Volume XIX, No. 4 (No. 487)

Friday, August 11, 2017

A Biweekly Electronic Newsletter

 

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874

         

Long Island Office:

535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

 

www.hurwitzfine.com

© Hurwitz & Fine, P. C. 2017
All rights reserved
 

As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts.  The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers. 

 

In some jurisdictions, newsletters such as this may be considered Attorney Advertising.

 

If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at ddk@hurwitzfine.com or call 716-849-8900.

 

You will find back issues of Coverage Pointers on the firm website listed above.

 

Dear Coverage Pointers Subscribers:

 

Do you have a situation?  We love situations.  Call us.  We’ll help you turn confusion into strategy.

 

Fewer Hundred Years Ago Stories in this Issue; Instead, Family History:


On Wednesday, I returned from Switzerland and Italy. I know that SOME of you missed me (oh sure) and some of you were with me.

 

The trip included the FDCC Annual Meeting in Montreux, Switzerland, then a journey with good friends to Florence, Naples, Sorrento and the Amalfi Coast.  It had been on my bucket list, not to see Pompeii (which was fascinating) and the Isle of Capri (beautiful) but to visit Tito, a tiny town of 7000 people, located in the Province of Potenza.  It was my wife’s dream to visit the village of San Fele, a village of 3000 people, located about 50 km south.  I’ll tell you why.  First, a reflection.

 

We complain, sometimes, about the inconveniences we encounter in our lives.  It’s good to remember how lucky we are, most of the time. When you think you have had tough times consider the plight of the German refugees. This is why many Jews are empathetic towards those fleeing from Syria and places similarly situated.  From immigration papers, obtained on ancestry.com, I learned that my paternal grandparents, Moses David and Helene Kohane, were protected by the Italian people in and around Tito, after they escaped Nazi oppression and tried to come to the United States.  I wanted to thank the people of Tito, so we went there.

 

My father’s parents remained in Germany after my dad escaped to Palestine in 1936.  He faced arrest for being an agitator against the Nazis.  Somehow, my grandparents, a while after, made it out of Germany, perhaps through Czechoslovakia, trying to come to the U.S.  They were on a ship from Rhodes, which shipwrecked and they were transported to a “safe” concentration camp in Tarsia in Calabria, south of Tito. How they made it to Rhodes, I do not know yet. I did find their names on the shipwreck list. 

The Island of Rhodes is located in the Aegean Sea, just off the coast of Turkey. Rhodes was part of the Ottoman Empire until the end of the First World War. Today Rhodes is Greek, but between 1922 and 1948 Rhodes was Italian, the island having been seized by Mussolini. 

 

During the 1930's, several ships full of European (Ashkenazi) Jews heading to Palestine stopped off at Rhodes for refueling and supplies. One of these ships was known to have been shipwrecked off the coast on the island of Samos in May 1939 or May 1940 (reports differ). This ship is believed to have been the "Penuche", whose point of origin was Bratislava, Slovakia.

 

My grandparents were on that ship.

 

The damaged vessel managed to return to port in Rhodes, but the refugees on board had lost almost all their luggage and had to live in the Rhodes athletic stadium for several months. The local Rhodes Jews, known as Rhodeslis, brought them food, blankets, and supplies.

Eventually, a new transport ship was obtained and most of the European refugees continued on to Palestine. The Rhodes community also arranged for 300 of the refugees to be transported to Tangiers. My grandparents were still destined to go to the U.S.

 

Some were transferred to Tito, Potenza province where they were protected and then to the camp in Ferramonti. That group included my paternal grandparents. 

 

Luckily, most of the shipwrecked and deported people survived the Holocaust and were freed in 1944.  As indicated, my grandparents were transferred to Ferramonti.

 

Ferramonti Di Tarsia was an internment camp for Jews near Cosenza in Southern Italy and was the largest of the fifteen internment camps established by Mussolini between June and September, 1940. Between June, 1940, and August, 1943 there were 3,823 Jewish internees at Ferramonti. Here’s a little more about the Camp.

 

The camp was never a concentration camp in the German sense of the term. Internees were not maltreated, and they were allowed to receive food parcels and visit sick relatives. In addition, there were no mail restrictions.

 

Six weeks after Mussolini's downfall (September, 1943), the internees were released.  In 1944, My grandparents, as part of Operation Safe Haven, were sent to Oswego, New York, which was the only U.S. internment camp for European refugees during WW II. Many of these internees joined the Allied armed forces.  About 1,000 were shipped to the United States and interned at Camp Oswego, New York (Operation Safe Haven).  They traveled on the SS Henry Gibbins.  For more about that, and to see their names on the camp manifest, you can visit the Museum (my son and I have both visited) or see the website:

 

https://en.m.wikipedia.org/wiki/Safe_Haven_Museum_and_Education_Center

 

They were interned there for 14 months.  Ultimately, they were allowed to stay, processed in Niagara Falls (in 1945) and then moved to NYC, where my Uncle Henry had arrived (a journey from Germany to London to Brooklyn) and my Aunt Irma had landed (traveling from Germany).

 

My father next saw his parents when he took a ship from Haifa, Palestine, in the spring of 1948, 12 years after he left Germany.  He quickly returned to the Middle East in May 1948, as the UN was debating Israeli statehood.  He landed in Haifa, Israel, on May 19, the day after Israeli statehood.

 

He had met his wife-to-be, whose family had also escaped the Nazis, in Palestine and they were married three days before the Japanese bombed Pearl Harbor. My older sister, was born in Israel, in 1950 and I was smuggled, “in utero”, to the United States in August 1952 when my parents decided to move to New York to be near his family.  I was born in March 1953, truly a first generation American.

 

My wife’s family name is Naples (or, in Italy, DiNapoli).  Her father’s parents came from San Fele.  We had to visit.

 

When we found the little town hall, it was staffed by three men.  While they first advised us that they were closed for lunch, they kindly let us in when we told them that we had come from America to find records of the DiNapoli family.  As fate would have it, the clerk who came to the door said to us: “I am a DiNapoli” and just like that, Chris met a cousin.  He told us that there was only one DiNapoli family in San Fele.  She found records of her grandmother’s birth and we took lots of pictures of this unexpected family reunion.

 

Pretty good stuff.  Now, I’m back in the saddle again.

 

Ciao. 

 

Wartime Insurance Legislation:

 

 

Democrat and Chronicle

Rochester, New York

11 Aug 1917

 

INSURANCE BILLS ARE INTRODUCED

IN BOTH HOUSES

 

Soldiers Indemnified for

Death or Wounds.

 

New Feature Would Make It

Compulsory for Officers and Men to

Allot $15 a Month from Pay to

Dependents, Government Giving Rest

 

Washington, Aug. 10.—The administration’s program for insuring soldiers, sailors and marines was placed before Congress to-day in identical bills introduced by Senator Simmons and Representative Alexander.  Committee hearings will be held soon and the measure probably will be taken up in the Senate and House as soon as the war tax bill has been disposed of.

 

In its general features the insurance program varies but little from previously announced outlines, the chief innovation being the proposal to compel men and officers to allot a minimum of $15 a month out of their pay to dependent wives and children.  The bill proposes to vest in the war and navy departments’ authority to compel such payments.  Authority also is proposed to compel the men to be insured, to deposit, at four percent interest, with the government and at the discretion of the war and navy departments so much of their pay as is represented by the difference between the $15 family allotment and half their regular pay. 

