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Coverage Pointers - Volume XIV, No. 15

Dear Coverage Pointers Subscribers:
Do you have a situation?  We love situations.

Greetings, warm ones, from Scottsdale, AZ, where I’m completing a brief but necessary respite from Buffalo’s sub-zero temps.  All things considered, I would rather be in warm weather.

While it was, as always, a working vacation, there is an advantage to working by the pool, in bathing trunks, as compared to by the fireplace, with mittens. 

We welcome a flurry of new subscribers this week.  For those who are just joining the family, this cover letter has an attachment, the Coverage Pointers issue, where you will find a summary of every appellate case involving insurance coverage released during the previous two weeks, with a link to the full body of the text.  You will also find summaries of selected lower court and out-of-state opinions as well as summaries of No Fault arbitration rulings and state legislative highlights.  Past issues of our newsletter, now well into its 16th year of publication, can be found at our website, www.hurwitzfine.com.  Our sister publications, Labor Law Pointers and Health Care Pointers are there as well.

A Star in Born:

Neither my wife, Christine Naples nor I, consider ourselves real golfers, but we do enjoy the executive courses.  On the seventh hole at Mountain Shadows Golf Course in Paradise Valley here in Arizona, Chris shot a hole-in-one on a par-three, 75 yards using a 9-iron.  It was a lovely thing for all of us to see.  She has become, of course, somewhat insufferable, but being that way myself, I can handle it.  Atta golfer!

Welcome Tessa Scott:

On Wednesday, the firm’s newest associate was sworn in a lawyer by the Appellate Division, Fourth Department.  Please join me in welcoming Tessa Scott who will be part of our litigation team.

Tessa Scott is a cum laude graduate of Canisius College where she earned a bachelor’s degree in psychology.  She graduated in 2014 from Ohio Northern University Law School and passed both the New York and Massachusetts bar exams.  While in law school, Tessa was awarded several awards for oral advocacy and was admitted to the Order of the Barrister. Prior to law school Tessa taught ballet and performed throughout the Greater Buffalo Area.   She has traveled extensively and has been to India, Indonesia, Thailand, Cambodia and Italy. She is very excited to be joining the litigation department of Hurwitz & Fine as an associate attorney.

Her favorite author is Isabelle Allende, she is the youngest of eight children and is a foodie.

Fahey Appointed to High Court:

Buffalo’s own Justice Eugene Fahey has been nominated by Governor Cuomo to fill the Court of Appeals seat occupied by Judge Robert Smith.  Judge Smith was “aged out” of the Court as of December 31.

Justice Fahey, when confirmed by the Senate, will be the second jurist on the Court of Appeals from Western New York.  Few can remember whether WNY ever had two Judges on the high court at one time.  Judge Piggott, the other Western New Yorker, who served as Presiding Justice of the Fourth Department, will welcome his former Associate Justice.

Fahey was first elected as a member of Buffalo Common Council, its legislative body, in 1977 and spent several years as a city legislator.  He also worked for Kemper Insurance Company as a staff attorney.  He then served as a Confidential Law Clerk to Court of Claims Judge Edgar C. “Micky” Nemoyer and then in the same position for Judge Nemoyer’s brother, Supreme Court Justice Patrick NeMoyer.  [The brothers spelled their last names differently]

He then ascended to the City Court bench and eventually was elected to the State Supreme Court, where he served with distinction.  In 2006, Governor George E. Pataki appointed Justice Fahey as an additional justice of the Appellate Division, Fourth Department. Justice Fahey served in that capacity until Governor David A. Paterson designated him as an associate justice of the Appellate Division, Fourth Department in December 2009. After his re-election in 2010, Justice Fahey was re-designated as an associate justice of the Appellate Division, Fourth Department by Governor Andrew M. Cuomo.

In his younger days, he had a pretty good shot from the corner when we played lunchtime basketball at the Buffalo Athletic Club.  That was his only shot, but it was dead-on accurate.

Judge Fahey is replacing a superb jurist in Judge Smith, but will bring common sense and good scholarship to the high court bench. We look forward to his reasoned decisions.
Hewitt’s Highlights:
Dear Subscribers:
We have now entered 2015. My four year old and five year old celebrated the New Year with an early 9:00 p.m. countdown and did not make it to midnight, but my wife and I were able to hang in there. In this new year, the Appellate Courts went right to work issuing several decisions on the serious injury threshold, mostly in plaintiff’s favor, finding issues of fact. 

The Courts again remind us that a defendant’s experts must address all claims in the bill of particulars if the defendant is going to make a prima facie case for summary judgment. Nevertheless, no matter how many expert reports defendant’s submit, the Courts will find an issue of fact if the plaintiff’s expert is able to challenge and rebut the defendant’s expert’s findings/conclusions. The Courts did grant summary judgment to defendants in cases where defendants’ expert’s findings that plaintiff’s injuries were pre-existing and degenerative went unchallenged by plaintiff. It was not enough for plaintiff’s experts to find an injury. Furthermore, in one case, the Court held that defendant’s expert need not review plaintiff’s actual MRI films or intra-operative photographs to make a prima facie showing, but could simply review the reports as to those items.
Hoping 2015 is treating you well,
Rob
Robert Hewitt
[email protected]
A Century Ago – Insurance Regulation in Michigan:

Escanaba Morning Press
Escanaba, Michigan
16 Jan 1915

WOULD ELIMINATE FAKE INSURANCE

Lansing, Jan. 15.—The principal work before both branches of the state legislature this week will be the introduction of bills, with scores of measures, covering a wide range of subjects, prepared and ready for submission.

The state insurance commissioner’s office leads off with three bills which are intended to safeguard the public relative to the work of insurance corporations and their guests and repealing all law inconsistent with the provisions of the proposed legislation.

One bill requires that all insurance corporations shall register with the state insurance commissioner, paying a registry fee of $10.  Agents, other than clerical help and attorneys representing the companies must also register with the insurance commissioner on the payment of a fee of $5.

Would Stop Fakers

The object of the bill is to stop fake insurance placing and to prevent agents from falsifying as to the returns their company will pay to the insured.  The insurance commissioner is given power to question agents and thereby determine if they are fit persons to engage in the business.  This is in accordance with the goal of the state to raise the standard of insurance workers.

Jen’s Gems:

How does the song go? “Baby, it’s cold outside.”  That pretty much sums up things here.  But, with that said, we will try to warm you up with our interesting and occasionally amusing insights into insurance coverage cases.

