Coverage Pointers - Volume XV, No. 11

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.

A joyous Thanksgiving and Chanukah to all.  For those who are curious about the coincidence of having Thanksgiving and Chanukah fall at the same time, there are a number of articles written on the subject.  One author has calculated that it will happen again in 2070, again in 2165 and then never again.

Going to Florida at this time of the year can be a nice treat, when one lives in cold country.  We surely enjoyed our visit to Jacksonville, and participation in the PLRB Large Loss Conference this week.  Thanks to those who stopped in to say “hello” and welcome to our new subscribers.

The program focused on a fire loss that occurred in the Buffalo area some years back, that led to a very interesting subrogation claim and a fascinating appeal involving the “No Assignment” clause in the liability policy of the insulation company.  We handled the coverage case which resulted in a favorable outcome at the Appellate Division, Fourth Department in Greenhomes, et al v. Farm Family, 91 AD3d 1352 (2012). The speakers included some of the players in that action and we created a very interactive presentation interweaving coverage, subrogation, mediation, strategy and nimbleness.  Fun stuff.

Twitter:

Follow us on Twitter: @kohane

K2 Investments:

Parties are lining up to be heard on the reargument of the K2 Investments decision.  The parties are filing their briefs. Coughlin Duffy on behalf of American Guarantee filed its brief on November 18.  K2’s brief is due on December 23.  The insurance industry and the policyholder bar are squaring up with amicus filings.  Hurwitz & Fine, P.C. has filed an amicus application on behalf of NYIA, PCIAA, NAMIC and the FDCC.  We believe that Wiley Rein will be filing on behalf of CICLA and the AIA.  United Policyholders has filed as well.

The motions seeking amicus status are returnable on December 4 with the appeal scheduled for January 7 and a decision expected in the first quarter of 2014.

Fifty Years Ago Today, I Remember:

When I was born, Dwight Eisenhower was President.  We lived in a neighborhood where my parents and everyone else’s parents were Democrats.  I have such a distinct memory of the energy and joy in Crown Heights, Brooklyn, when a Democrat entered the White House.  I remember how much younger he looked than President Eisenhower.  He was MY President.

We all remember where we were when we heard the news.  Ten years old, I was in my fifth grade class at P.S. 241 on President Street.  A teacher came to the door and called my teacher, Mrs. Kemmins, out into the hall.  Mrs. Kemmins came back in stone-faced, telling us that the President was shot.  All I can recall over the next few days is watching the news on the black-and-white TV at home, constantly.  I am certain that I was watching at the moment Lee Harvey Oswald was shot by Jack Ruby, a moment frozen in time.

I remember thinking, at that age, Lyndon Johnson, a man who I knew only from campaign initials, the poetic composition of JFK and LBJ, seemed to be ancient and sad.

I remember reading the Warren Commission Report from cover to cover, available from Scholastic Books. It had a black cover. Once I completed he book, I was convinced that Lee Harvey Oswald acted alone. 

Things have never been the same. So very sad.

 

H&F Recognized:

Hurwitz & Fine has been named one of the Top 5 Law Firms in all of New York State – again

Super Lawyers Magazine has issued its Business Edition, 2013.  The publication selected five law firms in the entire State of New York for categorical Top Law Firms listing.  In the categories of Litigation and Business and Transactions, only one medium-sized law firm was so designated, Hurwitz & Fine, P.C.

The other four New York firms listed were chosen in categories for solo practitioners, small or large firms, most of which are from New York City. Top Law Firms were chosen based on the number of firm attorneys who were selected to the highly selective Super Lawyers list, as well as a combination of metrics for quality including the number of years selected to the list, inclusion on a top list and average blue ribbon panel score.

I’ll tell you something, it is a great honor to have our firm so designated.  I’ll tell you something else, which really compounds this honor.  This is the third year in a row we have been recognized by this publication as one of the Top 5 Law Firms.  In addition, we are the only Buffalo law firm listed as a Top 5 Law Firm in any of the five categories listed.

Kudos to the firm

 

Peiper’s Pickings:

This week marks a major historic event.  Well, the 50th anniversary of the assassination of JFK is quite an event as well, but we are speaking of the fact that, for the first time in years, there will be no Coverage Pointers on Thanksgiving Day.  Warning…the turkey will taste a bit drier; the cranberry sauce will be too tart.  That said, your humble author proposes you deal with it.  I, for one, am quite excited to be “off” on the Thanksgiving. 

Fortunately, we’ve got a full helping of cases to get you through until December rolls around.  Check out the Court of Appeals’ interesting write up detailing the intersection of the duty to cooperate with the First Amendment.  Trust us, you won’t see this very often.  We also review an interesting decision regarding the cancellation of a policy funded through a premium finance agreement, among a host of others.  As always, we’ve selected a nice mix of potpourri so you don’t get overwhelmed with too much of one thing. 

Before we sign off, and dreams of stuffing and mash potatoes fill our heads, I wanted to pass my thanks along to the fine folks at CLM who permitted me a 3-hour forum to rant (and sometimes rave) about additional insured protections.  I had the pleasure of working with Jessica Foscolo for the first time, who, I might add, did an excellent job of keeping yours truly in check.  

That’s it for now.  See you in December. 

Steve
Steven E. Peiper
[email protected]

 

DRI Insurance Coverage and Practice Symposium: NYC – December 12 - 13:

Who doesn’t want to be in New York City around the holiday season?  Here’s a great excuse to be there.

DRI’s Insurance Coverage and Practice Symposium is the premier professional educational event on the subject of insurance coverage and claims. This year’s faculty is comprised of insurance industry leaders and nationally known attorneys, who will provide insightful education and practice tips on some of the most important insurance coverage and claims issues facing coverage attorneys and the insurance industry today. The symposium also provides an excellent opportunity for networking in New York City during the holidays with some of the best practitioners and professionals in the insurance coverage and claims arena.

For more information and registration, click here.  We’ll be there and hope to see you.

 

Margo Musings on No Fault:

Although we do not generally report on decisions from the trial level courts, this one caught our attention and we decided to cover it here, in the Cover Note.  I hope that you will also find it interesting.

On November 12, 2013, the Kings County Supreme Court rendered its decision in Okslen Acupuncture, P.C. v. Lawsky (2013 NY Slip Op 23375).  Benjamin Lawsky, as Superintendent, and the Department of Financial Services, had brought a pre-answer motion to dismiss all the causes of action alleged in the petition and was successful except for the cause of action seeking a declaratory judgment that Insurance Law § 5108(b) is unconstitutional.  The court held that this cause of action was actually governed by the court rules for plenary actions and that Respondents’ motion was, therefore, a motion to dismiss that was premature because no answer had been interposed.  The denial of the dismissal of that cause of action was, however, without prejudice and, after interposing an answer, Respondents renewed their motion.

As a refresher, Insurance Law § 5108(b) provides that:

“The superintendent, after consulting with the chairman of the workers’ compensation board and the commissioner of health, shall promulgate rules and regulations implementing and coordinating the provisions of this article and the workers’ compensation law with respect to charges for the professional health services specified in paragraph one of subsection (a) of section five thousand one hundred two of this article, including the establishment of schedules for all such services for which schedules have not been prepared and established by the chairman of the workers’ compensation board.”

So, § 5108(b) vests authority in the Superintendent to establish payment schedules for services that are not already established in the schedules promulgated by the Workers’ Compensation Board.  Petitioner, Okslen Acupuncture, asserted that the statute violates the separation of powers doctrine because it is an unlawful delegation of legislative power to the Superintendent. 

The court disagreed noting first that there is no constitutional prohibition against the delegation of power to an agency to administer a law enacted by the Legislature.  The court pointed out that the outline for the implementation and interpretation of the Insurance Law is set forth in Insurance Law § 301, which section was already determined to be constitutional, and not in violation of the separation of powers doctrine, by the Court of Appeal (see Medical Society of the State of NY v Serio, 100 NY2d 854 [2003]).  According to the court, the only interpretation of the Court of Appeal’s holding is that “§ 301 provides a constitutionally adequate standard to govern the Superintendent’s discretionary authority to promulgate regulations implementing and interpreting the Insurance Law, including Insurance Law § 5108(b).”  Moreover, the court further found that the Court of Appeal’s holdings in Medical Society and Matter of Nicholas v Kahn (47 NY2d 24 [1979]), are consistent with the modern view that the Legislature does not need to provide rigid formulas to administrative officials, particularly where the legislative policy requires flexibility to deal with the variable conditions innate in programs.  Therefore, the court held that Insurance Law § 5108(b) is not unconstitutional and granted Respondents’ motion dismissing the declaratory judgment cause of action.

Glad to see the argument was not successful and we will be surprised if the decision is appealed.  We wish all our readers a wonderful Thanksgiving and safe travels wherever they may go this holiday season.

