Coverage Pointers - Volume XIV, No. 16

Dear Coverage Pointers Subscribers:

You have a situation? We love situations.


Audrey’s Angel:

We replace Audrey’s Angles with Audrey’s Little Angel. We are delighted to report that Audrey Seeley brought Aston Edward Seeley into the world on January 27th, at 1:45am. He weighed in at 7lbs 3oz.  Everyone is well.

Congratulations to Audrey and her husband Ed Seeley.

Starting next week, Margo Lagueras will assume the responsibilities for the substantive no fault column and we’ll move the “serious injury” column to a new author.


First Late Notice Prejudice Case Reported:

So patient, we have been, for the first material prejudice late notice case to be decided and the wait has finally come to an end.

New York coverage aficionados will remember that there was a sea change in 2008 with regard to late reporting of accidents, occurrences and lawsuits under liability policies issued in New York.  From time immemorial, New York courts had held that an unexcused failure to provide timely notice to an insurer would be considered a breach of the insurance contract and lead to a loss of liability insurance coverage, irrespective of any prejudice suffered by the insurer.  New York was in a minority of states that did not consider prejudice.

In late 2008, the New York State legislature changed that paradigm by amending the Insurance Law.  Effective for policies issued or renewed after January 17, 2009, an insurer would have to establish that it was materially prejudiced in its ability to investigate or defend in order to be able to sustain a late notice disclaimer.

So, we’ve been watching and waiting for the first case to be decided and reported, at any level, interpreting the new statute.  Finally, we have one, a trial level federal court decision from the United States District Court for the Southern District of New York, decided this past week.  It covers many subjects, besides late notice, and Kathie Fijal reports on the details in her Federal Focus column.  The decision is 40 pages in length and if you want a copy, we’d be happy to send it along, but it’s simply too long to attach and there isn’t a live link to it readily available.

This case involved a building collapse, alleged caused by snowfall, and a six-month delay in providing notice to the insurer.  The debris was removed before the insurer had a chance to conduct an investigation.  Although the insureds attempted to offer an excuse for the six month delay in reporting the claim (reasonable belief in nonliability because it appeared the snowfall caused the collapse and because it was impractical to provide prompt notice as the demolition occurred so quickly), the court determined that based on the facts of this case, the delay of roughly six months was unreasonable. 

The court also concluded that Atlantic, the insurer, had shown that the late notice materially impaired its ability to investigate the claim and defend against it. The late notice prevented Atlantic from being able to independently ascertain potential causes of the collapse, information which the court opined would be highly relevant to an investigation and defense of the claim made here.

One for the good guys.


Peiper’s Passions:

Happy Groundhog’s Day.  Here is to Phil not seeing his shadow on Saturday morning.

While we don’t have groundhogs, prairie dogs, beavers or any other noxious varmints in this week’s potpourri, we do have three decisions that make your writer want to run like he just saw a shadow.   The First Department’s decision in Samaroo permits a party to assert a contractual indemnification claim where the contract was assigned after its execution.  The result of which required a third-party to indemnify another party that it may not have ever known existed.  That decision surprised us. 

The second case, Port Parties v Merchandise, shocked us.  While the First Department’s reasoning is sound, the unintended consequences appear, to us at least, to be troubling.  As discussed at length below, in a nutshell, Merchandise was able to avoid its obligation to provide contractual indemnity to Port Parties because it, unilaterally, chose to breach is concurrent obligation to procure insurance.  Two wrongs, or one wrong in this case, does not make a right in our humble opinion.

The third case, Alleva v. UPS, amused us.  Again, we discuss the case at length below, but the upshot is that UPS was entitled to contractual indemnity from its security contractor even though a UPS employee assaulted an employee of the security contactor. 


Aside from reviewing eclectic cases from the Appellate Divisions, our involvement with the aftermath of Hurricane/Post-tropical Storm Sandy remains intense.  I am happy to report this week, that a group of my colleagues from around the country have been granted permission to telecast a webinar on Hurricane Sandy related issues for DRI.   While the dates have not yet been set, we anticipate the program will be broadcast during the week of March 18th.   The program, which will feature folks from the insurance industry, as well as practitioners from the Gulf (along with yours truly), will focus on claims handling and litigation tactics as these matters move from the engineer’s table to the courtroom.  We’re excited about the program, and urge you  to stay tuned for further details on scheduling.

That’s it for now, but we’ll be back next issue with another white paper on business interruption expenses.  In the meantime, feel free to drop us a line to tell us what we did wrong (or right!).  See you on Valentine’s Day.

Steve Peiper
[email protected]


A Century Ago:

Twenty-six year old Jim Thorpe, star of the 1912 Olympics and known as the “World’s Greatest Athlete,” signs to play baseball with the New York Giants.  He ended up playing the better part of eight years in the National League, six with the Giants, and one each with the Boston Braves and Cincinnati Reds, ending up with a lifetime batting average of .252.


PLRB Claims Conference Coming Up:

We hope to see many of you at the Claim Conference in Boston.  With Kipper Burke, Division VP and Sr. Claims Counsel at Great American P&C, we’ll be presenting on:


Casualty Campus -- Intermediate Level
Monday 3:30 - 5:00 (MPB1055)
Wednesday 10:30 - 12:00 (WAB1055)

We will spend time helping our audience to:

  • Distinguish between an insurer's obligations to those who qualify as additional insureds and those who benefit from contractual indemnity obligations
  • Evaluate how tenders of defense and indemnity should be made under both policy and trade agreement
  • Describe the protocols to be considered when tenders are received under both insurance policy and contract
  • Identify the relevant factors when sending or receiving tenders


Please stop in and say “hi” even if you decide to go to a “black box” presentation instead!


One Hundred Years Ago Today

New York City's Grand Central Terminal, having been rebuilt, reopened as the world's largest railroad station.  Originally known as Grand Central Terminal, it opened in 1871.  Between 1903 and 1913, the entire building was torn down in phases and replaced by the current Grand Central Terminal, which was designed by the architectural firms of Reed and Stem and Warren and Wetmore, who entered an agreement to act as the associated architects of Grand Central Terminal in February 1904.