This week I report on a late notice case out of Kings County.  While one would certainly believe that with the change to Insurance Law § 3420 occurring almost exactly six years ago (January 17, 2009), that we would be running out of these pre-prejudice cases to report on, but, somehow, they keep coming.  We can apparently attribute that to the frequently slow pace of litigation and/or delays in filing suit.  Glanz v New York Mar. & Gen. Ins. Co. addresses the question, which we do see come up once and a while,  whether an insurer who denies coverage to its named insured, but later receives notice from the injured party, has an obligation to timely deny coverage to the injured party.  This issue of course comes up because an injured party has an independent right and obligation to provide notice of an occurrence, claim and suit.  In Glanz, the court found that once a carrier denies coverage to the named insured any later notice provided by the injured party is superfluous.  

We note that most of the appellate case law confirms this holding (see Steinberg v. Hermitage. Co., 26 AD3d 426 [2nd Dept. 2006]); however, there are a number of decisions that find the injured party has an independent right to provide written notice to plaintiff and is not bound by the named insured’s allegedly late notice (see Utica Mutual Ins. Co. v. Gath, 265 AD2d 805 [4th Dept. 1999]).  In turn, our recommended best practice has always been, when denying for late notice, to cite both the insured’s and injured party’s late notice. 

Stay warm and until next issue...

Jen
Jennifer A. Ehman
[email protected]

 

Women Making Progress 100 Years Ago:

Times Herald
Olean, New York
16 Jan 1915

WOMAN ASSISTANT
SERGEANT AT ARMS

Topeka, Kan., Jan. 16.—The Kansas Senate has a woman assistant sergeant at arms for the first time in history.  She was appointed in recognition of the woman vote. 

Fitz’ Bits:
Dear Subscribers:

I hope that you all enjoyed the holidays and that 2015 is treating you well two weeks in.

As those of you who are regular readers of this column know, I frequently write about cases involving faulty workmanship or construction defects from varying jurisdictions across the country.  The analysis differs greatly depending upon the jurisdiction, and several states have enacted legislation seeking to clarify the law and, in particular, the issue of whether faulty workmanship constitutes an “occurrence” within the meaning of a Commercial General Liability policy.  In Colorado, efforts have been made for several years to reform Colorado’s construction defects law and a new Lakewood Ordinance is expected to be introduced in the new legislative session.  The present law, which allows the majority of a Homeowner’s Association Board, rather than a majority of the homeowners, to decide to sue over construction defects and allows homeowners to reject a fix offered by a builder before the builder even does the work, is blamed for slowing condominium construction to a trickle.  The new ordinance gives builders a right to repair faulty work before facing legal action and requires that a majority of homeowners approve legal action before it is taken.

This week I bring you a case involving reverse bad faith in the context of a construction defect claim in the great state of Washington.

Til next time, 

Beth
Elizabeth A. Fitzpatrick
[email protected]

A Century Ago -- Devastating Earthquake Rocks Italy:

The New York Times
New York, New York
16 Jan 1915

TOLL OF SLAIN BY EARTHQUAKE
NOW OVER 25,000

Death Total Still Rising, with
Many Districts Yet to be Heard From

4,000 Killed There—Americans
Aid as All Italy Rushes
Rescue Work.

 

Editor’s Note:  Over 30,000 were killed in this cataclysmic event.  The earthquake took place at around 8:00 local time affecting thousands of people throughout central and southern Italy; the shaking was even felt in Rome. The town of Avezzano was literally toppled from the shaking and only one high-rise building survived. Some 96 percent of its population was eliminated almost simultaneously, the worst casualty zone. Several other settlements were demolished in the worst of the earthquake. This damage was attributed to the length of the shock, over one minute, and the enormous amount of power released during the tremor. Compound motion of the fault was also a likely contributor to the earthquake's destruction. The structure of the housing also contributed to the collapse; many homes had been built from simple rocks of varying size and were not reinforced by mortar or even wood.

Peiper’s Potables:

We begin this issue by joining the others who have already extended their congratulations to Justice Eugene Fahey for his nomination to the New York Court of Appeals.  As a law student, I was very fortunate to spend a summer clerking for His Honor.  It was apparent at that time, and continues to be so, that he has a sharp judicial acumen and is dedicated to his craft.  Kudos to him for a very well earned, very well deserved, honor.

With regard to our column this week, we note the Fourth Department’s decision in Blair as being noteworthy.  The decision was not particularly ground breaking, but the Court reminds us that the insured bears the burden of establishing coverage in a coverage action.  However, when moving, the burden shifts to the carrier to establish, as a matter of law, that the policy does not cover the loss.  That is a distinction that is often times missed by those not as familiar with insurance law precedent. 

That’s it for this week.  Stay warm. 

Steve
Steven E. Peiper
[email protected]

Smoking Hurts, Even Then:

Dunkirk Evening Observer
Dunkirk, New York
16 Jan 1915

OFFICERS TROUSERS
TORN IN TUSSLE

Man Being Taken to State Hospital
in Gowanda Made Things
Lively for Officers

Officer James Lehan had the trousers of his new uniform badly torn Friday evening while assisting in handling an Arkwright man who was being taken to the state hospital in Gowanda. 

The man had been brought over to the Erie station by Police Chief S. B. West of Fredonia and an attendant sent from the hospital to escort him there.  He was placed in one of the coaches, but made so much noise that several women passengers objected to his presence.  When an attempt was made to take him to the smoking car, he objected saying that the cigar smoke would affect his lungs, and put up a fight.  It took five men to remove him to the smoker. 

 

Highlights in This Week’s Issue, Attached:

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

  • Settlements and “Consent Decrees” are Not Adjudicated Determinations; it is Against Public Policy to Provide Insurance for Disgorgement of Illegally Gotten Gains
  • Staged Accident Not a Covered Act under Liability Policy so Underinsured Benefits Recoverable
  • Insured Knew of Pollution and Failed to Notify Insurer; Late Reporting Vitiates Coverage

HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]

  • Plaintiff Failed to Address Defendants Medical Evidence that His Injuries Were Degenerative in Nature and Not Caused by the Accident
  • Defendant’s Motion Fails Because He Failed to Address All Claims Made in Bill of Particulars in His Motion
  • Plaintiff Raised Issue of Fact by Submission of Medical Reports Rebutting Defendants’ Medical Expert’s
  • Plaintiff Was Able to Raise Triable Issues of Fact to Defeat Summary Judgment Despite Defendant’s Establishing a Prima Facie Case as to Lack of Causation
  • Appellate Court finds that Defendant’s Expert Need Not Review Plaintiff’s Actual MRI Films or Intra-Operative Photographs to Make Prima Facie Showing
  • Plaintiff Raised Triable Issues of Fact As To Whether He Sustained Serious Injuries To His Spine Despite Defendant’s Submission of Three Expert Reports

 

MARGO’S MUSINGS ON NO FAULT
Margo M. Lagueras
[email protected]

Arbitration:

  • Denial Upheld Where Cervical MRI Ordered Without Evidence of Neurological Findings
  • Peer Review Insufficient Where It Fails to Address Possible Aggravation
  • Denial for MRI Studies Upheld

 

Litigation:

  • Defendant’s Cross Motion Granted Where Proper Cancelation Established
  • Time Used to “Qualify” Injured Party Does Not Extend 30-Day Pay or Deny Period
  • Failure to Receive Certified Copy of EUO Scheduling Letters Does Not Excuse Failure to Appear

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]

  • Unduly Speculative Expert Affidavit does not Create  Question of Fact on Defendant’s Negligence
  • Long Term Water and Mold Damage is Not “Sudden and Accidental” and Therefore Outside the Scope of Coverage of the Policy

 

FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]

  • Reverse Bad Faith

 

AUDREY’S ALL THINGS PERSONAL
Audrey A. Seeley
[email protected]

  • In Chicago this week, for DRI Leadership Meeting.