Margo
Margo M. Lagueras
[email protected]

 

One Hundred Years Ago, Suffragette Fined: 
New York Times
November 22, 1913

LUCY BURNS FINED $1
Militant Proudly pays for Chalking
the White House Walk

WASHINGTON, Nov. 21. – Miss Lucy Burns, the Capital’s first militant suffragist, paid a fine of $1 in police court to-day for chalking the White House sidewalks with “Votes for Women.”  The Judge proposed to release Miss Burns on her promise not to repeat the offense.

“I want this thing settled and over with,” said Miss Burns; so the court imposed the fine. Several sympathizers pleaded for the privilege of paying the dollar, but Miss Burns insisted on having the distinction herself.

 

Mike’s Missive:  A Devine Loss

Devine, suffering from a lack of omniscience, nails Edwards with a church van in a rear-end collision.  But I, unlike Edwards, cannot complain about the results.  With all due deference to the other Departments of the Appellate Division, I get excited when I see a Fourth Department serious injury decision.  Perhaps it is the result of some sense of affinity I feel for having been first admitted to the Bar in the Fourth and because I live in the Fourth.  In any regard, Edwards v. Devine is a nice piece of serious injury analysis.  It is lengthy, but it provides detail and shows that despite herculean and competent efforts by the defendant, a plaintiff’s case may still survive.

Although I have mentioned it in passing before, when a defendant wins partial summary judgment in a threshold case, like the defendants in Edwards, it is by no means necessarily a loss.  Granted, it would have been better had the case been dismissed in its entirety, but the motion might still be counted a great success.  The defendants limited the issues for trial and thereby created a lot less uncertainty and opportunity for the plaintiff to squeeze out a win.  The defendants also probably drastically simplified trial and improved settlement potential.

Lastly, if you want to get a glimpse of the impact a court’s discretion can have on a case; take a closer look at Siemucha.  I limited the summary to those issues relevant to threshold, but the Court in that case also denied the defendant’s attempts to introduce drug abuse evidence even though it was arguably relevant to the plaintiff’s heart condition and loss of enjoyment claims.  Further, the Court, without much explanation, indicates that a cervical spasm might constitute a serious injury.

Hoping you all enjoy your Thanksgiving wherever, with whomever, and however you spend it.

Mike
Michael Scott Kristansen
[email protected]

 

A Century Ago, Court Frowns Upon Polygamy:
New York Times
November 22, 1913

HAS THREE HUSBANDS
Mrs. Murphy-Vollaman-Jones Admits
It and Is Sentenced to 1 Year

Upon her admission to Judge Rosalsky in the Court of General Sessions that she had three husbands at the same time, Mrs. Lulu Powers Murphy-Vollaman-Jones was sentenced yesterday to one year in the penitentiary.

The young woman testified that she was only 17 years old when she married Edward J. Murphy of 2,896 Valentine Avenue, the Bronx, in 1900, and that she left him because he objected to her going to dances.  She said that she understood later that he had a divorce and that she was unconscious of any wrongdoing when she married Charles Vollaman of Jamaica Avenue, Cypress Hills, in 1906.  She lived with Vollaman only a few months and sometime after she left him read in a Brooklyn paper of the suicide of a Charles Vollaman.  On Feb. 10, 1909, she married Samuel Jones of 2,178 Eighth Avenue, whom she left some months ago.

On July 17, Jones learned of his wife’s previous marriages and had her arrested.  She has been in the Tombs since that time.  Murphy, the first husband, pleaded that the punishment she had already suffered was enough.

 

Audrey’s Angles:

I am very proud that Hurwitz & Fine, P.C. for not the first time or even the second, but the THIRD straight year in a row is the only Buffalo law firm listed as one of the five top law firms in New York State in Business & Transactions and Litigation by Superlawyers Magazine, Business Edition 2013.  We have exceptional attorneys and support staffs that help us achieve that distinction. 

I hope to see some of you in a few weeks in NYC for DRI’s Insurance Law Committee’s Insurance Coverage and Practice Symposium.  If you have not registered yet there is still time, even up until the day of the seminar to do so.  The seminar is Thursday and Friday, December 12-13.  It is noted that the Professional Liability Committee is also holding its seminar on the same date and location and you can attend a few topics at this seminar and return to the Insurance Law Committee’s seminar without registering for both.  If you need a brochure or have a question about the program, feel free to contact me at [email protected].

I wish you and your family a Happy Thanksgiving.  I can’t wait for it as I am able to enjoy someone else’s cooking this year!

Audrey
Audrey A. Seeley
[email protected]

 

One Hundred Years Ago -- Denying Charity to Immigrants, Illegal or Not:

New York Tribune
November 22, 1913

NO FREE TURKEY TO ALIENS
Don't Appreciate the "Fixin's,"
Says Cleveland Man

Only American families will be supplied with free turkey Thanksgiving dinners this year, according to W. H. Winans, of the Associated Charities.

"We are going to try to send a real turkey Thanksgiving dinner, with the celery, cranberries and all the fixings, to every poor American family in the city area we can reach," he said.

"There is no use sending all these fancy things to the foreigners who have only been in this country a year or so, for they don't understand, and those who are self-supporting don't make any change in their menu on this American holiday anyhow. We'll send them instead, if they really need it, a good, substantial dinner, but we'll save the fussing for those who will appreciate it.’
Editor’s Note:  Associated Charities has been serving Ashland County since 1910.  According to its website, that policy has changed:

We provide Thanksgiving meals of either ham or turkey and all the trimmings to families unable to purchase the extras for this holiday meal. Each year, we give out the meals on the Monday and Tuesday before Thanksgiving Day working hours of 9-12 and 1-4 p.m. A valid driver's license or photo id (to show proof of Ashland County Residency) and proof of income for the household are needed.

 

Language is a River Through Sentences, A Century Ago:

WELLSVILLE (NY) DAILY REPORTER
November 22, 1913

A WOMAN OR LADY

According to the Rochester Post-Express, a controversy has been started in an English journal over the use of the terms “lady” and woman,” due to the fact that a member of the family “of good social standing,” has been spoken of as a “woman.”  One of the controversialists, on the “woman” side, quoted high authority in favor of his opinion.  He recalled the pious memory of Queen Victoria who, when an aggressive male British subject, anxious to see the royal countenance, exclaimed, “Get out of the way, woman,” addressing one of the ladies-in-waiting, and she appealed to the queen, that sensible member of the material sisterhood said calmly: “And pray what you are but a woman.” 

The truth is that the word “lady” to distinguish a well-bred woman, is nearly outworn.  There are many reasons for this.  One is that more noble, tender and beautiful associations cling around the ideal of womanhood than about the conventional and pretentious conception of ladyhood.  To be “thoroughly womanly” is a greater thing than to be “perfectly ladylike.”  The adjective “genteel,” so much used in the eighteenth century, and the early part of the nineteenth, has long since been doomed.

Perhaps the pride taken by the best member of a sex, which is at present much more in the public eye than the masculine half of creation, in calling themselves just “women” arises from the fact that woman, whether we deem her entitled to vote or not, has entered into the world movement.  The controversy in the London paper may prove useful as the death knell in England—we dropped it long ago—of the word “lady” which may be decently interred with the crinolines, and furbelows of the past.
          Editor’s note: fur·be·low (fûr b-l) n. 1. A ruffle or flounce on a garment. 2. A piece of showy ornamentation.

This Week’s Issue:

In this week’s issue, attached, you will find summaries of the following cases:

 

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

• Disclaimer Sufficiently Outlined Late Notice by Insured and Claimant
• Battle Between Carriers on Timely Notice Yet to Be Resolved; However, Intra-Insurer Demands Do Not Compel Timely Denials Since They Are Outside Statutory Requirements
• Legal Malpractice Claim and Common Law Indemnity Claim Dismissed Against Defense Counsel
• Split Court Finds Sufficient Proof of Insurance Company Mailing Practices to Agree that Homeowners Policy Was Amended With Lead Paint Endorsement and Finds that Endorsement Does Not Violate Public Policy

 

MICHAEL’S MINI-MISSIVES ON SERIOUS INJURY UNDER NO-FAULT LAW
Michael P. Scott-Kristansen
[email protected]

• Court Partially Dismisses Plaintiff’s Complaint as Far as It Seeks Recovery for a Mild Limitation
• Opinion of Plaintiff’s Physician on Causation/Preexisting Injury Is Speculative Where He Did Not Treat Plaintiff Before the Accident and Failed to Review Medical Records From Before the Accident
• A Spasm May Constitute a Serious Injury
• Plaintiff Prevails Because Report of Defendant’s Expert Establishes Significant Limitation

 

MARGO’S MUSINGS ON NO-FAULT
Margo M. Lagueras
[email protected]

Arbitration

• Attorney’s Instruction to Not Attend IMEs Is Not Valid or Reasonable Excuse
• Is Range of Motion Testing Encompassed Within the Billing for Manual Muscle Testing?
• Peer Review Mention of EIP’s History of Osteoporosis Only Means That EIP Was Eggshell

 

Litigation

• Trial Court Reversed: Exceptions to HIPAA
• Trial Court Reversed: Acupuncture Payment Limited to “Charges Permissible for Similar Procedures”

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property

• Failure to Stay Current on a Premium Finance Agreement Results in Loss of Policy

 

Potpourri

• Failure to Consent to Settlement Results in a Breach of the Duty to Cooperate under Public Officers Law
• CPLR 2001 Permits Plaintiff to Amend its Complaint to Identify the Proper Subrogor
• Plaintiff’s Burden of Establishing Unknown Owner/Operator
• WCLJ’s Preclusion Order Does Not Bar Introduction of the Same Evidence in a Subsequent Bodily Injury Case
• Court Identifies Key Evidentiary Points for Expert Disclosure

 

BETH’S BANTER OF COVERAGE “B” AND FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]

• On hiatus this week.