 

Tessa’s Tutelage:

 

Dear Readers,

 

This week we have a bit of a theme: organization.   There are some people who are just born with a planner and a label maker in their hands, but I imagine even the Martha Stewarts of the world have missed an appointment now-and-again.  The parties in the cases we have today had some organizational blunders.  The first case involves a Plaintiff who served a complaint on a foreign corporation.  They waited and waited for an answer… and never got one.  At that point they sought leave to enter a declaratory judgment against the Defendant, which went unopposed.  The problem?  They missed one step in the service of their Complaint—they didn’t provide an affidavit of compliance.  An affidavit of compliance is basically proof of service, which must be filed with a return receipt within 30 days after the Plaintiff has received the return receipt from the post office.  Without that, they weren’t entitled to a default judgment.  Ouch! 

 

Worse still is the Defendant who didn’t answer for 3.5 months following the service of the Complaint?  The Defendant tried to get Plaintiff to accept their late Answer but Plaintiff wasn’t having it.  The Court wasn’t either.  The Court reminded the defendant that in the event that you are seeking to compel a Plaintiff to accept a late answer you need two things 1) a good excuse and 2) proof that you have a good defense(s) to the allegations in the complaint.  If you are wondering about the second requirement, it is pretty simple: the Court doesn’t want to waste even more time on a late answer if you can’t even defend the action.  As the cool kids are saying these days, “Ain’t nobody got time for that.”

 

My best,

 

Tessa

Tessa R. Scott

trs@hurwitzfine.com

 

Burglars Burgle, Insurance Rates Rise, a Century Ago:

 

The New York Times

New York, New York

11 Aug 1917

 

BURGLARS INCREASE

INSURANCE RATES

 

Recent Losses by New York

Merchants Force Underwriters

to Put Up Cost.

 

RISKS ‘EXTRA HAZARDOUS’

 

Company Representatives Will

Confer with Police on How to

Cut Down Left Thefts

 

Following an all-day conference, the Burglary Insurance Underwriters’ Association yesterday adopted the recommendations of the organization’s Mercantile Committee, and voted a substantial increase in rates for risks covering certain lines in which losses by theft in this city have of late been especially heavy.  W. P. Learned, Vice President of the Fidelity and Casualty Company of New York, presided at the meeting, which was held at the offices of the company, 92 Liberty Street.  Representatives from twenty-two companies, doing business in New York City were present at the conference.  

 

 

Pete Rose – Born too Late:

 

The Buffalo Commercial

Buffalo, New York

11 Aug 1917

 

BOSTON CLUBS MUST PUT

STOP TO ALL GAMBLING

 

            Cincinnati, Aug. 11.—Chairman August Herrmann of the National Baseball Commission in a statement anent reports of alleged gambling being carried on at the Boston ball parks said the question primarily is for club control with the co-operation of the interested leagues, if necessary, but believed that the evil, if it exists, will be eradicated eventually.

 

            “I do not hesitate to put myself on record as condemning gambling on the ball games,” he added.  “The club that tolerates open betting is not worthy to enjoy the privileges of the National agreement.”

 

            “Each major league has the right to insist that those in control of a franchise enforce the provision in its constitution against betting in ball parks.  Failure to safeguard the game’s integrity and sportsmanship from this menace is so serious an offense under baseball law that it is one of the causes for which the National or American League franchise may be revoked.” 

 

Ewell’s Universe:

 

Dear Subscribers:

 

Where did the summer go? That is the question that I keep asking myself. I cannot  believe that it is already August. I took some time off yesterday and enjoyed the beautiful weather by taking a trip out to Coney Island. As I was riding the “F” train out to Coney Island, I could not help but think of the Seinfeld episode where Jerry takes the subway out to Coney Island and none of his friends want to go.

 

For those who do not know, Coney Island is in fact no island at all. I believe the proper geographical term is peninsula. Geography aside, it was a beautiful day to get a Nathan’s hot dog and ride the Cyclone, a wooden rollercoaster built in 1927 which is still operating today. I will skip the play-by-play of riding the roller-coaster. Suffice to say, as soon as I got off the Cyclone, I ran around and got back in line, this time getting the very front seat. This roller-coaster will always be one of my favorites.

 

Turning to the high courts, I found one high court that was not riding the rollercoasters and enjoying their summer. The justices on the Nebraska Supreme Court are spending their summer, among other things, ruling on insurance cases.

 

The facts read like a typical cancellation case. The insurer attempted to electronically withdraw the monthly premium from the insured’s bank account, but the insured’s bank account lacked sufficient funds. The insurer then took steps to cancel the policy. In Nebraska, when insurers cancel automobile and motorcycle policies, they are required to notify the named insured by a registered or certified letter. The insurer prepared cancellation notices and mailed the notices to the insured.

 

The insured denied ever receiving the letter. The insurer submitted a stack of evidence in support, including a certificate of mailing. The certificate of mailing contained a space for certified mailing; however, that box was unchecked. Based upon this, the Supreme Court held that there was a material issue of fact whether the cancellation notices were sent by certified mail. The court explained that, if the insurer had simply checked the box indicating “Certified Mail” on the certificate of mailing, it would have had “direct proof” that the mailing was sent to the insured. Instead, the conclusion that the cancellation notices were sent by certified mail could only be reached by resolving inferences in favor of the insurer. An impermissible act since the insurer moved for summary judgment. Finding a material issue of fact, Nebraska’s Supreme Court remanded the case for a jury to decide whether the insurer sent the cancellation notice by certified mail.

 

This case serves as a timely reminder that insurers need to comply with cancellation procedures prescribed by state law to the letter. This includes having the required evidence to establish that the cancellation notice was sent in accordance with state law.

 

‘Til Next Time,

 

John

John R. Ewell

jre@hurwitzfine.com

 

Peiper’s Position:

 

We are happy to see our editor has reclaimed his  rightful place at the top of the fold.  We were beginning to wonder if he’d ever return, and given the tenor of his recent e-mails he was beginning to  have the same questions.  Just between us, I think he actually missed us.    

 

Unfortunately, his first day back in the office coincided with my departure to the city 400 miles to the East.   It has not stopped him from inquiring into the status of my note for this week, however.  Nor does it ever, by the way, but that is a story for a different day. 

 

My absence from the office saved him, and everyone else there, from my complaining about the Advanced Chimney decision reviewed in Dan’s column.  I’ll start with this qualification before I lay into my manifesto below.  I do not know the facts of this case, nor  how it was presented to the Court, and this commentary is in no way a criticism of the Advanced Chimney case.  It follows, however, a long line of cases that I do know a bit more about, and in many of those cases my below rant is apropos.    

 

Readers of this column surely know how yours truly believes this case law has been expanded well beyond the Court’s original intent.  Simply put, if you look at the earliest decisions on this, if a lawyer is doing “legal work” the material should be protected…end…of…story.  If it is “mixed purpose” it is discoverable.  This is not difficult, and it is not new. 

 

But, we, as a profession cannot help ourselves.  We see more and more frequently situations with lawyers offering to “quarterback” claims, with the mistaken impression that the investigation can be shielded from discovery in later coverage litigation.  This is particularly prevalent in the first party world, and I, myself, have had this conversation numerous times. 

 

A lawyer cannot be a claims professional, and what is more, we typically don’t do a good job of investigation anyway. 

 

The upshot is a developing body of precedent which puts the lawyer, and carrier, in the position of proving obvious legal work is, in fact, legal in nature.  It is a trend that if continues will destroy the ability of a carrier to have any level of comfort in having candid discussions with their coverage counsel.  It’s already on wobbly legs, and we, as a profession, have to be vigilant that we are drawing an appropriate line. 

 

This is not to say that an attorney does not have a role in a coverage investigation.  It just cannot be omnipresent, and the dichotomy of the two roles needs to be explained, in depth, when a challenge ensues.  If a court is given the full information of the role of counsel, more times than not they reach an appropriate balance.  When we don’t, more times than not, the parties involved share some portion of the blame. 

 

Just sayin’, and with that I’ve said enough this week.  The Bills are on, and I’ll go transfer my frustrations to the TV.  I’m not sure which outlet is more futile! 

