Coverage Pointers - Volume XI, No. 5

Dear Coverage Pointers Subscribers:

On behalf of the New York State judicial system, I apologize for the scant number of cases in this week's issue.  As I have mentioned in other late summer offerings, the courts have little to say between the Fourth of July and Labor Day, particularly towards the end of that summer cycle.

This week brought me to the Bronx and Nassau County for back-to-back court appearances.  I have frequent flier miles for sale to the highest bidder. Interesting insurance appeal next week at the Fourth Department.  We'll report on that in a future issue.

We welcome back Scott "The Duke of Lead" Duquin who brings us some insight into new developments in lead paint regulation. 

For our new subscribers, who joined us due to a nice mention by two of our subscribers in a Yahoo newsgroup, welcome.  Every two weeks you will hear from us, with far more substance than this issue offers.

From Audrey Seeley, the ever-hard working Queen of No Fault:

I cannot believe this weekend is Labor Day.  Where did time go??

We have a few cases to report on and there is an Insurance Department Circular Letter regarding HCRA charges paid directly to the Pool can no longer be offset against the policy limits.  If you would like a copy of the Circular Letter please let me know.

Fall is a great time to get training in and if anyone needs some refresher on No-Fault claims handling practices, obtaining proper IME/Peer reviews, or simply understanding what some of the recent trends are in the area please let us know.

Also, this November 18-19 DRI's Insurance Coverage and Practice Symposium is being headed up by our own Dan Kohane, Esq.  Dan has arranged to have representatives from the New York State and State of New Jersey Insurance Departments to speak on the new challenges facing the industry.  Also, there is a good mix of topics toward property and casualty such as what conduct causes allegations of bad faith under a property policy, what are the emerging issues in employment practices liability insurance and the impact of deductibles and SIRs when multiple policies are triggered.  It will no doubt be a great conference and Autumn in NY is so exciting!!  We hope you can join us and if you need the brochure send me an email at [email protected].

Enjoy Labor Day!


Training, Training

We travel near and farm to provide in-office claims training.  Here are a few suggested topics.  We can manuscript a program on any topic of interest.  Let us know how we can help:


      1. Primary and Excess Insurance - Rights & Responsibilities
      2. SUM Claims Handling
      3. Preventing Bad Faith Claims - First Party Cases
      4. Preventing Bad Faith Claims - Liability Cases
      5. New Rules Regarding Notice, Developing Proof of Prejudice and a Strategic to Avoiding Direct Actions
      6. The Cooperation Clause - How to Handle
      7. NY Disclaimer Letter - Nuts & Bolts: How to Create and Write and Send a Disclaimer Letter, and How Not To. (The Reservation of Right Letter Myth)
      8. No- Fault Arbitrations and Appeals: Mock Arbitrations, Preserving the Record, Taking an Appeal 
      9. No Fault Regs - Knowledge is Power
      10. An Auto Liability Policy Primer
      11. A CGL Policy Primer
      12. A Homeowners Liability Policy Primer
      13. EUO's Under First Party Policies
      14. How to Resolve Coverage Disputes:  DJ Actions, Insurance Law Section 3420 Direct Actions (Choice, Strategy and Timing)
      15. Insured Selected Counsel: When is it Necessary and How to Avoid it? 
      16. Mediation and the Role of the Mediator
      17. Meaningful Mediation and How to Get to "Yes".
      18. Construction Cases - The Interplay Between Indemnity Agreements and Insurance Policies
      19. Other Insurance, Additional Insureds and Priority of Coverage

 One Hundred Years Ago Today: 

The boll weevil, an insect which had destroyed cotton crops since first entering the United States from Mexico, in 1892, was first detected in Alabama, where cotton production was, at the time, the main industry. The destruction of cotton farming forced farmers to diversify to other crops that, ultimately, were much more profitable-so much so that the citizens of Enterprise Alabama erected a monument to the pest in 1919.  I know you want to see it.

By the way,  it was the same day that Kitty Carlisle was born, and I'm telling the truth.  (She died at age 96, in 2007).  I bet you didn't know that Mike Wallace was the first host of that long running syndicated show, that included Orson Bean, Tom Poston and Peggy (not Mama) Cass.  Budd Collyer was the most famous of the hosts.


From Steve Peiper, the Purveyor of Property and Potpourri:


A warm welcome to our new friends in Cranbury, New Jersey.  Welcome aboard, and thank you for the warm reception last week. 

For all those interested in training, we would recommend that you consider the 2010 Law School for Claims Professionals.  The Law School for Claims Professionals is a program that is put together by the New York Bar Association that is geared solely toward those in the insurance business.  For those who are familiar with the program, we have changed the format again this year in an ongoing effort to keep materials fresh and useful for the attendee.  The topics to be covered include: basic coverage defenses, avoiding bad faith and extra-contractual clams, efficiently evaluating claims, legal procedures impacting claim management, as well as new topics discussing the tactical use of mediation and settlement discussions.  As always, the Program is chock full of excellent practitioners from across the State.  Yours truly has again been invited to speak at the Syracuse location on September 28th.  If you're not near Syracuse, the Program is also being offered in New York (9/28), Long Island (10/1), Westchester County (10/1), Albany (9/29) and Buffalo (10/1).  If you would like more information, please drop me a line with your contact information and I will send you a copy of the brochure. 


[email protected]

Our Peers Salute Our Partners

The most important compliment we ever receive is when our clients trust us with work.  That is the truest measure of success and achievement.

It is nice though, and surely humbling, when our peers - our brothers and sisters at the bar - speak well of us.

Three publications posted their "best lawyers" lists over the last few weeks.  It is a peer review process for each.   

