Dear Coverage Pointers Subscribers:
Do you have a situation? We do love situations and making them disappear.
We wish you the best for the Memorial Day Weekend. Remember that the holiday was created not as the unofficial start of summer, but as a day to remember those who died for our freedoms.
Privilege Issues:
You will find a missive (is it a tome?) on the attack on the attorney-client privilege in this letter. A Fourth Department decision, reported in the attached issue, takes dead aim at insurers who seek coverage advice before making a decision to deny or accept coverage. Keep reading.
A special greeting to our new subscribers who were kind enough to hear my presentation on Multiple Party Predicaments at the Buffalo and Long Island venues of the NYS Bar Association, Torts, Insurance & Compensation Law programs. A special thanks to the co-state wide and L.I. chair, Beth Fitzpatrick and Syracuse chair, Kevin Merriman, for including me on the panels. For our new readers, let me introduce the format. This cover letter intersperses your editor’s ramblings, cover notes by our staff of talented authors, announcements of upcoming educational programs, historical artifacts and trivia from a century ago as well as the headlines of the Coverage Pointers issue. Like the ethics hour in any educational program, we put the headlines at the end of the cover note, so you have to read through the rest of it to get credit.
The actual issue is attached in Word format so you can cut and paste our summaries into claim files, to your heart’s content.
New Column, New Columnist: Wilewicz’s Wide World of Coverage:
In our most recent issue, we were pleased to announce the newest member of our coverage team, Agnes A. Wilewicz, a seasoned coverage attorney who comes to us with several years of excellent experience. She was anxious to add to our educational offering, this newsletter, and her first column appears in this issue.
Kathie Fijal, before her retirement from the practice, wrote a column dubbed Fijal’s Federal Focus. She reported on Second Circuit Court of Appeals cases, primarily, with an insurance coverage theme. Agnes is taking over that “desk” but will broaden her coverage to US District Court cases in New York and relevant federal cases from other circuits. So welcome Agnes and do take a look at her offering in Wilewicz’ Wide World of Coverage.
Let me introduce all of our scribes and tell you what their columns cover:
- Rob Hewitt is in our Long Island office and provides summaries, analysis and commentary on No Fault “Serious Injury” threshold cases.
- Margo Lagueras is in our Buffalo office and writes on litigated and arbitrated No Fault decisions (other than those involving the “Serious Injury” cases.
- Steve Peiper is in our Buffalo office, although like me, spends more time in New York City and in other corners of the state than here, and writes on First Party cases and the odd-ball potpourri cases that often cross the lines between insurance and tort law (e.g. risk transfer).
- Beth Fitzpatrick is our resident partner in our Long Island office and offers commentary on Coverage “B” (personal and advertising liability) and the developing area of cyber-liability and related coverages. She may toss in the occasional construction defect case if so inclined.
- Agnes Wilewicz is in our Buffalo office and, as indicated above, will be covering the federal beat and has a particular interest in the environmental coverage universe.
- Cassie Kazukenus is our resident associate in Albany and covers legislative and regulatory issues.
- Jen Ehman, currently on maternity leave, focuses on bad faith, good faith, ECL and lower court decisions in the state courts. Others are currently taking up that slack as she enjoys her time with her daughter.
- Earl Cantwell out of our Buffalo office, writes on current trends and interesting cases that can be from anywhere in the country.
- Audrey Seeley, also attached to our headquarters in Buffalo, is currently on hiatus from her column (but surely, not from the office) because of her commitment as Chair of the DRI Insurance Law Committee. She will take up those editorial duties again when her responsibilities ebb a bit over there. She will continue to offer cover notes, as she does in this issue, advising on national issues.
- Yours truly, who lives on airplanes, and spends a considerable amount of time in both Buffalo, New York City and throughout the United States, writes on everything else casualty – CGL, D&O, E&O, both personal and commercial lines, and anything else not otherwise covered.
Upcoming Presentations:
May 29:
New York Insurance Association Annual Conference
Saratoga Hilton
Wait Until You Hear What’s Coming Next! Tomorrow’s Coverage Issues Today
June 4:
New York State Bar Association – Automobile Litigation Update
Holiday Inn, Amherst, New York
Coverage Issues Impacting Automobile Litigation – Rental/Temporary Substitute, Late Notice, and the Graves Amendment
June 9:
Federation of Defense & Corporate Counsel Litigation Management College
Emory University, Atlanta, Georgia
Coverage 101
Reading List:
- Just completed: The First Tycoon: The Epic Life of Cornelius Vanderbilt, by T.J. Stiles
- In process: Dead Wake, The Last Crossing of the Lusitania, by Erik Larson
- On deck: Always looking for recommendations.
CoverageCounsel – Insurer Attorney Client Privilege: Another Nail in the Coffin
I am so concerned about this decision and this subject; I was tempted to speak of nothing else in this cover letter. Attention all who work for or with insurance companies! Unlike all other parties who need, secure or provide legal advice, YOUR communications may be discoverable.
This madness must stop.
We review a May 8, 2015 Fourth Department decision in Lalka v. ACA Insurance Company. This was an action to recover supplementary underinsured motorist coverage. Plaintiff sought the entire claim file in discovery. While some portions of the file were produced, counsel for the insurer resisted producing any documentation that covered counsel’s communication with the insurer on the grounds, in part, that attorney-client privilege protected those exchanges.
The motion judge, a very thoughtful and respected jurist, Hon. Patrick NeMoyer, granted that part of the motion seeking those portions of the claim file generated before the date of commencement of the action "with the exception of those materials reviewed in camera." Those documents withheld by the court were exchanges between counsel and the insurer that discussed counsel’s coverage opinion.
The Appellate Division, Fourth Department concluded that the court properly denied that part of plaintiff's motion seeking disclosure of documents in the claim file created after commencement of the action. However, the appellate court agreed with plaintiff, that the court abused its discretion in denying that part of her motion seeking disclosure of those documents submitted to the court for in camera review:
It is well settled that [t]he 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 which of the two indicated actions to pursue are made in the regular course of its business' " (Nicastro v. New York Central Fire Insurance Company, 117 AD3d 1545,1546). "Reports prepared by . . . attorneys before the decision is made to pay or reject a claim are thus 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”. Emphasis added.
The court concluded that the documents submitted for in camera review constituted multi-purpose reports motivated in part by the potential for litigation with plaintiff, but also prepared in the regular course of defendant's business in deciding whether to pay or reject plaintiff's claim, and thus plaintiff is entitled to disclosure of those documents.
The Nicastro case, cited as precedent, is worth reviewing. It held that:
- A party seeking to invoke the attorney-client privilege must show that the information sought to be protected from disclosure was a “confidential communication” made to the attorney for the purpose of obtaining legal advice or services;
- The burden of proving each element of the privilege rests upon the party asserting it;
- For the privilege to apply when communications are made from client to attorney, they must be made for the purpose of obtaining legal advice and directed to an attorney who has been consulted for that purpose;
- For the privilege to apply when communications are made from attorney to client—whether or not in response to a particular request—they must be made for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship
We have no problem with any of those elements, but the court carved out an exception for insurers:
It is well settled that "[t]he 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 which of the two indicated actions to pursue are made in the regular course of its business".
The court continued:
[W]hile information received from third persons may not itself be privileged … a lawyer's communication to a client that includes such information in its legal analysis and advice may stand on different footing. The critical inquiry is whether, viewing the lawyer's communication in its full content and context, it was made in order to render legal advice or services to the client.
In Nicosia, the Fourth Department drew a line between an attorney who is retained to act as an adjuster and one who is retained for legal advice:
Here, defendant did not retain counsel to perform the work of an adjuster or otherwise to handle claims. [The insurer] itself evaluated plaintiff's claim and determined that it was obligated to pay and did pay him in excess of $100,000 as a result of a fire that damaged two insured properties. When it became clear that plaintiff believed that the value of his claim was far in excess of what defendant was willing to pay him, [the insurer] retained counsel to protect its rights. [Coverage counsel] expressly stated that he was retained to provide legal services to [the insurer], to advise … of its legal responsibilities, and to conduct the examination under oath of plaintiff.
The court in Nicosia thus concluded that counsel was retained to provide legal advice and services to the insurer with respect to plaintiff's claim and, as a result, the court should not have granted disclosure of documents of or relating to communications between defendant and its attorney and documents that constitute attorney work product.
