Volume XVII, No. 24 (No. 454)
Friday, May 20, 2016
A Biweekly Electronic Newsletter
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202
Phone: 716-849-8900
Fax: 716-855-0874
Long Island Office:
535 Broad Hollow
Melville, New York 11747
Phone: 631-465-0700
Fax: 631-465-0313
www.hurwitzfine.com
© Hurwitz & Fine, P. C. 2016
All rights reserved
As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.
In some jurisdictions, newsletters such as this may be considered Attorney Advertising.
If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.
You will find back issues of Coverage Pointers on the firm website listed above.
Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations. Bring them on.
Harry Mooney – May He Rest in Peace:
We lost our dear friend and partner, Harry F. Mooney, on May 10th after a long battle with challenging conditions. He was 69. He was a trial lawyer’s trial lawyer, a great colleague, a wonderful partner, a terrific human being. He and I shared a wall for about 25 years. We had lunch together almost every single day (when the two of us were actually both in the office). I will miss him; I already do.
Recognized locally and nationally, the Buffalo defense lawyer also earned a reputation for sharing his vast knowledge and expertise with peers.
Harry specialized in litigating large product liability, professional malpractice and catastrophic injury cases. He also provided training in those areas to others lawyers and claims professionals across the country.
In 2012, Harry was named Lawyer of the Year in the area of product liability defense by Best Lawyers in America. He also was honored for his work in professional malpractice defense in 2013 and 2014. He served on the Board of the International Association Defense Counsel and as President of the Harmonie Group.
Named Defense Trial Lawyer of the Year in 2007 by the Defense Trial Lawyers Association of Western New York, he was also a fellow of the Litigation Counsel of America, a highly selective invitation only honorary society.
Harry’s first love was his family. He especially enjoyed traveling with his wife De and spending time with his children and grandchildren. His son Joshua, also an attorney, said his father “instilled in us the values of trust, hard work, and compassion. He loathed self-pity.”
In addition to his wife and son, Harry is survived by a daughter, Claudia; a brother, Martin; a sister, Claudia Hopkinson; and two grandchildren.
Please keep his family in your thoughts and prayers.
Harry and Dinty Moore:
Just one Harry Mooney story of the hundreds I can tell. Harry’s son Josh is a coverage lawyer with the great Philadelphia law firm of White and Williams.
When Josh, his wife Andrea and his sister Claudia came to clear out their dad’s office, they could not help but notice a can of Dinty Moore Beef Stew sitting on a shelf. It looked pretty much like this. They almost left it behind. However, there was a story behind the can of stew which made it a treasured memory. I told him I would e-mail the story. You can tell by the vignette that Harry was a trial lawyer. Picture Jimmy Stewart in front of a jury. Here was my email:
Josh:
You have the can of Dinty Moore that was sitting in your father’s office. I told Claudia and Andrea that there was a story behind it and it had to do a summation. Please share this with them.
The can of stew had to do with a lying witness, and the doctrine of falsus in uno, falsus in omnibus. That is the Latin phrase that is the part of every civil jury charge given in this state and probably every other. Literally, it means false in one, false in everything.
The jury is charged that if a witness lies about one topic or one thing, he or she may lie about everything and a jury can reject his or her entire testimony.
Your dad used the can of Dinty Moore in a summation to underscore the principle: If you take one bite of the stew from the can and it is spoiled, you can throw out the contents of the entire can without eating any more of it.. If a witness tells one lie, the rest of the testimony is contaminated and not worthy of belief.
That can’s a keeper.
Fondly,
Dan
Central Claim Executives Association:
At the kind invitation of Matt Nelsen, Regional Claim Manager – AVP at Meadowbrook Insurance, I was honored to speak at the Central Claim Executive Association spring meeting in San Antonio last week. The topic was “Underwriting Issues” with the presentation focusing on preparing underwriting witnesses for fact and PMK/PMQ/30(b)(6) depositions. It was a dynamic audience with great questions and interaction. I welcome a number of new subscribers from that conference to the Coverage Pointers family. So you know, the each issue has a cover letter (you’re reading it) with the issue attached. Enjoy. Over 17 years of past issues are available on our website, www.hurwitzfine.com. Just click on the Newsletter tab at the top of the page.
PLRB Claims Conference:
This issue comes to you from the Hynes Convention Center in Boston where I’m participating in the Planning Committee Meeting for the 2017 PLRB Claims Conference and Expo. It takes a good year to consider, arrange and organize the educational and service program for the two thousand or so who attend. Next year’s program is here in Boston and the Committee works to consider and propose great educational offerings. Hope to see you in Boston on March 26 - 29, 2017. I’ll also be speaking on risk transfer/additional insured issues at the three Regional Adjusters Conferences this year:
- 2016 Western Regional Adjusters Conference
June 21 - 22, 2016, Sacramento, CA - 2016 Central Regional Adjusters Conference
September 07 - 08, 2016, St. Louis, MO - 2016 Eastern Regional Adjusters Conference
November 15 - 16, 2016, Richmond, VA
Legal Malpractice – A Law Firm’s Insurance Counseling Obligations:
Our subscriber base includes many lawyers from across the country. This week’s issue contains two “counseling point” decisions, reminders for in-house training of less experienced counsel in your firms. An E&O decision against a law firm works hand-in-glove with a decision in a declaratory judgment action where coverage was lost.
In Soni v. Prior, a Second Department legal malpractice case discussed in the attached issue, a claim against a law firm was sustained when it failed to advise its client to notify an insurer that a claim being made against it might be covered by a liability policy. Coverage was lost and the law firm was unable to establish that the failure to give that notice would have satisfied the notice condition of the policy.
The message is clear – a law firm has an obligation to consider what kind of coverage may be available for a claim (a) made against its client or (b) at least in New York, may protect a party against whom a claim is or will be made. In New York, because of the provisions of Insurance Law §3420, even a claimant has the right to put a liability carrier on notice of a potential claim and has to act diligently in identifying the carrier and giving notice. In fact, we even have a case on that principle in this week’s issue: see the Mt. Hawley case in my column.
Message to New Subscribers:
This is the cover note and the full issue is attached. You will find our “Hundred Years Ago” stories interspersed between and among letters of greeting from some or all of our scribes.
Wilewicz’ Wide World of Coverage
Dear Readers,
A somber issue this time around, as we reflect on the passing of H&F partner Harry Mooney. As Dan noted, he passed away last week, and his services were on Monday. Magistrate Judge McCarthy gave a truly moving eulogy, as did Mr. Fine of our office. Personally, I only worked with Harry for about a year, but he was one of the first H&F attorneys I met years ago and he was on the first panel to interview me for a position here. We shared a secretary for a time, and I attended quite a number of the lunches with him and Dan here. He was a skilled, prolific litigator who was exceptionally knowledgeable and talented. He was also just a really nice guy.
Now, in the Wide World of Coverage, we bring you a couple of Circuit Court cases of recent days. First, out of our own Second Circuit, we have United States Fidelity v. Fendi, which deals with advertising injury. There, Fendi alleged that U.S. Fidelity’s insured (Ashley Reed) had sold counterfeit Fendi goods and thus diluted its trademark, among other things. Ashley’s policy provided that it would “pay those sums that the insured becomes legally liable to pay as damages because of ... ‘advertising injury’ to which this insurance applies”. In turn, “advertising” was defined as “attracting the attention of others by any means for the purpose of seeking customers or supporters or increasing sales or business”. Further, “advertising injury” included injury resulting from offenses that included “c. The use of another’s advertising idea in your ‘advertising’; [and] d. Infringement of another’s copyright, trade dress or slogan in your ‘advertising’”. The Second Circuit held that no advertising injury, as such, occurred. Ashley was only alleged to have sold goods, while Fendi never alleged that it actually suffered any injuries as a result of any advertising activities on the part of Ashley. Thus, no coverage.
Next, in Ash Grove Cement Company v. Liberty Mutual, we again encounter the issue of whether EPA/administrative agency demand letters are “suits” sufficient to trigger the duty to defend. These cases come up again and again, and ever increasingly hold that a defense obligation is owed. Here, in a decision out of the Ninth Circuit, the demand letter only sought information from the insured, via a form series of questions. Nevertheless, the Court held that this was sufficiently coercive and a use of a legal process to obtain a result, i.e. the functional equivalent of a suit. As an aside, if you’re interested in this topic, my DRI co-author (Elsa Schmidt of Kenney Shelton) and I have written an article on the recent evolution of the term “suit” relative to administrative agency demand letters. It will be published in the upcoming edition of DRI’s Covered Events. Look for it in your inbox in June! If you’re not a member of DRI (*gasp!*), drop me a line and I will forward the issue to you, if you promise to join and become a member of my subcommittee – the Long Tail and Toxic Torts Substantive Law Committee. (Alright, even if you don’t promise, I’ll still forward it to you. I had to try.)
See you all in a couple of weeks!
Agnes
Agnes A. Wilewicz
Fort MacMurray Wildfires:
My friend Heather Sanderson, the principal at Sanderson Law in Calgary, Alberta, has over 30 years of experience providing legal advice and direction on the investigation and prosecution of personal and commercial lines claims. She also has extensive experience with policy drafting and defending actions within the self-insured retention and bad faith actions.
She has crafted a very informative piece about the business interruption and civil authority losses arising from the Fort Mac wild fires and with her kind permission, I am linking to it here.