 

            AUDREY’S ANGLES ON THE NATIONALLY NOTEWORTHY
Audrey A. Seeley
[email protected]

• Nominal Party Exception Applied To Insured Named In Allocation Dispute Between Insurers

 

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

• Governor Cuomo Announced the First Round of Doctors and Health Service Providers Banned from Billing under No-Fault.

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
[email protected]

• New York Insurance Law §2121 – Agent for Payment of Premiums

 

KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected] 
                                                                       

• Discovery of Bad Faith Claims Stayed During Prosecution of UIM Claim
• Question of Fact Found on Bad Faith Claim; Huh?.  

EARL’S PEARLS
Earl K. Cantwell
[email protected]

POSSIBLE COVERAGE FOR “ILL-GOTTEN GAINS”

 

Thanks for your loyal support.

See you soon.

Dan
Dan D. Kohane
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202    
Phone: 716.849.8942
Fax:      716.855.0874
E-Mail:  [email protected]
H&F Website:  www.hurwitzfine.com
LinkedIn: www.linkedin.com/in/kohane
Twitter: @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
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Jennifer A. Ehman
[email protected]

INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
[email protected]

Michael F. Perley
Elizabeth A. Fitzpatrick
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Michael P. Scott-Kristansen
Diane F. Bosse

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]

Elizabeth A. Fitzpatrick
Cassandra Kazukenus
Michael P. Scott-Kristansen

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]

 Elizabeth A. Fitzpatrick
Diane F. Bosse

Index to Special Columns

Kohane’s Coverage Corner
Michael’s Mini-Missives on Serious Injury
Margo’s Musings on No Fault
Steve on Sandy, Peiper on Property and Potpourri
Beth’s Banter on Coverage B and Fitz’ Bits
Audrey’s Angles on the Nationally Noteworthy
Cassie’s Capital Connection
Fijal’s Federal Focus
Keeping the Faith with Jen’s Gems
Earl’s Pearls

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

11/20/13         AutoOne Insurance Company v. Sarvis
Appellate Division, Second Department
Disclaimer Sufficiently Outlined Late Notice by Insured and Claimant
This was an application to stay an uninsured motorist (UM) arbitration.  AutoOne took the position that New Hampshire Insurance Company, the tortfeasor’s carrier, which had disclaimed, had not properly denied coverage and therefore the torfteasor was not uninsured.

When an insurer disclaims coverage, the notice of disclaimer must promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated.  A disclaimer of coverage based only on the insured's failure to comply with the notice provisions of a policy is ineffective against the injured party and the insurer will be precluded from subsequently disclaiming coverage on the ground that the injured party failed to comply with the policy's notice provisions.   

Here, the insurer’s disclaimer did in fact indicate that the late notice was on the part of both the insured and the claimant.

Contrary to the appellant's further contentions, NHIC established that it was prejudiced by the injured claimant's failure to provide timely notice, citing to a pre-prejudice case, Vacca v State Farm Ins. Co., 15 AD3d 473 but not specifying what the prejudice might have been.
Editor’s Note:  Remember, in New York, the insured and the claimant each have a right to give notice of an accident, claim or occurrence.  If an insurer receives notice first from the injured party or another claimant, and the insurer is denying coverage based on that delinquency, it must make certain that it denies coverage based on late notice by the insured, the injured party and other claimants.  That is the specificity required in New York.

11/14/13         Public Service Mutual Ins. Co. v. Tower Insurance Company
Appellate Division, First Department
Battle Between Carriers on Timely Notice Yet to Be Resolved; However, Intra-Insurer Demands Do Not Compel Timely Denials Since They Are Outside Statutory Requirements
Public Service Mutual (“PSM”) sought reimbursement from Tower for defense costs incurred in defending HGC in underlying litigation.  That claim is not affected by any delays in Tower’s disclaiming because Insurance Law §3420(d)(2), which requires prompt disclaimers, does not apply to requests for defense and indemnification between insurers.

Tower claimed it received late notice of claim (48-days but there are questions of fact as to whether or not that was timely or whether PSM’s delay was excused by its investigation.

11/13/13         Markel Insurance Co. v. American Guar. and Liability Ins. Co.
Appellate Division, Second Department
Legal Malpractice Claim and Common Law Indemnity Claim Dismissed Against Defense Counsel
A construction worker was injured on property owned by American Gardens (“owner”).  He sued the owner in November 2005 and later joined as defendants, the property's managing agent, American Gardens Management, LLC, and the managing agent's affiliate, American Gardens Management Corp. (“American Gardens defendants”).  The American Gardens defendants' primary insurer was Chartis and they had an umbrella excess policy with American Guarantee and Liability Insurance Company (“AGLIC”).  The AGLIC policy contained an endorsement requiring the insured, or someone on its behalf, to provide notice to AGLIC of any claims or lawsuits against the insured as soon as practicable.  The endorsement also provided that notice to any agent of AGLIC would constitute notice to AGLIC.

New Empire Group, Ltd. (“NEG”) was a managing general agent for AGLIC and a program administrator for the Policy.  AGLIC delegated authority to NEG to act as AGLIC's agent, inter alia, for underwriting excess policies and to accept notices of claim or suit on its behalf.  NEG itself carried an Insurance Agents & Brokers Errors and Omissions policy with Markel.

Soon after the underlying action was commenced, American Gardens defendants gave notice thereof to their retail insurance broker, which, in turn, notified NEG of the underlying action within one month after the commencement of the underlying action.  AGLIC denied coverage alleging lack of timely notice. Rebore defended the lawsuit

The underlying action was settled, and the settlement agreement provided that Chartis, as the primary insurer of the American Gardens defendants, would pay the plaintiffs in the underlying action the sum of $1,000,000, and Markel, on behalf of NEG, would pay the sum of $2,000,000.  The plaintiffs in the underlying action gave a release to the American Gardens defendants, which assigned, to Markel, the rights of the American Gardens defendants as against AGLIC, Rebore, and the retail insurance broker of the American Gardens defendants.

Markel and NEG then sued Rebore to recover monies that Markel had paid to settle the underlying action.  In the complaint, Markel and NEG alleged that, out of concern that NEG might be found liable for the purported failure of the American Gardens defendants to notify AGLIC, Markel agreed to participate in and contribute to the settlement of the underlying action.  Markel asserted a cause of action against Rebore alleging legal malpractice and, as subrogee of NEG, a cause of action seeking common-law indemnification.  Rebore moved to dismiss these two causes of action.

There is no proof that American Gardens defendants suffered ascertainable damages as a result of Rebore's alleged negligence in not notifying the insurer.

Additionally, any claims my Markel for common law indemnity must fall.  NEG was not found liable to the plaintiff and thus any payment Markel made were “voluntary”.  

11/08/13         Preferred Mutual Insurance Co. v. Donnelly
Appellate Division, Fourth Department
Split Court Finds Sufficient Proof of Insurance Company Mailing Practices to Agree that Homeowners Policy Was Amended With Lead Paint Endorsement and Finds that Endorsement Does Not Violate Public Policy
From June 1995 until December 1995, Jackson lived in a home owned by Donnelly, who had obtained a landlord's insurance policy from Preferred with annual renewals. When first issued, it did not have a lead exclusion. That exclusion was added to the policy when it was renewed in June 1994.

The court found that Preferred met its initial burden of establishing that the lead exclusion was properly added to the policy and that notice of the lead exclusion amendment was provided to the insured, Donnelly. Although many of the documents appended to the attorney affirmation were not in admissible form the affidavit from plaintiff's Office Services Supervisor was sufficient to lay a proper foundation for the business records.

