422 F Supp 1305; Fireman's Fund Ins. Co. v Bank of N.Y., 146 AD2d 95; Hall v Bank of Blasdell, 306 NY 336; Chemical Bank of Rochester v

      Haskell, 51 NY2d 85; Banco Mercantil de Sao Paulo v Nava, 120 Misc 2d 517.) VI. HSBC Bank USA had an absolute right to setoff against the IOLA account for the provisional credit. (United States Trust Co. of N.Y. v McSweeney, 91 AD2d 7; Marine Midland Bank-N.Y. v Graybar Elec. Co., 41 NY2d 703; 622 W. 113th St. Corp. v Chemical Bank N.Y. Trust Co., 52 Misc 2d 444; Miles v Bank of Commerce, 76 Misc 2d 623; In re Bennett Funding Group, Inc. v Manufacturers & Traders Trust Co., 146 F3d 136; Chemical Bank v Ettinger, 196 AD2d 711; Gillman v Chase Manhattan Bank, 73 NY2d 1.) VII. Appellant waived its claim to punitive damages. (Schwartz v Aetna Life Ins. & Annuity Co., 214 AD2d 975; Sanderson v Bellevue Maternity Hosp., 259 AD2d 888; Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603; New York Univ. v Continental Ins. Co., 87 NY2d 308; New York Mar. & Gen. Ins. Co. v Tradeline [L.L.C.], 266 F3d 112; Ladenburg Thalmann & Co. Inc. v Imaging Diagnostic Sys., Inc., 176 F Supp 2d 199.)

      Zeichner Ellman & Krause LLP, New York City (Barry J. Glickman of counsel), for Citibank, N.A., respondent.
    I. Citibank, N.A. properly rejected payment of the check as a matter of law pursuant to the UCC — it had no additional duty to notify that the check was counterfeit. (Pace Publs. v Bank of N.Y., 183 AD2d 601; Campbell v Citibank, 302 AD2d 150; Putnam Rolling Ladder Co. v Manufacturers Hanover Trust Co., 74 NY2d 340; Monreal v Fleet Bank, 95 NY2d 204; JP Morgan. Chase Bank, N.A. v Pinzler, 28 Misc 3d 1214[A], 2010 NY Slip Op 51324[U].) II. Plaintiff has no negligence nor equity and estoppel claims against Citibank, N.A. as a matter of law. (Prudential-Bache Sec. v Citibank, 73 NY2d 263; Putnam Rolling Ladder Co. v Manufacturers Hanover Trust Co., 74 NY2d 340; Met Frozen Food Corp. v National Bank of N. Am., 89 Misc 2d 1033; Casco Bank & Trust Co. v Bank of New York, 584 F Supp 763; Hanna v First Natl. Bank of Rochester, 87 NY2d 107; Banco Mercantil de Sao Paulo v Nava, 120 Misc 2d 517; Marine Midland Bank v Umber, 96 Misc 2d 835; Hall v Bank of Blasdell, 306 NY 336; Bunge Corp. v Manufacturers Hanover Trust Co., 31 NY2d 223; Fireman’s Fund Ins. Co. v Bank of N.Y., 146 AD2d 95.) III. The Appellate Division properly affirmed the dismissal of plaintiff-appellant’s improper claims for punitive damages and attorneys fees against Citibank, N.A. (Laurie Marie M. v Jeffrey T.M., 159 AD2d 52, 77 NY2d 981; Ossandan v Swiss Bank Corp., 880 F2d 1319; Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603; Luxonomy Cars v Citibank, N.A., 65 AD2d 549; Giblin v Murphy, 73 NY2d 769; Silberstein v First Wall St. Capital Corp.,
      128 AD2d 516; Matter of A.G. Ship Maintenance Corp. v Lezak, 69 NY2d 1; Rollin v Grand Store Fixture Co., Inc., 231 App Div 47; Lurman v Jarvie, 82 App Div 37, 178 NY 559.) IV. The truth is that plaintiff caused its own loss.
   OPINION OF THE COURT

Ciparick, J.

In this dispute between a law firm and two banks, the issues presented are (1) the scope of the duty a payor bank owes to a noncustomer depositor of a counterfeit check and (2) the scope of the duty a depositary bank owes its customer when it acts as a collecting bank during the check collection process. We conclude that neither the depositary/collecting bank nor the payor bank violated any duty owed to the depositor and that summary judgment dismissing the complaint was properly granted.

I

Plaintiff Greenberg, Trager & Herbst, LLP (GTH) is a law firm primarily involved in construction litigation law. In September 2007, a partner at GTH received an e-mail from a representative of Northlink Industrial Limited (Northlink), a Hong Kong company. The e-mail stated that Northlink was looking for legal representation to, among other things, assist it in the collection of debts owed by its North American customers. A series of e-mails followed discussing the nature of Northlink’s desired representation. At some point, GTH indicated a willingness to represent Northlink and requested a $10,000 retainer. The law firm was informed that a Northlink customer had sent a payment to GTH and that GTH could take its retainer from those funds. A Citibank check for $197,750 was received by GTH and GTH was instructed, via e-mail, to remit the funds to Northlink while retaining $10,000 as a retainer. The e-mail also provided wiring instructions to Citibank in Hong Kong. On Friday, September 21, 2007, GTH deposited the check into its attorney trust account at HSBC.

The next business day, Monday, September 24th, the HSBC account reconciliation department processed the check and pursuant to the federal funds availability law provisionally credited GTH’s account for $197,750. HSBC, like most commercial banks, presents its checks through the Federal Reserve Bank. HSBC determines which Federal Reserve Bank should receive the check for presentment to the appropriate payor bank by utilizing the American Bankers Association routing number located on the bottom of the check. The routing number is part of the microencoding number (MICE) on the bottom of every check. The routing number on the bottom of this check read 026009645. According to HSBC, this routing number indicated that the check should be sent to the Federal Reserve Bank of Philadelphia (FRBP) for presentment to the appropriate payor bank. Accordingly, HSBC sent the check to FRBP for processing. FRBP presented an image replacement document (IRD) of the check to Citibank’s Item Processing North Department in Englewood Cliffs, New Jersey (Item Processing North) that same day.

According to Citibank, Item Processing North processes only checks with the following three routing numbers: 021000089, 021272655 and 221172610. If a check contains a routing number other than one of these three routing numbers, the check cannot be processed by Item Processing North because it only has access to account information associated with the three routing numbers. Because the routing number was not recognized by Item Processing North, the automated sorting system directed the IRD to the reject pocket. This happens when there is an issue with the MICR on the check. An Image Processing North clerk examined the IRD and determined that the routing number was not a number that belonged to Image Processing North. Image Processing North sent the IRD back to FRBR with the notation “sent wrong.” The FRBP sent the IRD back to HSBC.

HSBC received the IRD with the notation “sent wrong” the next day, September 25, 2007. According to HSBC, when a check is returned for reasons other than dishonor, such as a damaged or illegible routing number, it is known in the industry as an “administrative return.” HSBC also noted that when a payor bank dishonors a check, HSBC typically receives an Electronic Advanced Return Notification System (EARNS) notification. HSBC did not receive such a notice on September 24 or 25. Because the check was marked “sent wrong,” HSBC assumed that there was a problem with the routing number that required repairing. HSBC then repaired the routing number by utilizing the partial routing number located on the top right hand corner of the check. HSBC, using the repaired routing number, determined that the check actually belonged to Citibank, Las Vegas. HSBC placed the repaired routing number on the bottom of the check. On September 26, 2007, HSBC sent the check to the Federal Reserve Bank, San Francisco (FRBS). HSBC never informed GTH of the “administrative return” of the check.

On September 27, 2007, a GTH partner called a representative of HSBC inquiring as to whether the check had “cleared” and if the funds were available for disbursement. According to GTH, a five-year banking relationship existed between them. GTH was informed that the funds were available. Later that day, GTH wired $187,750 from its account to Hong Kong pursuant to the wiring instructions it received from Northlink. GTH claims that, but for the assurance that the check had “cleared,” it would not have forwarded the funds. On September 28, 2007, HSBC confirmed to GTH that the wire transfer had been consummated.

On October 2, 2007, HSBC received an EARNS notice from Citibank that the check was being dishonored as “RTM [return to maker] Suspect Counterfeit.” An HSBC Branch Manager later contacted GTH, informing them that the check had been dishonored and returned as counterfeit. HSBC then revoked its provisional settlement and charged back GTH’s account.

On October 17, 2007, GTH commenced this action against HSBC and Citibank sounding in conversion and conspiracy; negligence and negligent misrepresentation by HSBC for failure to inform GTH that the check had been returned and dishonored on September 25, and for informing GTH over the phone that the funds had “cleared” and were available for disbursement; and negligence by Citibank for failing to detect that the check was counterfeit when it was originally presented to Image Processing North on September 24. Both Citibank and HSBC moved for summary judgment dismissing the complaint. Supreme Court ruled from the bench that HSBC had no duty under the Uniform Commercial Code (UCC) to inform GTH that the check had been returned “sent wrong” on September 25th, but rather that the dishonor actually took place when HSBC discovered the check was “Suspect Counterfeit.” The court granted both HSBC and Citibank’s motions and dismissed the complaint in its entirety.

The Appellate Division affirmed, holding that because the check had not been dishonored pursuant to UCC 4-212, HSBC had no duty to inform GTH of the administrative return of the check. The court further held that, even if an HSBC employee misrepresented that the check had cleared, GTH’s reliance on such a misrepresentation does not give rise to an action for negligent misrepresentation barring a fiduciary relationship, which, it said, does not exist between a bank and its customer. The court additionally found that if the principle of estoppel governs the case, GTH was in the best position to guard against the risk of a counterfeit check by knowing its client. The court finally stated that the personnel at Citibank were not in a position to discern whether the check was counterfeit and had no duty to inform HSBC at that time (see Greenberg, Trager & Herbst, LLP v HSBC Bank USA, 73 AD3d 571, 572 [1st Dept 2010]). We granted GTH leave to appeal (15 NY3d 707 [2010]) and now affirm.