Reed & Stem were responsible for the overall design of the station, Warren and Wetmore added architectural details and the Beaux-Arts style. Charles Reed was appointed the chief executive for the collaboration between the two firms, and promptly appointed Alfred T. Fellheimer as head of the combined design team. This work was accompanied by the electrification of the three railroads using the station and the burial of the approach in the Park Avenue tunnel. It reopened one hundred years ago today


Cassie’s Comment – Kohane Recognized by New York State Bar for Distinguished Contributions:

My colleague Dan Kohane, your CP Editor, received the New York State Bar Association’s Torts, Insurance & Compensation Law Section’s highest award this past week, at the State Bar’s Annual Meeting in New York City.

Dan was recognized by the Torts, Insurance & Compensation Law Section (TICL) of the Association. He received the John E. Leach Memorial Award, which is presented to an individual who demonstrates "outstanding service and distinguished contributions to the legal profession as a member of the TICL Section."  He was honored for his "tireless efforts for the profession and his great talent in mentoring others," the Bar Association said.

As Dan would say: “Atta Lawyer”.

Dan is the fourth H&F Attorney to have received the Leach Award.  The late Sheldon Hurwitz, the firm’s co-founder was the first recipient, followed by Jim Gauthier and Paul Suozzi.

P.S.  Dan was the first recipient of the TICL Section’s “Young Lawyer Award” in 1983, thirty years ago.  I was two years old at the time, and missed the awards ceremony.

Cassandra Kazukenus
[email protected]


One Hundred Years Ago: Lincoln, Lincoln, I’ve been Thinking …:

Saturday, February 1, 1913

$2,000,000 Memorial To Lincoln Will Be Erected In Potomac Park, Washington
Washington, Feb 1. – In the presence of the Lincoln Memorial commission here President Taft today signed the joint congressional resolution appropriating $2,000,000 for a memorial to Abraham Lincoln to be erected in Potomac Park, this city.  Those present at the signing were Senator Wetmore, Rhode Island; Martin, Virginia; and Cullom, Illinois; Speaker Clark and Representative Cannon, Illinois, and McCall, Massachusetts. Five thousand dollars is expected to be available within a few days for the beginning of the memorial.  Architect Henry Beacon of New York, whose plan was approved, will be instructed to start the work on the Greek Temple which will form the memorial. 

Editor’s Note: The first public memorial to Abraham Lincoln in Washington D.C. was a statue erected in front of the District of Columbia City Hall in 1868, three years after Lincoln's assassination. Demands for a fitting national memorial had been voiced since the time of Lincoln's death, and in 1867, Congress passed the first of many bills incorporating a commission to erect a monument for the sixteenth president. An American sculptor, was chosen to design the monument. His plans reflected the nationalistic spirit of the time, and called for a 70-foot structure adorned with six equestrian and 31 pedestrian statues of colossal proportions, crowned by a 12-foot statue of Abraham Lincoln. However, money could not be raised for the memorial and the issue did not receive serious consideration again until the 20th century.

Five bills were proposed to create a Memorial Commission in the years to 1901, 1902, and 1908, met with defeat because of opposition from Speaker Joe Cannon. The sixth bill introduced on December 13, 1910, passed. The Lincoln Memorial Commission had its first meeting the following year and former U.S. President William Howard Taft was chosen as the commission's president. Progress continued at a steady pace and by 1913 Congress had approved of the Commission's choice of design and location.

With Congressional approval and a $300,000 allocation, the project got underway on February 12, 1914 and was completed eight years later. Commission president William H. Taft – who was then Chief Justice of the United States – dedicated the Memorial on May 30, 1922 and presented it to President Warren G. Harding, who accepted it on behalf of the American people. Lincoln's only remaining son, 79-year-old Robert Todd Lincoln was in attendance.

Speaking of Presidents, the US President biography marathon continues.  We read a Grover Cleveland biography, then Benjamin Harrison’s papers, and of course, had to read Cleveland’s biography a second time.  It seemed awfully familiar.

If you need someone to stop out to your to assist your claims professionals, let us know. Here's a list of some of the topics on which we can present and we can manuscript any kind of coverage or tort program that might be important for your book of business. The first three topics, the ones highlighted below, have been the most popular ones recently. We have a traveling troupe so contact us and we can schedule a visit at a mutually convenient time.

  • Tenders, Additional Insured Obligations, Indemnity Agreements and Priority of Coverage
  • Good Faith, Consequential Damages and Extra-Contractual Liability - the New York Experience
  • NY Disclaimer Letter - Nuts & Bolts: How to Create and Write and Send a Disclaimer Letter, and How Not To. (The Reservation of Right Letter Myth)
  • Uninsured and Underinsured Claims Handling
  • Preventing Bad Faith Claims - First Party Cases
  • Preventing Bad Faith Claims - Liability Cases
  • New Rules Regarding Notice, Developing Proof of Prejudice and a Strategic to Avoiding Direct Actions
  • The Cooperation Clause - How to Handle
  • No- Fault Arbitrations and Appeals: Mock Arbitrations, Preserving the Record, Taking an Appeal
  • No Fault Regs - Knowledge is Power
  • An Auto Liability Policy Primer
  • A CGL Policy Primer
  • A Homeowners Liability Policy Primer
  • Storms and Fires: EUO's Under First Party Policies
  • How to Resolve Coverage Disputes: DJ Actions, Insurance Law Section 3420 Direct Actions (Choice, Strategy and Timing)
  • Insured Selected Counsel: When is it Necessary and How to Avoid it?
  • Mediation and the Role of the Mediator
  • ADR and How to Get to "Yes".
  • The Internet as a Tool for the Claims Representative
  • Construction Cases - The Interplay Between Indemnity Agreements and Additional Insured Obligations

Secret of Long Life Revealed 100 Years Ago Today:

New York Tribune
February 1, 1913

Egyptian Noblemen Had Wives Tickle Their Feet.

It was common for the Egyptian noblemen in ancient times to live 110 years, but it has remained until now for the real secret of their longevity to be revealed by Professor W. Max Muller, of the University of Pennsylvania.