On the issue of mailing, Preferred did not submit evidence that the notice of the amendment was mailed to Donnelly and Donnelly could not recall receiving the notice, however, Preferred submitted evidence in admissible form "of a standard office practice or procedure designed to ensure that items are properly addressed and mailed," thereby giving rise to a presumption that Donnelly received the notice.  There was proof of stuffing envelopes, placing them in envelopes and delivering them to the post office.

Two dissenting judges argued that there was no evidence submitted of a practice to ensure that the number of envelopes delivered to the mail room corresponded to the number of envelopes delivered to the post office but the majority did not deem the absence of such evidence fatal light of the detailed description of all of the other office practices geared toward ensuring the likelihood that the notices were always properly addressed and mailed.

Contrary to contention of the injured plaintiff, the lead exclusion does not violate public policy nor were the terms ambiguous.
Editor’s Note:  With two dissenting votes, the Court of Appeals may be the next voice speaking on this matter.

 

MICHAEL’S MINI-MISSIVES ON SERIOUS INJURY UNDER NO-FAULT LAW
Michael P. Scott-Kristansen
[email protected]

11/8/13           Linnane v. Szabo
Appellate Division, Fourth Department
Court Partially Dismisses Plaintiff’s Complaint as Far as It Seeks Recovery for a Mild Limitation
The plaintiff moved and the defendant cross-moved for summary judgment on the issue of serious injury.  The plaintiff alleged the three most common categories of serious injury, including permanent consequential limitation of use, significant limitation of use, and 90/180-day impairment to her knees, left shoulder, cervical spine, and lumbar spine.  The lower court granted the plaintiff’s motion.

The Fourth Department held that plaintiff’s motion was improperly granted.  The defendant’s cross-motion should have been granted with respect to the plaintiff’s left knee because the record established that she sustained only a minor, mild, or slight limitation to her left knee.  As for the remaining injuries, neither motion should have been granted because the conflicting reports and affidavits of the parties’ medical experts created questions of fact.

11/15/13         Edwards v. Devine
Appellate Division, Fourth Department
Opinion of Plaintiff’s Physician on Causation/Preexisting Injury Is Speculative Where He Did Not Treat Plaintiff Before the Accident and Failed to Review Medical Records From Before the Accident
The plaintiff alleged that he sustained neck, back, and shoulder injuries as a result of being rear-ended by a church van.  The plaint alleged that such injuries resulted in significant disfigurement, permanent consequential limitation of use, significant limitation of use, and 90/180-day impairments.

The defendants met their burden by showing a lack of causation.  The defendant established that plaintiff’s injuries were due to a preexisting condition by submitting persuasive evidence that included an IME report from a physician who concluded that plaintiff’s injuries were limited to resolved sprains and strains.

As a result of defendants having met their burden, the plaintiff was burdened with establishing that there was an issue of fact requiring trial.  The plaintiff failed to fulfill such burden with respect to his neck and back injuries.  The plaintiff submitted his physician’s affidavit, but the Court found it was merely speculative on the issue of causation.  The physician began treating after the accident and did not review any medical records from before the accident.  The fact that plaintiff told his physician that he did not have preexisting cervical spine problems did not help because plaintiff’s medical records showed a history of extensive degenerative disc disease and spondylosis that predated the accident.

As for significant disfigurement to the plaintiff’s shoulder, the defendants met their burden by submitting evidence that the scar was the result of previous surgery.  The plaintiff failed to prove his subsequent shoulder surgery exacerbated the scar.  As for the 90/180-day shoulder impairment, the plaintiff failed to meet his burden of showing the curtailment was not caused by preexisting injuries.  Therefore, defendant’s motion should have been granted with respect to significant disfigurement of plaintiff’s shoulder and the 90/180-day injury to plaintiff’s shoulder.

The defendant’s motion was properly denied, however, with respect to plaintiff’s claims of significant limitation of use and permanent consequential limitation of use to his shoulder.  The plaintiff submitted the affidavit of a physician who treated the plaintiff for his shoulder injuries before and after the accident.  That physician opined that the accident caused pain and joint problems requiring ongoing treatment and surgery.

11/15/13         Siemucha v. Garrison
Appellate Division, Fourth Department
A Spasm May Constitute a Serious Injury
In another lengthy case, which offers a rare glimpse into a serious injury trial, the Court states that although the defendants met their burden on the prior summary judgment motion, the plaintiff met his burden, in turn, by submitting objective proof of spasm in his cervical spine as well as proof of quantitative limitations in the plaintiff’s cervical and lumbar range of motion. 

The plaintiff met his burden on causation by submitting the opinions of two physicians, stating that the plaintiff’s cervical spine injury and exacerbation of his lumbar spine injury were causally related to the accident.

At trial, the court had permissibly, within its discretion, refused to allow evidence of the plaintiff’s drug abuse even though it was relevant the plaintiff’s credibility.  The trial court also properly precluded the defendants from offering evidence that was not included in the defendants’ expert disclosure. 

The verdict for the plaintiff, finding that the plaintiff sustained a significant limitation of use, was upheld as a finding that a reasonable person could have rendered after receiving conflicting evidence.

11/20/13         Varghese v. Ramcharitar
Appellate Division, Second Department
Plaintiff Prevails Because Report of Defendant’s Expert Establishes Significant Limitation
The defendant’s motion for summary judgment was improperly granted.  The defendant did not meet his burden because the defendant’s own expert found significant limitations to the range of motion of the plaintiff’s cervical spine.  Alternately, the defendant also failed to meet his burden because the defendant’s expert did not establish a lack of causation.

 

MARGO’S MUSINGS ON NO-FAULT
Margo M. Lagueras
[email protected]

Arbitration

11/12/13         Applicant v. Geico Insurance Co.
Erie County, Arbitrator Kent L. Benziger
Attorney’s Instruction to Not Attend IMEs Is Not Valid or Reasonable Excuse
Applicant failed to attend two scheduled IMEs and Respondent denied benefits contending that Applicant breached a condition precedent to coverage.  Applicant asserted that the attorney handling her personal injury case had instructed her to not appear for the IMEs.  The Arbitrator allowed her additional time to submit an affidavit from the personal injury attorney but when she did not, he denied her claim noting that although the personal injury action might have settled, she could still receive no-fault benefits outside the settlement structure which might only contemplate pain and suffering.  Even if the personal injury attorney directed her not to appear for the IMEs, and even if that advice were erroneous, it was not a valid or reasonable excuse.  However, Applicant might, in certain instances, have recourse against the attorney that gave her such advice.

11/12/13         Albany Multi Medicine Group v. Progressive Insurance Co.
Erie County, Arbitrator Douglas S. Coppola
Is Range of Motion Testing Encompassed Within the Billing for Manual Muscle Testing?
Yes.  Respondent reimbursed manual muscle testing at CCPT Code 95833 (rather than 95831) but denied reimbursement for range of motion testing billed separately for range of motion testing.  Respondent argued that it paid the maximum rate of $13.53 times the conversion factor for region 2 for each treatment but that billing for more than a “total body” code is not permitted.  The Arbitrator agreed and denied Applicant’s claim.

11/08/13         Buffalo Spine Surgery v. Geico Insurance Company
Erie County, Arbitrator Michelle Murphy-Louden
Peer Review Mention of EIP’s History of Osteoporosis Only Means That EIP Was Eggshell
The 62-year old EIP was involved in an accident in December 2010.  An initial CT scan showed an L1 compression fracture.  The EIPs past history included left knee surgery, three right shoulder surgeries and bilateral wrist surgery.  There was also a history of left knee and right shoulder arthritis.  In May 2011, the EIP presented at the ER with complaints of low back pain after falling while mowing the lawn.  He also claimed that he developed osteoporosis as a result of the accident and had since fallen several times.  In September 2011, he had another lumbar CT scan which revealed significant and severe compression deformity at L1, and disc bulges with foraminal narrowing at L3-4, L4-5 and L5-S1.  After several consultations, two stage lumbar surgery was performed in February 2012.  The pre-operative diagnosis was an L1 burst fracture with nonunion lateral listhesis and severe mechanical back pain with progressive kyphosis and instability, intractable para gluteal neuropathic pain and spinal deformity. 

A peer review was performed in which the history of osteoporosis was mentioned and it was concluded that the surgery was not causally related to the accident.  Based on the peer review the Respondent denied.  In answer to a rebuttal letter, the peer reviewer issued an addendum in which he commented on the possibility that he had not seen all the relevant reports and imaging studies.  The Arbitrator determined that the peer review was not based upon a review of the EIP’s complete records and noted that when evidence is available but not supplied by the insurer for the peer reviewer’s consideration, the peer review is insufficient to support the denial.  Furthermore, the fact that the EIP may have suffered from osteoporosis only means that he was an eggshell plaintiff/applicant.  Respondent did not provide any pre-accident medical records to the peer reviewer so there was no evidence of any pre-existing conditions that may have contributed to the need for the lumbar surgery.  Therefore, Applicant was awarded reimbursement.