 

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
Legislation in the Albany Hopper:

  • A93/S322 – Windstorm Deductibles
  • S253 Homeowners Deductible Triggers for Hurricane Windstorms
  • A147 – Abusive Insurance Practices Remedy Act
  • S29 – Similar “Bad Faith” Civil Remedy
  • A164 Damages in Wrongful Death Actions

 

KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected] 

  • Court Directs Disclosure of Underwriting and Claim File; Any Documents Asserted to be Privileged Subject to In-Camera Review
  • Carrier Not Required to Cite Injured Party’s Late Notice in Disclaimer Where Notice Was Only Provided after Disclaimer Issued

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

  • Insurance Litigation Deemed Untimely

All for now.  Next issue, back in the shivering north.  Remember to contact us for any training programs that might assist your staff.

Dan

 

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


NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Jennifer A. Ehman
[email protected]

INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
[email protected]

Michael F. Perley
Elizabeth A. Fitzpatrick
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Taylor F. Gabryel
Diane F. Bosse
Joel R. Appelbaum

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]

Elizabeth A. Fitzpatrick
Cassandra Kazukenus

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Taylor F. Gabryel

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

 Elizabeth A. Fitzpatrick
Diane F. Bosse

Index to Special Columns

Kohane’s Coverage Corner
Hewitt’s Highlights on Serious Injury
Margo’s Musings on No Fault
Peiper on Property and Potpourri
Fitz’ Bits
Audrey’s All Things Personal
Cassie’s Capital Connection
Keeping the Faith with Jen’s Gems
Earl’s Pearls

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

01/15/15       J.P. Morgan Securities Inc. v. Vigilant Insurance Company
Appellate Division, First Department
Settlements and “Consent Decrees” are Not Adjudicated Determinations; it is Against Public Policy to Provide Insurance for Disgorgement of Illegally Gotten Gains
In 2000, Vigilant Insurance Company issued a professional liability insurance policy to Bear Stearns, and the other defendants issued "follow-the-form" excess policies, which required them to indemnify Bear Stearns for all losses it became "legally obligated to pay as a result of any Claim ... for any Wrongful Act" on its part. The policy broadly defined "loss" to include "compensatory damages," "judgments," and "settlements," while "claim" was expressly defined to include investigations by the Securities & Exchange Commission (SEC) and the New York Stock Exchange (NYSE) into "possible violations of law or regulation." The "Dishonest Acts Exclusion" in the policies provided:

"This policy shall not apply to any Claim(s) made against the Insured(s) ... based upon or arising out of any deliberate, dishonest, fraudulent or criminal act or omission by such Insured(s), provided, however, such Insured(s) shall be protected under the terms of this policy with respect to any Claim(s) made against them in which it is alleged that such Insured(s) committed any deliberate, dishonest, fraudulent or criminal act or omission, unless judgment or other final adjudication thereof adverse to such Insured(s) shall establish that such Insured(s) were guilty of any deliberate, dishonest, fraudulent or criminal act or omission" (emphasis added).

In 2003, the SEC and the NYSE began to investigate Bear Stearns for allegedly facilitating late trading and deceptive market timing by certain of its customers.  The SEC informed Bear Stearns that it intended to commence civil enforcement proceedings charging Bear Stearns with violations of federal securities laws and seeking injunctive relief and sanctions. Bear Stearns decided not to contest the matter but to settle it. Bear Stearns submitted an offer of settlement, which the SEC accepted and incorporated into an "Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order" (the SEC Order).

The SEC Order included approximately 170 factual "findings" setting forth the malfeasance that the SEC had alleged against Bear Stearns. The "findings" explained, inter alia, how Bear Stearns operated its late trading. Bear Stearns entered into a similar arrangement with the NYSE. Bear Stearns was also named in several shareholder class actions and ultimately agreed to pay $14 million to settle the actions.

The insurers Bear Stearns sought indemnification from defendants for the amounts they paid refused to pay, citing, inter alia, the doctrine that disgorgement payments are not insurable as a matter of settled New York law and public policy, as well as several exclusions in the policies, including the Dishonest Acts Exclusion.

Defendants contend that the Dishonest Acts Exclusion applies because, by consenting to the entry of administrative orders that contained detailed "findings" and required Bear Stearns to make compensatory payments and pay penalties, Bear Stearns had been adjudicated a wrongdoer. Defendants stress the incorporation of "findings" in the SEC Order and the NYSE Stipulation, and contend that the inclusion of these "findings" effectively transformed them from mere allegations to proven fact. Defendants further point to cases that they characterize as equating consent judgments and orders with adjudications.

Bear Stearns argues that the SEC Order, the NYSE Stipulation and the resolution of the class action were settlements, and that a settlement can never constitute an adjudication for purposes of the type of exclusion at issue here

The court found that the consent decrees and settlements were not “adjudications”.  The term appears in an exclusion and to negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation

However, it is against public policy to allow coverage for the disgorgement of illegally gained and that defense will remain in the case.

 

01/14/15       Matter of Liberty Mutual Ins. Co. v. Young
Appellate Division, Second Department

Staged Accident Not a Covered Act under Liability Policy so Underinsured Benefits Recoverable
A vehicle operated by Young allegedly was struck in the rear by a vehicle operated by Trotman. Young and two passengers in Trotman's vehicle filed claims with Trotman's insurer, GEICO Indemnity Company (hereinafter GEICO). GEICO disclaimed coverage on the ground that the claims resulted from an intentional act.

Young then filed an uninsured motorist claim with her insurer, Liberty Mutual. When Young sought arbitration of that claim, Liberty commenced this proceeding to permanently stay the arbitration. The lower court added Trotman and GEICO as additional respondents and held a framed-issue hearing on the issue of whether GEICO had properly disclaimed coverage under Trotman's policy.

As a result of the hearing, the lower court concluded that GEICO had not established that the collision was a "staged loss." Accordingly, it issued a judgment granting Liberty Mutual ‘s petition for a permanent stay of arbitration of Young's uninsured motorist claim and directed GEICO to defend and indemnify Trotman with respect to the subject accident. GEICO appealed.

