Coverage Pointers - Volume XVIII, No. 10

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Volume XVIII, No. 10 (No. 466)

Friday, November 4, 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.  Dave Adams, our Labor Law Pointers editor, ALSO likes situations.  If you don’t subscribe to his team’s publication, send him a note at [email protected] and tell him that “Dan sent you”.

 

A salute to our veterans, on their special day next Friday.  Thank you for the service you have given and do give to keep our nation safe and free.

 

It has been a busy couple of weeks, for sure.  Greetings from the Big Apple.

 

We send a special welcome to our newest subscribers from White Plains.  Jody Briandi, Mike Perley, Agnes Wilewicz, and your editor provided tag team training for our good friends in Westchester County.  We’re pleased to have you as part of the CP family.  You will find the issue attached to this cover letter and past issues available, in searchable format, on our website, www.hurwitzfine.com.

 

Kudos to Audrey Seeley:

 

We are pleased to announce that Hurwitz & Fine, P.C. Member, Audrey A. Seeley, was elected to serve as a National Director on the Board of Directors of DRI, “The Voice of the Defense Bar,” at the organization’s annual meeting in Boston. As a leader in this 22,000-member organization, considered the largest of its kind to exclusively represent the defense bar, she will serve a three-year term. Audrey was elected to this position in less than 10 years from joining DRI, after being very active within the organization, having just served as Chair of the Insurance Law Committee, one of DRI’s largest and most active committees with over 2,700 members. 

 

She focuses her practice in insurance coverage and No-Fault coverage, arbitration and litigation, as well as municipal law. Best Lawyers of America and New York Super Lawyers have recognized her for insurance coverage since 2014 and she is listed in the Top 50 Lawyers and the Top 25 Women Lawyers in New York Super Lawyers, Upstate Edition. She has also been recognized by Buffalo’s Business First, 40 Under 40 and is a recipient of the New York State Bar Association’s Hurwitz Award, named after Hurwitz & Fine, P.C.’s founding member, Sheldon Hurwitz, in recognition of outstanding contributions to the practice of law in the field of insurance.

 

Audrey is a true national leader and we’re proud to have her as a partner.

 

Holiday Giving – National Foundation for Judicial Excellence

 

Does your law firm give to charities during the Christmas/Chanukah season?  Looking for a worthy cause, linked to the legal profession?  Let me suggest a contribution to the National Foundation for Judicial Excellence, The NFJE supports a strong, independent, responsive judiciary by providing officers of the courts with educational programs and other tools that enable them to perform at their highest level.  It runs an annual symposium designed to help exposed state appellate court judges (over 160 this year) to a balanced view of the civil justice system.  Don’t know the NFJE?  Visit its website at www.nfje.net.

 

PLRB Eastern Regional Conference:

 

Hope to see some of you at the PLRB 2016 Eastern Regional Adjusters Conference, next week in Richmond VA.  My presentation, along with John Hanlon, from Selective, will be on risk transfer.

 

Election Around the Corner – 100 Years Ago:

 

It’s every four years, you know.  That means 100 years ago, the nation faced a presidential election.

 

In 1916, Woodrow Wilson was running for re-election. 

 

Democrat Wilson had been elected in 1912 with 41.8% of the popular vote winning 40 of the 48 states and 435 Electoral votes.  The Republicans split their vote between incumbent President William Howard Taft, who carried a mere two states, eight electoral votes but 23.2% of the popular vote and Progressive (former Republican and former President) Theodore Roosevelt (who did even better than the incumbent), carrying  six states, and winning 88 electoral votes as well as 27.4% of the popular vote.

 

In the 1916 election, he faced Charles Evan Hughes, a Republican politician from New York, who had served as the Governor of the Empire State from 1907-1910 and Associate Justice of the Supreme Court from 1910 to 1916 (nominated by William Howard Taft), resigning to run for President.  Hughes later returned to the Supreme Court as Chief Justice, nominated by Herbert Hoover, and held that position from 1930 to 1941.

 

We reprise some articles from 100 years ago today, as the Wilson-Hughes race which occurred on November 7, 1916.  We will assume – rightly so – that you know the results of the 1916 election.

 

First Woman Elected to Federal Office

 

By the way, on that same election day, 100 years ago this week, Jeannette Pickering Rankin was elected to Congress, becoming the first woman to hold federal office in the United States when she was elected to the U.S. House of Representatives by the state of Montana. She won a second House term 24 years later, in 1940.

 

Each of Rankin's Congressional terms coincided with initiation of U.S. military intervention in each of the World Wars. A lifelong pacifist, she was one of 50 House members (total of 56 in both chambers) who opposed the war declaration of 1917, and the only member of Congress to vote against declaring war on Japan after the attack on Pearl Harbor in 1941.

 

Rankin was also instrumental in initiating the legislation that eventually became the 19th Constitutional Amendment, granting unrestricted voting rights to women; and she championed the causes of gender equality and civil rights throughout a career that spanned more than six decades.

 

Hughes Confident of Success – 100 Years Ago:

 

 

Pittston Gazette

Pittston, Pennsylvania

4 Nov 1916

 

HUGHES FINISHES TOUR

CONFIDENT OF HIS ELECTION

 

            New York, Nov. 4.—Charles Evan Hughes finishes today the most strenuous race for a Presidency that any man has ever run.  He finishes it in a series of meetings over downtown New York during the day and with a monster mass meeting in Madison Square Garden tonight.  The Republican nominee added about thirty additional miles by automobiles during the day to the 30,000 he has traveled since he started, Aug. 1.

 

            There wasn’t any doubt today about Hughes’ own belief in his election next Tuesday.  He breathed a spirit of complete confidence.  Tuesday night he will remain quiet at the Astor hotel without any special wires being run into his rooms to give him the details of the vote casting which he and his friends feel certain will sweep him into the Presidency. 

 

Phillips Federal Philosophies:

 

Hello, All:

 

I went to bed before the end of the game last night.  Did the Red Sox win?

 

One case out of the Western District of New York this week.  In Cincinnati Insurance Company v. Harleysville Insurance Company, the district court considers the application of two different additional insured endorsements to a multi-contract construction project.  Full disclosure: Hurwitz & Fine represented Harleysville in this one. 

 

As always, thanks for reading. 

 

J.

Jennifer J. Phillips

[email protected]

 

Hughes Record an Asset – a Century Ago:

 

The Oneonta Star

Oneonta, New York

4 Nov 1916

 

HUGHES’ RECORD

A PUBLIC ASSET

 

Straightforward and Clean,

Declares Roosevelt

 

ASSAILS WILSON RULES

 

Says He Had Not Said One Thing

of President Which He Did

Not Deem Necessary

 

            New York, Nov. 3.—Theodore Roosevelt, speaking at a mass meeting in Cooper Union here tonight, denounced the policy of the Wilson administration, and urged his audience to “put in the presidential chair the clean and upright justice of the supreme court, the fearless former governor of New York, whose whole public record has been that of a man straight forward in his thought and courageous in his action, who cannot be controlled to do what is wrong and who will do what is right no matter what influences may be brought against him.”

 

Expresses Views on “Hyphenates”

 

            The former president broke away from his speech which he had prepared in advance to say what he thought of the so called “hyphenates.”  He declared that although Washington and Lincoln were of English blood they were both Americans through and through.

 

            “No American can be a good American on a fifty-fifty basis,” said Colonel Roosevelt.  “There is no room in this country for English-Americans, German-Americans, French-Americans, Irish-Americans or any other kind of Americans but real Americans.”

 

Tessa’s Tutelage:

 

Dear Readers:

 

I hope this article finds you well; however, I imagine that the Cubs fans have celebrated themselves into oblivion and Indians fans are trying to make it through the doldrums of loss.  (At least Cleveland has basketball season with Lebron to look forward to.) 108 years is a very long time to wait for a victory of this magnitude.   I sort of hope that the Buffalo sports teams have a similar break in the near future!

