Coverage Pointers - Volume XIII, No. 6

Dear Coverage Pointers Subscribers:

We bring late summer greetings from Long Island and the Long Island Insurance Community Gala.  

We apologized in advance last week for e-mail gaffes caused by our migration from one e-mail program to another.  We have tried to work out the kinks, but are bound to have some difficulties this week as well, albeit fewer.  For those who received four copies of Coverage Pointers, we hope you shared the extras with friends and colleagues.  Please continue to be patient with us and thanks.

As the courts return to their regular schedules, decisions will come fast and furiously in the next few weeks.  We’re still suffering from the drought caused by the summer oral argument hiatus.

New York State Weighs in On Flood Insurance Coverage for Irene

Our new Superintendent of the Department of Financial Services, the agency created by the merger of the Insurance and Banking Departments, has issued a press release on flood insurance:

Superintendent Lawsky: Flood Insurance Will Cover Flood Damage Caused by Irene
Irene was tropical storm in New York so hurricane deductibles should not apply

NEW YORK, NY (09/01/2011) -- Benjamin M. Lawsky, Superintendent of the Department of Financial Services, announced today flood insurance does cover flood damage caused by Irene. Some individuals who have suffered severe flood damage in New York are being told by their insurers that flood insurance does not apply. In fact, flood insurance covers flooding caused by tropical storm Irene and no insurer should even think about not honoring its commitments under a flood insurance policy.
Separately, Superintendent Lawsky noted that Irene has been designated a tropical storm, not a hurricane, when it reached New York and therefore hurricane deductibles should not apply on homeowners' insurance policies. Homeowners should not have to pay this deductible and insurers should be aware that the Department will make sure they are not hitting consumers with a hurricane deductible, which is often a full five percent of the insured property's value.

Superintendent Lawsky stated, "Homeowners are suffering terribly from this storm and we will continue to ensure that insurers do not abuse those they insure by not paying flood insurance or by forcing homeowners to pay big hurricane deductibles that just don't apply. While Irene obviously started out as a hurricane, by the time it reached New York it was a tropical storm, with winds in the 60 mph range. This makes a big difference for homeowners because it means that special hurricane deductibles will not kick in, saving them thousands of dollars."

One Hundred Years Ago (and two weeks)
A Bill McKechnie (Post-script)

We know that our readership is comprised of insurance coverage aficionados and surely we try to satisfy all of your craving for cogent coverage commentary.  But regular readers of this column know that your editor has a passion for history and our “Hundred Years Ago Today” vignettes are among our most popular features.   Those who read the fine print know that we often look for “the rest of the story,” and try to bring you some “color” or “completeness” to the century-old snapshot.  The most fun for me is when I am able to track down a descendent of the focus of the story.

In the previous issue of Coverage Pointers, we told the story of Hall of Fame Pittsburgh Pirate infielder, Bill “Deacon” McKechnie, who hit two inside-the-park homeruns on September 2, 1911.  We included some commentary from Jim McKechnie, a descendent.  The day after our issue went to press, I received this generous e-mail from Bill McKechnie’s last surviving child – who by her note will turn 80 in December – and I wanted to share it with you:

Hi Dan,

I got your message by a very round-about way but thought I could shed a bit of light on your query about my dad, Bill McKechnie, the ballplayer. I wish I would have gotten it in time to make your Sept 2 deadline but I was out of town several days and am just now wading through the e-mails.

I am the last surviving offspring of mother and dad out of four. I had two brothers and a sister who were older than I and now, other than grandchildren and cousins, am all that is left.

I do indeed remember hearing mother tell of the two inside the parkers but I had no idea of the date. It must have been when Daddy was playing with Pittsburgh. Since I didn't arrive until Dec. of ‘31, there were many stories that I heard that I had not been able to witness in person.

I did just finish a short book on my rather unusual childhood as a baseball brat which is at the publisher as I write. I hope to have it for sale within a few weeks. It's called "The Deacon's Daughter". I wrote it mainly so that my children and grandchildren could share in some of the wonderful times I remember so vividly.

If you decide to do a late note on the Sept.2 item I would love to see your publication.


Carol McKechnie Montgomery

Editor’s Note:  Thanks Carol.  Your dad’s legacy lives own with our readership.  More than a few people dropped me notes with your father’s stats and accomplishments.

Audrey’s Angle:

Thank you to those who attended the NBI Seminar on No-Fault Law in Syracuse and Buffalo and welcome to those who joined Coverage Pointers after attending the seminar.  Each location had a good mix of plaintiff and defense counsel as well as insurance adjusters.  It was nice to hear from Arbitrators Benziger and O’Connor with regard to what they expect to see from both sides at a No-Fault arbitration.  The following is a summary of the points made and they are worth carefully reviewing and considering.

Be prepared.  The arbitrator should not have to spend a lot of time on “housekeeping.”  This means BOTH sides should know what the amount in dispute is; what the fee schedule is; what the basis for denial is; and whether there is an issue with standing which should be raised immediately at the hearing.

Insurers should have succinct evidence submissions and consider having an outline of all of the defenses you will raise at the hearing.  One arbitrator mentioned that an insurer routinely copies nearly the entire file and mails it in with a one sentence cover note.  Further, when looking at the file three copies of the same denial for the same service will be provided when only one is needed.  Unfortunately, this leads the arbitrator to think that the insurer has not placed much thought into the evidence submission.  Also, it leaves the arbitrator searching for something and ultimately becoming frustrated because it cannot be easily found.  Also, insurers are sending in one sentence cover letters indicated that the attached is the evidence and the insurer is standing behind its denials.  The arbitrators would like to see some outline of what the defenses will be asserted at the arbitration.  Apparently, some insurers were advised by counsel that less said is better.  [I tend to agree in some cases.]  The point is that you should enumerate whether there is a standing or fee schedule defense and what dates your denials were and the basis for same that you are relying upon.  This provides the arbitrator with information up front on the issues to be addressed at a hearing and provides useful information as to the denial dates, which are referenced in decisions, as well as whether the denial is based upon an IME, peer review, breach of a policy condition, etc.  The arbitrators did not indicate that wanted to see full arguments in writing on the merits in the submissions. 

Applicants that have lost wage claims should be prepared to be able to break down the monthly wage calculation and not just submit the time period and total amount.  Also, Applicants should be prepared to advise of any disability offsets, etc.

Counsel should be respectful to the arbitrator and each other.  An arbitrator commented how some attorneys, in particular some who have been practicing for fewer years, have been overly aggressive at arbitrations and engaged in personal attacks.  The arbitrators gently reminded that those tactics are not helpful to your client and only make the hearing run longer than it needs to on irrelevant issues.

Finally, both parties should know the arbitrator they are appearing in front of by reviewing decisions that are on line with AAA on particular issues being arbitrated.  If you have prior reported decisions on that issue you should bring them with you to the hearing and provide a copy to the arbitrator and your opponent.  The arbitrator wants to know if he or she took a particular position on this exact issue before and what it was to ensure consistency.

If you are looking for another top notch program to attend then mark your calendar for December 15-16 as DRI’s Insurance Law Committee is presenting the Insurance Coverage and Practice Symposium in New York City.  The program has great topics regarding successfully using an expert in insurance coverage litigation, the insurer’s strategy in defending class actions, and litigating the confessed judgment.  Aside from the timely topics, there will be industry representatives from Chartis Claims, Inc., Ironshore Inc., Munich Reinsurance America, Willis Re and others attending.  Registration is due by November 25, 2011, but recommended that you get it in and book your hotel room as early as possible as it fills up fast around this holiday season.  Further, if you are an insurer interested in catching up with your panel counsel DRI has great incentives and makes it easy for you to hold a panel counsel meeting at this program.  If you need a brochure or want more details on the panel counsel meeting please send me an email at [email protected].

Audrey A. Seeley

Super Good News
While we are proud to announce that 15 of the firm's attorneys were identified by other lawyers as outstanding in their respective fields in the 2011 New York Super Lawyers Magazine Upstate Edition (everything outside of NYC), we are especially proud to have firm President Ann Evanko gracing the cover of this highly respected annual publication. For those who don’t receive New York Super Lawyers Magazine you may wish to follow this link to the article Leading By Example: Ann E. Evanko solves employment law problems and mentors the next generation. Great article on a great person and attorney.

Only 5% of lawyers statewide make the final list yet over 50% of our 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.