Professor Muller says that papyrus scripts discovered along the Nile and hieroglyphic inscriptions on the walls of chambers in the pyramids show that it was the custom of the noblemen of Egypt’s palmy days to have their numerous wives tickle their feet and to drink one hundred jars of beer a day.  The professor adds that the joyous sensation of having his feet tickled by a lot of wives may have been an important factor in lengthening a nobleman’s life.  He fails to give specific credit to the consumption of one hundred jars of beer a day, perhaps because the size of the Egyptian beer jar is not announced, nor the proportion of froth to real beer in its contents. 
Editor’s Note:  I checked to see whether Professor Muller took this advice to heart and had his feet tickled by “a lot of wives” and therefore lived a long life.  Sadly, that did not occur, as the July 13, 1919 New York Times headline told the tale of his untimely demise at age 57:

Noted Egyptologist Is Seized with Cramps While Bathing at Wildwood, N.J.
Author and Professor at University of Pennsylvania
Was Sent to Egypt by Carnegie Institute


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In This Week’s Issue:


Dan D. Kohane
[email protected]


  • A 43-day Delay in Denying Coverage Renders Disclaimer Based on Exclusion, Untimely

Margo M. Lagueras
[email protected]

  • Certified Physician Records Sufficient to Establish Treatment Was Sought Shortly After Accident
  • Defendants’ Motion Fails for Failure to Address Claim in Bill of Particulars
  • Plaintiff Successfully Rebuts Defendants’ Showing


Audrey A. Seeley
[email protected]


  • Oh baby!  And a beautiful baby at that.


Steven E. Peiper
[email protected]


  • All Risk Does Not Mean “We Insure Everything”; Coverage Still Governed by Application of Exclusions



  • Contractual Indemnity Language Survives Even after Assignment of Contract
  • Adding Insult to Injury:  UPS’s employee injures Pitt employee…Pitt must still indemnify UPS
  • Breach of Insurance Procurement Clause; Precludes Any Indemnity Claim
  • Defendant Merchandise leased a premises on Pier 94 in NYC to hold a trade show. 


Cassandra A. Kazukenus
[email protected]

  • Amendment to No-Fault Regulations (11 NYCRR 65-3)


Katherine A. Fijal
[email protected]


  • Insurer Not Entitled to Client’ Documents
  • Court Finds that Insurer Was Prejudiced by Late Notice


Jennifer A. Ehman
[email protected]

  • Where a Consent Judgment was entered against the Insured, the Court Determined that Discovery as to the Injured Party’s Counsel’s Recommendation that the Matter be settled for Significantly Less than the Judgment Amount was Appropriate
  • Subcontractor Owes Additional Insured Coverage to Actively Negligent General Contractor Whose Employee Stabbed Subcontractor’s Employee
  • Unsworn Engineer’s Report Insufficient to Establish Application of Earth Moving or Settlement Exclusion
  • Bad Faith – Alaska: No Bad Faith Where Insurer Makes Multiple Attempts to Settle Claim, but Injured Party Wants More than Policy Limits


Earl K. Cantwell
[email protected]


Flood Water Damage Barred by “Anti-Concurrent Causation” Clause


The wind continues to howl here; we hope that you are all safe.  Root for an early spring.  We surely are doing so.

A special thanks to my Florida friend for the tasty treats received, home-made party mix and splendid barbecue sauce, that did the Country Style Ribs proud!

See you in two weeks.

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]

Jennifer A. Ehman
[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]

Diane F. Bosse

Index to Special Columns

Kohane’s Coverage Corner
Margo’s Musings on “Serious Injury”
Audrey’s Angles on No Fault

Steve on Sandy, Peiper on Property and Potpourri
Cassie’s Capital Connection
Fijal’s Federal Focus
Keeping the Faith with Jen’s Gems
Earl’s Pearls
Across Borders

Dan D. Kohane
[email protected]

01/22/13       National Casualty Co. v. American Home Assur. Co.
Appellate Division, First Department
A 43-day Delay in Denying Coverage Renders Disclaimer Based on Exclusion, Untimely
The underlying claim was involved exposure to lead paint. The court found that Chubb’s disclaimer was untimely, as the insurer presented no satisfactory explanation for the 43-day delay from the receipt of the claim to the issuance of the letter declining coverage.  In reviewing the lower court decision, Chubb had argued that it had some difficulty in retrieving old policies from dead storage, but the court did not find that excuse compelling.


Margo M. Lagueras

[email protected]

01/31/13       Ortiz v Salahuddin
Appellate Division, First Department
Certified Physician Records Sufficient to Establish Treatment Was Sought Shortly After Accident
On appeal, plaintiff’s claim of serious injury to her right knee is reinstated even though defendants submitted evidence from an orthopedic surgeon, a neurologist and a radiologist who found no evidence of recent trauma, normal range of motion and only degenerative injury.  However, in opposition, plaintiff submitted the affirmation of a radiologist who found that the MRI taken shortly after the accident revealed a meniscal tear.  In addition, her orthopedic surgeon stated that he observed and repaired the torn meniscus when her performed arthroscopic surgery.  He further noted that her limitations were permanent and that the injury was causally related to the accident.  The court agreed with plaintiff that the certified records of her prior physician, who referred her both to the MRI and the surgeon, were sufficient to establish that she sought treatment shortly after the accident and that she was not required to submit proof of a quantitative assessment contemporaneous with the accident.

However, with respect to plaintiff’s claim of serious injury to her cervical spine, defendants noted the lack of objective evidence and plaintiff’s admission, during an IME, that her neck was now “OK.”  Similarly, plaintiff’s claim of serious injury to her lumbar spine was dismissed because defendants submitted the affirmation of a physician who opined that the injury was pre-existing, and plaintiff did not submit any evidence of a recent examination showing significant or consequential limitations.