That ruling we understand. If an insurer is acting as a claims professional and conducting the work that a claims professional would undertake and a decision to deny or pay a claim is based on that work we can recognize why that kind of activity might be discoverable. However, the court’s language in Lalka is considerably broader, not restricting discovery to those cases where the attorney is acting as a claims professional. Again:
Reports prepared by . . . attorneys before the decision is made to pay or reject a claim are thus 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".
The court then cites to Bombard v. Amica Mutual Insurance Company, 11 AD3d 647 (2nd Dept. 2014). In that case, the court held that documents generated between counsel and the carrier during a period of investigation starting from the date that a reservation of rights letter was issue and the date of disclaimer were discoverable. The court found that “the insurer’s investigation of the incident and the facts related to the plaintiff's notice of the incident was ongoing and that it was not until the disclaimer letter, dated February 4, 2003, that there was a firm decision to reject the plaintiff's claim”. Since it was only at that time that the files became privileged, the Supreme Court, the Court held, properly directed the defendant to comply with the plaintiff's request for the production of the material previously prepared.
What was the Second Department telling the parties and what is the Fourth Department saying is this latest decision?
We are hopeful that the court would restrict discovery to factual investigation and not legal analysis, strategic advice and mental impressions. However, the language of these decisions suggest a broader, more dangerous and intrusive and privilege-smashing approach.
Insurers are entitled to legal advice, confidential, private and protected, the same as other litigants. We are hopeful that Aca seeks further review and that the industry joins to seek clarification from the courts.
Cassie’s Capital Connections (reporting from our Albany office):
Dear Subscribers:
I write this while enjoying the scenic Hudson River views on the train from Albany to New York. I wanted to drop a quick cover note in light of yesterday’s announcement by DFS Superintendent Lawsky’s resignation. It is expected that Superintendent Lawsky will leave the Department of Financial Services in late June. The New York Times has reported that Superintendent Lawsky is starting his own legal and consulting firm that will offer risk management and compliance advice.
Today’s column includes a summary of legislation pending in the Senate which pertains to the electronic delivery of insurance documents and notices and the electronic posting of property and casualty insurance policies. For those that are NYIA members, NYIA is seeking input regarding the proposed legislation. If you need a copy of the proposed bill, please let me know, and I can provide you a copy of the bill. I hope everyone enjoys their Memorial Day weekend, and thank you to all who have served.
Cassie
Cassandra A. Kazukenus
[email protected]
Russian for Coverage – 100 Years Ago:
The Wilmington Dispatch
Wilmington, North Carolina
22 May 1915
COMPULSORY STATE FIRE INSURANCE
Petrograd, Russia, May 22.—A project to institute compulsory State fire insurance is now under consideration by the minister of the interior, and will be seen presented to the Council of Ministers for approval. The proposal was first made by the budget committee of the Duma, which pointed out the desirability of such a measure as a course of income to the government.
According to preliminary estimates, if this fire insurance monopoly were undertaken by the government, it would yield an annual income of 15 million dollars. The minister of the interior, however, is in favor of the passing of such a measure, not primarily because it would bring a large revenue to the government, but because compulsory insurance is demanded by the condition of the majority of buildings in Russia, which are wooden and poorly protected against fire. The constant destruction of these wooden buildings by fire has been a perceptible drain on the economic strength of the country.
Audrey’s Angles:
Dear Coverage Pointers friends,
It has been some time since you have heard from me and I need to explain why. As you may know, I am currently serving as Chair of DRI’s Insurance Law Committee. It is a phenomenal opportunity. I have been able to work with the best attorneys in the nation and the top insurance professionals at many different insurance companies. The Insurance Law Committee of DRI is over 2,600 members and the committee is extremely active in programming, publications, social media, and networking. As a result, this position has required me to temporarily, reallocate my efforts. I hope that you will forgive my hiatus from my usual column in Coverage Pointers during my time as Chair of the Insurance Law Committee. I will provide a cover note from time to time to advise of educational programming and publications that may interest you as well as share with you some of the national, cutting edge information I have gained through my position.
The DRI Insurance Law Committee is presenting its biannual Insurance Bad Faith and Extra Contractual Liability Program in Chicago June 17-19th. Our program team, which is headed up by Chris Martin, Esq., from Martin Disiere Jefferson Wisdom LLP, Catalina Sugayan, Esq., from Sedgwick LLP, and Kevin Willging, from Travelers Insurance Company, has created a fantastic program bringing in many industry professionals and the top bad faith speakers in the nation. We have industry speakers from Zurich, Brit Global Specialty USA, Travelers Insurance Company, QBE North America, Allianz Global Corporate and Specialty, Allied World Assurance Co., State Farm Insurance Co., and W.R. Berkley Corp.
For the first time in this program, on Friday there will be a roundtable solely for in-house counsel and insurance professionals. This roundtable will focus on creating a dialog to discuss, among other things, current claims trends that may result in bad faith suits in the future, issues in the management and payment of outside counsel, as well as handling coverage claims in suits where a bad faith claim was added for leverage. If you are a claims professional or in-house counsel and not a DRI member and would like to attend this program, please email me at [email protected] as you may qualify to attend for free. To register for this program, which can be done up to the day of the program, go to www.dri.org or call 312.795.1101.
I hope you have a great Memorial Day weekend with family and friends!
Audrey
Audrey A. Seeley
[email protected]
Some Dead People Have All The Luck – A Century Ago:
The Intelligencer
Anderson, South Carolina
22 May 1915
REMARKABLE CASE OF GOOD FORTUNE
MAN’S INSURANCE POLICY
EXPIRED FEW HOURS AFTER HE WAS KILLED
VICTIM CYCLONE
His Policy Had Lapsed and Cash
Value of Same Had Been Exhausted
One of the most extraordinary examples of fortune, good luck, or whatever one might desire to call it, with reference to life insurance that has ever been known in this part of the country came to light in the recent cyclone which swept several counties in the eastern part of the State, killing several persons and injuring others.
A man was killed when a stone building was blown upon him by the cyclone. He left a wife and several children. All the insurance he had was a policy of $1,000 on one company and policy for $4,000 in the Mutual Benefit Life Insurance. The policy for the larger amount of insurance expired, but a few hours after the man was killed. As a matter of fact, the policy had lapsed because of non-payment of a premium and because the cash value of the same had been exhausted by loans on the same. It was in force, however, at the time of the party’s death because of the company’s rules with reference to the payment of dividends.
In a letter to agents throughout the State, Mr. M. M. Mattison, general agent, recites the facts of this remarkable case, as follows:
Under date of the 8th inst., our Mr. E. O. Horton of Manning wrote as follows:
“In re policy No. 573,905—D. B. Davis.—I regret to report that assurer was killed yesterday afternoon at 4 o’clock in stone building which was destroyed in the terrific cyclone. I note that assured’s policy was extended until May 7th, 1915, the exact date of his death. Please advise status of policy.”
The response:
Upon investigation we found that a policy for $4,000 was issued on the life of Mr. Davis in 1911; that it lapsed because of non-payment of premium due October 1st, 1914; that the cash value of the policy had been exhausted by loans on same, but was in force at the time of party’s death, because of our rules in reference to the payment of dividends.
Under Mutual Benefit policies, dividends after the first are not conditioned upon payment of premiums; so when this policy lapsed the company automatically applied the dividends, $14.64 regular, and $2.93 special, a total of $17.57, as a credit on the loan, which as you can understand revived or restored an equal amount of the cash value, which value was sufficient to extend the policy for 218 days, or through May 7, 1915. The extended insurance period therefore expired Friday night, May 7, a few hours after Mr. Davis was killed. Mr. Horton has been instructed to make up proofs of loss, and just as quickly as possible we will make settlement with the beneficiary, Mrs. Sue Davis, wife of the deceased.
Peiper’s Punchline:
A slow week in the first party world. We do offer two title insurance cases, but otherwise you’re left to your devices for entertainment.
I do want to highlight the intentional injury/lack of occurrence case reviewed in Kohane’s Coverage Corner this week. In Ellis, the court rejected an attempt assert that voluntary intoxication negated the policyholder’s apparent intentional conduct. The hope, of course, was that establishing a lack of intent would result, necessarily, in a ruling that the incident giving rise to the claim was accidental in nature. To accept voluntary intoxication as a mitigating factor, would have resulted in immunity (insofar as insurance is concerned) for the most grievous of actions and would have fundamentally changed the risk pool for personal lines liability coverage.