 

Steve

Steven E. Peiper

sep@hurwitzfine.com

 

Hewitt’s Highlights: 

 

Dear Subscribers:

 

Unfortunately, this week we only have a handful of serious injury cases as we enter August and the Appellate Courts slow down their decision writing. The only case to highlight this issue is the last one I write about in which the Appellate Courts again remind us that a driver who hit another vehicle from behind has the burden of coming forth with evidence of a nonnegligent explanation. Failure to do that will lead to the driver that was hit from behind to win on summary judgment on the issue of liability. Of course, plaintiff must still prove a serious injury.

 

There’s still almost four weeks here before the kids go back to school. My boys’ summer camp is wrapping up this week and my teacher wife is counting down the days to getting back to work. Besides back to school supplies in stores, I’ve seen Halloween decorations and costumes for sale. Can’t we at least wait until after Labor Day? I hope you are enjoying your summer.

 

Until next time,

 

 

Rob
Robert Hewitt

reh@hurwitzfine.com

 

Wilewicz’ Wide-World of Coverage:

 

Dear Readers,

 

Unbelievably, it’s August already, and back-to-school is just around the corner. Indeed, my studious spawn has already purchased all of her school supplies (granted, she had wanted to start in June, but I belayed that request in favor of enjoying the season a little first), and we have just a few short weeks left before falling back into a stricter schedule and no school breaks until Thanksgiving. Now, we’ve done a number of camps this year, plus a bit of traveling, but it seems to have gone by predictably, and yet unusually, fast. So, one final venture next week – to Yellowstone and Grand Teton National Parks to view the solar eclipse. I’ll report back on the viewing in the next edition of CP, but if you’re in a viewing zone: wear those protective lenses!

 

Meanwhile, this time in the Wild World of Coverage, we report that the Second Circuit has been quiet this summer. They did issue one case of late however, interpreting a relatively obscure provision of the Insurance Law. In Gevorkyan v. Judelson, the court interpreted New York Insurance Law § 6801(a)(1), which deals with bail bond sureties. With very few facts about the alleged crime, the court dove right into the statutory interpretation. That proviso of the law has been interpreted to mean that a bond surety cannot retain the premium if the criminal defendant is not released on bail. Makes sense. The surety had argued that general contract principles permitted them to keep the money. The court, however, cited the basic insurance idea that “premium follows the risk”. If the risk is nil (i.e. he/she’s not going anywhere), you need to return that money.

 

Finally, just a little further afield, we also bring you a Third Circuit decision (governed by Pennsylvania law). In Westport Insurance Corp. v. Peter G. Mylonas, we have an occurrence counting case. There, a disgruntled client sued his attorney when a corporation formation deal fell apart. The client sued for negligence, breach of fiduciary duties, and breach of contract. While there were separate causes of action for these things, the court found that these were all one and the same “claim”. For one claim, there was one policy limit, and that’s it. This particularly hurt because the per-claim limit was relatively low ($500k), and defense costs eroded the limits of liability (and totaled over $400k!). However, like inartful pleadings, clever pleadings do not multiple claims make.

 

Until next time,

Agnes

Agnes A. Wilewicz

aaw@hurwitzfine.com

 

Barnas on Bad Faith:

 

I bring you this edition of Barnas on Bad Faith from Supreme Court, Kings County, where the weather is gorgeous. The weather has also taken a nice turn in Buffalo. Summers are always great at my parents' house, which is situated on a small man-made lake. However, with the lake comes unwanted visitors; namely, Canadian geese. The geese enjoy wandering up the shore from the water onto my parents' lawn, where they leave large amounts of waste. Growing up, the geese left our yard alone because they feared the wrath of my golden retriever. However, as time has gone on, and the geese have realized my dog is no longer with us, they have grown quite bold and come into the yard on almost a daily basis. They have become quite a nuisance. 

 

The underlying plaintiffs in the Sarris case in my column had a similar issue. The Sarrises had a pond on their property and began to entice various waterfowl to their pond, much to the chagrin of their neighbors. The neighbors brought a lawsuit and the Sarrises’ insurer disclaimed coverage.  The court determined that the Sarrises actions constituted and "occurrence" under the policy, and that coverage was not barred by the intentional acts exclusion.  The claim for violation of the duty of good faith and fair dealing survived motion practice based on procedural issues. 

 

Elsewhere in Weathers, the Second Department declined to dismiss a claim for bad faith based on failure to settle.  The court concluded that there was no basis for dismissing the complaint even though there was an outstanding issue regarding total damages in the underlying action. 

 

Brian

Brian D. Barnas

bdb@hurwitzfine.com

 

Altman’s Administrative (and Legislative) Agenda:  

 

Greetings, Dear Readers. 

 

I hope you are enjoying your summer.   As we turn to the dog days of August, I find myself celebrating my one-year anniversary at Hurwitz & Fine, and find myself newly single.  So, I have two reasons to celebrate!  I will spend the last weeks of summer hiking, cooking lavish meals, and pining for my not-so-secret crush, Lauren Graham.  If you know anyone looking to date a Nice Jewish Lawyer who cooks, plays the piano, and writes nifty poems – or if you know Lauren Graham — drop me a line at hba@hurtwitzfine.com.  

 

August also begins New York’s rollout of its cyber-security regulations, which I discuss in my column.

 

Howard

Howard B. Altman

hba@hurwitzfine.com

 

Object Matrimony:

 

Vancouver Daily World

August 11, 1917

 

“Young Lady, 20, desires acquaintance with young gentleman.  Object: matrimony. Box 1621, World Office.”

 

Off the Mark:

 

Dear Readers,

 

My kids are enjoying their last two weeks of camp and are starting to look forward to the new school year.  I can’t believe how fast the summer is going by.  I also can’t believe that the Halloween decorations and candy are already out in the stores.  In an effort to get some more summer in before it’s over, this weekend will be a beach weekend with the family.

 

This edition discusses a recent case involving a construction defect from the Northern District of Mississippi.  In Employers Mut. Cas. Co. v. West, a wooden outdoor deck collapsed causing injuries to those who were standing on it when it fell.  During a deposition, the sub-contractor that built the deck admitted that an improper method of fastening the deck to the building was used.  Based on the sub-contractor’s contemporaneous knowledge of the failure to use a proper method to fasten the deck to the building, the U.S. District Court for the Northern District of Mississippi held that the actions of the sub-contractor did not constitute an accident and, therefore, the underlying claims did not involve an “occurrence”.  As such, the Court held that the sub-contractor’s insurance carrier did not have an obligation to defend or indemnify its insured.  As the underlying injuries were not caused by an “occurrence”, there was no potential for coverage under the policy. 

 

Until next time …

 

Brian

Brian F. Mark
bfm@hurwitzfine.com

 

Headlines from attached edition:

KOHANE’S COVERAGE CORNER
Dan D. Kohane
ddk@hurwitzfine.com

 

  • Issue of Fact as to Whether “Authorized Agent or Broker” Received Cancellation Notice

  • Policyholder’s Failure to Comply with Terms of Settlement Agreement with Insurer Forfeits Right to Coverage

  • A Reminder and a Warning: Lawyer’s Investigatory File Discoverable, Where Lawyer Conducted Investigation as to Whether or Not to Disclaim or Rescind, Except that Part Primarily of a Legal Nature.  Lawyer who Handled Investigation Also Disqualified, but Not Law Firm

 

HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW

Robert E.B. Hewitt III

reh@hurwitzfine.com

 

  • No Serious Injury to Plaintiff’s Spine or Right Shoulder

  • Issues of Fact as to Whether Spine Injury Was Caused by the Accident

  • Operator of Vehicle which Hit Other Vehicle in Rear Must Provide Evidence of a Nonnegligent Explanation for Accident

 

TESSA’S TUTELAGE

Tessa R. Scott

trs@hurwitzfine.com

 

  • To Compel a Plaintiff to Accept an Untimely Answer You Must Provide a Reasonable Excuse for the Delay and Demonstrate a Meritorious Defense

  • Ensure That You Have Strict Compliance with Rules for Service upon a Foreign LLC

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

sep@hurwitzfine.com

 

  • Volunteer Coach Deemed to Have Assumed Risk of Slip & Fall Injury During Practice

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

aaw@hurwitzfine.com

 

  • Third Circuit Holds that Multi-Count Malpractice Suit Against Attorney was One Single “Claim”, Thus Per-Claim Single Policy Limit Applied (PA law)

  • Second Circuit Finds that New York Insurance Law Prohibits Bail Bond Sureties from Retaining Premiums when Accused is Never Admitted to Bail, Citing Premium Follows the Risk Principle (NY Law)

 

JEN’S GEMS

Jennifer A. Ehman

jae@hurwitzfine.com

 

  • Gem-less this week.