Litigation

11/14/13         Eagle Surg. Supply, Inc. v. Geico Ins. Co.
Appellate Term, First Department
Trial Court Reversed: Exceptions to HIPAA
The trial court sua sponte precluded defendant from offering medical evidence in support of its defense of medical necessity because it had not obtained HIPAA-compliant authorizations from plaintiff’s assignor.  On appeal, the Appellate Term notes that even if defendant were a “covered entity” subject to HIPAA, it would have been entitled to obtain the assignor’s records pursuant to the HIPAA exceptions for “payment” and “health care operations”.
Note:  We question what authority the trial court might have had in mind to step in (clearly plaintiff did not even consider raising such an argument) and hold that the no-fault carrier must have HIPAA authorizations to obtain the medical records for the bills that it is being asked to pay).  The governing regulations are found at 45 CFR 164.506 and 45 CFR 164.501.  The court additionally cited the Opinions of General Counsel of the NY Ins. Dept. No. 03-07-10 [July 2003]. 

11/14/13         Akita Med. Acupuncture, P.C. v. Clarendon Ins. Co.
Appellate Term, First Department
Trial Court Reversed: Acupuncture Payment Limited to “Charges Permissible for Similar Procedures”
Plaintiff sued to recover the difference between the amount it billed for acupuncture services ($120 per session), and the amount reimbursed by defendant pursuant to the “charges permissible for similar procedures under the schedules already adopted or established by the superintendent,” in this case $29.30 allowed for acupuncture performed by chiropractors set forth in the workers’ compensation fee schedule.  Unless the medical provider can show that the specific service was not a “similar procedure” to the one chosen by the insurer for comparison, the carrier is entitled to reimburse at the rate set for the “similar procedure” when dealing with a service for which the Superintendent has not adopted a fee schedule.  Here there was no showing that the acupuncture services performed by a licensed acupuncturist were not similar to those performed by a chiropractor so the amount reimbursed by defendant was proper.

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property

11/12/13         Honeymoon Diamonds v. Int. Jewelers Underwriters Agency, Ltd.
Appellate Division, First Department
Failure to Stay Current on a Premium Finance Agreement Results in Loss of Policy
Lexington appears to have disclaimed a loss that otherwise would have been covered by its policy but for its decision to cancel the policy prior to the loss due to plaintiff’s “non-payment of premiums.”  Lexington cancelled the policy at the request of Premium Financing Solutions (PFS), a premium finance agent, on the assertion that plaintiff had failed to timely remit premium payments pursuant to a premium finance agreement. 

In affirming the cancellation, the Court first noted that Lexington/PFS complied will all the requirements of Banking Law § 576, which governs premium financing agreements.  In addition, the Court also noted that PFS was not required to “call upon” plaintiff in an effort to ensure that premium payments were kept current.  Under their arrangement, PFS was nothing more than a broker who, accordingly, had “no duty to advise, guide or direct” a client. 

In addition, there was also no basis for plaintiff’s negligent misrepresentation claim against PFS wherein PFS allegedly confirmed (post denial) that coverage would be confirmed.  Where, as here, there was no detrimental reliance, the negligence misrepresentation claim could not stand.

Finally, the Court noted that PFS’ power of attorney status (as provided by the PFA) only authorized it to cancel the policy.  PFS had no authority to withdraw funds of plaintiff to ensure that premiums remain active.

Potpourri

Court of Appeals

11/20/13         Lancaster v. Village of Freeport
Court of Appeals
Failure to Consent to Settlement Results in a Breach of the Duty to Cooperate under Public Officers Law
Several elected and appointed Representatives of the Village of Freeport (Representatives), along with the Village itself, were named as defendants in an action commenced by Water Works Realty.  Water Works alleged that the Representatives engaged in a scheme to prevent Water Works from acquiring a certain parcel of real estate. 

Pursuant to Section 18 of the Public Officers Law (which was adopted into the Village Code), the Village was required to defend and indemnity the Representatives so long as the acts giving rise to the litigation arose out of their official duties.  Here they did, and accordingly the Village provided a defense to all named defendants.  The defense, however, came with a catch.  In exchange for accepting the defense and indemnity, the Representatives were required to cooperate with the Village’s efforts in defending the case.

Eventually, Village attorneys were able to negotiate what appeared to be a favorable resolution of the claim being prosecuted by Water Works.  The only catch was that Water Works demanded that a “disparagement” clause be included into the settlement which would prohibit the Representatives from challenging or criticizing the terms of the agreement. 

After being advised of the proposed terms, the Representatives objected and refused to sign off on the deal.  They remained steadfast in their position even after counsel to the Village advised that their refusal to agree to the settlement amounted to a lack of cooperation, and would result in the loss of a defense moving forward. 

When the Village eventually withdrew its defense from the Representatives, the instant lawsuit proceeded.  Therein, the Representatives allege that the Village’s actions amounted to a prior restraint of their rights to free speech.  The Court of Appeals, however, disagreed. 

Importantly, the “disparagement” clause was suggested, and demanded, by Water Works.  It was not suggested by the Village, and accordingly its mere existence did not support a claim that the Village was suppressing first amendment freedom of speech rights.

Moreover, the fact that the Village assented to the clause was not dispositive either.  Rather, the decision of the Village was to resolve the claim, and in doing so, protect Village taxpayers from a potential financial calamity.  It was not, as argued by the Representatives, an attack on free speech. 

Further, the Village’s decision to accept the “disparagement” clause and withdraw its defense of the Representatives was not a restraint on prior speech.  The withdrawal of the defense was based upon the Village’s desire to protect against a loss.  It was not motivated by a desire to suppress the Representative’s rights to free speech.  Indeed, the Representatives could have, and in fact did, opt out of the settlement.  Doing so, however, made them responsible for their own defense costs moving forward. 

Interestingly, the Court eventually noted that the duty to cooperate under the Public Officers Law is analogous to the same duty to cooperate in insurance contracts.  The Court went on to cite its long established Thrasher standard in evaluating whether the representatives actions fell within the Court’s standard for non-cooperation.  In this vein, the Court noted that the Public Officers Law, though not a policy, was meant to be interpreted in such a way that the duty to cooperate extended through the defense and settlement of an action.  The Representatives had argued that they while they did have to cooperate with a defense, absent any special provision in the law, they had no obligation to provide consent to a settlement. 

In addition, the Court noted that the Village properly attempted to persuade the Representatives to accept the settlement.  Here, the Village’s attorneys responded to questions posed by the Representatives and explained the basis for their litigation strategy, including why settlement was the best available option. 

Finally, the Court noted that refusing to acknowledge and accept a settlement was clearly an act of “willful and avowed obstruction.”

In an intriguing dissent, Judge Pigott noted that the very basis of the “disparagement” clause was to silence various Representatives who vigorously disputed Water Works claims.  Accordingly, in the instant case, the dissent argues that the Representatives should not have been forced to choose between silencing their opposition and accepting a funded defense.

Appellate Divisions

11/21/13         Greenwich Ins. Co. v. New Amsterdam Assoc.
Appellate Division, First Department
CPLR 2001 Permits Plaintiff to Amend its Complaint to Identify the Proper Subrogor
Plaintiff commenced this action as a subrogee after paying a fire loss.  Unfortunately, plaintiff named Vital Equities as the subrogor when, in fact, the loss had been paid to Vintage Realty, LLC.  Importantly, Vital and Vintage were both related, and had been operating under the same managing member. 

Because the “real party in interest” was Greenwich, and because Vital and Vintage were related, the Court permitted Greenwich to amend its Complaint to identify the appropriate party as “subrogor.”  In reinstating plaintiff’s Complaint, the Court noted that the trial court should have exercised its discretion under CPLR 2001 to remedy what was a minimal error.

11/20/13         Joseph v. MVAIC
Appellate Division, Second Department
Plaintiff’s Burden of Establishing Unknown Owner/Operator
Plaintiff’s claims against MVAIC failed where, as here, he was unable to demonstrate that the offending vehicle was operated/owned by an unknown person. 

11/12/13         American Home Assur. Co. v. Highrise Constr. Co.
Appellate Division, First Department
WCLJ’s Preclusion Order Does Not Bar Introduction of the Same Evidence in a Subsequent Bodily Injury Case
Interestingly, there was little dispute among the parties that American properly cancelled the policy prior to the loss giving rise to the claim.  Nonetheless, in a companion workers’ compensation claim, the Workers Compensation Law Judge determined that plaintiff was precluded from introducing proof of the cancellation due to procedural violations and plaintiff’s failure to appear at a scheduled workers’ compensation hearing. 