Named lawyers include:

         Robert P. Fine (Top 50)
         Lawrence C. Franco (Top 50)
         Dan D. Kohane (Top 50)
                    Insurance Coverage
         Harry F. Mooney (Top 10 and Top 50)
                    Personal Injury Defense: Products                    
         Ann E. Evanko (Top 50, Top 25 Female)
                    Employment & Labor
         Paul J. Suozzi
                    Personal Injury Defense: General
         Roger L. Ross
                    Real Estate
         Lawrence M. Ross
                    Health Care
         Michael F. Perley (Top 50)
                    Personal Injury Defense: General
         Diane K. Church
         Andrea Schillaci (Top 25 Female)
                    Business Litigation
         Edward C. Robinson
                    Estate Planning & Probate
         Earl K. Cantwell
                    Business Litigation
         Kevin J. Zanner
         Diane F. Bosse
                    Insurance Coverage

The Best of News
Please join me in congratulating our nine attorneys honored by inclusion in Best Lawyers in America – now in even more categories than ever. Best Lawyers in America is the oldest peer-review publication in the legal profession with results published annually in an advertisement-free publication – no fluff, just good stuff. The Best Lawyers list features the results of an exhaustive peer-review survey with more than 3.1 million votes cast on the legal abilities of other lawyers in the same and related specialties. Because of the rigorous and transparent methodology used by Best Lawyers, and because lawyers are not required or allowed to pay a fee to be listed, inclusion in Best Lawyers is considered a singular honor.

Hurwitz & Fine, P.C. Best Lawyers include:

         Ann E. Evanko
                    Corporate Law
                    Employment Law - Management
          Robert P. Fine
                    Corporate Law
                    Health Care Law
                    Mergers & Acquisitions Law
                    Trusts and Estates
          Lawrence C. Franco
                    Corporate Law
                    Trusts and Estates
          Dan D. Kohane
                    Commercial Litigation
                    Insurance Law
          Harry F. Mooney
                    Civil Rights Law
                    Commercial Litigation
                    Product Liability Litigation - Defendants
                    Professional Malpractice Law - Defendants
          Michael F. Perley
                    Litigation - Municipal
                    Personal Injury Litigation - Defendants
          Lawrence M. Ross
                    Corporate Law
                    Health Care Law
          Roger L. Ross
                    Real Estate Law
          Paul J. Suozzi
                    Personal Injury Litigation – Defendants

Peiper’s Postulates:

Times are, again, slow this week.   We do offer two fine Labor Law decisions out of the First Department for your review this week.  The second case discussed, Cordeiro, references one our favorite contractual indemnity cases Tonking v Port Authority.  For those of  you that have not reviewed it in a while, Tonking is the Court of Appeals famous ruling on the specificity requirements of indemnity provisions. 

The Tonking case a involved a situation where Bovis, as an agent to the Port Authority, claimed a right to indemnification under a contract the Port Authority entered into with V.P.H.  The Court noted, however, that Bovis was never identified as an agent of the Port Authority at any point in the body of the contract at issue.  As succinctly stated by the Court of Appeals, “[i]f the parties intended to cover Bovis [here a non-party agent of a co-signee of the agreement Port Authority] as a potential indemnitee, they had only to say so unambiguously”

We couldn’t have said it better ourselves.  In a nutshell, Tonking and its progeny stand for the proposition if you want contractual indemnity in a construction contract, you’d better ask for it!

That’s it for this week.  See you on the 30th.

[email protected]


One Hundred Years Ago Today – the Beginning of the Green Race Car Taboo:

The September 16, 1911 headline of the Syracuse Herald screamed:

Speed Kings Vie For Records
World’s Auto Records to Go
State Fair Ends in Glory

The crack of the starter’s pistol, the chug, chugging of powerful motors and then a gray streak, fleeting around a circular track, daring death at every turn: a big field thronged with thousands, speed-mad, watching the cars that seem to have no wheels — that is Automobile day at the State Fair.

The President of the United States is a guest of Syracuse and the State Fair to-day.

Daring death at every turn?  How right they were.  Speed?  About 70 mph

As the story indicated, President William Howard Taft visited the New York State Fair in Syracuse.  Shortly after he left the fairgrounds, disaster struck. The newspaper story in the following day’s paper, told the story:

Syracuse Herald
September 17, 1911

Lee Oldfield's Racing Machine Leaves
Track and Crashes Into Fence.
Two of Wounded Are Dying and Nine Others Are Seriously Hurt

  • Car Somersaults and Hurtles Through Air Into Maw of

People — Accident Occurs Daring Fifty-mile Race —Seven
of Dead Killed Outright or Died Soon After Arriving at the
Hospital—Races Continue After Catastrophe—The Accident
Occurred After President Taft Had Left Grounds.

Nine persons are dead, two are dying and nine others are injured, some of them seriously, as the result of the catastrophe during the automobile races at the State fair yesterday afternoon, when a Knox racing car, driven by Lee Oldfield, leaped from the track and in a series of somersaults hurtled through the mass of people lined up beside the track.

At least seven of the dead were killed outright or died on their way to the hospital. One died three hours after the Accident in St. Joseph's Hospital. Of the injured, two are 'expected to die before morning. One of those in a critical condition is Lee Oldfield, the driver of the car.

The tragedy occurred shortly after 5:30 o'clock, when the racers in the fifty-mile automobile race were just entering upon the forty-third mile of the race. The track on either side was lined with people and they were six and seven deep on either side.

PEOPLE CRUSHED LIKE PAPER. The machines, with Ralph De Palma in the lead, had just swung into the quarter beyond the grandstand when a report like the crack of a pistol was heard. Oldfield's car leaped from the track. Crashing through the fence, it somersaulted through the crowd on the other side. People went down before the great weight and were crushed like paper.

Oldfield was thrown from the car. When he was picked up later he still held in one hand a part of his steering grip, the rest of it having been shattered in the crash. As the car broke through the fence pieces of wood were hurled in every direction. Sharp pointed splinters were hurled into the spectators as if shot from a gun. Most of the spectators were men. Many of these were crushed beneath the machine and frightfully mashed. For a minute after the crash came people stood in awe not realizing that dead and injured people lay at their feet!

Then the cries of the wounded aroused them. People from all over the track flocked to the scene. It was with difficulty that doctors and others bringing water and aid were able to get to the injured.

Editor’s Note -- Despite the early report of the driver being in critical condition, Oldfield suffered only minor injuries and stayed in the race game for many, many years, primarily off the track and very involved in racing rules development and enforcement.  The coroner’s report, issued in October sprinkled the blame all around, on the driver for not stopping to change his tire when it became damages and likely to burst, on the sponsor, the American Automobile Association, for not keeping the track in proper condition, on the referee, for not inspecting the track conditions, on the State Fair, for not providing sufficient police protection at the race and on the crowd, for standing up against the fences when danger was clear.

When interviewed by the Syracuse Herald in 1958, Oldfield blamed the condition of the track, caused by the hoopla of President Taft’s visit, and the positioning of the crowd, for the loss of eleven lives.   To this date, because of Oldfield’s accident in a green race car and another, just nine years later involving race car driver Gaston Chevrolet, green cars are considered unlucky by some and rarely seen on a racetrack.

Lee Oldfield was not related to Barney Oldfield, one of the premier racers of that age.

In this Week’s Coverage Pointers:

Dan D. Kohane
[email protected]

For the first time in 12+ years, not a single decision was reported that would fall within the venue of this column’s coverage.  Fortunately for our readership, we summer drought of decisions will soon end as all appellate courts are now in session.

Margo M. Lagueras

[email protected]

  • Plaintiff’s Reports Fail to Address Etiology of Alleged Injuries and Therefore Fail to Rebut Defendants’ Prima Facie Case


Audrey A. Seeley
[email protected]


  • Peer Review Insufficient To Deny Durable Medical Equipment As Cited Articles Do Not Present Sufficient Evidence To Meet Burden
  • Failure To Submit A Rebuttal Report Results In Denial Being Upheld
  • Peer Review Valid To Partially Deny Claim As Applicant Did Not Submit Rebuttal Letter
  • Lack of Gas And Inability To Find Location Without Contacting Insurer To Discuss Not Excuse For Failing To Appear For IMES.


  • Insurer Prevails On Breach Of Condition For Failure To Attend IMEs
  • Defendant Raised No Issue of Fact Precluding Summary Judgment
  • Insurer’s Motion On Lack Of Medical Necessity Granted.

Steven E. Peiper

[email protected]

  • Rail Is Considered a “Structure” for Labor Law § 241(6) Purposes
  • Direction, Supervision or Control Not Necessary Where There Is a Dangerous Worksite Condition Present


Cassandra A. Kazukenus
[email protected]

  • Press Releases/Announcements from Governor Cuomo and Superintendent Lawsky
  • Reporting Under Medicare Secondary Payer


Katherine A. Fijal
[email protected]

  • Did “Wrongful Act” Occur Wholly After Retroactive Date in Policy?


Jennifer A. Ehman
j[email protected]

  • Definition of “Who Is An Insured” Does Not Include A Car Thief
  • Permanent Stay of Arbitration Denied; Framed Issue Hearing Ordered to Determine Whether Vehicle Was Insured at Time of Accident
  • Where Two Policies Purport to Be Excess, They Cancel Each Other Out And the Insurers Are Required to Contribute Ratably in such Proportion as its Policy Limit Bears to the Total of all Policy Limits
  • Insurer Failed to Submit Sufficient Evidence to Establish that the Infant Plaintiff First Ingested Lead at the Insured Premises Prior to the Effective Date of the Policy


Earl K. Cantwell
[email protected]  

Professional Errors and Omissions Policies : the Perils and Pitfalls of Prior Knowledge

All the best to you and yours.