New York Super Lawyers Magazine - Upstate New York Edition ("Super Lawyers") listed 15 Hurwitz & Fine attorneys were as outstanding in their respective fields. While only 5% of lawyers in upstate New York made the final list - more than 50% of Hurwitz & Fine's attorneys were recognized through this multi-phase selection process which surveys attorneys across the state to determine which counsel have attained the highest degree of peer recognition and professional achievement.  In Super Lawyers, seven of our lawyers were designated as in the top 50 of all upstate NY attorneys, Harry Mooney was one of the top 10, and Andrea and Ann were in the top 25 Female Attorneys.

Best Lawyers in America ("Best Lawyers") followed with nine designations and 15 were selected by our peers in Business First of Buffalo's Who's Who in Law ("Who's Who").  We congratulate the following designees:


  • Robert P. Fine (Best Lawyers, Super Lawyers, Who's Who)
  • Lawrence C. Franco (Best Lawyers, Super Lawyers, Who's Who)
  • Dan D. Kohane (Best Lawyers, Super Lawyers, Who's Who)
  • Harry F. Mooney (Best Lawyers, Super Lawyers, Who's Who)
  • Ann E. Evanko (Best Lawyers, Super Lawyers, Who's Who)
  • Paul J. Suozzi (Best Lawyers, Super Lawyers, Who's Who)
  • Roger L. Ross (Best Lawyers, Super Lawyers, Who's Who)
  • Lawrence M. Ross (Best Lawyers, Super Lawyers, Who's Who)
  • Michael F. Perley (Best Lawyers,  Super Lawyers, Who's Who)
  • Diane K. Church (Super Lawyers)
  • Andrea Schillaci (Super Lawyers, Who's Who)   
  • Edward C. Robinson (Super Lawyers, Who's Who)        
  • Earl K. Cantwell (Super Lawyers, Who's Who)                
  • Kevin J. Zanner (Super Lawyers)   
  • Shawn P. Martin (Super Lawyers, Who's Who)               
  • Audrey A. Seeley (Who's Who)
  • David R. Adams (Who's Who)       
In this week's issue, attached, you will find the following columns: 

Dan D. Kohane

[email protected]

  • In Coverage Action, Failure to Answer Interrogatories Not Enough to Compel Ultimate Discovery Sanction

Margo M. Lagueras
[email protected]

Margo is not on vacation but regrets that the courts have not given her a single case on which to report in the past two weeks.  She'll be back next issue.

Audrey A. Seeley


  •         Proof of Mailing of IME Notice Helpful In Deciding Whether Applicant Could Have Received It and Perhaps Insurer Should Consider Using Local Experts Instead of Scheduling Saturday IMEs.



  • Ensure Your Expert Reports Are Consistent.
  • Plaintiff's Plea of Lack of Documents to Properly Oppose SJ Motion Presented To a Brick Wall.
  • Counsel's Affirmation On Practice and Procedure for Scheduling and Conducting EUOs Imperative
  • While Sur-Reply Rejected, Initial Opposition Created Issue of Fact Precluding Summary Judgment


8/24/10           State of New York Insurance Department, Cir. Ltr. No. 1

Circular Letter No. 16 and Supplement No. 1 to that letter are being withdrawn as of August 24, 2010.  An insurer or self-insurer who pays the HCRA charges directly to the New York State Department of Health's Office of Pool Administration cannot offset that payment against the eligible injured person's No-Fault benefit limit.

Steven E. Peiper

[email protected]

  • Surcharges are Prohibited Where There is No Bodily Injury and the Property Damage Claim is Less Than $2,000
  • Under 2610-a, Carriers Can No Longer Dictate the Provider of Rental Car Services to Their Insured While the Insured Vehicle is Undergoing Repairs

Katherine A. Fijal

[email protected]

  • Applying Maine Law - The Never Ending Saga of "Arising Out Of"
  • Applying Colorado Law - "Use" of an Uninsured Motor Vehicle?

Jennifer A. Ehman
[email protected]

  • Court Dismissed Complaint Based on Lack of Privity between Plaintiffs and Defendants
  • Both Parties' Motions for Summary Judgment Denied in Late Notice Matter

Scott Michael Duquin
[email protected]

Batten Down the Hatches

(Earl is No Pearl this Week)

Earl K. Cantwell

[email protected]

Bad Caption Deep Sixes Scuba Disclaimer

Have a lovely Labor Day weekend.  See you in a couple of weeks.  Keep that feedback flying in.


Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York

Dan D. Kohane

[email protected]

Dan D. Kohane, Team Leader
[email protected]
Michael F. Perley
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Jennifer A. Ehman
Diane F. Bosse

Andrea Schillaci, Team Leader
[email protected]
Jody E. Briandi
Steven E. Peiper

Audrey A. Seeley, Team Leader
[email protected]
Tasha Dandridge-Richburg
Margo M. Lagueras
Jennifer A. Ehman

Jody E. Briandi, Team Leader
[email protected]
 Scott M. Duquin
Diane F. Bosse

Index to Special Columns
Kohane’s Coverage Corner
Margo’s Musings on “Serious Injury”
 Audrey’s Angles on No Fault
Peiper on Property and Potpourri
Fijal’s Federal Focus
Jen’s Gems
Duquin -- The Duke of Lead
Earl’s Pearls
Across Borders

Dan D. Kohane

[email protected]

8/24/10           Campione v. New Hampshire Insurance Company
Appellate Division, First Department
In Coverage Action, Failure to Answer Interrogatories Not Enough to Compel Ultimate Discovery Sanction.