We also highlight the NY Bar Association’s TICL CLE team, headed by our own Beth Fitzpatrick, on another excellent insurance coverage program. The program this year was headed up by Beth and Joanna Roberto. The materials, and presentations, were top notch once again. As those of you who have attended this program in year’s past know, however, insightful speakers and excellent materials have long been a hallmark of that program. Congratulations to all who participated.
That’s it for now. Happy Memorial Day to all.
Steve
Steven E. Peiper
[email protected]
Happy Wife, Happy Life, One Hundred Years Ago:
TIMES HERALD
Olean, New York
22 May 1915
READY FOR 14TH MARRIAGE
Woman of 70 Lost Love for Last
Hubby When He Jumped Bond
Evansville, Ind., May 22.—Mrs. Polly Anne Strodes, age 70, living in this city, who has been married 13 times, says she is spry and full of life as she was when 16 years old and that she may take another husband.
The last husband of Mrs. Strodes was recently arrested, and his wife gave a cash bond of $500, which he jumped. Mrs. Strodes said that when she last heard from her husband he was in Colorado. The other husbands are either divorced or died.
“I have lost all love for Harrison,” she said, “and I never want to see him again. He forced me to go on his bond under threats of death. I was a fool for ever marrying him, and just think of it, he told me he had not taken a bath for 25 years. This was the limit.”
Fitz’ Bitz:
Dear Subscribers:
In this week’s column, I discuss some cyber liability decisions involving coverage under a CGL and cyber policy, a construction defect case involving claims by the contractor against the owner’s insurers sounding in equitable subrogation and a social media and discovery case from a trial court here on Long Island. On May 11, 2015, a Utah federal court issued a decision finding no duty to defend in Travelers Property Casualty Company v. Federal Recovery Services, one of the first cases in the country addressing coverage under a Cyber Liability policy. The claims against Travelers’ insureds sounded in tortious interference, conversion and breach of contract.
Addressing coverage for data breach under a Commercial General Liability policy, the Connecticut Supreme Court in Recall Total Information Management, Inc. v. Federal Insurance Co., held there was no coverage under the insured’s Commercial General Liability policy for costs incurred by the insured in connection with the loss of computer tapes, which contained IBM employees’ personal information. The court held that the Commercial General Liability policy’s coverage for injury caused by electronic, oral, written or other publication of material that violates a person’s right of privacy was not invoked.
In a trial court decision involving the disclosure of social media, the Supreme Court, Suffolk County, (Justice Rebolini) granted the defendant’s motion to compel in part and directed plaintiff’s counsel to print out and retain all photographs and videos, whether posted by others or by plaintiff herself, as well as status postings and comments, including all deleted materials, and to disclose all postings that are relevant to plaintiff’s damage claim. The court rejected the defendant’s request that there be an in camera inspection, finding that there was no basis to believe that plaintiff’s counsel could not honestly and accurately perform their review function in the case.
Finally, we note that it was announced this week that Benjamin Lawsky will be stepping down as head of the Department of Financial Services. It remains to be seen who will be appointed to the position by Governor Cuomo. We will, of course, be watching closely.
Til next time,
Beth
Elizabeth A. Fitzpatrick
[email protected]
HEWITT’S HIGHLIGHTS:
Dear Subscribers:
There are several good decisions this week by the appellate courts on the serious injury issue. In one case, the First Department found an issue of fact where the plaintiff’s expert found range of motion limitations in her knee. The twist here was that the range of motion limitations was found in an examination that occurred three years after the accident at issue. The First Department noted that to defeat summary judgment on the serious injury issue, there was no requirement that the measurements suggesting serious injury be recorded contemporaneous to the accident.
Although the Court stated it might be relevant to an issue of causation, not serious injury, the defendants had failed to raise the issue of causation in their motion for summary judgment and thus it was not before the appellate court. More careful drafting of the motion papers could have avoided that and very well might have led to the motion being granted. In another case, the First Department also found an issue of fact, when plaintiff’s expert was able to detail that even though she had full range of motion now, she had a possible significant, although not permanent, injury, as shown by the fact that she had persistent limitations up until the time of surgery.
Hopefully you are enjoying spring and better weather.
Until next time,
Rob
Robert Hewitt
[email protected]
Toeing the Line, 100 Years Ago:
THE BROOKLYN DAILY EAGLE
Brooklyn, New York
22 May 1915
TYPEWRITING FOR FEET TO
HELP WAR CRIPPLES
Berlin, May 22 (by wireless telegraphy to Sayville, L.I.)—The Overseas News Agency today gave out the following:
The Russian daily newspaper Rech confesses that the attack on the Bosporus is most difficult, and that immense losses are probable.
“A typewriter had been invented for the use of one-armed persons, who will use their feet in place of the lost arm.
Wilewicz’s Wide World of Coverage
Dear Subscribers,
I am very excited to start my column Wilewicz’s Wide World of Coverage (and alliteration). The weather is warmer and the courts continue to come down with coverage cases. As Dan mentioned, every other week I hope to bring you interesting recent federal court cases, as well as the latest environmental decisions the New York State courts might have in store.
To that end, in this edition we have a couple of federal decisions hot off the presses, each with a hint of environmental issues. First, a Southern District case involving methyl tertiary butyl ether (say that three times fast) contamination and the Commonwealth of Pennsylvania trying to circumvent the tried and true anti-subrogation rule. After the Commonwealth agreed to provide primary coverage to certain defendants under an indemnification fund, it was understandably upset when those insureds also recovered money from other insurers for the same remediation. However, the Southern District did not buy the argument that, in this particular case, subrogation should be permitted as an equitable remedy, reminding the Commonwealth of the actual definition of the antisubrogation rule. As a consolation prize, the court permitted their unjust enrichment claim to proceed.
Second, in an interesting reinsurance dispute, two carriers recently went at it over whether New York’s prejudice requirement or Illinois’s no prejudice rule applied, where the reinsurance certificates had no choice of law provision. In a case stemming from the settlement of a large number of asbestos-related personal injury claims, the choice between the two states was critical, especially since everyone agreed that notice was untimely. In the end, the Second Circuit decided to side with the reinsurer in a roundabout way. Even though Illinois’s highest court has yet to speak on the subject, the court here chose to consider its law “settled” anyway, on the basis of other federal cases that had interpreted it. Coupled with the undisputed fact that Illinois had the most significant contacts, the untimely insurer was out of luck. Just demonstrates the power of choice of law provisions.
Have a great long weekend everyone. Until next time!
Agnes
Agnes A. Wilewicz
[email protected]
A Copper Stopper – 100 Years Ago:
THE BROOKLYN DAILY EAGLE
Brooklyn, New York
22 May 1915
DISMISSED FROM POLICE
Twenty Charges Against Maurice A.
Corcoran, Mounted Officer
Maurice A. Corcoran, a mounted policeman attached to the Classon Avenue station, was dismissed from the force by Police Commissioner Arthur Woods last night. About twenty charges were filed against the policeman. The most serious of these were neglect of duty, frequenting saloons, drinking from a glass while on horseback and in uniform, smoking cigarettes while doing mounted duty, and failing to report for service.