 

BARNAS ON BAD FAITH

Brian D. Barnas

bdb@hurwitzfine.com

 

  • Assignee Stated Claim for Bad Faith Failure to Settle against Insurer

  • Duck, Duck, Occurrence

 

EWELL’S UNIVERSE
John R. Ewell

jre@hurwitzfine.com

 

  • Summary Judgment Denied To Insurer Where Insurer Lacked “Direct Proof” that It Mailed Cancellation Notice by Certified Mail

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

hba@hurwitzfine.com

 

  • Cybersecurity Regulations

OFF THE MARK
Brian F. Mark
bfm@hurwitzfine.com

 

  • US District Court Grants Insurer Summary Judgment in a Declaratory-Judgment Action Against Victims of a Deck Collapse Finding that there is no Injury or Damage Caused by an Occurrence

     

EARL’S PEARLS

Earl K. Cantwell
ekc@hurwitzfine.com

                                                                                                   

  • Rescission for Material Misrepresentations Reversed

 

Nice to be home. 

 

 

Dan D. Kohane

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

 

Office:            716.849.8942

Mobile:           716.445.2258

Fax:                716.855.0874

E-Mail:            ddk@hurwitzfine.com

Website:         www.hurwitzfine.com

Twitter:           @kohane

LinkedIn:       www.linkedin.com/in/kohane

 

 

 

 

Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York


NEWSLETTER EDITOR
Dan D. Kohane
ddk@hurwitzfine.com

 

ASSOCIATE EDITOR

Agnes A. Wilewicz

aaw@hurwitzfine.com

 

ASSISTANT EDITOR

Jennifer A. Ehman

jae@hurwitzfine.com

 

INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
ddk@hurwitzfine.com

 

Steven E. Peiper, Co-Chair

sep@hurwitzfine.com
 

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Edward B. Flink

Patricia A. Fay

Brian D. Barnas

Howard B. Altman

Brian F. Mark

John R. Ewell

Diane F. Bosse

Joel R. Appelbaum

 

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
sep@hurwitzfine.com

 

Michael F. Perley

Robert E. Hewitt, III

Brian D. Barnas

 

NO-FAULT/UM/SUM TEAM
Jennifer A. Ehman, Team Leader
jae@hurwitzfine.com
 

Patricia A. Fay

 

APPELLATE TEAM
Jody E. Briandi, Team Leader
jeb@hurwitzfine.com

 

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Tessa’s Tutelage
Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith
Ewell’s Universe

Altman’s Administrative (and Legislative) Agenda
Off the Mark

Earl’s Pearls

 

KOHANE’S COVERAGE CORNER
Dan D. Kohane
ddk@hurwitzfine.com

 

08/09/17       GC Clinton, LLC v. Leading Insurance Group Insurance Co., Ltd.

Appellate Division, Second Department       
Issue of Fact as to Whether “Authorized Agent or Broker” Received Cancellation Notice

Leading Insurance Group Insurance Co. (“Leading”), issued a commercial insurance policy with respect to GC Clinton’s (“GC”) residential rental property in Brooklyn. The policy listed Buckingham as the agent. According to GC, Omni Agency (“Omni”) was its broker.

 

On March 26, 2013, Leading issued a notice of cancellation of insurance for nonpayment of premium and mailed that notice to Buckingham. After the purported cancellation date, there was a fire in GC’s building. GC commenced this action, seeking a declaratory judgment regarding coverage and damages for breach of contract.

 

GC contended that Leading failed to comply with the requirement set forth in Insurance Law § 3426 that the notice of cancellation be mailed or delivered to the insured's "authorized agent or broker," and therefore, the policy was not effectively cancelled.

 

GC made a prima facie showing that mailing the notice of cancellation to Buckingham, rather than Omni, did not satisfy the requirement set forth in Insurance Law § 3426 that notice be mailed or delivered to the insured's "authorized agent or broker." However, in opposition, Leading raised triable issues of fact, inter alia, as to whether Buckingham was the "authorized agent or broker”.

 

Issues of fact thereby justify denying both motions for summary judgment.

 

08/08/17       Bovis Lend Lease (LMB), Inc. v. Arch Insurance Company

Appellate Division, First Department

Policyholder’s Failure to Comply with Terms of Settlement Agreement with Insurer Forfeits Right to Coverage

Under paragraph 4 of the parties' Companion Agreement, Bovis was required to obtain Arch's consent to the settlement of the claims and counterclaims asserted by and against Bovis and Lower Manhattan Development Corporation (LMDC), in order to seek indemnification from Arch. Bovis' contractual remedy in the event of Arch's refusal to consent to a settlement, whether or not such refusal was reasonable, was to be indemnified by Arch "for all damages suffered in excess of the result that [Bovis] would have obtained if the settlement had been accepted."

 

By entering, contrary to the plain terms of the Companion Agreement, into a settlement with LMDC to which Arch had refused to consent, Bovis breached the Companion Agreement and forfeited its right to the contractual remedy for Arch's refusal to consent to a settlement acceptable to Bovis, whether or not Arch withheld its consent in good faith.

 

08/02/17       Advanced Chimney, Inc. v. Graziano

Appellate Division, Second Department
A Reminder and a Warning: Lawyer’s Investigatory File Discoverable, Where Lawyer Conducted Investigation as to Whether or Not to Disclaim or Rescind, Except that Part Primarily of a Legal Nature.  Lawyer who Handled Investigation Also Disqualified, but Not Law Firm

Tudor Insurance Company issued a policy to Advanced.  Greater New York Mutual (“GNY”) sued Advanced, as subrogee of 408 East 73 Street Housing Corp. (“408”) seeking to recover the amount paid by GNY to 408 for damages caused in a fire, alleged caused by Advanced’s negligence. Tudor hired the law firm of Kaufman Borgeest & Ryan, LLP (“KBR”), to investigate GNY's claim, as well as the plaintiff's procurement of insurance with Tudor.

 

Stephanie Gitnik, a member of KBR, conducted the investigation, which included interviews with the plaintiff's representative, Peter Lippis, and with the plaintiff's broker, Kimberly A. Graziano of K.A.G. Insurance Brokerage, Inc. After conducting the investigation, KBR sent a letter to the plaintiff dated January 6, 2012, notifying it that Tudor was rescinding the policy based on material misrepresentations made by the plaintiff in the procurement of the policy.

 

Advance then commenced this action seeking a judgment declaring that Tudor is obligated to defend and indemnify it in the underlying action. GNY, who was named as a nominal defendant in this action, moved to compel Tudor to comply with discovery demands, including the production of the investigative file of KBR for the period through and including January 6, 2012, and to disqualify KBR from further representation of Tudor in this matter.