At the same time, the injured party also commenced a claim for bodily injuries.  That lawsuit, apparently, resulted in a third-party action seeking common law indemnification due to plaintiff’s “grave injury.”  In arguing for coverage, Highrise staked the position that the WCLJ’s opinion precluding introduction of the policy cancellation should be given res judicata/collateral estoppel effect in the bodily injury action.  Accordingly, coverage was confirmed at the trial court level.

On appeal, the First Department reversed and overturned.  In so holding, the court noted that the WCLJ’s opinion was not based upon the “merits of the case.”  As such, the opinion did not have an impact on American’s ability to raise the cancellation in the bodily injury action.  They went on to instruct that because workers’ compensation coverage and employer’s liability coverage (ie., 1[B]) are different coverages, the duties and obligations under both sections of the policy must be evaluated separately. 

 

11/12/13         Lindkvist v. Travelers Ins. Co.
Appellate Division, First Department
Court Identifies Key Evidentiary Points for Expert Disclosure
Plaintiff commenced the instant action seeking recovery for damages that were allegedly caused and/or exacerbated due to ongoing exposure to mold.  Plaintiff submitted that the mold was caused, and damages arose out of, several contractors’ collective failure to properly perform a mold remediation.  In support of his argument, plaintiff submitted an affidavit of an expert that generally opined that mold existed, it was harmful to plaintiff, and it caused/exacerbated his injuries.

Defendants’ collectively moved to dismiss the expert affidavit as insufficient, and the Appellate Division agreed.  In striking the opinion, the court noted that the expert failed to establish any of the following key evidentiary points:
(a)       failure to identify the specific type of mold present
(b)       failure to explain how that mold causes injury
(c)        failure to explain the quantity of mold necessary to cause injury;
and,
(d)       failure to establish how the specific mold caused specific injury to
plaintiff.

Where, as here, plaintiff could not make out a prima facie case without an expert, it followed that the Complaint was likewise dismissed.

 

BETH’S BANTER OF COVERAGE “B” AND FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]

On hiatus this week.

            AUDREY’S ANGLES ON THE NATIONALLY NOTEWORTHY

Audrey A. Seeley
[email protected]

11/15/13         Hartford Fire Ins. Co. v. Harleysville Mut. Ins. Co.
US Court of Appeals, Fourth Circuit
Nominal Party Exception Applied To Insured Named In Allocation Dispute Between Insurers
An issue of first impression for the Fourth Circuit was whether a named insured was a nominal party to the declaratory judgment action requiring its consent to remove it to Federal Court.  The Court applied the dictionary definition of “nominal” and stated that the appropriate inquiry must be upon the particular facts and circumstances of the case as to whether the party was nominal and consent required.

G.R. Hammonds, Inc. (“Hammonds”) was sued by South Carolina homeowners and their association for alleged roofing defects performed on a project.  Hammonds was insured by five different insurers during the timeframe when the work was allegedly completed.  Three insurers, Harleysville, Zurich, and the Hartford, agreed to pay portions of a settlement in the action against Hammonds by the homeowners but preserved their right to resolve the settlement allocation issue through litigation or arbitration. 

Harleysville commenced the first declaratory judgment action in District Court in North Carolina wherein all other insurers and Hammonds were named.  Thereafter, the Hartford commenced a declaratory judgment action in South Carolina state court naming all other insurers and Hammonds.

Harleysville removed the state court action to the District Court in South Carolina and obtained the other defendant insurers’ consent to removal the same day.  Hammonds never consented or objected to the removal.  The Hartford moved to remand the case back to state court on the ground that Harleysville did not obtain Hammonds consent.  Interestingly, months later Hammonds interposed an untimely answer asserting an interest in the outcome of the declaratory judgment action.

The Court reviewed the rule of unanimity regarding removal to federal court and recognized its exception for a nominal party.  Here, using the plain meaning of “nominal” the Court recognized that there was no indication that Hammonds truly possessed a sufficient stake in the proceeding to give rise to something more than nominal status.  The Court recognized that if proof was provided leading to a reasonable belief that Hammonds would be affected by the declaratory judgment action, then he may have more than nominal status.  However, the tort action against him was settled and discontinued with prejudice.  None of the insurers were seeking any monetary relief against Hammonds for settling the tort action.  Thus, Harleysville was not required to obtain Hammonds consent to remove the case to federal court as the nominal party exception to the unanimity rule applied.

 

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

Governor Cuomo announced the first round of doctors and health service providers banned from billing under No-Fault.
Pursuant to 11 NYCRR 65-5.2, the superintendent of DFS has the authority to investigate any allegations “regarding providers of health services engaging in any of the unlawful activities set forth in Insurance Law section § 5109(b).”  Insurance Law §5109(b) sets forth the following illegal activities:

• The provider has been guilty of professional or other misconduct or incompetency in connection with medical services rendered under this article; or
• The provider has exceeded the limits of his or her professional competence in rendering medical care under this article or has knowingly made a false statement or representation as to a material fact in any medical report made in connection with any claim under this article; or
• The provider solicited, or has employed another to solicit for himself or herself or for another, professional treatment, examination or care of an injured person in connection with any claim under this article; or
• The provider has refused to appear before, or to answer upon request of, the commissioner of health, the superintendent, or any duly authorized officer of the state, any legal question, or to produce any relevant information concerning his or her conduct in connection with rendering medical services under this article; or
• The provider has engaged in patterns of billing for services which were not provided.

 

After the investigation, the superintendent will send to the Commissioner of Health and the Commissioner of Education a list of any providers the superintendent believes may have engaged in any of the above listed unlawful activities.  Within 45 days of receipt of the list, the Commissioner of Health and Commissioner of Education must notify the superintendent whether they agree there is a reasonable basis to proceed with notice and a hearing.  The notice and hearing will then result in a determination as to whether the providers should be deauthorized from demanding or requesting any payment for medical services in connection with any claim under the No-Fault law.

Upon consideration of the hearing officer's report and recommendation, the superintendent may issue a final order prohibiting the provider from demanding or requesting any payment for medical services in connection with any claim under the No-Fault law.  Our review of the regulation does not reveal any other mechanism for consideration such as an appeal, and it is unclear whether the provider will be able to take any steps to challenge the determination.

The Governor and DFS, pursuant to the above referenced regulation, have set forth a list of doctors and health service providers banned from billing under the no-fault insurance system:

• Ashraf Ashour, P.T. (Brooklyn, NY)
• Victor Basbus, M.D. (New York, NY)
• Michael Conrad, M.D. (Staten Island, NY )
• Anthony D. Cox, Massage Therapist (Rochester, NY)
• Bella Dorman, Psychologist (Brooklyn, NY)
• Ricardo Galdamez, M.D. (Flushing, NY)
• Aron Goldman, M.D. (New York, NY)
• Chantal Hilaire, M.D. (Rockville Centre, NY)
• Matthew G. Keschner, D.C. (New York, NY)
• Gary Leviton, Massage Therapist (Valhalla, NY)
• German Laufer, M.D. (Brooklyn, NY )
• Dan Steven Lewis, M.D (Mamaroneck, NY)
• Stuart Press, M.D. (Mamaroneck, NY)
• John Prue, M.D. (Staten Island, NY)
• Alexander Rozenberg, M.D. (Brooklyn, NY)
• Roman Tabakman, M.D (New York, NY)
• Gang Wang, Acupucturist (Bronx, NY)
• Pavel Isaakovich Yutsis, M.D. (Brooklyn, NY)

 

NOTE:  NYIA was able to obtain and provide some additional clarity regarding the ban on billing for these providers.  Notably, the ban prevents the above providers from collecting on previously billed claims.  If the PC is owned by a banned provider, the PC is also barred from billing and collecting.  Lastly, if the banned provider was an employee of a PC, the PC itself is not banned from billing under No-Fault.  However, the PC cannot bill under no-fault for treatment provided by the banned employee/provider.  (Thanks as always to NYIA for providing this information!)

Amendment to General Obligations Law §§ 5-101 and 5-335.
At the end of session this summer, we summarized the legislation which amended General Obligations Law §§5-101 and 5-335, and we thought it was worth repeating as the Governor recently signed the legislation into law.  As a result, the changes are now effective and applicable.  

General Obligations Law §5-335 when originally signed into law in 2009 sought to limit a health insurers right to recover against personal injury and wrongful death settlements.  The original language of this statute was less than clear and used language which suggested that it only applied when the settlement occurred during the course of litigation.  Although the goal of this provision was to protect settlements from liens/subrogation, it was less than successful.  For instance, in one federal decision, Wurtz v. Rawlings Co., LLC, 933 F Supp 2d 480, 502 [EDNY 2013], the court held that this legislation was preempted to the extent it applied to any insured employee benefit plan covered by the Employee Retirement Income Security Act of 1974, as amended (ERISA).  The amendments set forth below are intended:

to make clear the original purpose of  sections  5-101  and  5-335  of  the general  obligations  law  which  is to ensure that insurers will not be able to claim or access any monies paid in settlement of  a  tort  claim whether  by way of a lien, a reimbursement claim, subrogation, or otherwise so that the burden of payment for health care services,  disability payments,  lost  wage  payments or any other benefits for the victims of torts will be borne by the insurer and not any party to a settlement  of such  a  victim's tort claim.   This law is specifically directed toward entities engaged in providing health insurance, thus falling under the "savings” clause contained in ERISA, which reserves to the states the right and the ability to regulate insurance.