II

The manner in which checks are processed by banks is governed by the Uniform Commercial Code. The UCC defines a “Depositary Bank” as “the first bank to which an item is transferred for collection” (UCC 4-105 [a]). A “Collecting Bank” is defined as “any bank handling the item for collection except the payor bank” (UCC 4-105 [d]). A “Payor Bank” is defined as “a bank by which an item is payable as drawn or accepted” (UCC 4-105 [b]). An “Intermediary Bank” is defined as “any bank to which an item is transferred in course of collection except the depositary or payor bank” (UCC 4-105 [c]).

In a typical check presentation scenario, a bank customer deposits a check at its bank, the depositary bank. After deposit by the customer, the depositary bank either presents the check to the payor bank, or as is more commonplace, the depositary bank sends the check to a clearing house, which acts as an intermediary bank. Once the depositary bank sends the check to the intermediary bank, the depositary bank becomes a collecting bank. The intermediary bank then presents the check to the payor bank (at which time the intermediary bank is also a collecting bank). When the check is received by the payor bank, it either pays the check, returns the check or dishonors the check.

The UCC prescribes the duties the various banks owe to a depositor. A collecting bank must use ordinary care in presenting a check or sending a check for presentment, sending notice of dishonor or nonpayment or returning a check, and settling the check when the collecting bank receives final settlement from the payor bank (see UCC 4-202 [1]). A collecting bank has until midnight of the next banking day (its “midnight deadline” [UCC 4-104 (h)]) to take the above actions when receiving a check, notice of dishonor or final settlement of the check (see UCC 4-202 [2]). In other words, whenever a collecting bank receives a check from a depositor or notice or settlement from the payor bank it must act on it by midnight the next banking day.

A payor bank must, by its “midnight deadline” (UCC 4-104 [h]), pay the item (see UCC 4-302), return the item or send written notice of dishonor or nonpayment (see UCC 4-301). Final settlement of a check occurs when the payor bank has paid the item or fails to return the check, or sends written notice of dishonor or nonpayment of the check by its midnight deadline (see UCC 4-301 [1]; 4-302 [a]).

Pursuant to the Expedited Funds Availability Act (12 USC § 4001 et seq.), banks are required to make funds from a deposited check available for the depositor’s withdrawal within certain short time periods (see 12 USC § 4002 [b] [1]). The purpose of the “[a]ct is to provide faster availability of deposited funds” (Haas v Commerce Bank, 497 F Supp 2d 563, 565 [SD NY 2007]). This availability is provisional and the collecting bank has the right to charge back the amount if the check is dishonored or the bank fails to receive a settlement for the check (see UCC 4-212).

In this case, GTH deposited the check into its account at HSBC on Friday, September 21, 2007. The next business day, Monday, September 24, 2007, HSBC, within its midnight deadline, sent the check to FRBP for presentation, as well as provisionally making the funds available to GTH. FRBP presented the check to Citibank on that same day. Citibank returned the check as “sent wrong,” within its midnight deadline, on September 25, 2007. On September 26, 2007, within its midnight deadline, HSBC repaired the routing number of the check and sent it to the FRBS, which ultimately dishonored it as counterfeit on October 2, 2007.

III.

GTH claims that Citibank was negligent in breaching its obligation to implement effective procedures for detecting counterfeit checks in that it failed to detect that the item was fraudulent when Citibank processed the check at Item Processing North. GTH notes the uncontroverted fact that on September 24, 2007, the day Citibank returned the check in question to the FRBP, Citibank returned at least six other checks, each in the identical amount of $197,750, which should have put Citibank on notice that something was amiss. Additionally, Citibank admits that the personnel who reviewed checks after being sent to the reject packet were not trained to determine if they were counterfeit. In short, it is clear that Citibank did nothing to determine if the check was counterfeit prior to returning it to FREE

To establish a cause of action sounding in negligence, a plaintiff must establish the existence of a duty on defendant’s part to plaintiff, breach of the duty and damages (see Akins v Glens Falls City School Dist., 53 NY2d 325, 333 [1981]). Plaintiff alleges that Citibank owed it a duty to have procedures in place to detect counterfeit checks. For this proposition plaintiff cites Putnam Rolling Ladder Co. v Manufacturers Hanover Trust Co. (74 NY2d 340 [1989]) and Monreal v Fleet Bank (95 NY2d 204 [2000]).

The duty of a payor bank (in this case Citibank) to a non-customer depositor of a check is derived solely from UCC 4-301 and 4-302. UCC 4-301 provides in pertinent part:

“(1) Where an authorized settlement for a demand item . . . received by a payor bank . . . has been made before midnight of the banking day of receipt the payor bank may revoke the settlement and recover any payment if before it has made final payment . . . and before its midnight deadline it
“(a) returns the item; or
“(b) sends written notice of dishonor or nonpayment if the item is held for protest or is otherwise unavailable for return.”

UCC 4-302 (a) provides that a payor bank is liable for an item received by the payor bank if it “does not pay or return the item or send notice of dishonor until after its midnight deadline” (emphasis added). In this case, it is uncontroverted that Citibank returned the check to FRBP within its midnight deadline.

GTH’s reliance on Putnam and Monreal is unavailing. Those cases dealt with claims by a customer of a payor bank for that payor bank’s failure to exercise ordinary care with regards to forged checks drawn on the customer’s account and examined the duties owed by a payor bank to its customers (see Putnam, 74 NY2d at 343-346; Monreal, 95 NY2d at 206-207). These duties are codified in article 4, part 4 of the UCC. Specifically, the duty of a payor bank to exercise ordinary care in paying a customer’s item is found in UCC 4-406 (3).

In this case, GTH is not a customer of Citibank and the duties codified in UCC 4-406 (3) are not applicable here. Moreover, there was never any payment made by Citibank on the check. In short, the only duty Citibank owed GTH was to pay the check, return the check or send notice of dishonor of the check by midnight of the next banking day after receiving the check. It is uncontroverted that Citibank returned the check within its midnight deadline. Because GTH cannot establish any duty owing from Citibank that was breached, GTH’s claims against Citibank were properly dismissed.

IV

As against HSBC, GTH alleges two causes of action. First, it alleges negligent misrepresentation as a result of HSBC informing GTH that the check had “cleared” and the funds were available for transfer and second, it alleges negligence for failing to inform GTH and charge back the check on September 26th, when it was originally returned on September 25th by Citibank via FREE

As for the claim of negligent misrepresentation, “liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified” (Kimmell v Schaefer, 89 NY2d 257, 263 [1996]). “[T]he relationship between a bank and its depositor is one of debtor and creditor” (Brigham v McCabe, 20 NY2d 525, 530 [1967]; see also Solicitor for Affairs of His Majesty’s Treasury v Bankers Trust Co., 304 NY 282, 291 [1952]) and “an arm’s length borrower-lender relationship . . . does not support a cause of action for negligent misrepresentation” (Dobroshi v Bank of Am., N.A., 65 AD3d 882, 884 [1st Dept 2009]; see also Aaron Ferer & Sons Ltd. v Chase Manhattan Bank, N.A., 731 F2d 112, 123 [2d Cir 1984]; Korea First Bank of N.Y. v Noah Enters., Ltd., 12 AD3d 321, 323 [1st Dept 2004], lv denied 4 NY3d 710 [2005]; River Glen Assoc. v Merrill Lynch Credit Corp., 295 AD2d 274, 275 [1st Dept 2002]; FAB Indus. v BNY Fin. Corp., 252 AD2d 367, 367 [1st Dept 1998]). This is true even if there is a long-standing relationship between the customer and a particular bank employee (see Manufacturers Hanover Trust Co. v Yanakas, 7 F3d 310, 318 [2d Cir 1993]; Bennice v Lakeshore Sav. & Loan Assn., 254 AD2d 731, 732 [4th Dept 1998]) or “if the parties are familiar or friendly” (Call v Ellenville Natl. Bank, 5 AD3d 521, 523 [2004]).

GTH argues that, pursuant to UCC 4-201, HSBC was an agent of GTH during the period that HSBC was acting as a collecting bank for plaintiff. UCC 4-201 (1) provides, in pertinent part, that “prior to the time that a settlement given by a collecting bank for an item is or becomes final . . . the bank is an agent or sub-agent of the owner of the item and any settlement given for the item is provisional.” GTH thus claims that pursuant to this agency relationship, HSBC owed a fiduciary duty to GTH. HSBC claims that it owed no fiduciary duty, and also relies on a waiver contained in the contract between GTH and HSBC. That contract contained the following provision:

“BALANCE INFORMATION
“Balances may change frequently throughout a business day. You hereby waive any claim against the Bank based on representations made by the Bank, either orally or in writing to you, or your authorized person, or to any other party, regarding balance information.”

Although an agent owes a duty to its principal to disclose all material facts that come to its knowledge regarding the scope of the agency (see Kirschner v KPMG LLP, 15 NY3d 446, 480 [2010]), the purpose of UCC 4-201 is not to impose a fiduciary duty on a collecting bank. We have interpreted the statute such that the use of the term “agent” means that the item and any inherent risk in that item remains with the depositor and. not the collecting bank (see Hanna v First Natl. Bank of Rochester, 87 NY2d 107, 119 [1995] [“(a) collecting bank acts as the agent of its customer, and until such time as the collecting bank receives final payment, the risk of loss continues in the customer, the owner of the item”]; Long Is. Natl. Bank v Zawada, 34 AD2d 1016, 1017 [2d Dept 1970] [“(Section 4-201) operates to keep the risk of loss upon the owner of the item rather than the bank and gives to the depositary bank a right to reimbursement superior to the owner’s rights to the proceeds and superior to the rights of the owner’s creditors”]).

To resolve this case, we do not need to decide whether the relationship between GTH and HSBC would preclude all possible claims for negligent misrepresentation, but it is clear that the claim GTH asserts here cannot succeed, even accepting as true, as we must at this stage of the litigation, GTH’s version of the conversation with the representative at HSBC. GTH’s claim is based on the alleged oral statement by the HSBC representative that the check had “cleared” — an ambiguous remark that may have been intended to mean only that the amount of the check was available (as indeed it was) in GTH’s account. Reliance on this statement as assurance that final settlement had occurred was, under the circumstances here, unreasonable as a matter of law.