Dan D. Kohane
Hurwitz & Fine, P.C.

1300 Liberty Building
Buffalo, NY 14202    
Phone:  716.849.8942
Fax:      716.855.0874
E-Mail:  [email protected]
H&F Website: 


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

Dan D. Kohane
[email protected]

Audrey A. Seeley
[email protected]

Margo M. Lagueras
[email protected]


Dan D. Kohane, Team Leader
[email protected]

Michael F. Perley
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
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]

Margo M. Lagueras
Cassandra Kazukenus
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
Cassie’s Capital Connection
Fijal’s Federal Focus
Jen’s Gems
Earl’s Pearls
Across Borders

Dan D. Kohane
[email protected]

For the first time in 12+ years, not a single decision was reported that would fall within the venue of this column’s coverage.  Fortunately for our readership, the summer drought of decisions will soon end as all appellate courts are now in session.

Margo M. Lagueras
[email protected]

09/08/11         Graves v. L&N Car Service
Appellate Division, First Department
Plaintiff’s Reports Fail to Address Etiology of Alleged Injuries and Therefore Fail to Rebut Defendants’ Prima Facie Case

Upon reargument, defendants’ motion is granted where the affirmations of their expert radiologist explained with particularity that the alleged injuries to plaintiff’s cervical and lumbar spine, and right shoulder, appeared to be the result of chronic and degenerative conditions and not trauma.  In opposition, the radiology reports submitted by plaintiff did not address the etiology of the alleged injuries and plaintiff’s chiropractor merely gave a conclusory opinion that the injuries were causally related to the accident.  In addition, plaintiff admitted in her deposition testimony and bill of particulars that she only missed three weeks of work following the accident.  Therefore, her claims under the permanent consequential and significant limitation of use categories, as well as the 90/180-day category of serious injury were dismissed. 

The one-judge dissent agreed with the majority with regard to the 90/180-day claim, but opined that the reports of plaintiff’s chiropractor and radiologist were sufficient to raise issues of fact with respect to the permanent consequential and significant limitation of use categories.

Audrey A. Seeley
[email protected]


09/14/11         Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Peer Review Insufficient to Deny Durable Medical Equipment as Cited Articles Do Not Present Sufficient Evidence to Meet Burden

The applicant’s assignor was involved in a June 17, 2005, accident and was subsequently prescribed an RS4i Sequential Stimulator for three months.  The assignor was rented to the applicant’s assignor.  The insurer denied the equipment based upon a peer review conducted by Dr. Mary Bezkor.  Dr. Bezkor opined that the eligible injured person’s clinical profile was not reflective of a rapid neurological deterioration or any acute decline.  Dr. Bezkor cited to a few medical articles to support her position.  The assignor received office physical modalities and there was no necessity for an additional rental of the unit.

The assigned arbitrator determined that the peer review report was not persuasive as the articles relied upon failed to establish it was against accepted medical practice to prescribe such a device.  One article questioned the passive nature of the device and recommended active exercise.  Another article cautioned about making predictions regarding enhanced neurological recovery in using this device.  Yet another article determined there was no proven superiority between a TENS unit and this device.  In all, the assigned arbitrator determined that none of the articles provided evidence that the device was not medically necessary.

09/14/11         Applicant v. Respondent
Arbitrator Thomas J. McCorry, Erie County
Failure to Submit a Rebuttal Report Results in Denial Being Upheld

The applicant’s assignor was involved in an April 30, 2007, accident and was thereafter prescribed a RS-4 interferential stimulator to relieve chronic pain, relax muscle spasm, and maintain as well as increase range of motion.  The insurer denied the equipment based upon an independent medical examination of Dr. Polavarpu.  Dr. Polavarpu opined that while the assignor sustained multiple strains, they had resolved.  Therefore, there was no evidence of any need for durable medical equipment. 

The assigned arbitrator determined that the insurer met its burden and that the applicant failed to rebut the conclusions in the report.  Also, the prescription submitted to establish medical necessity was deemed a form prescription that did not offer enough detail to overcome the conclusions in the independent medical examination.

09/12/11         Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
Peer Review Valid to Partially Deny Claim as Applicant Did Not Submit Rebuttal Letter

The applicant’s assignor sought reimbursement for an LSO, interferential unit and associated supplies.  The insurer denied the claim for the durable medical equipment based upon the peer review of Dr. Jeffrey Passick.  Dr. Passick opined that the assignor was receiving physical therapy and a comprehensive course of conservative care in the office.  Dr. Passick further opined that it was excessive to prescribe the muscle stimulator for home use when the assignor was undergoing supervised in-office care. 

The assigned arbitrator partially upheld the insurer’s denial for the interferential unit and supplies based upon this peer review report.  The applicant did not interpose a rebuttal letter as to the conclusions set forth in the peer review report.  However, the denial as to LSO brace was not upheld as the peer review did not address this equipment.

[Great job to our own Cassie for handling this one on the insurer’s behalf!]

09/12/11         Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
Lack of Gas and Inability to Find Location Without Contacting Insurer to Discuss Not Excuse for Failing to Appear for IMES

The insurer denied the applicant’s entire No-Fault claim for breach of condition precedent to coverage under the policy in failing to appear for two scheduled independent medical examinations (“IME”).  The applicant was scheduled for an IME on December 22, 2010 and January 17, 2011, to which she did not appear.  The applicant contended that she tried to attend the first IME but could not find the location.  She called her attorney for assistance and eventually gave up attempting to find the location.  Neither the applicant nor her attorney’s office contacted the IME vendor to tell the vendor she could not find the IME location and needed further direction.

The applicant attempted to have the second IME located closer to her home and testified she discussed same with her attorney.  Apparently, her attorney contacted the insurer requesting this change but the location remained the same.  Then on the date of the IME the applicant again called her attorney to advise she could not attend because she had no gas for her vehicle. 

The insurer’s activity log reflected one contact from counsel after the applicant failed to appear for two scheduled IMEs.

The assigned arbitrator determined that the applicant did not submit to the two IMEs and there was no reasonable excuse as to why the applicant could not attend same.


09/14/11         Multi-Specialty Pain Mgt PC a/a/o Jurie Burke v. New York Cent. Mut. Fire Ins. Co.
Appellate Term, First Department
Insurer Prevails on Breach of Condition for Failure to Attend IMEs

The insurer’s summary judgment motion on failure to appear for scheduled IMEs was properly granted as the insurer demonstrated proper mailing and follow up notices for IMEs.  The plaintiff failed to raise a triable issue regarding the reasonableness of the insurer’s requests or the assignor’s failure to appear.

09/09/11         Devonshire Surg. Facility and Carnegie Hill Orthopedic Services, PC a/a/o Olga Mashurova v. American Tran. Ins. Co.
Appellate Term, First Department
Defendant Raised no Issue of Fact Precluding Summary Judgment

The plaintiff was entitled to summary judgment as the insurer failed to raise a triable issue of fact after the plaintiff established its prima facie case that the prescribed statutory billings were mailed and received by the insurer without any payment. 

09/09/11         Triangle R Inc.  a/a/o Michael Torres v. New York Cent. Mut. Fire Ins. Co.
Appellate Term, Second Department
Insurer’s Motion on Lack of Medical Necessity Granted

The insurer was entitled to summary judgment as the plaintiff submitted, in opposition to the motion on lack of medical necessity, an undated medical report which was not properly sworn and in admissible form.

Steven E. Peiper
[email protected]

09/15/11         Medina v. City of New York
Appellate Division, First Department
Rail Is Considered a “Structure” for Labor Law § 241(6) Purposes
Plaintiff, an employee of the NYC Transit Authority, was in the course of his employment when he was struck with a subway rail that “sprang upward and the fell, striking his leg.”  At the time of the incident, members of a crew supervised by plaintiff were removing old rails as part of an overall upgrade to at least 400 to 500 obsolete signal rails. 

The process of removing the rail simply involved cutting it out of the system (section by section).  During the process of removing the rail in question, it was realized that the rail was under extreme pressure from both ends.  This kinetic energy was ultimately released, which resulted in the rail jumping loose from its position in the track bed. 

Plaintiff’s claim was premised on Labor Law § 240(1) and Labor Law § 241(6) violations.  The Labor Law § 240(1) was dismissed because the incident was not a result of gravity, but rather kinetic energy “loaded” into the rail due to the pressures exerted on each end of it. 

The trial court also dismissed the Labor Law 241(6) claim on directed verdict.  However, this portion of the trial court’s order was overturned by the First Department.  In reinstating plaintiff’s Labor Law § 241(6) claim, the Court noted that plaintiff’s claim was premised upon the section of the Labor Law which required “continuing inspections” for hand-related demolition work.  The term “demolition”, as defined in the statute, is “the total or partial dismantling or razing of a…structure including the removing or dismantling of machinery or other equipment.”  It follows that the First Department found the rail in question to qualify as a “structure,” and therefore the protections for hand-held demolition triggered.  Finally, the Court noted that a question of fact existed as to whether the plaintiff was engaged in “routine maintenance” or a physical “alteration.”