 

CPLR 3101(a) entitles parties to full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof. Discovery determinations should be evaluated on a case-by-case basis "with due regard for the strong policy supporting open disclosure”. The payment or rejection of claims is a part of the regular business of an insurance company. Consequently, reports which aid it in the process of deciding whether to pay or reject a claim are made in the regular course of its business. Reports prepared by insurance investigators, adjusters, or attorneys before the decision is made to pay or reject a claim are not privileged and are discoverable, even when those reports are mixed/multi-purpose reports, motivated in part by the potential for litigation with the insured.

 

Here, the Supreme Court properly compelled disclosure, as the material sought by GNY was prepared by KBR as part of Tudor's investigation into the claim, and was not primarily and predominantly of a legal character. Nor was the file protected as the work product of KBR.

 

The Supreme Court providently exercised its discretion in disqualifying Stephanie Gitnik, the attorney who conducted the investigation, from further representation of Tudor in this matter since she was likely to be a witness on a significant issue of fact (see Rules of Professional Conduct but, it improvidently exercised its discretion in disqualifying KBR itself. Pursuant to Rule 3.7(b)(1) of the Rules of Professional Conduct, "[a] lawyer may not act as [an] advocate before a tribunal in a matter if ... another lawyer in the lawyer's firm is likely to be called as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony may be prejudicial to the client" (Rules of Professional Conduct [22 NYCRR 1200.0] 3.7[b][1]. Here, there was no showing that Gitnik's testimony may be prejudicial to Tudor's case.

 

HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW

Robert E.B. Hewitt III

reh@hurwitzfine.com

 

08/09/17       Avila v. Jica

Appellate Division, Second Department

No Serious Injury to Plaintiff’s Spine or Right Shoulder

The defendants met their prima facie burden of showing that the plaintiff Ana Rosero did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical region of Rosero's spine and to Rosero's right shoulder did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102 and that, in any event, these alleged injuries were not caused by the subject accident. Rosero failed to raise a triable issue of fact in opposition. No facts are given.

 

08/02/17       Gomez v. NYC Trans. Auth.

Appellate Division, Second Department

Issues of Fact as to Whether Spine Injury Was Caused by the Accident

The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injury to the lumbar region of the plaintiff's spine was not caused by the accident at issue. In opposition to the defendants' cross motion for summary judgment, however, the plaintiff submitted evidence raising a triable issue of fact as to whether the alleged injury to the lumbar region of her spine was caused by the accident at issue. No facts are given.

 

08/02/17       Karademir v. Mirando-Jelinek

Appellate Division, Second Department

Operator of Vehicle which Hit Other Vehicle in Rear Must Provide Evidence of a Nonnegligent Explanation for Accident

The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the injured plaintiff's spine did not constitute serious injuries under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, however, the plaintiffs submitted competent medical evidence raising a triable issue of fact as to whether the injured plaintiff sustained serious injuries to the cervical and lumbar regions of his spine.


Plaintiff also moved for summary judgment on the issue of liability. A rear-end collision with a stopped vehicle establishes a prima facie case of negligence against the operator of the moving vehicle and imposes a duty on the latter to provide evidence of a nonnegligent explanation for the collision in order to rebut the inference of negligence. The plaintiffs were required to establish, prima facie, not only that the defendants were negligent, but also, that the injured plaintiff driver was free from comparative fault. Here, the plaintiffs established that the vehicle operated by the injured plaintiff had been stopped for 20 seconds in heavy traffic when it was struck in the rear by the vehicle owned by the defendant. This was sufficient to establish the plaintiffs' prima facie entitlement to judgment as a matter of law. Since the defendants failed to opposed the cross motion, they failed to provide any nonnegligent explanation for the rear-end collision, or to raise any triable issue of fact as to the injured plaintiff's comparative fault, the plaintiffs' cross motion for summary judgment on the issue of liability should have been granted.

 

TESSA’S TUTELAGE

Tessa R. Scott

trs@hurwitzfine.com

 

08/02/17       State Farm Mut. Auto. Ins. Co. v Austin Diagnostic Med., P.C.

Appellate Division, Second Department

To Compel a Plaintiff to Accept an Untimely Answer You Must Provide a Reasonable Excuse for the Delay and Demonstrate a Meritorious Defense

The plaintiff insurance company commenced this action against the defendant, seeking a judgment declaring that it was not obligated to pay certain no-fault insurance benefits because the defendant failed to appear for examinations under oath. The defendant filed an answer approximately 3½ months after the statutory time to file an answer had expired. The plaintiff rejected the answer as untimely, and the defendant moved to extend its time to answer, or in the alternative, to compel the plaintiff to accept the untimely answer. The Supreme Court denied the motion, and the defendant appeals.

 

To compel the plaintiff to accept an untimely answer as timely or to extend the time for a defendant to answer, a defendant must provide a reasonable excuse for the delay and demonstrate a potentially meritorious defense to the action. Here, the defendant submitted an answer which was verified only by its attorney and an affirmation from its attorney who did not have personal knowledge of the facts. These documents were insufficient to demonstrate that the defendant had a potentially meritorious defense to the action.

 

As a result, the Supreme Court’s decision was affirmed.

 

08/09/17       Global Liberty Ins. Co. v Surgery Ctr. of Oradell, LLC

Appellate Division, Second Department

Ensure That You Have Strict Compliance with Rules for Service upon a Foreign LLC

The plaintiff served an answer on a foreign company, after the defendant did not appear or answer the complaint, the plaintiff moved for leave to enter a default judgment. The Supreme Court denied the plaintiff's unopposed motion on the ground that the plaintiff had not submitted sufficient facts to support its claim. Plaintiff appealed.

 

It goes without saying that a plaintiff seeking leave to enter a default judgment must file proof of proper service of the summons and the complaint, the defendant's default, and the facts constituting the claim. As Defendant was a foreign LLC the Limited Liability Company Laws applied.  With regard to service, that statute requires three things:

 

  • First, service upon the unauthorized foreign limited liability company may be made by personal delivery of the summons and complaint, with the appropriate fee, to the Secretary of State.

  • Second, the plaintiff must also give the defendant direct notice of its delivery of the process to the Secretary of State, along with a copy of the process. The direct notice may be sent to the defendant by registered mail, return receipt requested, to the defendant's last known address.

  • Third, after process has been delivered to the Secretary of State and direct notice of that service has been sent to the defendant, the plaintiff must file proof of service with the clerk of the court. That proof of service must be in the form of an "affidavit of compliance." The affidavit of compliance must be filed with the return receipt within 30 days after the plaintiff has received the return receipt from the post office. Service of process shall be complete 10 days after the affidavit of compliance has been filed with the clerk with a copy of the summons and complaint.

 

Strict compliance with Limited Liability Company Law is required. Here, the plaintiff failed to submit an affidavit of compliance with the return receipt within 30 days after it received the return receipt from the post office. Thus, the plaintiff was not entitled to enter a default judgment.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

sep@hurwitzfine.com

 

08/02/17       Siegel v Albertus Magnus High School

Appellate Division, Second Department

Volunteer Coach Deemed to Have Assumed Risk of Slip & Fall Injury During Practice

Plaintiff was a volunteer coach on his son’s baseball team.  He was injured in August of 2013 when he allegedly slipped and fell on a cream color “cushiony” tile which covered a metal drainage grate at the field maintained by defendant.  Upon being sued, the Albertus Magnus then commenced a third-party action against the baseball team, the Generals, for whom plaintiff was acting as a coach at the time of the incident.  The Generals, apparently, leased the fields pursuant to a contract between defendant and themselves.  

 

In affirming the trial court, the Appellate Division ruled that plaintiff assumed the risk when he voluntarily participated in sport or recreational activity.  The Court noted this included risks inherent with the construction of the field or any open condition thereon. Notably, the Court also stated that the injury need not be foreseeable for the “assumption of the risk” doctrine to apply, so long as the injured party understood the possibility of the injury causing event.