An expanded version of the article will appear in the June/July issue of Claims Canada (http://www.claimscanada.ca/digital-archives/)
Heather notes that:
[e]ven if the still out-of-control wildfire in the Fort Mac area of northeastern Alberta does not return to inhabited areas, the losses from the Fort MacMurray wildfire in northeastern Alberta have been estimated to have a greater impact on Canadian insurers than the impact of Hurricane Katrina on American insurers. Just under 2,500 structures have been lost in the inferno that shut down almost a quarter of Canada’s oil and gas production. A mandatory evacuation order is in place; there are no reliable predictions as to when the order will be lifted; 80,000 to 90,000 residents evacuated from the area are living in temporary shelters throughout Alberta; all businesses within the evacuation zone that includes the City of Fort Mac are shuttered, likely causing supply line losses in the United States.
The coverage issues from this disaster will stress the commonly used business interruption, contingent business interruption and civil authority coverage forms used both in Canada and the United States. The adjustment of these claims and issues resolved through litigation will impact commercial claims handling and underwriting throughout North America for as the fires in California and Colorado have demonstrated, catastrophic wildfire isn’t a Canadian issue – it’s a North American issue.
To reach Heather:
SANDERSON LAW
Calgary, Alberta, Canada
email: [email protected]
tel. 403-837-2508
Phillips Federal Philosophies.
Hello, All:
I only convinced the folks at Hurwitz & Fine to let me in a few months ago, so I didn’t get the chance to spend a lot of time with Harry. I did, however, become accustomed to the steady sounds of Harry’s footsteps in the hall as he made his rounds in the evening, broken occasionally to stop and chat. I have no doubt that the echoes of those footsteps will continue to resonate through these hallways for years to come, in all the best ways. Thanks, Harry.
Today we’re off to Connecticut, where a district court magistrate judge revisited a prior discussion on who can benefit from and who can avoid the obligation to post security when an insurer unauthorized to do business in Connecticut is sued in that state.
As always, thanks for reading.
J.
Jennifer J. Phillips
Norman Rockwell: 100 years Ago Today:
May 20, 1916 fell on a Saturday. It was also the first time a Norman Rockwell (1894 – 1978) cover appeared on the cover of the Saturday Evening Post. The work, submitted by the 21-year old Rockwell, was entitled Mother’s Day Off and was the first of 323 illustrations that graced the cover of that publication. His last was a portrait of JFK, a week after his assassination.
Peiper’s Perplexities:
It seems every few issues we develop a theme. It is not so much that we develop it, but rather in reviewing the Appellate decisions a theme begins to take shape. You’ll note in this Edition an unusual amount of malpractice claims. Legal malpractice, medical malpractice, medical malpractice leading to legal malpractice. All of which reminds us, if nothing else, that each year lawyers are more willing to sue other lawyers, and clients are more willing to sue their attorneys. This is not to say that someone is wrong for pursing their legal right to redress a “legal wrong.” It is more of an observation.
Of the cases reviewed, the Soni v Pryor case found in Mr. Kohane’s column is most troubling. In that case, the defendant (a law firm) was, and is, facing a legal malpractice claim for failing to recognize potential insurance coverage. This was despite the fact that the claim was based upon a fraud allegation, and the policy appeared to preclude coverage for adjudicated fraud losses. The decision, it seems to me, teaches us two lessons. First, a lawyer, any lawyer, handling cases where insurance is at issue better understand the difference between the duty to defend (driven by allegations) and the duty to indemnify (driven by proof). The second lesson is that if you move on a coverage case, as the movant one must actually establish the applicability of the entire exclusion, as written. Not just the spirit of the exclusion.
Enough bad stuff for today. If you care at all about insurance, or at least recognize the need to pay attention to it, please note the NYSBA’s annual Spring Insurance Coverage Update. A quick review of the NYSBA website reveals multiple locations across the State in the coming weeks. If you’re in Western New York, we hope to see you on June 3rd in downtown Buffalo. Yours truly will be speaking on homeowners coverage. As always, the various panels are loaded with excellent practitioners and you are sure to learn something.
That’s it for now. See you in June.
Steve
Steven E. Peiper
A One Game Wonder:
Paul Raymond “Shorty” Des Jardien was a pitcher. He pitched and batted from the right side, was 6' 4" tall and weighed 205 pounds. Des Jardien pitched for the Indians. He didn’t last an inning when he debuted in the eighth inning, on May 20, 1916, a hundred years ago today. Des Jardien gave up two hits, three walks and three runs when he faced six batters in the eighth inning of the Cleveland-Washington game. As reported in an Illinois paper:
The Decatur Herald
Decatur, Illinois
21 May 1916
CLEVELAND IS BEATEN
CLEVELAND, May 21. – Cleveland was beaten 13 to 3 Saturday by Washington. Klepfer was batted out of the box in the seventh, when a base on balls, and eight hits, including two triples netted seven runs. In the eighth, three runs were obtained off Des Jardien on three passes, two hits and an error.
Editor’s Note: One game, two innings. Never again did he appear in a major league contest However, he did something that most of us only dream about – he made it to the Big Leagues. For a wonderful biography about this very versatile athlete, click here.
Tessa’s Tutelage:
Dear Readers,
It has been a rather sad time at Hurwitz & Fine on account of the loss of Harry Mooney. I have only had the pleasure of knowing him for a year and half, but he certainly left his mark and role model for the type of attorney and person I would like to be.
Shortly after starting at H&F I was invited to join Harry, Dan and a few others for lunch downstairs in the Main Place Mall. As we finished eating they informed me that it was their tradition to go for a walk, without coats, for exercise. It was January, I was wearing heels… Luckily, Harry kindly kept pace with me as everyone else walked as fast as they could to get back inside. Ever since then Harry would drop off news articles about the practice of law and example motions he thought might be helpful. I will truly miss his insights and presence at the office.
This week in Brand Med. Supply, Inc. v. Infinity Ins. Co., the Court reminds that the insurance declaration page has its own independent legal significance and need only to be authenticated to be admissible. In a somewhat vague opinion the court in New Age Acupuncture, P.C. v. 21st Century Ins. Co., indicated that the defendant failed to show its entitlement to reimbursement for its services billed. In Omega Diagnostic Imaging, P.C. v. Praetorian Ins. Co., the court determined there were simply too many questions to grant summary judgment, especially in light of the fact that the assignor’s failure to appear may have been due to incarceration. In the Matter of GEICO Ins. Co. v. AAAMG Leasing Corp. the court considers when an attorney gets additional fees in arbitration. Finally, Vladenn Med. Supply, Corp. v. American Commerce Ins. Co. makes clear that there must be evidence of personal knowledge of office procedures when a claimant fails to appear.
I hope you all have a lovely week.
Tessa
Tessa R. Scott
Universal Health Insurance a Century Ago:
The Kinston Free Press
Kinston, North Carolina
20 May 1916
HEALTH INSURANCE GETTING
A LOT OF ATTENTION NORTH
Raleigh, N.C., May 17—Health insurance, according to the State Board of Health, is a matter that is claiming no little attention in many Northern States from both a public health point of view and as concerns labor and industrial conditions. Massachusetts, New York and New Jersey have before their legislatures bills which provide for the legislation necessary to meet the needs of this subject.
The scheme of health insurance that these three states are seriously considering have the following outstanding features: That for all wage earners receiving less than $1,200, health insurance shall be compulsory; that others who so desire may participate in the plan, and that the following shall be the benefit to be derived: Medical and nursing attendance not to exceed six months in the year and surgical supplies not to exceed $50; a cash benefit during sickness or incapacity not for more than six months in the years; a maternity benefit for working mothers, and a funeral benefit of not more than $50.
The fund for this system of insurance is to be made up of contributions: from workers 50 percent, from employers, 40 per cent and from the State,10 per cent.
Health insurance is already working successfully in a number of countries, and it is believed that it is only a matter of time when all progressive States of the Union will be seriously considering it.
HEWITT’S HIGHLIGHTS:
Dear Subscribers:
We are suffering from day after day of rain down here on Long Island but on the bright side, that will lead to prettier flowers. Since last time, my oldest turned seven years old. It is fun watching them grow up, but it’s happening so quickly. On the serious injury front, we have a number of cases for you this edition. One of them deals with the need for defendants to show as a matter of certainty that pre-existing conditions were entirely pre-existing and not exacerbated by the current accident, in order to prevail on summary judgment. We also have a split decision, with the dissent not considering it dispositive that the plaintiff did not work for more than six months after the accident and reduced his time playing basketball, for its 90/180-day claim. The majority thought that those factors, together with a lack of pre-existing injuries and the diagnosis of a temporary permanent disability led to an issue of fact for that category of injuries. We will have to see what the Court of Appeals rules on that matter.
Hope you enjoy your Memorial Day weekend. Give some thought to those who are honored on Memorial Day for giving all they had in service of their country.
Until next time,
Rob
Robert Hewitt
[email protected]
Bull Moosers, 100 Years Ago:
El Paso Herald
El Paso, Texas
20 May 1916
“If Republicans Get Gay
We’ll Fix ‘Em,” Says
Mrs. Flannigan, Bull Mooser
Chicago, Ill., May 20.—Mrs. Sarah E. Flannigan, of Spokane, Wash., a delegate to the Progressive party national convention, arrived in Chicago today and was hailed as the first Bull Moose delegate reporting to the local headquarters.