In coverage lawsuit, party’s answer was stricken because of its failure to respond to answer interrogatories. New York courts much prefer that cases be disposed of on the merits, rather than on discovery sanctions.  The neglectful party had complied with all other demands, except answering interrogatories.
There is no proof that counsel’s failure to respond was willful or in bad faith.  In fact, defense counsel had been dealing with his stepson’s Iraq War injuries. When counsel was apprised of the oversight, he provided answers to plaintiffs' interrogatories within two days. Furthermore, plaintiffs have failed to demonstrate that they have been prejudiced.
Editor’s Note:  Clearly the right decision.  While this really is not a coverage decision, the paucity of pre-Labor Day appellate cases is so dramatic, that we feel compelled to include this summary, only because insurers were involved in the litigation and otherwise, the column would have been empty.  In 11+ years of writing this column, I’m quite sure this is the first time that two weeks have passed without a single appellate coverage decision.  We are regularly desperate for material over the late summer months because the appellate courts are generally on summer holiday at this time of year.

Margo M. Lagueras
[email protected]

Margo is not on vacation but regrets that the courts have not given her a single case on which to report in the past two weeks.  She’ll be back next issue.

Audrey A. Seeley


8/23/10           Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Proof of Mailing of IME Notice Helpful In Deciding Whether Applicant Could Have Received It and Perhaps Insurer Should Consider Using Local Experts Instead of Scheduling Saturday IMEs.

The sole issue was whether the insurer properly denied No-Fault benefits based upon breach of a condition to coverage requiring the eligible injured person (“EIP”) to appear for scheduled independent medical examinations (“IME”).

The EIP was involved in a June 23, 2005, accident resulting in extensive medical treatment and loss from work.  The EIP received and appeared for IMEs on January 18, 2006, January 29, 2006, and May 10, 2006, with a chiropractor and orthopedist.  Both the chiropractor and physician recommended continued treatment.

On June 8, 2006, the insurer by letter through Support Claim Services, scheduled additional IMEs to be conducted on June 29, 2006, with an orthopedist and acupuncturist.  Those letters were addressed to the EIP and her counsel and complied with the No-Fault requirements.  The insurer further submitted an internal mailing request that the letters be forwarded to the EIP and counsel.  There did not appear to be any proof that the letters had actually been mailed.

The EIP claimed she never received the letter scheduling the IMEs.

A second letter was sent by the insurer dated June 30, 2006, re-scheduling the IMEs on July 15, 2006.  It is noted that this is a Saturday.

The EIP received that letter but her counsel advised her not to appear because it was a Saturday.  The EIP submitted an affidavit that she was and will be willing to attend any and all IMEs.

The assigned arbitrator determined that the insurer did not comply with the No-Fault regulations on three grounds – 1. there was no proof that the IME notices had all been mailed or at least any proof of the procedure for mailing IME notices; 2. the second examination was not scheduled at a convenient time – Saturday; and 3.  the insurer treated its insured as an adversary.

In regard to the proof of mailing, the issue was that the first notice was claimed not to be received by the EIP.  The insurer could not demonstrate that it actually mailed the notice and only could demonstrate the internal request that the notice be mailed [I wonder whether counsel received the notice?]

The assigned arbitrator determined as a finding of fact that Saturday IMEs are not reasonably convenient unless the parties agree to that date.  It was stressed that the insurer has a habit of scheduling IMEs and flying in the physicians or chiropractors to conduct same solely because those experts allegedly have other business commitments Monday through Friday.  The assigned arbitrator suggested that perhaps the insurer should reconsider that practice and begin using the extensive number of highly qualified experts within the Buffalo area.


8/13/10           Hillcrest Radiology Assoc. a/a/o Dennys Barcco v. State Farm Mut. Auto. Ins. Co.
Appellate Term, Second Department
Ensure Your Expert Reports Are Consistent.

The insurer’s summary judgment motion was properly denied because the evidence submitted was contradictory as to lack of medical necessity.  The insurer submitted in support of its motion an affirmed peer review report opining that the MRIs were not medically necessary.  Unfortunately, the insurer also submitted in support of its motion an IME report that found one of the MRIs to be medically necessary.  The trial court properly determined that the insurer did not establish its prima facie case entitlement to summary judgment.

It is noted that the dissent properly pointed out that there is no reason why summary judgment should not have been granted as to the other MRI at issue as there was no contradictory report.

8/12/10           Mega Supply & Billing, Inc. a/a/o Wilhelmina Laing v. Larendon Nat. Ins. Co.
Appellate Term, Second Department
Plaintiff’s Plea of Lack of Documents to Properly Oppose SJ Motion Presented To a Brick Wall.

The insurer’s summary judgment motion was properly granted as the plaintiff did not appropriately demonstrate what discovery was needed and why it was needed to oppose the insurer’s motion.  The plaintiff’s argument that it did not have the documents the peer reviewer relied upon was without merit because the plaintiff never demonstrated why those documents were needed to raise a triable issue of fact.  Also, plaintiff failed to demonstrate that it served discovery demands for those documents and did anything to obtain those documents during discovery before the summary judgment motion was filed.

8/12/10           Points of Health Acupuncture, PC a/a/o Eman Adam v. Lancer Ins. Co.
Appellate Term, Second Department
Counsel’s Affirmation On Practice and Procedure for Scheduling and Conducting EUOs Imperative.

The insurer’s summary judgment motion should have been granted as it demonstrated the medical provider failed to appear for two scheduled EUOs.  The insurer submitted an affirmation from a partner at the law firm retained to conduct the EUOs for the insurer that set forth the detailed office practice and procedure for mailing of EUO scheduling letters.  Further, the affirmation set forth sufficient facts that the medical provider failed to appear for the scheduled EUO. 