The Second Department held that a deliberate collision by an insured is not a covered event under an insurance policy.  Here, the strong circumstantial evidence at the framed-issue hearing established that Trotman intentionally caused the collision between his vehicle and Young's vehicle. Accordingly, because the evidence at the hearing established that Trotman intentionally caused the collision with Young's vehicle, the collision between the two vehicles was not a covered event under Trotman's policy with GEICO.

Therefore, the Supreme Court erred in entering a judgment granting Liberty Mutual ‘s petition for a permanent stay of arbitration of Young's claim for uninsured motorist benefits on the ground that Trotman's vehicle was insured and directing GEICO to defend and indemnify Trotman with respect to the subject accident.
Editor’s Note:  Procedurally, the court merged an application for stay of an uninsured motorists claim with a declaratory judgment action. 

01/08/15       The Travelers Ind. Company v. Orange and Rockland Utilities
Appellate Division, First Department
Insured Knew of Pollution and Failed to Notify Insurer; Late Reporting Vitiates Coverage
Travelers sought a declaration that it is not required to provide coverage to defendant Orange and Rockland Utilities (ORU), based on ORU's failure to provide timely notice of the occurrences for which it sought coverage

The First Department, in a previous decision, had already determined did not give timely notice under the policies, which was a requirement for coverage. ORU’s argument that it never had actual notice of any pollution was insufficient.

 

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

Robert E.B. Hewitt III
[email protected]

01/14/15       John v. Linden
Appellate Division, Second Department
Plaintiff Failed to Address Defendants Medical Evidence that His Injuries Were Degenerative in Nature and Not Caused by the Accident
The Appellate Court reversed the trial court’s denial of summary judgment. Defendant met her prima facie burden of showing that the plaintiff did not sustain a serious injury as a result of the accident. The Court found that the defendant submitted competent medical evidence establishing, prima facie, that the alleged injuries to the plaintiff’s cervical and lumbar regions of the spine did not constitute a serious injury and, in any event, were degenerative in nature and not caused by the accident. Plaintiff’s deposition testimony further established that the plaintiff only missed one day of work following the accident and therefore, he did not sustain a serious injury under the 90/180 day category of Insurance Law.

The Court found plaintiff failed to raise a triable issue of fact as the affirmation of plaintiff’s treating neurologist failed to address the findings of the defendant’s examining radiologist that the plaintiff suffered from a longstanding and degenerative disc disease in his cervical spine not caused by the subject accident. Furthermore, the affirmed magnetic resonance imaging report of the plaintiff’s examining radiologist and the affirmed EMG report of the plaintiff’s treating physician, which revealed disc bulges and disc herniation in the plaintiff’s cervical spine, did not set forth those doctors’ opinions on the cause of the findings that they made in their reports. Plaintiff also failed to set forth any competent medical evidence sufficient to raise a triable issue of fact as to whether he sustained a medically determined injury of a nonpermanent nature that prevented him from performing his usual and customary activity for 90 of the last 180 days.

01/14/15       Burris v. Samuel
Appellate Division, Second Department
Defendant’s Motion Fails Because He Failed to Address All Claims Made in Bill of Particulars in His Motion
The Appellate Court reversed the granting of summary judgment to the defendant/third-party plaintiff by the trial court. Defendant third-party plaintiff failed to meet his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of the insurance law. The papers failed to adequately address the claim set forth in the Bill of Particulars that she sustained a serious injury under the 90/180 day category. Therefore, there was no reason to evaluate whether plaintiff raised an issue of fact.

01/14/15       Kwon v. New York Antioch Korean Baptist Church
Appellate Division, Second Department
Plaintiff Raised Issue of Fact by Submission of Medical Reports Rebutting Defendants’ Medical Expert’s
The Appellate Court reversed the trial’s court granting of summary judgment to the defendants. As to the 90/180-day category, defendants failed to meet their prima facie burden that plaintiff Sang Hyok Kwon did not sustain a serious injury within the meaning of the insurance law as the motion failed to address the claims in plaintiff’s bill of particulars. It was therefore unnecessary to determine whether plaintiff raised an issue of fact.

As to plaintiff Myung Hee Kwong, the Court found defendants met their prima facie burden of showing that she did not sustain a serious injury under the insurance law through submission of competent medical evidence through affirmed medical expert’s reports that the alleged injuries to the lumbar region of the spine did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories. In response, plaintiff raised an issue of fact as to whether she sustained a serious injury through submission of an affidavit from medical experts rebutting Defendants’ expert affidavits.

01/14/15       Fontana v Aamaar & Maani Karan Tr. Corp.
Appellate Division, Second Department
Plaintiff Was Able to Raise Triable Issues of Fact to Defeat Summary Judgment despite Defendant’s Establishing a Prima Facie Case as to Lack of Causation
The Appellate Division reversed the trial court’s grant of summary judgment to the defendant. The Appellate Court did find that the defendant met their prima facie burden by showing through competent medical evidence that the alleged injuries to the cervical and lumbar regions of the plaintiff’s spine were not caused by the accident. However, in opposition, plaintiff raised triable issues of fact. The Court did not express what those issues were.

01/14/15       Ochoa v. Droz
Appellate Division, Second Department
Plaintiff’s Expert Rebuttal of Defendants’ Medical Experts Raised Issues of Fact
The Appellate Court reversed the grant of summary judgment to defendants by the trial court.  Defendants did not establish a prima facie case of summary judgment as to plaintiff Flavio Ochoa as the motion failed to address the claims in plaintiff’s bill of particulars that he sustained a serious injury under the 90/180-day category. It was therefore unnecessary to determine whether plaintiff raised an issue of fact.

The Appellate Court found defendants met their prima facie burden of showing that plaintiff Isauro Ochoa did not sustain a serious injury under the insurance law through submission of competent medical evidence through affirmed medical expert’s reports that the alleged injuries to the cervical and lumbar regions of the spine and left knee did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories. In response, plaintiff Isauro raised an issue of fact as to whether he sustained a serious injury to the cervical and lumbar regions of his spine and left knee.

01/13/15       Mejia v. Ramos
Appellate Division, First Department
Appellate Court finds that Defendant’s Expert Need Not Review Plaintiff’s Actual MRI Films or Intra-Operative Photographs to Make Prima Facie Showing
The Appellate Court reversed the grant of summary judgment to defendant on the significant limitation of use and 90/180-day injury claims and affirmed the grant of summary judgment as to the permanent consequential limitation of use category.