“If the Republicans get gay, we’ll fix ‘em.” said Mrs. Flannigan as she was greeted by secretary Davis of the Progressive national committee.
Mrs. Flannigan left later in the day for Oyster Bay, N.Y., to meet Col. Roosevelt.
Editor’s Note: The term “gay” had a different meaning a century ago.
Barnas on Bad Faith:
Hello again:
Today is an exciting day for me personally, as I am off to the Erie County Clerk’s Office this afternoon to close on my first home. I’m both excited and nervous to finally be a home owner.
I also wanted to again mention the New York Insurance LinkedIn group. Some good information about recent cases and other insurance issues can be found over there. It is also a great place to drop a comment and get thoughts and feedback from others who have a particular fondness for insurance coverage law. If you’re not a member and would like to join, just make a request and one of the group moderators will approve your request in short order.
This week’s column has two interesting bad faith decisions. In Sobiech, the plaintiff’s bad faith case against Allstate was dismissed on summary judgment. The case arose out of a disagreement between the plaintiff and Allstate regarding the cause of damage to his boat. Plaintiff’s experts claimed the damage was caused by a collision, but Allstate’s experts concluded that the damage was caused by excluded wear and tear. The court concluded that this mere disagreement regarding the cause of the damage, which was the basis for the plaintiff’s bad faith claim, was insufficient and granted Allstate summary judgment. Instead, the disagreement raised an issue of fact for trial relative to coverage for the damage.
In Bamford, the Eighth Circuit examined whether Regent’s failure to settle the plaintiffs’ claims within the policy limits constituted bad faith after an excess verdict was obtained against the insured. Following a serious car accident, Regent set reserves in the $2 million range during the course of the litigation. However, Regent did not increase its reserve after the court found its insured negligent as a matter of law and scheduled trial solely on the issue of damages. After a verdict of $10.6 million was obtained by the plaintiff, Regent’s insured brought an action alleging a bad faith failure to settle. The jury found Regent liable for the amount of the judgment in excess of the policy limit. The Eighth Circuit affirmed the jury’s finding, concluding that, while the jury also could have concluded Regent acted in good faith, there was sufficient evidence for the jury to conclude Regent acted in bad faith in failing to settle the claim within the policy limits.
See you next time.
Signing off,
Brian
Brian D. Barnas
Anti-Semitism in Student Elections – 100 Years Ago:
The New York Times
New York, New York
20 May 1916
CALL POLICE TO COLUMBIA
Almost a Riot Over Election of a
Student Board
A near-riot that brought the police marked the second day’s balloting in the new election for a Student Board at Columbia yesterday.
Shortly before noon 150 students, including athletic leaders and several candidates, gathered outside of the School of Journalism to seize Milton Weinhandler, who has denounced the Student Board because it ordered a new election following evidences of fraud by members of the School of Journalism in the first election.
Weinhandler has declared that the election was adjudged void because two of the men elected were Jews. Angered at the taunts of Weinhandler, the leaders of the crowd gathered to seize him.
A call for the police from a friend of Weinhandler brought three men from the Thirty-sixth Precinct in a hurry. By the time they had arrived Dr. Talcott Williams and Dean Frederick Paul Keppel had been notified and they quickly dispersed the students.
Editor’s Notes: What do we know of Milton Weinhandler, this student radical who opposed anti-Semitism? He changed his last name from Weinhandler to Winn and lived until age 70, passing in 1966. He became an attorney and a leader of the American Jewish Committee. Winn served was a general counsel in 1942 for the U.S. Office of Civilian Defense, and during World War II a regional attorney for the Office of Price Administration.
Winn was a special representative of the Foreign Economic Administration in 1955 and in 1945 was named senior deputy chief of the United Nations Relief and Rehabilitation Administration in Czechoslovakia, where he served several years. As a special representative of the UN Technical Administration assigned to work with the Turkish Government, starting in 1951, he had a distinguished record of helping to improve United States-Turkish relations. At his death he was co-president of the American Turkish-Society.
This Week’s Headlines from the Attached Issue:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Without Proof that the Applicant for Uninsured Motorists Benefits was in an Accident with an Insured Vehicle, it is Inappropriate to Schedule a Framed Issue Hearing
- Injured Party Made No Showing of Diligence in Attempting to Identify Insurer for Defendant, So, in a Pre-Prejudice Case, Late Notice is Fatal to Coverage
- Framed Issue Determination on Residency Sustained. Itinerant Musician Lived with Parents for Purposes of SUM Coverage
- An Agreement to Procure Insurance is Separate and Distinct from a Contractual Obligation to Hold Harmless and Indemnify
- Parties Need to Fully Develop Record on Whether a Prior Determination in a Property Damage Arbitration is Collateral Estoppel on Issues in Subsequent Uninsured Motorists Proceeding
- Lawyers Failure to Advise Client of Potential Coverage under D&O Policy Exposes Them to Legal Malpractice. Defenses Raised Insufficient to Defeat Claim
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
- Defendant Was Entitled to Summary Judgment Due to Its Establishment of No Serious Injury to Plaintiff’s Shoulders Knees Wrist and Elbows
- Plaintiff Established an Issue of Fact through the Affirmed Report of Her Treating Orthopedist
- Plaintiff’s 90/180-Day Claim Refuted by Deposition Testimony That She Missed Less than 90 Days of Work and Otherwise Worked Light Duty
- Defendants as Initial Tortfeasors Are Liable for Not Only Her Injuries but any Exacerbation of Her Injuries by Negligent Treatment
- Defendants Failed to Address the 90/180-Day Category of Serious Injury
- Defendant Failed to Submit Competent Evidence that Plaintiff Did Not Suffer a Serious Injury
- Plaintiff Raised Issue of Fact as to Injuries to Cervical Spine
- Split Decision as To Whether Plaintiff Demonstrated an Issue of Fact as to the 90/180-Day Category Where Plaintiff Did Not Work for More than 90 Days after Accident
- Defendant Must Show that any Pre-Existing Condition Was Not Exacerbated By Accident
TESSA’S TUTELAGE
Tessa R. Scott
[email protected]
- An Insurance Declaration Page Has Independent Legal Significance And Need Only Be Authenticated To Be Admissible
- Defendant Failed to Show it’s Entitlement to Reimbursement
- Was Assignor’s Failure to Appear Excusable because of Incarceration?
- Additional Fees May Be Awarded if the Master Arbitrator Determines that the Issues In Dispute were of such a Novel or Unique Nature as to Require Extraordinary Skills or Services
- An Insurer Must Demonstrate Personal Knowledge of the Nonappearances at the Scheduled Examinations under Oath
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
- Dismissal for Failure to Prosecute Must be Preceded by a 90 Day Letter
- No Tolling for Derivative Medical Malpractice Claim
- Failure to Seek Leave to File a Late Notice of Claim within Relevant Statute of Limitations is Fatal to Plaintiff’s Claim
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
- Second Circuit Says No “Advertising Injury” Occurred Where Counterfeiter Sold Goods but There Was No Allegation of Use of Advertising in Connection Therewith
- Ninth Circuit Says Duty to Defend Triggered by EPA Request for Information, Calling It a “Suit” Within Policy
JEN’S GEMS
Jennifer A. Ehman
- Court Upholds Policy’s 12-Month Time Limitation to Commence Legal Proceedings
.
BARNAS ON BAD FAITH
Brian D. Barnas
- Insurer’s Failure to Increase its Reserves following Grant of Partial Summary Judgment Supported Bad Faith Finding
- Mere Difference of Opinion between Experts was Insufficient for a Bad Faith Claim
PHILLIPS’ FEDERAL PHILOSOPHIES
Jennifer J. Phillips
- A Connecticut Pre-Pleading Motion in District Court
EARL’S PEARLS
Earl K. Cantwell
[email protected]
- Injured Trucker Employee – Policy Exclusion Applies
That’s all from Boston. Celebrate each day of life. Peace be with you.
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
Twitter: @kohane
LinkedIn: www.linkedin.com/in/kohane
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]
ASSOCIATE EDITOR
Audrey A. Seeley
ASSISTANT EDITOR
Jennifer A. Ehman
INSURANCE COVERAGE TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
Michael F. Perley
Audrey A. Seeley
Jennifer A. Ehman
Patricia A. Fay
Agnieszka A. Wilewicz
Jennifer J. Phillips
Brian D. Barnas
Diane F. Bosse
Joel R. Appelbaum
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]
Michael F. Perley
Robert E. Hewitt, III
Jennifer J. Phillips
Brian D, Barnas
NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]
Jennifer A. Ehman
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Diane F. Bosse
Topical Index
Hewitt’s Highlights on Serious Injury
Tessa’s Tutelage
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
Barnas on Bad Faith
Phillips’ Federal Philosophies
Earl’s Pearls
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
05/18/16 GEICO v. Huang
Appellate Division, Second Department
Without Proof that the Applicant for Uninsured Motorists Benefits was in an Accident with an Insured Vehicle, it is Inappropriate to Schedule a Framed Issue Hearing
This was an application to stay an uninsured motorists benefit arbitration.
Huang has a policy of auto insurance with GEICO. He claims he sustained physical injuries in a hit-and-run accident. GEICO brought an action to stay arbitration (within 20 days, as required by law) claiming that there was an MTA bus involved in the accident with Huang’s car and therefore, uninsured motorists benefits should not be available.