09/15/11         Cordeiro v TS Midtown Holdings, LLC
Appellate Division, First Department
Direction, Supervision or Control Not Necessary Where There Is a Dangerous Worksite Condition Present
This action has its roots as a Labor Law § 240(1) case.  Plaintiff sustained injury when he fell into an elevator shaft while in the course of his employment for Third-Party Defendant Schindler.  While the issues of Labor Law § 240(1) are relatively straight-forward, the indemnity claims against Schindler (as well as a cross-claim for common law indemnity) are much more interesting.  In case there was any question, the trial court found a violation of Labor Law § 240(1) and the First Department affirmed on Appeal. 

With regard to TS Midtown Holdings’ (“owner”) cross claim for common law indemnification, the motion was denied where, as here, there was a finding that the worksite was unsafe.  As such, TS Midtown’s potential liability was not based upon direction, supervision or control as it usually is in a Labor Law case, but rather upon whether it had knowledge (actual or constructive) of the defective condition prior to plaintiff’s fall.  If it did, it would have negligence and the common law indemnity claim against a co-defendant would be inapplicable.

Moreover, TS Midtown’s third-party claim for contractual indemnification against plaintiff’s employer, Schindler, failed where the indemnity clause at issue was impermissibly vague.  Citing one of our favorite decisions, Tonking v. Port Authority, the First Department reaffirmed the long standing rule that indemnity provisions “must be strictly construed to avoid reading into a duty which the parties did not intend to be assumed.” 

Cassandra A. Kazukenus
[email protected]

Press Releases/Announcements from Governor Cuomo and Superintendent Lawsky

            Normally, I do not report on the press releases from the Governor’s office or the Department of Insurance, soon to be known as The Department of Financial Services (October 3rd), but in the aftermath of Tropical Storm Irene, two press releases were sent out that dealt with insurance that caught my eye.

            On September 2nd, the new Superintendent of the Department of Financial Services, Benjamin Lawsky, put out a press release that may be found on the Insurance Department’s website that said “At Governor Cuomo’s direction, the state will do everything in its power to ensure that insurance companies are properly paying claims.”  It goes on to state that if homeowners are being told that “insurance doesn’t at all cover the damage caused by Irene, that is just plain wrong” and insurance companies and their personnel will be held accountable. 

The press release then provides insureds some advice such as the fact that they should report the claim even if they don’t believe it is covered and that FEMA may be available to provide some assistance.  Superintendent Lawsky goes on to state “Most insurance companies are working hard to do the right thing and serve their customers.  However, in some situations there has been misinformation about what losses are covered, how they are covered and what types of losses are not covered by insurance.”  The press release does state that most homeowner policies do not cover damage from flooding but they do provide coverage for damage from wind and that the hurricane deductible should not be applied because the storm was downgraded to a tropical storm before it hit New York.

This week, on September 13th, another press release was published on the Insurance Department website.  Generally this press release has a lot of good tips for insureds regarding what steps they should take to protect themselves if they sustained damage as a result of Tropical Storm Irene, including take photos of the damage before repairs are made, the time limits for submitting a claim to FEMA, save all receipts for costs incurred in the repair or clean up, ask if there are expenses for additional living expenses (ALE) under your policy if it is uninhabitable.  The press release also states that if the first offer made by the insurance company does not meet your expectations you should:

  • Be prepared to negotiate
  • Ask for the specific policy language the company is relying upon and
  • If you are being treated unfairly contact the Insurance Department


Although not surprising after an event such as Tropical Storm Irene, I suspect the number of insurance department complaints will increase this year. Both of these press releases, as well as others, may be found on the Insurance Department website.  I will gladly provide a copy to you if you wish as well.  

Reporting Under Medicare Secondary Payer

For those who have the daunting responsibility of interpreting and implementing the Medicare Secondary Payer Reporting rules, a new User Guide (3.2) was recently updated and posted to the CMS website.  Many of the changes to the User Guide pertain to the technical aspect of the reporting.  I am going to highlight some of the changes to the User Guide that pertain to the data that needs to be reported.  Also, as a quick reminder, TPOC (total payment obligation claims) reporting is necessary for liability claims that are settled on or after October 1, 2011.  CMS will reject any reported TPOC settlements that had no ORM component that total less than $5000.  That date is quickly approaching!

Changes Made

ICD-9 Codes

  • Four previously excluded codes are not available as cause of injury codes.  Generally these codes are to be used when none of the other available E codes are applicable.  Generally, these are extremely generic accident codes such as the accident occurred at an unspecified location.  The codes are:
    • E0008
    • E0009
    • E8498
    • E8499
  • Also, E9670-E9679 are removed from the excluded ICD-9 codes list.
  • A reminder – the new ICD-9 code list comes out January 1st and can be found on the CMS website.  As always, if you need a copy, I will be happy to provide it for you.
  • Section of the User Guide now allows the use of code NOINJ in both the cause of injury and diagnosis sections when the settlement between the carrier and the injured person releases medicals but there was no medical treatment sought as a result of the incident.
    • This code must be input as both the cause and diagnosis ICD-9
    • There can NOT be an associated ORM
    • CMS cautions this code will be closely monitored as it does not want this code being used when it is not appropriate.  An example of when CMS anticipates the use of this codes is when there is a loss of consortium claim or an employment action that alleges mental distress but no medical treatment was sought.


Direct Data Entry Dos & Don’ts

  • Only delete a record if the entire record was added in error or if a key field (CMS Date of incident, Plan Insurance Type, ORM indicator) was improperly entered.
  • Cannot submit partial ICD-9 codes and no decimal points are allowed.
  • ORM indicator should never be switched from Y to N.  If Y at any point, it remains Y.
  • Be sure to update ORM termination dates.


ORM (Ongoing Responsibility for Medicals)

  • Previously you could not submit an ORM termination date that was less than 30 days from the assumption date.  This is no longer true.  The actual ORM termination date is acceptable even if it is the same date the ORM was accepted


What claims must be reported?

  • The User Guide stresses that any claim involving a Medicare beneficiary where medicals are claimed and/or released in the settlement must be reported. 
    • This is extremely broad!  My understanding from participating in the various conference calls is that this would include a property damage claim where the settlement releases any and all claims that could possibly be submitted even those that were not alleged.  For example, if you settle the PD liability claim for water intrusion and mold and the release also releases you from any bodily injury claims (BI from the mold) you will need to report even if there is no allegation at the time of settlement there were bodily injuries.


  • Medicare now allows an insurer to look up a claimant’s Medicare status without being limited to the once a month query.
    • This is limited to 100 query look ups per month
    • This is a manual process as compared to the large submissions done once a month
    • Only available for RREs in production status
    • Not available for DDE (direct data entry) participants


Changes to Field Descriptions

  • Field 12 – Cumulative Injury description now says “the DOI is the earlier of the date that treatment for any manifestation of the cumulative injury began, when such treatment preceded formal diagnosis; or the first date that formal diagnosis was made by any medical practitioner.”


Katherine A. Fijal
[email protected]

09/07/11         American Automobile Insurance Company v. Murray
Third Circuit Court of Appeals – Pennsylvania
Did “Wrongful Act” Occur Wholly After Retroactive Date in Policy?
In the district court American Automobile Insurance Company [“AAIC”] sought and received a declaratory judgment that its insured, insurance agent Tyrone Murray, is not covered under its professional liability policy.  The issue that the court faced was whether the alleged “wrongful act” of Murray fell wholly within retroactive date of the AAIC professional liability policy. 

The claim against Murray arose out of a motor vehicle accident which took place on March 23, 2006, when 19 year old Stephen Meloni drove his vehicle while intoxicated and struck a pole killing his passenger Jessica Easter. Jessica’s father filed suit on October 25, 2006, against Ennie and Steven Meloni in the Philadelphia County Court of Common Pleas [“Easter lawsuit”].  In his suit, Easter alleged that Ennie illegally sold alcohol to 19 year old Gary Grato, who then supplied that alcohol to Meloni causing him to operate his vehicle negligently and recklessly.

Upon receipt of the lawsuit, Ennie sought a defense and indemnification from its general liability insurer, Century Surety Company [“Century”]. Century provided a defense under a reservation of rights and then filed a declaratory judgment action in the United States District Court for the Eastern District of Pennsylvania.  The district court ultimately granted summary judgment to Century because the insurance policy in effect during the relevant time period contained a liquor liability exclusion.

In response to the district court’s decision Ennie filed suit against its insurance agent, Tyrone Murray [“Ennie lawsuit”], alleging that Murray negligently failed to place liquor liability insurance coverage for Ennie. Ennie claimed that it consulted with Murray on August 23, 2000, for the purpose of obtaining insurance that would protect the company from any and all risks arising out of the business of operating a beer distributorship.  Ennie alleged that in 2002, Murray sold it the Century insurance policy under the pretense that it protected Ennie from these risks.  Ennie then renewed the policy annually believing that it covered these risks.  Ennie alleged that Murray, as a licensed commercial insurance agent, breach his duty to advise it properly of the necessity or availability of liquor liability coverage. 

