Volume XVIII, No. 2 (No. 458)
Friday, July 15, 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.
Greetings from Chicago, where I’m attending the Twelfth Annual Symposium sponsored by the National Foundation for Judicial Excellence. I’m proud to be a longtime supporter of this organization and a Board member over the last two years. The National Foundation for Judicial Excellence 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 is a wonderful program designed for state appellate judges and we’ll have over 125 at this year’s Symposium.
Audrey Seeley is across the street, attending the DRI Insurance Roundtable. We have Chicago covered.
Insurance Coverage Team Expands in Long Island – Howard B. Altman:
We are pleased to welcome Howard B. Altman to our coverage team, resident in the Melville, Long Island office. Biographical information will be included in the next issue. A lawyer of many year of coverage experience, he is a welcome addition to our ever-expanding coverage group.
EMERGENCIES? WE CAN HELP:
We are often brought in to help, right after an accident occurs. Preserve evidence, protect the witness, intercede with the authorities. We want you to know that we are here for you:
HURWITZ & FINE’S 24 HOUR RESPONSE TEAM
(716) 849-8948
Accidents can happen at any time and Hurwitz & Fine’s 24 Hour Emergency Response Team is ready to help 24/7. Our first responders, Mike Perley, Jody Briandi, Dave Adams and Todd Bushway have over 75 years of experience investigating and defending:
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Catastrophic Motor Vehicle Accidents
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Trucking Accidents
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Construction Site Accidents
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Building Collapses
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Fire Losses
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High Exposure First Party Claims.
We have carefully vetted experts on call 24/7 across New York State who we can mobilize to get to the scene before critical evidence is lost or compromised. When called out to the scene we have identified physical evidence and witnesses that investigating officials have missed, documented the scene and preserved critical evidence to solidify our client’s defense. We consider this service so important that we have a dedicated number to put you in contact with a member of our team, any time, day or night: (716) 849-8948.
Let us know when we can help. To meet the team, click here.
Time Flies When You’re Having Fun:
While our issue is always dated on Friday, we post it on alternating Thursdays (for those who wake up in the middle of the night craving for insurance news). I posted this little ditty on my Facebook page. This being our 18th year of publication, it’s hard to remember that there were 21 years at H&F when I didn’t publish Coverage Pointers:
On July 14, 1977, 39 years ago today, during the summer following my first year of law school, I started clerking at 45-day old law firm called Hurwitz & Fine, P.C. I was 24 years old, drove a 1968 Chevy, was earning $3.00/hour and was working 15 hours a week. The number of hours per week increased soon thereafter, the pay scale didn't change until a couple of weeks ago, when they bumped me up to $4.00.
I had slightly darker brown hair, smoked a pipe in the office (cherry tobacco), typed on an IBM Selectric II (with the erasable tape) and was responsible for putting the pocket parts in the Shepherds' books. We used carbon paper for copies, did not have a fax machine, a computer or anything known as word processing and kept track of our time for billing on yellow cards.
When I received my first paycheck the following week ($37 after taxes) I went over to Erie County Savings Bank and had the teller give me a $1 bill, which I had signed and dated by Shelly Hurwitz and Bob Fine and it sits encased in Plexiglas in my office as my first legal fee. George Washington was still around in those days and he too could have autographed the bill.
How can time fly so quickly? Where did it go?
Baseball Debut – July 15, 1916:
Joe Lotz appeared in his first major league game 100 years ago today, as a pitcher for the St. Louis Cardinals. He pitched in a total of 12 games in the two months he stayed with the Cards, and never graced a big league game again. His ERA was 4.28, ended up with an 0-3 record and actually did better as a hitter than as a pitcher having gone four for 12, including a double, in his 12 at bats. Fast forward 68 years later, and he is still remembered as a major leaguer, when he was mentioned in this article about his great grandson, Ryan Lotz, a superb little league ball player. Great granddad died on New Year’s Day 1971 and didn’t get to see his great-grandson play.
Ryan now runs a small hauling company in the same town, Los Gatos.
The San Bernardino County Sun
San Bernardino, California
19 Aug 1984
No. Cal Blanks Arizona
1-0 to win Regional
SAN BERNARDINO – Ryan Lotz left his mark at the Little League Western Regional championship Saturday night.
His two-hit, 16-strikeout performance was being called the best game of his young life and it combined with a first-inning solo home run by leadoff hitter Jason Halladay to give Los Gatos LL of Northern California a 1-0 victory over Sunnyside LL of Tucson, Ariz., in Saturday’s title game before a capacity crowd estimated at 8,000 at Al Houghton Stadium.
Los Gatos advances to this week’s Little League World Series in Williamsport, Pa., where it will meet Altamonie Springs of Florida at 11 a.m. Tuesday in the opening game.
Los Gatos got past its last obstacle, Arizona, thanks mostly to Lotz, the great-grandson of former major leaguer Joe Lotz, who pitched with the St. Louis Cardinals in 1916.
All Lotz did was strike out the side in four of the six innings he pitched, walk only one (an intentional pass) and preserve the win by striking out Arizona’s Arnie Orozco with the bases loaded in the sixth to end the game.
Arizona pitcher Larry Marchbanks scattered four hits, fanned 10 and walked one, but it wasn’t enough.
“It’s the best-pitched Little League game I’ve ever seen in my life,” said Northern Cal manager Leo Berk. “He (Lotz) was throwing strikes. He was setting them up with his fastball and getting them with his curve.”
“Ryan was our team tonight,” said Northern Cal shortstop Steven Lane …
Barnas on Bad Faith:
Hello again:
This week I am writing from the great state of South Carolina where I am enjoying a couple of days of much needed rest and relaxation with my girlfriend and her family. Yesterday, we had the pleasure of visiting the Fort Sumter National Monument, the site of the first battle of the Civil War. In addition to enjoying the history of the fort, I was particularly impressed with the volunteer who gave a demonstration on how to fire a Civil War era musket. Even more impressive than the rifle display was the fact that the volunteer gave the demonstration in 100 degree weather while wearing an all wool uniform.
Earlier this week I also appeared in Supreme Court, Fulton County in Johnstown, New York. Fulton County still uses the old courthouse that was built in 1773. The building was listed on the National Register of Historic Places in 1972. Opposing counsel also informed me that Aaron Burr, best known for dueling with Alexander Hamilton, argued in the same courthouse.