Plaintiff underwent arthroscopic knee surgery on July 9, 2009 and two additional surgeries later that month, as a result his injuries from a car accident and subsequent infections. Defendant established prima facie that plaintiff did not sustain a serious knee injury by submitting an orthopedist report that the tears in the operative report were pre-existing degenerative changes and plaintiff had full range of motion in the knee.

Although plaintiff contended that the report itself found abnormalities in the knee, the Appellate Court found such symptoms, without evidence of some permanent or significant limitations, do not constitute a serious injury under the statute. Furthermore, the Appellate Court opined that defendant’s expert need not review plaintiff’s actual MRI films or intra-operative photographs to make a prima facie showing.

Plaintiff failed to raise a triable issue of fact as to the existence of a permanent consequential limitation of use of the knee. The Appellate Court found the report of his recent examination showed permanency but the persistent limitations noted were not sufficiently meaningful to sustain a permanent consequential limitation claim. The grant of summary judgment as to this category was sustained.

The Court found plaintiff did raise an issue of fact as to whether he sustained a significant limitation of use of the knee by submitting  reports from his treating physiatrist and orthopedic surgeon finding significant limitations and positive clinical findings about 1.5 months after the accident and weeks before the surgery, Plaintiff also raised an issue of fact as to causation, since the surgeon concluded that the injuries he observed during surgery were traumatically induced and causally related to the accident. Based upon his treatment and review of plaintiff’s medical records, the treating physiatrist also opined that the injuries observed during surgery were traumatic in nature and causally related to the accident.

Plaintiff also raised an issue of fact with respect to his 90/180 day claim by submitting medical records showing he was totally disabled and unable to work from May 11, 2009 through May 15, 2009 and then for eight months from July 9, 2009 through March 5, 2010, four of which fell within the 180-day statutory period.

12/31/14       Berger v. Siu Yin Wong
Appellate Division, Second Department
Plaintiff Raised Triable Issues of Fact As To Whether He Sustained Serious Injuries To His Spine Despite Defendant’s Submission of Three Expert Reports
The Appellate Court affirmed the trial court’s denial of summary judgment. Defendant argued that plaintiff did not sustain a serious injury within the meaning of Insurance Law §5102 as a result of the accident. Defendant met their prima facie burden of showing that there was no serious injury  by submitting competent medical evidence that the alleged injuries to the cervical region of the plaintiff’s spine did not constitute serious injuries under the permanent consequential limitation of use or significant limitation of use categories, and that the injuries were not caused by the accident. The medical evidence was in the form of a report of an independent radiological review of the plaintiff's MRI studies and an interpretation of an EMG and Nerve Conduction study, as well as a physician who conducted an independent medical examination.

Plaintiff, however, raised triable issues of fact as to whether the injured plaintiff sustained serious injuries to the cervical region of his spine that were caused by the accident, in which plaintiff’s vehicle was hit by defendant’s from the rear. The Appellate Court did not specify how plaintiff raised the issue of fact.

MARGO’S MUSINGS ON NO FAULT

Margo M. Lagueras
[email protected]

Arbitration

01/02/15       Borg & IDE Imaging, P.C. v Geico Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Denial Upheld Where Cervical MRI Ordered Without Evidence of Neurological Findings
The injured person alleged injuries to her neck, left forearm and left knee.  She started chiropractic treatment.  About two months later, she consulted with applicant with complaints of neck and back pain, with numbness and tingling.  Applicant noted “highly limited” range of motion of the cervical spine and, the following day, ordered a cervical MRI which was performed five days later.  Respondent arranged for a peer review and the peer reviewer opined that the records reviewed did not present a sound rationale for the cervical MRI as there was no evidence of any neurological deficits and, in fact, the examination revealed normal neurological findings. 

The Arbitrator found the peer review persuasive.  On her NF-2, the assignor only mentioned forehead pain and a bruised left arm and knee.  No medical records made any specific mention of the neck or any radicular cervical symptoms.  Applicant prescribed the MRI due to limited range of motion, muscle spasm and trigger points, but made no mention of any neurological issues.  Nor did Applicant rebut the conclusions in the peer review or further explain the need for the MRI.  As such, the denial was upheld.

12/31/14       Surgical Associates of WNY v Geico Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Peer Review Insufficient Where It Fails to Address Possible Aggravation
At issue was reimbursement for a lumbar discectomy and fusion.  The EIP had had a prior microdiscectomy in 2007 but, following a 2012 accident, appeared to have aggravated the same segment.  The surgeon opined that a lumbar fusion was necessary to correct the disc herniations and degenerative instability.  Respondent’s peer reviewer noted an apparent gap in treatment of about ten months.  However, although records were not contained in the ADR file, the surgeon’s records implied that during that time the EIP was receiving chiropractic care. 

The Arbitrator found the peer review insufficient because it did not address the issue of whether the 2012 accident aggravated the EIP’s prior back injury.  While the reviewer noted that the surgeon documented an aggravation, the reviewer did not opine that the condition was not aggravated and even failed to comment on that possibility.  This failure rendered the peer review insufficient to demonstrate that the surgery was not medically necessary.

12/27/14       WNY MRI, LLP v Geico Ins. Co.
Erie County, Arbitrator Gillian Brown
Denial for MRI Studies Upheld
One month after the accident, MRI studies were performed of the EIP’s cervical and thoracic spine, brain and left elbow.  These MRIs, as well as items of durable medical equipment, were prescribed during her first visit to Zenith Medical.  On the basis of a peer review, respondent denied reimbursement.  During the hearing, the EIP testified that her treating doctors were reluctant to refer her for the MRIs but she insisted.  She stated that as a part-time roller derby skater, she had sustained three prior concussions and was concerned about a fourth.  However, the peer reviewer noted that there were no neurological issues, no sensory deficits and no loss of consciousness that would warrant a brain MRI.  As to the other three studies, he opined that they were premature and, in fact, all four studies were negative.

The Arbitrator denied the claim noting that the EIP’s treating doctors were reluctant to order the studies for the same reasons set forth in the peer review.  The tests were ordered just two weeks after the accident, well before any conservative care could have had any significant positive effect.  Furthermore, applicant failed to offer any effective rebuttal to the conclusion that the studies were not medically necessary.

Litigation

12/22/14       Healthway Med. Care, P.C. v Travelers Ins. Co.
Appellate Term, Second Department
Defendant’s Cross Motion Granted Where Proper Cancelation Established
Plaintiff’s motion for summary judgment was properly denied because plaintiff failed to establish that defendant’s denials were untimely or conclusory, vague or meritless.  Defendant’s cross motion was properly granted as defendant’s submissions demonstrated that the subject insurance policy was properly canceled, pursuant to V&T 313, for non-payment of premium and plaintiff failed to establish that defendant failed to comply with any statutory requirements as to form or procedure.