 

Here, the plaintiff was aware of the field and the cream colored tile where he slipped.  The Court also stated there was no dispute he was engaged in a recreational activity at the time of the incident, and likewise, there was no argument that the tile was open and obvious. 

 

At the same time it moved for a default, defendant also moved for indemnity against the baseball team.  In reversing the trial court, the Appellate Division found that defendant had established the existence of a contractual indemnity clause that applied “for any and all liability and injuries which occur or arise out of [the General’s] use of the fields during the course of organizational games, practices and events.” 

 

As the injury occurred during practice, at the field, it followed the terms of the indemnity clause was triggered.  In so holding, the Court rejected the baseball team’s argument that the indemnity provision violated GOL 5-322.1 and/or GOL 5-321.  The court ruled that GOL 5-321 was inapplicable, and also ruled that GOL 5-322.1 was also not appropriate where, as here, the contract was not one for construction or maintenance.  

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

aaw@hurwitzfine.com

 

08/04/17       Westport Insurance Corp. v. Peter G. Mylonas

United States Court of Appeals, Third Circuit

Third Circuit Holds that Multi-Count Malpractice Suit Against Attorney was One Single “Claim”, Thus Per-Claim Single Policy Limit Applied (PA law)

Anastasios Papadopoulos brought a suit against his former attorney, Peter Mylonas, and his law firm. He had hired the firm to advise in connection with formation of a corporation, but the deal fell apart. Thus, in his suit against the firm, Papadopoulos included multiple counts, including negligence, breach of fiduciary duties, and breach of contract. The facts underlying each of these claims were substantially the same.

 

Westport insured Mylonas under a professional liability policy. That policy stated that a claim was a “demand made upon any INSURED for LOSS, as defined in each of the attached COVERAGE UNITS, including, but not limited to, service of suit or institution of arbitration proceedings or administrative proceedings against any INSURED.” A “potential claim” was defined as “any act, error, omission, circumstance or PERSONAL INJURY which might reasonably be expected to give rise to a CLAIM against any INSURED under the POLICY” or as “any breach of any duty to a client or third party which has not resulted in a CLAIM against an INSURED”. Finally, the policy’s section on “Multiple Insureds, Claims and Claimants” stated: “Two or more CLAIMS arising out of a single WRONGFUL ACT, as defined in each of the attached COVERAGE UNITS, or a series of related to continuing WRONGFUL ACTS, shall be a single CLAIM. All such CLAIMS ... are subject to one “Per Claim Limit of Liability” and deductible.”

 

After a $525,000 judgment was entered against Mylonas, and over $400,000 in defense costs incurred (which eroded the policy limits), coverage litigation ensued. The insurer asserted that the entire suit was one “claim” and thus only one policy limit of $500,000 applied. The insured argued that there were multiple claims involved and thus up to $1,000,000 in coverage was available, in the aggregate.

 

In a clear and well-reasoned opinion, the Third Circuit found that the policy terms were unambiguous. The claims against Mylonas arose out of essentially one claim, namely the law suit. The claim was not an underlying wrong or wrongs, but a demand for loss made upon an insured party. Here, this was one professional liability claim. As such, only one policy limit applied. 

 

07/28/17       Karine Gevorkyan v. Ira Judelson

United States Court of Appeals, Second Circuit

Second Circuit Finds that New York Insurance Law Prohibits Bail Bond Sureties from Retaining Premiums when Accused is Never Admitted to Bail, Citing Premium Follows the Risk Principle (NY Law)

In this brief decision, the Second Circuit analyzed whether an entity engaged in the “bail business”, as defined under New York Insurance Law, could retain a premium paid if a criminal defendant is never admitted to bail. With scant facts, the Circuit Court noted that the Court of Appeals in New York had concluded that “New York Insurance Law prohibits a bail bond surety from retaining a premium when a criminal defendant is not released on bail, and that a bail bond surety’s retention of a premium under such circumstances circumvents the insurance law principle that premium follows risk”.

 

While the bail bond surety in this case had argued that he could retain the premium on principles of general contract interpretation, the Court rejected that. Since the accused was never admitted to bail, New York Insurance Law precluded the retention of the premium. Citing public policy grounds, the Court went on to state that this “prohibition applies regardless of the terms of the parties’ contract because, under New York law, contractual provisions that contravene applicable laws in ways that harm the public policies underlying those laws are unenforceable.”

 

JEN’S GEMS

Jennifer A. Ehman

jae@hurwitzfine.com

 

Gemless this week.

 

BARNAS ON BAD FAITH

Brian D. Barnas

bdb@hurwitzfine.com

 

08/09/17       Weathers v. Tri State Consumer Insurance Company

Appellate Division, Second Department

Assignee Stated Claim for Bad Faith Failure to Settle against Insurer

In June 2008, a vehicle driven by Alex Rios collided with a vehicle driven by Ronald B. Weathers in Brooklyn.  Thereafter, Weathers commenced a personal injury action against Rios. Rios had an insurance policy Tri State at the time of the accident, with liability limits of $100,000 per person and $300,000 per occurrence.  Tri State undertook Rios's defense in the personal injury action.  After Weathers successfully moved for summary judgment on the issue of liability, the personal injury action proceeded to a trial on the issue of damages. The jury awarded Weathers damages in the principal sums of $450,000 for past pain and suffering, $1,000,000 for future pain and suffering, $72,000 for future physical therapy, and $125,000 for future medical expenses, and a judgment was entered upon the verdict.

 

Rios appealed.  Pursuant to a written stipulation, Weathers consented to reduce the damages award for past pain and suffering from $450,000 to $350,000, and to reduce the damages award for future pain and suffering from $1,000,000 to $450,000, in accordance with the decision of the Second Department on appeal.  However, he did not agree to reduce the damages awards for future physical therapy and future medical expenses.

 

Subsequently, Rios assigned his rights against Tri State to Weathers.  Weathers, as assignee of Rios's rights, then commenced this action alleging that Tri State acted in bad faith by refusing to settle this case before the trial for the policy limit of $100,000 and breached the implied covenant of good faith and fair dealing in handling the defense of the personal injury action on behalf of Rios.  Tri State moved to dismiss.  Tri State argued that the bad faith action was premature because there was no jury verdict on damages, and therefore, it cannot be said that Tri State acted in bad faith for refusing to settle the personal injury case.

 

The Second Department concluded that Tri State failed to establish any ground to dismiss the complaint.  Although there were outstanding questions as to the total award of damages in the personal injury action, Tri State failed to demonstrate why that prevents Weathers from maintaining an action against Tri State alleging bad faith refusal to settle and breach of the implied covenant of good faith and fair dealing.

 

07/28/17       Metropolitan Property and Casualty Ins. Co. v. Sarris

United States District Court, Northern District of New York

Duck, Duck, Occurrence

Metro issued a homeowners policy and an excess liability policy to George and Joy Sarris.  In 2005, Schillaci and Newell, neighbors of the Sarrises commenced a lawsuit against them.  The complaint in the Schillaci action alleged that the Sarrises expanded their pond and diverted the water flow onto Schillaci’s property.  Schillaci also alleged that the Sarrises began raising ducks and geese and enticed native and domesticated ducks and geese onto their property by putting out feed.  This increased the fowl population exponentially and allegedly greatly interfered with Schillaci’s use of the property.

 

The complaint alleged that the Sarrises acted intentionally in enticing the ducks and geese.  According to the complaint, Schillaci and Newell tried to work things out with the Sarrises, but they did nothing about the continuing nuisance.

 

Sarris received service of the lawsuit on May 11, 2005.  He claimed that he informed his insurance agent within days.  In contrast, the agent did not recall receiving a copy of the lawsuit from Sarris, and had no recollection of hearing about the issues with the neighbors or the lawsuit.  Metro claimed it did not receive notice of the suit until December 23, 2014.  Metro sent the Sarrises a letter denying the claim based on untimely notice and because the alleged property damage, if any, was not caused by an occurrence and was barred by the intentional act exclusion. 