In response to the Ennie lawsuit, Murray sought a defense under his professional liability policy with AAIC.   The AAIC policy was a “claims made and reported” errors and omissions liability policy.  The insuring clause in the AAIC policy provided that, “we will pay on the Agent’s behalf all Loss which such agent is legally obligated to pay as a result of the Claim first made against such Agent . . . to Us during the Policy Period . . . provided that such claim for a Wrongful Act in the rendering of or failure to render Professional Services in connection with a Covered Product if that Wrongful Act occurs wholly after the Retroactive Date.”

A Wrongful Act is defined as, “any actual or alleged negligent act, error or omission, or negligent misstatement or misleading statement by any Agent . . . in the rendering of or failure to render Professional Services.”

An amendatory endorsement on the AAIC policy defines Retroactive Date stating that “the Retroactive Date, if any, shown on the Agent’s Property/Casualty Insurance Agent’s Error and Omissions Liability Policy; (a) which immediately proceeded the first policy AAIC issued to the Agent; or (b) which immediately preceded the date the Agent was first added to the AAIC policy, if the Agent was added after the inception date of the first AAIC policy, provided that there is no lapse in coverage between the termination date of that other policy and the inception date of coverage for the Agent under the AAIC Policy. If a lapse in the coverage exists, the Retroactive Date shall be:  (a) the inception date of the first policy AAIC issued to the Agent; or (b) the inception date of coverage when the Agent was first added to the AAIC policy, if the Agent was added after the inception of the first AAIC policy.”

In order to determine whether coverage was triggered the Court had to first determine the Retroactive Date on the policy and then decide whether Murray’s “wrongful act” occurred “wholly after” that retroactive date.  Interpretation of the amendatory endorsement, specifically the term “immediately preceded” determined the retroactive date.

In support of coverage Ennie argued that the retroactive date must be determined by considering only the first paragraph of the amendatory endorsement, and, as such, the retroactive date must be the retroactive date which immediately preceded the first policy AAIC issued to Murray.  It was Ennie’s contention that the policy which “immediately preceded” the first AAIC policy beginning 1/1/06 was a policy issued by USLIC covering the period 11/24/04 to 11/24/05 because that policy was the last in time. In the alternative, Ennie argued that if “immediately preceded” is open to two different interpretations, then we must construe the term against the insurer and conclude that “immediately preceded” means “next in line.”  Ennie also dismissed the second paragraph of the amendatory endorsement, maintaining that its language and lapse provisions are not applicable to Murray.  Ennie argued that the lapse provisions apply only if the agent was added after the inception date of the policy and since Murray was insured under the first AAIC policy since inception, there were no lapses in AAIC coverage because the two policies were continuous.

On the other hand, AAIC argues that the first paragraph of the amendatory endorsement supports a retroactive date of January 1, 2006.  AAIC contends there was no policy that “immediately preceded” the first AAIC policy since there was a delay and lapse of time between Murray’s coverage with USLIC and AAIC.  As a result, Murray’s retroactive date would be the first effective date for his AAIC policy, January 1, 2006.

The Third Circuit [“Court”] agreed with what it called the district court’s thorough and thoughtful analysis regarding the retroactive date.  In analyzing the amendatory endorsement, the district court pointed out that AAIC’s policy was poorly drafted. The district court noted that not applying the lapse language to the first paragraph of the amendatory endorsement renders it superfluous and creates absurd results, and then determined that the only reasonable interpretation of the endorsement as a whole “is to give effect to the lapse provision in all instances of lapse in coverage.”  The district court concluded that because of Murray’s lapse in coverage the retroactive date was January 1, 2006, the inception date of the AAIC policy.

In agreeing with the district court’s decision the Court noted that Pennsylvania law requires that the Court read the policy language regarding the retroactive date as a whole in the context of the entire amendment and that the Court must attempt to give effect to all its provision.  In doing this the court determined that the lapse provisions must be applicable to both paragraphs of the amendatory endorsement in order to give logical meaning to paragraph one and the lapse provisions themselves.  The Court also noted that this interpretation also protects the purpose of claims made policies and retroactive dates, which are meant to limit an insurer’s coverage, and avoids the absurd result of giving effect to dates decades in the past.

In addition, the Court was not persuaded that the term “immediately preceded” in the amendatory endorsement was an ambiguous term. The Court stated that reading “immediately preceded” in light of the lapse provision removes any ambiguity about the term, the date of retroactivity in the policy that “immediately preceded” the AAIC policy is only relevant if the insured has maintained continuous insurance coverage.  Since Murray allowed his coverage to lapse, the retroactive date is the inception date of the first AAIC policy issued – January 1, 2006.

In order to trigger coverage under the AAIC policy, both the claim and the wrongful act by Murray must have occurred “wholly after” the retroactive date of January 1, 2006.  Since there was no dispute that the claim occurred after the retroactive date the issue was whether Murray’s “wrongful act” occurred after that date.  Ennie argued that Murray’s only wrongful act was failing to advise and provide liquor liability insurance to Ennie on the specific date of the accident, March 21, 2006.  Ennie argues that any negligence attributable to Murray before that time did not result in any harm and therefore, did not give rise to any claims for which coverage is sought under the AAIC policy.

AAIC, on the other hand, argued that Murray’s wrongful act occurred in the fall of 2002 when he failed to provide liquor liability coverage and continued at each policy renewal through the last renewal in December 2005.

The Court agreed with AAIC and concluded that the “wrongful act” occurred when Murray failed to exercise the proper degree of care in placing insurance for Ennie and exposed it to unreasonable risk of harm, i.e., when Murray first procured coverage for Ennie in 2002.  The Court concluded that Murray created an “unreasonable risk of harm” to Ennie at the earliest in the fall of 2002 and at the latest during the last policy renewal in December 2004.  Any meeting between Ennie and Murray that occurred in 2006 regarding insurance coverage was a continuation of Murray’s wrongful act of failing to provide the proper coverage.  The Court held that because Murray’s acts did not occur “wholly after” the retroactive date of January 1, 2006, coverage was not triggered. 

Jennifer A. Ehman
[email protected]

08/26/11         Travelers Indem. Co. of Connecticut v. Conroy
Supreme Court, New York County
Definition of “Who Is an Insured” Does Not Include a Car Thief
Defendant, Scott Thomas Conroy (“Conroy”), stole a 1995 Dodge Intrepid.  While in the process of stealing the vehicle, the owner’s son attempted to stop Conroy who then lost control of the vehicle and struck a pedestrian. 

The pedestrian commenced an action again Conroy, the owner and the owner’s son.  The complaint alleged that, at the time of the accident, Conroy was operating the vehicle with the permission and consent of the owner.  Based on this allegation, the vehicle’s insurer, Travelers, correctly provided all parties a defense in the action.

Thereafter, during the course of Traveler’s investigation of the underlying action, it was discovered that Conroy pled guilty to Robbery in the Third-Degree and admitted, in open court, that he forcibly took the vehicle and had no authority or permission to take it.  Based on this statement, the owner and her son moved for summary judgment, which was granted.  This left Conroy as the only remaining defendant in the underlying action.

Travelers then commenced a declaratory judgment action naming Conroy and the injured pedestrian.  While Conroy appeared in the action, the pedestrian did not.  Shortly thereafter, Travelers brought this motion seeking a default judgment against the pedestrian and summary judgment as to it duty to defend and indemnify Conroy.

Travelers argued that Conroy did not fall within the “Who is an Insured” section of the policy, which included as insureds “you, any relative, and anyone else using your car if the use is or is reasonably believed to be with your permission…”  In support, Travelers submitted Conroy’s statements.  In opposition, Conroy submitted an affidavit attesting that he had implied permission.  Specifically, he alleged that his car was broken and at the mechanic’s shop.  His girlfriend called a man named Rufio, who gave Conroy the keys to the vehicle, which he assumed Rufio owned. 

The court granted the default as to the pedestrian and ruled that Conroy failed to raise a triable issue of fact to defeat summary judgment.  The implied permission cases relied upon by Conroy involved owners who placed their vehicles under the unrestricted control of a second party who allowed a third person to operate them.  This was not the case here.  Rather, Conroy never provided proof that Rufio had the owner’s permission to operate the vehicle.  Further, he failed to provide any evidence to contradict his own statements made in Criminal Court. 

08/23/11         Matter of Government Empls. Ins. Co. v. Toise
Supreme Court, Nassau County
Permanent Stay of Arbitration Denied; Framed Issue Hearing Ordered to Determine Whether Vehicle Was Insured at Time of Accident
GEICO moved to permanently stay an uninsured motorist arbitration or, in the alternative, it moved for a temporary stay pending a framed issue hearing on whether the vehicle its insured struck was, in fact, insured.  GEICO also asserted that if a framed hearing was ordered, its insured was required to furnish it with a copy of all relevant medical records and authorizations and submit to an examination under oath and physical examinations prior to proceeding to arbitration.

The insured, Tony Toise, opposed the permanent stay, but consented to a temporary stay pending a hearing.  He also agreed to comply with any and all discovery demands as a condition precedent to arbitration.  