 

Luckily you don’t have to wait 108 years, or even for basketball season for your installment of Coverage Pointers.  This week we have some interesting no-fault cases to consider.  First, in Ave T MPC Corp. v Prudential Prop. & Cas. Ins. Co., plaintiff entered into a stipulation agreement to provide legible copies of the claims at issue to defendant.  They did not.  The court ordered them to. Again, they failed to do so.  Defendant moved to preclude any such evidence and to dismiss the claims because plaintiff failed to prove their case. Plaintiff tried to offer an affidavit explaining why they couldn’t provide proper documentation, but failed to explain why they didn’t just say that in the timeframe given by the court.  Unsurprisingly the Court was unpersuaded by plaintiff’s arguments and refused to reverse the decision of the lower court.  Next, in Easy Care Acupuncture, PC v MVAIC the court reversed the grant of summary judgment because it found there still remained questions of fact. Finally in Matter of DTG Operations v AutoOne Ins. Co., the court was asked to vacate the decision of an arbitrator.  The Court noted that where an arbitration was compulsory, a more careful review of the decision was required.  Alas, even with the keen eye on the evidence supporting the arbitrator’s decision, the reviewing Court upheld the arbitrator’s decision.

 

That’s all for now! Go Bills!

 

Tessa

Tessa R. Scott

[email protected]

 

Wilson in the Lead – 100 Years Ago:

 

Winston-Salem Journal

Winston-Salem, North Carolina

4 Nov 1916

 

Wilson Holds Splendid

Lead in Straw Vote

 

            After see-sawing back and forth for the past few days, the straw vote conducted in the 8,000 Rexall stores throughout the country gives the President the same vote which he had several days ago; 281 electoral votes against 250 for the Republican candidate, or a majority of 31 votes.  A total of 266 electoral votes are required for the election of a President.

 

            Of especial interest, on account of the extreme closeness, is the popular vote.  The most notable among these is New York, which gives Hughes the 45 electoral votes of that State with the slender margin of six popular votes separating the candidates.  The State of Washington goes to Hughes by a majority of 13 popular votes.  Offsetting this to a certain extent is Wisconsin in the Wilson column by 13 votes.  Kansas is in the President’s column by the narrow margin of 64 votes.  Several other States give one or the other of these two candidates a majority of less than 100 votes.

 

            O’Hanlon’s Drug Store continues to be the center of interest on account of the fact that the returns of the vote of the United Drug Company’s mammoth straw vote are being posted there each day. 

 

Hewitt’s Highlights: 

 

Dear Subscribers:

 

Welcome to another column on the serious injury threshold. The ghouls and ghosts are over. The scary season is past. Now we move deeply into fall with its colors, wind, rain, and Thanksgiving. My two boys spent two hours trick or treating. I wanted to go more when they wanted to quit, but my wife reminded me trick or treating is for the kids.

 

On the serious injury threshold front, we have a few cases for you this edition. In one case, the plaintiff did not offer any testimony from treating physicians but just an expert. 

 

The appellate court stated that this expert could only testify regarding their examination of plaintiff, and not as to plaintiff’s history of an accident as related by the plaintiff or concerning the plaintiff's medical complaints.  In another case, an appellate court again warned plaintiff’s that exacerbation of preexisting conditions had to be explained by an objecting basis in the medical record and not a conclusory statement by the physician or simply based on plaintiff’s statements.

 

Until next time,

 

Rob
Robert Hewitt

[email protected]

 

Hughes Endorsed:

 

The Appeal

Saint Paul, Minnesota

4 Nov 1916

 

SIX REASONS WHY.

 

1. CHARLES EVANS HUGHES is the Republican candidate for president of the United States, and history has demonstrated that the Republican party is the only party fit to govern this country.

    

2. CHARLES EVANS HUGHES has demonstrated his executive capacity.  He administered the government of the great state of New York with business ability and introduced many reforms.

    

3. CHARLES EVANS HUGHES is a sincere man.  He says what he means and means what he says.  He does not veer from point to point like a weathercock and change his opinions overnight.

    

4. CHARLES EVANS HUGHES would make the world respect the United States.  He has declared that every right with regard to American life and property and commerce should be upheld. 

    

5. CHARLES EVANS HUGHES is a friend of labor.  This is shown by his record.  Labor’s opinion is based on what he has done.

    

6. CHARLES EVANS HUGHES stands for equality before the law.  His public statement “I stand ever against unjust discrimination against any man on account of his color, on account of his race or on account of anything” stamps him as a true American.

    

            If you are a true American and believe in genuine democracy you should vote for CHARLES EVANS HUGHES for President of the United States.

 

Altman’s Administrative (and Legislative) Agenda:  

 

Greetings, Dear Reader:

 

As we turn the corner past Halloween and towards Thanksgiving, with 24-hour-a-day Holiday Music already on the radio (and a Holiday poem penned, in part, by yours truly to come), I wanted to wish you all a happy, and cozy Fall.  I am a “foodie”, and when November rolls around, I think not of elections or holiday shopping, but of turkey, cranberry sauce and pie. And, Dear Reader, I hope this year, as I’ve hoped each year before, that this will be the year that someone sends me a Turducken. 

 

Today, as part of our continued analysis of New York’s new cyber security regulations, I bring you a case from Alabama, Camp's Grocery, Inc. v. State Farm Fire & Cas. Co., No. 4:16-CV-0204-JEO, 2016 WL 6217161, at *1–9 (N.D. Ala. Oct. 25, 2016), which confronts the problem of companies that do not purchase insurance covering cyber security attacks.

 

In other news, and in a coincidence that I’m sure has nothing to do with this intense election season, the Department of Financial Services has issued recommendations for insuring substance abuse and opioid addictions. 

 

Howard

Howard B. Altman

[email protected]

 

Wilson Campaign Ending:

 

The Fort Wayne Journal-Gazette

Fort Wayne, Indiana

4 Nov 1916

 

PRESIDENT WILSON WILL MAKE LAST

SPEECH OF THE CAMPAIGN TO-DAY

 

            LONG BRANCH, N.J., Nov. 3.—President Wilson will close his campaign for re-election tomorrow with a speech at Shadow Lawn for people from his home state of New Jersey.  For sentimental reasons, he wishes to make his last campaign address to the people of the state in which he began his political career.

 

            Many in the president’s audience to-morrow will be political and personal friends of long standing.  For this reason he has promised to state his views more completely than before during the campaign.  Democrats from different parts of New Jersey have arranged to come on special trains.

 

            In his speech the president will express confidence in the outcome of the voting next Tuesday.  Mr. Wilson has no engagements before election.  He feels that the issues are made up and that most of the people have determined how they will vote.

 

            After his return from New York to-day the president received a message from Victor Carlstrom, the aviator who made a flight from Chicago to New York bearing a letter to Mr. Wilson from Mayor Thompson, of Chicago. 

 

Wilewicz’ Wide World of Coverage

 

Dear Readers,

 

Once again, welcome to all of our new subscribers! As Dan mentioned, we have been fortunate enough to meet some of our latest members to our CP family in recent weeks – and we are very glad to now have you along. For those who don’t yet know, in my column I focus on the latest and most interesting of Federal Circuit Court coverage decisions from around the country. While I aim to include something from our own Second Circuit, they don’t tend to venture into coverage territory as often as we might like. I also have a penchant for environmental coverage litigation (and resultant decisions), so I feature those as well. While I had been covering (pardon the pun) cyber liability coverages and decisions, I now pass that mantle to Howard, who recently wrote about cyber security regulation and will be on the look-out for applicable decisions down the road. Check out his column going forward.

 

In other news, I don’t follow baseball (any Premier League fans out there?! Bundesliga? LaLiga? Anything?), so instead I’ll briefly update you all on my mini-me. The school year is in full swing and I’m proud to report that my daughter is doing excellently in her new school. Shout out to her! She dressed as a manticore this year for Halloween (I know, I had to look it up, too), but we might be nearing the age where she prefers to hand out candy than go scouting for it. Tempus fugit, eh?