 

Met sought a declaratory judgment that it had no obligation to defend or indemnify the Sarrises in the Schillaci.  The Sarrises counterclaimed for violations of General Business Law § 349, New York Insurance Law 2601, and breach of the implied covenant of good faith and fair dealing.

 

The court concluded that Metro had a duty to defend the Sarrises.  It found that the conduct alleged in the Schillaci case was an occurrence.  While Sarrises’ decision to raise the waterfowl was intentional, there were no factual allegations that the Sarrises intended to injure the neighbors by raising the ducks and geese.  Thus, the damage was unintended, even though the acts leading to the damage were intentional.  Further, the harm to the neighbors was not inherent to the act of raising the waterfowl.   The court also rejected the argument that the Sarrises’ decision to keep raising the ducks and geese was intentional because they were told about the issues but persisted.  The Sarrises took a calculated risk in continuing to raise the ducks and geese despite their neighbors’ complaints, but that decision did not establish the intent to cause harm.

 

The court also concluded that the intentional acts exclusion did not apply.  The court incorporated its analysis of the occurrence issue to its discussion of the intentional acts exclusion.  It stated that since the complaint alleged an occurrence, Metro could not rely on the intentional acts exclusion to disclaim coverage.

 

Turning to the notice issue, the court concluded that there was an issue of fact.  The Sarrises claimed they gave notice immediately, but Metro claimed they did not receive notice until 2014.  Both parties had witnesses to support their arguments, and the court could not resolve the conflicting narratives without making factual findings.

 

Turning to the duty to indemnify, the court declined to grant summary judgment.  Metro’s duty to indemnify depended on a liability determination in the underlying action, which had not yet been determined.

 

The court dismissed three of the Sarrises’ counterclaims on the pleadings.  The court cited the longstanding rule that there is no private cause of action for violation of Insurance Law § 2601 or violation of New York insurance regulations.  The GBL § 349 counterclaim was dismissed because the Sarrises failed to plead conduct that was consumer oriented.  However, the counterclaim for violation of the duty of good faith and fair dealing was not dismissed as Metro failed to properly develop its argument.

 

EWELL’S UNIVERSE
John R. Ewell

jre@hurwitzfine.com

 

07/28/17       Barnes v. American Standard Ins. Co. of Wisconsin

Nebraska Supreme Court

Summary Judgment Denied To Insurer Where Insurer Lacked “Direct Proof” that It Mailed Cancellation Notice by Certified Mail

Jimmy Barnes entered into three insurance policies with American Standard. One of the policies insured a motorcycle and included underinsured motorist coverage. When American Standard attempted to electronically withdraw the monthly premium payments, Barnes’ bank account had insufficient funds for the payments. American Standard immediately prepared cancellation notices with respect to all three policies. The notices were addressed to Barnes at his mailing address and stated that the three policies would be canceled effective October 1, 2013 unless the premiums were paid.

 

On October 10, 2013, Barnes was struck by an underinsured motorist while riding his motorcycle and sustained injuries. After collecting $100,000 from the underinsured motorist’s insurance provider, Barnes made a claim for underinsured motorist coverage under his American Standard motorcycle policy. American Standard denied the claim asserting that the policy was not in force at the time of the accident. Barnes sued American Standard.

 

American Standard moved for summary judgment “on the issue of whether notice of cancellation was sent by certified mail.” Under Nebraska law, “[n]o notice of cancellation of a policy . . . shall be effective unless mailed by registered or certified mail to the named insured . . . .” Thus, American Standard was not required to establish that Barnes received the cancellation notice; rather, American Standard was required to prove that it mailed the cancellation notice to Barnes by registered or certified mail.

 

In support of its motion, American Standard offered as evidence: the cancellation notices; two affidavits from American Standard employees regarding mailing procedures; documents regarding American Standard’s policy cancellation procedure; a demonstrative envelope used to illustrate certified mail; a copy of American Standard’s mailing log (“Certificate of Mailing”); and a U.S. Postal Service certificate of mailing for a piece of first-class mail relating to Barnes’ homeowner’s policy. Notably, the envelopes had a tracking number. In opposition to American Standard’s motion, Barnes submitted an affidavit stating that he did not receive the cancellation notice by certified mail.

 

The trial court found that the Certificate of Mailing had a space to indicate what type of service was applied to the mail, but the box for “Certified” was not checked. The trial court found this to be “problematic”. Nonetheless, the envelopes had tracking numbers, so the trail court held that American Standard had substantially complied with Nebraska law. As such, the trial court granted summary judgment to American Standard and denied Barnes’ summary judgment motion.

 

The sole issue on appeal to the Nebraska Supreme Court was whether American Standard complied with Nebraska law by sending the cancellation notice to Barnes via certified mail.

 

After reiterating the summary judgment standard, Nebraska’s Supreme Court reviewed the evidence submitted to the trial court. The Court focused on the fact that American Standard failed to check the certified box on the Certificate of Mailing. The Supreme Court then reviewed the affidavit provided by American Standard’s mail clerk. The mail clerk stated that the fee charged by the post office indicates certified service. However, the Court interpreted this provision as: the clerk “does not state that [the fee] is consistent only with certified service.” For these reasons, the Nebraska Supreme Court found that the trial court’s conclusion that the cancellation notices were sent be certified mail could only be reached by resolving inferences in favor of the insurer. The Court held that, by giving inferences favorable to American Standard, the trial court failed to adhere to summary judgment standards. In others words, the trial court resolved factual issues by taking the inferences in favor of the moving party rather than the nonmoving party. Therefore, the Supreme Court concluded that there was an issue of material fact and remanded the case back to the trial court for a jury to decide whether American Standard sent the cancellation notice by certified mail.

 

The Court also made clear that if the insurer had checked the box indicating certified mail, the Supreme Court would have affirmed the grant of summary judgment to the insurer.

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

hba@hurwitzfine.com

 

Effective March 1, 2017, the New York State Department of Financial Services (“DFS”) promulgated regulations to help protect against cybercriminals and their efforts to exploit sensitive electronic data. These cybersecurity regulations apply to all entities governed by DFS, including insurance companies.

 

New York’s cybersecurity regulations require all “Covered Entities”, as defined in the regulations, to maintain a cybersecurity program to guard the confidentiality of Nonpublic Information, which includes a risk assessment and a comprehensive cybersecurity policy.  In addition, Covered Entities are now required to designate an individual to serve as the Chief Information Security Officer (“CISO”).  The CISO is tasked with overseeing, implementing and enforcing the Covered Entity’s cybersecurity policy, and is required to report, in writing and at least annually, to the Covered Entity’s Board of Directors or similar governing body.  The CISO’s report must include, as applicable, information on “(1) the confidentiality of

Nonpublic Information and the integrity and security of the Covered Entity’s Information Systems; (2) the Covered Entity’s cybersecurity policies and procedures; (3) material cybersecurity risks to the Covered Entity; (4) overall effectiveness of the Covered Entity’s cybersecurity program; and (5) material Cybersecurity Events involving the Covered Entity during the time period addressed by the report.”

 

Compliance with the cybersecurity regulations will be transitioned over a two-year period with full compliance required by March 1, 2019, however many of the regulations and requirements must be met by August 28, 2017. By August 28, covered entities are required to have met the following requirements to be in compliance:

 

  • Perform a Risk Assessment.

 

While not officially required under the rule for compliance until March 1, 2018, when the NYDFS will be prepared to provide further guidance, it is in the best interest of covered entities to perform a risk assessment. The goal of this risk assessment is to determine the covered entity’s basic risk, as well as the type of data that it holds and processes, which will help to determine the appropriate controls to put in place for compliance. With this risk assessment, you will have the foundation to develop and implement a strong cybersecurity program, cybersecurity policies to help you stay on track, audit trails, multi-factor authentication, and access privilege allowances and restrictions, based on the type of data, services and systems for which you are responsible.