In support of the petition, the GEICO submitted an unsworn and uncertified MV-104 motor vehicle accident report, signed by the Huang stating that the respondent's vehicle was sideswiped by an MTA bus. In opposition to the petition, the MTA and MTA Bus Company submitted evidence that no bus route ran along the intersection where the accident occurred, and that they received no report that an MTA bus was involved in an accident at that location.
The issue of whether there was physical contact with the insured's vehicle and an alleged hit-and-run vehicle is to be determined by the court and not an arbitrator. When there is a question of fact, the court must determine it in a framed-issue hearing, and the appropriate procedure under such circumstances is to temporarily stay arbitration pending a determination of the issue.
The party seeking a stay of arbitration has the initial burden of showing the existence of sufficient evidentiary facts to establish a preliminary issue which would justify the stay. Here, GEICO failed to sustain its initial burden of demonstrating that a factual issue exists. What is submitted was not “evidentiary” and therefore, there was no admissible proof that an MTA bus was involved in the accident.
05/18/16 Mt. Hawley Insurance Co. v. Seville Electronics Trading Corp.
Appellate Division, Second Department
Injured Party Made No Showing of Diligence in Attempting to Identify Insurer for Defendant, So, in a Pre-Prejudice Case, Late Notice is Fatal to Coverage
On September 15, 2005, a fire occurred at a building owned by the D.P. Holding) and occupied by the Seville Electronics Trading Corp. (“Seville”). On that date, D.P. Holding was a named insured under a policy of insurance issued by the Mt. Hawley.
In 2006, Seville commenced an action against D.P. Holding to recover damages allegedly sustained by it as a result of the fire. Seville and D.P. Holding agreed to a settlement in the underlying action. As part of the settlement, Seville obtained a judgment by confession in its favor and against D.P. Holding in the amount of $819,574.35, and an assignment of D.P. Holding's rights under its insurance contract with the Mt. Hawley
Thereafter, the Mt. Hawley commenced this action, inter alia, for a judgment declaring that it is not obligated to defend or indemnify either D.P. Holding or Seville in the underlying action because it did not receive timely notice of the fire. Seville filed a counterclaim pursuant to Insurance Law § 3420(a)(2) to recover from the plaintiff the amount of the unsatisfied judgment it obtained against D.P. Holding in the underlying action.
Insurance Law § 3420(a)(2) expressly permits an injured party to commence a direct action against an insurer once it has a judgment against an insured. Insurance Law § 3420(a)(3) requires the injured party to demonstrate that he or she acted diligently in attempting to ascertain the identity of the insurer, and thereafter expeditiously notified the insurer.
Here, Mt. Hawley M showing that Seville failed to act diligently in attempting to ascertain the plaintiff's identity and in expeditiously notifying it. In opposition, Seville failed to raise a triable issue of fact. Accordingly, the plaintiff was entitled to summary judgment dismissing Seville's counterclaim and declaring that it is not obligated to satisfy the judgment obtained in the underlying action.
05/18/16 Progressive Northern Insurance Company v. Pedone
Appellate Division, Second Department
Framed Issue Determination on Residency Sustained. Itinerant Musician Lived with Parents for Purposes of SUM Coverage
This was a proceeding to stay Supplemental Uninsured/Underinsured Motorist Arbitration (“SUM”). Pedone was a pedestrian and struck and seriously injured by a motor vehicle owned and operated by Kane, a Pennsylvania resident. Pedone sought coverage under a SUM endorsement on a policy with Progressive contained in his parents' policy.
The SUM endorsement defined insured, in relevant part, as follows: "you, as the named insured and, while residents of the same household, your spouse and the relatives of either you or your spouse." Progressive denied coverage on the ground that Jarrod was not a resident of his parents' household in Staten Island at the time of the accident and, therefore, was not an insured under the policy.
Jarrod served a demand for arbitration of his claim for SUM benefits, and Progressive commenced this proceeding to permanently stay arbitration. Following a framed-issue hearing, the Supreme Court concluded that Jarrod was a resident of his parents' household in Staten Island, and, in effect, denied the petition.
While a person can have more than one residence for purposes of insurance coverage, a person's status as a resident of an insured's household "requires something more than temporary or physical presence and requires at least some degree of permanence and intention to remain". "The issue of residency is a question of fact to be determined at a hearing.
Here, the evidence supports the Supreme Court's determination that Jarrod, an itinerant musician, resided in his parents' household in Staten Island at the time of the accident. Under the circumstances of this case, the proof in the record, including the presence of Jarrod's personal belongings and professional equipment at his parents' house, the numerous official documents listing his parents' address as his residence, and the testimony adduced at the framed-issue hearing, sufficed to establish Jarrod's residency in his parents' household within the meaning of the subject insurance policy.
05/12/16 Mt. Hawley Ins. Co. v. American States Ins. Company
Appellate Division, First Department
An Agreement to Procure Insurance is Separate and Distinct from a Contractual Obligation to Hold Harmless and Indemnify
Chatsworth Builders, LLC (“Chatsworth”) was the general contractor for a construction project. It subcontracted with J & R Glassworks, Inc. (“J & R”) to perform certain glasswork. A construction worker, Mejia, was hurt while performing the glasswork. Mejia sued the property owner, 537 West 27th Street Owners, LLC (“537”) and Chatsworth, among others (“Mejia Action”). Chatsworth and 537 commenced a third-party action against J & R and Walsh Glass & Metal, Inc. (“Walsh”), another glass-work subcontractor on the project, asserting causes of action for contractual and common-law indemnification and breach of contract for failure to procure insurance.
While the Mejia action was pending, Chatsworth and 537 commenced this action seeking a declaratory judgment that J & R breached its obligation to purchase insurance. J & R failed to respond to plaintiffs' summons and complaint in this action, and plaintiffs moved for default judgment, which was granted.
J & R then moved to vacate the default which the lower court refused to allow and the First Department affirmed that denial. J & R argued that the lower court, in addition to denying J & R's motion to vacate the default, improperly granted the owner and GC damages related to contractual indemnification, which J & R asserts plaintiff did not seek in its amended complaint.
In fact, the lower court had not ruled on contractual indemnity issues. The lower court determined only that J & R failed to procure the promised coverage for 537 and Chatsworth.
05/12/16 Liberty Mutual Insurance Company v. Robles
Appellate Division, First Department
Parties Need to Fully Develop Record on Whether a Prior Determination in a Property Damage Arbitration is Collateral Estoppel on Issues in Subsequent Uninsured Motorists Proceeding
Liberty sought a permanent stay of an uninsured motorists arbitration. Robles was a passenger in a car insured by Liberty that was involved in a hit-and-run arbitration concerning a property damage claim, an arbitration determined that, in fact, the USAA was the vehicle that fled the scene.
Liberty did not raise the issue of collateral estopped in its petition and USAA did not raise it in its opposition (although the issue was raised in untimely served reply papers. Accordingly, USAA had no obligation or opportunity to address the issue. Accordingly, the court should not have decided the issue based on collateral estopped principles.
Moreover, USAA argues, that the relevant arbitration agreement expressly limits the preclusive effect of the arbitrator's findings. Such limiting language may be dispositive on the issue. But, agreement is not in the record on appeal, the issue cannot be determined.
The First Department sent the matter back to develop a full record on all of these issues.
05/11/16 Soni v. Pryor
Appellate Division, Second Department
Lawyers Failure to Advise Client of Potential Coverage under D&O Policy Exposes Them to Legal Malpractice. Defenses Raised Insufficient to Defeat Claim.
Soni retained Pryor and his law firm (“Lawyers”) to represent him in an action commenced against them by CIT Healthcare, LLC (“CIT action”). The CIT action included allegations that the plaintiffs, as directors and officers of several corporations, aided and abetted the corporations in committing acts of fraud and conversion. After the Lawyers withdrew as counsel for the plaintiffs, the plaintiffs commenced this action, alleging that the appellants had committed legal malpractice by failing to advise them that they had coverage for the CIT action under a "Directors and Officers" coverage section of an insurance policy issued by National Union Fire Insurance Company of Pittsburgh, Pa. (“National Union”).
The Lawyers argued that any failure on their part to advise the Soni of the existence of insurance coverage did not cause Soni any damages because a policy exclusion would have barred coverage with respect to the CIT action.
The Lawyers did not prove that the policy exclusions would have barred the coverage. To negate coverage by virtue of an exclusion, it must be established] that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case.
The relevant exclusion, amended by Endorsement 12, provides: "The Insurer shall not be liable to make any payment for loss in connection with any Claim made against any Insured . . . (a) arising out of, based upon or attributable to the committing of any criminal, fraudulent or dishonest act if any final adjudication establishes that such criminal, fraudulent or dishonest act occurred (emphasis added)." Moreover, the policy expressly provides that the insured will reimburse the insurer for advanced defense costs "in the event and to the extent that the Insureds or the Company shall not be entitled under the terms and conditions of this policy to payment of such Loss."