This amendment makes several changes to the previously enacted General Obligations Law §§ 5-101 and 5-335.  §5-101 was amended by striking the term provider for that of insurer.  It was further amended to make it clear that an insurer is an “insurance company or any other entity, which provides payment or reimbursement of health care expenses, health care disability payments, lost wage payments…”   

The remaining changes were all to §5-335.  In short the legislation was changed to make it clear that this section applies to all settlements not just settlements occurring during the course of litigation.  Essentially, the changes seek to make it clear that a health insurer may not recover its payments made from a settlement of a bodily injury or wrongful death claim.  Added to this provision is subsection (c) which states that “This section shall not apply to a subrogation or reimbursement claim for the recovery of benefits provided by Medicare or Medicaid.” 

In Wurtz v. Rawlings Co., the court explained that “Section 514(b)(2)(A) enables a state law, that sufficiently “relate[s] to” a benefit plan, to be “saved” from preemption if it “regulates insurance, banking, or securities.” Wurtz v Rawlings Co., LLC, 933 F Supp 2d 480, 502 [EDNY 2013].  In order to demonstrate that the Savings Clause found in the ERISA statute applies, “[t]here are two requirements that a state law must satisfy…under ERISA § 514(b)(2)(A). ‘First, the state law must be specifically directed toward entities engaged in insurance. Second, ... the state law must substantially affect the risk pooling arrangement between the insurer and the insured.’” 

In Wurtz, the court found that the use of the phrase benefit provider did not sufficiently demonstrate that the legislation was specifically directed toward insurance entities.  Id. at 504.  The court also found that the second prong was not met because “only a slice of certain types of settlements in certain types of cases involving certain types of benefit providers are actually implicated.”  Id.  Because the court found that “the law, for all intents and purposes, only applies to a subset of benefit providers, specifically, those without a statutory right of reimbursement and who do not intervene in underlying third party actions in which the third party settles,” there was not sufficient evidence to demonstrate that the law “substantially affects the risk pooling arrangement between the insurer and the insured.” 

The change from using the term provider to insurer is an attempt by New York to meet the first prong and demonstrate that the law is specifically directed at entities engaged in insurance.  The clarification that the statute applies to non-litigated actions is an attempt to meet the second prong set forth in Wurtz.  However, it is unclear and likely to be litigated again, as to whether the inclusion of non-litigated claims is enough to demonstrate that this law substantially affects the risk pooling arrangement between the insurer and insured as there are still numerous subrogation rights not affected by this statute, including workers’ compensation, Medicare, Medicaid and APIP subrogation rights.

While the statute certainly clarified that the statute applies to both litigated and non-litigated subrogation rights, it seems likely that the issue of whether ERISA health plans are also barred from seeking subrogation under these amendments will be litigated once again. 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
[email protected]

11/15/13         Maclaren Europe Limited v ACE American Insurance Company.
United States Court of Appeals, Second Circuit (Summary Order) – New York Law
New York Insurance Law §2121 – Agent for Payment of Premiums
A summary order was issued by the Second Circuit on a case that was decided in the Southern District of New York on November 5, 2012.  The facts of this case are stated in that that case.  Maclaren Europe Limited v. ACE American Insurance Co., 908 F.Supp.2d 417 (S.D.N.Y. 2012).

In April 2006, ACE American Insurance Company [“ACE”] renewed the insurance policy it had previously issued to Maclaren Europe Limited [“MEL”] and Maclaren Hong Kong, a related entity.  The renewal was procured by a New York retail insurance broker, Sahni, who used a New York wholesale broker, Program Brokerage Corporation [“PBC”], to negotiate and obtain the renewal from ACE.  ACE delivered the renewal policy to PBC in New York, which in turn delivered it to Sahni in New York.  Before the then existing policy expired, but before ACE issued the 2006 renewal, MEL wired an anticipated renewal premium to Sahni’s bank account in New York.  Sahni never remitted the premium to PBC or ACE.  ACE subsequently mailed a cancellation notice to MEL at MEL’s USA’s address in Connecticut.

The issue presented to the district court involved the application of New York Insurance Law §2121, which essentially makes an insurance broker an agent for the insurer for the limited purpose of collecting premiums.  Section 2121(a) was designed to relieve the insured from all risks stemming from a broker’s possible dishonesty or insolvency.  When an insurer gives a policy to a broker for delivery to the insured, the insurer in effect extends credit to the broker, and the broker is thereby held to be an agent for the insurer for the purpose of the payment of the premium on that policy.

Before the district court ACE argued that §2121 extends no further than to PBC as the agent of ACE, but at no time was Sahni ACE’s agent. The district court disagreed finding that an agent may authorize subagents to perform in accordance with authorization from the principal, and the subagent “affect the relations of the principal to third persons as fully as if the appointing agent had done such acts.  The court noted that subagents are quite common in the insurance industry, noting further that PCB acted as a subagent or sub-broker to MEL, when it procured the policy for ACE at Sahni’s request.

The district court found no coincidence in the fact that this was also the opinion held by the New York Insurance Department in 1990 when the Department rendered an opinion stating that it has long held the position that the insurer must accept that payment of premiums to a broker is equivalent to receipt by the insurer, even though the insurer had no direct dealings with such broker.

The district court held that pursuant to §2121, ACE must be charged with the receipt of the premium.  PCB was an agent of ACE for the limited purpose of receiving on ACE’s behalf the payment of any premium which was due on the policy issued at PCB’s request.

ACE filed an appeal with the United States Court of Appeals for the Second Circuit [“Court”].  In its appeal ACE conceded that it is subject to New York Insurance Law §2121, but argued that the payment to the broker was not covered by §2121 because MEL made the payment before ACE issued the policy.  Because the broker wrongfully converted the payment before the policy was issued, ACE argued that it was entitled to cancel the policy for non-payment of premium.  The Court rejected that argument. 

The Court analyzed §2121 and determined that a literal reading of the provision supported MEL’s position.   The Court noted that, on its face, the statute merely requires the insurer to deliver the policy to the broker for the broker to be deemed the insurer’s agent – ACE delivered the policy to Sahni. 

ACE argued that the plain language places temporal limits on the broker-insured relationship.  ACE asserts that the phrase “at the time of its issuance” implies that the insured is covered by §2121 only if the insurer actually issued the contract.  The Court disagreed and noted that, read in context, the phrase “at the time of the issuance” modifies the phrase “any premium” and was included to describe the type of payments covered under §2121,  The Court determined that ACE’s argument requires words to be read into the statute – that only payments made after the policy is delivered are covered.

Notwithstanding the above, the Court did state that there is some ambiguity in §2121 because it is silent on the issue of pre-payment.  First, the court opined that the statute arguably sets forth a risk-shifting scheme:  an insurer who delivers a policy to a broker assumes the risk of loss for any payment the insured makes to the broker for the policy, and is therefore liable under §2121 for the broker’s misappropriation.  Second, the court opined that the statute could set forth a rule governed by agency principles. Under this framework, advance payment of premiums to a broker would be imputed to the insurer for purposes of §2121 only if some kind of relationship exists between the insurer and the broker, such that the payment was in return for, or referable to, the policy at issue.  The Court determined, however, that it did not have to reach the question of whether §2121 is a strict loss-allocation rule or a rule governed by agency principles because MEL would prevail under either scenario.

The Court pointed out that the record contained undisputed facts showing that when MEL transmitted its payment to Sahni, it believed that Sahni would apply these funds toward the renewal of the existing policy, as he had done in the prior year.  The court held that in light of the ongoing relationship between the parties and ACE’s history of authorizing Sahni to act as its agent for collection of premiums, there was little doubt that the premiums MEL advanced to Sahni were “referable to” the policy ACE issued.  The court determined that the only conclusion a reasonable factfinder could reach was that Sahni was ACE’s agent for purposes of receiving premiums. As a result, ACE can be charged with the receipt of premiums that MEL advanced to Sahni.

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
                                                    [email protected] 
                                                                       
09/23/13         Procopio v. Government Employees Insurance Company
Superior Court of New Jersey, Appellate Division
Discovery of Bad Faith Claims Stayed During Prosecution of UIM Claim
This decision arises out of a demand for underinsured motorist benefits.  The injured party James Procopio was involved in a motor accident.  After obtaining the limits of the tortfeasor’s policy, he commenced this action against GEICO asserting claims for UIM benefits as well as bad faith refusal to pay the claim, breach of contract, and violations of the New Jersey Consumer Fraud Act.