Leaving the historical discussions behind, there are, once again, no New York bad faith cases to discuss this week. Thus, we’re going over the Jersey state line for a couple of cases discussing extra-contractual liability. In Boisvert, the court dismisses the plaintiffs’ breach of contract and good faith and fair dealing claims as time barred by the policy’s one year statute of limitations. However, the court allowed the New Jersey Consumer Fraud Act claim to go forward as it contained different allegations and was not covered by the policy’s statute of limitations. In Product Source International, the court dismissed Plaintiff’s bad faith claim for failing to plead Defendants' knowledge or reckless disregard for the fact that they had no reasonable basis for their denial of insurance benefits. Nonetheless, the court gave the plaintiff time to file an amended complaint curing the deficiency.
Have a great weekend and I hope that everybody stays cool in the hot weather.
See you next time.
Signing off,
Brian
Brian D. Barnas
Some Things Never Change -- Building a Wall – A Century Ago:
Democrat and Chronicle
Rochester, New York
15 Jul 1916
WANTS IMMIGRATION OF
JAPS PROHIBITED
Only Means of Solving the
Problem, Senator Works
of California Says
Washington, July 4.—Senator Works, of California, addressing the Senate to- day, on the Japanese problem in America, declared that the issue could be solved only by keeping the Pacific ocean between peoples of the two nations. He argued that the time had come when the United States, as an act of self-preservation, should declare by statute its purpose “not to tolerate further race complication on our soil by preventing immigration of all peoples not of the white race.”
The California Senator declared that relations between the United States and Japan were friendly, but insisted that Japan’s “gentlemen’s agreement” did not prevent Japanese from coming to America.
“If war with Japan comes, what then?” he added. “Have we prepared for it? Will we be prepared for it if the proposed program of military and naval expansion is carried out? No; not on the Pacific coast. To make the Pacific coast states secure we must have two armies and two navies, one on each of the seacoasts.
“I do not believe we are going to have war with Japan, but those who think so should see to it that the Pacific coast, which must bear the brunt of any fighting with that country, has a sufficient portion of the increased army and navy to protect it from attack.”
Hewitt’s Highlights:
Dear Subscribers:
Unfortunately, it appears the Appellate Courts are enjoying the summer, as I have no new serious injury cases to present to you in this edition, after having quite a number in the last edition. Hopefully, next issue I will have some interesting cases to present. In the meantime, my two sons are enjoying their summer with my wife, who is a teacher and off for the summer. Between their camps, and their activities at the local library, they have been having a lot of fun. I hope you too are enjoying your summer.
Until next time,
Rob
Robert E. Hewitt
[email protected]
For Sale in the El Paso Herald, July 15, 1916:
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1916 Ford roadster, brand new; Yale lock, electric horn and insured; half cash, balance terms. Phone 6903 W.
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A fine lot of pigeons, 2422 Montana Street, Phone 4408
Phillips Federal Philosophies:
Hello, All:
I now have a good faith basis on which to report that Nashville is a pretty cool town, one which I’ll happily revisit in the future. Even if it’s only to figure out who the commercial general liability carrier for the Opry is – those balcony seats are no joke to someone of my limited balance and grace.
Today we have a case of separation ambiguity (see what I did there?). In Hastings Development v. Evanston Insurance Company, the Eastern District considers what happens when you have an Employers Liability Exclusion, a Separation of Insureds clause, and multiple “Named Insureds.” Spoiler alert: the insured walks away with coverage for an underlying action commenced by an employee of a co-Named Insured.
As always, thanks for reading.
J.
Jennifer J. Phillips
Walking up the Bar --- Almost, a Century Ago
Scott County Kicker
Benton, Missouri
15 Jul 1916
Altoona, Wis., is a dry town. At a story session of the common council a license was issued to the Altoona Mercantile Co., a municipal saloon, the profits to go into a fund for building waterworks. It is not ready to open.
Wilewicz’ Wide World of Coverage
Dear Readers,
This week’s edition of the Wide World of Coverage comes to you during what is shaping up to be the hottest week of the year. Nevertheless, we have seen no traditional “summer slump” yet, despite this heat, and continue to plug away in court while scouring the dockets for coverage cases from hinder and yon to present to our loyal subscribers for their reading pleasure. Always a good time, whatever the weather.
This week, we have but one case for you, a Second Circuit decision that raised an interesting question of law, but did not actually get around to answering it. In Migdal Insurance v. Ins. Co. of PA, one primary policy contained an “other insurance” clause, while the other did not. After one of the carriers picked up the defense and paid the tab on a litigated claim, it then sought contribution from the other insurer. Unfortunately, the policies were governed under California law, so the Second Circuit was unclear how that would, or should, play out. The rule could be either 1) that a policy must expressly state that it is excess over specified policies, or 2) the “other insurance” clause is effective and the lack thereof does not cancel out its existence, as there is nothing to compare it to. The Second Circuit did not know which way to go – thus they sent the case to the Supreme Court of California. We will watch for a decision on this one, and report back.
See you all in a couple of weeks! Stay cool, everyone.
Agnes
Agnes A. Wilewicz
Tilting at Windmills:
The Maurice Times
Maurice, Iowa
15 Jul 1916
New Insurance Ruling.
By a ruling of the Iowa Supreme Court in the case of Murphy vs. Continental Insurance Company, appellant, the term “farm utensils” used in farm insurance policies is broader than the term “garden tools” and includes any instrumentalities within the meaning of the word “utensils” used on a farm, including stock scales and windmills. This is of great interest to farm and tornado insurance companies which have refused to insure windmills.
Peiper’s Postulates:
Each year, we lament all Summer about the lack of decisions coming out of the Appellate Division. While I could go on, and on, I’ll simply note that my only case this week deals with an interesting trivial defect case out of the First Department. The triviality of which, I will leave to you to decide.
At least you have the 100 stories to fall back upon.
I should tell you that I, myself, was the subject of a 100 year investigation earlier this week. When the origin of my middle name was questioned, our Editor dove deep into the archives of the Shippensburg News Chronicle (that would be in Pennsylvania for those of you wondering) to dig up stories of my ancestors. Turns out I have a great, great aunt Birdella in my “family tree.” Birdella, by the way, was sisters with my great, great Aunt Phoebe.
Good thing I didn’t realize this 10 years ago, or my daughter might have a different name. She doesn’t share the same fondness for the name as I do, apparently.