After the insured submitted his papers, in its reply, GEICO asserted that it had since ascertained that the vehicle that struck Mr. Toise was insured by General Ins. Co. of America; however, the claim was under investigation for a possible fraudulently issued insurance identification card.  Nevertheless, a denial had not yet been issued.  

Accordingly, the court denied the request for a permanent stay, ordered a framed issue hearing, and ordered that the caption be amended to include General Ins. Co. of America and the owner and/or operator of the vehicle that struck Mr. Toise. 


08/21/11         National Fire Ins. Co. of Hartford v. Harleysville Ins. Co.
Supreme Court, New York County
Where Two Policies Purport to Be Excess, They Cancel Each Other Out and the Insurers Are Required to Contribute Ratably in Such Proportion as Its Policy Limit Bears to the Total of All Policy Limits
This is a dispute between two insurance carriers over priority of coverage in a labor law case.  National Fire Ins. Co. of Hartford (“National Fire”) issued a policy to Americon Construction, Inc. (“Americon”), as the named insured while Harleysville Ins. Co. (“Harleysville”) issued a policy to a subcontractor of Americon, Gallagher Electrical Contractors, Inc.  Under the Harleysville policy, Americon qualified as an additional insured.

Thus, in order to resolve this issue, the court examined the relevant “other insurance” clauses.  The Harleysville policy provided, in relevant part:

  • If there is other insurance covering the same loss or damage, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect it or not….

The court reasoned that the National Fire policy covered the same loss or damage as the Harleysville policy; thus, this “other insurance” clause rendered the Harleysville policy excess insurance.

In comparison, the National Fire policy provided in relevant part:

  • Primary Insurance

This insurance is primary except when b. below applies.  If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary.  Then, we will share with all that other insurance by the method described in c. below. 

  • Excess Insurance


This insurance is excess over:

(2)       Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.

The court determined that this “other insurance” cause provided that that National Fire policy was primary unless there was other primary insurance coverage for the same occurrence.  Since Americon was entitled to additional insured coverage on a primary basis on the Harleysville policy, the Harleysville policy, based purely on this language, would be primary; thus, the National Fire would be excess.

Where two policies both purport to provide excess coverage, they cancel each other out and each carrier is required to contribute ratably in such proportion as its policy limit bears to the total of all policy limits.  Here, both insurers were required to share defense and indemnity of Americon equally. 

08/19/11         Vigilant Ins. Co. v. Sibbio
Supreme Court, New York County
Insurer Failed to Submit Sufficient Evidence to Establish That the Infant Plaintiff First Ingested Lead at the Insured Premises Prior to the Effective Date of the Policy
An action was brought against Ralph Sibbio, by an infant plaintiff, seeking damages for personal injuries caused by exposure to lead paint.  The underlying complaint alleged that the exposure occurred between July 2003 and July 2004, during the period of the infant’s tenancy at a premises owned by Mr. Sibbio. 

Upon receipt of the suit papers, Mr. Sibbio’s insurer, Vigilant Ins. Co., denied coverage citing the definition of “occurrence,” which provided that the term meant “an accident to which this insurance applies which begins within the policy period...”  Since the policy became effective on December 3, 2003, Vigilant denied coverage asserting that the suit was outside the grant of coverage.

Ultimately a declaratory judgment action was brought, and Vigilant moved for summary judgment seeking a declaration that it was under no obligation to defend or indemnify Mr. Sibbio.  In support of its motion, it submitted a copy of the complaint and a copy of the lease agreement showing the child’s mother lived at the subject premises from June 1, 2003 (before the policy began) through May 31, 2005.  Vigilant also pointed to portions of a sworn affidavit submitted by Mr. Sibbio in which he stated that he bought the property in March 2004 and, at the time he purchased, the child’s mother lived in the building.  Further, he attested that when he closed on the property he was not able to gain access to the subject apartment and, in turn, did not have an opportunity to observe it conditions, including whether it had any dangerous condition involving lead paint.

The court found that this information was insufficient to establish when the infant plaintiff, who tested positive for lead in July, 2004 and was born in April 2002, first ingested the lead, or how long the hazard existed in the relevant apartment.  In other words, based on the evidence presented, the court could not determine when the injury occurred and, therefore, whether it qualified as an “occurrence” within the policy period.  Accordingly, Vigilant’s motion was denied with leave to renew upon additional proof.


Earl K. Cantwell
[email protected]  


            Standard professional errors and liability policy applications contain questions that the insured inform the carrier as part of an original or renewal application of existing or pre-existing matters that might give rise to a claim under the policy.  An accounting firm failed to fulfill this obligation, and as a result it was denied liability insurance coverage in the case of Cuthill & Eddy, LLC v Continental Casualty Company, 2011 W L 1835851 (Middle District Florida, Orlando Division, May 16, 2011). 

            The insureds were long-time clients of the accounting firm Cuthill & Eddy.  The accounting firm was insured under two consecutive one year professional liability policies issued by Continental Casualty starting in August, 2005.  In April, 2006, the customers’ counsel sent a letter to the accounting firm complaining of “several acts or omissions” that gave rise to professional malpractice, and the attorney advised the accounting firm to forward the letter to its insurance company.  The accounting firm did not send the letter to Continental, although it later asserted it did notify its insurance broker. 

            In 2007, while the renewal policy was in force, the customer again told the accounting firm that it would file a lawsuit for professional negligence in handling the family’s income tax returns.  The accounting firm then notified Continental, but the insurance company denied coverage under both policies.  The court granted the insurer’s motion finding no coverage available under either policy.

            First, the renewal policy’s “prior knowledge” exclusion conditioned coverage on the accounting firm having no knowledge or basis to believe prior to the effective date of the renewal policy that a pre-existing act or omission “might reasonably be expected to be the basis of a claim.”  Here, the accounting firm knew in April, 2006, which was confirmed in an internal firm memo in May, 2006, that there were obvious concerns that a malpractice claim might be filed.  Therefore, the renewal policy’s prior knowledge exclusion applied and precluded coverage under that policy for this particular claim.

            The court then rejected the accounting firm’s alternative argument that it gave notice to Continental during the first policy period.  Even if the accounting firm had notified its broker of the attorney letter of April, 2006 (which the broker disputed), the notification would not have constituted a sufficient claim notice under the policy since the plain language of the policy required the accounting firm to give notice of any claim or potential claim to the insurer directly, not to any “agent” of the company.  Therefore, the accounting firm failed to give notice in the manner specified and the first policy also afforded no coverage. 

            The one basic lesson of this case is that no matter how contested, embarrassing or fraught with pain it may be, when applying for a new or renewal professional liability policy the applicant must candidly disclose any event or pre-existing state of affairs which might give rise to a professional liability claim.  Actually, in Cuthill & Eddy, the April, 2006 letter from the customer’s attorney alleging the malpractice was a fairly bright line threat of a possible claim.  The accounting firm also had circulated an internal memo in May 2006 that “clearly disclosed” concerns that a malpractice claim might be filed.  Based on such factual and documentary evidence, the court ruled there was no issue of fact but that the accounting firm had “prior knowledge” of the possible malpractice and threat of a legal claim in April/May, 2006, which was not disclosed in the renewal policy application. 
The advice is do not hide, do not fail to disclose, and do not run away from the situation since it will only make matters worse, such as in this case resulting in denial of insurance coverage to the accounting firm.  While public airing of client complaints and possible performance problems is not comfortable or pretty, here the alternative of secrecy and non-disclosure proved far worse.

Courtesy of the FDCC Website

09/07/11         Swartzbaugh v. Encompass Ins. Co. of America
Maryland Court of Appeals
Being “First” Is Not a Question of Location in an Insurance Policy Application
In 1998, “Kenneth and Lynne S. Swartzbaugh” applied for car insurance from Encompass. The application was signed by Lynne. That same year, Lynne signed a statutorily-mandated waiver of uninsured motorist coverage. That waiver stated that the person executing it was “the first named insured/applicant” and that they had been offered and refused excess UM coverage, opting only for the statutory minimum of $20,000/$40,000 for bodily injury. Years later, the Swartzbaugh’s daughter Kelly was seriously injured in an automobile accident caused by an uninsured driver, and brought a declaratory judgment action to declare the UM waiver invalid and compel Encompass to pay the full policy limits on her UM claim. Kelly noted that § 19-510 of the Maryland Insurance Article required the “first named insured” to sign the UM waiver.
Because the policy was issued to “Kenneth and Lynne,” and Lynne signed the waiver, Kelly argued Encompass had failed to comply with § 19-510, and the waiver was therefore invalid. The Court of Special Appeals disagreed. Finding no statute or case, in Maryland or otherwise, construing the phrase “first named insured,” the Court resorted to dictionary definitions. It disagreed with Kelly that “first” meant the first name listed, noting “first” could also mean “primary.” Since Lynne had signed the application and the waiver, and since the waiver had noted the person signing the waiver was the “first named insured,” the Court upheld the waiver as valid.
Submitted by: Jennifer Johnsen, Paul Greene, and Nick Farr, Gallivan, White & Boyd, PA