GTH’s claim of negligence against HSBC alleges that HSBC owed a duty to GTH to inform it and charge its account back pursuant to UCC 4-212 (1) when the check was first returned marked “sent wrong” to HSBC on September 25th. GTH argues that the return of the check was a dishonor of the check, thereby triggering HSBC’s duty to inform GTH and charge back its account by the midnight deadline (i.e., September 26th, the day before GTH wired the funds). UCC 4-212 (1) provides:

“If a collecting bank has made provisional settlement with its customer for an item and itself fails by reason of dishonor, suspension of payments by a bank or otherwise to receive a settlement for the item which is or becomes final, the bank may revoke the settlement given by it, charge back the amount of any credit given for the item to its customer’s account or obtain refund from its customer whether or not it is able to return the items if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notifica- , tion of the facts. These rights to revoke, charge-back and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final.”

However, the duty a collecting bank owes to a depositor is that of ordinary care in handling the item (see UCC 4-202). The UCC does not define “ordinary care,” but it should be read as to have its normal tort meaning (see Putnam, 74 NY2d at 346). Other courts have determined that while “ordinary care [should] be [understood to have] its normal tort meaning, the realities of the modern banking system cannot be ignored in evaluating a bank’s negligence” (United States Fid. & Guar. Co. v Federal Reserve Bank of N.Y., 590 F Supp 486, 499 [SD NY 1984] [internal quotation marks omitted]). HSBC argues that when the check was returned “sent wrong,” it was, what is known in the banking industry, an “administrative return.” An “administrative return” occurs when the routing number on the check is damaged or unreadable. When such a return occurs, the bank will do more research, repair the routing number and resubmit the check, which is what happened here. According to HSBC, this type of return is not a dishonor of the check. The check was, in HSBC’s view, still being processed.

GTH argues that the UCC does not provide for an “administrative return” of a check and, therefore, the return of the check was a dishonor of the check. HSBC responds that it acted with “ordinary care” because treating a check returned in this manner as an “administrative return,” repairing the routing number and re-presenting the check is the custom and practice of the banking industry (see Trimarco v Klein, 56 NY2d 98, 105-106 [1982]). HSBC proffered the affidavit of its Assistant Vice-President and First Shift Manager in the Exceptions Processing Department of HSBC as evidence that “administrative returns” occur periodically in the banking industry and are dealt with by repairing the routing number and re-presenting the check. The record demonstrates that HSBC acted with ordinary care (see Putnam, 74 NY2d at 347 [“by showing that it acted in accordance with general banking rules or practices, a bank can ensure that its conduct at least prima facie meets an ordinary care standard”]). GTH, by contrast, offered no evidence in support of its claim that the bank acted unreasonably (see id. at 346 [“a customer could prove a bank lacked ordinary care by presenting any type of proof that the bank failed to act reasonably”]). GTH relies on HSBC’s internal document that noted that the check was returned for insufficient funds as evidence the check was dishonored on September 25th. However, the courts below properly accepted HSBC’s explanation that the document stating the check was returned for insufficient funds was a clerical error. In sum, because GTH offered no proof that HSBC failed in its duty to exercise ordinary care in the handling of the check, and no issues of fact remain, the claim for negligence against HSBC likewise fails.

V

Finally, GTH argues that it should prevail against both defendants under the theory of equitable estoppel. This argument is unavailing. Under the doctrine of equitable estoppel, when innocent parties suffer from the acts of a third person, the party that enabled the third person must bear the loss (see Bunge Corp. v Manufacturers Hanover Trust Co., 31 NY2d 223, 228 [1972]). Here, neither Citibank nor HSBC breached any duty owed to GTH.

GTH argues that the banks were in the best position to determine that the check was counterfeit. However, the Appellate Division held, and we agree, that “[GTH] was in the best position to guard against the risk of a counterfeit check by knowing its ‘client’ ” (Greenberg, 73 AD3d at 572). Additionally,

“the UCC has the objective of promoting certainty and predictability in commercial transactions. By prospectively establishing rules of liability that are generally based not on actual fault but on allocating responsibility to the party best able to prevent the loss by the exercise of care, the UCC not only guides commercial behavior but also increases certainty in the marketplace and efficiency in dispute resolution” (Putnam, 74 NY2d at 349).

The UCC is clear that, until there is final settlement of the check, the risk of loss lies with the depositor (see Hanna, 87 NY2d at 119). Final settlement of a check occurs when the payor bank has:

“(a) paid the item in cash; or
“(b) settled for the item without reserving a right to revoke the settlement and without having such right under statute, clearing house rule or agreement; or
“(c) completed the process of posting the item to the indicated account of the drawer, maker or other person to be charged therewith; or
“(d) made a provisional settlement for the item and failed to revoke the settlement in the time and manner permitted by statute, clearing house rule or agreement” (UCC 4-213 [1]).

It is uncontroverted that since none of the above actions occurred in this case prior to October of 2007, the risk remained with GTH and HSBC retained the right to charge back plaintiffs account pursuant to UCC 4-212. Since GTH cannot establish that defendants breached any duty owed, the courts below have correctly determined that no triable issues of fact exist and properly awarded summary judgment in favor of the defendant banks.

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

Pigott, J.

(dissenting in part). I believe that HSBC is not entitled to summary judgment on GTH’s negligent misrepresentation claim.

Under New York’s Uniform Commercial Code, “[i]f a collecting bank has made provisional settlement with its customer for an item and itself fails by reason of dishonor, suspension of payments by a bank or otherwise to receive a settlement for the item which is or becomes final,” the bank may revoke the settlement and charge back the amount of any credit given for the item to the customer’s account (UCC 4-212 [1]). “The right to charge-back is not affected by . . . failure by any bank to exercise ordinary care with respect to the [check] but any bank so failing remains liable” (id. at 4-212 [4] [b] [emphasis supplied]). Thus, a bank has a duty to exercise ordinary care when dealing with its customers (Aikens Constr. of Rome v Simons, 284 AD2d 946, 947 [4th Dept 2001]). The term “ordinary care” is used with its normal tort meaning and not in any special sense relating to bank collections. A customer may prove a bank “lacked ordinary care by presenting any type of proof that the bank failed to act reasonably” (Putnam Rolling Ladder Co. v Manufacturers Hanover Trust Co., 74 NY2d 340, 346 [1989]). Further, section 4-103 (1) states that “[t]he effect of the provisions of this Article may be varied by agreement except that no agreement can disclaim a bank’s responsibility for its own lack of good faith or failure to exercise ordinary care or can limit the measure of damages for such lack or failure.”

In this case, GTH alleges that on September 27, 2007, David A. Trager, a partner at GTH, telephoned his contact at HSBC, Frances Scott, to inquire about the status of the Citibank check. Trager and Scott had a five-year banking relationship, whereby Trager would call Scott to confirm that checks deposited into GTH’s trust account had cleared and were available for disbursement. Scott informed Trager that the Citibank check had “cleared” and that the funds were available to be wired to another account. Relying in good faith on that statement, Trager asked Scott to wire proceeds of the check, which she did.

HSBC makes much of the fact that the word “cleared” is not found in the UCC and the majority finds it to be ambiguous. However, UCC 1-205 entitled “course of dealing and usage of trade,” defines “usage of trade” as encompassing “any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question” (UCC 1-205 [2]). The term “cleared” is used liberally in the banking business. Indeed, the Federal Trade Commission in a bulletin addressed to consumers states that “[i]t’s best not to rely on money from any type of check . . . unless you know and trust the person you’re dealing with or, better yet — until the bank confirms that the check has cleared” (Federal Trade Commission, FTC Facts for Consumers, Giving the Bounce to Counterfeit Check Scams, Jan. 2007, available at http://www.ftc.gov/bcp/edu/ pubs/consumer/credit/cre40.pdf, cached at http:// www.nycourts.gov/reporter/webdocs/cre40.pdf [emphasis added]). Therefore, I disagree with the majority’s position that relying on this statement was unreasonable as a matter of law (see majority op at 580). I suspect many business professionals would have done the same thing as Trager.

Viewing the facts in the light most favorable to GTH, which we are required to do on this motion for summary judgment, GTH raises questions of fact as to whether HSBC failed to exercise ordinary care when Scott misrepresented the status of the check to Trager (see JP Morgan Chase Bank, N.A. v Pinzler, 28 Misc 3d 1214[A], 2010 NY Slip Op 51324[U] [Sup Ct, NY County 2010]; JP Morgan Chase Bank, N.A. v Cohen, 26 Misc 3d 1215[A], 2009 NY Slip Op 52725[U] [Sup Ct, Albany County 2009]).

Counterfeit check scams are pervasive. That Citibank could not recognize one of its own checks as counterfeit is testament to the seriousness of this problem within the banking industry. It is no answer that Citibank and HSBC seemed to stumble along over a period of 10 days resulting in one of their customers being bilked out of $187,750. This problem has long been known to the banks and a mere recitation of their normal practices does not, in my view, establish the appropriate standard of care in this day and age and certainly not their entitlement to summary judgment.

Equally unavailing is HSBC’s claim that the negligent misrepresentation claim must fail because GTH waived all claims concerning GTH’s balance information. Even if GTH waived such claims, this is not a debate about who said what to whom about an account balance. Rather, the issue is whether HSBC told GTH that the check had cleared and whether GTH could have relied on HSBC’s representations to that effect.

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

Order affirmed, with costs.

      . An image replacement document is a digital representation of the check and maintains the status of a legal check in lieu of the original check.

      . According to Citibank, approximately 2% of scanned checks are redirected to the reject pocket each day. The checks are then manually reviewed to determine why they were rejected.