 

This week, we only have one case from the Federal Circuit courts to highlight here in the Wide World. Out of the Fifth Circuit, Apache v. Great American is already making waves throughout the country. There, an insured was duped into changing the payment information of a vendor, by fraudsters posing as that vendor. Though the insured had a multi-step process for verifying and changing that information, the criminals were able to get through each step and millions of dollars were sent to the wrong accounts. Thus, the insured made a claim under the “Computer Fraud” provision of its policy. Unfortunately, the use of a computer was only tangentially related to the crime. Since the use of a computer is ubiquitous in communicating, something more than mere use of one was required to trigger the language of the policy. That is, the fraud must have been directly related to the use of a computer. Here, it wasn’t. Ouch.

 

Enjoy. More to come!

 

Until next time,

Agnes

Agnes A. Wilewicz

[email protected]

 

Gambling on the Results of the Election?:

 

Democrat and Chronicle

Rochester, New York

4 Nov 1916

 

AVALANCHE OF HUGHES

MONEY CHANGES ODDS

 

Betting Now 10 to 8 Upon Hughes,

Including One Wager of $40,000

 

Special Dispatch to Democrat and Chronicle

 

            New York, Oct. 31.—An avalanche of Hughes money was poured into the market this afternoon and the odds turned to 10 to 8 1-2, then 10 to 8 on Hughes. One Wall Street commissioner reported one bet of $40,000 on Hughes.

 

            One best of $10,000, distributed in small lots on the curb for a Stock Exchange house, was made this morning at odds of 10 to 9 on Hughes.  The odds quoted this morning on the curb were 10 to 9 on Hughes and 8 to 10 on Wilson, and there was evidently plenty of money to be had at those prices.

 

            A bet of $5,000 was made to-day that Governor Whitman will carry New York state by 100,000, the wager being placed at even money.  Several small wagers were made that Whitman will receive more votes in the state than Hughes.

 

            The betting continues at even money that Hughes will carry Ohio.  Some of the largest bets on the President come from Nevada and the Pacific coast.  It is said $50,000 from this section has been placed at 8 to 10.  Most Wilson men, however, are willing to take odds of 10 to 8 1-2.  Odds of 2 to 1 that Wilson will carry Greater New York by 50,000 are offered freely, while it is even money he will carry Kings county.  In the New York state race Hughes continues a 10 to 7 favorite. 

 

Barnas on Bad Faith:

 

Hello again:

 

One hundred and eight years is a long time when it comes to most things.  One hundred and eight years is an especially long time to go in between winning World Series titles.  I couldn’t help but feel like I was watching something historic last night seeing the Cubs clinch their first World Series since 1908 in what might go down as the best game seven in baseball history.  To put just how long one hundred and eight years is into perspective I thought I would share some fun facts about the year 1908:

 

• 1908 started off with a ball drop in Times Square to signify the New Year for the first time.

• 1908 also was a presidential election year (side note: go vote on Tuesday).  Republican William Howard Taft defeated Democrat William Jennings Bryan 321 to 162.

• Former Mayor of Buffalo and President of the United States Grover Cleveland died at 71.

• The 46^th star is added to the United States flag for Oklahoma.

• Mother’s Day is celebrated for the first time.

• Henry Ford introduces the Model T car.

• The average wage was $0.22 per hour.

 

Safe to say quite a bit has changed in one hundred and eight years.  Congratulations to all of the long-suffering Cubs fans in Chicago and across the country.

 

I have two cases in my column this week.  25 Bay Terrace Associates is a first party bad faith case hot off the presses of the Second Department.  The court concludes that the plaintiff stated a cause of action for breach of the implied covenant of good faith and fair dealing independent of the cause of action for breach of contract after the insurer offered $5,186.26 for water damage sustained during Hurricane Irene.  Plaintiff estimated that the loss was in excess of $500,000.  Interestingly, the plaintiff’s demand for punitive damages and attorney’s fees survived the motion to dismiss as well.  Read for yourself and see, but this case was wrongly decided in my opinion.

 

Liston-Smith is another Connecticut case in which a homeowner sustained foundation damage due to chemical reactions in the concrete.  The homeowner’s claim was denied when the insurer determined that the loss was not covered by the policy’s collapse coverage.  You may remember the Belz v. Peerless case I summarized in our September 9, 2016 newsletter addressed a similar factual scenario.  In this case, the insurer’s motion to dismiss the plaintiffs’ cause of action for violation of the covenant of good faith and fair dealing was granted.  There were no allegations of bad faith separate from the disagreement over the application of the policy.  It seems that there are a number of these cases making their way through the Connecticut courts at this time.  We will continue to monitor them in this space going forward.

 

See you next time.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

Some TR Supporters Cross the Line:

 

The Oneonta Star

Oneonta, New York

4 Nov 1916

 

BULL MOOSERS ENDORSE WILSON ACHIEVEMENTS

 

16 OF 19 MEMBERS OF RESOLUTIONS

COMMITTEE OF FIRST PARTY

 

            New York, Oct. 31.—Sixteen of the 19 members of the resolutions committee of the first Progressive party convention which framed the platform on which Theodore Roosevelt was nominated for the presidency in 1912, endorsed a statement issued here to-night by the Democratic National committee commending “the legislative achievements of President Wilson.”  Eleven of the number signed the statement, which also urged the re-election of the President.

 

This Week’s Highlights in the Attached Edition:

 

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

 

• Insurance Procurement Provisions in Contract Issued After Loss May Bind Parties Who Signed It

• Determination of Identity of Employer at Workers Compensation Board was Not Res Judicata because Identity of Employer was Not at Issue at Board

• “Contractor or Subcontractor Limitation” Upheld

• First in Time, First in Line

• SUM Arbitration Award was Supported by the Record.

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

Robert E.B. Hewitt III

[email protected]

 

• Defendant Established Prima Facie Case That Injuries to Lumbar Spine Did Not Constitute Serious Injury

• Issue of Fact as to whether Injuries to Cervical and Lumbar Spine Were Serious Injuries

• Plaintiff’s Non-Treating Expert May Only Testify as to His Examination of Plaintiff and Not the History of the Accident or Plaintiff’s Medical Complaints as Relayed by Plaintiff

• Plaintiff Offered No Evidence other than Her Own Testimony as to whether Her Preexisting Condition Was Exacerbated by the Accident

• Defendants Failed to Meet Burden of Demonstrating a Prima Facie Case

 

TESSA’S TUTELAGE
Tessa R. Scott
[email protected]

Litigation

 

• Follow the Order of the Court

• Summary Judgment Is Not Appropriate When There are Remaining Questions of Fact

• An Arbitrator’s Decision Stemming From a Compulsory Arbitration Requires Greater Judicial Scrutiny

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

• Waiver of Subrogation Does Not Preclude Party from Seeking Damages that were Unpaid by Insurance

• No Frivolous Conduct for Late Selection of Umpire

• Question of Fact as to the Appropriateness of Met Life’s Underwriting Precludes Summary Judgment

• Assignment of Right to Sue, Precludes Plaintiff from Seeking Further Recovery

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

• Fifth Circuit Holds that Crime-Protection Insurance Policy Does Not Cover Computer Fraud, Where Use of Computer Was Only Tangential or Incidental to the Fraudulent Transfer Crimes (Texas Law)

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

• Trial courts were quiet…

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

• Plaintiffs’ Disagreement about the Interpretation of the Policy’s Coverage in a Collapsing Foundation Case was Insufficient to State a Claim for Bad Faith

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

• Contractors Conundrum

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

• Cybersecurity Coverage

• DFF’s Circular Letter on Coverage for Treatment of Substance Abuse

                                                                     

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

• Many Theories of Liability:  Only One Covered Occurrence

 

 

Until next time.  Go and vote (wisely, of course) but vote!