While Dan did not dig up anything I wasn’t generally familiar with, the speed and ease of his research was impressive. My family has lived, more or less, within the same 30 mile radius for much of the past 200 years, so perhaps we’re fairly easy to find.
By the way, in case you were wondering, of the articles he located, none could be said to even remotely resemble a police blotter. Proving, I would add, that the Peiper clan has a long history of rule followers…or fast runners…depending on your perspective!
Cheers.
Steve
Steven E. Peiper
Don’t Spend it All in the Same Place:
The Brooklyn Daily Eagle
Brooklyn, New York
15 Jul 1916
DR. ANNE E. KING
WINS DIVORCE SUIT
Well-Known Alienist Is Also
Granted Alimony of
$8 a Week.
“BURDENED WITH A HUSBAND.”
Couple Married in 1900, but Separated
in 1905—No Defense Interposed.
Dr. Anna E. King of 494 Willoughby avenue, one of the best-known woman physicians of Brooklyn, today obtained from Justice Kelly, in the Supreme Court, a decree of divorce from her husband, John H. King. Her attorney, Forrest S. Chilton, moved before the Court that the decree carry with it alimony of $8 a week, payable at the Doctor’s own home.
Dr. King is well known because of her many appointments by the Supreme Court and County Court to examine defendants in criminal cases, to decide whether they were responsible for their crimes, and her practice has caused recognition of her as an alienist of ability.
Although she used to be quite active in the cause of woman suffrage, and had a wide circle of friends, her domestic life and troubles were a closed book to all her acquaintances, and many of those who knew her in a professional way did not even know she was married until the granting of the divorce by Justice Kelly today revealed that she had been “burdened with a husband,” as she herself expressed it, since 1900.
Dr. King and her husband got along well until about 1905, when they separated. John H. King is a printer, widely known in newspaper and publication offices. Out of his earnings, which were supposed to be much less than the income of his wife, he agreed to pay her $8 a week. A stipulation was signed and thus the notoriety of a contest in the alimony court was, for the time being, avoided.
The divorce action was begun by Dr. King against her husband early this year. Lawyer Chilton produced evidence before Justice Kelly to the effect that King had been living at 164 Schermerhorn Street with a woman known as Mrs. Leary. King was represented at the trial by his lawyer, George K. Hunton, but interposed no defense to the action.
Editor’s Note: An “alienist” is the term formerly used for a psychiatrist.
Tessa’s Tutelage:
Dear Readers:
I hope this finds your well! This past week I am house sitting and gained a greater appreciation for rain, and maybe the lack thereof. Half of me was very happy that the grass was perpetually burnt, as I was excused from mowing their lawn. On the other hand I nearly developed tennis elbow from the near constant watering required to keep their plants alive. Luckily the rain has held off tonight because we have an important softball game. Hurwitz & Fine with only three wins this season, and in ninth place in the league, could stand to make it to the playoffs this year. Fingers crossed that H&F has more luck that other Buffalo Sports teams… (Go Bills!)
This week we have some fairly surprising topics in the world of No-Fault. Generally most cases seem to center around non-appearance and medical necessity. Today, we have four rather interesting cases. I won’t spoil your fun by telling you what they are this week (is the anticipation killing you? Luckily CP is a searchable document!).
Happy reading!
Tessa
Tessa R. Scott
Highlights of the Week’s Issue (attached):
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
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Mold Exclusion Removed Coverage for (Apparently) a Mold Claim
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A Cautionary Tale: Mind the Gap or Take the Rap. Insurer had Obligation to Notify Insured that it was (and Why it was) Changing Underlying Coverage Requirements of Personal Umbrella Policy or Policy is Reformed. That Insured Renewed His Policy for Five Years Thereafter Doesn’t Change. Do Thousands Flee? A Debate.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]
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With the courts on summer recess, not a single case on which to report.
TESSA’S TUTELAGE
Tessa R. Scott
[email protected]
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Master Arbitration Has Different Timeliness Timetables And Will Proceed Even If A Party Fails To Appear Or Submit Materials And That The Master Arbitrator Must Make A Determination On The Merits, Not In Favor Of An Appearing Party Solely On The Default Of The Other Party
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Defendant’s Failure to Serve the Supreme Court's Judgment with Notice of Entry Is Not Fatal In view Of the Binding and Conclusive Effect of the Declaratory Judgment
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As Plaintiff Failed to Allege any Prejudice Resulting from Defendant's Seeking Summary Judgment Based on an UnpleadedAffirmative Defense, the Court Deemed Defendant's Answer Amended
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Privity Argument Failed because it was Not Preserved for Review
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
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Asked to Review Contractor’s Tort Duty, the Court, sua sponte, Elects to Address Triviality of Defect in Question
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
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Second Circuit Punts One Question of Whether Contribution Permitted Where One Primary Policy Contains “Other Insurance” Clause and Another Primary Policy Does Not, Under California Law
JEN’S GEMS
Jennifer A. Ehman
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A Carrier’s Rights as Subrogee are no Greater than those of the Subrogor
BARNAS ON BAD FAITH
Brian D. Barnas
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Plaintiff’s Bad Faith Claim was Dismissed Based on Plaintiff’s Failure to Allege its Insurer had Knowledge its Denial was Unreasonable
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Good Faith and Fair Dealing Claims Dismissed Based on the Policy’s One Year Statute of Limitations
PHILLIPS’ FEDERAL PHILOSOPHIES
Jennifer J. Phillips
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Separation Ambiguity
EARL’S PEARLS
Earl K. Cantwell
[email protected]
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Nothing this week.
Enjoy the summer days, they too fly by quickly.
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
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
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]
07/06/16 Cleary v. Automobile Insurance Company of Hartford
Appellate Division, Second Department
Mold Exclusion Removed Coverage for (Apparently) a Mold Claim
This was a mold exclusion case. The court held that an exclusion from coverage must be specific and clear in order to be enforced, and an ambiguity in an exclusionary clause must be construed most strongly against the insurer but that an unambiguous policy provision must be accorded its plain and ordinary meaning, and the plain meaning of the policy's language may not be disregarded in order to find an ambiguity where none exists.
Here, in support of that branch of its motion which was, in effect, for summary judgment declaring that the plaintiffs are not entitled to coverage for certain losses under homeowners' insurance policies it issued, the defendant Automobile Insurance Company of Hartford, Connecticut established its prima facie entitlement to judgment as a matter of law by demonstrating that the claimed losses fell within the mold exclusion clause in the subject policies.