8/2/10             Stephen Fealy, MD, PC a/a/o Audrey Esposito v. State Farm Mut. Auto Ins. Co.
Appellate Term, Second Department
While Sur-Reply Rejected, Initial Opposition Created Issue of Fact Precluding Summary Judgment.

The insurer’s summary judgment motion was properly denied as an issue of fact was raised with the plaintiff’s initial opposition consisting of an affidavit from the treating surgeon as to the causal relationship and necessity of the knee surgery.  It is noted that the appellate court held that the plaintiff’s sur-reply was improperly considered as plaintiff failed to show good cause for its submission.


8/24/10           State of New York Insurance Department, Cir. Ltr. No. 12

Circular Letter No. 16 and Supplement No. 1 to that letter are being withdrawn as of August 24, 2010.  An insurer or self-insurer who pays the HCRA charges directly to the New York State Department of Health’s Office of Pool Administration cannot offset that payment against the eligible injured person’s No-Fault benefit limit.

Steven E. Peiper

[email protected]

Amendment to Insurance Law § 2335 – Motor Vehicle Liability Insurance Rates
As Adopted on July 20, 2010
Surcharges are Prohibited Where There is No Bodily Injury and the Property Damage Claim is Less Than $2,000
As signed into law by Governor Patterson on July 20, 2010, Section 2335 of the Insurance Law has now been amended to prohibit certain surcharges as a result of accidents.  Previously, the law only prohibited surcharges that were triggered by traffic infractions.

Under the newly amended law, a carrier will not be able to recover surcharges which arise from accidents so long as the incident results in less than $2,000 in damage.  In addition to the $2,000 threshold, the surcharge prohibition only applies instances where there is no bodily injury and the accident in question as the only accident under the current policy term. 

Section 2610-a Added to New York Insurance Law
As Adopted on August 13, 2010
Under 2610-a, Carriers Can No Longer Dictate the Provider of Rental Car Services to Their Insured While the Insured Vehicle is Undergoing Repairs
By way of legislative act passed by both houses in February of 2009, and signed into law on August 13, 2010 by Governor Patterson, Insurance Law § 2610-a now provides certain protections with respect to rental car coverage.  As outlined in the new law, “rental vehicle reimbursement coverage” is defined by the statute as providing reimbursement for “the cost of renting a vehicle used as s substitute transportation if the insured vehicle is damaged or temporarily out of use due to a covered loss…”

The new law then mandates that the insured shall have his or her own choice of rental car company and rental car location.  Moreover, Section 2610-a(c) requires that carriers actually disclose that the insured has the right to independently select its rental car company and rental car location.  Finally, under Section 2610-a(d) the carrier is now required to enclose a separate sheet that discloses the insured’s independent right to select his or her rental car company.  Such a disclosure statement is required to accompany all policies issued on or after November 11, 2010.

It is noted that this section only applies where the insured has elected to procure rental car coverage. Naturally, where no rental car coverage is purchased, it follows that there is no obligation to include the disclaimer sheet required by subsection (d) of this Section.

Katherine A. Fijal

[email protected]

8/24/10    Penn American Ins. Co. v. Lavigne
United States Court of Appeals for the First Circuit
Applying Maine Law – The Never Ending Saga of “Arising Out Of”
Appellant Lavigne, and his friend Archie Perry, visited the job site where Mr. Perry knew that Michael Daigle was working on the roof of a building.  Perry stopped to ask Daigle whether he needed any supplies from the Home Depot Store.  In an effort to locate Daigle, Lavigne climbed up on the scaffolding that Daigle’s crew used to access the roof. A portion of the scaffolding snapped and Lavigne fell to the ground, breaking his neck and sustaining other serious injuries.

Daigle, who conducted business as Mike’s Carpentry, held a commercial general liability insurance policy issued by Penn-America.  The policy provided coverage for injuries and property damage, subject to certain terms and conditions.  Endorsement A was also added to the policy which excluded “any and all claims arising from roofing”.

After the accident Lavigne asserted a claim on Daigle’s insurance.  Penn-America denied coverage based on Endorsement A. Penn-American then filed a declaratory judgment action seeking a declaration that Daigle’s insurance policy excluded liability coverage for claims arising from roofing.

The United States District Court for the District of Maine granted Penn-America’s motion finding that Endorsement A excluded claims arising from roofing and that there was no genuine issue of material fact as to whether Lavigne’s accident arose from roofing.  Lavigne then filed its Appeal with the United States Court of Appeals for the First Circuit.

Two principal issues were addressed on appeal:  (1) the applicability to the accident at issue of Endorsement A; and, (2) if the Endorsement A exclusion applies, whether the accident involves a claim “arising from roofing”.

Before addressing the substantive issues it is helpful to understanding the format of Endorsement A.  The preprinted language at the top of the form offers three alternative introductory phrases, each preceded by a box for a checkmark.  The following introductory phrase is checked:  “In consideration of the premium charged, it is understood and agreed that.” The form then lists 19 numbered
items, such as “Premium,” “Classification” and “Coverage,” each with a line for a checkmark, but none of which is checked.  Beneath the list of categories is a short list of four alternative courses of action, potentially applicable to any of the items checked above, including “is corrected to read as listed below” and “is amended or changed to read as listed below.”  Again, each course of action has a line for a checkmark, but none is checked.  Typed in bold beneath the course of action is the phrase:  “EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING.”            At the bottom of the page, there are spaces for a date and initials, both of which are blank. 