Highlights of this week’s issue, attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Attorney Errors and Omissions Carrier Had Right to Defend under ROR and Investigate Whether Self-Dealing Exclusions Applied
- Stolen Keys Do Not Equate to a Stolen Car
- In Uninsured Motorist Claim, Injured Party Failed to Conduct Investigation to Establish Inability to Ascertain Identity of Driver
- Late Notice of Claim Vitiates Coverage – Pre-Prejudice Case
- Hearing Required on Reasonableness of Recoverable Defense Costs
Question of Fact Found Where the Policyholder Recollection of the Claim Differs from Non-Party Statements - Framed Issue Hearing Decision Upheld; Credibility Findings Not to be Disturbed
- Attorney Client Privilege Continues to Crumble, Thousands Flee
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]
- Plaintiff Can Raise Triable Issues of Fact Despite Defendants’ Establishment of A Prima Facie Case of Discrimination
- Plaintiff Could Rely on Report From Her Expert That Showed Range of Motion Limitation In Her Knee Even Though Report was Based On An Examination Three Years After the Accident
- Plaintiff Raised Issue of Fact When Expert Demonstrated That There Were Additional Herniations and Bulges That Had Not Been Present After a Prior Accident and Surgery Was Only Indicated After the Accident At Issue Not Before
- Plaintiff Was Found To Have A Possible Serious Injury Because Of Her Expert’s Finding That She Suffered Persistent Limitations Requiring Surgical Treatment Despite No Limitations On Her Range of Motion In A Recent Examination
MARGO’S MUSINGS ON NO FAULT
Margo M. Lagueras
[email protected]
Arbitration
- Reasonable Justification Found to Exist For Late Notice of Claim
- Arbitrator, Sua Sponte, Raises Issue of Standing
- Applicant’s Progress Notes Found Insufficient to Support “By Report” Code Billing
Litigation
- Court Determines Plaintiff Was “Occupying” the Motorcycle and Is Not Entitled to First-Party Benefits
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Where Carrier Negotiates a Favorable Resolution of Title Dispute, Claims for Coverage under the Policy are Moot
- Attorney Verified Complaint is Insufficient to Establish Facts Needed for a Default Application; Proof of Service of Complaint Needed as Well
FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]
- No Coverage for Data breach under CGL Policy
- Facebook Posting Discoverable
- No Coverage Available Under Cyber Liability Policy
- Equitable Subrogation in Construction Defect Case Fails
WILEWICZ’ WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
[email protected]
- Antisubrogation Means What You Think It Means
- No Coverage Based On Late Notice to Reinsurer; Choice of Law Critical in Prejudice Requirement Context
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
- S5249 Electronic Delivery of Insurance Notices And Documents
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]
- Home with the baby. Hurry back, Jen, we miss you…
EARL’S PEARLS
Earl K. Cantwell
[email protected]
- Good Claims Practices Overcome Bad Faith Claims
That’s it for now. Keep those cards and letters coming in. We welcome and love your feedback.
Have a glorious and healthy Memorial Day Weekend. If you are coming to the NYIA conference, please take a moment to say “hello”.
Dan
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: [email protected]
Website: www.hurwitzfine.com
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
[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
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Taylor F. Gabryel
Agnieszka A. Wilewicz
Diane F. Bosse
Joel R. Appelbaum
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]
Elizabeth A. Fitzpatrick
Cassandra Kazukenus
NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Taylor F. Gabryel
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Elizabeth A. Fitzpatrick
Diane F. Bosse
Index to Special Columns
Kohane’s Coverage Corner
Hewitt’s Highlights on Serious Injury
Margo’s Musings on No Fault
Peiper on Property and Potpourri
Fitz’ Bits
Wilewicz’s Wide World of Coverage
Cassie’s Capital Connection
Keeping the Faith with Jen’s Gems
Earl’s Pearls
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
05/21/15 Law Offices of Zachary R. Greenhill P.C., v. Liberty Ins. Under. Appellate Division, First Department
Attorney Errors and Omissions Carrier Had Right to Defend under ROR and Investigate Whether Self-Dealing Exclusions Applied
Greenhill is a lawyer insured under a professional liability policy with Liberty Insurance Underwriters (“LIU”). He brought an action against the Dwight School for breach of contract and Dwight counterclaimed. The contract action settled and the counterclaims were dismissed. Greenhill sought the costs of defending the counterclaims.
LIU contended that Greenhill failed to establish any breach of the duty to defend, that plaintiffs' motion is premature, and that they need discovery to determine whether the counterclaims fall within certain policy exclusions which apply to situations where an attorney is sued for legal malpractice, but the attorney has also engaged in certain outside business activities. The court agreed with LIU.
LIU denied coverage for the counterclaims based upon the following exclusions:
3. Certain Services and Capacities.
This policy does not apply to any claim arising out of your services and/or capacity as:
a. an officer, director, partner, trustee, manager operator, or employee of an organization other than that of the name insured . . . (bold omitted) (the Capacity Exclusion).
6. Equity Interests. If a person insured under this policy owns, along with his or her spouse, ten percent (10%) or more of the issued and outstanding shares, units or other portions of the capital of an organization, and that person simultaneously provides professional legal services with respect to such an organization, this policy will provide no coverage to that person for any claims that result therefrom.
If the collective equity interest of:
a. all persons and entities insured under this policy;
b. spouses of persons insured under this policy; and
c. the named insured
is thirty-five percent (35%) or more of the issued and outstanding shares, units or other portions of the capital of an organization, and any person simultaneously provides professional legal services with respect to such an organization, this policy will provide no coverage to any person insured or to the named insured for any claims that result therefrom” (the Equity Interests Exclusion).
Later, LIU agreed to defend the lawyer under a full reservation of rights indicating that they reserved the right to further investigate Mr. Greenhill's status as a Dwight China executive to determine whether "he was wearing two hats — one as a solo practitioner and the other as negotiator and executive for Dwight China."
We reject plaintiffs' argument that defendants repudiated or breached the policy by agreeing to defend them subject to a full reservation of rights. We also agree with Supreme Court that plaintiffs' motion for summary judgment is premature, because no discovery has been conducted as to whether the allegations in the counterclaims fall within either or both exclusions to coverage.
This is precisely the situation that the Capacity Exclusion and Equity Interests Exclusion seem to encompass and presents circumstances very similar to those decided by the Court of Appeals in K2 Inv. Group, LLC v American Guar. & Liab. Ins. Co. (22 NY3d 578 [2014]) (K2).
05/21/15 Allstate Insurance Company v. Peralta
Appellate Division, First Department
Stolen Keys Do Not Equate to a Stolen Car
This was an appeal from a hearing with respect to an uninsured motorists claim. The UM carrier claimed that the denial for permissive use was improper and the court agreed.
The evidence at the hearing did not overcome the presumption of permissive use. While there was evidence that the insured’s car keys were stolen hours before the accident and that the theft was reported to the police, there was no evidence that the car itself was ever stolen or reported stolen. Under these circumstances, the court could reject appellants' contention that the car must have been driven by an unknown thief at the time of the accident, and no basis exists to disturb the findings of the hearing court.
05/19/15 Yi Song He v. MVAIC
Appellate Division, First Department
In Uninsured Motorist Claim, Injured Party Failed to Conduct Investigation to Establish Inability to Ascertain Identity of Driver
Petitioner, who commenced this action to recover for injuries he allegedly sustained when, while riding a bicycle, he was hit by a motor vehicle that fled the scene, failed to establish that "all reasonable efforts" were made "to ascertain the identity of the motor vehicle and of the owner and operator thereof". However, petitioner conducted no investigation to identify the driver.
05/19/15 The Argo Corporation v. Admiral Indemnity Company
Appellate Division, First Department
Late Notice of Claim Vitiates Coverage – Pre-Prejudice Case
October 4, 2008, Argo received a letter from plaintiff’s counsel indicating that he was going to sue Argo for an incident where property damage was caused to the underlying plaintiff’s real estate. Argo did not provide notice to Admiral until March 19, 2009.
This was a pre-prejudice case and Admiral denied coverage based on late notice without being required to demonstrate prejudice.
In determining whether notice should be provided, the test is not whether the insured will ultimately prevail as to liability, or believes it will prevail. The test is whether from the information available relative to the accident, an insured could glean a reasonable possibility of the policy's involvement. Argo's contented it had cordial relations with the plaintiff’s counsel. However, the court noted Argo's receipt of an October 14, 2008 letter wherein the attorney explicitly mentioned bringing suit. That put Argo on notice that the damage to the underlying plaintiff's apartment could result in a claim, and Argo's failure to notify Admiral until March 19, 2009 constituted untimely notice pursuant to the policy.
Argo's belief of nonliability was not reasonable under the circumstances. Equally unavailing is Argo's claim that "loss run" reports issued by the condominium's former insurer constituted notice to Admiral, as an insured's obligation to provide notice is not excused if an insurer has received notice from another insured or an independent source.
05/14/15 S. T. A. Parking Corp. v. Lancer Insurance Company
Appellate Division, First Department
Hearing Required on Reasonableness of Recoverable Defense Costs
Lancer was required to defend its insured. The only issue presented by this appeal is the amount of attorneys' fees incurred in plaintiff's defense up to the date of the coverage determination. After a much abbreviated hearing before the JHO, plaintiff's counsel was awarded attorneys' fees of $196,372.33, the exact amount that was sought, to the penny. The court finds that a new hearing is required to develop the record as to the reasonableness of the attorneys' fees charged by plaintiff's counsel. In determining what constitutes reasonable attorneys' fees, the court should consider, among other things, the time, labor and skill required, the difficulties involved in the matter, the lawyer's experience, ability and reputation, the amount involved and the results obtained.