07/06/16 Gotkin v. Allstate Insurance Company
Appellate Division, Second Department
A Cautionary Tale: Mind the Gap or Take the Rap. Insurer had Obligation to Notify Insured that it was (and Why it was) Changing Underlying Coverage Requirements of Personal Umbrella Policy or Policy is Reformed. That Insured Renewed His Policy for Five Years Thereafter Doesn’t Change. Do Thousands Flee? A Debate.
At issue on this appeal is Insurance Law § 3425(d)(1), which requires an insurer to notify a policyholder, at least 45 days before the end of the coverage period, of its intention to condition renewal "upon change of limits or elimination of any coverages," and to provide a specific reason for so conditioning renewal. The court found that the notice requirement applies to an umbrella policy as well, where an umbrella policy requires certain levels of underlying coverage to be maintained. A failure to provide that notice provides a basis for reforming the policy.
Starting in 1990, Gotkin had two policies with Allstate, a primary policy with limits of $100,000/$300/000 (“primary policy”) and an excess liability insurance policy with $1,000,000 in limits (“umbrella policy”). The umbrella policy required that the primary policy contain at least $100,000/$300,000 in underlying policy limits. In 2004, Godkin switched primary coverage to Nationwide Insurance Company (“Nationwide”), keeping the same policy limits of $100,000 per claimant and $300,000 per occurrence.
In October of 2004, the Godkin renewed his Allstate umbrella policy while continuing to maintain the same underlying automobile insurance policy limits. However, he was billed an increased premium. By letter dated February 3, 2005, Allstate informed the plaintiff that the increased premium for the umbrella policy was billed in error. Enclosed with the February 2005 letter was an amended policy declarations page, which provided that for the premium period beginning October 14, 2004, Allstate required underlying primary automobile insurance policy limits of $250,000/$500,000. However, there was no language in the February 2005 letter notifying the plaintiff of this change. Rather, the only indication of this change was in an enclosed amended declarations page. Also enclosed with the February 2005 letter was an "Important Notice Concerning the Insurance You Must Maintain (Not a part of the Policy)," advising the plaintiff, among other things, to carefully read the provisions concerning the "Required Underlying Insurance."
According to Allstate, its decision to increase the amount of underlying automobile insurance the plaintiff was required to maintain was prompted by the plaintiff's cancellation of his Allstate automobile insurance policy. There was there was therefore a gap created between $100,000 and $250,000. .
A renewal policy for the period of October 14, 2005, through October 14, 2006 was sent without specific mention of the “gap” or the need to increase primary coverage to $250,000 per claimant and $500,000 per occurrence. The plaintiff renewed his umbrella policy with Allstate each year through 2009.
In July 2009, the plaintiff was involved in an automobile accident with another vehicle. When the personal injury action was commenced, Allstate told the insured of the gap and denied coverage for any damages between $100,000 and $250,000, but extended coverage for any damages over $250,000.
By summons and verified complaint dated May 22, 2012, the plaintiff commenced this action against Allstate. As relevant to this appeal, the plaintiff sought reformation of his insurance contract with Allstate to provide coverage of $100,000 to $1 million without any gap. The plaintiff additionally sought declaratory relief directing Allstate to fill the umbrella policy's gap in coverage based upon its failure to timely notify him of a change in the underlying limits, in violation of Insurance Law § 3425(d)(1).
The insured subsequently moved for summary judgment to reform the umbrella liability insurance policy to provide coverage in the originally issued amounts of $100,000 to $1 million, and for a declaration that Allstate must provide coverage to him for amounts between $100,000 and $250,000. In support of his motion, arguing that he was entitled to reformation of his umbrella policy because the evidence demonstrated that Allstate changed the underlying automobile policy limits without notifying him of the change. The plaintiff maintained that the February 2005 letter did not satisfy the notice requirements of Insurance Law § 3425(d)(1) because it only addressed the change to the underlying policy limits in the "third page buried in the declaration[s]."
Even assuming that this letter constituted notice of the policy change, the plaintiff maintained that it did not satisfy statutory requirements because it did not set forth an explanation for the policy change as required by Insurance Law § 3425(d)(1). The plaintiff further alleged that Allstate violated Insurance Law § 3425(d)(3), which requires an insurer to notify an insured of its intention to "substitute at the annual renewal date another approved policy form," and to provide the insured with a "full and clear comparison of the differences between the policy form as last issued and the substitute policy form."
Insurance Law § 3425(d)(1) provides:
"Unless the insurer, at least forty-five but not more than sixty days in advance of the end of the policy period, mails or delivers to the named insured, at the address shown in the policy, a written notice of its intention not to renew a covered policy, or to condition its renewal upon change of limits or elimination of any coverages, the named insured shall be entitled to renew the policy upon timely payment of the premium billed to the insured for the renewal. The specific reason or reasons for nonrenewal or conditioned renewal shall be stated in or shall accompany the notice"
The court held that a change to the requirements of the underlying limits to the primary automobile insurance policy, which would create a gap in coverage in an umbrella policy and upon which renewal is conditioned, requires that the insurer provide proper notice pursuant to Insurance Law § 3425(d)(1), and that the failure to do so provides a basis to grant reformation of the umbrella policy.
A change of the underlying limits constituted an "elimination of any coverages," which required written notice. As a result of the change of the underlying limits, the plaintiff was no longer covered for the gap between the $100,000/$300,000 coverage of the primary policy and the $250,000/$500,000 coverage of the umbrella policy. Put another way, the change in the underlying limits eliminated the umbrella policy's coverage of automobile accidents from $100,000 to $250,000 per claimant and from $300,000 to $500,000 per accident. In effect, the plaintiff's coverage was eliminated for the extent of the gap in coverage.
Thus, Allstate was required, "at least forty-five but not more than sixty days in advance of the end of the policy period," to mail or deliver to the plaintiff "a written notice of its intention . . . to condition its renewal" on what was a new condition to coverage under the umbrella policy (Insurance Law § 3425[d][1]). Further, "[t]he specific reason or reasons for . . . conditional renewal" were required to "be stated in or . . . accompany the notice".
That the insured might have known of the gap, read the policy or should have read the policy, was of no consequence.
Editor’s Note: As only a well-oiled coverage team can do, this decision let to two days of debate between and among the H&F coverage team.