In light of the fact that the CIT action had not been finally adjudicated, and the plain language of the policy conditioning applicability of the cited exclusion on a final adjudication, the Lawyers failed to demonstrate that the relevant exclusion clearly applied to preclude coverage with respect to the CIT action, or, at the very least, that the exclusion was subject to no other reasonable interpretation
The Lawyers also failed to demonstrate, prima facie, that the plaintiffs could not establish causation because they declined to submit a claim to National Union when, approximately one year and two months after being served in the CIT action, they allegedly first discovered the potential for coverage. The appellants did not demonstrate that it will be impossible for the plaintiffs to establish that notice given to National Union at that time would not have complied with the ]condition precedent to coverage that the plaintiffs give notice of a claim "as soon as practicable" .
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
05/18/16 Olagunju v. Anna & Diane Cab Corp.
Appellate Division, Second Department
Defendant was Entitled to Summary Judgment Due to Its Establishment of No Serious Injury to Plaintiff’s Shoulders Knees Wrist and Elbows
The Appellate Court reversed the lower court’s denial of summary judgment to the defendant and dismissed the action. The Appellate Court found the defendant met its prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The moving defendant submitted competent medical evidence establishing, prima facie, that none of the alleged injuries to the cervical and lumbar regions of the plaintiff's spine, as well as the plaintiff's shoulders, knees, wrists, and left elbow, constituted a serious injury under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In addition, the defendant demonstrated, prima facie, that during the 180-day period immediately following the subject accident, the plaintiff did not have an injury or impairment which, for more than 90 days, prevented him from performing substantially all of the acts that constituted his usual and customary daily activities. In opposition, the plaintiff failed to raise a triable issue of fact, as the report submitted in opposition was not in admissible form.
05/18/16 Vlachos v. New York City Transit Authority
Appellate Division, Second Department
Plaintiff Established an Issue of Fact through the Affirmed Report of Her Treating Orthopedist
The Appellate Court reversed the grant of defendant’s summary judgment motion and reinstated the case. The Appellate Division found the defendants New York City Transit Authority and MTA Bus Company met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injury to the plaintiff's left shoulder did not constitute a serious injury under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, however, the plaintiff raised a triable issue of fact as to whether she sustained a serious injury to her left shoulder through the affirmed report of her treating orthopedist.
05/17/16 Dingle v. New York City Transit Authority
Appellate Division, First Department
Plaintiff’s 90/180-Day Claim Refuted by Deposition Testimony that She Missed Less than 90 Days of Work and Otherwise Worked Light Duty
The Appellate Court modified the lower court’s denial of motion for summary judgment and granted the motion as to plaintiff's claims of permanent consequential and significant limitation of use of the lumbar spine and left knee, and the 90/180-day claim, and otherwise affirmed. The Appellate Division held that defendant met his prima facie burden by submitting the affirmations of a radiologist who found that the MRIs of the claimed injured body parts showed degenerative changes unrelated to the accident, and of an orthopedist who found full ranges of motion in all planes as to each claimed body part.
In opposition, plaintiff raised a triable issue of fact as to whether she sustained a serious injury to her right knee through the affirmed report of her treating surgeon, who set forth limitations in right knee range of motion found on recent examination, and opined that plaintiff's right knee injuries, including a torn medial meniscus and a partial tear of the ACL, observed by him during arthroscopic surgery, were caused by the accident. Plaintiff, however, failed to raise an issue of fact with respect to her claims of serious injury to her left knee and lumbar spine, since she submitted no evidence that any injuries to those parts resulted in any significant or permanent limitation in use. However, if the trier of fact determines that plaintiff sustained a serious injury to her right knee, she can recover for any other injuries shown to be causally related to the accident, even those that do not meet the serious injury threshold. Plaintiff's deposition testimony that she missed less than 90 days of work in the 180 days immediately following the accident and otherwise worked "light duty" refutes her 90/180-day claim.
05/12/16 DaCosta v. Gibbs
Appellate Division, First Department
Defendants as Initial Torfeasors Are Liable for Not Only Her Injuries but any Exacerbation of Her Injuries by Negligent Treatment
The Appellate Court modified the lower court’s dismissal of plaintiff’s complaint to deny the motion as to the claims of permanent consequential and significant limitation of use of the lumbar spine, cervical spine, and right hand, and otherwise affirmed the decision. The Appellate Division found that Defendants established prima facie that plaintiff did not suffer either significant limitation or permanent consequential limitation of use of her lumbar and cervical spine, by submitting affirmations by an orthopedist who found full ranges of motion in all planes and a neurologist who found no injury, except right hand weakness and deficits not related to the accident. However, the sworn reports of plaintiff's treating chiropractor and pain management physician, who found objective indications of injury to the cervical and lumbar spine, raised triable issues of fact as to the extent of plaintiff's injuries and causation. In concluding that plaintiff's spinal injuries were causally related to the accident, plaintiff's physician adequately addressed plaintiff's previous treatment for scoliosis, in light of plaintiff's claim that she was asymptomatic before the accident and the absence of any medical records showing otherwise. Further, plaintiff's pain management physician diagnosed her with intrinsic minus hand injury involving a clawhand deformity, and opined that the hand condition resulted from cervical spine trigger point injections administered to relieve spinal pain causally related to the accident. Defendants, as the initial tortfeasors, may be liable not only for any injuries plaintiff may have sustained because of the accident, but also for any aggravation of her injuries resulting from subsequent negligent medical treatment of those injuries. The conflicting expert opinions as to the cause of plaintiff's subsequent hand injuries raised an issue of fact for trial. However, Plaintiff's testimony indicating that she missed less than 90 days of work in the 180 days immediately following the accident and otherwise worked "light duty" was fatal to her 90/180-day claim.
05/11/16 Dong v. Tobar
Appellate Division, Second Department
Defendants Failed to Address the 90/180-Day Category of Serious Injury
The defendants' motion for summary judgment dismissing the complaint was denied. The Appellate Division found the defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The papers submitted by the defendants failed to adequately address the plaintiff's claim, set forth in his bill of particulars, that he sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d).Since the defendants failed to meet their prima facie burden, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact. No facts were given.
05/11/16 Holiday v. United Steel Products, Inc.
Appellate Division, Second Department
Defendant Failed to Submit Competent Evidence that Plaintiff Did Not Suffer a Serious Injury
The Appellate Division reversed the Supreme Court’s grant of summary judgment. The Appellate Division found defendants failed to meet their prima facie burden of establishing that neither plaintiff sustained a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants failed to submit competent medical evidence establishing, prima facie, that the plaintiff Charles Holiday did not sustain a serious injury to the cervical region of his spine and his shoulders under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In addition, the defendants failed to submit competent medical evidence establishing, prima facie, that the plaintiff Mara Holiday did not sustain a serious injury to the cervical and lumbar regions of her spine under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). Since the defendants failed to meet their prima facie burden, it was unnecessary to consider whether the papers submitted by the plaintiffs in opposition were sufficient to raise a triable issue of fact. No facts are given.
05/11/16 Khartchina v. Rothman
Appellate Division, Second Department
Plaintiff Raised Issue of Fact as to Injuries to Cervical Spine
The Appellate Division reversed the lower court’s grant of defendant’s summary judgment motion. The Appellate Division held that Bottom of FormDefendants met their prima facie burden of showing that the appellant did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent evidence establishing, prima facie, that the alleged injury to the cervical region of the appellant's spine did not constitute a serious injury under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d).In opposition, however, the plaintiff raised a triable issue of fact as to whether he sustained a serious injury to the cervical region of his spine under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). No facts were given.
05/06/16 Williams v. Jones
Appellate Division, Fourth Department
Split Decision as To Whether Plaintiff Demonstrated an Issue of Fact as to the 90/180-Day Category Where Plaintiff Did Not Work for More than 90 Days after Accident
The Appellate Division reversed the lower court’s grant of defendant’s summary judgment motion in part by denying the motion in part and reinstating the complaint with respect to the 90/180-day category of serious injury within the meaning of Insurance Law § 5102 (d). However, it was not unanimous and therefore, an automatic appeal to the New York Court of Appeals will occur. Plaintiff commenced this action seeking damages for injuries he sustained in a motor vehicle accident that occurred when defendant tried to turn left in front of plaintiff's oncoming vehicle. The Appellate Division held that o the extent that plaintiff contends that he sustained a serious injury under the permanent loss of use category, that contention is not properly before the Appellate Division because it was raised for the first time on appeal and in any event, the record established plaintiff did not sustain a total loss of use of his cervical spine. The Appellate Division also rejected plaintiff's contention that there was a triable issue of fact whether he sustained a serious injury under the permanent consequential limitation of use and significant limitation of use categories holding that Defendant met her burden on the motion with respect to those categories by submitting evidence that plaintiff sustained only a temporary cervical strain, rather than any significant injury to his nervous system or spine, as a result of the accident.. In opposition to the motion, plaintiff failed to provide a qualitative or quantitative assessment demonstrating the seriousness of his injuries and thus failed to raise a triable issue of fact as to either of those two categories.
The Appellate Division agreed with plaintiff, however, that the lower court erred in granting defendant's motion with respect to the claim of a serious injury under the 90/180-day category, i.e., a medically determined injury or impairment of a nonpermanent nature that prevented him from performing substantially all of his usual and customary daily activities for 90 of the 180 days after the accident.