01/30/13       Carmody v Bald
Appellate Division, Second Department
Defendants’ Motion Fails for Failure to Address Claim in Bill of Particulars
Defendants moved, and plaintiff cross moved for summary judgment.  On appeal, defendants’ motion is denied as they failed to address plaintiff’s claim, set forth in her bill of particulars, that she sustained a serious injury to her cervical and lumbar spine.  Plaintiff, in contrast, submitted sufficient competent evidence showing that she did sustain such injuries and defendants failed to raise a triable issue of fact in opposition.

01/30/13       Perez v Schreier
Appellate Division, Second Department
Plaintiff Successfully Rebuts Defendants’ Showing
Although defendants met their burden showing that plaintiff did not sustain a serious injury to his cervical or lumbar spine, or under the 90/180-day category, plaintiff submitted evidence raising a triable issue of fact with respect to the claimed injuries to his cervical and lumbar spine.  As such, on appeal the trial was reversed.


Audrey A. Seeley

Oh baby!  And a beautiful baby at that.


Steven E. Peiper
[email protected]


01/29/13       Renaissance Art Inv., LLC v AXA Art Ins. Corp.
Appellate Division, First Department
All Risk Does Not Mean “We Insure Everything”; Coverage Still Governed by Application of Exclusions
Plaintiff, Renaissance, purchased an “all risk” policy of insurance from AXA.  After it was determined that a principal of Renaissance (along with a member organization) were involved in a fraud, Renaissance sought coverage under the policy.  AXA immediately disclaimed on the basis of an exclusion which precluded coverage for fraudulent acts committed by certain classes of individuals.  When it was determined that the principal and member organization both fell within the class of individuals to whom the exclusion applied, coverage was, indeed, forfeited. 

In opposition, Renaissance argued that it believed it had coverage because it specifically purchased “all risk” insurance.  By its terms, Renaissance argued that there should be no limitation to coverage.  In dismissing Renaissance’s arguments, the Court noted that policies never cover “non-fortuitous losses.”  Moreover, to find coverage in the instant case would require the court to disregard the plain language of the exclusions forth therein.

Peiper’s Point – This is a common misconception among policy holders.  All risk, despite its name, does not mean that everything is covered.  Rather, the term all risk generally means that a loss initially falls within the insuring clause regardless of how the claim occurred.  Even the claim is within the insuring grant, one must refer to the exclusions portion of the policy which carves out certain losses (e.g., fraud).  Named peril policies, on the other hand, generally require the insured to establish an enumerated loss before the insuring grant can ever be triggered


01/30/13       Samaroo v Patmos Fifth Real Estate, Inc.
Appellate Division, Second Department
Contractual Indemnity Language Survives Even after Assignment of Contract
Plaintiff was injured in the course of his employment with Rotavele when he fell down an elevator shaft.  At the time of the incident, Rotavele was performing work under a contract that it had entered into with the building owner Mazl.  Prior to the incident, however, Mazl had sold its interest in the building to Patmos.  As part of that deal, Mazl also assigned all of its contracts to Patmos as the new owner.

Patmos, as the owner, was named as the defendant in the instant case.  In turn, Patmos then commenced a third-party action against Rotavele which sought contractual indemnification.  Rotavele resisted the Patmos claim on the basis that it only had a contract with Mazl, and that it owed no duties to Patmos.

The Court, however, disagreed.  Where, as here, there was a valid assignment of the contracts between Mazl and Patmos, it followed that Patmos ascended to the rights of Mazl.  Because the contract in question did not have a prohibition against assignment, and there was no valid public policy reason to void it, the Court applied the indemnity terms as written.

Peiper’s Point – We were just a little bit surprised by this decision.  As you know, indemnity provisions are meant to be strictly construed.  The assignment of a contractual right to another party, which is enforceable against a third-party, seems questionable.  Especially, where, as here, it may have materially altered the risk for which indemnity was sought.  Notably, however, the Court ruled that there was no change in the risk, despite there being an entirely new ownership entity.

01/29/13       Alleva v United Parcel Services, Inc.
Appellate Division, First Department
Adding Insult to Injury:  UPS’s employee injures Pitt employee…Pitt must still indemnify UPS
Plaintiff was hired as a security guard for third-party defendant Pitt.  Plaintiff sustained injury while working for Pitt at a UPS distribution center.  Apparently, a UPS employee assaulted plaintiff when plaintiff sought to search the employee’s bag.

Upon being sued, UPS then commenced a third-party action against Pitt seeking contractual indemnification.  The claim was based upon the agreement that Pitt/UPS had entered into that broadly provided Pitt would indemnify UPS for any injury sustained by an employee of Pitt…except where the injury arose from the sole negligence of UPS.  Thus, Pitt was entitled to indemnify UPS for injuries UPS’ employee caused to an employee of Pitt. 

01/22/13       Port Parties, Ltd. v Merchandise Mart Props., Inc.
Appellate Division, First Department
Breach of Insurance Procurement Clause; Precludes Any Indemnity Claim
Defendant Merchandise leased premises on Pier 94 in NYC to hold a trade show.  Merchandise then retained Port Parties to provide “bathroom matron services.”  As part of that agreement, Merchandise agreed to obtain insurance on behalf of Port, and to indemnify Port for any and all claims “arising from or in connection with the use or occupancy of the [space].” 

Unfortunately, a guest at the trade show was injured when she slipped and fell in the bathroom being maintained by Port Parties.  In the subsequent lawsuit, Port Parties defaulted and judgment was entered against them.  Thereafter, Port Parties commenced a claim for contractual indemnity against Merchandise pursuant to the aforementioned contract.  Merchandise countered that the indemnity clause at issue was void by operation of GOL § 5-323 which prohibits a contractor from exempting itself from liability caused by its own negligence. 

In response to Merchandise’s argument, Port Parties argued that GOL § 5-323 could be circumvented where, as here, two parties dealing at arm’s length agreed to shift liability exposure via an indemnify clause AND an insurance procurement clause.  Thus, Port Parties argued that where, as here, the indemnity clause was meant to be covered by insurance, the GOL section relied upon by Merchandise was inapplicable.

Unfortunately for Port Parties, Merchandise never actually procured coverage as it was obligated to under the terms of the agreement at issue.  Thus, the First Department reasoned that because there was no insurance to shift the exposure, the indemnity agreement in question was, in fact, in violation of the GOL.  Therefore, Port Parties’ claim for contractual indemnification was void as a matter of law.

