Coverage Pointers - Volume XIV, No. 17

Dear Coverage Pointers Subscribers:

Do you have a situation?  Sure seems like a lot of you do.  We love situations.  Bring them on.

Labor Law Pointers:

Don’t forget that Dave Adams and his team publish a monthly companion publication that keeps track of New York State Labor Law decisions [Sections 200, 240(1) and 241(6)].  Contact Dave at [email protected] for your free subscription.


Oh Canada…:

I had a terrific time in Toronto last week, speaking on U.S.coverage issues at the Toronto Defence Lawyers 9th Annual Insurance Symposium.  We ran through ten areas of hotly litigated coverage issues being considered by our courts and likely to be consider by the provincial courts in the months and years to come.


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”.

I Just Love these Folks:

Random thought and comment.  I’m leaving the office on Thursday; it’s about 6:00 P.M.  Everyone’s tired, another long day.  Your know that feeling.  I’m almost to the front door of the office and I run into Mike Perley, Steve Peiper and Jen Ehman.  “Hey,” says one.  “Whaddya think about this situation …” (they having been brainstorming) and we spend the next 20 minutes or so just debating some nuances on a coverage question and then another one, and then a third, each one adding to the argument, taking the other side, debating the points, changing sides, until we hash out a group consensus.  I’m a lucky guy to have such talent around me, each one pumped, even late in the afternoon, to debate and challenge each other, to reach for higher ground.  I’m just saying.


The Margo Two-Step and Introducing Michael Scott-Kristansen:

With Audrey remaining on maternity leave (whatever happened to Pearl Buck, Wang Lung and O-Lan having babies in the field?), Margo has taken stewardship of Audrey’s column, now titled: MARGO’S MUSINGS ON NO-FAULT and we introduce our newest editor, Michael Scott-Kristansen who has taken over Margo’s column on “serious injury”.  We’ve given it the working caption: MICHAEL’S MINI-MISSIVES ON SERIOUS INJURY UNDER NO-FAULT LAW. 

Time to Rant:  Call this One:  Words Ought to Mean SOMETHING in Additional Insured Endorsements:

Lewis Carroll, in Through the Looking Glass, described the use of words:
'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.'

'The question is,' said Alice, 'whether you can make words mean so many different things.'

'The question is,' said Humpty Dumpty, 'which is to be master — that's all.'

In 1923, the New York State Court of Appeals, Pound, J. put it a little differently:

[An insurance] …policy should be read, if it can be, without twisting words and rendering plain meanings nugatory …

Ira S. Bushey & Sons v Am. Ins. Co., 237 NY 24, 28.

OK, let’s consider the plain meaning of words.  Can a decision that is handed down on Valentine’s Day be considered heartless?

A February 14 First Department decision, National Union Fire Ins. Co. of Pittsburgh, PA v Greenwich Ins. Co., is discussed in greater detail in my column this week.  I don’t agree with it and I am hoping that others around the state will agree and take up the cudgels in case working their way up in other Departments.

The AI endorsement in the Greenwich Insurance Company policy issued to Associated, a subcontractor, provided that it only applied to bodily injury caused, in whole or in part, by Associated’s acts or omissions. It’s the classic ISO CG 10 10 07 04 endorsement.

While there are cases out in the insura-verse where there are still unresolved battles over the phrase “in whole or in part,” that’s not the issue in this case.  The question here focused on the term “caused”.  Does caused  mean “caused”?  That one seems to be a no-brainer.  Words mean something and what they say should be what they mean.  Courts tell us that all the time.