Even assuming, arguendo, that defendant met her initial burden of establishing as a matter of law that plaintiff did not sustain the requisite medically determined the Appellate Division concluded that plaintiff raised triable issues of fact through the affirmed report of his treating physician, who described objective MRI findings that included a disc bulge and asserted that plaintiff had sustained a "chronic/recurrent acute cervical strain/sprain with cervical disc injury" that was causally related to the accident, and that defendant failed to establish as a matter of law that plaintiff was not curtailed from performing the usual activities to a great extent rather than some slight curtailment during the time period at issue.
The majority noted that plaintiff was diagnosed with a temporary total disability, plaintiff was 20 years old at the time of the accident, with no preexisting injuries, and the physician who treated plaintiff after the accident asserted that he had sustained a causally related cervical disc injury. In their view, when a plaintiff presents objective evidence of a medically determined injury along with evidence that a medical provider placed restrictions on his or her daily activities, and there is no apparent explanation unrelated to the accident for those restrictions it cannot be said as a matter of law that causation is lacking or that the plaintiff's limitations are based solely on subjective pain particularly given that the nonmoving party must be afforded the benefit of every reasonable inference on a motion for summary judgment.
Two dissenters disagreed with the majority's conclusion that Supreme Court erred in granting that part of defendant's motion for summary judgment seeking to dismiss plaintiff's claim of a serious injury under the 90/180-day category set forth in Insurance Law § 5102 (d). They concluded that defendant met her initial burden on the motion of establishing as a matter of law that plaintiff did not sustain a serious injury under the 90/180-day category by submitting, inter alia, plaintiff's deposition testimony and the affirmed report of the physician who conducted an independent medical examination (IME) for defendant. They noted Plaintiff testified that he did not work during the first six months after the accident. He also noted that, prior to the accident, he played basketball three times per week, but within the first six months after the accident he played much less, i.e., "here and there," "probably . . . once a week." Plaintiff also testified that he continued to help his mother around the house, "but not as much as he used to." In the dissent’s view, it was not dispositive that plaintiff was out of work for more than 90 days following the accident and that plaintiff was unable to do certain household chores and could not play basketball as much as he used to, as those restrictions do not equate to being unable to perform substantially all of the material acts which constitute his usual and customary daily activities for 90 out of 180 days. They also found the restrictions unsupported by any medical evidence in the record.
05/06/16 Croisdale v. Weed
Appellate Division, Fourth Department
Defendant Must Show that any Pre-Existing Condition Was Not Exacerbated By Accident
The Appellate Division affirmed the lower court’s denial of defendant’s summary judgment motion. Sandra J. Croisdale and her husband commenced this negligence action seeking damages for injuries she allegedly sustained when the vehicle she was operating was struck by a vehicle owned by defendants and operated by defendant Robert R. Weed. Following discovery, defendants moved for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d), as partly evidenced by a gap in plaintiff's treatment for her left knee, which plaintiffs alleged had been injured in the accident. The Supreme Court granted the motion in part, dismissing plaintiffs' claims insofar as they are based on injuries other than to plaintiff's left knee and based on the significant limitation of use, permanent loss of use and significant disfigurement categories of serious injury.
The court denied the motion, however, insofar as it sought dismissal of the claim of serious injury to plaintiff's left knee under the permanent consequential limitation of use category. The Appellate Division concluded that although defendants contended in support of the motion that plaintiff's left knee injuries were preexisting and the result of a degenerative condition, they failed to submit evidence establishing as a matter of law that the injuries were entirely preexisting and were not exacerbated by the accident in question. An issue of fact was raised in any event by plaintiff submitting evidence that the tear in plaintiff's left lateral meniscus was caused by the accident, and that any preexisting condition suffered by plaintiff was aggravated by the accident. The Appellate Division also concluded that plaintiffs provided a reasonable explanation for plaintiff's failure to seek medical treatment for her injuries in the six months after the accident.
TESSA’S TUTELAGE
Tessa R. Scott
[email protected]
05/05/16 Brand Med. Supply, Inc. v. Infinity Ins. Co.
Appellate Term, Second Department
An Insurance Declaration Page Has Independent Legal Significance And Need Only Be Authenticated To Be Admissible.
Following a nonjury trial in this action by a provider to recover assigned first-party no-fault benefits, the Civil Court awarded judgment to plaintiff in the principal sum of $1,772.59.
In support of its defense of exhaustion of the policy limits, defendant unsuccessfully attempted to have the applicable insurance policy's declaration page, which set forth, among other things, the coverage limits of the policy admitted into evidence. This Court disagreed with the lower court and determined it should have been let in.
Defendant was not required to lay foundation for the declaration page, since a declaration page is not hearsay, but rather, as part of an insurance contract, it "has independent legal significance and need only be authenticated to be admissible." Here, the testimony of defendant's senior no-fault representative sufficiently identified the document as an accurate representation of the declaration page which defendant maintained electronically.
Furthermore, in describing defendant's procedure for generating a declaration page, defendant's witness set forth the "manner or method in which tampering or degradation of the reproduction is prevented. Consequently, in view of the Civil Court's improper exclusion of the declaration page, a new trial was warranted.
05/05/16 New Age Acupuncture, P.C. v. 21st Century Ins. Co.
Appellate Term, Second Department
Defendant failed to show it’s entitlement to reimbursement
In this action by provider to recover assigned first-party no-fault benefits, defendant moved for summary judgment dismissing the complaint. Plaintiff appealed from so much of an order of the Civil Court as granted the branch of defendant's motion seeking summary judgment dismissing the portion of the complaint as sought to recover for services billed using CPT code 97026.
Upon a review of the record, the Court found that defendant's moving papers failed to demonstrate defendant's entitlement to summary judgment with respect to so much of the complaint as sought to recover for services billed using CPT code 97026
Accordingly, the order was reversed pertaining to CPT code 97026.
05/13/16 Omega Diagnostic Imaging, P.C. v. Praetorian Ins. Co.
Appellate Term, First Department
Was assignor’s failure to appear excusable because of incarceration?
While defendant-insurer established that it timely and properly mailed the notices for examinations under oath to plaintiff's assignor and his attorney, and that the assignor failed to appear at the initial and follow-up EUOs the limited record so far developed presented triable issues as to whether the assignor's failure to appear was excusable.
In this regard, defendant's moving submission, which contains letters from its no-fault examiner and no-fault supervisor acknowledging the assignor's incarceration, creates rather than eliminates genuine triable issues.
05/18/16 Matter of GEICO Ins. Co. v. AAAMG Leasing Corp.
Appellate Division, Second Department
Additional Fees May Be Awarded If The Master Arbitrator Determines That The Issues In Dispute Were Of Such A Novel Or Unique Nature As To Require Extraordinary Skills Or Services.
Appellant, a medical provider, made a claim for no-fault benefits from the petitioner insurance carrier. The petitioner denied the claim, stating that the supplies provided were not medically necessary. The appellant sought arbitration of the claim, and the arbitrator awarded the appellant the sum of $3,870.45, plus interest, and an attorney's fee in the sum of $850.
The petitioner sought review of the arbitrator's award by a master arbitrator. In a determination dated August 4, 2014, the master arbitrator affirmed the original arbitration award, and awarded an additional attorney's fee in the sum of $650.
The general rule is that in proceedings involving arbitration, as in other litigation, an attorney's fee is not recoverable unless provided for by agreement or statute. If a valid claim or portion of a claim for no-fault benefits is overdue, "the claimant shall also be entitled to recover his attorney's reasonable fee, for services necessarily performed in connection with securing payment of the overdue claim, subject to [the] limitations promulgated by the superintendent in regulations." In a proceeding for judicial review of an award by a master arbitrator, an attorney's fee shall be fixed by the court adjudicating the matter.
The maximum attorney's fee for a master arbitration dispute is $65 per hour, up to a maximum fee of $650, plus an additional fee of $80 per hour for oral argument, if oral argument is requested. Additional fees may be awarded "if the master arbitrator determines that the issues in dispute were of such a novel or unique nature as to require extraordinary skills or services"
In this case, the appellant did not ask for an attorney's fee for oral argument, and there was no finding that the issues involved were novel or unique. Accordingly, the appellant was entitled to an award of an additional attorney's fee in the sum of $650.
5/17/16 Vladenn Med. Supply, Corp. v. American Commerce Ins. Co.
Appellate Term, First Department
An Insurer Must Demonstrate Personal Knowledge Of The Nonappearances At The Scheduled Examinations Under Oath.
Defendant failed to meet its burden by proof in admissible form, because it submitted no evidence from anyone with personal knowledge of the nonappearances at the scheduled examinations under oath.
While the affirmation of defendant's attorney described the office procedures for contacting a claimant 48 hours prior to the scheduled EUO to confirm the appearance, it failed to demonstrate personal knowledge of the office procedures when a claimant failed to appear for the EUOs on the scheduled dates.
The order of the lower court was affirmed.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
05/19/16 The Bd. of Managers of Lore Condominium v Gaetano
Appellate Division, First Department
Dismissal for Failure to Prosecute Must be Preceded by a 90 Day Letter
The Court, sua sponte, dismissed plaintiff’s Complaint for want of prosecution. Upon hearing the motion to vacate, the Court again adhered to its previous decision and upheld the dismissal of plaintiff’s claim. On appeal, however, the First Department overturned the trial court therein noting that CPLR 3216 had not been fully satisfied.
As relevant, to dismiss a matter under CPLR 3216, a defendant is required to provide plaintiff with a written demand to proceed with 90 days or face a motion to dismiss. Here, no such letter was issued, and accordingly there was no basis for the Court’s decision to dismiss.