 

 

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

Agnes A. Wilewicz

[email protected]

 

ASSISTANT EDITOR

Jennifer A. Ehman

[email protected]

 

INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]

 

Steven E. Peiper, Co-Chair

[email protected]
 

Michael F. Perley

Audrey A. Seeley

Jennifer A. Ehman

Patricia A. Fay

Agnieszka A. Wilewicz

Jennifer J. Phillips

Brian D. Barnas

Howard B. Altman

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

Patricia A. Fay

 

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

 

Jennifer J. Phillips

Diane F. Bosse
 

 

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Tessa’s Tutelage
Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith
Phillips’ Federal Philosophies

Altman’s Administrative (and Legislative) Agenda
Earl’s Pearls

 

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

 

11/02/16       Meehan v. County of Suffolk

Appellate Division, Second Department

Insurance Procurement Provisions in Contract Issued After Loss May Bind Parties Who Signed It

On February 18, 2010, the plaintiff, while driving her own vehicle, was involved in an accident with a vehicle driven by Roslyn Birnbaum and owned by Harvey Birnbaum. At the time of the accident, Roslyn was traveling as part of work she performed on behalf of the defendants jointly referred to as the County.  After the accident, the County and Roslyn signed a "Consultant/Personal Services Contract". Its term was from January 1, 2010, through December 31, 2010, and included a provision requiring the County to provide insurance coverage for Roslyn.

 

When the County was sued for breaching that insurance procurement agreement, the County moved to dismiss the lawsuit on the grounds that the agreement was signed after the accident and that it was ambiguous and contradictory.  The Second Department found that the County submissions do not demonstrate, as a matter of law, that they did not breach the terms of the consultant agreement.

 

11/01/16       Antoniak v. P.S. Marcato Elevator Co., Inc.

Appellate Division, First Department

Determination of Identity of Employer at Workers Compensation Board was Not Res Judicata because Identity of Employer was Not at Issue at Board

371 Seventh Avenue, LLC (“371”) was sued as a third party defendant in what appears to be a Labor Law case.   It sought to dismiss the action against it and for summary judgment under a claim for contractual indemnification against P.S. Marcato Elevator Company (“PS Marcato”).

 

371 argued, in its motion, that it was plaintiff's employer, by submitting plaintiff's W-2 forms, plaintiff's testimony that 371 appeared on his checks, and the affidavit of a 371 executive explaining the corporate structure of the organization. In opposition, plaintiff and PS Marcato offered only speculation that 371 was not plaintiff's employer. The entity plaintiff named as his employer at his deposition and listed by plaintiff in paperwork to his pension fund was a trade name.

 

The trade name, as well as the name of the entity that purchased the master workers' compensation insurance policy for 371, was listed in workers' compensation paperwork is of no evidentiary value, since the issue of the identity of plaintiff's employer was not in dispute before the Workers' Compensation Board. The indemnity provision in the full service elevator contract between defendants was triggered by plaintiff's accident.  In light of PS Marcato's contractual duty to ensure proper leveling, and its admitted weekly inspections, the complaints of alleged misleveling from months and years prior are insufficient evidence of negligence on the part of 371. Indemnity at this stage is conditional since 371 failed to establish as a matter of law that it was entirely free from negligence.

 

10/27/16       Tudor Insurance Company v. Sundaresen

Appellate Division, First Department

“Contractor or Subcontractor Limitation” Upheld

The "Contractor or Subcontractor Limitation" endorsement within the insurance policy issued by plaintiff bars coverage of the underlying personal injury action.

 

That endorsement bars coverage of "bodily injury" to, among others, "a contractor or subcontractor of the insured" (the exclusion). The evidence shows that the injured worker who brought the underlying action was hired by either the Sundaresen defendants (the insureds and owners of the premises) or defendant Excell (the general contractor). Accordingly, he was a "contractor or subcontractor of the insured" for the purposes of the exclusion. That the injured worker might be an independent contractor does not preclude him from being considered a contractor or subcontractor for purposes of the exclusion, since the terms "contractor" and "subcontractor" are not mutually exclusive and can include independent contractors.

 

The court’s decision was based on Century Surety Co. v Franchise Contractors, LLC , 2016 WL 1030134, *8, 2016 US Dist. LEXIS 31271, *21-22 [SD NY, March 10, 2016, No. 14-Civ-277 (NRB)], which was our firm’s favorable decision.

 

10/26/16       Seneca Specialty Insurance Co. v. T.B.D. Capital, LLC

Appellate Division, Second Department

First in Time, First in Line
Seneca, after denying TBD’s claim, commenced an action for rescission.  However, TBD has already commenced a declaratory judgment action in Indiana, seeking a declaration that the policy covered the loss.

 

A party may move for judgment dismissing one or more causes of action asserted against him on the ground that there is another action pending between the same parties for the same cause of action in a court of any state. Here is substantial identity of the parties and the causes of action alleged in the Indiana action and this action so the court dismissed the action.

 

Further, the Indiana action was filed "first-in-time." In the context of a motion to dismiss on the ground of another action pending, generally the courts of this state follow the first-in-time rule, meaning that the court which has first taken jurisdiction is the one in which the matter should be determined and it is a violation of the rules of comity to interfere.

 

 10/25/16      Hanover Insurance Company v. Vasquez

Appellate Division, First Department

SUM Arbitration Award was Supported by the Record
This was a challenge to a SUM (supplementary uninsured motorist benefits) award.  The parties argued whether this was a compulsory arbitration or voluntary arbitration as the standard for review for compulsory arbitration is less stringent.  The court never reach that question, instead holding that under any standard, the arbitration award was supported by the record.

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

Robert E.B. Hewitt III

[email protected]

 

11/02/16       Taylor v. Hall

Appellate Division, Second Department

Defendant Established Prima Facie Case That Injuries to Lumbar Spine Did Not Constitute Serious Injury

The defendant met her 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. The defendant submitted competent medical evidence establishing, prima facie, that the alleged injury to the lumbar region of the plaintiff'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 lumbar region of his spine. No factual details given.

 

11/02/16       Sok Hwan Chun v. Bloom

Appellate Division, Second Department

Issue of Fact as to whether Injuries to Cervical and Lumbar Spine Were Serious Injuries

The plaintiff alleged that he was injured when a vehicle that he was driving was struck in the rear by a vehicle operated by the defendant David Bloom. The plaintiff's vehicle, in turn, struck the rear of a vehicle operated by the defendant Robert R. Maxwell. The plaintiff contends that the Supreme Court erred in granting those branches of the moving defendants' separate motions which were for summary judgment dismissing the complaint insofar as asserted against each of them on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. In support of their separate motions for summary judgment, the moving defendants each met their prima facie burden of demonstrating 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 defendants each established, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d)), and that, in any event, such injuries were not caused by the subject accident.

 

In opposition to the moving defendants' separate motions, however, the plaintiff raised a triable issue of fact as to whether he sustained serious injuries to the cervical and lumbar regions of his spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d), and as to whether the alleged injuries were caused by the accident. No specific details were given.

 

11/02/16       Scariff v. Wall Street Mail Pickup Serv. Inc.

Appellate Division, Second Department

Plaintiff’s Non-Treating Expert May Only Testify as to His Examination of Plaintiff and Not the History of the Accident or Plaintiff’s Medical Complaints as Relayed by Plaintiff

The plaintiff, while a pedestrian, was struck by a vehicle driven by the defendant John Holloway III and owned by the defendant Wall Street Mail Pick Up Service, Inc. At the ensuing damages trial, the plaintiff did not offer any testimony from her treating physicians. The plaintiff submitted the testimony of an expert neuropsychiatrist, who testified that the plaintiff had severe major depression as a result of the accident, and that she also had cognitive problems, which had largely improved. The trial court precluded the expert neuropsychiatrist from offering any testimony regarding the plaintiff's medical complaints or the accident history. The defendants presented the testimony of a diagnostic radiologist who reviewed the plaintiff's MRI films, and of a behavioral neurologist who examined the plaintiff. Both physicians testified that the plaintiff did not sustain a traumatic brain injury as a result of the accident.

 

The jury found that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) and a judgment was entered in favor of the defendants and against the plaintiffs dismissing the complaint.