Lavigne argues that grammatical defects in Endorsement A render it ambiguous.  The First Circuit, however, found this argument unpersuasive.  The court noted that the relevant question was whether or not the endorsement is reasonably susceptible to different interpretations, not whether it forms a grammatically incomplete sentence.  The district court concluded that even the severely truncated and facially-incomplete form that appears in the Policy is reasonably susceptible to only one interpretation, i.e. that any and all claims arising from roofing are excluded from coverage under the policy.  To disregard Endorsement A entirely, as Lavigne argued, would not be to construe the endorsement strictly against the insurer, but rather to render it meaningless – an approach which is disfavored by Maine Law.  The First Circuit fully agreed with the district court’s analysis.

Lavigne argued in the alternative that the absence of check marks on Endorsement A rendered the exclusion language ambiguous.  The court found this argument to be illogical and agreed with Penn-American that the concern was not with the boxes on the endorsement that might have been checked, the focus should be on the intention of the parties as gather from the language of the agreement. The court noted that the only language added to Endorsement A plainly expresses the intent of the parties to exclude claims arising from roofing.

Lavigne also argued that even if Endorsement A excludes coverage for roofing claims, his injuries did not arise from roofing.  First, appellant argued that the term “roofing” was ambiguous and should not be interpreted to include Daigle’s “re-roofing” work. Appellant next argued that there is a genuine issue of material fact about whether the accident arose from roofing because Daigle’s project involved both roof and non-roof related repairs and because the work being done at the time of the accident involved the faulting scaffolding and not the roof.

The First Department concluded that based on common sense and the dictionary re-roofing is roofing. The risks that an insurer seeks to avoid by excluding coverage for roofing, such as the risk of bodily injury caused by the equipment involved and the height of the work, and the risk of property damage if the roof is not properly installed, are materially indistinguishable from those associated with re-roofing. 

As to whether the injury to Lavigne arose from roofing the court pointed out that under Maine law, as elsewhere, phrases such as “arising out of,” when used in insurance contract, do not connote a direct causal nexus.  Rather, such phrases are understood to invoke the concepts of “originating from, growing out of, flowing from, incident to or having connection with.  The court found no dispute that Lavigne’s injuries originated from grew out of, flowed from or had a connection with, roofing.  The primary purpose of the job was roofing, and that the scaffolding from which Lavigne fell was set up to be used in roofing the building.  That is enough to make it clear that Lavigne’s injuries arose from roofing.

8/24/10             State Farm Automobile Ins. Co. v. Fisher
United States Court of Appeals for the Tenth Circuit
Applying Colorado Law – “Use” of an Uninsured Motor Vehicle?
Jeremy Fisher picked up his friend Tiffany Howard, a high school student, from her residence because Howard was concerned about the conduct or her ex-boyfriend, Andrew Brown. Shortly after picking Howard up, Mr. Fisher and the other passengers in the vehicle noticed that they were being followed.  Brown then rammed the Fisher vehicle several times.  Brown then pulled up next to the Fisher vehicle and fired a shotgun at it injuring two of the passengers.

Next, Fisher pulled his vehicle over to the side of the road, got out of the vehicle, and attempted to obtained assistance for one of the wounded passengers.  The other passengers got out of the car at the same time.  Brown then turned his vehicle around and parked it behind Fisher’s vehicle and perpendicular to the flow of traffic.  Brown got out of his vehicle and shot and killed Fisher who was standing in the middle of the roadway.  Brown then assaulted Howard and when the police arrived Brown went to his vehicle, obtained another firearm and killed himself.

Fisher’s estate filed a claim against Brown’s insurer, Geico, which disclaimed based on the intentional act exclusion.  Ms. Fisher, the executor of Mr. Fisher’s estate then filed an Uninsured Motorists claim [“UM”] against her own insurer, State Farm.  Other passengers also filed claims with State Farm.

After the claims were submitted State Farm filed a declaratory judgment action seeking declarations (1) that Mr. Fisher’s death, along with his passengers injuries, were not caused by an accident that involved the operation and/or use of an uninsured motor vehicle as defined by State Farms’ policy, and (2) that Ms. Fisher cannot obtain the stacked limits of two State Farms policies potentially applicable to her son’s death.  The stacking issues were resolved by stipulation.

The district court denied State Farm’s motion for summary judgment on the issue of causation with respect to the passenger’s claims, but granted it with respect to Ms. Fisher, holding that Fisher’s death did not arise out of the use of an uninsured motor vehicle.  Fisher appealed.

In determining whether UM benefits are available under a Colorado automobile insurance policy, the Colorado Supreme Court adopted a two part test. State Farm Ins. Co. v. Kastner, 77 P.3d 1256 (Colo. 2003).  To be entitled to benefits, a claimant must first demonstrate that an uninsured motor vehicle was being “used” at the time he or she sustained an injury.  If so, the next prong of the inquiry is whether the “use” is causally related to the injury.

State Farm argued that because Brown got out of his vehicle before shooting Fisher, his death did not arise out of Brown’s use of his vehicle.  Ms. Fisher argued that the first prong of the test does not require contemporaneity so long as the events in question constitute one ongoing assault.

The Court concluded that Brown’s use of his vehicle was not sufficiently linked to the cause of Fisher’s injuries as to satisfy the second prong of the Kastner test – the causation prong, so it found no need to resolve any potential confusion which related to the first prong. 

When addressing the “causation” prong of the test the court stated that the claimant must show that no independent significant act or non-use of the vehicle interrupted the “but for” causal chain between the covered use of the vehicle and the injury, and that where the injury in question is actually the result of an intentional act of another, this showing can be particularly difficult to make.  When the vehicle in which the assailant is traveling stops and the assailant gets out of the vehicle before attacking his or her victim, the requisite causal connection between the “use” of the vehicle and the attack becomes difficult to establish.