      . GTH notes that an internal HSBC document states that the check was returned for “Insuff Funds.” HSBC explained that this internal document is a printout from HSBC’s returned imaging system, which contains a true and accurate copy of the check. The image of the check itself has the notation, from Citibank, “sent wrong.” HSBC further explained that when a check image is placed into HSBC’s returned image system, descriptive information is associated with it. The default setting for the descriptive information is “insufficient funds.” According to HSBC, an operator did not adjust the default setting and, therefore, the descriptive information read “insufficient funds.” However, Citibank did not indicate that the check had been returned for insufficient funds, and there is no indication on the image of the check itself that it was returned for insufficient funds. Moreover, there is no evidence that HSBC treated the check as one that had been returned for insufficient funds.

      . The contents of this conversation are disputed, with HSBC having a different recollection of the conversation. For purposes of this summary judgment motion we must accept the version as proffered by GTH.

      . GTH does not address its claims for conversion or conspiracy on this appeal and these claims appear to have been abandoned.

      . UCC 4-212 (1) states that a collecting bank retains its right to charge back to a customer’s account any provisional credit it has given if, upon an item’s dishonor, the bank “returns the item or sends notification of the facts” by the midnight deadline. The midnight deadline “is midnight on [a bank’s] next banking day following the banking day on which it receives the relevant item” (see UCC 4-104 [1] [h]).

      . UCC 4-406 (1) requires that a customer examine its bank statement to determine if there are any unauthorized signatures or alterations on any item and notify its bank promptly. UCC 4-406 (2) states that if the bank establishes that the customer failed to comply with subsection (1) with respect to an item, the customer is precluded from asserting against the bank its unauthorized signature or any alteration of the item. UCC 4-406 (3) provides: “The preclusion under subsection (2) does not apply if the customer establishes lack of ordinary care on the part of the bank in paying the item[ ]” (emphasis added).

      . We note that GTH, in its own words, asked HSBC if the check had “cleared.” “The term ‘cleared’ is not employed in the UCC and, as commonly used, is not the equivalent of ‘final settlement’ ” (Call v Ellenville Natl. Bank, 5 AD3d 521, 524 [2d Dept 2004]).

       If the term “cleared” means anything in common banking usage, it is that final settlement has occurred (see Black’s Law Dictionary [9th ed 2009], clear [defining the term as it relates to a bank as “to pay (a check or draft) out of funds held on behalf of the maker <the bank cleared the employee’s check>”; defining the term as it relates to “a check or draft” as “to be paid by the drawee bank out of funds held on behalf of the maker <the check cleared yesterday>”]).


source: Caselaw Access Project

author: Jones, J.

license: Public Domain

text:
    [958 NE2d 88, 934 NYS2d 54]
    New York and Presbyterian Hospital, as Assignee of Joaquin Benitez, Respondent, v Country-Wide Insurance Company, Appellant
    Argued September 6, 2011;
    decided October 13, 2011

      POINTS OF COUNSEL

      Thomas Torto, New York City, and Jaffe & Koumourdas, LLP for appellant.
    A proof of claim which is given beyond the 30-day period immediately after the accident cannot serve as a timely notice of accident under 11 NYCRR 65-1.1. (New York & Preshyt. Hosp. v American Tr. Ins. Co., 45 AD3d 822; St. Vincent’s Hosp. & Med. Ctr. v Country Wide Ins. Co., 24 AD3d 748; Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274.)

      Joseph Henig, P.C., Bellmore (Joseph Henig and Gregory Henig of counsel), for respondent.
    Defendant’s reason for the denial of claim was incorrect as a matter of law, as the form NF-5 was submitted timely and served as both the “proof of claim” and the “notice of claim.” (Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564; Todaro v GEICO Gen. Ins. Co., 46 AD3d 1086; Matter of John Paterno, Inc. v Curiale, 88 NY2d 328; Dermatossian v New York City Tr. Auth., 67 NY2d 219.)
   OPINION OF THE COURT

Jones, J.

The question before the Court is whether a health care services provider, as assignee of a person injured in a motor vehicle accident, can recover no-fault benefits by timely submitting the required proof of claim after the 30-day period for providing written notice of the accident has expired. We hold it cannot.

On July 19, 2008, Joaquin Benitez was injured in a traffic accident which took place in Manhattan, and treated at New York and Presbyterian Hospital (Presbyterian) from that date through July 26, 2008. On the date of Benitez’s discharge, he and Presbyterian executed an assignment of no-fault benefits form under which he assigned to Presbyterian “all rights[,] privileges and remedies to payment for health care services provided by [Presbyterian] to which [Benitez is] entitled under Article 51 (the No-Fault statute) of the Insurance Law.” Benitez and Presbyterian also executed a completed NYS Form NF-5 (i.e., a hospital facility form). Neither Benitez nor Presbyterian provided the required written notice of accident to his no-fault insurer, Country-Wide Insurance Company (Country-Wide), within 30 days of the accident as required by the New York insurance regulations (11 NYCRR 65-1.1).

On August 25, 2008, Presbyterian, as assignee of Benitez, billed Country-Wide (i.e., sought no-fault benefits) for the sum of $48,697.63. In billing Country-Wide, Presbyterian submitted a number of documents, including the required proof of claim (the NF-5 form). Country-Wide received the bill and other documents on August 28, 2008, 40 days after the accident. CountryWide denied Presbyterian’s claim on the ground it had not received timely notice of the accident under 11 NYCRR 65-1.1 (d), which requires an “eligible insured person” to give written notice to the insurer “in no event more than 30 days after the date of the accident.”

Presbyterian brought this action against Country-Wide to compel payment of no-fault benefits in the amount of its bill, plus statutory interest and attorney’s fees, alleging it had provided timely notice and proof of claim under 11 NYCRR 65-1.1, which requires an insured person’s assignee to submit written proof of claim no later than 45 days after the date health care services are rendered. Presbyterian and Country-Wide each moved for summary judgment.

Supreme Court granted Presbyterian summary judgment, ruling that the hospital satisfied its notice obligation by timely submitting the proof of claim (Wyckoff Hgts. Med. Ctr. v Country Wide Ins. Co., 2009 NY Slip Op 33263[U] [2009]). Citing 11 NYCRR 65-3.3 (d), the Appellate Division affirmed (71 AD3d 1009 [2d Dept 2010]), stating, “[c]ontrary to the insurer’s contention, the hospital’s submission of a completed hospital facility form . . . within 45 days after services were rendered satisfied the written notice requirement set forth in 11 NYCRR 65-1.1” (id. at 1010). This Court granted Country-Wide leave to appeal and we now reverse.

Country-Wide argues that the Appellate Division decision eviscerates the 30-day written notice of accident requirement and that the aforementioned regulations do not contain any language which provides that submission of a proof of claim for health care services within 45 days excuses the failure to give the threshold notice of accident within 30 days of the accident. In response, Presbyterian construes the stated no-fault regulations as exempting health care providers from the 30-day notice of accident requirement. In Presbyterian’s view, its filing of the hospital facility form within 45 days of the date services were rendered constitutes both “proof of claim” and timely “notice of accident.” For the reasons that follow, we agree with CountryWide’s position.

The primary goals of New York’s no-fault automobile insurance system are “to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003]). In furtherance of these objectives, “the Superintendent of Insurance has adopted regulations implementing the No-Fault Law (Insurance Law art 51), including circumscribed time frames for claim procedures” (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 [2007] [emphasis added]).

11 NYCRR 65-1.1 (d), the mandatory personal injury protection endorsement for motor vehicle liability insurance policies, provides:

“Conditions
“Action Against [Insurance] Company. No action shall lie against the Company unless, as a condition precedent thereto, there shall have been full compliance with the terms of this coverage.
“Notice. In the event of an accident, written notice setting forth details sufficient to identify the eligible injured person, along with reasonably obtainable information regarding the time, place and circumstances of the accident, shall be given by, or on behalf of each eligible injured person, to the Company, or any of the Company’s authorized agents, as soon as reasonably practicable, but in no event more than 30 days after the date of the accident. . .
" Proof of Claim; Medical, Work Loss, and Other Necessary Expenses. In the case of a claim for health service expenses, the eligible injured person or that person’s assignee or representative [e.g., a health care services provider] shall submit written proof of claim to the Company, including full particulars of the nature and extent of the injuries and treatment received and contemplated, as soon as reasonably practicable but, in no event later than 45 days after the date services are rendered” (emphasis added).

In addition, 11 NYCRR 65-3.3 (d) states:

“The written notice required by .. . the mandatory and additional personal injury protection endorsements) shall be deemed to be satisfied by the insurer’s receipt of a completed prescribed application for motor vehicle no-fault benefits (NYS Form N-F 2) forwarded to the applicant pursuant to subdivision 65-3.4(b) of this subpart or by the insurer’s receipt of a completed hospital facility form (NYS Form N-F 5)” (emphasis added).

The “notice of accident” and “proof of claim” under 11 NYCRR 65-1.1 are independent conditions precedent to a no-fault insurer’s liability (see Hospital for Joint Diseases, 9 NY3d at 317 [“These regulations require an accident victim to submit a notice of claim to the insurer as soon as practicable and no later than 30 days after an accident. Next, the injured party or the assignee (typically a hospital . . .) must submit proof of claim for medical treatment no later than 45 days after services are rendered” (emphasis added and citations omitted)]). By ruling that the notice of accident condition was satisfied based on the plain language of 11 NYCRR 65-3.3 (d), the Appellate Division disregarded the separate and distinct nature and purpose of these requirements. Even more troubling, such a construction effectively reads the 30-day written notice of accident requirement out of the no-fault regulations. But nothing in 11 NYCRR 65-3.3 (d) explicitly dispenses with the 30-day notice of accident requirement. Rather, 11 NYCRR 65-3.3 (d) merely provides that a NF-5 form may constitute the written notice required under the notice of accident provision.

In other words, these regulations (read alone or in tandem) cannot be interpreted to mean that a hospital/assignee’s timely submission of a proof of claim for health services within 45 days of discharge of the injured person excuses the insured/assignor’s failure to give the threshold notice of accident within 30 days of the accident, or that health care service providers are exempt from the written 30-day notice of accident requirement. Neither 11 NYCRR 65-1.1 nor 11 NYCRR 65-3.3 (d) contains such language. That is, while 11 NYCRR 65-3.3 (d) allows a completed hospital facility form to satisfy the written notice of accident requirement, the regulation does not provide (or suggest) that a “proof of claim” in that form filed within 45 days of treatment satisfies the 30-day notice of accident requirement where, as here, the form was submitted to Country-Wide after the 30-day period has expired.