GEICO moved to have the actions severed, and for the bad faith matter to be held in abeyance pending resolution of the UIM matter.  In an odd decision, the judge bifurcated the claims for trial, held the bad faith claims in abeyance, but compelled simultaneous discovery of all claims.  GEICO sought clarification or reconsideration reasoning that it would be prejudiced by compelling discovery of the bad faith claims contemporaneous with discovery of the UIM claim, which was declined. 

However, the appellate court agreed with GEICO finding that it could discern very little benefit in allowing discovery to proceed simultaneously since a claim for UIM discovery benefits is separate and distinct from a claim of bad faith and the evidence used to establish each claim is very different.  Requiring simultaneous discovery on both claims would result in a significant expenditure of time and money, generally rendered needless if the insurer prevails on the UIM claim.  The court further cautioned:

Indeed, if an insured attempting to prove the validity of his or her claim against an insurer could obtain the insurer's investigative files — showing exactly how the company processed the claim, how thoroughly it was considered and why the company took the action it did — merely by alleging the insurer acted in bad faith, then there would be an open invitation to all plaintiffs to include such allegations with every breach of contract claim.

Accordingly, the court reversed the decision and remanded it. 

11/15/13         Diperna v. GEICO General Ins. Co.
United States District Court, M.D. Florida, Orlando Division
Question of Fact Found on Bad Faith Claim; Huh?
Daniel Diperna (“Diperna”) was rear-ended by GEICO’s insured, Joseph Umberger.  At the time of the loss, Umberger was insured under a personal auto policy with a limit of $10,000 per person.  The day after the loss, the claim was reported to GEUCI and Sherry Zuniga was assigned to act as the claims representative. 

On that same day, Ms. Zuniga conducted a recorded interview of Diperna and explained the bodily injury claims process to Diperna’s mother.  During the interview, Diperna told Ms. Zuniga that he was rear-ended and that evening began experiencing neck, back and shoulder pain. 

Ms. Zuniga also advised the insured directly that a claim was being made against him, and that while GEICO would attempt to settle the action within the policy limits, the claims had the potential to exceed the policy limits. 

About a week later, Ms. Zuniga received a letter of representation.  At the same time, GEICO requested and then reviewed the police accident report.  The report indicated that the insured was ticketed for failure to use due care and that there were no injuries in the accident.  Ms. Zuniga, in turn, called the insured that same day to inform him of the information. 

The letter of representation also requested policy information.  Ms. Zuniga acknowledged receipt and requested additional information specifically medical records from counsel.  The insured was copied on the letter.  An “Affidavit of Coverage” was also sent to counsel informing him of Mr. Umberger’s available coverage limits and indicating that he had no knowledge of additional insurance coverage. 

Thereafter, communications were exchanged concerning a medical diagnosis and the disclosure of the actual policy.  As noted by the court, “Ms. Zuniga left messages for Mr. Panagakis (counsel) numerous times in November and December 2007” in order to obtain updates regarding treatment. 

On December 17,GEICO received a demand letter offering to settle the claim.  The demand was for the insured’s policy limit.  The offer was condition on:  1) a mutual release; 2) a financial affidavit; and 3) an executed affidavit of no other coverage. 

On December 19, GEICO confirmed that Diperna had suffered an avulsion fracture.  Based on this confirmation, GEICO authorized payment of the policy.  Ms. Zuniga contacted counsel and advised that GEICO was tendering its policy.  Ms. Zuniga also called the insured and spoke with him about the Demand Letter, the purpose of the financial affidavit requested, and the requirement that the affidavit be completed and returned to counsel by the demand deadline.  Mr. Umberger agreed to complete the affidavit and send it to counsel.  The documents were mailed to him that day. 

Ms. Zuniga then sent the proposed release to counsel, and indicated that the settlement check was being sent under separate cover.  Counsel never responded.  Ms. Zuniga followed up with the insured who advised that he completed the affidavit and mailed it the same day. Apparently, the insured never completed the affidavit, and in turn never sent it to counsel.

Months later, GEICO learned that the settlement check had not been cashed, and issued a new one. 

Counsel then sued the case, and two months later GEICO received a Motion for Default that had been entered against Mr. Umberger.  That same day, GEICO referred the case to counsel who it appears opened the default.  Nevertheless, three years later, the insured entered into a Consent Judgment with Diperna for $625,000, and this third-party bad faith action was commenced against GEICO. 

On these motions for summary judgment, the court found questions of fact on whether GEICO: 1) appropriately advised Mr. Umberger of Diperna’s settlement offer, 2) could have settled the claim, where a reasonably prudent person, faced with the prospect of paying the total recovery, would have done so, 3) advised Mr. Umberger of the probable outcome of litigation, 4) warned Mr. Umberger of the possibility of an excess judgment, and 5) advised Mr. Umberger of any steps he might take to avoid an excess judgment. 

Take Away:  This is one of those decisions that makes me crazy and also want to kiss the sweet New York ground I practice law on.  I cannot see how there was a question of fact on the bad faith claim.  In this decision, the plaintiff dictated both the strict terms of the settlement, and the small window whereby GEICO had to comply with them.  When GEICO made every attempt to complete the settlement, the Court still found those efforts were not enough. 

GEICO did everything to facilitate the settlement, and the plaintiff’s counsel did nothing.  GEICO tendered its policy limits, and advised both counsel and the insured of its decision.  It drafted the settlement papers, and reached out to the insured and counsel concerning its efforts.  GEICO issued the check, and made arrangements for the execution of the financial affidavit, which the insured advised that he had completed.  Admittedly, I place little stock in any denial by the insured on this point.   It then mailed counsel a proposed release.   

If counsel had once, picked up the phone and said “listen, I haven’t received the affidavit yet.”  This entire case would not have come about.  But, the court provides no incentive to do so.  Instead, it provides the opposite incentive.  It encourages a plaintiff’s attorney to make no effort to actually participate in the physical process of settlement. 

I also question how the insured could have entered into a consent judgment, when he was being represented without reservation by GEICO, but I suppose that is another question for another day.  

EARL’S PEARLS
Earl K. Cantwell
[email protected]

POSSIBLE COVERAGE FOR “ILL-GOTTEN GAINS”

A recent major case which wound up before the New York State Court of Appeals generally dealt with insurance coverage for alleged inflated profits and “ill-gotten gains” from trading schemes at a major New York City stockbrokerage.  JPMorgan Securities, Inc. v. Vigilant Insurance Co., et al. 2013 WL 2475864 (June 11, 2013).  The SEC sued Bear Stearns for millions of dollars and sanctions for ongoing alleged improper stock trading practices.  The brokerage firm claimed it was not liable for many reasons, including because it only processed trades for clients.  Eventually a $250 Million settlement was arranged with the SEC which (generally) consisted of a $90 Million fine and $160 Million disgorgement remedy.  There were also several private lawsuits which were settled for several million dollars in payouts and defense costs. 

Bear Stearns then sought reimbursement from its primary insurance company, Vigilant, and several other secondary insurers to recover the costs of the settlement, except for the $90 Million fine.  The insurance companies rejected the claims on the basis that the “disgorgement” remedy was not covered because it was in repayment of illegally acquired funds/profits.
The Trial Court ruled in favor of Bear Stearns and ordered the insurers to pay.  An appellate decision in 2011, however, reversed the Trial Court, agreed with the insurance companies, and dismissed JPMorgan’s suit. 

On appeal to the New York State Court of Appeals, Bear Stearns and JPMorgan, which acquired Bear Stearns during the financial crisis, argued that the bulk of the disgorgement remedy, approximately $140 Million, represented allegedly improper profits and earnings by third party hedge fund customers, and was not revenue or funds Bear Stearns itself received.  The Court of Appeals reversed the appellate court and essentially reinstated the Trial Court ruling that $140 Million of the disgorgement amount represented customer profits, not receipts by Bear Stearns, and therefore the brokerage firm was not seeking recoupment or coverage for its own “ill-gotten gains”.  Although the Court of Appeals stated it could not condone the late trading and market timing activities described in the SEC proceedings and order, it held the insurers did not meet their “heavy burden” of establishing that Bear Stearns was barred from pursuing insurance coverage.  The crux of the argument and holding was that neither Bear Stearns nor JPMorgan management manipulated the timing of the challenged trading, and the profits from the trading went to Bear Stearns’ customers, not the insured itself.

On a general level, the saga of this case supports the proposition that claims presented for coverage may present situations where some claims or damages are potentially covered, but some are not.  On a more specific level, although “ill-gotten gains” may not be subject to insurance coverage, if there are claims of fraud, theft, improper or illegal activities, some losses or damages may be covered if they do not represent earnings or funds received or pocketed by the insured, but rather potentially benefitted some other third party.