 

The appellate division held that contrary to the plaintiffs' contention, the Supreme Court properly precluded the expert neuropsychiatrist from testifying regarding the plaintiff's medical complaints or the accident history. A nontreating physician, retained only as an expert, may not testify regarding the history of an accident as related by the plaintiff or concerning the plaintiff's medical complaints. The expert may give an opinion based on, inter alia, an examination of the plaintiff. The Supreme Court also properly precluded the expert neuropsychiatrist from testifying regarding an eve-of-trial examination of the plaintiff of which the defendants had no notice.

 

10/27/16       Bobbio v. Amboy Bus Co. Inc.

Appellate Division, First Department

Plaintiff Offered No Evidence other than Her Own Testimony as to whether Her Preexisting Condition Was Exacerbated by the Accident

Defendants made a prima facie showing that plaintiff Germania Bobbio did not sustain a serious injury to her cervical spine as a result of the motor vehicle accident by submitting the affirmed reports of their neurologist, who found no objective neurological disability or permanency and full range of motion.  Their orthopedist's finding of minor limitations in range of motion does not defeat this showing. Defendants also relied on plaintiff's deposition testimony that she had been found to be disabled as a result of a neck condition more than six years before the subject accident, thereby shifting the burden to plaintiff to demonstrate a causal connection between the accident and her claimed cervical injury.

 

In opposition, plaintiff failed to raise an issue of fact as to causation or aggravation of the preexisting condition of her cervical spine. Her orthopedist acknowledged that an MRI of the cervical spine taken four years before the accident showed a preexisting condition, but he provided no objective basis, only the history supplied by plaintiff, for his opinion that the accident exacerbated the preexisting condition. Plaintiff offered no evidence of any injuries different from her preexisting condition, and her orthopedist failed to explain why her preexisting conditions were ruled out as the cause of her current alleged injuries.

 

10/26/16       Mueckenheim v. Smith

Appellate Division, Second Department

Defendants Failed to Meet Burden of Demonstrating a Prima Facie Case

The defendants, moving separately but relying on the same evidence and arguments, failed to meet their prima facie burdens 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 claims, set forth in the bill of particulars, that she sustained serious injuries 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) and that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the defendants did not sustain their prima facie burdens, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact. No details were given.

 

TESSA’S TUTELAGE
Tessa R. Scott
[email protected]
 

10/21/16       Ave T MPC Corp. v Prudential Prop. & Cas. Ins. Co.

Appellate Term, Second Department

Follow the Order of the Court

In this action by a provider to recover assigned first-party no-fault benefits, the parties entered into a stipulation pursuant to which plaintiff agreed to provide defendant with legible copies of the claims at issue or be precluded from offering such evidence at trial. Thereafter, defendant moved to compel plaintiff to provide legible copies of the claims. By order entered October 9, 2009, plaintiff was required to serve defendant with legible copies of the claim forms at issue, or provide defendant with an affidavit from plaintiff setting forth why plaintiff was unable to do so, within 60 days of the date of the order, or be precluded from offering such evidence should a judge find the explanation set forth in the affidavit from plaintiff to be insufficient.

 

After plaintiff failed to provide either, defendant moved, to preclude plaintiff from using any such evidence and to dismiss the complaint, asserting that plaintiff could not establish its case. In opposition, a representative of plaintiff explained, in an affidavit, why plaintiff was unable to provide legible copies of the claim forms, without offering any explanation for its failure to comply with the 60-day requirement of the order, or indicating when, or if, plaintiff had previously served that affidavit upon defendant.

 

Unsurprisingly, the Appellate Court found no basis to reverse the judgment.

 

10/26/16       Easy Care Acupuncture, PC v MVAIC

Appellate Term, First Department

Summary Judgment is Not Appropriate When There are Remaining Questions of Fact
Plaintiff appeals from an order of the Civil Court of the City of New York and granted defendant's cross motion for summary judgment dismissing the complaint.

 

This action, seeking recovery of assigned first party no-fault benefits, was not ripe for summary dismissal. While the record reflected that defendant properly paid a portion of the submitted claims for acupuncture services pursuant to the workers compensation fee schedule, questions of fact remain with respect to the claims denied in whole or part by defendant on the stated basis that the maximum payment had already been made for the billed codes.

 

Defendant's submission revealed the existence of questions of fact as to whether defendant partially exhausted the coverage by payments to another provider, and whether those payments were proper under the insurance department regulations. Defendant's failure to deny the claim within 30 days did not preclude a defense that the coverage limits have been exhausted.

 

Thus, the matter was remanded for further proceedings.

 

11/1/16         Matter of DTG Operations v AutoOne Ins. Co.

Appellate Division, First Department

An Arbitrator’s Decision Stemming from a Compulsory Arbitration Requires Greater Judicial Scrutiny

Here, the Court was asked to vacate the decision of an arbitrator.  Notably the arbitration was compulsory which requires greater scrutiny than those arbitrations which are voluntary.   When an arbitration is compulsory a party seeking to vacate the arbitrator’s decision must show that an arbitrator’s decision did not have evidentiary support and was arbitrary and capricious.

In the present case, the AutoOne vehicle involved in the underlying accident had been registered as a livery vehicle for the five years prior to the accident.

 

However, there was a change of registration — just five days prior to the date of loss — and was orchestrated by an insurance agent who was illegally insuring "dollar vans" as personal use vehicles. All four of the injured passengers confirmed that the AutoOne vehicle was being used as a vehicle for hire and for commercial purposes on the accident date, and the registration on the AutoOne vehicle was switched back to a "livery" vehicle shortly following the accident.

The Court held that there was adequate support for the arbitrator's finding that the AutoOne vehicle was being used, principally, for the "transportation of persons or property for hire," and loss transfer applied.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

11/02/16       American Scientific Lighting Corp. v. Hamilton Plaza Assoc.

Appellate Division, Second Department

Waiver of Subrogation Does Not Preclude Party from Seeking Damages that were Unpaid by Insurance

Plaintiff was rented the fourth floor of a building owned by Hamilton.  In 2007, plaintiff was forced to vacate the premises due to Hamilton’s alleged failure to maintain the roof of the premises.  Litigation was started in 2008, and in 2013 Hamilton moved to amend its answer to assert waiver of subrogation as affirmative defense.

 

The Court, noting that motions to amend should be freely granted, overturned the trial court’s decision and permitted the amendment.  In so holding, the Court ruled that the proposed amendment was not devoid of merit and that there was no surprise to plaintiff as the waiver argument had been referenced earlier in the litigation.

 

Nevertheless, the Court also noted that waiver of subrogation clauses must be construed so as to only provide relief within “the scope of specific context in which it appears.”  Here, plaintiff alleges that some of its damages were not reimbursed by insurance, and thus outside the scope of any waiver of subrogation clause.  Further, plaintiff undoubtedly incurred at least $10,000 in damages when the relevant deductible is factored in this case.  As such, triable issues of fact remained as to what was covered by plaintiff’s insurance, and what was not, thus precluding summary judgment.
 

10/25/16       Nat. Union Fire Ins. Co. v Odyssey Reinsurance Co.

Appellate Division, First Department

The Court, sua sponte, awarded attorneys’ fees to Petitioner, and the Odyssey sought appellate review.  In reversing the trial court, the Appellate Division noted that the court could not award fees absent a “statute or agreement between the parties.”  Here, because neither existed, the trial court was ruled to have been in error.

 

In addition, the trial court was without authority to award sanction for “frivolous” conduct in its allege delay in selecting an umpire for arbitration.  As the alleged conduct occurred prior to the litigation, it did not fall within the scope of Uniform Rules 130-1.1(c).

 

10/25/16       Mano Enterprises, Inc. v. Metropolitan Life Insurance Co.

Appellate Division, First Department
Question of Fact as to the Appropriateness of Met Life’s Underwriting Precludes Summary Judgment

Plaintiff appears to have tried to assign its rights under a policy issued by Met Life.  For some reason, Met Life placed a “hold” on the policy and delayed processing the assignment.  During the delay, the policy lapsed and coverage was lost.  Where, as here, there remains an issue of fact as to whether Met Life’s actions were justified, the Court ruled that a motion to dismiss plaintiff’s Complaint was not properly supported on the Record at hand.