09/06/11         Ins. Commissioner for State of Maryland v State Farm Cas.
Maryland Court of Special Appeals
An Insurance Binder Is Not an Insurance Policy
D.C. Washington attempted to purchase car insurance through State Farm. Washington’s insurance agent noted that Washington, in light of his accident history, was eligible for insurance at a premium of $1,401.46. The agent issued a binder to that effect. When State Farm underwriting received the application, it noted Washington was at fault for two accidents, which resulted in a policy premium of $2,512.62, rather than the amount noted in the binder. It issued the policy at that premium, with no advance notice to Washington of the change from the binder amount. Washington filed suit, alleging, among other things, that State Farm had failed to comply with § 27-614 of the Maryland Insurance Article, pursuant to which an insurer must give a policyholder written notice 45 days prior to any “increase in the total premium for a policy of private passenger motor vehicle liability insurance.” After administrative reviews and intermediate appeals, the court held State Farm could not have violated Maryland law because the statutory notice provision only applies to policy premium increases, not changes between an insurance binder and a policy. In reaching that conclusion, the court specifically noted “binder” and “policy” are not interchangeable words, and that the Maryland legislature omitted “binders” from the statutory scheme intentionally.
Submitted by: Jennifer Johnsen, Paul Greene, and Nick Farr, Gallivan, White & Boyd, PA

Reported Decisions

Graves v. L & N Car Service

Baker, McEvoy, Morrissey & Moskovits, P.C., New York
(Stacy R. Seldin of counsel), for appellants.
Michael D. Hassin, Rockville Centre (Randall A. Sorscher of
counsel), for respondent.
Order, Supreme Court, Bronx County (Mary Ann Brigantti-Hughes, J.), entered July 19, 2010, which, upon reargument, denied defendants' motion for summary judgment dismissing the complaint on the threshold issue of serious injury, reversed, on the law, without costs, and the motion granted. The Clerk is directed to enter judgment in favor of defendants dismissing the complaint.
This is an action seeking damages for "serious injury" within the meaning of Insurance Law § 5102(d) allegedly resulting from a motor vehicle accident. In support of their motion for summary judgment, defendants submitted affirmations of a radiologist, Dr. Jessica Berkowitz, attesting that she examined MRIs of plaintiff's cervical spine, lumbar spine and right shoulder, and found no evidence of a causal relationship between plaintiff's injuries and the subject accident. Rather, for reasons Dr. Berkowitz explained with particularity in her affirmations, the injuries appeared to result from chronic and degenerative conditions and were not the type of injuries that are caused by trauma. The radiology reports submitted by plaintiff, by contrast, said nothing about the etiology of the injuries, and the report of plaintiff's chiropractor contained only a conclusory assertion that there was a causal connection between the injuries and the accident. On this record, defendants established a prima facie case for dismissal of the complaint insofar as based on an alleged permanent, consequential and significant serious injury, and plaintiff failed to meet her burden to come forward with competent medical evidence specifically refuting the claimed lack of causal connection to the accident (see Pommells v Perez, 4 NY3d 566, 579-580 [2005]; Charley v Goss, 54 AD3d 569, 571-572 [2008], affd 12 NY3d 750 [2009]). Moreover, plaintiff's admissions in her bill of particulars and deposition testimony that she missed only three weeks of work as a result of the accident established as a matter of law that she did not suffer a serious injury within the meaning of the 90/180-day prong of Insurance Law § 5102(d).
Accordingly, defendants' summary judgment motion should have been granted.
All concur except Moskowitz, J. who dissents in part in a memorandum as follows:

MOSKOWITZ, J. (dissenting in part)
I agree with the majority that plaintiff has not raised an issue of fact with respect to her 90/180-day claim. However, I disagree with the dismissal of the complaint under the permanent, consequential and significant limitation categories of serious injury under Insurance Law § 5102(d).
While defendants' experts concluded that plaintiff had normal range of motion in her shoulder and cervical and lumbar spine, plaintiff raised an issue of fact through the affidavit of her chiropractor, Dr. Rosenfeld, who first examined plaintiff a week after the accident and again in October 2009. Specifically, Dr. Rosenfeld opined that plaintiff did not have normal range of motion and had "sustained a permanent disability as a result of the bulging and herniated discs in her cervical spine and lumbar spine." He concluded that "based upon this patient[']s history, treatment, physical examination, range of motion testing, and review of the MRI and EMG test results," these injuries "are the direct result of the automobile accident of July 23, 2007."
Moreover, Dr. Shapiro, a radiologist, attested to MRI studies (upon which Dr. Rosenfeld relied) that revealed, inter alia, "focal disc bulge at C4-5[,] right paracentral herniation at C5-6," "right foraminal herniation at L3-4, [and] loss of signal and central herniation at L4-5 with extension of disc into the neural foramen bilaterally." Accordingly, this case involves contested issues of fact inappropriate for summary adjudication (see de La Cruz v Hernandez, 84 AD3d 652 [2011]; see also Linton v Nawaz, 62 AD3d 434, 440-441 [2009], affd 14 NY3d 821 [2010]).

Medina v City of New York

Law Offices of Lawrence P. Biondi, Garden City (Lisa M.
Comeau of counsel), for appellant.
Wallace D. Gossett, New York (Steve S. Efron of counsel), for
Judgment, Supreme Court, Bronx County (Mary Ann Brigantti-Hughes, J.), entered March 1, 2010, upon a directed verdict, dismissing the complaint, unanimously modified, on the law, to reinstate plaintiff's Labor Law § 241(6) claim, the matter remanded for a new trial on said claim, and otherwise affirmed, without costs.
Plaintiff, an inspector for the New York City Transit Authority (TA), was injured on September 17, 2005 while inspecting a subway rail. Plaintiff was standing on the track bed when a 12-foot section of the rail, unsecured and weakened by saw cuts, suddenly sprang upward and then fell, striking his leg. Plaintiff brought this action asserting claims pursuant to, inter alia, Labor Law § 240(1) and § 241(6).
During the liability portion of the bifurcated trial, plaintiff testified that he was installing new track. He stated that this was part of a subway system modification project and not a repair project to replace worn rails. At the time of his accident, plaintiff and his crew were attempting to "strip" and remove a rail.
The operating superintendent for the track department of TA testified at trial that during three attempts to cut the rail, the saw blade jammed, indicating that the rail was expanding. He explained that the welded rails could expand significantly due to temperature variations, placing the rails under significant compression tension. The superintendent testified that typically spike anchors were installed every 10 feet to keep the rails from expanding and moving vertically or laterally. However, his post-accident investigation revealed that there were no anchors in place along a 600-foot section of rail that included the section where plaintiff was injured. The superintendent testified that he did not know how long the anchors had been missing, but the fact that there were no anchors should have been discovered during twice-weekly track inspections.
The superintendent characterized plaintiff's work as "routine maintenance." However, he later conceded that the upgrade to the D subway line was part of a five-year signal improvement contract, which entailed replacement of 400 to 500 obsolete signal rails that were incompatible with updated braking and signaling systems.
At the close of plaintiff's case, the parties moved for directed verdicts. Defendant contended that plaintiff was engaged in routine maintenance and that his work did not pose an elevation-related risk as contemplated by § 240(1). Defendant further contended that with regard to the § 241(6) claim, plaintiff was not engaged in "demolition" within the meaning of Industrial Code (12 NYCRR) § 23-3.3. Plaintiff argued that the work was "alteration" pursuant to § 240(1) and/or "demolition," which is covered by both sections of the Labor Law.
On March 1, 2010, a judgment on the verdict was entered in favor of defendant on the grounds that plaintiff's work was "routine maintenance" and therefore not within the scope of the Labor Law. For the reasons set forth below, we find that plaintiff's § 240(1) claim was properly dismissed, but that the court erred in dismissing plaintiff's § 241(6) claim.
A directed verdict may be rendered where the court finds that, "upon the evidence presented, there is no rational process by which the fact trier could base a finding in favor of the nonmoving party" (Sorrentino v Fireman, 13 AD3d 122, 123 [2004], quoting Szczerbiak v Pilat, 90 NY2d 553, 556 [1997]). The facts established at trial must be considered in the light most favorable to plaintiff, and the court must afford plaintiff every favorable inference which may properly be drawn from those facts (Sorrentino at 123; Villoch v Lindgren, 269 AD2d 271 [2000]). Applying this standard, defendant's motion for a directed verdict on plaintiff's Labor Law § 241(6) claim should have been denied.
In order to recover under § 241(6), a plaintiff must demonstrate that there was a violation of a specific regulatory provision of the Industrial Code which resulted in his injury (Rizzuto v L.A. Wenger Contr. Co., 91 NY2d 343, 350 [1998]). 12 NYCRR 23-3.3(c), the section relied upon by plaintiff, requires "continuing inspections" during "hand demolition operations" to protect against hazards "resulting from weakened or deteriorated floors or walls or from loosened material." "Demolition" is defined in the Industrial Code as "work incidental to or associated with the total or partial dismantling or razing of a ... structure including the removing or dismantling of machinery or other equipment" (12 NYCRR 23-1.4[b][16]).
Under this definition, the removal and dismantling of the rail constituted demolition of a structure. The record supports the view that the repeated saw cuts loosened the rail, rendering it unstable. We find that on this record, the stressed rail was the kind of hazard contemplated by section 23-3.3(c) (see e.g. Wade v Atlantic Cooling Tower Servs., Inc., 56 AD3d 547 [2008]). We further find questions of fact on the existing trial record as to whether defendant conducted the "continuing inspections" required by section 23-3.3(c) (see e.g. Salinas v Barney Skanska Constr. Co., 2 AD3d 619, 622-623 [2003]).
Furthermore, uncontradicted testimony establishes that the rails at issue were being removed for the purpose of upgrading the subway signal system, and not because they were worn, and that the "general context of the work" was a five-year capital improvement contract. These factors raise triable issues that militate against a finding, as a matter of law, that plaintiff was engaged in routine maintenance (see Prats v Port Auth. of N.Y. & N.J., 100 NY2d 878, 881-82 [2003]; Joblon v Solow, 91 NY2d 457, 466 [1998]; cf. Esposito v New York City Indus. Dev. Agency, 1 NY3d 526, 528 [2003]). Thus, the court should not have directed a verdict for defendant dismissing plaintiff's § 241(6) claim (see Koren-DiResta Constr. Co. v New York City School Constr. Auth., 2 AD3d 114 [2003]; see e.g. Hamill v Mutual of Am. Inv. Corp., 79 AD3d 478 [2010]).
We find, however, that plaintiff's Labor Law § 240(1) claim was properly dismissed, albeit on different grounds. In order to recover under § 240(1), the hazard to which plaintiff was exposed must have been one "directly flowing from the application of the force of gravity to an object or person" (Prekulaj v Terano Realty, 235 AD2d 201, 202 [1997], citing Ross v Curtis-Palmer Hydro-Elec. Co., 81 NY2d 494 [1993]). Here, the rail was propelled by the kinetic energy of the sudden release of tensile stress in the steel rail. Thus, plaintiff's injuries were not the result of the effects of gravity (see Daley v City of New York Metro. Transp. Auth., 277 AD2d 88 [2000]).
Cordeiro v TS Midtown Holdings, LLC,