While we might not have liked it, we understood the court’s view that the change in underlying coverage requirements might be a significant enough change in a coverage condition to justify the notice described by the statute and the accompanying “specific reasons” for the conditional renewal.
More troubling for some (particularly me) was the second part of the decision, the part that punishes the carrier, years later, for the mistake.
Here’s my take:
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In February 2005, the insured is advised, by the new declarations page, that the underlying limits were now to be $250,000, rather than $100,000.Let’s assume for the purposes of discussion, that the notice was defective because there was no information provided about the reason for the change.
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A renewal policy was issued for the October 2005 – October 2006 term was issued, with a requirement for the same $250,000 underlying limits.
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A renewal policy was issued for the October 2006 – October 2007 term.
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A renewal policy was issued for the October 2007 – October 2008 term.
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A renewal policy was issued for the October 2008 – October 2009 term (and the accident occurred during this policy period).
For the last FOUR renewals, there was no change in coverage. The insured received the declarations page. Even assuming that the 2005 change was ineffective for that year, the subsequent policy years did not change the coverages from the year preceding. The insured received his declarations page. He had an obligation to read it.
I subscribe to the view that the insured, provided with a copy of his policy, has an obligation to read it. We see that in the insurance agent E&O cases:
Although Sutton Park is correct that the Supreme Court mistakenly concluded that no cause of action sounding in negligence could lie against Allstate based on its agent's failure to procure a valid policy …, where, as here, Sutton Park received the subject policy years prior to the incident for which coverage was sought, and repeatedly renewed the policy as originally written, "the plaintiff is conclusively presumed to have read and assented to its terms" …
Portnoy v Allstate Indem. Co. 82 AD3d 1196 (2nd Dept. 2011)
The court rejected that line of cases, asserting that allowing insurers to ignore the statutory requirement of notice, the “protections afforded thereunder to policyholders would be severely undermined, if not eviscerated”.
I get that for the first year’s renewal. However, I do not believe that an insured can simply ignore clear policy term provided to him in proper renewals over another four years.
Others may disagree, and some do.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]
With the courts on summer recess, not a single case on which to report.
TESSA’S TUTELAGE
Tessa R. Scott
[email protected]
07/06/16 AutoOne Ins. Co. v Eastern Is. Med. Care, P.C.
Appellate Division, Second Department
Master Arbitration Has Different Timeliness Timetables And Will Proceed Even If A Party Fails To Appear Or Submit Materials And That The Master Arbitrator Must Make A Determination On The Merits, Not In Favor Of An Appearing Party Solely On The Default Of The Other Party
The plaintiff, AutoOne Insurance Company, a no-fault insurance carrier, was entitled to commence this action to compel the de novo adjudication of the insurance dispute at issue since a master arbitrator's award in favor of the defendant, Eastern Island Medical Care, P.C., as assignee of Jaime Benitez, exceeded the statutory threshold sum of $5,000
The Appellate division Court concluded that the Supreme Court erred in denying the portion of the plaintiff's motion which was for summary judgment on the ground that the demand for a trial de novo was untimely filed. The Court based its decision on the fact that this arbitration dispute was originally submitted to the American Arbitration Association and was not court-ordered; thus, the 35-day timetable applied by the court was not applicable. Instead, the plaintiff had 90 days from the date the master arbitrator's award was mailed to it to commence this action, and the plaintiff did so. Therefore, the Supreme Court erred in granting the defendant's cross motion to confirm the award of the master arbitrator on the ground that this action was not timely commenced.
The defendant's argument that the plaintiff failed to exhaust its administrative remedies or satisfy a condition precedent because the plaintiff defaulted before the master arbitrator was unconvincing to the Court. The court stated “The insurance regulations specifically provide that a master arbitration will proceed even if a party fails to appear or submit materials and that the master arbitrator must make a determination on the merits, not in favor of an appearing party solely on the default of the other party.”
The Court also held that the Supreme Court also should have granted those branches of the plaintiff's motion which were pursuant to CPLR 3211(b) to dismiss the first (failure to exhaust administrative remedies), second (default in master arbitration proceeding), and fourth (failure to satisfy condition precedent) affirmative defenses, as those defenses were without merit as a matter of law).Since the Supreme Court did not consider the merits of those branches of the plaintiff's motion, the matter was remitted to the Supreme Court, Nassau County, for a determination of those branches of the motion.
07/07/16 Atlantic Chiropractic, P.C. v Liberty Mut. Fire Ins. Co.
Appellate Term, Second Department
Defendant’s Failure to Serve the Supreme Court's Judgment with Notice of Entry Is Not Fatal In view Of the Binding and Conclusive Effect of the Declaratory Judgment
In this action by a provider to recover assigned first-party no-fault benefits, defendant moved for summary judgment dismissing the complaint on the ground that the action is barred by virtue of res judicata. Defendant stated that it had been awarded a declaratory judgment on default in the Supreme Court, Bronx County. That judgment declared that defendant has no obligation to pay assigned first-party no-fault claims due to the failure of plaintiff's assignor to appear for duly scheduled examinations under oath (EUOs). Plaintiff cross-moved for summary judgment. By order entered September 3, 2014, the Civil Court denied defendant's motion and granted plaintiff's cross motion. Defendant's appeal.
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The Supreme Court judgment declared that the failure of plaintiff's assignor to appear for duly scheduled EUOs constituted a material breach of a condition to coverage and that, as a result, defendant is not obligated to pay first-party no-fault benefits related to the subject accident. The Civil Court denied defendant's motion on the ground that the default declaratory judgment in the Supreme Court action had not been entered by the Bronx County Clerk and served with notice of entry. However, contrary to the determination of the Civil Court, defendant's moving papers established that the judgment had been entered on May 21, 2013. Moreover, defendant's failure to serve the Supreme Court's judgment with notice of entry is not fatal in view of the binding and conclusive effect of the declaratory judgment. Consequently, in light of the Supreme Court's declaratory judgment, defendant's motion for summary judgment should have been granted based on res judicata, as any judgment in favor of plaintiff in this action would destroy or impair rights or interests established by the judgment in the declaratory judgment action
Accordingly, the judgment is reversed, the order entered September 3, 2014 is vacated, defendant's motion for summary judgment dismissing the complaint is granted, and plaintiff's cross motion for summary judgment is denied.
07/07/16 J.K.M. Med. Care, P.C. v Liberty Mut. Fire Ins. Co.