 

10/26/16       Xavier Construction Co., Inc. v. Bronxville Union Free School

Appellate Division, Second Department

Assignment of Right to Sue, Precludes Plaintiff from Seeking Further Recovery
Xavier Construction commenced this action seeking damages against, among others, Triton Construction. Triton, in defense, moved to amend its answer to assert the affirmative defense of standing.  At the same time, Triton moved for summary judgment asserting that Xavier had assigned its rights to sue under the contract to another party, and, as such, had no basis to maintain the instant action.

 

Upon appellate review, the Court noted that Xavier did not oppose Triton’s motion to amend and could not oppose it for the first time on appeal.  Moreover, because Xavier assigned its rights to sue to First National Insurance Company, it was no longer a “real party in interest.”  With no interest in the litigation, it followed that Triton demonstrated its right to have the claim dismissed.   

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

10/18/16       Apache Corporation v. Great American Insurance Company

United States Court of Appeals, Fifth Circuit

Fifth Circuit Holds that Crime-Protection Insurance Policy Does Not Cover Computer Fraud, Where Use of Computer Was Only Tangential or Incidental to the Fraudulent Transfer Crimes (Texas Law)

Apache is an oil-production company based in Texas. They purchased a crime-protection policy from Great American, which included coverage for “Computer Fraud”. One day, an Apache employee in Scotland received a phone call from someone who identified herself as a representative of a vendor. The caller instructed Apache to change its bank account routing information for payments to that vendor. The Apache employee replied that they could not make that request without a written document on the vendor’s letterhead. About a week later, accounts-payable received an email from what looked like that vendor’s email (it was from @petrofacltd.com, rather than the vendor’s @petrofac.com). Attached thereto was a letter from Petrofac’s letterhead, including a contact phone number. Apache called that number and confirmed the bank routing information change. Payments started to flow into that account.

 

About a month later, the real Petrofac notified Apache of its late payments – in the amount of about $7 million. An investigation ensued. Apache was able to recoup about a third of those funds, however it ultimately lost about $2.4 million. So, they made a claim under their policy with Great American. That policy contained the following “Computer Fraud” provision: “We will pay for loss of, and loss from damage to, money, securities and other property resulting directly from the use of any computer to fraudulently cause a transfer of that property from inside the premises or banking premises: a. to a person (other than the messenger) outside those premises; or b. to a place outside those premises.”

 

Great American denied, however, stating that the “loss did not result directly from the use of a computer nor did the use of a computer cause the transfer of the funds”. Following litigation, the Fifth Circuit agreed. This was not a case of hacking or fraud directly related to the use of a computer, the court reasoned. Here, the “computer use” was just an email with instructions to change the payment information. Phone calls and changes to Apache’s payment systems followed.

 

“The email was part of the scheme; but, the email was merely incidental to the occurrence of the authorized transfer of money. To interpret the computer-fraud provision as reaching any fraudulent scheme in which an email communication was part of the process would [...] convert the computer-fraud provision to one for general fraud,” the court wrote. “We take judicial notice that, when the policy was issued in 2012, electronic communications were, as they are now, ubiquitous, and even the line between “computer” and “telephone” was already blurred. In short, few—if any—fraudulent schemes would not involve some form of computer-facilitated communication. This is reflected in the evidence at hand. Arguably, Apache invited the computer-use at issue, through which it now seeks shelter under its policy, even though the computer-use was but one step in Apache’s multi-step, but flawed, process that ended in its making required and authorized, very large invoice-payments, but to a fraudulent bank account.” Those invoices, not the emails or any ‘computer use’ were the reason for the crime. Thus, there was no coverage.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

Trial courts were quiet…

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

11/02/16       25 Bay Terrace Associates, L.P. v Public Service Mut. Ins.

Appellate Division, Second Department

Allegations of Improper Investigation and Inconsistent Statements Enough to Preserve a Potential Bad Faith Claim

The instant lawsuit has its nexus in a Hurricane Irene claim from 2011.  At that time, plaintiff allegedly sustained water damage to 28 apartment units in its building.  Plaintiff’s claim for repairs and loss of rental income exceeded $500,000.  Public Service, apparently, offered $5,186.26 after it adjusted plaintiff’s claim.  Not surprisingly, plaintiff sued.

 

The first cause of action sought coverage for breach of contract, and the second cause of action predictably alleged breach of the covenant of good faith and fair dealing.  Plaintiff alleged that plaintiff did not act in good faith when it initially advised that the damaged property would be covered in full before changing its mind.  In addition, plaintiff alleged that Public Service’s use of “unlicensed professionals” breached the obligations of good faith as well.

 

Public Service moved to dismiss the bad faith/extra-contractual claims.  In opposition, plaintiff submitted affidavits from its property manager, one of its tenants, and its roofing contractor, “all of whom stated that the defendant's adjustor who inspected the property on two occasions prior to the defendant's denial of the majority of the claim verbally assured them that water had infiltrated the building as a result of the hurricane and that the loss was completely covered under the policy.”   In addition, plaintiff also adduced affidavits that swore Public Service “sent an engineer to inspect the building for the sole purpose of preparing a report, which was factually inaccurate, to support its denial of the entire claim.”

 

On these assertions, the Court concluded that plaintiff sufficiently supported its allegations that Public Service breached the covenant of good faith and fair dealing.  

 

Peiper’s Point – We offer a dissenting view, if you will. While plaintiff did a nice job of arguing why it believed the carrier’s actions to be wrongful, recall that a bad faith claim in New York also requires the party to demonstrate that the actions of the carrier were directed toward the general public “as a whole.”  Here, we see no evidence address that prong, and for that reason would respectfully suggest the motion to dismiss should have been granted.

 

10/25/16       Liston-Smith v. Casualty Insurance Company

United States District Court, District of Connecticut

Plaintiffs’ Disagreement about the Interpretation of the Policy’s Coverage in a Collapsing Foundation Case was Insufficient to State a Claim for Bad Faith

The plaintiffs Lynne Liston-Smith and John Smith own and reside at a house in Toland, Connecticut.  Their home was insured by CSAA.  Over time, they noticed cracks in the concrete walls of their basement and decided to hire a structural engineer to inspect those cracks.  The engineer informed them that the cracks were due to a chemical reaction in the concrete that would ultimately render the walls unstable and recommended that the concrete be replaced.

 

On September 5, 2015, the plaintiffs made a claim to CSAA for coverage of the damages caused by the chemical reaction based on the report made by the structural engineer.  The claim was based on the terms of the policy, which specifically stated that one of the “Perils Insured Against” was the “risk of direct physical loss to property,” and the policy’s collapse coverage.  CSAA disagreed with the plaintiffs and denied the claim on October 12, 2015. 

 

On October 26, 2015, CSAA informed the plaintiffs that it was planning on cancelling their insurance coverage if the plaintiffs did not repair their foundation by February 15, 2016.  CSAA sent this letter despite an order from the Commissioner of the Department of Insurance specifically prohibiting policy cancellations due to the deterioration of concrete in houses like the plaintiffs.  Ultimately, after counsel and public officials applied pressure, CSAA reversed its position and withdrew its plan to cancel the plaintiffs’ insurance.

 

Plaintiffs filed an action against CSAA based on its failure to pay.  The complaint alleged causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of the Connecticut Unfair Practices Act, section 816 of title 38A of the Connecticut General Statutes (“CUIPA”), and the Connecticut Unfair Trade Practices Act, section 110b of title 42 of the Connecticut General Statutes (“CUTPA”).  CSAA moved to dismiss all of the claims except the breach of contract cause of action.

 

Plaintiffs alleged that CSAA sought out policy provisions that allowed it to deny benefits and interpreted those provisions unreasonably in bad faith.  However, the allegations only support the inference that they disagree with CSAA in the interpretation of their contract.  There was nothing suggesting that CSAA acted in bad faith or with a sinister motive. 