Although the Department of Insurance has not issued any interpretive statements or opinions regarding the subject regulations, our case law provides some guidance as to the importance of the “notice of accident” and “proof of claim” requirements to the no-fault regulatory scheme. In Serio, the Court explained that in 2001, the Superintendent of Insurance, in response to an alarming increase in insurance fraud over the preceding nine years, amended these regulations (see 100 NY2d at 861-863). Specifically, the notice of accident requirement was reduced from 90 days to 30 days, and the time to provide proof of claim was reduced from 180 days to 45 days (id. at 860, 862) in order to, among other things, prevent the fraud and abuse the Superintendent linked to the lengthy time frames (id. at 862) — for example, there were numerous cases where individuals were “exploiting the time lag between the alleged loss and the deadline for submitting proof of the loss, coupled with the reality that insurers are given only 30 days to review and investigate claims before paying them without risk of penalties for denying or delaying a claim” (id. at 861). Thus, it is clear that the Superintendent of Insurance — the official responsible for administering the Insurance Law and promulgating the insurance regulations — viewed both the “notice of accident” and “proof of claim” as integral requirements/time periods that further the goals of the no-fault system. Moreover, Presbyterian’s interpretation of 11 NYCRR 65-3.3 (d) would undercut the anti-fraud purpose of the, reduced time periods, particularly in cases where treatment does not occur until months or years after the accident.

Based on the foregoing, the proper construction of the subject regulations is that an NF-5 form (or other form that can serve as proof of claim) may constitute timely notice of an accident, as permitted by 11 NYCRR 65-3.3 (d), only if such proof of claim is given within the 30-day period prescribed by 11 NYCRR 65-1.1. Any other construction is unwarranted and would undermine the importance of the 30-day time period to the no-fault system.

Presbyterian nevertheless argues that interpreting 11 NYCRR 65-3.3 (d) in Country-Wide’s favor “would severely impact the hospital’s ability to submit a timely bill” in cases where the insurer is not readily identifiable. But the Superintendent has addressed these concerns. The regulations allow late notices of accident if there is “written proof providing clear and reasonable justification for the failure to comply with such time limitation” (11 NYCRR 65-1.1 [d]). Indeed, the regulations specifically direct carriers to consider whether the injured person was a pedestrian or an occupant of a vehicle who may have difficulty identifying the proper carrier in assessing untimely notices of accident:

“The insurer shall establish standards for review of its determinations that applicants have provided late notice of claim or late proof of claim. In the case of notice of claim, such standards shall include, but not be limited to, appropriate consideration for pedestrians and non-related occupants of motor vehicles who may have difficulty ascertaining the identity of the insurer” (11 NYCRR 65-3.5 [1]).

Finally, as an assignee of all the rights, privileges and remedies to which Benitez was entitled under the No-Fault Law, Presbyterian stood in the shoes of Benitez and acquired no greater rights than he had (see Matter of International Ribbon Mills [Arjan Ribbons], 36 NY2d 121, 126 [1975] [Chief Judge Breitel wrote, “(i)t is elementary ancient law that an assignee never stands in any better position than his assignor”]). Here, because no written notice of accident was given, there was a failure to fully comply with the terms of the no-fault policy, which is a condition precedent to insurer liability. As a result, the assignment effectively became worthless (i.e., Benitez assigned nothing to Presbyterian) — you cannot assign your right to benefits if your right to those benefits has not been triggered, or if you had no right to those benefits in the first place.

For the foregoing reasons, the submission of the proof of claim within 45 days of the date health care services are rendered may not serve as timely written notice of accident after the 30-day period for providing such written notice has expired.

Accordingly, the order of the Appellate Division should be reversed, with costs, defendant’s motion for summary judgment granted and the complaint dismissed.

Chief Judge Lippman and Judges Ciparick, Graffeo, Read, Smith and Pigott concur.

Order reversed, etc.

       See also 11 NYCRR 65-3.3 (e), which provides:
      “When an insurer denies a claim based upon the failure to provide timely written notice of claim or timely submission of proof of claim by the applicant, such denial must advise the applicant that late notice will be excused where the applicant can provide reasonable justification of the failure to give timely notice.”


author: Jones, J. Pigott, J.

text:
    [958 NE2d 1183, 935 NYS2d 268]
    Gloria Doomes, Appellant, v Best Transit Corp. et al., Defendants, and Warrick Industries, Inc., Doing Business as Goshen Coach, Respondent. Ana Jiminian, Appellant, v Best Transit Corp. et al., Defendants, and Warrick Industries, Inc., Doing Business as Goshen Coach, Respondent. Kelli Rivera, Appellant, v Best Transit Corp. et al., Defendants, and Warrick Industries, Inc., Doing Business as Goshen Coach, Respondent.
    Argued September 14, 2011;
    decided October 18, 2011

      POINTS OF COUNSEL

      Pollack Pollack Isaac & DeCicco, New York City (Brian J. Isaac of counsel), Kahn, Gordon, Timko & Rodrigues, P.C. (Nicholis I. Timko of counsel), Trolman, Glaser & Lichtman,

      P.C. (Jeffrey A. Lichtman, Michael T. Altman and David B. Corley of counsel), Shramko & DeLuca LLP (Jonathan D. Shramko of counsel), and Alan M. Shapey for appellants.
    I. The lack of passenger seatbelts claim was not impliedly preempted by Federal Motor Vehicle Safety Standard 208 (49 CFR 571.208) under governing case law on point; the claim is cognizable based on the savings provision of 49 USC § 30103 (e). (Chevere v Hyundai Motor Co., 4 AD3d 226; Sprietsma v Mercury Marine, 537 US 51; Freightliner Corp. v Myrick, 514 US 280; Geier v American Honda Motor Co., 529 US 861; Cipollone v Liggett Group, Inc., 505 US 504; American Telephone & Telegraph Co. v Central Office Telephone, Inc., 524 US 214; Florida Lime & Avocado Growers, Inc. v Paul, 373 US 132; Medtronic, Inc. v Lohr, 518 US 470; Morales v Trans World Airlines, Inc., 504 US 374; Fidelity Fed. Sav. & Loan Assn. v De la Cuesta, 458 US 141.) II. Dismissal of the weight distribution claim on the ground of legal insufficiency was erroneous as there was a rational view of the evidence which supported the jury’s verdict. (Cohen v Hallmark Cards, 45 NY2d 493; Campbell v City of Elmira, 84 NY2d 505; Ramos v City of New York, 68 AD3d 632; Ochs v Woods, 221 NY 335; Altman v Alpha Obstetrics & Gynecology, 255 AD2d 276, 93 NY2d 801; Gunder v Murthy, 185 AD2d 915; Dranofsky v Collins, 271 App Div 932; Denny v Ford Motor Co., 87 NY2d 248; Scarangella v Thomas Built Buses, 93 NY2d 655; Sage v Fairchild-Swearingen Corp., 70 NY2d 579.)

      Shaub Ahmuty Citrin & Spratt LLP, Lake Success (Steven J. Ahmuty, Jr., and Timothy R. Capowski of counsel), Nicoletti Hornig & Sweeney, New York City, and Camacho Mauro Mulholland, LLP, for respondent.
    I. The Safety Act and Federal Motor Vehicle Safety Standard 208 (49 CFR 571.208) preempt plaintiffs’ state tort claim that the bus at issue was defective because it was not equipped with seatbelts at the passenger positions. (Hines v Davidowitz, 312 US 52; Gibbons v Ogden, 9 Wheat [22 US] 1; Geier v American Honda Motor Co., 529 US 861; Smith v Allwright, 321 US 649; Sprietsma v Mercury Marine, 537 US 51; Griffith v General Motors Corp., 303 F3d 1276, 538 US 1023; United States of Am. v Chrysler Corp., 158 F3d 1350; Voss v Black & Decker Mfg. Co., 59 NY2d 102; Freightliner Corp. v Myrick, 514 US 280; Paccar, Inc. v National Hwy. Traffic Safety Admin., 573 F2d 632, 439 US 862.) II. Assuming arguendo that the seatbelt claim was not preempted, this claim should still be dismissed because plaintiffs failed to adduce legally sufficient evidence of causation to warrant its submission to the jury. (Parochial Bus Sys. v Board of Educ. of

      City of N.Y., 60 NY2d 539; Town of Massena v Niagara Mohawk Power Corp., 45 NY2d 482; Dickinson v Dowbrands, Inc., 261 AD2d 703; Caiazzo v Volkswagenwerk A. G., 647 F2d 241; Cornier v Spagna, 101 AD2d 141; Garcia v Rivera, 160 AD2d 274, 77 NY2d 801; Bilbao v Westinghouse Elec. Corp., 300 AD2d 23, 100 NY2d 514; Tiner v General Motors Corp., 909 F Supp 112; Huddell v Levin, 537 F2d 726; Lieber v Ford Motor Corp., 5 AD3d 1016.) III. Plaintiffs failed to adduce legally sufficient proof to warrant submission of their “weight distribution” claim to the jury. IV. On the specific facts of this case, the jury verdict finding that the bus was not defective for purposes of plaintiffs’ strict liability design defect claim was fatally inconsistent with its finding that the bus was defective for purposes of their breach of implied warranty claim. (Giunta v Delta Intl. Mach., 300 AD2d 350; DiMura v City of Albany, 239 AD2d 828; Denny v Ford Motor Co., 87 NY2d 248, 87 NY2d 969; Voss v Black & Decker Mfg. Co., 59 NY2d 102; Fritz v White Consol. Indus., 306 AD2d 896; Barry v Manglass, 55 NY2d 803; Bradley v Earl B. Feiden, Inc., 30 AD3d 709, 8 NY3d 265.)