Mischel & Horn, P.C., New York (Scott T. Horn of counsel),
for appellants-respondents.
Pollack, Pollack, Isaac & De Cicco, New York (Brian J. Isaac
of counsel), for respondents-appellants.
Sonageri & Fallon, LLC, Garden City (James C. De Norscia of
counsel), for respondent.
Order, Supreme Court, New York County (Paul G. Feinman, J.), entered June 16, 2010, which, to the extent appealed from as limited by the briefs, denied plaintiffs' motion for partial summary judgment as to liability on their Labor Law § 240(1) claim and granted their motion to strike defendants' answer to the extent of ordering that an adverse inference charge be given at trial, granted defendants' cross motion for summary judgment dismissing the complaint and all counterclaims against them to the extent of dismissing plaintiffs' Labor Law § 241(6) claim, and granted third-party defendant Schindler Elevator Corporation's motion for summary judgment dismissing the third-party complaint, unanimously modified, on the law, to grant plaintiffs' motion for partial summary judgment as to liability on their Labor Law § 240(1) claim and to deny defendants' cross motion for summary judgment dismissing plaintiffs' Labor Law § 241(6) to the extent it is based on a violation of Industrial Code (12 NYCRR) § 23-1.7(b)(1), and otherwise affirmed, without costs.
Plaintiff John Cordeiro, an employee of third-party defendant Schindler, was injured while preparing to remove elevator equipment from a building owned and managed by defendants by hoisting it through hatchway doors connecting a motor room with the floor below it. As plaintiff was sliding open the latch to the doors, they unexpectedly opened, causing him to fall to the floor below.
Plaintiffs met their prima facie burden of establishing entitlement to partial summary judgment on their Labor Law
§ 240(1) claim. Although the doors through which plaintiff fell were a permanent fixture of the building, they were not a "normal appurtenance," but rather, an access opening specifically built for the purpose of allowing workers to perform their work on the building elevators by hoisting materials to the building's motor rooms (Brennan v RCP Assoc., 257 AD2d 389, 391 [1999], lv dismissed 93 NY2d 889 [1999]). Accordingly, we find that the hatch in this case was a "device" within the meaning of § 240(1) (see id.; Crimi v Neves Assoc., 306 AD2d 152, 153 [2003]). Further, plaintiff did not step onto hatchway doors that opened accidentally (compare Bonura v KWK Assoc., 2 AD3d 207 [2003], and Rodgers v 72nd St. Assoc., 269 AD2d 258 [2000]). Rather, plaintiff was required to open the doors in order to hoist up the governor from the 19th floor hallway below. This exposed plaintiff to a gravity-related risk of falling into the hallway from the motor room (see Godoy v Baisley Lbr. Corp., 40 AD3d 920 [2007]).
In opposition, defendants failed to raise a triable issue of fact as to whether plaintiff was the sole proximate cause of the accident (see Gallagher v New York Post, 14 NY3d 83, 88 [2010]; Blake v Neighborhood Hous. Servs. of N.Y. City, 1 NY3d 280, 289 n 8 [2003]; see also Miglionico v Bovis Lend Lease, Inc., 47 AD3d 561, 565 [2008]). Defendants did not submit any admissible evidence that plaintiff knew he should have used his safety harness under these circumstances, or that he knew his partner had a suitable 50-foot lifeline to which the harness could have been attached. While defendants argue that plaintiff could have tied his six-foot lanyard to a nearby beam or staircase, no evidence, expert or lay, was submitted that either of these options were appropriate anchorage sites (see Miglionico, 47 AD3d at 564-565). Accordingly, plaintiffs were entitled to partial summary judgment as to liability on their Labor Law § 240(1) claim.
Supreme Court improperly dismissed plaintiff's Labor Law § 241(6) claim to the extent it is based on an alleged violation of Industrial Code (12 NYCRR) § 23-1.7(b)(1). Plaintiffs first alleged this particular Code provision concerning hazardous openings in a third supplemental bill of particulars served, without leave of court, after plaintiffs moved for summary judgment. However, plaintiffs' original bill of particulars claimed that defendants failed to adequately maintain the hatchway, causing plaintiff to fall when it suddenly opened. Accordingly, plaintiffs' belated identification of 12 NYCRR 23-1.7(b)(1) "entails no new factual allegations, raises no new theories of liability, and has caused no prejudice to defendant[s]" (Noetzell v Park Ave. Hall Hous. Dev. Fund Corp., 271 AD2d 231, 233 [2000]; see Cevallos v Morning Dun Realty, Corp., 78 AD3d 547, 549 [2010]). Further, the provision is sufficiently specific to support a Labor Law § 241(6) claim (see Luckern v Lyonsdale Energy Ltd. Partnership, 281 AD2d 884, 886 [2001]), and issues of fact exist as to whether it was violated.
Supreme Court properly dismissed plaintiff's Labor Law § 241(6) claim to the extent it is based on 12 NYCRR 23-1.16, since plaintiffs never alleged in their original bill of particulars that plaintiff was given defective safety equipment (see Gaisor v Gregory Madison Ave., LLC, 13 AD3d 58, 59-50 [2004]). Plaintiffs' § 241(6) claim based on an alleged violation of 12 NYCRR 23-1.5 was also properly dismissed, since that section is insufficiently specific to support such a claim (see Carty v Port Auth. of N.Y. & N.J., 32 AD3d 732, 733 [2006], lv denied 8 NY3d 814 [2007]).
Supreme Court properly denied defendants' cross motion for summary judgment dismissing plaintiffs' common-law negligence and Labor Law § 200 claims. Proof of defendants' supervision and control over plaintiff's work is not required to impose liability under the statute and the common law where, as here, the accident results from a dangerous work site condition (see Makarius v Port Auth. of N.Y. & N.J., 76 AD3d 805, 808 [2010]). The building superintendent testified that he had seen an unusual configuration in the hatchway doors prior to the accident. Thus, issues of fact exist as to whether defendants had notice of the dangerous or defective doors (id. at 808-809).
Supreme Court providently exercised its discretion in declining to impose the drastic sanction of striking defendants' answer due to their loss of the accident report, and instead, ordering that an adverse inference charge be given at trial (see Hall v Elrac, Inc., 79 AD3d 427 [2010]).
Supreme Court properly dismissed the third-party action, since the contract between Schindler and defendant/third-party plaintiff TS Midtown Holdings, LLC does not contain a clear and unambiguous indemnity provision running in favor of TS Midtown. When a party is under no legal duty to indemnify, a contract assuming that obligation "must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed" (Tonking v Port Auth. of N.Y. & N.J., 2 AD3d 213, 214 [2003], affd 3 NY3d 486 [2004] [internal quotation marks and citation omitted]).

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