 

The plaintiffs’ claim that CSAA threatened to cancel their insurance despite an order by the Commissioner of the Department of Insurance that specifically prohibited cancellations due to concrete issues also did not support their bad faith claim.  The only damages alleged stemmed from the breach of contract, and the Complaint made no allegations that relate the threat of cancellation.  Further, the cancellation was withdrawn without effect, and the plaintiffs claimed no damages from the threatened cancellation.

 

However, the plaintiffs did state a claim for violation of the CUTPA and CUIPA.  The court took judicial notice of four other lawsuits against CSAA alleging unfair denials of claims.  Thus, there were sufficient allegations of a general business practice in violation of CUIPA.  Further, plaintiffs alleges that, through the ISO, CSAA involved itself in an industry-wide practice of denying claims of deteriorating concrete to the disadvantage of the insured, despite knowledge that the claims were meritorious.  This was sufficient to state a claim for violation of CUPTA and CUIPA.

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

10/25/16       The Cincinnati Insurance Co. v. Harleysville Insurance Co.

United States District Court, Western District of New York

Contractors Conundrum

In this coverage dispute, Plaintiff Cincinnati Insurance Company seeks a declaration that defendant Harleysville Insurance Company is required to defend and indemnify on a primary basis Cincinnati’s insured J.T. Mauro Co., as well as the University of Rochester Medical Center/Strong Medical Center (“the University”), LeChase Construction Corp., LeChase Construction Services LLC (collectively “LeChase”) in an underlying action in which an employee of Harleysville’s own insured The Kimmel Company, Inc. (“Kimmel”) seeks damages for injuries sustained while performing repairs to the University Hospital. Specifically, Cincinnati seeks a determination that the Harleysville policy issued to Kimmel provides additional insured status to the University, LeChase, and Mauro.

 

By way of background, the University entered into a prime contract with general contractor LeChase to provide repairs to the University Hospital's HVAC system.  LeChase entered into a subcontract with Mauro wherein Mauro agreed to perform the project under the prime contract and procure and maintain primary and non-contributory general commercial liability insurance expressly naming LeChase and the University as additional insureds.  Mauro then entered into a subcontract with Kimmel wherein Kimmel agreed to perform the HVAC project, perform its duties in accordance with the Mauro subcontract and the prime contract, and assume all the obligations and responsibilities assumed by Mauro toward LeChase and the University. Kimmel was also required to, among other things, maintain a primary and non-contributory CGL insurance policy naming “Owner and all other parties required of [Mauro]” as “insureds on the CGL, using ISO Additional Insured Endorsement[.]”

 

As framed by the district court, the issue was whether the University and LeChase qualified as additional insureds under the Harleysville policy, resolution of which required consideration of the insurers conflicting interpretations of two endorsements contained in the Harleysville policy: CG 20 10 and CG 20 33. Endorsement CG 20 10 provided additional insured status to “the persons or organizations shown in the Schedule but only with respect to liability for ‘bodily injury'...caused, in whole or in part by:  1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured(s).”  (Emphasis added).

 

Endorsement CG 20 33 provided additional insured status to “any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.”  Cincinnati did not dispute that this endorsement required contractual privity between Kimmel and the party to be afforded additional insured status.

 

In resolving Cincinnati’s motion for summary judgment, the district court found that the language of the Harleysville policy was unambiguous:

 

“Endorsement CG 20 33 clearly confers additional insured status only upon persons or organizations for whom the insured is ‘performing operations’ as provided in a written agreement that requires the insured to add that person or organization as an additional insured to the policy. A plain reading of the Kimmel subcontract reveals that Kimmel agreed to name Mauro and [the University] as additional insured parties. At no point in the subcontract does Kimmel expressly agree to add LeChase to the Harleysville policy as an additional insured.”

 

The district court rejected Cincinnati's argument that a subcontract provision requiring Kimmel to assume toward Mauro all the obligations and responsibilities that Mauro assumed toward LeChase in the separate Mauro subcontract obligated Kimmel to name LeChase as an additional insured. “It is well settled that the requirement to procure additional insured coverage must be specifically stated in a construction contract before it can be interpreted as such. ‘Under New York law, incorporation clauses in a construction subcontract, which incorporate by reference clauses in the prime contract into the subcontract, bind a subcontractor only to the prime contract provisions relating to the scope, quality, character and manner of the work to be performed by the subcontractor.’ ” The district court recognized that providing additional insured coverage to LeChase might have been intended by the parties, but the Kimmel subcontract contained no clear, express language requiring such coverage.

 

The district court further found that the GC 20 10 endorsement was clearly and unambiguously limited to entities “identified as scheduled person(s) or organization(s) in the Declarations,” and neither LeChase nor the University were so identified.  Accordingly, the district court concluded that the University was an additional insured under the CG 20 33 endorsement, but LeChase does not qualify for additional insured status coverage under any endorsement in the Harleysville policy.

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

Cybersecurity Coverage

 

10/25/16       Camp’s Grocery, Inc. v. State Farm Fire & Cas. Co.

United States District Court, Northern District of Alabama

Northern District of Alabama Warns of Dangers of Failing to Purchase Cybersecurity Coverage

During the past weeks, we have analyzed New York’s new cybersecurity regulations, viewable here: DFS.NY.GOV., which require insurers and financial companies to implement and maintain cybersecurity programs, and report any cybersecurity event to DFS. 

 

A case recently decided in Alabama, Camp's Grocery, Inc. v. State Farm Fire & Cas. Co., No. 4:16-CV-0204-JEO, 2016 WL 6217161, at *1–9 (N.D. Ala. Oct. 25, 2016), warns of the dangers of failing to purchase insurance that affords ‘third-party’/liability coverage for cybersecurity events.

 

In Camp’s Grocery,  Camp's was sued by three credit unions after Camp's computer network was hacked, compromising confidential data on its customers, including their credit card, debit card, and check card information. That breach, the credit unions claim, caused the credit unions to suffer losses on their cardholder accounts, including for reissuance of cards, and reimbursement of their customers for fraud losses, and they sought to recoup these damages from Camp’s.  Camp’s sought coverage for the losses and suit under its State Farm policy, which included coverage for loss of “electronic data” and “computer equipment” coverage, but did not include liability coverage for data breaches.

 

The “Computer Equipment” coverage form afforded coverage as follows:

 

We will pay for accidental direct physical loss to:

 

1. “Computer equipment”, used in your business operations, that you own, lease from others, rent from others, or that is loaned to you....

 

2. Removable data storage media used in your business operations to store “electronic data”.

 

* * *

 

We do not insure “computer programs” or “electronic data” except as provided in the Computer Programs and Electronic Data Extension of Coverage.

 

The extension of coverage referenced above, in turn, provides in relevant part:

 

EXTENSIONS OF COVERAGE

 

1. Computer Programs and Electronic Data

 

a. We will pay for accidental direct loss to:

 

(1) The following types of “computer  programs” and “electronic data” that you own, license from others, lease from others, or rent from others:

 

(a) “Computer programs” used in your business operations;

(b) The “electronic data” that exists in “computer” memory or on “computer” storage media, used in your business operations;

 

(2) That portion of your customers' “electronic data” that is supplied to you for processing or other use in your business operations. Coverage for customers' “electronic data” is limited to the specific data file(s) containing the information you are processing or using in your business operations.

 

Loss does not include any consequential loss except as may be provided in the optional Loss of Income and Extra Expense coverage.

 

State Farm moved for summary judgment, arguing  that it had no duty to either defend or indemnify Camp's in the underlying action, since the “first-party insuring agreement,” covered losses sustained directly by the insured (Camp’s) itself and not liability to others.   State Farm argued that the computer equipment/electronic data coverage applied only to losses suffered by Camp’s itself, and not to liability to others.  Camp argued that the “loss of electronic data” coverage applied to the loss.