Appellate Term, Second Department
As Plaintiff Failed to Allege any Prejudice Resulting from Defendant's Seeking Summary Judgment Based on an Unpleaded Affirmative Defense, the Court Deemed Defendant's Answer Amended
In this action by a provider to recover assigned first-party no-fault benefits, defendant moved for summary judgment dismissing the complaint on the ground that the action is barred by virtue of res judicata. Defendant showed that it had been awarded a declaratory judgment on default in the Supreme Court, Bronx County, which judgment declared that defendant has no obligation to pay assigned first-party no-fault claims to plaintiff, among others, with respect to the motor vehicle accident at issue, due to the failure of plaintiff's assignor to appear for duly scheduled examinations under oath.
The rule is that "an unpleaded defense may serve as the basis for granting summary judgment in the absence of surprise or prejudice to the opposing party.” Defendant failed to include res judicata as an affirmative defense in its answer, or to move to dismiss the complaint on that ground pursuant prior to serving its answer. Its proper remedy was to move for leave to amend its answer in order to include that defense. However, Defendant never moved to amend and instead moved for summary judgment based on res judicata and also sought "such other and further relief as [the Civil Court] may deem just and proper."
As plaintiff, in opposition to defendant's motion, failed to allege any prejudice resulting from defendant's seeking summary judgment based on that unpleaded affirmative defense, under the circumstances, and in the interest of justice, the Court deemed defendant's answer amended to include the affirmative defense of res judicata.
07/08/16 Island Life Chiropractic, P.C. v Unitrin Auto & Home Ins. Co.
Appellate Term, Second Department
Privity Argument Failed because it was Not Preserved for Review
Island Life Chiropractic, P.C. (Island Life) commenced this action in the Civil Court on August 19, 2013 to recover assigned first-party no-fault benefits for services. In its answer to the complaint, the insurer (Kemper) asserted, among other things, that Island Life's action is barred by collateral estoppel and res judicata.
Before Island Life commenced its action, a declaratory judgment action had been commenced in the Supreme Court, New York County, by Kemper against Island Life, five other providers and the assignor herein, alleging that he had breached the terms of the insurance policy by failing to appear for duly scheduled examinations under oath. After Island Life had served an answer in the Supreme Court action, Kemper moved in that court for an order declaring there was no coverage for Island Life's claims. By order entered October 24, 2013, the Supreme Court declared that Island Life was "not entitled to no-fault reimbursements or benefits for the motor vehicle accident.
Thereafter, defendant moved in the Civil Court for summary judgment dismissing the complaint on the ground that the present action is barred by virtue of the order in the declaratory judgment action. By order entered July 14, 2014, the Civil Court granted defendant's opposed motion.
Island Life's contention on appeal was that defendant Unitrin was not in privity with Kemper, and, thus, that the order in the declaratory judgment action in favor of Kemper has no preclusive effect in the instant action against Unitrin. This argument failed because it was unpreserved for appellate review, because plaintiff failed to raise the issue in the Civil Court. Thus, there was no merit to plaintiff's remaining contentions with respect to the lack of preclusive effect of the order in the declaratory judgment action. Consequently, the Court was unwilling to disturb the Civil Court's determination that the action is barred by res judicata.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
07/05/16 Myles v Spring Valley Marketplace
Appellate Division, First Department
Asked to Review Contractor’s Tort Duty, the Court, sua sponte, Elects to Address Triviality of Defect in Question
Plaintiff commenced this action after apparently tripping and falling over a metal bar connected to a shopping cart corral. At the time of the incident, plaintiff was retrieving a shopping cart from the corral outside of a Christmas Tree Store. Plaintiff sued Christmas Tree Stores, who, in turn, commenced a third-party action against McCue as the designer of the corral.
McCue moved to dismiss the claim on the basis that it did not owe plaintiff a duty under the Espinal line of cases. However, even as a third-party contractor, because McCue designed the product in question, a question of fact existed as to whether it fell within an exception to the Espinal doctrine. Although not expressed in the decision we presume the question of fact existed based upon the fact that McCue could have been said to have “launched an (or in this case the) instrument of harm (ie. the defective corral).
On appeal, the case took a slightly different turn. The Appellate Division focused on the fact that the bar upon which plaintiff tripped was only 3/8” off of the ground. Moreover, testimony established that the lighting was sufficient, and that the smooth silver bar was conspicuous against the black, rough surface of the parking lot. McCue also produced an expert witness who provided an affidavit that the corral in question did not violate any safety rule, regulation or standard.
Plaintiff, who was unable to submit any evidence to raise a triable issue of fact as to the triviality of the alleged defect, argued instead that McCue’s motion focusing on duty should not be read to provide the Court an avenue to dismiss the claim on the basis of a trivial defect. The Court rejected this argument by noting that the bar, and the safety of it, including its height, was placed into issue by the plaintiff and considered by the lower court. As such, the Court was free to review all of the evidence to determine if plaintiff presented prima facie evidence of negligence. Here, the Court found they did not and accordingly dismissed the Complaint.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
07/07/16 Migdal Insurance Company, Ltd. v. The Insurance Company of the State of Pennsylvania
United States Court of Appeals, Second Circuit
Second Circuit Punts One Question of Whether Contribution Permitted Where One Primary Policy Contains “Other Insurance” Clause and Another Primary Policy Does Not, Under California Law
In this case, Migdal Insurance issued a liability policy to Kinetic Systems, and other insureds. Meanwhile, the Insurance Company of the State of Pennsylvania (let’s call them ICOSP for short) also issued a liability policy. Both policies appeared to provide primary coverage. When the insured was sued, Migdal picked it up, while ICOSP refused to defend. Thus, Migdal defended the case, paid $1.75 million to settle it, and sought contribution from ICOSP. Then came the analysis of the other insurance clauses in order to establish priority of coverage. Fairly straight forward.
Here’s the rub – the Migdal policy did not contain an “other insurance” provision. ICOSP’s policy did. It stated that “This insurance is excess over: ... Any of the other insurance or your self-insurance plan that that [sic] covers a loss on the same basis”. Moreover, ICOSP’s policy said that “All payments made under any local policy issued to you by us or any other insurance company will reduce the Limits of Insurance of this policy”. Now, given this, the questions posed to the Second Circuit were: 1) is Migdal entitled to equitable contribution from ICOSP, where they are both primary but one has no “other insurance” clause? and 2) is the ICSOP’s policy language that limits contribution even enforceable?