12/19/14       Optimal Well-Being Chiropractic, P.C. v MVAIC
Appellate Term, Second Department
Time Used to “Qualify” Injured Party Does Not Extend 30-Day Pay or Deny Period
MVAIC argued that the 30-day pay or deny time requirement did not apply to it until after it had “qualified” an injured party.  The trial court disagreed, and on appeal it was affirmed, that when MVAIC ultimately paid the claim after litigation had been commenced, that payment was late.  The issue then became the amount of interest and attorneys’ fees owed.  On appeal, it was determined that the interest awarded by the trial court was excessive as the accrual period was erroneously calculated.  As a result, the amount of attorneys’ fees was also incorrect, requiring reversal and remittance to the trial court.

12/17/14       MML Med. Care, P.C. v Praetorian Ins. Co.
Appellate Term, Second Department
Failure to Receive Certified Copy of EUO Scheduling Letters Does Not Excuse Failure to Appear
Defendant moved for summary judgment establishing that it had timely mailed EUO scheduling letters by both first-class and certified mail, return receipt requested.  In further support, defendant submitted certified transcripts that plaintiff’s assignor failed to appear and also demonstrated that it timely mailed the denials based on such failure.  Plaintiff did not claim to have responded in any way to the EUO requests.  The Civil Court held that, according to the certified mail tracking numbers, it appeared that the letters had not been delivered to the assignor, and therefore the court denied defendant’s motion and granted plaintiff’s cross motion.  However, on appeal the Appellate Term reversed holding that, even if true, that fact would not excuse the assignor’s failure to appear because there was no evidence that the scheduling letters sent by first class mail had not been delivered.

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

01/14/15       Utica First Ins. Co. v Infinity Mechanical & Heating, Inc.
Appellate Division, Second Department
Unduly Speculative Expert Affidavit does not Create  Question of Fact on Defendant’s Negligence
Plaintiff’s insureds owned premises located at 430 Jefferson Street in Brooklyn.  Even though the owner of the location was also a principal in the defendant corporation, the location was leased to Infinity pursuant to a written lease agreement.  The building sustained damage due to a fire that occurred on June 19, 2015.  Utica paid the loss, and commenced this case in subrogation against Infinity.

Infinity moved for summary judgment alleging that none of its activities at the premises caused, or contributed to, the fire.  While Utica submitted an expert affidavit that suggested Infinity was, in fact, responsible, the disclosure was rejected as unduly speculative.  Absent the expert’s opinion, Utica’s fall back argument of res ipsa loquitur was inapplicable where there is no basis to conclude that anyone’s negligence actually caused the fire.  Accordingly, the Second Department affirmed the trial court’s decision to grant Infinity’s motion to dismiss the case in its entirety. 

01/02/15       Blair v Allstate Indem. Co.
Appellate Division, Fourth Department
Long Term Water and Mold Damage is Not “Sudden and Accidental” and Therefore Outside the Scope of Coverage of the Policy
Allstate denied the current claim for mold and water damage on the basis that the intrusion was not “sudden and accidental.”  In affirming the trial court’s decision to grant Allstate’s application for a declaratory judgment, the Appellate Division noted that plaintiff failed to proffer any evidence which suggested that the loss might not have been a long standing issue.  In so holding, the court also noted that plaintiff’s argument that a “collapse” due to water and ice buildup was raised for the first time on appeal, and thus not properly before the court.

 

FITZ’ BITS

Elizabeth A. Fitzpatrick
[email protected]

01/09/15                 Granite State Ins. Co. v. Integrity Structures, LLC
United States District Court, Western District of Washington
Reverse Bad Faith
In this reverse bad faith case, Granite State Ins. Co. sought declaratory relief that it had no duty to defend or indemnify Integrity Structures or its assignee, The Point at Westport Harbor Homeowners Association.  Integrity and the Association counterclaimed against Granite alleging breach of the duty to defend.  The case came before the court on motions for partial summary judgment.

The pertinent facts relevant to the coverage dispute are as follows.  In 2006, Dodson-Duus LLC contracted with Integrity to serve as general contractor for a multi-unit condominium project in Westport, Washington for which Dodson served as developer.  Integrity had several insurance policies during the relevant time period, including policies with Granite State, Century Surety and General Fidelity and a contractor-controlled insurance policy (CCIP) with Gemini Insurance Company.

In September 2010, the Association sued Dodson-Duus and during the ensuing months and years, the parties to the lawsuit conducted an investigation, during which time the Association’s engineer noted probable deficiencies in the construction of structural support components and that the design and construction of the lateral force resisting system of the project was dangerously deficient.

Thereafter, the Association filed a first amended complaint against Dodson-Duus adding Integrity and making claims for damages due to defective construction and materials at the project.  In essence, the Association sought an award for construction defects, incomplete construction and related damage, and for negligence against Integrity.

In September 2012, the Association and Integrity entered into a contingent settlement agreement whereby the Association and Dodson-Duus were to enter into a settlement agreement, which would include assignment of all Dodson-Duus’ rights against Integrity regarding the claims.  Integrity was to tender its defense to its three primary general liability insurers and to any contractors or subcontractors not enrolled in the Gemini CCIP.  If all of the contingency terms were met, Integrity consented to judgment in favor of the Association in the amount of $4.1 million.  Integrity then assigned the Association all rights against all the project entities and the three general liability insurers (but not against Gemini).  In exchange, the Association agreed not to execute on the consent judgment on Integrity.  Dodson-Duus settled with the Association and assigned its claims against Integrity to the Association.  Thereafter, the Association filed a second amended complaint naming Integrity and others as defendants.  The Association also made a claim for indemnity and contribution and for negligence in regard to structural defects against Integrity.  Thereafter, Integrity tendered defense of the underlying lawsuit to its three insurance carriers.  Within 30 days of the tender, two of the carriers, Century Surety and General Fidelity, notified Integrity that they were declining to defend it in the underlying lawsuit because of policy exclusions.

Granite State received its tender letter from Integrity on November 29, 2012.  They insisted Granite State provide a defense to Integrity in the underlying lawsuit, contending that under the commercial liability policy, Granite State agreed to pay those sums that the insured becomes legally obligated to pay as damages because of property damage to which the insurance applied.

Granite State thereafter responded, through letter dated December 7, 2012, acknowledging receipt of the tender and asking for additional information.  Evidently, the Association’s lawyer did not respond to Granite State and, through correspondence on February 5 2013, Granite State again requested a response to their letter.  Subsequent correspondence was issued by Granite in April 2013 advising that no response to their request for information had been provided.  Granite State wrote several additional letters to which evidently no response was made.  On September 30, 2013, a stipulated consent judgment of $4.1 million was entered against Integrity in favor of the Association.  On November 20, 2013, Integrity disclosed to Granite State for the first time the facts and details of the September 2012 contingent settlement agreement and the entry of the $4.1 million consent judgment.