Peiper’s Point – This is a weird case, but it sets a dangerous precedent.  Notice that Merchandise, by unilaterally violating the terms of its contract, also exempted itself from contractually liability.  While the Court’s decision is technically “spot on,” we have a hard time permitting a party to avoid one contractual obligation (contractual indemnification) simply because it intentionally choose to ignore another one (ins. procurement).


Cassandra A. Kazukenus
[email protected]

Amendment to No-Fault Regulations (11 NYCRR 65-3)
Changes to procedures around verification effective April 1, 2013
The amendments to 11 NYCRR 65-3.5 included two new subsections (o) and (p).  Subsection (o) requires an applicant, upon whom verification was requested, to submit the verification under their control or written proof providing a reasonable justification for the failure to comply with 120 calendars from the initial verification request.  The insurer must advise the applicant in the initial request that the carrier may deny if this information is not provided within 120 calendars from the initial request.  This does not apply to a prescribed NF-Form, medical examination or EUO.  It does apply to medical services, lost earnings and reasonable expenses incurred on or after April 1, 2013.

Subsection (p) states that a carrier’s non-substantive technical or immaterial defect or omission in the verification request and the carrier’s failure to comply with a prescribed time frame will NOT negate an applicant’s obligation to comply with such. 

Section 65-3.8(b) is also amended by incorporating the above changes allowing denial when the verification requested has not been received within 120 calendar days.  Added to this provision is a paragraph which states that an insurer’s non-substantive technical or immaterial defect or omission will not affect the validity of a denial (NF-10) and applies to medical expenses, lost earnings and other reasonable and necessary expenses incurred on or after April 1, 2013.


Katherine A. Fijal
[email protected]

01/28/13       CAMICO Mut. Ins. Co. v. Heffler, Radetich & Saitta, LLP
United States District Court – Eastern District Pennsylvania
Insurer Not Entitled to Client Documents
Defendant, Heffler, Radetich & Saitta, LLP [“law firm”] administers class action settlement funds, and was insured by plaintiff, CAMICO Mutual Insurance Company [“CAMICO”].  The law firm was sued by a class member who alleged that one of the firm’s employees misappropriated class action settlement proceeds.  The law firm independently retained the O’Brien law firm to defend that action [“underlying action”].

CAMICO paid the O’Brien firm for its defense of the law firm in the underlying action and initiated this declaratory judgment action seeking a declaration that its coverage obligation is limited to $100,000.  During the declaratory judgment action CAMICO moved to compel production by the law firm of numerous documents relating to the underlying action. The law firm refused to turn over the documents on the ground that they were subject to attorney-client privilege.

CAMICO did not contest the law firm’s claim that the documents at issue were subject to attorney-client privilege. Instead, CAMICO argued that an exception to the privilege applied because it shared a common interest with the law firm regarding the defense of the underlying action.

The parties did not dispute that the privilege rules of Commonwealth of Pennsylvania applied to the case; however, the Pennsylvania Supreme Court has not addressed the issues of when the “common interest” or “co-client” exceptions to attorney-client privilege apply.   In order to predict how the Pennsylvania Supreme Court would decide the court considered:  (1) what the court has said in related areas; (2) the decisional law of the state intermediate courts; (3) federal cases interpreting state law; and (4) decision from other jurisdictions that have addressed this issue.

Most significantly, the court analyzed the Third Circuit case, In re Teleglobe Communications Corp., 493 F.3d 345 (3rd Cir. 2007), where the court described two distinct exceptions to attorney-client privilege, the “common interest” exception and the “co-client” exception.

The court noted that the “common interest” exception applies where separate clients retain different attorneys who share information with each other pursuant to a common legal interest; and, since CAMICO did not claim that it had separate counsel who sharing information, the “common interest” exception is not applicable in this case.

The “co-client” exception to the attorney-client privilege operates where two or more clients share the same attorney.  In this case CAMICO argued that the O’Brien firm represented the joint interests of the law firm and CAMICO with respect to defense of the underlying action and, as such, the documents at issue are not privileged with respect to CAMICO.

The Court identified two ways by which CAMICO could be considered a co-client with the law firm:  (1) the parties would be co-clients if, by virtue of the absolute rule, insured and insurer are always considered co-clients whenever the insurer pays for the defense of the insured; and, (2) even if an absolute rule does not apply, the parties may be co-clients if the facts of the case demonstrate that a joint representation occurred.

The question of whether an insurance carrier is always a co-client with its insured has been the subject of debate in the courts, but, as noted above, the question had never been addressed by the Pennsylvania Supreme Court.  The Pennsylvania state appellate courts which have considered this issue have agreed that a co-client relationship does not exist simply by virtue of the insurer-insured relationship.   Citing to the case of Eckman v. Erie Ins. Exchange, 21 A3d 1203 (2011)(rejecting an absolute rule  that the insured is always a co-client with the insurer when the insurer funds the defense of the insured); the Restatement(Third) of the Law Governing Lawyers (the insurer is not, simply by the fact that it designates the lawyer, a client of the lawyer); and, Teleglobe, supra, (a wide variety of circumstances are relevant to the determination of whether two or more parties intend  to create a joint-client relationship), the Court concluded that where an insurer funds the defense of its insured, the insurer may be, but is not always, a co-client with the insured.

The court went on to state that even though the absolute rule does not apply, if the O’Brien firm in fact conducted a joint representation of the law firm and CAMICO in the underlying action, the documents at issue would not be privileged as to CAMICO.   Based on the record before it the Court concluded that CAMICO was not a co-client with the law firm and that the law firm may refuse to turn over the privileged documents at issue.

01/15/13       Atlantic Casualty Ins. Co. v.  Value Waterproofing, Inc.
United States District Court – Southern District of New York
Court Finds that Insurer Was Prejudiced by Late Notice
Atlantic Casualty Insurance Company [“Atlantic”] issued a commercial general liability insurance policy to defendant Value Waterproofing, Inc. [“Value”]. Kentucky Fried Chicken, Inc. [“KFC”] owns non-residential property located on Lenox Avenue in New York.  The building was a two story structure with a barrel vaulted roof.  Shortly before February 26, 2010, KFC hired Value to perform work on the bottom chord of the bow truss – the bow truss is an assembly of beams which supports the barrel vaulted roof.