 

The Court rejected Camp’s argument, holding that the form only provided “first-party” coverage for loss or damage to the insured itself. In support, the court relied on the policy language (which required “direct . . . loss to” the insured), and the absence in the inland marine form of any explicit duty to defend or indemnify Camp’s.  Camp's Grocery, Inc. v. State Farm Fire & Cas. Co., No. 4:16-CV-0204-JEO, 2016 WL 6217161, at *1–9 (N.D. Ala. Oct. 25, 2016)

 

DFF’s Circular Letter on Coverage for Treatment of Substance Abuse

         

The Department of Financial Services issued a Circular Letter last week, viewable here: DFS Circular, which outlines DFS’s recommendations regarding for substance abuse.

 

The letter, dated October 19, 2016, is addressed to “All Insurers Authorized to Write Accident and Health Insurance in New York State, Article 43 Corporations, Health Maintenance Organizations (“HMOs”), Student Health Plans Certified Pursuant to Insurance Law § 1124, and Municipal Cooperative Health Benefit Plans.”

 

The Circular Letter seek to “provide direction to insurers authorized to write accident and health insurance in this state…regarding the coverage requirements for treatment of substance use disorders” under Insurance Law § 4902(a)(9) and Public Health Law § 4902(1)(j) (the “Substance Abuse Treatment Regulations”).

 

Under current law, large group health insurance policies or contracts are not required to cover prescription drugs.  The newly-added/amended Insurance Law §§ 3221(l)(7-a) and 4303(l-1) to require every large group policy or contract that provides medical, major medical or similar comprehensive-type coverage to provide coverage for medication approved by the U.S. Food and Drug Administration (“FDA”) for the detoxification or maintenance treatment of a substance use disorder.  An issuer must include the new coverage in its large group policies or contracts that are issued, renewed, modified, altered or amended on or after January 1, 2017.  Accordingly, issuers must amend any large group policy or contract that provides medical, major medical or similar comprehensive-type coverage but does not include coverage for medication approved by the FDA for the detoxification or maintenance treatment of a substance use disorder.  Large group health insurance policies and contracts that currently cover prescription drugs should already be covering medication approved by the FDA for the detoxification or maintenance treatment of a substance use disorder.

 

Insurance Law §§ 3216(i)(31-a), 3221(l)(7-b), and 4303(l-2) to require every policy or contract that provides medical, major medical or similar comprehensive-type coverage and provides coverage for prescription drugs for the treatment of a substance use disorder to include immediate access, without prior authorization, to a five-day emergency supply of prescribed medications otherwise covered under the policy or contract for the treatment of a substance use disorder where an emergency condition exists, including a prescribed drug or medication associated with the management of opioid withdrawal or stabilization, except where otherwise prohibited by law.  Coverage of an emergency supply includes medication for opioid overdose reversal otherwise covered under the policy or contract when prescribed to an individual covered under the policy or contract.

 

Insurance Law §§ 3216(i)(31-a), 3221(l)(7-b), and 4303(l-2) further provide that coverage of the five-day emergency supply of medication may be subject to copayments, coinsurance, and annual deductibles that are consistent with those imposed on other benefits within the policy or contract, and prohibit issuers from imposing an additional copayment or coinsurance on an insured who received an emergency supply of medication and then received up to a 30-day supply of the same medication in the same 30-day period in which the emergency supply of medication was dispensed.  However, issuers may impose a copayment or coinsurance on the initial emergency supply of medication in an amount that is less than the copayment or coinsurance otherwise applicable to a 30-day supply of the medication, provided that the total sum of the copayments or coinsurance for an entire 30-day supply of the medication does not exceed the copayment or coinsurance otherwise applicable to a 30-day supply of the medication.  These new five day emergency supply requirements apply to policies or contracts issued, renewed, modified, altered, or amended on or after January 1, 2017.  The Department of Financial Services (“Department”) will provide model contract language to assist issuers with compliance.

 

The Circular Letter also discussed Insurance Law §§ 3216(i)(30), 3221(l)(6) and 4303(k) which require every policy or contract that provides hospital, major medical or similar comprehensive coverage to include inpatient coverage for the diagnosis and treatment of substance use disorder, including detoxification and rehabilitation services.  This coverage includes unlimited medically necessary treatment for substance use disorder treatment services provided in a residential setting as required by the federal Mental Health Parity and Addiction Equity Act of 2008, codified at 29 U.S.C. § 1185a (“MHPAEA”). 

 

Finally, addresses the newly added Insurance Law §§ 3216(i)(33), 3221(k)(21) and 4303(qq), which require a policy or contract providing prescription drug coverage subject to a copayment to charge a copayment for a limited initial prescription of an opioid drug that is either:  (1) proportional between the copayment for a 30-day supply and the amount of drugs the patient was prescribed; or (2) equivalent to the copayment for a full 30-day supply of the opioid drug, provided that no additional copayments may be charged for any additional prescriptions for the remainder of the 30-day supply.

 

This new requirement is effective as of July 22, 2016.  Issuers should administer their policy and contract forms in accordance with this requirement pending submission and approval of amended policy and contract forms.

 

The letter closes by cautioning that DFS “intends to investigate issuers’ compliance with requirements for coverage of substance use disorder treatment as described in this circular letter, including during market conduct exams.  The Department will take action against an issuer for any failure to adhere to all statutory and regulatory requirements for substance use disorder treatment.”

 

The clear intent is for insurers to “do their part” to see to it that their insureds have ready and full access to substance abuse treatment. 

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

04/12/16       Hollis v. Lexington Insurance Co.

Eastern District of Virginia

Many Theories of Liability:  Only One Covered Occurrence

Just in time for the summer holidays comes a case from Virginia dealing with injuries suffered to bystanders at an “Independence Day” celebration in Virginia in 2007 after fireworks mortar tubes unexpectedly detonated and launched a shell into the crowd.  Three young members of the Hollis family were seriously injured.  Juries subsequently found the fireworks company negligent and rendered substantial multi-million dollar damages awards. 

 

The family launched a subsequent lawsuit against the fireworks company alleging breach of some 19 separate duties of care, such as failing to buy safe fireworks, failing to train employees, failing to manage explosives correctively, not warning and protecting spectators, etc.  The family then filed suit against the insurance companies for a declaratory judgment that this suit was covered by the insurance policy which provided up to $1,000,000.00 in coverage for bodily injury caused by an occurrence, defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions”.  The family moved for summary judgment contending that each of the 19 alleged “breaches of duty” constituted a separate “occurrence” invoking separate coverage and indemnification under the policy.  Lexington Insurance crossed moved for a declaration that there was but one occurrence involved, and therefore only a $1,000,000.00 coverage limit. 

 

The District Court ruled in favor of Lexington Insurance.  The Court first ruled that Pennsylvania law controlled, and that the courts in that state had adopted a “cause approach” in determining the number of occurrences in a coverage dispute.  This approach holds that, when one proximate and uninterrupted cause results in the subject injuries, there is a single “occurrence” for coverage purposes.  The Court ruled that in this case the explosion of the errant shell was one single occurrence.  All of the other alleged acts of negligence, or multiple “breaches of duty”, caused and culminated in this single act causing the same contemporaneous event and injuries. 

 

The Court further noted that to really argue that each negligent act was a separate cause of action; the argument would have to be that each act resulted in a separate, distinct injury, which clearly was not the case.  In short, the Court ruled there was but one cause of the accident, which resulted in one damaging act or event, and injury only followed from that singular event.  Therefore, the Court agreed with the insurance company that there was only one occurrence and therefore only one $1,000,000.00 policy limit available to compensate for the accident.

 

This case presents an interesting situation where it was the injured party/claimant who commenced the declaratory judgment action in an effort to force and make a claim for coverage.  This case also emphasizes the importance of the choice of law issue, and in this case it was Pennsylvania law that controlled the “number of occurrences” question.  This is yet another example of a federal District Court sitting in diversity jurisdiction attempting to discover, determine and apply the applicable state law to the greatest extent possible to substantive issues in the dispute. 

 

Although there were multiple “theories of liability” and alleged breaches of duty, there was still only one occurrence caused by the one wayward firework round resulting in one event which caused all of the injuries.  An interesting scenario might have been presented if the wayward firework shell had instead exploded into other fireworks which in turn further exploded or detonated into the crowd causing injuries in a cascade effect.