 

  • Design and Document a Strong Cybersecurity Program.

 

Work with your cybersecurity team, which might include the retention of professional cybersecurity consultants, to develop a strong cybersecurity program, based on your risk assessment. Your cybersecurity program should focus on protecting the confidentiality, integrity and availability of your covered entity’s information systems. According to the rules of the NYDFS cybersecurity regulation, your cybersecurity program is not due for one year from the effective date. It is important to document all relevant information in the development of your cybersecurity program since it must all be made available to the superintendent upon request.

 

  • File First Annual Certifications with the NYDFS.

 

The first annual certifications are due from covered entities no later than February 15, 2018.

 

  • Create a Cybersecurity Policy and an Incident Response Plan.

 

Also based on your initial risk assessment, your detailed cybersecurity policy must also include an incident response plan.

 

  • Continuously Focus on Training Cybersecurity Personnel.

 

Whether it is your in-house cybersecurity team, or a third-party service provider, it is important that your qualified cybersecurity personnel stay up to date on the latest information on cybersecurity threats and appropriate countermeasures.

 

  • Designate a CISO to Your Cybersecurity Team.

 

You can hire a CISO (Chief Information Security Officer) for a permanent post, or you can reach out to a third-party candidate to take responsibility for this critical task in your organization to stay in compliance.

 

  • Notify the Superintendent When Cybersecurity Events Occur.

 

Each time your organization experiences a cybersecurity event, you must notify the superintendent within 72 hours. The event might involve an act, successful or unsuccessful, which was attempted to gain unauthorized access to, disruption of, or misuse of an information system.

 

OFF THE MARK
Brian F. Mark
bfm@hurwitzfine.com

 

07/21/17       Employers Mut. Cas. Co. v. West
U.S. District Court for the Northern District of Mississippi, Aberdeen Division
US District Court Grants Insurer Summary Judgment in a Declaratory-Judgment Action Against Victims of a Deck Collapse Finding that there is no Injury or Damage Caused by an Occurrence

This declaratory-judgment action arises out of a number of underlying personal injury actions commenced following a collapse of an outdoor deck.  The plaintiff, Employers Mutual Casualty Company (“Employers”), filed this action against the two underlying plaintiffs whose claims did not settle.  Employers filed motions for summary judgment seeking a declaration as to whether it owes a coverage obligation with regard to the underlying claims against its insureds, Jason Littrell and Littrell Construction, Inc. (“Littrell”).

 

The underlying complaints allege that D.L. Acton Construction Company (“DLA”) constructed multifamily dwellings that were “defective, inadequate, and negligent [in] design and construction.”  The dwellings consisted of three story apartment buildings with outdoor wooden decks.  The complaints allege that DLA’s subcontractor, Littrell, attached the decks to the buildings using nails, as opposed to using the more common and safer alternative of bolts.  Additionally, the complaints allege that the decks were nailed only to press board or oriented strand board and not a solid piece of wood and that no flashing was installed, which purportedly allowed water to damage the already structurally weak deck and its attachment to the building.  On November 22, 2014, the deck on one of the buildings collapsed causing everyone standing on the deck to fall onto cars parked below and suffer injuries.

 

In its motions for summary judgment, Employers argued that no coverage obligation was owed as the underlying complaints do not claim “bodily injury” or “property damage” caused by an “occurrence”  The Employers’ policy states that it only applies if the bodily injury or property damage is caused by an “occurrence.”  The term “occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

The District Court noted that the “Mississippi Supreme Court has found that the use of the term ‘accident’ in a CGL policy to define ‘occurrence’ is ‘sufficiently unambiguous for [the court] to hold that the term accident refers to [the insured’s actions] and not whatever unintended damages flowed from that act.’”  The Court has further held that “an accident by its very nature produces unexpected and unintended results.  It follows that bodily injury or property damage, expected or intended from the standpoint of the insured, cannot be the result of an accident.

 

During his deposition, Jason Littrell testified that the method he used to fasten the deck, using nails secured into oriented strand board, would not be an appropriate method of fastening a deck used for live loads.  He also testified that he knew people would use the decks.

 

In light of Mr. Littrell’s contemporaneous knowledge of his failure, the District Court held that it cannot be said that his actions constitute an accident.  Therefore, the Court concluded that the claims in the underlying actions do not involve injury caused by an “occurrence” and hence do not create a potential for insurance coverage under the Employers’ policy.  The Court stated that based on the allegations in the underlying complaints, there is no duty to defend or indemnify under the policy relative to the underlying claims.  As such, Employers’ motions for summary judgment were granted.

 

EARL’S PEARLS

Earl K. Cantwell
ekc@hurwitzfine.com

                                                                                  

06/29/17       Duarte v. Pacific Specialty Insurance Company

13 Cal. App. 5th 45 (Court of Appeals) 

Rescission for Material Misrepresentations Reversed

Duarte acquired a rental property and was sued by his tenants.  Pacific Specialty refused to defend him, and Duarte sued Pacific seeking, inter alia, a declaration that Pacific was required to defend him from the tenant suit.  The Trial Court granted Pacific Specialty’s motion for summary judgment on grounds that the insurance company was entitled to rescind the policy because Duarte made material misrepresentations and/or concealed material facts when he applied for the policy, and rescission rendered the policy unenforceable.  However, this decision was reversed on appeal.

 

The insurance company’s denial was based on two questions in the policy application.  Durante had answered “no” to question 4 with respect to whether there were disputes concerning the property at the time of the application.  He also answered “no” to question 9 representing that there was no business being conducted at the property. 

 

The Appellate Court ruled, with respect to rescission, that insurers generally have a right to know all that the applicant knows about the risk at hand.  Material misrepresentation or concealment of facts are grounds for rescission of the policy, and actual intent to deceive and may not need to be shown.  “Materiality” is determined by the probable effect which the answers would have had upon an insurer and its decision to insure the risk. 

 

With respect to question 4, Pacific Specialty offered evidence of a prior dispute between Duarte and tenants in February 2012.  However, the Appellate Court ruled that question 4 was extremely ambiguous and could be interpreted as limited to whether any such defect, claim, dispute, etc. resulted in any unrepaired damage to the property.  Therefore, the question could be reasonably construed as simply asking whether any damage to the property remained unrepaired from various past events, such as a previous claim, property dispute, or lawsuit.  The Court agreed with the policyholder that the question was ambiguous, or could be reasonably interpreted to ask whether the property had unrepaired damage associated with past events. 

 

With respect to question 9, the policyholder argued that he interpreted question 9 as referring to regular and ongoing business activity at the premises, and that there was no regular business activity at the rental house, and the Court agreed that interpretation was reasonable.  Apparently there was some intermittent business conducted at or from the rental property, but no “regular and ongoing business activity”.  Viewing the questions and the evidence in a light most favorable to the policyholder, the Court ruled that Pacific Specialty had not met its burden of proving that Duarte misrepresented the existence of a business on the premises when he submitted his application for insurance. 

 

This case emphasizes the importance of straightforward, well-worded, single purpose questions on the policy application with respect to investigating and underwriting the risk at hand.  The Court ruled that question 4 on the policy application was “utterly ambiguous”, which was harmful to Pacific Specialty’s legal position, and also perhaps not truly helpful to the underwriting department. 

 

The case affirms an insurance company’s ability to rescind a policy for material misstatements on the policy application even absent evidence of intent.  However, questions and answers on the policy application may be construed in favor of a policyholder and against the insurance company, and if there is any doubt or ambiguity with respect to a question or answer, it may well be construed against the carrier.