A major snow storm occurred in New York City on February 25 and 26, 2010, leaving approximately 20 inches of snow on the roof.  On either February 26 of 27, the roof collapsed.  KFC informed Value of the collapse.  One or two days later, KFC called Value again and requested Value’s Certificate of Insurance.  Value obtained the certificate of insurance and provided it to KFC on March 9.

On March 1, 2010, KFC’s insurer, Greenwich Insurance Company [“Greenwich”] received notice of the collapse and hired an adjuster to inspect the property.  The New York City Department of Buildings ordered demolition of the second floor of the property.  Demolition began on March 3, 2010 and by March 17, 2010 the demolition had been completed.

On September 2, 2010, Greenwich sent a letter to Atlantic notifying it of the collapse.  Atlantic received the notice on September 8, 2010 and on September 9, hired a claims investigation company to investigate the collapse of the building.  The investigator contacted Greenwich on September 13 requesting photographs and documentation regarding the work done by Value and the subsequent loss.  Greenwich never responded. The investigator also spoke with a representative of Value on September 13, and met with him on September 22.  On September 22, the investigator also visited the property and learned that the entire roof had been removed as well as the entire second story of the building.

On October 4, 2010, Atlantic instructed its investigator to close its file because Atlantic had determined that it was going to decline coverage.

Notably, when Value applied for coverage in April 2009, Value indicated that 100% of the construction work it performed was remodeling construction work; 100% of the work was inside buildings; and, 100% was residential as opposed to commercial.  There was no indication that Value did any roofing work. The classifications listed were:  drywall or wallboard installation; masonry; painting-interior buildings or structures; tile, stone, marble, mosaic or terrazzo work interior construction.

In October 2009, Value requested insurance for roofing work. Value identified the roofing work would be limited to residential, as opposed to commercial. 

All premiums charged were based on the understanding the Value would be doing only residential work.

On April 2, 2011, Greenwich, which had made payments on KFC’s claims, initiated a subrogation action against Value in the New York State Supreme Court.  Atlantic is not a party to the subrogation action, but is providing Value’s defense in that suit.

On October 26, 2011, Atlantic initiated this declaratory judgment action against the defendants.  Although Atlantic disclaimed on several grounds the court’s decision focused on late notice/prejudice and the policy classifications.

As to late notice Atlantic argued that it had no duty to defend or indemnify Value because it did not receive notice of the loss until roughly six months after the collapse of the roof.  The court noted that pursuant to current New York law, an insurer may disclaim coverage if it did not receive timely notice in compliance with the policy’s notice requirement and it was prejudiced by the untimely notice. The court pointed out that, courts applying New York law have routinely held that delays for one or two months are unreasonable.

The court pointed to case law in New York which holds that the test for determining whether the notice provision has been triggered is whether the circumstances known to the insured at the time would have suggested to a reasonable person the possibility of a claim.  Recognizing also, that an insured may be able demonstrate that notice was timely under the circumstances if the insured “lacked knowledge of the occurrence or had a reasonable belief in nonliability”. 

Since the Atlantic policy issued to Value was issued after January 17, 2009, an insurer cannot disclaim coverage on the basis of untimely notice unless the insurer was prejudiced by the late notice.  Where the notice is given within two years of the occurrence, but is untimely, the insurer has the burden of proving that it was prejudiced by the late notice.  In order to show prejudice the insurer must show that the failure to timely provide notice “materially impairs the ability of the insurer to investigate or defend the claim.”  New York Ins. Law §3420 (c)(2)(c).

Although the defendants attempted to offer an excuse for the six month delay in reporting the claim to Atlantic (reasonable belief in nonliability because it appear snowfall caused the collapse and because it was impractical for KFC to provide prompt notice because the demolition occurred so quickly), the court determined that based on the facts of this case, the delay of roughly six months was unreasonable. 

The court also determined that Atlantic had shown that the late notice materially impaired its ability to investigate the claim and defend against it. The late notice prevented Atlantic from being able to independently ascertain potential causes of the collapse, information which the court opined would be highly relevant to an investigation and defense of the claim made here.

In responding to arguments posed by the defendants on the issue of prejudice, the court determined that the existence of litigation and its attendant opportunities for discovery did not remove the prejudice to Atlantic.  The court pointed out that Greenwich and Value were adverse parties in the underlying subrogation action and Atlantic should not be required to rely on its adversary’s investigation to defend its insured in the underlying action.  The court held that where the best physical evidence was available to only one side but not the other because of an unreasonable failure to provide notice, prejudice has been shown and Atlantic had no duty to defend or indemnify Value in the underlying subrogation action.

Finally, the court addressed the issue of whether or not Value’s repair work fell within the policy’s classifications.  The court determined that although the defendants were able to show that the work done by Value was roofing, they were unable to show that the work done on the KFC building by value fits within the classification, i.e., “ROOFING –RES”.  The defendants argued that “RES” was ambiguous and did not necessarily mean residential.  The court did not agree stating that the term “RES” is, in the context of an insurance policy such as the one at issue here, unambiguous and refers to residential as opposed to commercial roofing.

Accordingly, the court granted Atlantic’s motion for summary judgment declaring that it had no obligation to either defend of indemnify Value in the underlying subrogation action.



Jennifer A. Ehman
[email protected] 

01/22/13       Young v. Utica First Ins. Co.
Supreme Court, New York County
Where a Consent Judgment was entered against the Insured, the Court Determined that Discovery as to the Injured Party’s Counsel’s Recommendation that the Matter be settled for Significantly Less than the Judgment Amount was Appropriate
Young commenced a personal injury action against Utica’s insured, JRC Productions, Inc.  Utica denied coverage for the lawsuit citing a breach of the policy’s notice provision.  Thereafter, JRC entered into a consent judgment with Young in the amount of $950,000.  This action was then commenced to recover on the judgment. 