In so holding, the Court also advised that a Scheduling Order did not satisfy the written demand requirement of the Section 3216. While an Order may constitute such a demand, the one at issue was not signed by both parties and did not provide that plaintiff must proceed within 90 days or face dismissal of the action.
05/12/16 Baer v Law Offices of Moran & Gottlieb
Appellate Division, Third Department
No Tolling for Derivative Medical Malpractice Claim
Plaintiff originally contacted defendant Gottlieb about representation in a medical malpractice case in 2004. In 2008, Mr. Gottlieb then referred the case to a Mr. Clegg who, apparently, focused his practice in medical malpractice claims. Mr. Clegg then pursued the claim on behalf of the injured minor. However, as the statute of limitations had run on potential derivative claims for the parents, all such claims had expired prior to Mr. Clegg’s involvement.
After resolution of the lawsuit against the tortfeasor, plaintiff brought the instant lawsuit seeking recovery against Mr. Gottlieb’s firm for legal malpractice in light of the lost opportunity to prosecute the derivative claims. Defendant then commenced a third-party action against Clegg seeking indemnity/contribution. Clegg moved to dismiss therein arguing that the right to derivative claims expired in October of 2006, and he did not become involved in the case until 2008.
The Court noted that while an infant’s claims are tolled until the age of maturity, parents’ derivative claims do not enjoy the same protections. Thus, per the CPLR, any derivate claims must be commenced within 2 ½ years from the claimed malpractice. Accordingly, Clegg could not have committed malpractice because the claims were lost prior to his involvement. In so holding, the Court did note that an attorney who is charged with a malpractice claim may seek contribution from another attorney who contributed to the malpractice. Here, again, those claims failed because Clegg had no responsibility to either the plaintiff or his co-defendant.
05/10/16 Yessenia D v New York City Health & Hospitals Corp.
Appellate Division, First Department
Failure to Seek Leave to File a Late Notice of Claim within Relevant Statute of Limitations is Fatal to Plaintiff’s Claim
Plaintiff attempted to prosecute an action on behalf of her minor son. However, her attorneys failed to file a timely Notice of Claim, and thereafter failed to seek leave to file a late Notice of Claim. Accordingly, the action was never properly commenced and subsequently dismissed as untimely.
Plaintiff argued that service of late Notice of Claim prior to the expiration of the statute of limitations was sufficient to preserve the action. In rejecting the position, the Court noted that mere service, without leave of court, of a late Notice of Claim is still procedurally deficient.
In addition, the Court refused to adopt plaintiff’s estoppel argument against NYCHHC. Although the case was litigated for more than 10 years (through the expiration of the infancy toll and the expiration of the statute of limitation), it was held that NYCHHC’s denial that the matter was timely commenced sufficiently placed plaintiff on notice of the defect in the pleading.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
05/17/16 United States Fidelity and Guaranty Co. v. Fendi Adele, et al.
United States Court of Appeals, Second Circuit
Second Circuit Says No “Advertising Injury” Occurred Where Counterfeiter Sold Goods but There Was No Allegation of Use of Advertising in Connection Therewith
Fendi manufactures luxury goods, including handbags, purses, and wallets, among many other things. They own many federally-registered trademarks. Ashley Reed Trading is an entity that engages in purchase and sale of off-price branded goods, which it sells to retailers such as Burlington Coat Factory. In this case, Ashley Reed sold counterfeit goods that displayed Fendi trademarks to Burlington, and others. Fendi sued for trademark counterfeiting, false designation of origin, and trademark dilution, and unfair competition, on the ground that Ashley Reed intentionally used the trademarks with knowledge that they were counterfeit.
Ashley Reed was insured by U.S. Fidelity under a policy that provided commercial, property, and liability insurance. That policy provided that it would “pay those sums that the insured becomes legally liable to pay as damages because of ... ‘advertising injury’ to which this insurance applies”. In turn, “advertising” was defined as “attracting the attention of others by any means for the purpose of seeking customers or supporters or increasing sales or business”. Further, “advertising injury” included injury resulting from offenses that included “c. The use of another’s advertising idea in your ‘advertising’; [and] d. Infringement of another’s copyright, trade dress or slogan in your ‘advertising’”.
Interpreting New York law, the Second Circuit held that the policies did not cover the injuries alleged. The language of the policy required the use of another’s “advertising idea” or “copyright, trade dress or slogan” in “your advertising”. Here, Ashley Reed did not engage in any advertising of the counterfeit goods and Fendi never alleged that it suffered any injury because of any advertising activities on the part of Ashley Reed. Rather, the Court said “Fendi complained that it suffered injury because defendants sold counterfeit goods” and damages were awarded not relative to advertising activities but as to the sales of counterfeit products. As such, no advertising activity occurred.
05/11/16 Ash Grove Cement Company v. Liberty Mutual Insurance Company
United States Court of Appeals, Ninth Circuit
Ninth Circuit Says Duty to Defend Triggered by EPA Request for Information, Calling It a “Suit” Within Policy Terms
The insured Ash Grove operated two cement plants on the east shore of the Willamette River within the Portland Harbor Superfund Site. In early 2008, it received an EPA § 104(e) information request relative to contamination about that site. Section 104(e) letters refer to the CERCLA/Superfund section 42 U.S.C. 9604(e), and simply request information via a series of questions tailored to the type of site at issue. The insured tendered defense and indemnification of the EPA’s request to its carrier, Liberty, which the insurer denied. At issue before the Ninth Circuit was whether, at a minimum, the duty to defend had been triggered relative to the EPA’s demand.
The Court found that the EPA’s request for information was considered a “suit” under the policy and thus triggered a defense obligation, even though it was admittedly not a lawsuit per se, did not require any action to be taken with regard to the contamination, and sometimes such letters do not even result in more formal administrative proceedings. The Court held that it was a “coercive information demand that is an attempt to gain an end through legal process” and therefore was a “suit”. Moreover, the Court rejected the argument that the intent of the parties was not to treat such a letter as a suit because the policies distinguished “suit” and “claim”. That made no difference to the Court. Further, even though the letters contained no allegations of property damage which could impose liability on the insured, the information contained therein was sufficient to trigger the duty to defend. Finally, the Court noted that the duty to defend did not cease when the insured responded to the letter. Rather, the duty continued until a Record of Decision was filed relative to that property.
Jennifer A. Ehman
05/04/16 Chandler Mgt. Corp. v. First Specialty, Inc.
Supreme Court, Kings County
Hon. Karen B. Rothenberg
Court Upholds Policy’s 12-Month Time Limitation to Commence Legal Proceedings
First Specialty issued commercial property insurance to Chandler for physical loss or damage to Chandlers’ apartment building. The building’s roof sustained damage from a windstorm and hail from a storm that took place on or about May 24, 2011. Where the policy contained a 12-month time limitation in which to commence legal proceedings, this action, commenced nearly three years beyond that deadline, was subject to dismissal. The court found that Chandler failed to establish that the shortened limitation period was unreasonable, invalid and/or unenforceable under the circumstances.
Brian D. Barnas
05/13/16 Bamford, Inc. v. Regent Insurance Company
United States Court of Appeals, Eighth Circuit
Insurer’s Failure to Increase its Reserves following Grant of Partial Summary Judgment Supported Bad Faith Finding
In 2008, Bamford purchased commercial automobile liability insurance from Regent with a total policy limit of $6 million. In May 2009, Packer, a Bamford employee, was involved in a two-vehicle collision with a vehicle driven by Bobby Davis (“Bobby”). During the accident, a steel pipe stored on the roof of Packer's vehicle became dislodged and ultimately penetrated Bobby's left thigh, through his abdomen and pelvis, and out his right buttock, pinning him inside his vehicle. Bobby was trapped for between thirty and sixty minutes until paramedics arrived and were able to cut the pipe and extract him. He suffered a number of serious injuries and underwent extensive medical treatment to save his life and treat his injuries. Packer burned to death inside his vehicle.
Regent opened a claim file the day after the accident and established a $1,000,000 reserve. Bobby, his brother, and his wife, Brenda Davis (“Brenda”), retained attorney Tom Fee (“Fee”) to represent them. On August 5, 2010, Fee sent Regent a settlement packet offering to settle the Davises' claims for Bamford's policy limit of $6 million. Fee asserted that the claims had a verdict potential between $7.5 and $10 million. Regent hired Nolan to defend Bamford against the Davises' claims, and Bamford independently hired Nebraska attorney Daniel Placzek (“Placzek”) to represent its interests in the matter. On August 23, Placzek sent Regent a letter asserting that the Davises' claims presented an exposure risk above Bamford's $6 million policy limit and demanding that Regent settle the claims within the policy limits. Placzek sent Regent subsequent letters further advising that an excess verdict was possible.
During the course of the litigation, Nolan believed that it was possible a loss of consciousness defense could be asserted. This defense, if successful, would bar liability completely. However, even if it was not successful, Nolan and Regent believed it would make Packer and Bamford more sympathetic to the jury, specifically because Packer had a history of seizures and burned to death. This, they believed, would limit their ultimate liability.
During the course of the litigation, Regent’s adjustor set reserves of $1.75 million, $2 million, and $2.25 million. The parties also engaged in two mediations, which proved unsuccessful. Regent also believed that an excess verdict was unlikely based on its perception that the Nebraska jury pool was conservative.