05/05/15 Kemper Ind. Ins. Co. v Ellis
Appellate Division, Fourth Department
Question of Fact Found Where the Policyholder Recollection of the Claim Differs from Non-Party Statements
Kemper commenced a Declaratory Judgment action against its policyholder, LeVea, and decedent’s Estate, Ellis, after a fatal automobile wreck. The crash was occasioned due to LeVea’s repeated actions of striking the rear bumper of the decedent’s vehicle at high rates of speed. The Court noted that a reasonable person would not construe LeVea’s actions as “accidental.” Accordingly, the Court held that Kemper had met its prima facie burden of establishing the incident in question was not an “accident”, and therefore outside the scope of coverage.
In addition, the Court also noted that the policyholder, LeVea’s, recollection of the events, including the crash, were “incredible as a matter of law.” Nevertheless, despite finding LeVea’s version as unbelievable, the Court advised that it was compelled to accept certain portions of LeVea’s overall version as possible. This included LeVea’s testimony that he was distracted by a basset hound puppy, and that, as such, he did not intentionally strike the rear of decedent’s vehicle.
In so holding, the Court ruled that LeVea’s criminal plea, in which he stated he could not remember the collision, was insufficient to preclude LeVea from telling a different version of the events later in the coverage case. Because LeVea could not recall the events at the time of the criminal plea, he was not precluded from discovering his memory at the time of his deposition.
Finally, we note that the Court rejected decedent’s Estate’s attempts to argue that LeVea’s excessive intoxication negated his ability to form the intent injury decedent.
05/08/15 State Farm v. Watson
Appellate Division, Second Department
Framed Issue Hearing Decision Upheld; Credibility Findings Not to be Disturbed
Where, as here, a matter is determined after a hearing, this Court's power to review the evidence is as broad as that of the hearing court, taking into account in a close case the fact that the hearing court had the advantage of seeing the witnesses. In this case, the hearing officer found that a particular vehicle was, in fact, involved in an accident.
05/08/15 Lalka v. ACA Insurance Company
Appellate Division, Fourth Department
Attorney Client Privilege Continues to Crumble, Thousands Flee
This was an action to recover supplementary underinsured motorist coverage. Plaintiff sought the entire claim file.
The motion judge granted that part of the motion seeking those portions of the claim file generated before the date of commencement of the action "with the exception of those materials reviewed in camera." What they were is unclear, but they appear to have included communications with counsel.
The Fourth Department concluded that the court properly denied that part of plaintiff's motion seeking disclosure of documents in the claim file created after commencement of the action. However, the appellate court agreed with plaintiff, that the court abused its discretion in denying that part of her motion seeking disclosure of those documents submitted to the court for in camera review.
"It is well settled that [t]he 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 which of the two indicated actions to pursue are made in the regular course of its business' " (Nicastro, 117 AD3d at 1546). "Reports prepared by . . . attorneys before the decision is made to pay or reject a claim are thus 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 documents submitted to the court for in camera review constitute multi-purpose reports motivated in part by the potential for litigation with plaintiff, but also prepared in the regular course of defendant's business in deciding whether to pay or reject plaintiff's claim, and thus plaintiff is entitled to disclosure of those documents.
Editor’s Note: This is another unfortunate attack on attorney client privilege. Why can’t an insurer consult with an attorney to seek advice on how to respond to a claim and then keep that conversation confidential? It is simply wrong to invade the sanctity of that privilege.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]
05/13/15 Cordova-Perez v. Lauer
Appellate Division, Second Department
Plaintiff Can Raise Triable Issues of Fact Despite Defendants’ Establishment of a Prima Facie Case of Discrimination
The Appellate Division issued a very basic opinion in this case, affirming the order of the trial court which denied defendant’s motion for summary judgment. Defendant’s met their prima facie burden of showing that the alleged injuries to the cervical region of the plaintiff’s spine and to her left shoulder did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories. In opposition, however, the Appellate Court felt that plaintiff raised triable issues of fact as to whether or not she sustained serious injuries to her spine and left shoulder.
05/12/15 Streeter v. Stanley
Appellate Division, First Department
Plaintiff Could Rely on Report from Her Expert That Showed Range of Motion Limitation In Her Knee Even Though Report was Based on an Examination Three Years after the Accident
The trial court had granted defendants’ summary judgment and dismissed the complaint in its entirety. On appeal, the Appellate Division modified the decision and restored the plaintiff’s claims for permanent consequential or significant limitation of use of plaintiff’s left knee, but otherwise affirmed.
Defendants satisfied their prima facie case of summary judgment by submitting the affirmed report of an orthopedist, who, upon examining plaintiff, found no objective evidence of injury and full range of motion in the cervical spine, lumbar spine, and left knee. Defendants also submitted plaintiff’s deposition testimony that she was confined to home for just two days after the accident. However, in opposition plaintiff raised a triable issue of fact with respect to whether she suffered a serious injury to her left knee by submitting a report of her expert noting range of motion limitation in her knee. Defendants objected because the report was based on an examination three years after the accident. However, the Court stated there was no requirement that, to defeat summary judgment, a plaintiff must show quantitative measurements suggesting serious injury that are recorded contemporaneous to the accident. While the length of time may be relevant as to causation, defendants did not raise causation in their prima facie summary judgment showing, and this waived it for purposes of appeal.
Plaintiff’s verified bill of particulars, in alleging “left knee contusions, pain and stiffness” adequately placed defendants on notice as to the nature of that injury. Defendant’s expert also issued a report that reflected full examination of plaintiff’s left knee, so defendants suffered no prejudice or surprise. The Court noted that if the jury determines plaintiff suffered a serious injury to the left knee, it may award damages for all of plaintiff’s injuries causally related to the accident.
Plaintiff raised an issue of fact as to whether her cessation in treatment was indicative of a lack of serious injury, since she testified that her no-fault benefits ran out and that she did not have private insurance to pay for further treatment.
The Appellate Court did find that the court properly dismissed plaintiff’s 90/180-day claim, as she failed to allege in her bill of particulars that she was incapacitated for at least 90 of the first 180-days following the accident.
05/07/15 Matos v. Urena
Appellate Division, First Department
Plaintiff Raised Issue of Fact When Expert Demonstrated That There Were Additional Herniations and Bulges That Had Not Been Present After a Prior Accident and Surgery Was Only Indicated After the Accident at Issue Not Before
Plaintiff successfully on appeal had the Appellate Court reverse the trial court’s granting of summary judgment to Defendants. There was no dispute plaintiff presently had an orthopedic injury to her cervical and lumbosacral spine or that she required surgery in 2011. The issue was whether it was related to the 2002 accident, or the current 2009 accident, or both. Defendants made a prima facie case of summary judgment by showing that plaintiff did not sustain a serious injury to her cervical and lumbar spine by submitting the affirmed reports of an orthopedic surgeon and radiologist who both reviewed plaintiff’s MRI films and concluded that her spinal condition was preexisting and degenerative in nature and not causally related to the accident.
Plaintiff, however, raised an issue of fact as to whether the accident at issue aggravated preexisting conditions by submitting an affirmed report from her expert, an orthopedic surgeon who compared MRI reports taken before and immediately after the accident. Plaintiff’s expert found that plaintiff had some residual injuries from the prior 2002 accident, he concluded additional bulges and herniations, not previously present, were causally related to the later accident. He also based his conclusion that the 2009 accident caused aggravated injuries to the spine on the fact that plaintiff underwent surgery following the 2009 accident and the absence of any indication that surgery was necessary beforehand.
05/07/15 Rosado v. Wadolowski
Appellate Division, First Department
Plaintiff Was Found To Have A Possible Serious Injury Because Of Her Expert’s Finding That She Suffered Persistent Limitations Requiring Surgical Treatment Despite No Limitations On Her Range of Motion In A Recent Examination
The Appellate Court reinstated plaintiff’s claims of serious injury to her right knee but otherwise affirmed summary judgment. Defendants made a prima facie showing that plaintiff did not sustain permanent consequential or significant limitation of her right knee by submitting the report of an orthopedist who found full range of motion in her knee, and a neurologist who said based upon review of her medical records, that her knee condition related to pre-existing tendinitis.