This issue in this decision involved the scope of discovery.  Apparently, during document discovery in this action, Young’s counsel disclosed a letter in which he recommended that this client demand $350,000 to settle the underlying claim.  Based on this disclosure, Utica demanded Young’s attorney’s entire file that he maintained with respect to his representation of Young in the underlying action, including all communication between Young and his client. 

Young’s attorney responded to this demand providing over 400 documents along with a privilege log.  Upon receipt, Utica moved to compel the privileged documents. 

The court held that Young’s disclosure of the September 1 8, 2008 letter which explained the reasons for the $350,000 recommended offer of settlement arguably waived the attorney-client privilege.  Moreover, by commencing this lawsuit and putting the reasonableness of the $950,000 consent judgment at issue, communications which discuss the differences in the initial demand and the final consent judgment, are relevant to the issues in this lawsuit, and, therefore, will be subject to disclosure. Nevertheless, whether a particular document is or is not protected by a privilege is necessarily a fact specific determination; thus, the court held that it would review the withheld documents in camera.  

01/17/13       Davis & Partners, LLC v. QBE Ins. Corp.
Supreme Court, New York County
Subcontractor Owes Additional Insured Coverage to Actively Negligent General Contractor Whose Employee Stabbed Subcontractor’s Employee
This decision has something for everyone.  On February 17, 2004, Edward Callegari, an employee of non-party Jansons Associates, was stabbed by Drew Rose, an employee of Davis & Partners, LLC, while performing work at a construction site.  RFD 425 Fifth Avenue LP was the owner of the site, and Davis was the General Contractor.  The matter eventually went to trial and fault was apportioned 60% to Rose, 9.17% to Davis, and 30.83% to Callegari. 

Davis and RFD brought this action seeking additional insured coverage under a CGL policy issued by QBE to Jansons, the injured worker’s employer.  The demand for coverage was made pursuant to a contract between Jansons and non-party Tishman. 

The additional insured endorsement in the QBE policy stated:  “WHO IS AN INSURED (Section II) is amended to include as an Insured the person or organization shown in the Schedule, but only with respect to liability arising out of your work for that Insured by or for you.”

QBE’s first challenge to coverage was that the contract required Jansons to name Davis & Partners, L.P. and RFD 425 Fifth Avenue, LLC along with “all related companies.”  The court held that plaintiffs submitted sufficient evidence that they were successors to the entities listed on the contract and, in turn, were related companies under the terms of the contract.

Next, QBE argued that the notice provided by Davis and RFD was untimely.  As this was a pre-prejudice case, plaintiffs argued that New Jersey law (which had a prejudice standard) governed the interpretation of the contract, not New York law.  The court applied New York’s center of gravity or groupings approach, which seeks to identify the law of the state with the most significant relationship to the transaction and parties.  Ultimately, the court determined that New Jersey law applied, and in turn QBE would have to prove prejudice to deny on these grounds.  The court relied on the fact that the policy was issued in New Jersey to a New Jersey corporation.  Notably, the court rejected QBE’s argument that New York law should apply because the additional insured endorsement at issue provides coverage to plaintiffs only for liability arising out of Jansons’ work for Davis – work that was contracted for and performed solely in New York.  Accordingly, as QBE could not prove prejudice, the court refused to uphold its denial on this ground.

After determining that plaintiffs were named as additional insureds and that notice was timely, QBE then asserted that it did owe coverage because the injury to Callegari did not arise out of Jansons’ work.  The court found that where an employee of the insured subcontractor is injured performing the subcontractor’s work, there is sufficient connection to trigger coverage for the additional insured under the “arising out of” additional insured endorsement. 

Lastly, as a final argument, QBE asserted that the incident was not an occurrence under the policy.  In considering this argument, the court echoed the rule that in deciding whether a loss is the result of an accident, it must be determined, from the point of view of the insured seeking coverage.  Here, from the stand point of Davis and RFD, the incident was unexpected.  Although Davis was found actively negligent at trial, Davis did not direct or authorize the assault. 

Take Away:  Amazing.  Davis’ employee stabs Jansons’ employee, Davis is found actively negligent for the incident and, nonetheless, Davis convinces the court that it is entitled to coverage for the resulting verdict under Jansons’ policy.

01/16/13       Trezza v. New York Central Mut. Fire Ins. Co.
Supreme Court, Suffolk County
Unsworn Engineer’s Report Insufficient to Establish Application of Earth Moving or Settlement Exclusion
Two pipes beneath the slab under the kitchen floor in the insured’s home burst.  This caused sustained leaking of hot water which allegedly compromised the foundation and resulted in extensive damage to the home and its fixtures.

Defendant retained an engineer to inspect the damage.  While noting his inability to divine the exact cause of the damage due to its subterranean source, the engineer determined that the physical damage to the home was a direct result of an ongoing water damage event originating from leaking piping beneath the slab and along the rear wall.  This was based on observations of gaps and separations of moldings from first-floor ceilings and misalignments of certain doors, windows, and cabinets, which was consistent with a settlement of the slab in the area of the suspected leak.

In light of this report, defendant denied coverage based on exclusions for losses resulting from earth moving and settling.  It also stated that the pipe began to leak prior to the insured’s purchase of the home. 

On this motion for summary judgment, the court ultimately found that defendant failed to establish its evidentiary burden.  The court noted that defendant submitted only the affirmation of its attorney, which is of no probative or evidentiary significance.  Further, while the affirmation references certain deposition testimony in which plaintiff is claimed to have acknowledged that there were problems with the plumbing even before he purchased the home, the attorney’s reading of the testimony was not borne out on review of the transcript, nor was it shown how such general knowledge on the plaintiff’s part might translate to an exclusion from coverage. 

Moreover, according to the court, even were it to consider the unsworn statements contained in the engineer’s report, it would not avail the defendant.  In the court’s opinion, the report did not refer to any movement of earth or soil.  To the extent that the defendant relied on the policy exclusion for “settling,” it was clear that the settlement of the slab described in the report was not so much a physical cause of the loss as an effect.