The Court concluded that Brown did not use his motor vehicle to control the movement of Fisher, or anyone else.  Rather, Fisher’s pulling his vehicle over to the side of the road was, at worst, caused by Brown’s use of the shotgun, and not the use of his vehicle. The court also found it significant that when Brown turned his vehicle around he did not position it in a manner which restricted the movement of either the Fisher passengers, or the Fisher vehicle itself.  The Brown vehicle was not used by Brown to strike Fisher, or as an instrumentality in assaulting Mr. Fisher.

The Court opined that Brown used his vehicle as a means to transport himself to the scene of his assault of Fisher, finding it clear that such “use” is insufficient to establish the causal nexus required by Kastner’s second prong.

Jennifer A. Ehman
[email protected]

8/18/10                     Ramsarup v. Rutgers Cas. Ins. Co.
Supreme Court, Nassau County
Court Dismissed Complaint Based on Lack of Privity between Plaintiffs and Defendants
This case arises out of a home improvement contract.  The court does not tell us what happened, but it appears that the plaintiffs/homeowners commenced an action against the home improvement company.  Thereafter, a default judgment was taken and plaintiffs commenced this action against the home improvement company’s insurer, insurance broker, and the insurance broker’s president.

The insurance broker and the insurance broker’s president then moved for summary judgment on two of the alleged causes of action:  fraud and negligent misrepresentation.  In support of their motion, they argued that the existence of a contractual relationship, a special relationship or some kind of privity was necessary to impose liability upon an insurance broker.  Accordingly, they further argued that as there was no contractual relationship, no privity of contract and no duty running between them and plaintiffs, the court was constrained to dismiss the complaint.   Without providing a discussion of the facts, the court agreed.

8/18/10                     Courduff’s Oakwood Rd. Gardens & Landscaping Co., Inc. v. Merchants Mut. Ins. Co.
Supreme Court, Suffolk County
Both Parties’ Motions for Summary Judgment Denied in Late Notice Matter
On September 1, 2005, plaintiff, a retail garden and landscape contracting company received a delivery of stones from one of its suppliers, Wicki Wholesale Stone, Inc.  The shipment consisted of “colonial boulders” and a pallet of “river rounds.”  As the suppliers’ employee, Gerard Molin, started to dump the boulders the pallet of “river rounds” somehow became wedged among the bounders.   Accordingly, Robert Bemiss, plaintiff’s president, drove his skid steer (a small piece of riding equipment) over to the truck.  While attempting to free the pallet, Molin sustained injury when his toe was pinched by the cross bar on the rear of the skid steer. 

An ambulance was called to the scene and Molion was taken to the hospital.  Thereafter, Bemiss received a call from Wicki’s workers’ compensation insurance carrier concerning the incident.  Based on this discussion, Bemiss assumed that the matter would be entirely covered by workers’ compensation.  Thus, he never put defendant (plaintiff’s general liability insurer) on notice of the incident. 

A little over a year and a half later Molin commenced an action against plaintiff.   Defendant promptly disclaimed based on late notice of claim and plaintiff brought this action.  Shortly thereafter, plaintiff moved for summary judgment and defendant cross-moved.   In support of plaintiff’s motion, Bemiss submitted an affidavit.  The court noted that Bemiss’ affidavit made no mention of any personal involvement in the incident.  Instead, it merely stated that Molin was injured while delivering a shipment of stones and unloading a pallet of stones.  Accordingly, the court held that based on the incomplete description of the accident questions arose as to what if any part plaintiff had in the accident.  The court reasoned that if Bemiss played no part, it would give more credence to plaintiff’s and Bemiss’ belief that workers’ compensation would cover the accident.   Thus, the court held that plaintiff failed to show a prima facie entitlement to summary judgment.

With regard to defendant’s cross-motion, the court also denied it reasoning that the proffered excuse was plausible.  Thus, the reasonableness of it was a question of fact. 

Scott Michael Duquin
[email protected]

Batten Down the Hatches
(Earl is No Pearl this Week)

With Hurricane Earl threatening the Outer Banks and the North Carolina Coast tonight, with potential to make landfall in Long Island, Cape Cod, or even Boston this weekend it maybe time to start thinking about repair, renovation and replacement of windows.   In 2008 the Environmental Protection Agency promulgated new rules concerning lead-based paint hazards that went into effect April 22, 2010.  The regulations are particularly relevant now with Earl approaching as most of the housing stock of the northeast is older, pre-1978.

The newly effective regulations are applicable to any work that disturbs paint in housing that was built before 1978, or any child occupied facility. The reason for the work is of no consequence, remodeling, painting, plumbing, electrical work, carpentry work, window replacement are all subject to the new regulations.  The test is weather the renovation work will disturb paint, if paint will be disturbed; the work needs to be done in compliance with the newly effective regulations. If the painted area to be disturbed is less than six square feet on the interior or less than twenty square feet on the exterior, or if it is a homeowner do-it-yourselfer-job, the work is exempted from the regulations. 

Under the regulations, contractors performing the work must be EPA certified in lead-safe abatement techniques.  Renovators are required to distribute an EPA pamphlet on lead-based paint prior to the commencement of the work to the property owner and any tenants, and then the renovator must follow techniques that minimize dust, and paint debris.  The target is to reduce environmental contamination, and the spread of lead laden dust during renovation projects, and more particularly the demolition phase. Maximum penalties for non-compliance include up to $37,500 per violation, per day. Remember, it is the dust, and the ingestion of the dust from deteriorated lead-based paint that is usually the source of lead poisoning in humans. (Well that and gunshots wounds but we will leave comment on senseless acts of violence for another piece).   Please find links to the EPA’s website that detail the new regulations, and the EPA information pamphlets on lead-based paint and the in effect regulations.