Seven potential questions for certification were submitted by the Association.  Granite State opposed certifying any questions to the Supreme Court and argued that all of the questions could be answered on the record.

The Court discussed the condition of cooperation, which it noted was essential to the insurance relationship, because that relationship involves a continuous exchange of information between insurer and insured, noting that an insured that substantially and materially breaches a cooperation clause is contractually barred from bringing suit under the policy if the insurer can show it has been actually prejudiced.  The court also discussed the notice conditions of the policy, further noting that the policy includes a provision prohibiting an insured from transferring their rights and duties under the policy without the insurer’s written consent, except in the case of death of an individual named insured.

The court found no evidence that Integrity and the Association notified Granite State of the potential claims as soon as practicable and that Integrity and the Association substantially and materially breached the cooperation clauses of the insurance contract by entering into the contingent settlement agreement that included a stipulated $4.1 million judgment prior to notifying Granite State of the litigation.  They also noted that Granite State began to investigate the claims against Integrity approximately a week after receipt of the tender letter requesting basic information which would be material to the circumstances giving rise to its liability and that no response was provided to these requests.

The court, however, found that although “it is a close question at this time,” it was unable to conclude as a matter of law that Granite State has been actually and substantially prejudiced by Integrity’s and the Association’s breach of the cooperation and notice provisions of the contract.  The court noted that prejudice means damage or detriment to one’s legal claims and whether or not late notice prejudiced an insurer is a question of fact, seldom to be decided as a matter of law.  To show prejudice under Washington law, an insurer must prove that an insured’s breach had an identifiable and material detrimental effect on its ability to defend its interests.  Granite State’s motion was denied without prejudice.

Addressing Granite’s duty to defend, the court noted that the duty is determined from the eight corners of the insurance contract and the underlying complaint and that extrinsic facts may only be used to trigger the duty to defend, not to avoid one.  The court found that based upon the eight corners of the contract and amended complaint, the underlying lawsuit alleged conceivably covered liabilities.  The duty to defend was thus triggered.  The court, however, found that Integrity and the Association failed to point to issues of fact as to whether Granite State acted in bad faith and, thus, that claim was dismissed.  The court also granted Granite State’s motion to dismiss the claim sounding in coverage by estoppel since no issues of fact were raised as to Granite State acting in bad faith.  Granite State also argued that Integrity and the Association’s counterclaims should be dismissed because of unclean hands.  That motion was denied.

I expect we will see cases addressing these issues to continue, particularly as the stakes are typically very high.

 

AUDREY’S ALL THINGS PERSONAL

Audrey A. Seeley
[email protected]

In Chicago this week, for DRI Leadership Meeting.

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

Bills in the Albany Hopper:

A93/S322 – Windstorm Deductibles

This proposed legislation seeks to limit the maximum deductible allowed in a “catastrophic windstorm” to no more than $1500.  This bill further seeks to require the insurer to set forth the deductible in numerical terms, and that the deductible will only be applicable when the windstorm involved wind speeds in excess of 125 miles per hour. 

S253 Homeowners Deductible Triggers for Hurricane Windstorms

Per the Sponsor’s Memorandum, this bills seeks to “promote better understanding of the applicability and amount of hurricane windstorm deductibles in homeowners and dwelling fire policies” by establishing “reasonable standards for the operation of hurricane windstorm deductibles.”

This proposed Legislation would amend Insurance Law §3445 by adding an additional provision requiring the Superintendent to regulate and establish standards for hurricane windstorm deductibles which would create uniformity in the application of the deductible.  Specifically it seeks to create uniformity with regard to the triggering event.  The bill would require the Superintendent to issue regulations by “emergency adaptation or otherwise” within 180 days from the passage of the proposed Legislation. 

A147 – Abusive Insurance Practices Remedy Act

This proposed Legislation seeks to enact the “abusive insurance practices remedy act” which seeks to create liability for an insurer’s refusal to pay or unreasonably delay payment to the insured if the refusal or delay was not substantially justified.”  As stated in the sponsor’s memorandum, this would create a private right of action which currently does not exist in New York allowing an insured to directly sue insurers for violations of unfair claims settlement practices.  This or substantially similar bills have been introduced over the last several years.

This bills proposes a new section Insurance Law 2601-a which would create a civil remedy for unfair claims settlement practices.  This would allow an insured to recover damages against an insurer where the preponderance of the evidence shows that the insurer’s refusal to pay or delay the claim payment “was not substantially justified.”  An insurer is not substantially justified in refusing to pay or unreasonably delaying a claim when the insurer:

  • Intentionally, recklessly or by gross negligence failed to provide accurate information regarding the policy provisions relating to the coverage at issue;
  • Failed to provide written denial of claim with full and complete explanation of the denial including reference to the specific provisions;
  • Failed, in good faith, to settle a claim where the liability of insurer to insured was “reasonably clear”;
  • Failed to make a final determination and notify the insured in writing of its position on both liability and valuation of the claim within 6 months receipt of actual or constructive notice of the loss;
  • Compelling an insured to institute suit to recover because insurer offered substantially less than the amount ultimately recovered.

 

The new section would permit an insured to recover punitive damages in an amount which would not exceed the total value of the damages recovered in the litigation.  It would further allow the insured to recover interest, costs and disbursements, compensatory damages and reasonable attorneys’ fees incurred from the date of the loss.

S29 – Similar “Bad Faith” Civil Remedy

The Senate has a bill which is substantially similar to that which was discussed previously.  It also seeks to create a private cause of action for an insured against an insurer for violation of unfair claims practice violations. 

A164 Damages in Wrongful Death Actions

This proposed Legislation seeks to Amend EPTL §5-4.3.  Currently, the provision states that in addition to “any other lawful element of recoverable damages, the reasonable expenses of medical aid, nursing and attention incident to the injury causing death and the reasonable funeral expenses of the decedent paid by the distributes, or for the payment of which any distribute is responsible, shall also be proper elements of damage.   This provision would be deleted and replaced with:

Any other lawful element of recoverable damages fair compensation for the following damages may be recovered: (i) reasonable funeral expenses of the decedent paid by the distributes, or for the payment of which any distributee is responsible; (ii) reasonable expenses for medical care incident to the injury causing death, including but not limited to doctors, nursing attendant care, treatment, hospitalization of the decedent, and medicines; (iii) grief or anguish caused by the decedent’s death, and for any disorder caused by such grief or anguish; (iv) loss of love, society, protection, comfort, companionship, and consortium resulting from the decedent’s death; (v) pecuniary injuries, including loss of services, support, assistance, and loss or diminishment of inheritance, resulting from the decedent’s death; and (vi) loss of nurture, guidance, counsel, advice, training, and education resulting from the decedent’s death.”

Essentially, the bill seeks to expand the damages recoverable in a wrongful death action to include damages for emotional loss.