      Richard P. Schweitzer, P.L.L.C. (Richard P. Schweitzer, of the District of Columbia bar, admitted pro hac vice and Craig M. Cibak of counsel), for American Bus Association, Inc., amicus curiæ.
    I. Plaintiffs would impose a safety standard that actually conflicts with federal law, and is preempted. (Geier v American Honda Motor Co., 529 US 861; Freightliner Corp. v Myrick, 514 US 280; Sprietsma v Mercury Marine, 537 US 51; English v General Elec. Co., 496 US 72; Hines v Davidowitz, 312 US 52.) II. The costs of requiring a retrofit of in use commercial motor vehicles is prohibitive, and the imposition of such a standard here is in conflict with the federal scheme.

      The Mastromarco Firm, PLLP, Annapolis, Maryland (Dan R. Mastromarco of counsel), for United Motorcoach Association, Inc., amicus curiæ.
    Federal Motor Vehicle Safety Standard 208 (49 CFR 571.208) preempts plaintiffs-appellants’ lawsuit in the instant action. (Geier v American Honda Motor Co., 529 US 861; Hodges v Delta Airlines, Inc., 44 F3d 334; Morales v Trans World Airlines, Inc., 504 US 374; Crosby v National Foreign Trade Council, 530 US 363; Hines v Davidowitz, 312 US 52; Medtronic, Inc. v Lohr, 518 US 470; Freightliner Corp. v Myrick, 514 US 280; Sprietsma v Mercury Marine, 537 US 51.)

      Jones Day, New York City (David M. Cooper of counsel), and Jones Day, Pittsburgh, Pennsylvania (Charles H. Moellenberg,

      Jr., and Leon F. DeJulius, Jr., of counsel), for Product Liability Advisory Council, Inc., amicus curiæ.
    Federal Motor Vehicle Safety Standard 208 (49 CFR 571.208) preempts plaintiffs’ design defect claim because it conflicts with the regulatory objective of preserving manufacturer choice of safety options. (Geier v American Honda Motor Co., 529 US 861; Burlington Truck Lines, Inc. v United States, 371 US 156; Fidelity Fed. Sav. & Loan Assn. v De la Cuesta, 458 US 141; Griffith v General Motors Corp., 303 F3d 1276; Sprietsma v Mercury Marine, 537 US 51; Hurley v Motor Coach Indus., Inc., 222 F3d 377; Juliano v Toyota Motor Sales, U.S.A., Inc., 20 F Supp 2d 573.)
   OPINION OF THE COURT

Jones, J.

In these personal injury actions arising from a single-vehicle bus accident, two questions are presented for our review. First, whether plaintiffs’ seatbelt claims, seeking to hold defendant liable for failure to install passenger seatbelts on the bus, were preempted by federal regulations promulgated by the National Highway Traffic Safety Administration (NHTSA). Second, whether plaintiffs’ weight distribution claim, alleging that the negligent modification of the bus’ chassis altered the weight balance, steering, and handling of the bus, was supported by legally sufficient evidence. We hold that plaintiffs’ seatbelt claims are not preempted by federal regulation, and that plaintiffs’ weight distribution claim is not supported by legally sufficient evidence.

I

On April 23,1994, a bus carrying approximately 21 passengers was returning from a visit to Adirondack Correctional Facility in Ray Brook, New York. The bus was equipped with a seatbelt for the driver, but not for the passengers. During the trip along the New York State Thruway, the driver, defendant Wagner M. Alcivar, “dozed off’ while the bus was traveling approximately 60 miles per hour. The bus veered across the highway from the right-hand lane into the passing lane, and encountered a median strip and a sloping embankment. Alcivar awakened, but his belated attempts to regain control of the bus were futile as the vehicle rolled over several times, injuring many of the passengers.

Plaintiffs Gloria Doomes, individually and as mother and natural guardian of two infants; Ana Jiminian, individually and as parent of two infants; Kelly Rivera; Sharon Rodriguez; and Heriberto Santiago commenced actions against defendants Best Transit Corp. (Best), the owner of the bus; Ford Motor Company (Ford), the manufacturer of the chassis and cab of the bus; War-rick Industries, Inc. (Warrick), the manufacturer who completed the construction of the bus; J&R Tours, the prior owner of the bus; and Alcivar, the bus driver. Plaintiffs alleged that the absence of passenger seatbelts and the improper weight distribution of the bus, created by the negligent modification of the bus’ chassis, caused the injuries.

Prior to trial, Supreme Court dismissed the claims against J&R Tours, plaintiffs settled with Ford, and Alcivar was deported. Warrick moved to preclude any evidence that the bus was defective or that it was negligent due to a lack of seatbelts on the ground that Federal Motor Vehicle Safety Standard (FMVSS) 208 (49 CFR 571.208), which did not require the installation of passenger seatbelts, preempted any claims of liability for failure to install such seatbelts. Supreme Court reserved decision on the motion.

Following trial, a jury determined that Best and Alcivar were negligent in the operation of the bus, and that Warrick defectively manufactured the bus and breached the warranty of fitness for ordinary purposes by modifying the chassis and altering the weight distribution of the bus. It also determined that Best negligently operated the bus without passenger seatbelts and Warrick breached the warranty of fitness for ordinary purposes by failing to install seatbelts. These failures were deemed substantial factors in causing the accident, and the absence of seatbelts was determined as a substantial factor in causing injury to all plaintiffs. Consequently, with respect to fault for the accident, the jury apportioned 60% liability to Best and Alcivar, and 40% liability to Warrick. As for fault for the lack of passenger seatbelts, the jury assigned Best 20% liability and Warrick 80% liability. The defendants moved to set aside the verdict pursuant to CPLR 4404 and Supreme Court granted the motion to the extent of ordering a new trial on damages unless plaintiffs stipulated to a reduction in damages. Plaintiffs so stipulated, and Supreme Court also reduced awards for past pain and suffering pursuant to General Obligations Law § 15-108.

The Appellate Division reversed the judgments and dismissed the complaints as against Warrick (68 AD3d 504 [1st Dept 2009]). The court held the seatbelts claims preempted, reasoning that these claims conflicted with the federal goal of establishing a uniform regulatory scheme for transit safety. With respect to plaintiffs’ weight distribution claim, the court determined that the evidence was legally insufficient to establish that Warrick’s modification of the chassis was a proximate cause of the accident.

This Court granted plaintiffs leave to appeal, and we now reverse.

II

Under the Supremacy Clause of the United States Constitution (US Const, art VI, cl 2), preemption analysis requires us “to ascertain the intent of Congress” (Matter of People v Applied, Card Sys., Inc., 11 NY3d 105, 113 [2008], quoting California Fed. Sav. & Loan Assn. v Guerra, 479 US 272, 280 [1987]). Express preemptive intent is discerned from the plain language of a statutory provision (see Balbuena v IDR Realty LLC, 6 NY3d 338, 356 [2006]). Implied preemption may be found in two distinct ways when either “the Federal legislation is so comprehensive in its scope that it is inferable that Congress wished fully to occupy the field of its subject matter (field preemption), or because State law conflicts with the Federal law” (Guice v Charles Schwab & Co., 89 NY2d 31, 39 [1996] [internal quotation marks omitted]).

Plaintiffs contend that the Appellate Division erred in finding preemption because the relevant portions of FMVSS 208, compelling only the inclusion of a driver seatbelt, neither reflects a pervasive scheme of regulation nor makes compliance with federal and state standards impossible. Moreover, it is argued that the United States Supreme Court’s recent decision in Williamson v Mazda Motor of America, Inc. (562 US —, 131 S Ct 1131 [2011]) disposes of this appeal in plaintiffs’ favor. Warrick claims that the statute affords manufacturers the option to choose among different protective devices for installation at the driver’s seat, and this availability of discretion places this appeal squarely within the holding of Geier v American Honda Motor Co. (529 US 861 [2000]).

First turning to express preemption, the pertinent statutory clause of the National Traffic and Motor Vehicle Safety Act (Safety Act) provides that

“[w]hen a motor vehicle safety standard is in effect under this chapter, a State or a political subdivision of a State may prescribe or continue in effect a standard applicable to the same aspect of performance of a motor vehicle or motor vehicle equipment only if the standard is identical to the standard prescribed under this chapter. However, the United State Government, a State, or a political subdivision of a State may prescribe a standard for a motor vehicle or motor vehicle equipment obtained for its own use that imposes a higher performance requirement than that required by the otherwise applicable standard under this chapter” (49 USC § 30103 [b]).

In Geier, the Supreme Court considered the preemptive effect of a pre-1994 edition of the above preemption clause that similarly limited the authority of states to prescribe motor vehicle safety standards (see former 15 USC § 1392 [d]). However, rather than parsing the precise significance of the plain language of the provision, the Supreme Court concluded that Congress did not intend the preemption clause to be construed so broadly as to preclude state claims because the “saving” clause explicitly reserved a right to assert common-law claims (see 529 US at 867-868).

As relevant here, the instant saving clause provides that “[c]ompliance with a motor vehicle safety standard prescribed under this chapter does not exempt a person from liability at common law” (49 USC § 30103 [e]). When read in conjunction with the preemption provision, the saving clause permits the commencement of common-law claims; compliance with applicable federal motor vehicle safety standards is not necessarily a preclusive bar. Accordingly, the presence of the saving clause limits a potentially broad reading of the preemption provision and does not expressly prohibit plaintiffs’ seatbelt claims.

With respect to implied “field preemption,” it does not appear that the federal statutes were intended to so greatly envelop the field of motor vehicle safety standards as to leave little room for state participation or operation. Certainly, the guidelines, as the Appellate Division noted, are consonant “with the federal goal of establishing uniform standards” (68 AD3d at 506). And, the preemption clause constrains states from enacting guidelines that deviate from federal standards (see 49 USC § 30103 [b]). However, the goal of uniformity cannot be singularly pursued at the expense of the Safety Act’s primary purpose to “reduce traffic accidents and deaths and injuries to persons resulting from traffic accidents” (former 15 USC § 1381; see also 49 CFR 571.208 [S2]). This is evinced by the presence of the saving clause which expressly allows the commencement of state common-law claims (see 49 USC § 30103 [e]). As the Supreme Court has reasoned previously, “the saving clause reflects a congressional determination that occasional nonuniformity is a small price to pay for a system in which juries not only create, but also enforce, safety standards” (Geier, 529 US at 871). Further, the saving clause represents a purposeful intent to allow meaningful state participation as a finding of preemption would “treat all such federal standards as if they were maximum standards, eliminating the possibility that the federal agency seeks only to set forth a minimum standard potentially supplemented through state tort law” (Williamson, 562 US at —, 131 S Ct at 1139 [emphasis added]). Consequently, there is no implied “field preemption” as the explicit permission of common-law claims indicates that the federal statutes promulgated under the Safety Act are not so pervasive as to encompass the entire scheme of motor vehicle safety guidelines.