However, the added monkey wrench in this was the fact that these polies were governed by California law. As such, the Second Circuit dodged the questions entirely. Either 1) a policy is only excess if it expressly states so and references specifically identified, which here it did not; or 2) as there is no conflict between the “other insurance” clauses (since there’s only one), they don’t cancel each other out. The Second Circuit could not be sure what the rule in California would or should be – “It is therefore unclear whether an insurer with an ‘other insurance’ clause must contribute to an insurer whose policy does not contain such a clause”. So, they punted the question to the Supreme Court of California.
Jennifer A. Ehman
07/01/16 Admiral Indem. Co. v. Ingber
Supreme Court, New York County
Hon. Barry R. Ostrager
A Carrier’s Rights as Subrogee are no Greater than those of the Subrogor
This decision comes out of a motion to reargue a prior decision issued by Judge Ostrager. The Ingbers were residents of a building owned by Park Regis Apartment Corp. A faulty dishwasher caused damage to Park Regis, and Admiral, as the insurer of Park Regis, paid for the damage sustained by the building. The Ingbers’ lease with Park Regis contained a waiver of subrogation provision which operated to prevent Park Regis from asserting a claim against the Ingbers as long as Park Regis had an insurance policy that recognized and accepted the waiver of subrogation provision in the lease.
At oral argument on Ingbers’ motion for summary judgment and in their papers, they were unable to either quote completely or identify the relevant portion of the Admiral policy relating to its waiver of subrogation.
On reargument, the Ingbers’ counsel demonstrated that the carrier’s rights as subrogee are no greater than the rights of Park Regis vis-à-vis the Ingbers and, because Park Regis waived its subrogation rights against the Ingbers, Admiral has no rights to proceed against them. Thus, the Ingbers should have been granted summary judgment as to Adirmal’s claims. The court agreed, granted reargument and dismissed Admiral’s claims against the Ingbers.
However, the court held Admiral is entitled to proceed with its subrogation claim against Adriatic Plumbing & Heating Corp. And, Adriatic correctly argued that the Ingbers failed to establish their right to dismissal of any counterclaims asserted against them.
Brian D. Barnas
07/06/16 Product Source International, LLC v. Foremost Signature Insurance Company
United States District Court, District of New Jersey
Plaintiff’s Bad Faith Claim was Dismissed Based on Plaintiff’s Failure to Allege its Insurer had Knowledge its Denial was Unreasonable
Product Source International, LLC (“PSI”) purchased a commercial general liability policy from Maryland Casualty Company. Foremost Signature Insurance Company underwrote the policy, and Farmers managed claims for Maryland and Foremost (collectively the “Insurers”). The policy PSI purchased provided coverage for personal and advertising injuries.
PSI sells cigarette filter products. The cigarette filters are sold in a white box with a blue background printed with the phrases “NIC OUT” and “LESS TAR – MORE TASTE.” PSI had previously applied for and was granted federal registration of the “NIC OUT” phrase. In 2013, PSI’s trademark was cancelled after a trademark proceeding commenced by Nahshin claiming he owned the mark. PSI appealed the decision to the United States District Court for the Eastern District of Virginia. In that proceeding, Nahshin brought counterclaims against PSI, including a false designation of origin claim under the Lanham Act.
PSI tendered a demand for defense of the counterclaims to the Insurers. The Insurers disclaimed coverage because PSI had submitted no documentation that the claims were covered under its CGL policy. PSI demanded that the Insurers withdraw their disclaimer, explaining that the counterclaims were covered under the policy. PSI also claimed that the Insurers had no colorable basis for disputing that the use of the phrase “NIC OUT” constituted the use of an advertising slogan and the counterclaims were for damages based on trade dress infringement.
The Insurers agreed to provide a defense to the counterclaims. Subsequently, Nahshin was granted summary judgment on all of his counterclaims against PSI, but he did not receive money damages. PSI appealed the ruling to the Court of Appeals. Thereafter, the Insurers informed PSI that they were no longer required to defend the action, and that they no longer had an obligation to defend or indemnify PSI.
PSI filed an action against the Insurers seeking a declaratory judgment on the duty to defend and indemnify and bad faith. The Insurers moved to dismiss.
First, the court agreed with PSI that its claim regarding the defense obligation was not moot. The court noted that the Insurers made inconsistent statements regarding the duty to defend. PSI had a remaining personal stake in the answer to the question regarding the duty to defend as the trade dress case was ongoing.
The court also disagreed with the Insurers argument that PSI’s claim regarding the duty to indemnify was moot and unripe. It reasoned that appeals had already been filed in the trade dress case, and the policy required the Insurers to defend PSI in an “ongoing action.” Because the underlying case was ongoing the claim for indemnity was not so remote or contingent as to render the duty to indemnify unripe for adjudication.
Finally, the court dismissed PSI’s bad faith claim, without prejudice to PSI’s right to amend and cure the deficiency in the pleadings. While PSI alleged that the Insurers lacked a reasonable basis for denying the claim, it failed to set forth the Insurers knowledge or reckless disregard for the fact that they had no reasonable basis to deny insurance benefits.
07/06/16 Boisvert v. State Farm Fire and Casualty Company
United States District Court, District of New Jersey
Good Faith and Fair Dealing Claims Dismissed Based on the Policy’s One Year Statute of Limitations
On October 29, 2012, Plaintiffs Jacques Boisvert and Crystal Boisvert suffered damage to their home in Phillipsburg, New Jersey as a result of Hurricane Sandy. At the time, Plaintiffs' home was covered by an insurance policy issued by State Farm. Following Hurricane Sandy, Plaintiffs immediately reported visible damage to State Farm. However, on December 27, 2012, Plaintiffs learned that their property suffered structural damage as well. As such, Plaintiffs immediately reported the structural damage to Defendant
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On about December 27, 2012, State Farm sent correspondence indicating it would pay $2,650.43 for the initial damage to Plaintiffs’ home. On the same day, Defendant also sent Plaintiffs a letter advising them of the requirement to file an internal appeal with Defendant if Plaintiffs contested Defendant's coverage decisions and only then, if they were unsatisfied with the result, were they able to contract the New Jersey Department of Banking and Insurance. Plaintiffs allege that this letter led them to believe that they had to appeal through State Farm's internal process.