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
[email protected] 

01/14/15       Wendal Home Center, Inc. v Royal Construction of Long Is. Corp.
Supreme Court, Suffolk County
Court Directs Disclosure of Underwriting and Claim File; Any Documents Asserted to be Privileged Subject to In-Camera Review
Wendal commenced this declaratory judgment action seeking additional insured status under a policy of insurance issued by State Farm.  Although a certificate of insurance naming Wendal was issued by an authorized agent of State Farm, no additional insured endorsement to the subject policy was ever issued.  At depositions, the agent testified that it was possible that he failed to forward Wendal’s request for the additional insured endorsement to State Farm underwriters.  Further, a commercial underwriter for State Farm testified that if State Farm became aware of an additional insured request, which was not submitted to underwriting and, in turn, no change was made to the policy, State Farm would have undertaken an investigation. 

Following depositions, Wendal made a request for State Farm’s underwriting and claim file.  In response, counsel for State Farm made the general objection that the documents sought was privileged. 

In considering Wendal’s request, the court held that in light of the agent’s testimony concerning the certificate of insurance, and the underwriter’s testimony regarding the investigative practices of State Farm where a certificate of insurance was not forwarded to or received by State Farm, disclosure of the underwriting and claim file was material and necessary for prosecution of Wendal’s claim.  Thus, the court directed that State Farm provide Wendal a copy of its underwriting and claim file, subject to State Farm’s preparation of a detailed privilege log and submission of the assertedly privileged documents to the court for an in-camera review. 
Take Away:  We would like to take Peter Krevmer, Esq., Faust Goetz Shenker & Blee, counsel for Wendal, for bringing this decision to our attention. 

The decision highlights the importance of providing a detailed privilege log when declining to turn over demanded documents.  While this was not a SUM case, we note that this is especially important in SUM cases where the case law coming out of the appellate courts favors disclosure of claim files even though they could contain both coverage discussions along liability assessments. 

12/17/14       Glanz v New York Mar. & Gen. Ins. Co.
Supreme Court, County of Kings
Carrier Not Required to Cite Injured Party’s Late Notice in Disclaimer Where Notice Was Only Provided after Disclaimer Issued
Glanz allegedly sustained serious injuries when he tripped and fell in front of a premises owned by Penn on September 5, 2009.  By letters dated December 14, 2009 and June 1, 2010, Glanz’s counsel wrote to Penn to advise it that his client had been injured.  Thereafter, Glanz commenced a lawsuit, and when Penn did not appear, was granted a default judgment on October 17, 2011. 

On November 14, 2011, Penn’s insurance broker sent New York Marine and General Insurance Company an Acord form attaching the default judgment.  New York Marine acknowledged the notice and, after conducting an investigation, denied coverage to Penn by letter dated December 15, 2011.  A copy of the letter was sent to Glanz’s counsel.  Five days later, Glanz’s counsel acknowledged receipt of the disclaimer, advised of the date of the upcoming inquest and offered to vacate the default.  New York Marine never responded.

Glanz then took a judgment against Penn and commenced this action via Insurance Law § 3420(a)(2) and (b)(1).  Glanz argued that he provided independent notice of this claim to New York Marine on December 20, 2011, four days after learning New York Marine insured Penn.  Since New York Marine’s only disclaimer to Glanz was made in its Answer, interposed over three years later, it was ineffective.  In other words, Glanz argued, if an injured party provides notice of a claim to an insurance company, for the disclaimer to be effective, the insurance company must specifically cite the injured party’s failure to give timely notice as well. 

Relying on two appellate decisions, Konig v Hermitage Ins. Co. and Steinberg v Hermitage Ins. Co., the court granted summary judgment in favor of New York Marine stating that an insurer is not required to cite the injured party’s failure to provide direct notice in the disclaimer that was already issued to the insured.  Specifically, where the insured is the first to notify the carrier, even if notice is untimely, any subsequent information provided by the injured party is superfluous for notice purposes. 
Take Away:  Even with the case law cited by the court, due to the existence of cases which hold that an injured party is not bound by an insured’s late notice, it is always best practice when denying an insured’s claim for late notice to also cite the injured party’s failure to provide timely notice.    

EARL’S PEARLS
Earl K. Cantwell
[email protected]

10/7/14         St. Paul Fire & Marine Insurance Co. v. Centex Homes
Central District of California, District Court
Insurance Litigation Deemed Untimely
The issues in this case involved the “timeliness” of claims brought by three insurance companies against contractors and developers sued for construction defects in an underlying action.  Homeowners in a California development sued Centex Homes on February 13, 2014 alleging construction defects.  Centex tendered the underlying action to three different insurance companies under various additional insured provisions.  Apparently, the insurers preliminarily agreed to defend Centex, subject to reservation of rights and the right to retain counsel.  However, a dispute arose over the appointment of counsel, and the insurance companies filed a declaratory judgment action on May 29, 2014.  The insurance companies alleged that Centex refused appointed counsel, demanded to be defended by independent counsel, and the insurance companies asserted claims for declaratory relief, breach of contract, and “equitable reimbursement”.

Centex moved to dismiss the declaratory judgment action arguing that it was not “ripe” and there was no justiciable controversy when the complaint was filed.  Centex argued that the insurance companies filed suit before they had even sent Centex reservation of rights letters, and before Centex had the chance to respond to the insurance companies’ requests for cooperation and appointment of counsel.  The Court essentially agreed with Centex and dismissed the case.

The insurance companies sent reservation of rights letters on June 13, 2014, the same day they filed the action.  The insurance companies sent reservation of rights letters under other policies June 18, 2014, five days after the complaint was filed.  One of the companies did not send either letter before bringing suit. 

As a result, the Court concluded that Centex could not have refused to cooperate, refused choice of counsel, or breached any contract obligations because the demands for same either had not yet been made or were made just after the lawsuit was filed.

With respect to the equitable reimbursement claim, the Court ruled that the insurance companies failed to allege that they had agreed to immediately defend Centex in the underlying action in its “entirety”, or had paid to defend claims against Centex that were not potentially covered claims.  Therefore the equitable reimbursement claim was not properly pleaded, and did not seem to arise given the facts of the case.

The lesson of this case is that timing is important in declaratory judgment actions.  While action is often required timely and promptly, this case is an example of litigation being commenced too soon and literally before the insured had any chance to act or violate policy conditions.

The background of this case also reeks of forum shopping.  The insurance companies most likely wanted to file their declaratory action first in a venue of their selection, whereas Centex undoubtedly wanted to retain its own counsel and also litigate with the insurance companies in some other perceptively more favorable forum.  Getting the insurance companies’ lawsuit thrown out may have opened the door to Centex filing its own coverage litigation against them in a jurisdiction more to its liking.

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