Plaintiff, however, submitted an affirmed report of her orthopedic surgeon who found objective medical evidence that she suffered a partial tear of her meniscus and other injuries to her right knee and opined that those injuries were causally related to the accident. He found no limitation on range of motion upon recent examination but his findings of qualitative limitations that persisted and required surgical treatment raised an issue of fact as to whether she suffered a significant if not permanent injury.
The lower court was found to have properly dismissed plaintiff’s 90/180 days as she failed to allege in her bill of particulars that she was incapacitated for at least 90 of the first 180 days following the accident.
Margo M. Lagueras
[email protected]
Arbitration
05/12/15 Howard Walsdorf, D.C. v A. Central Ins. Co.
Erie County, Arbitrator Douglas Coppola
Reasonable Justification Found to Exist For Late Notice of Claim
The claim arises out of a motor vehicle accident that occurred in April 2013. The assignor’s car was totaled and she gave notice the following day to her insurance agent so that her policy could be canceled. She began treating with a chiropractic practice in Oswego but apparently was unaware that neither her agent nor the chiropractor notified Respondent of her injuries, even though she averred that she submitted no-fault forms. She then moved to Syracuse and began treating with Applicant. When Applicant submitted bills for payment, he received a denial stating that the assignor failed to provide notice of her claim within 30 days.
The Arbitrator opined that even though the application was 107 days late, there was reasonable justification because there was notice to the insurance agency the day after the accident of the property damage and it was likely the agency would have presented the claim to the insurance company on her behalf given the extent of damage sustained. It was also reasonable for her to expect the initial treating chiropractor to timely submit billings. This Arbitrator goes on to remark that the insurance carrier should have accepted the claim rather than treat the assignor as an adversary. Furthermore, in this Arbitrator’s opinion, the reasonable insurance agent, being presented with a totaled vehicle, should have inquired whether there were injuries. Based on this, the Arbitrator determined that there was “clear and reasonable justification” for the failure to provide Respondent with notice within the 30 days required by regulations.
Note: While we cannot comment on the treating chiropractor’s failure to timely submit his billing, it is well known and understood that property damage is not part of a no-fault claim. Property damage is dealt with in an entirely separate unit of the insurance company. As a result, no-fault adjusters are not aware of property damage claims and would not have reason to suspect there potentially might be a no-fault claim unless the claim is presented. We also will not comment on what the “reasonable” insurance agent should have done. The award makes no mention as to whether the agent was an authorized agent of the insurance company or an independent broker, so we are unaware of what the agent’s authority might have been.
05/12/15 Applicant v Empire Fire & Marine Insurance
Erie County, Arbitrator Mona Bargnesi
Arbitrator, Sua Sponte, Raises Issue of Standing
This is an interesting decision where Applicant sought reimbursement for lost wages, prescription medication, medical treatment and mileage. According to Applicant’s submission, Respondent denied reimbursement based on two IMEs. However, Respondent failed to submit any documents to the ADR Center in defense and also failed to appear for the hearing. Given Respondent’s failure to defend, the Arbitrator awarded reimbursement for mileage and lost wages. However, given that there was no indication of whether or not there were assignments of benefits to the providers, or any evidence of out-of-pocket payments by Applicant, the Arbitrator, sua sponte, raised the issue of Applicant’s standing. She noted that, regardless of whether or not Respondent objected to Applicant’s standing, Applicant could not proceed without it because its absence negates the court’s authority to adjudicate. As a result, the balance of Applicant’s claim was dismissed without prejudice.
Note: Well-reasoned, in this writer’s opinion.
05/14/15 All Natural Chiropractic, PC v Unitrin Preferred Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Applicant’s Progress Notes Found Insufficient to Support “By Report” Code Billing
Respondent denied reimbursement for chiropractic spinal decompression on the basis that the amount billed by Applicant exceeded the applicable fee schedule. Specifically, Applicant billed $225.00 for each spinal decompression procedure under By Report Code 97799. The Ground Rules of the fee schedule place the burden to justify the amount claimed under a By Report Code entirely on the billing medical provider who must submit the required justification or establish a relative value unit for the procedures billed. Once an insurer shows that the amount charged is in excess of the fee schedule, the burden shifts back to the provider to show that the charges involve a different interpretation of the fee schedule or an inadvertent miscalculation or error.
Here, upon receipt of the billing under Code 97799, Respondent changed it to 97012 and arranged for a peer review on the issue of the fee schedule. The reviewing chiropractor found the treatment was appropriate but noted that the chiropractic reimbursement is limited to 8.0 RVUs per treatment session. Code 97012, traction, mechanical, has a relative value of 2.71 that must be multiplied by the correct conversion factor dependent on the geographic region where the service was performed. The appropriate region in this case is 1 for zip code 14051. This means that $4.44 multiplied by 2.71 results in $12.03 per session which can be combined with other relative values within a treatment session (up to a total of 8.0).
The Arbitrator found that, in this case, Applicant failed to submit the required justification or establish a relative value. The Arbitrator also noted that the attempt by Applicant’s counsel to argue that the treatment provided employed subtle increases in the use of force was a lay argument and incomplete explanation of spinal decompression which did not substitute the provider’s burden under Ground Rule 3. Applicant only submitted his spinal decompression progress notes listing the assignor’s subjective complaints and the pounds and oscillations used for each treatment in support of his charges. The Arbitrator determined that these records were insufficient to establish compliance with Ground Rule 3 and that, as a result, applicant failed to substantiate its billing under By Report Code 97799. Respondent’s denial was therefore upheld.
Litigation
05/08/15 Boyson v Kwasowsky
Appellate Division, Fourth Department
Court Determines Plaintiff Was “Occupying” the Motorcycle and Is Not Entitled to First-Party Benefits
Plaintiff was a passenger on a motorcycle that was attempting to pass an RV when a pickup truck approached from the opposite direction. In an attempt to avoid a head-on collision, the motorcycle veered to the left and dropped on its side. Both Plaintiff and the driver of the motorcycle were ejected. The motorcycle then collided with the front of the pickup, flew into the air, and came down on top of Plaintiff.
Plaintiff was insured by Kemper and Defendant by Farm Family. Both insurers denied coverage based, in part, on the exclusion for injuries sustained while occupying a motorcycle. Both policies defined “occupying” as “in or upon or entering into or alighting from.” Plaintiff did not claim the injuries sustained when the motorcycle was dropped, but rather only the injuries sustained when it landed on her arguing that, at that time, she was a pedestrian and therefore an EIP. She contended that there were two separate accidents and that she was an occupant of the motorcycle only during the first, but a pedestrian during the second.
The court disagreed finding that although arguably Plaintiff was not an “occupant” when she was lying on the ground and the motorcycle landed on her, she was nevertheless “occupying” the motorcycle in the broader sense of being “vehicle oriented” when she was injured. The court reasoned that a person may be vehicle oriented even when not in physical contact with the vehicle as long as that separation is temporary and brief and “provided there has been no severance of connection with it” (citing Matter of Rice v Allstate Ins. Co., 32 NY2d 6, 11 [1973]). Here, Plaintiff was injured by an impact with the motorcycle she was occupying immediately following her accidental ejection from it. The court concluded that there was only a single accident and that Plaintiff was continuously “occupying” the motorcycle within the meaning of the exclusions in the Kemper and Farm Family policies. As such, Plaintiff was not entitled to first-party no-fault benefits under either policy.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
05/13/15 Renaissance Venture Capital Corp. v Fidelity Natl. Tit. Ins. Co.
Appellate Division, Second Department
Where Carrier Negotiates a Favorable Resolution of Title Dispute, Claims for Coverage under the Policy are Moot
The Second Department affirmed the trial court’s dismissal of plaintiff’s claim for failure to state a cause of action. The Record before the Court confirmed that when a challenge was presented to the insured title, Fidelity engaged counsel and negotiated a resolution of the claim which confirmed the title and cured the claimed defect.
Where, as here, there was no ongoing claim, and no defect in the title, it followed there was no basis for coverage.
05/13/15 DLJ Mtge. Capital, Inc. v. United Gen. Tit. Ins. Co.
Appellate Division, Second Department
Attorney Verified Complaint is Insufficient to Establish Facts Needed for a Default Application; Proof of Service of Complaint Needed as Well
If at first you don’t succeed, keep trying. Plaintiff moved for a default judgment in the above-captioned matter. Said motion, although unopposed, was denied where the movant did not include proof of service.