Thereafter, State Farm sent an adjuster to evaluate the structural damage. On April 29, 2013, State Farm sent Plaintiffs a letter indicating that the structural damage was caused by settling and was not covered by the Policy. Plaintiffs informed Defendant that they disagreed with its decision not to cover the structural damages to their home. Subsequently, Defendant sent a second adjuster to Plaintiffs' home to assess the structural damage. Nevertheless, on July 26, 2013, State Farm sent Plaintiffs a letter again indicating that the structural damage was not covered by the Policy. In the July 26, 2013 letter, Defendant invited Plaintiffs to submit additional information for Defendant's consideration.
Plaintiffs then participated in mediation with State Farm to resolve the dispute on October 3, 2013. During this mediation, Defendant invited Plaintiffs to provide additional documents in support of their claims for reconsideration. Ultimately, Defendant denied Plaintiffs' claims
On September 16, 2014, Plaintiffs filed a three-count complaint, alleging breach of contract, breach of good faith and fair dealing, and a violation of the New Jersey Consumer Fraud Act. State Farm moved to dismiss the claim as time-barred by the Policy’s one year statute of limitations.
The court agreed with State Farm that the claim was time-barred. It reasoned that the July 26, 2013 letter was an unequivocal denial of coverage. Plaintiffs’ action, filed in September of 2014, was thus untimely under the Policy’s one year statute of limitations. In so ruling, the court concluded that the mediation between the parties did not toll the statute of limitations. The court found no basis for equitable tolling of the limitations period. Accordingly, the causes of action for breach of contract and breach of good faith and fair dealing were dismissed.
However, the court reached a different result with respect to Plaintiff’s claims under the New Jersey Consumer Fraud Act. Plaintiffs’ allegations of fraudulent and deceptive conduct were sufficient to state a claim. Further, the consumer fraud act was distinct from the breach of contract and breach of good faith and fair dealing claims, which centered on wrongful denial of payment.
PHILLIPS’ FEDERAL PHILOSOPHIES
Jennifer J. Phillips
06/29/16 Hastings Development, LLC v. Evanston Insurance Company
United States District Court, Eastern District of New York
Separation Ambiguity
Plaintiff Hastings Development, LLC commenced this action against Defendant Evanston Insurance Company seeking a declaration that Evanston was required to indemnify Hastings in a personal injury action pending in state supreme court. This decision resolves the defendant insurer’s motion for reconsideration of a prior decision and order resolving this insurance coverage dispute, as well as the plaintiff insured’s motion to alter the declaratory judgment issued as a result of that prior order.
The relevant commercial general liability policy was issued by Evanston to the “Named Insureds,” with the first two pages of the policy declarations listing Universal Photonics, Inc. as the “Named Insured” and the third page of the policy declarations stating “Named Insureds: Universal Photonics, Inc.; JH Rhodes Co., Inc.; Facilities Realty Management, LLC; and Hastings Development, LLC.” The policy contained an “Employers Liability Exclusion” which excluded coverage for “any claim, suit, cost or expense arising out of bodily injury to” an “employee of the Named Insured arising out of and in the course of employment by any insured, or while performing duties related to the conduct of the Insured’s business.” In the underlying state court action, an employee of Universal Photonics sought damages from Hastings for bodily injuries allegedly sustained during the course of his employment. Evanston disclaimed coverage based on the Employers Liability Exclusion.
In this litigation, Hastings relied on a Separation of Insureds clause, pursuant to which the rights and duties under the policy applied “[a]s if Named Insured were the only Named Insured” and “[s]eparately to each insured against whom claim is made or ‘suit’ is brought.” Hastings argued that, as such, the phrase “an employee of the Named Insured” in the Employers Liability Exclusion must be read as “an employee of Hastings.” Evanston countered that the phrase must be read as applying to claims made by employees of any of the Named Insureds.
In its original October 30, 2015 decision and order, the district court found both interpretations to be reasonable and therefore resolved the ambiguity against the drafter of the policy, Evanston, and in favor of Hastings. At issue in the present decision and order is Evanston’s motion for reconsideration and Hasting’s motion to modify the wording of the resulting judgment.
With respect to Evanston’s motion, the district court noted the strict standard for granting a motion for reconsideration, which generally requires a moving party to point to controlling decisions or data overlooked by the court. Here, the district court rejected that the summary, or unpublished, Second Circuit case of Endurance Am. Specialty Ins. Co. v. Century Sur. Co., 630 F. App’x 6 (2015) required a declaration in Evanston’s favor in this matter. The district court noted that unpublished summary orders are not ‘controlling’ for the purpose of the motion for reconsideration standard. The court went on to distinguish that case, which despite have a similar exclusion for injuries to employees of the named insured, involved an ‘additional insured,’ not a named insured.
The district court then appeared to back away slightly from its conclusion in the prior decision and order that both parties’ interpretations were reasonable, explaining: “Here, by contrast, there are multiple Named Insureds under the policy and therefore, there is ambiguity as to what ‘an employee of the Named Insured’ means in the context of the Employers' Liability Exclusion. Hastings is a ‘Named Insured’ under the policy. Thus, it would appear that the separation of insureds clause which applies the insurance ‘separately to each insured against whom claim is made or “suit’ is brought,’ would require the Court to interpret the policy as if Hastings is the only ‘Named Insured’ under the policy. Under that logic, ‘the Named Insured” in the Employers Liability Exclusion should be replaced with ‘Hastings.’ As [the underlying plaintiff] was not an employee of Hastings, the Employers Liability Exclusion does not bar coverage to Hastings for the [underlying] Action.” The district court then concluded, regardless of what rationale was used – a finding that the policy was ambiguous or that the policy language unambiguously supported Hastings’ argument – reconsideration of its prior finding in Hastings’ favor was unwarranted.
Finally, the district court considered Hastings’ motion to alter the Amended Judgment, which adjudged and declared that Hastings was “entitled to indemnification for the [underlying] Action subject to the applicable limits on damages established in the Policy.” Hastings argued that the judgment should declare that Evanston “shall reimburse [Hastings] all legal fees and expenses incurred in the [underlying] action.” The district court noted that declaratory relief in federal court is discretionary, and that the wording and scope of any declaratory judgment is similarly within the discretion of the court. Because Hastings’ proposed declaration afforded relief “significantly broader than the language of the Policy,” the district court denied the motion to alter the amended judgment.
EARL’S PEARLS
Earl K. Cantwell
[email protected]
Nothing this week.