Earl K. Cantwell

[email protected]


In Huverserian v. Catalina Scuba Luv, Inc., 2010 Cal. App. LEXIS 750 (May 26, 2010), a California Appellate Court sank a liability disclaimer that drowned in its own language.  Just like Gilligan’s Island, the saga starts innocently enough with Mr. Huverserian and his son renting scuba diving equipment from Catalina Scuba Luv on March 30, 2005 (for a three hour tour together with a millionaire and his wife, a movie star and assorted others).  The father executed an equipment rental agreement which included exculpatory language captioned in bold-faced type and an underlined font which stated that it was a “liability release and assumption of risk of scuba and snorkel gear for boat dives or multiple day rentals”.  Also just like Gilligan’s Island, problems ensued because the plaintiffs did not rent the equipment for either a boat dive or a multiple day rental.  They took the equipment to a seashore park in California and proceeded, naturally, to dive into the water.  Unfortunately, the father ran out of air at a depth of 60 feet, made a controlled ascent by breathing with his son, but went into cardiac arrest on the beach and died the next day at UCLA Medical Center. 

A wrongful death complaint was filed by the family.  Catalina Scuba Luv moved for summary judgment based on the release language, which motion was opposed by the plaintiffs on grounds that the clause did not cover the facts and circumstances giving rise to this action and accident.  The trial court granted the motion for summary judgment and dismissed the complaint.  However, the Appellate Court rescued the case from Davey Jones’ Locker and restored the action.

The release language was on a form rental agreement.  It was undisputed that it was drafted by or for Catalina Scuba Luv and that the father had signed the agreement.  The plaintiffs argued that the caption limited the release’s effect to persons who rented equipment for a boat dive or multiple day rentals, and since the plaintiffs in this incident did not fall into either category, the language did not apply to this mishap. 

The Appellate Court ruled that a written release may exculpate a tortfeasor from future negligence or misconduct, but to be effective the release must be clear, unambiguous and explicit in addressing the intent of the subscribing parties.  Releases for recreational sports do not implicate the public interest and were not deemed void as against public policy.  However, ambiguity may exist if there are alternative reasonable meanings to the language

The Appellate Court ruled that the language in this rental agreement was unambiguous.  It released Catalina Scuba Luv from liability for boat dives or multiple day rentals.  This rental did not fall into either category and, therefore, the release was inapplicable and provided no defense upon which summary judgment could be based.  The caption of the clause was an anchor that dragged the release down to the depths. 

Catalina Scuba Luv argued that the caption of the clause was not part of the agreement, but the court disagreed, finding that the relevant language was not a mere caption but an integral part of the release language emphasized in bold face type and underlined.  The court stated that a person reading the rental agreement who was neither a boat diver nor a multiple day renter could reasonably conclude that the language did not apply to them.  The Appellate Court held that the trial court’s grant of summary judgment was “unfathomable”.  Since the release language did not provide a complete defense, the summary judgment in favor of Catalina Scuba Luv was deep-sixed, and the plaintiffs’ case was salvaged from the depths. 

One of the lessons from Huverserian is that release language must indeed be clear and explicit and very often more is less or certainly more confusion and ambiguity.  Another lesson is to make sure that captions in an agreement match the intent of the subsequent paragraph and do not limit, restrict or detract from it. 

Another lesson is that releases will be strictly and narrowly construed so the burden is usually on the defendant to argue and enforce the release language.  If a release or limitation of liability is intended to be general, do not foul the water with restrictive headings, definitions, or conditions.  This case also raises the problem of using generic legal forms which may not necessarily fit a particular business. 

Courtesy of the FDCC Website

8/30/10                     Gore v. Arabella Mutual Insurance Co.
Massachusetts Court of Appeals

Unfair Insurance Practices – Failure to Timely Respond to Demand Letter Where Liability Clear
Arbella was found to have committed unfair insurance practices against both its insured Anthony Caban, and the person injured by Caban in an auto accident, Angelina Dattilo. Datillo’s attorney sent Arbella a 30-day policy-limit demand letter, to which Arbella responded after five months by advising that it was seeking to determine if there were other claims likely to arise from the accident. Two months later, Arbella offered to pay its $ 20,000 policy limit in exchange for a release, which offer was rejected. Dattilo had filed suit at the expiration of the 30 day period stated in the demand letter.

Shortly thereafter, Arbella informed Caban that he had exposure in excess of the policy limits, but incorrectly indicated that no formal demand had been received, and did not mention the policy-limit settlement demand. Dattilo and Caban reached a stipulated settlement of the suit for $ 450,000, and Caban assigned to Dattilo his rights against Arbella. The trial judge found that Arbella had failed to promptly respond to the demand letter and failed to promptly settle the case in which liability was clear, and that the failures were “willfully reckless, and in that sense, intentional.” Arbella was therefore subject to double damages on the $ 20,000 claim by Caban (plus double legal fees and expenses); and was subject to multiple damages on the $ 430,000 in excess of the policy limits, with interest running from the date suit was filed. The case was remanded solely to determine whether the damages should be doubled, or tripled.
Submitted by: Scott Machanic of Cunningham, Machanic, Cetlin, Johnson & Harney, LLP

8/23/10                     Transcontinental Contracting v. Burlington Insurance
New Jersey Appellate Division
Cross-Liability Endorsement in Surplus Lines Policy Upheld
Transcontinental was the general contractor for a project with the NYC Economic Development Corp. (EDC).  Skanska was the construction manager.  A broad indemnity agreement required Transcontinental to indemnify EDC for any claims arising out of its acts or omissions and those of its subcontractors.