On June 19, 2012 the district court granted the plaintiffs’ motion for partial summary judgment. The court struck the loss of consciousness defense and found Bamford liable as a matter of law. The only issue at trial would be the amount of damages. Regent’s adjustor sent an email stating that the court’s ruling was significant because Defendant could no longer rely on the sympathetic facts of the accident to reduce its liability. Despite this development, Regent did not increase its reserve, even though the adjustor and counsel requested an increase to $3 million.
Before trial, Plaintiffs’ counsel offered to settle for approximately $3 million, but Regent never offered anything greater than $2.05 million. At trial, the jury returned a verdict of approximately $10.6 million. Defendant appealed, and the parties settled the case for $8 million. Bamford was responsible for the amount in excess of the policy limits
Bamford filed this action against Regent, alleging, as relevant, that Regent breached its fiduciary duty and acted in bad faith in refusing to settle. Bamford requested damages in the amount it had contributed to the settlement, as well the fees it had paid Placzek. Following a five-day trial, the jury returned a verdict for Bamford, awarding its requested damages of $2,037,754.33. Regent filed a renewed motion for judgment as a matter of law or for a new trial, challenging the sufficiency of the evidence and the jury instructions. The district court denied the motion, and Regent appealed.
On appeal, the Eighth Circuit affirmed the denial. Regent argued that the failure to settle was an honest mistake in judgment. It claimed it made efforts to settle, increased its reserves, followed advice and valuations of attorneys and mediators, evaluated the claim with senior management, and reasonably relied on Nebraska’s reputation as a conservative jurisdiction, among other things.
The court stated that Regent’s arguments, if accepted, could perhaps be adequate to support the conclusion Regent acted in good faith. However, drawing all reasonable inferences in Bamford’s favor, it concluded that a reasonable jury could have concluded Regent acted in bad faith.
Key to the court’s decision was the fact that Regent failed to increase its reserves after partial summary judgment was awarded to Plaintiffs. For nearly two years, Regent had counted on a tempering of damages when the jury heard the purportedly sympathetic facts that would be introduced to support the loss of consciousness defense. Regent had also believed that the loss of consciousness defense, which would have provided Bamford a complete bar to liability, had a slight chance of success. In the wake of the district court's ruling, the jury would hear neither the purportedly sympathetic facts supporting a medical emergency nor other evidence that could moderate its view of Bamford's culpability. Despite this development, Regent did not increase its reserve, and it did not increase its settlement offer.
The court also concluded that Regent did not act in god faith by following various valuations it received, which were made before the district court’s ruling and were completed with questionable methodology. In addition, the court concluded that Regent did not consider Bamford’s potential excess liability in settlement negotiations.
05/11/16 Sobiech v. Allstate Insurance Company
Supreme Court, Tioga County
Hon. Eugene D. Faughnan
Mere Difference of Opinion between Experts was Insufficient for a Bad Faith Claim.
The action arose out of Plaintiffs claim for insurance benefits from Defendant for damage to his 2000 Wellcraft Excalibur boat occurring on July 4, 2015. Plaintiff secured an insurance policy for the boat from defendant that included coverage for damage arising from collisions with obstructions in, or on, the water. However, wear and tear, latent physical defect and structural, electrical or mechanical breakdown are all excluded from coverage. On July 4, 2015, Plaintiff was operating his boat when he alleges that the boat "struck an object in the water" causing damage to the propeller and upper gears of the boat's outboard motor.
Defendant's marine surveyor inspected the boat and issued a report in which he opined that the damage to the boat was due to normal wear and tear. The surveyor also noted that the drive system on the boat had a maximum horsepower rating of 400hp and that there were modifications to the boat which resulted in the horsepower exceeding the rating.
Plaintiff submitted a letter from Hanafin Marine, in which a representative opined that the damage to the propeller occurred from an impact and that such an impact can, and did, cause internal failure of the motor. In response to this letter, Defendant’s marine surveyor again opined that the failure and resulting damage occurred due to normal wear and tear and the fact that the drive system was rated for 400hp when the engine output was modified to 575hp. On August 5, 2015, Defendant issued a denial of coverage citing, inter alia, exclusions under the policy for wear and tear and latent defects.
After receiving further evidence from Plaintiff, Defendant consented to obtaining a second review from a different marine surveyor. The second surveyor concluded that there was nothing revealed in his inspection that was consistent with a hard impact resulting in damage to the upper gears. Rather, he concluded that the damage to the upper gears was consistent with fatigue failure resulting from excessive horsepower and not consistent with a hard impact. On August 28, 2015, Defendant again sent a letter denying coverage for largely the same reasons noted in the prior denial.
Plaintiff commenced an action against Defendant alleging breach of contract and bad faith. The court granted Defendant’s summary judgment motion dismissing Plaintiff’s bad faith claim. It reasoned that Plaintiff’s bad faith claim was based on little more than disagreement with Defendant’s conclusion as to the cause of the damage. The difference of opinion between Plaintiff’s experts and Defendant’s experts did not rise to the level of bad faith. Rather, it presented a triable issue of fact as to the cause of the damage and if coverage under the policy was required. Plaintiff’s claim for punitive damages was also denied for these reasons.
PHILLIPS’ FEDERAL PHILOSOPHIES
Jennifer J. Phillips
05/10/16 Select Insurance Co. v. Excalibur Reinsurance Corp.
District of Connecticut
A Connecticut Pre-Pleading Motion in District Court
Plaintiff Select Insurance Company, an insurer organized under the laws of Texas with its principal place of business in Connecticut, commenced a diversity action for breach of a reinsurance contract against defendant Excalibur Reinsurance in the District of Connecticut. Plaintiff moved for pre-pleading security, i.e. it requested that Defendant, a Pennsylvania corporation, to either post security in the amount of Plaintiff’s alleged damages or procure proper authorization to conduct insurance in the state of Connecticut. The motion was based on a Connecticut’s statute mandating that pre-pleading security be obtained by an insurer unauthorized to do business in the state. Such statutes (New York has one as well) are designed to ensure that any defendant insurer will have sufficient assets to satisfy a judgment against it.
Defendant argued that it was not required to post any security under the Connecticut pre-pleading security statute because (1) that statute did not apply to reinsurers; (2) the relevant contract dictated that New York, rather than Connecticut law applied; (3) Plaintiff could not avail itself of the protection of the statute as it was not a Connecticut citizen nor was it an authorized insurer in Connecticut at the time the parties contracted; and (4) although no longer authorized, Defendant was authorized to do business in Connecticut at the time of contracting.
EARL’S PEARLS
Earl K. Cantwell
[email protected]
12/08/15 Progressive Mountain Insurance Co. v. MADD Transportation, LLC
Eleventh Circuit
Injured Trucker Employee – Policy Exclusion Applies
Ted Owens, an alleged independent contractor for MADD, suffered serious injuries while securing a load of pipes in his truck at a Pennsylvania facility of IPSCO Koppel Tubulars. Suit was filed in Pennsylvania state court against IPSCO for negligence, IPSCO then joined MADD as a third party defendant, and MADD in turn sought defense under its commercial auto insurance policy from Progressive Mountain. The insurance company brought a declaratory judgment in federal court in Georgia arguing that it had no duty to defend or indemnify MADD because the policy contained an exclusion for bodily injury to the insured’s own employees. The dispute existed because the policy did not define the term “employee”, but the Court of Appeals said that federal motor carrier regulations define “employees” to include contractors.
The Trial Court granted summary judgment in favor of Progressive Mountain, and this decision was affirmed on appeal. Progressive Mountain argued it had no duty to defend or indemnify MADD against the third party complaint due to the policy exclusion for injuries to the insured’s own employees. IPSCO argued that the employee exclusion did not apply because the driver was allegedly an independent contractor. The courts ruled that, as a federal motor carrier, the policy was drafted in accordance with federal regulations which define an employee to include an independent contractor in the course of operating a commercial motor vehicle. The federal regulations were held to define or at least broaden the policy definition of “an employee”, and there is no indication that the term “employee” was used differently in the policy.
IPSCO did try to make an argument that the declaratory judgment action should be stayed pending the outcome of the underlying tort action in Pennsylvania because the decisions and outcome in that case could determine whether the driver was an “employee”. This argument was rejected because the federal courts essentially said that the federal motor carrier regulations with the expansive definition of “employee” to include an alleged “independent contractor” were controlling, and were within the policy definition of an “employee”.
The first lesson of this case is that it is an example of policy terms such as “employee” being defined, in whole or in part, by applicable state or federal statutes or regulations. Here, the policy did not contain its own definition of an “employee”, and within the trucking industry and federal transportation practice the federal trucking regulations include an independent contractor within the definition of an employee. On a second level, this case is also an example where policy terms and conditions can be defined, or at least explained, by course and practice within a given industry. Within the trucking industry, the pertinent federal regulations include an alleged independent contractor within the meaning of an “employee”.
It is interesting that the courts did not delve too deeply into the usual criteria to make an ad hoc determination whether an individual is an employee or independent contractor such as control, hours of work, location of work, degree of supervision, method and manner of payment, etc., but took a rather simplistic and fixed view that, if the trucking regulations defined this person as an employee, then other extraneous inquiries were essentially foreclosed and not terribly relevant.