Bad Faith

01/25/13       Williams v. GEICO Casualty Co.
Supreme Court of Alaska
No Bad Faith Where Insurer Makes Multiple Attempts to Settle Claim, but Injured Party Wants More than Policy Limits
Alya Landt and Innocent Dushkin were in a rented truck.  Both heavily intoxicated.  As Landt was operating the vehicle, she ran over Robert Shapsnikoff, who was also intoxicated, and lying in the middle of the road.  Only in Alaska!  After running Shapsnikoff over, Landt and Dushkin stopped the truck, but since by Landt ‘s own admission she didn’t need trouble with the cops, they picked up Shapsnikoff and put him in the truck and drove him home.  Again, only in Alaska!  By the time they got to his apartment, Shapsnikoff had died of his injuries. 

Shapsnikoff’s estate brought an action against both Landt and Dushkin.  Landt had a policy with GEICO.  The policy had limits of $50,000 per person, and $100,000 per occurrence.  GEICO agreed to defend both girls under the terms of the policy. 

Throughout pre-suit discovery, GEICO made several attempts to settle the case for the $50,000 policy limit.  However, the Shapsnikoffs demanded $100,000 (in the form of two $50,000 policy limits) plus add-ons plus $500,000 from both Landt and Dushkin.  After this was rejected by GEICO, the attorney for the Shapsnikoffs made other demands for amounts in excess of the policy limit.  Eventually, when the matter did not settle, the Shapsnikoffs entered into a consent judgment with Landt and Dushkin with each confessing to a judgment of over $4,000,000. 

On this motion for summary judgment in the resulting declaratory judgment action, the court rejected the Shapsnikoffs’ argument that GEICO had an obligation to offer two $50,000 settlements for the release of both Landt and Dushkin.  It also rejected any argument that GEICO should have settled on behalf of one girl, and not the other.  Once GEICO agreed to defend both Landt and Dushkin, it was proper for GEICO to seek the release of both. 

Likewise, the court rejected the argument that the incident resulted in two occurrences:  the first when Mr. Shapsnikoff was run over; and the second when he was loaded into the truck.  Apparently, after he was struck, the injuries were already mortal and the later transportation did not result in any further harm.   

Interestingly, the court also found that Landt and Dushkin breached the insurance contract by confessing judgment.   While a breach would not have been found had GEICO breached the duty to settle first, the court reasoned that because GEICO did not breach that duty and, instead, acted properly throughout this case, the girls did breach it. 

Earl K. Cantwell
[email protected]


Hardy & Kelly, LLC v. QBE Insurance Corp., 2012 WL 1744670 (M.D. Tennessee May 16, 2012).  This case arose from the record rainfall in Tennessee in May 2010 which led to significant flooding and damage to businesses in downtown Nashville, including the Broadway Brewhouse.  The owners of the Brewhouse had commercial insurance underwritten by QBE Insurance.  The claim was that water seeped into the building through its sewer lines during the flooding, which would have been a covered event.  However, there was an exclusion for losses caused directly or indirectly by flood or overflow of any body of water regardless of any other cause or event that contributed “concurrently or in any sequence to the loss”.  QBE denied coverage for the property damage claim, and after removing the suit to Federal Court, the insurer moved for summary judgment arguing that the anti-concurrent causation clause excluded coverage because flooding was a non-covered “concurrent cause” of the property damage.

The Federal Court agreed with the insurance company finding it beyond dispute that the record rainfall and flooding contributed to the restaurant’s damages, even if in part or indirectly.  The exclusion was interpreted as holding that damage caused, directly or indirectly, by flooding was excluded regardless of any other cause or event that contributed concurrently, or in sequence to the loss.  Thus, even though water backing up into the property through sewer lines might have been a covered event, since some of the loss and damage was caused by flooding as a concurrent cause, there was no coverage.  The anti- concurrent causation exclusion barred coverage where an excluded peril caused or contributed to the property damage concurrently or in sequence.  The policy excluded flooding, flooding was at least a concurrent cause of the loss, and therefore the loss was not covered.

Another important aspect of this case is that the Federal Court ruled and explained that all of the endorsements, exclusions, and clauses in an insurance policy should be read together to determine whether coverage applies, or may be restricted or excluded.


Courtesy of the FDCC Website

01/17/13       Jamestown Ins. Co. RRG v. Reeder
Fifth Circuit Court of Appeals
Thirty-One Month Delay in Notifying Insurer of Judgment Violates Policy’s Notice Conditions
In 2004, the insured sued a number of business partners in a Texas state court (“the 2004 action”). In March 2006, the defendants in that action filed the first of multiple counterclaims against the insured. The case was subsequently tried, and the trial court entered its judgment in March of 2008, finding the insured liable. The insured appealed, and the Texas Supreme Court reversed, rendering a take-nothing judgment in the insured’s favor. During the pendency of the 2004 action, several entities affiliated with the insured filed separate claims against the defendants of the 2004 action in a neighboring Texas county. Subsequently, the defendants filed a third-party claim against the insured, alleging that he had committed fraud. In November 2010, the insured tendered the defense and indemnity of both actions to Jamestown, his commercial general liability carrier.
Thereafter, Jamestown sought a judicial declaration that had no duty to defend or indemnify the insured. The district court granted Jamestown’s motion for summary judgment on the grounds that the counterclaims in the 2004 action and the third party complaint in the second suit did not constitute an occurrence resulting in property damage.

With regard to the claims of the third party complaint, the Fifth Circuit agreed with the district court, finding that the third party plaintiffs alleged intentional conduct and, therefore, the claims did not constitute an occurrence. In addition, the Court affirmed the district court’s ruling regarding the counterclaims of the first suit – albeit on alternate grounds. In so doing, the Court held that the insured’s 31-month delay in notifying Jamestown following the final judgment violated the policy’s notice conditions. While Texas law had not addressed questions regarding an insured’s failure to notify an insurer of an appealable final judgment, the Court made an “Erie guess,” and found that the delay was in fact prejudicial to Jamestown.
Submitted by: Jennifer Johnsen and Nick Farr, Gallivan, White & Boyd, PA

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