On a second application for default, plaintiff failed to submit evidence of facts supporting the denial. In reaching the conclusion, the Court noted that a verified Complaint is sufficient to establish facts if they were properly pleaded therein. However, when the Complaint is verified by an attorney, it is insufficient. The attorney obviously does not have personal knowledge of the facts asserted therein, and as such the attorney verification is insufficient.
Finally, plaintiff’s motion for a default against a second party defendant was denied when the application was made more than year after the default.
FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]
05/18/15 Recall Total Information Management, Inc. v. Federal Insurance Co., et al., Not yet published-SC 19291
Connecticut Supreme Court
No Coverage for Data breach under CGL Policy
Recall Total Information Management, Inc. had contracted with Armonk to transport and restore computer tapes containing the personal information of current and former IBM employees. Recall subcontracted with Executive Logistics Inc. to provide transportation services for the tapes.
Executive Logistics lost the computer tapes when they fell from its truck onto the roadside by a highway exit ramp in New York and were retrieved by an unknown individual. The 130 computer data tapes contained personal information for more than 500,000 current and former IBM employees and were never recovered.
Federal Insurance Co. issued a Commercial General Liability policy and an umbrella policy to Executive Logistics which named Recall as an additional insured. IBM claimed a total of $6.2 million in damages in connection with the incident, including $2.5 million for notifying current and former employees, $595,000 for maintaining call centers, and $3.2 million for credit monitoring services.
Executive Logistics ultimately agreed to pay $6.4 million to Recall and assigned its rights under the policies to Recall. A lawsuit was subsequently commenced against the insurers alleging breach of contract. The claim was that coverage was owed because the loss constituted a “personal injury” defined as violating a person’s right of privacy. The court rejected the insured’s contentions, finding there had been no publication of the information stored on the tapes that resulted in a violation of a person’s right to privacy. Critical to the decision finding no coverage available under the CGL was a lack of evidence that the information was ever misused. The decision exemplifies ongoing litigation as to whether a Commercial General Liability policy will afford coverage for data breaches. Typically they will not, thus bringing to the forefront the need for companies at risk to purchase specialized Cyber Insurance policies.
03/18/15 Melissa “G.” and Gary “G.” v. North Babylon Union Free School District, Sean C. Feeney, et al., Index No. 36209/06
Supreme Court, Suffolk County
Facebook Posting Discoverable
The plaintiffs commenced an action to recover damages for personal injuries allegedly sustained by Melissa as the result of sexual contact she had with a teacher employed by the school district. Various injuries were alleged in the plaintiff’s bill of particulars, including emotional and mental distress, loss of enjoyment of life, post-traumatic stress disorder, loss of employment and loss of educational and employment opportunities.
The defendants demanded the production of complete, unedited account data for all Facebook accounts maintained by plaintiffs. Thereafter the defendants moved for an order compelling plaintiffs to disclose complete, unedited account data for all Facebook accounts maintained by plaintiff, Melissa. The plaintiffs opposed the application. In support of their application, defendant submitted printed pages from Melissa’s Facebook account depicting postings that were accessible to the general public, including photographs of Melissa engaged in a variety of recreational activities and activities with her boyfriend, at work at a veterinary hospital, rock climbing and out drinking with friends. The defendants asserted that the public content was material and necessary to the defense of plaintiff’s claims. They pointed to plaintiff’s testimony at her deposition that she has “serious trust issues with everyone” and that “she suffered from anxiety attacks.”
After discussing the mandates of CPLR §3101 for full disclosure of all matter material and necessary in the prosecution or defense of an action, the court reviewed cases in New York regarding postings on a Facebook account, noting that if relevant, they are not shielded from discovery merely because a party used Facebook’s privacy settings to restrict access. (Citing, Patterson v. Turner Construction, 88 A.D.3d 617 (1st Dept. 2011)). The court noted, as previous decisions have, that where the public postings showed plaintiff in a variety of recreational activities that are probative to her damage claims, it was reasonable to believe that other portions of her Facebook pages may contain further evidence relative to her defense.
Thus, plaintiff’s counsel was directed to review and disclose all postings that were relevant to plaintiff’s damage claim within 60 days.
05/11/15 Travelers Property Casualty Company v. Federal Recovery Service
United States District Court, District of Utah
No Coverage Available Under Cyber Liability Policy
In Travelers Property Casualty Company v. Federal Recovery Services, the United States District Court for the District of Utah, interpreting a Cyber Liability policy found no coverage available.
Federal Recovery Services was in the business of processing, storing and transmitting electronic data for their customers. In this capacity, they performed member account servicing for Global Fitness Holdings, an owner and operator of fitness centers. Federal Recovery Services retained gym members’ credit card and bank account information and processed payments on behalf of Global. Federal Recovery Services retained the only copy of Global’s member account information and after they entered into an asset purchase agreement, under which they were to be acquired by LA Fitness, they were required to transfer its members account information to LA Fitness. Despite Global’s repeated requests for the data, Federal Recovery Services failed to return it and retained members’ credit card and bank account information, Global sued Federal Recovery Services.
Federal Recovery Services maintained a Cyber Liability Insurance policy issued by Travelers that included Network and Information Security Liability and Technology Errors and Omissions Liability coverage. The errors and omissions portion provided coverage for errors and omissions wrongful acts defined as any error, omission or negligent act. Travelers agreed to defend Federal Recovery Services under a reservation of rights and thereafter, filed a declaratory judgment action seeking the court’s determination that it had no duty to defend.
The suit alleged that Federal’s actions knowingly harmed Global Rights and they sought attorney’s fees and punitive damages in the lawsuit which included causes of action for tortious interference and breach of contract and of the implied covenant of fair dealing.
The court found that the Global suit did not include any allegations of an error, omission or negligent act by Federal Recovery Services, but rather included claims of knowledge, willfulness and malice. The court, thus found there was no trigger of the duty to defend.
As cyber liability products become more prevalent, we can expect to see more and more challenges to the scope of the coverage provided.
05/12/15 Weitz Company, LLC v. Lexington Insurance Company, 2015 WL 2217552,
United States Court of Appeals, Eighth Circuit
Equitable Subrogation in Construction Defect Case Fails
This was an action brought by a construction company against the property owner’s post-construction property insurers and excess insurers alleging that monies it had paid to settle the owner’s construction defect claims against it should have been covered by policies issued by the insurers. The court rejected the claim by Weitz Company, which sounded in equitable subrogation and unjust enrichment. Weitz settled with the property owner for $51 million and was then indemnified, according to the court, by its liability insurers and subcontractors’ insurers in amounts totaling $55,799,684.69. The court found that the policies issued by the property owner’s property insurers expressly excepted and excluded losses caused by a construction company’s faulty workmanship and thus, resulting mold was excluded from coverage, thereby precluding Weitz’s equitable subrogation claim.
Weitz had constructed an assisted living facility through contract with Hyatt. According to the court’s decision, it was undisputed that the completed construction was defective in numerous ways and involved excessive moisture and mold growth. Hyatt submitted a proof of loss to its insurers who ultimately paid more than $11,000,000. Much of the damage was not afforded coverage under the policies obtained by Hyatt because of exclusions for faulty workmanship. After Weitz settled the case with Hyatt for $53,000,000, they sought to recover via subrogation under Hyatt’s post-construction insurance policies, alleging equitable subrogation and unjust enrichment, theories that were rejected by the District Court. In rejecting the claim, the court found that Weitz, as the initial source of the negligence and poor workmanship that started the tidal wave of damages to Hyatt, could not then avail themselves via the concept of equitable subrogation, an appropriate remedy when one who is secondarily liable satisfies a debt for which another is primarily liable. The court also rejected Weitz’s claim that the insurers had been unjustly enriched. Creative claims and an interesting read.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
[email protected]
05/14/15 In Re: MTBE Products Liability Litigation
United States District Court, Southern District of New York
Antisubrogation Means What You Think It Means
This consolidated multi-district litigation involves claims related to contamination of groundwater from the use of a gasoline additive called methyl tertiary butyl ether (“MTBE”) and tertiary butyl alcohol, which is a product formed by the breakdown of MTBE in water. MTBE is a volatile, flammable, and colorless liquid which dissolves readily in water and is used because it helps gas burn more completely and reduces tailpipe emissions. Unfortunately, according to the EPA, it dissolves so easily and does not “cling” to soil, that when spilled it migrates faster and farther into the ground than other contaminants and can quickly contaminate public water systems. Since it does not break down easily, removal is difficult and costly.