The significant point of contention between the parties is whether plaintiffs’ seatbelt claims are barred under implied conflict preemption. We conclude they are not.

Implied conflict preemption can arise in two situations: when “it is ‘impossible for a private party to comply with both state and federal requirements’ ... or where state law ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress’ ” (Freightliner Corp. v Myrick, 514 US 280, 287 [1995]). The Supreme Court has made clear that a state law will be preempted under the latter form of implied conflict preemption only where it would frustrate “a significant objective of the federal regulation” (Williamson, 562 US at —, 131 S Ct at 1136 [emphasis added]).

Here, the gross vehicle weight rating (GVWR) of the bus at issue was over 10,000 pounds, placing it within the ambit of 54.4.2.1 and S4.4.2.2 of FMVSS 208 (see 49 CFR 571.208). 54.4.2.1 states: “First option — complete passenger protection system — driver only. The vehicle shall meet the crash protection requirements of S5, with respect to an anthropomorphic test dummy in the driver’s designated seating position, by means that require no action by vehicle occupants” (emphasis added). S4.4.2.2 provides, in relevant part: “Second option — belt system — driver only. The vehicle shall, at the driver’s designated seating position, have either a Type 1 or Type 2 seat belt assembly that conforms to § 571.209 of this part and S7.2 of this Standard” (emphasis added). A plain reading of S4.4.2.1 and 54.4.2.2 shows that they only mandate the inclusion of protective devices at the driver’s seat of a bus and are absolutely silent regarding the installation of passenger seatbelts. This does not make it impossible to comply with both the federal standards and the gravamen of plaintiffs’ seatbelt claims, which seek liability for the failure to install such protective devices (see Sprietsma v Mercury Marine, 537 US 51, 67-68 [2002]; Freightliner, 514 US at 289). Quite simply, Warrick could have installed passenger and driver seatbelts without running afoul of federal motor vehicle safety standards. Hence, plaintiffs’ seatbelt claims are not preempted under the first category of implied conflict preemption.

Warrick primarily contends that FMVSS 208 affords manufacturers of buses with a GVWR over 10,000 pounds the latitude to choose among certain safety devices as S4.2.2.1 and S4.2.2.2 specifically provide manufacturers the discretion to opt between either a seatbelt or “complete passenger protection system” for the driver. And, as a result of this deliberate provision of choice between differing protective devices for the driver’s seat, War-rick argues that plaintiffs’ claims are preempted under the holding of Geier. However, this position is founded on an erroneous premise and an overly expansive reading of Geier.

As an initial matter, Warrick incorrectly contends that its ability to choose between safety devices for the driver’s seat should preempt common-law claims seeking the inclusion of passenger seatbelts. That it had the discretion to choose the type of protective device for the driver’s seat has no bearing on the issue of whether passenger seatbelts should have been installed, particularly when the relevant portions of FMVSS 208 are silent regarding passenger seatbelts.

Moreover, Geier does not have the expansive effect Warrick seeks. In that case, the Supreme Court concluded that the plaintiffs’ state claims, which sought immediate installation of airbags, were preempted because they conflicted with an expressed intent by the Department of Transportation to permit manufacturers to select from an array of protective devices and gradually incorporate them into motor vehicles. Absent such a deliberate policy or intent, Geier’s holding, which is limited to its particular facts and regulations, should not be applied to any case where manufacturers are merely provided some form of choice.

Indeed, the case before us is more analogous to the Supreme Court’s recent decision in Williamson, which held that the plaintiffs seatbelt claims were not preempted. In that case,, the plaintiffs decedent, who was situated on a rear inner seat of a passenger vehicle, was killed in a motor vehicle accident while wearing a lap belt; and the complaint alleged that a lap-and-shoulder belt should have been installed. The relevant FMVSS regulation required the installation of lap-and-shoulder belts at seats next to the doors or frames of passenger vehicles. But for rear inner seats, manufacturers were permitted to choose between lap belts and lap-and-shoulder belts (see 562 US at —, 131 S Ct at 1134). The defendant manufacturer argued that the plaintiffs seatbelt claims were preempted because they would interfere with the explicit provision of choice in the federal regulation.

The Supreme Court first limited the holding of Geier to its particular facts as the “history [of the regulation], the agency’s contemporaneous explanation, and the Government’s current understanding of the regulation convinced us that manufacturer choice was an important regulatory objective. And since the tort suit stood as an obstacle to the accomplishment of that objective, we found the tort suit pre-empted” (562 US at —, 131 S Ct at 1137). Second, although like Geier the relevant regulations in Williamson permitted manufacturers a choice, the Supreme Court concluded that there were critical differences between the regulations in the two cases. It was explained that “[w]hile an agency could base a decision to pre-empt on its cost-effectiveness judgment, we are satisfied that the rule-making record at issue here discloses no such pre-emptive intent” (562 US at —, 131 S Ct at 1139). Here, an examination of the relevant federal regulations confirms the lack of preemptive intent with respect to passenger seatbelts for buses with a GVWR over 10,000 pounds.

The NHTSA has consistently acknowledged the enhanced safety benefits of seatbelts, but it has neither imposed the installation of passenger seatbelts, nor expressed an intention to provide such an option to manufacturers of the type of bus involved in the instant appeal. In 1973, the gravamen of the regulation pertained to the modification of passenger seats because they were a significant factor in causation of injury “[b]y being too weak, too low, and too hostile” (38 Fed Reg 4776, 4776 [1973]). Any discussion of seatbelts did not reflect an intention to provide a discretionary option to manufacturers, but rather, considered its impact on the structure of passenger seats. “If a seat is equipped with belts, the performance characteristics of the seats are modified in some respects” (id. at 4776-4777).

In 1988 and 1989, the proposed rule-making regulations considered the installation of lap-shoulder belts in “passenger cars, light trucks, multipurpose passenger vehicles (e.g., passenger vans and utility vehicles), and small buses” (53 Fed Reg 47982, 47982 [1988]; 54 Fed Reg 46257, 46257 [1989]), but did not consider the inclusion of such protective devices for buses with a GVWR over 10,000 pounds. Again, the NHTSA acknowledged the efficacy of passenger seatbelts in enhancing safety as “a number of studies, evaluating thousands of cases, show that lap belts in the rear seat are effective in preventing deaths and reducing injuries. NHTSA knows of no comprehensive studies by any person or organization that suggests that rear seat lap belts are anything less than effective” (53 Fed Reg 47982, 47984). But in both 1988 and 1989, buses of the type involved in the instant accident were specifically excluded from consideration. Any “option of installing either lap-only belts or lap/ shoulder belts in rear seats” was limited to other forms of vehicles (54 Fed Reg 46257, 46258).

Further, any contention that manufacturers impliedly had an option to install rear passenger seatbelts in buses over 10,000 pounds, because the NHTSA was cognizant of the safety benefits of rear passenger seatbelts, is belied by the plain language of FMVSS 208 and the federal regulations which simply do not consider the inclusion of such protective devices for vehicles of this type. As such, like Williamson, there is simply no preemptive intent to be discerned from the regulations with respect to state common-law claims seeking the inclusion of passenger seatbelts in buses of this type.

In sum, we find neither express nor implied preemption of plaintiffs’ seatbelt claims.

III

Warrick asserts that the Appellate Division correctly concluded that the evidence was legally insufficient with respect to plaintiffs’ weight distribution claim because it was speculative. We find this position persuasive.

Generally, in a strict products liability claim, “the manufacturer of a defective product is liable to any person injured or damaged if the defect was a substantial factor in bringing about his injury or damages” (Voss v Black & Decker Mfg. Co., 59 NY2d 102, 106-107 [1983]). A claim of strict products liability can assert either a (1) manufacturing defect, (2) a design defect, or (3) a failure to provide adequate warning regarding the use of a product (see id.). Here, where plaintiffs allege a design defect based on the negligent modification of the weight distribution of the bus’ chassis, the relevant inquiry is “whether the product, as designed, was not reasonably safe” (id. at 107). Accordingly, plaintiffs carry the burden of showing “that the product, as designed, was not reasonably safe because there was a substantial likelihood of harm and it was feasible to design the product in a safer manner” (id. at 108). Moreover, plaintiffs must show that the design defect was a proximate cause of their injuries (id. at 109).

For the chassis at issue, Ford specified an overall GVWR of 11.500 pounds with a gross rear axle rating of 7,810 pounds, and a gross front axle rating of 4,600 pounds. Warrick modified the chassis, extending its length from 138 inches to 186 inches. It also increased the overall gross vehicle weight rating from 11.500 pounds to 13,500 pounds by adding a leaf spring to the gross rear axle, increasing its rating from 7,810 pounds to 9,300 pounds. The front axle remained untouched. Plaintiffs contend that a proper apportionment of weight between the axles is 60% (rear axle) and 40% (front axle), but as modified, the bus chassis had an improper distribution of 68% and 32%, respectively. Moreover, Warrick failed to install a tag axle that would compensate for the modification and enhance steering and handling.