Burlington issued three consecutive one-year surplus lines policies and each contained a cross-liability exclusion which provided that the carrier would not provide coverage for claims arising out of an employee of any insured.  One of the policies also excluded all contractual liability claims, including those under which the insured would be obligated to pay by reason of the assumption of liability in a contract.

Two Transcontinental employees were injured at the worksite and each filed suit, in New York, against the EDC and Skanska.  Burlington disclaimed on both the cross-liability endorsement and the contractual liability exclusion that existed in the one policy.

The appellate court upheld the enforcement of the cross-liability endorsement under NJ law noting that surplus lines policies, issued on high-risk insureds, often have limited coverage. 
Editor’s Note:  Very interesting discussion of the role played by the surplus lines market.  Kudos to Chris Strapp from the in-house staff at Guilford Specialty Group for the role played in this and related litigation and special thanks to Mike McMyne for providing this interesting case for review.

8/20/10                     Capella University, Inc. v. Executive Risk Specialty Ins, Co.
Eight Circuit Court of Appeals
Insurance Company Had Obligation To Defend Its Insured In Lawsuit Brought By Former Student And Awards Prejudgment And Postjudgment Interest To The Plaintiff

The Defendant, Executive Risk Specialty Insruance Co. (“ERSIC”), appealed the district court's determination that it had an obligation to defend its insured, Capella University, Inc. (“Capella”), against a federal lawsuit brought by a former student. Capella cross-appealed, challenging the district court's determination not to award prejudgment and post judgment interest. Capella argued that its educators' professional liability insurance policy with ERSIC should cover a lawsuit brought for civil rights violations.

The policy stated that ERSIC “shall have the right and duty to defend any Claim covered by this policy.” Nevertheless, ERSIC denied indemnity coverage for Capella's civil rights lawsuit and refused to defend against the claim. The district court awarded Capella damages for breach of contract and costs pursuant to ERSIC's refusal to provide a defense and indemnity against the student's claim. ERSIC argued that the policy excluded claims initiated in a formal administrative proceeding prior to the coverage period, and that the student's claim should be excluded because it was brought to the Office of Civil Rights before the ERSIC's coverage of Capella began. The court held that the proceedings before the Office of Civil Rights were not “formal,” so the coverage exclusion did not apply. In deciding that the proceedings before the Office of Civil Rights were not formal, the court cited the lack of regulations governing claims before the Office of Civil Rights, the Office of Civil Rights' limited investigative power, and the fact that plaintiffs are not required to exhaust administrative remedies with the Office of Civil Rights before filing a lawsuit.

ERSIC also challenged the district court's award of more than $800,000 in fees and costs to Capella, arguing that it was barred by the doctrine of judicial estoppel. The court held that since the district court did not grant the amount of costs and fees that Capella requested but instead made its order based on a more accurate accounting of fees and costs, there was no risk of inconsistent court determinations threatening judicial integrity, so the doctrine of judicial estoppel did not apply.

The court further held that 28 U.S.C. § 1961(a) entitled Capella to postjudgment interest. The court held that the issue of prejudgment interest was controlled by state law, and Minnesota Statute § 549.09 entitled Capella to prejudgment interest. The district court's holding as to liability and damages was affirmed, and the case was reversed and remanded for determination of appropriate postjudgment and prejudgment interest.
Submitted by: Michael D. O'Connell, Michelle L. Hummer & Steven J. Zakrzewski, O'Connell, Flaherty & Attmore, L.L.C.


Campione v. New Hampshire Insurance Company

Donovan Hatem LLP, New York (Douglas M. Marrano of
counsel), for appellant.
Wilkofsky, Friedman, Karel & Cummins, New York (David B.
Karel of counsel), for respondents.
Appeal from order, Supreme Court, New York County (Karen S. Smith, J.), entered April 27, 2009, to the extent it struck the answer of Meltzer/Mandl Architects, unanimously dismissed in light of our further disposition herein. Order, same court and Justice, entered November 6, 2009, which, to the extent appealed from, denied said defendant's motion to vacate the prior order and reinstate its answer, unanimously reversed, on the law, without costs, the motion granted, and the answer reinstated, on condition that said defendant's attorney pay $3,500 to plaintiffs' counsel within 30 days of service of a copy of this order with notice of entry.
Given the specific facts of this case and New York's strong preference for disposing of cases on the merits, Meltzer/Mandl should have been allowed to interpose its answer (Catarine v Beth Israel Med. Ctr., 290 AD2d 213, 215 [2002]). Plaintiffs concede that Meltzer/Mandl complied with the discovery demands of all parties, except for answering interrogatories.
However, several of Supreme Court's compliance orders on which plaintiffs rely did not even note defense counsel's presence, so it remains unclear whether Meltzer/Mandl was aware of those orders. While a lack of knowledge alone does not excuse noncompliance, the record does not reveal whether Meltzer/Mandl willfully, contumaciously or in bad faith disregarded any discovery orders (see Roman v City of New York, 38 AD3d 442 [2007]).
Defense counsel affirmed that since January 2009 he has been traveling between New York and Kentucky to deal with his stepson's serious injuries suffered during a military deployment to Iraq. He further affirmed that he was under the impression that an attorney in his firm had in fact answered the interrogatories. When counsel was apprised of the oversight, he provided answers to plaintiffs' interrogatories within two days. Furthermore, plaintiffs have failed to demonstrate that they have been prejudiced.

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