In this most recent decision, relating to a case brought by the Commonwealth of Pennsylvania against Exxon Mobil, the Southern District of New York had to consider whether the Commonwealth’s claim violated the antisubrogation rule.
The Commonwealth alleged that certain defendants had wrongfully obtained a “double-recovery” for claims involving environmental remediation costs stemming from chemical releases from underground storage tanks. These defendants had received payments from the Underground Storage Tank Indemnification Fund (“the Fund”), which was a program the Commonwealth engaged in 1994 to “provide primary coverage” for such remediation. In addition, those defendants also received payments from their insurers in connection with remediation costs. The Commonwealth asserted that this was a double-recovery and sought reimbursement. The Commonwealth also claimed that the defendant’s failure to disclose that they had other coverage effectively caused the Commonwealth to lose subrogation rights that they would otherwise have under the terms of the Fund.
Interestingly, the Commonwealth acknowledged that its subrogation claim was “atypical, but it trumpets the equitable nature of subrogation claims”. They argued that they should not be precluded from bringing a subrogation claim because the defendants “have already exercised the Commonwealth’s subrogation rights by pursuing and collecting from their insurers. Rather, considerations of unjust enrichment and unconscionable retention of property should counsel in favor of permitting the Commonwealth to pursue a subrogation claim” against them.
The Southern District of New York did not buy the Commonwealth’s arguments. Seeing the case a simple matter of an insurer seeking recovery from its own insured, the court applied Pennsylvania law and reiterated the standard: “the antisubrogation rule prohibits an insurer from bringing a subrogation claim against its own insureds”. It went on to say that allowing this type of claim would turn that rule “on its head”. For that reason, it dismissed it with prejudice. The Court permitted the Commonwealth’s other claims, including one for unjust enrichment, to proceed.
04/02/15 Granite State Insurance Company v. Clearwater Insurance Company
United States Court of Appeals, Second Circuit
No Coverage Based On Late Notice to Reinsurer; Choice of Law Critical in Prejudice Requirement Context
Clearwater had issued reinsurance certificates to Granite State for liabilities it might sustain. These certificates required prompt notice “of any event or development which [Granite State] reasonably believe[d] might result in a claim against [Clearwater]”. At some point, Granite State incurred considerable liabilities as an insurer of a company that entered into settlement agreements to resolve a large number of asbestos-related personal injury actions. However, Clearwater refused to pay Granite State’s claims under its certificates based upon late notice of those settlements. The underlying district court agreed that notice to Clearwater was untimely.
Now, at the Second Circuit, the remaining issue was whether the court would apply Illinois’s no prejudice rule or New York’s prejudice requirement to the case. The reinsurance certificates contained no choice of law provision, but whether New York or Illinois law applied would mean the difference between Clearwater having to prove prejudice (NY) or not (IL).
In its summary order, the court noted that it had two options. It could either chose to apply New York law because Illinois was unsettled on the matter (as it is highest court has yet to speak on it) or to apply Illinois law purely on the basis of an analysis of most significant contacts. In a sort of hybrid decision, the Second Circuit followed the rationale of a prior panel’s summary order and found that it could conclude that Illinois law was settled, drawing from a consensus of other federal and state decisions, and take into account the undisputed fact that the significant contacts analysis favored Illinois. As such, under Illinois law, Clearwater did not have to establish prejudice and the untimely notice was fatal.
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
S5249 Electronic Delivery of Insurance Notices and Documents
Currently, there is no Assembly companion to this bill which would create two new sections under the Insurance Law. The first would pertain to the electronic delivery of insurance notices and documents, and the second section would allow insurers to post their policies online.
The bill defines electronic delivery as an email to an address “at which a party has consented to receive notices or documents” or the posting on an electronic network or site via the internet together with a separate notice of the posting provided by email or any other consented to means of delivery. This provision would also allow any notice or document required or used to serve as evidence of insurance coverage may be delivered, stored and presented by electronic means. Delivery under this provision by electronic means will be the equivalent of delivery by mail.
Delivery by electronic means is permissible where:
- The party has affirmatively consented to electronic delivery;
- Prior to providing consent, the party is provided with a clear and conspicuous statement notifying the party of:
- The right to withdraw consent and any conditions or consequences imposed in the event consent is withdrawn;
- The types of notices and documents the consent to electronic delivery would apply to;
- The right to have the notice or document delivered by mail; and
- The procedure the party must follow to withdraw consent to electronic delivery and to update their email address.
- The party, before giving consent, is provided a statement of the hardware and software requirements necessary for access and retention of a notice or document delivered electronically; and
- The party must consent electronically in a manner that reasonably demonstrates he or she can access the insurance notices or documents in the form that will be used to provide the same;
Should an insurer change any of the software or hardware requirements needed to access or retain a notice or document electronically deliver, the insurer must notify the party of the right to withdraw consent to electronic delivery. Further, the legal effectiveness, validity or enforceability of any contract or policy of insurance may not be denied solely because of the failure to obtain electronic consent or confirmation of consent and a withdrawal of consent by a party does not affect the legal effectiveness, validity or enforceability of a notice or document delivered by electronic means prior to the withdrawal of consent is effect.
Should an insurer become aware that the email address provided is no longer valid or if an insurer has a reasonable basis for believing that the notice or document was not received, the insurer must deliver by any other method permitted by law.
The second new section to the Insurance law pertains to the posting of policies on the internet. This section would apply to allow standard property and casualty insurance policies and endorsements that do not contain personally identifiable information to be mailed, delivered or posted on the insurer’s website. If the insurer posts on its website instead of mailing, it must comply with the following conditions:
- The policy and endorsements must be accessible to the insured and producer and remain that way while the policy and endorsements are in force;
- Upon expiration of the policy, the insurer must archive the expired policy and endorsements for five years and make available upon request;
- The policies and endorsements must be posted in a manner that allows the insured and producer to save and print them while using widely available programs available on the internet which are free;
- The insurer provides the following information in, or simultaneous with, each declarations page:
- A description of the exact policy and endorsement forms purchased by the insured;
- A description of the insured’s right to receive, upon request and without charge, a paper copy of the policy and endorsement forms purchased by the insured; and
- The internet address where their policy and endorsements are posted.
- Upon request and without charge, the insurer mails a paper copy of the policy and endorsements to the insured; and
- The insurer provides notice, in the insureds preferred format, of any changes to the forms or endorsements and their right to obtain a paper copy along with the internet address where such are found.
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]
Home with the baby. Hurry back, Jen, we miss you…
EARL’S PEARLS
Earl K. Cantwell
[email protected]
02/18/15 Badiali v. New Jersey Manufacturers Insurance Group
New Jersey
Good Claims Practices Overcome Bad Faith Claims
Whenever a bad faith claim is overcome and dismissed, particularly on motion practice, it is frequently good claims practices which form the backbone of the defense and motion. This was the case in “Badiali” decided in February 2015. The case arose from a humble UM claim where the claimant was awarded $29,148.00 in an arbitration split between New Jersey Manufacturers Insurance and another carrier. NJM rejected the arbitration award arguing that it could dispute an arbitration award totaling more than $15,000.00 (the statutory policy limit). Even though its share of the liability was less than $15,000.00, NJM contended it could reject the arbitration award based on the total award amount of $29,148.00. The insured sued and obtained confirmation of the arbitration award which found NJM liable for its share. An appeals court affirmed the decision, and NJM eventually (and reluctantly) paid its portion of the award. However, this was not the end of the story.
Plaintiff then filed another action against NJM accusing it of bad faith in taking the position that the policy language allowed it to reject the arbitration award, and asserting claims and damages such as significant expenses, years of delay, attorneys’ fees and costs, and punitive damages. However, the trial court granted summary judgment to NJM finding that its contractual basis for rejecting the arbitration award was a legitimate and defensible argument, which was also supported by an unpublished court opinion in which NJM was involved under similar facts. Due to the fact that the insurance company’s position was defensible under the contract language, and by at least one established court precedent, the “bad faith” claim was dismissed.
The first lesson of this case is that a good faith, legitimate legal and factual analysis and claims position can overcome a bad faith claim.
The second lesson is to document the claim file to establish the factual and/or contractual reasons for a denial or disclaimer. Reference the specific contract language, and in this case prior legal decision, upon which the carrier relied in rejecting or limiting a claim. This will help defense of any bad faith claim later on, and particularly allow for stronger motion to dismiss practice at an early stage.