Plaintiffs’ expert opined that the purportedly negligent weight distribution was a substantial factor in causing the accident, but any conclusions as to the bus’ weight were based on speculative weight estimates of passengers, fuel, and luggage, and not empirical data (see Fotiatis v Cambridge Hall Tenants Corp., 70 AD3d 631, 632 [2d Dept 2010]; Briggs v 2244 Morris L.P., 30 AD3d 216, 216 [1st Dept 2006]). More specifically, plaintiffs’ expert testified that the evidence alluded to the inattentiveness of the driver as a contributing factor; that he attempted to calculate the weight of the bus, but there was insufficient information; and he could not tell with certainty whether the proper 60% to 40% weight ratio existed as his opinions were not from his “experience and knowledge of [the] particular bus.” While plain tiffs’ expert discussed various weight ratings for different components of the bus, he failed to present any calculations that would indicate that the weight distribution contributed to the rollover accident. Therefore, any findings that the weight distribution adversely affected steering and handling were conclusory and based on speculative data that failed to establish a causal relationship to the accident (see Cotter v Pal & Lee Inc., 86 AD3d 463, 466-467 [1st Dept 2011]).

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

Pigott, J.

(dissenting, in part). Under implied conflict preemption, the issue upon which all parties agree this case rises or falls, state common-law claims are barred in situations where it is “impossible for a private party to comply with both state and federal requirements” (English v General Elec. Co., 496 US 72, 78-79 [1990]) or where the state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” (Hines v Davidowitz, 312 US 52, 67 [1941]). It seems evident to me that plaintiffs’ state common-law negligence and products liability claims as they relate to the lack of passenger seatbelts do just that by “standing as an obstacle to the accomplishment and execution of the full purposes and objectives” of the National Traffic and Motor Vehicle Safety Act of 1966 and the Federal Motor Vehicle Safety Standards (FMVSS).

Whether or not a state law “stands as an obstacle to the accomplishment” of a federal regulation’s “significant objective” is determined by examining the history of the regulation, “the promulgating agency’s contemporaneous explanation of its objectives, and the agency’s current views of the regulation’s pre-emptive effect” (Williamson v Mazda Motor of America, Inc., 562 US —, —, 131 S Ct 1131, 1136 [2011], citing Geier v American Honda Motor Co., 529 US 861 [2000]). FMVSS 208 provides that buses like the one in this case, which have a gross vehicle weight rating of over 10,000 pounds, must meet one of the two following requirements pursuant to 49 CFR 571.208 (S4.4.2):

“S4.4.2.1. First option — complete passenger protection system — driver only. The vehicle shall meet the crash protection requirements of S5, with respect to an anthropomorphic test dummy in the driver’s designated seating position, by means that require no action by vehicle occupants. “S4.4.2.2. Second option — belt system — driver only. The vehicle shall, at the driver’s designated seating position, have either a Type 1 or a Type 2 seat belt assembly that conforms to § 571.209 of this part and S7.2 of this Standard” (emphasis supplied).

The history of this regulation as it relates to the passenger seatbelt requirements in buses such as we have in this case demonstrates that the National Highway Traffic Safety Administration (NHTSA) made considered policy judgments based on safety, cost and practicability in distinguishing between those buses that must have passenger seatbelts and those that don’t. For instance, although NHTSA has not mandated passenger seatbelts for buses in excess of 10,000 pounds (large buses), it has concluded that buses weighing 10,000 pounds or less (small buses) must have them (see 49 CFR 571.208 [S4.4.3.2]).

The regulations for large and small buses must be viewed as part of NHTSA’s overall regulatory scheme. Because NHTSA purposefully made these distinctions, it is clear that it did not leave unregulated the field of passenger seatbelts in large buses. Rather it made a conscious decision that seatbelts in these vehicles were unnecessary for passenger safety given their size and function.

This becomes apparent in a review of the regulation’s history as it relates to the inclusion of seatbelts in buses. There is a reason for this 10,000 pound dividing line; such “groupings reflect the differences in the vehicles’ functions and crash responses and exposure” (53 Fed Reg 47982, 47987 [1988]). Indeed, it is the safety concerns here that distinguish this case from Williamson because, in the latter case, the United States Supreme Court concluded that the Department of Transportation did not require lap-and-shoulder belts in rear aisle seats because of its belief that such restraints would cause “entry and exit-problems for occupants” and were not cost effective, not because of safety concerns (Williamson, 562 US at —, 131 S Ct at 1138-1139).

Here, it is apparent that safety was paramount in NHTSA’s decision. NHTSA at one time proposed a standard that would have required buses like the one in this case to contain passenger seatbelts (see 38 Fed Reg 4776 [1973]), only to retract that proposal because the seating in such buses, as designed, was deemed adequate for safety purposes (see 39 Fed Reg 27585 [1974]). This retraction was referred to by NHTSA’s chief counsel in 1992, who commented that pending legislation in New York that would have required intercity buses operating within the state to install passenger seatbelts in buses weighing more than 10,000 pounds was likely preempted by federal law:

“NHTSA expressly determined that there is not a safety need for safety belts or another type of occupant crash protection at these seating positions. See, 39 FR 27585, July 30, 1974. With respect to these large buses, the New York bill would be preempted to the extent that it requires seat belts to be installed at seating positions other than the driver’s seating position” (Letter from NHTSA to C.N. Littler, Motor Coach Industries, Aug. 19, 1992, at 1-2).

Based on the foregoing, it is clear that NHTSA has concluded that larger buses are safer than smaller buses, and that the latter should have passenger seatbelts while the former need not. In holding that plaintiffs’ claim is not preempted, this Court has, in essence, required that motor carriers of large buses must comply with small bus regulations. I don’t find that to be Congress’ intent.

It is evident from the regulatory scheme that NHTSA made considered policy judgments in promulgating a standard that did not mandate passenger seatbelts on large buses. This was not a failure to regulate on NHTSA’s part, as is evidenced by its regulation requiring seatbelts on small buses. When these regulations are considered in light of NHTSA’s reasons for using a 10,000 pound dividing line, it is fair to say that NHTSA intended to be the decision maker in this area, which would preempt common-law tort suits like the one at bar, which stand as an obstacle to the Act’s objectives of safety and cost (see 49 USC § 30111 [a] [providing that “(t)he Secretary of Transportation shall prescribe motor vehicle safety standards . . . (that) shall be practicable, meet the need for motor vehicle safety, and be stated in objective terms”]). Not only that, the imposition of a common-law requirement that large bus carriers must, in essence, comply with the small bus regulations is completely at odds with Congress’ goal of uniformity in the motor vehicle industry (HR Rep No. 1776, 89th Cong, 2d Sess, at 17 [1966]; S Rep No. 1301, 89th Cong, 2d Sess, at 12 [1966], reprinted in 1966 US Code Cong & Admin News, at 2720 [“The centralized, mass production, high volume character of the motor vehicle manufacturing industry in the United States requires that motor vehicle safety standards be not only strong and adequately enforced, but that they be uniform throughout the country” (emphasis supplied)]). Therefore, I would affirm the order of the Appellate Division.

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

Order reversed, etc.

      . Plaintiffs Doomes and Jiminian also named as a defendant, Operation Prison Gap, a company that leased buses from Best and provided transportation to prisons. Operation Prison Gap never appeared in the action and a default judgment was entered against it.

      . The jury awarded Doomes $8 million, Rodriguez $2.5 million, Santiago $1 million, Rivera $5 million, and Jiminian $10 million.

      . Supreme Court entered the following judgments, with interest, in favor of plaintiffs: Rivera, $2,728,194.30; Jiminian, $3,874,654.59; and Doomes, $3,388,992.38. Rodriguez and Santiago settled for $850,000 and $550,000, respectively, and are beyond the scope of this appeal.

      . The FMVSS regulation in Geier intentionally encouraged a variety of safety devices because the Department of Transportation hoped that this variety would result in better information about the comparative effectiveness of the devices and the eventual development of “alternative, cheaper, and safer passive restraint systems” (Geier, 529 US at 879).

      . Unlike the airbag regulation in Geier, the federal agency in Williamson “was not concerned about consumer acceptance; it was convinced that lap-and-shoulder belts would increase safety; it did not fear additional safety risks arising from use of those belts; it had no interest in assuring a mix of devices; and, though it was concerned about additional costs, that concern was diminishing”

        (Williamson, 562 US at —, 131 S Ct at 1138).
      Rather, “the more important reason why DOT did not require lap-and-shoulder belts for rear inner seats was that it thought that this requirement would not be cost-effective” (562 US at —, 131 S Ct at 1139).

      . “4. Vehicle Types NOT Covered by This Proposal

      “a. Vehicles with a Gross Vehicle Weight Rating of More Than 10,000 Pounds
      “NHTSA has traditionally used gross vehicle weight ratings as dividing lines for the purposes of applying occupant crash protection standards. These groupings reflect the differences in the vehicles’ functions and crash responses and exposure. This proposal would also use such a dividing line, by addressing only vehicles with a gross vehicle weight rating of 10,000 pounds or less” (53 Fed Reg 47982, 47987; 54 Fed Reg 46257, 46261).

      . The NHTSA has not considered the inclusion of passenger seatbelts for buses with a GVWR over 10,000 pounds until recently. In its notice of proposed rulemaking of August 18, 2010, the NHTSA reviewed the nature of injuries caused by rollover accidents and espoused a goal of “redacting] occupant ejections” (75 Fed Reg 50958, 50959 [2010]). To that end, it has considered a definition of “motorcoach” that would specifically apply to “buses above 10,000 lb [gross vehicle weight rating]” (id. at 50966). In the event the definition includes buses with a GVWR over 10,000 pounds, the inclusion of seatbelts is being considered as they are “estimated to be 77 percent effective in preventing fatal injuries in rollover crashes, primarily by preventing ejection” (id. at 50971).

       As recently as August 2010, NHTSA issued a Notice of Proposed Rule-making discussing amending FMVSS 208 “to require lap/shoulder seat belts for each passenger seating position in new motorcoaches,” the main purpose of the proposed rule being to “reduce occupant ejections” (75 Fed Reg 50958, 50958-50959 [2010] [emphasis supplied]). NHTSA noted that although it “was not proposing at this time that used buses be required to be retrofitted with the lap/shoulder belt system” given that “[t]he service life of a motorcoach can be 20 years or longer,” it estimated that the cost of retrofitting could range from $6,000 to $34,000 per vehicle (id. at 50960).