We can all remember that the older forms, before the 2004 policy changes, had different language.  For example, the ISO CG 20 10 10 01 form used different words:

Who Is An Insured 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 ongoing operations

Well, let’s see if we understand this.  Newer forms use the word CAUSE and the old forms use the words ARISING OUT OF.  We know that the term “arising out of” has been interpreted very broadly under the Regal decision in New York.  But NOW we have a more limited term­ and shouldn’t that term instruct that additional insured status would not be afforded unless the bodily injury had been “caused by the named insured’s acts or omissions …”

“No,” said the First Department. The word “cause” has nothing to do with cause:

The phrase "caused by" "does not materially differ from the . . . phrase, arising out of'" (W & W Glass Sys., Inc. v Admiral Ins. Co., 91 AD3d 530 [1st Dept 2012]). In turn, the phrase "arising out of" focuses "not on the precise cause of the accident but the general nature of the operation in the course of which the injury was sustained" (Regal Constr. Corp. v National Union Fire Ins. Co. of Pittsburgh, PA, 15 NY3d 34, 38 [2010] [internal quotation marks omitted]). Defense counsel admitted below that the underlying personal injury action arose out of an accident that occurred while Draper was acting on behalf of Associated in the performance of its ongoing operations. Thus, the condition set forth in the additional insured endorsement was satisfied, and summary judgment should have been granted in plaintiffs' favor (see e.g. Hunter Roberts Constr. Group, LLC v Arch Ins. Co., 75 AD3d 404 [1st Dept 2010]); it is not necessary to try the issue of causation.

Huh?  The word “cause” is in the endorsement but it’s not necessary to resolve the issue of causation?  I just don’t get it.  If the industry drafts a more narrow endorsement, as it did, the courts ought to respect it.

The W&W decision which we reported on back in 2012 does in fact, without explanation, say the same thing and that decision, we respectfully submit, is also misguided.


Women’s Suffrage, One Hundred Years Ago, Still a Dream:

New York Tribune
February 15, 1913

Kills Woman’s Suffrage
Minnesota Senate Puts Resolution to Sleep

St. Paul – The Minnesota Senate tonight adopted a resolution putting to death the women’s suffrage bill, which was passed by the House last week.  The vote, which was 24 to 21, came unexpectedly and at a time when many Senators were absent.
Editor’s Note:  In 1875, the Minnesota legislature recognized the right of women to vote in school board elections.  In 1893, the Minnesota Woman Suffrage Association (MWSA) convinced the Senate to take up women’s suffrage.  A bill to do so passed the Senate 32-19 but the change did not pass the House.  Similar legislation failed for the next quarter century.  It was not until 1919 when the Minnesota legislature recognized the right of women to vote in presidential elections and the same year, the legislature ratified the Nineteenth Amendment, which took effect the following year when the required two-thirds of the states approved it.  The MWSA then became the Minnesota League of Women Voters.


Jen’s Gem:

Happy Valentine’s Day!

By the time this newsletter is received, and used as a reminder of the day, unfortunately, it is probably too late to run down to the drugstore and get your wife/husband/significant other a card.  They now know you officially forgot Valentine’s Day.  The next two weeks will be miserable. 

With that said, on to brighter subjects, this week I report on a decision from New York County concerning additional insured status for a property owner, Visto Realty Corp. v. Castlepoint Ins. Co.  Although not the front and center issue in the decision, the court does note that where the contractual indemnification language does not reference defense or attorneys’ fees, they are not owed.  It’s a point that should be considered when reviewing these types of provisions.

Also, I report on a Tenth Circuit decision involving bad faith.  Where the insurer sends multiple letters following up on settlement negotiations and is actively involved in attempting to get the matter resolved, the court efficiently dispenses with the insured’s claims. 


Jennifer Ehman
[email protected]


Being NYC Mayor Was A Dirty Job 100 Years Ago:

New York Times
February 15, 1913

And So Dumbrow was fined $1 for Violating City Ordinance

Abraham Dumbrow, 23 years old, of 166 Flatbush Avenue, Brooklyn, has lost enthusiasm for the practice, which is followed merrily by shopkeepers in various parts of town, of sweeping sidewalk dust into the eyes and nostrils of passing pedestrians.  Yesterday Abraham swept dust over the Chief Executive of New York City and had to go to court to answer for it.  He expected to be charged with lese majeste or something like that, but, to his great relief, escaped with a fine of $1 for violating a city ordinance.  The violation of the said ordinance did not lie, exactly, in sweeping dust over New York’s Mayor, but in the act of cleaning off his sidewalk later than a certain hour of the morning.

Abraham was blithely plying his broom in front of the shop at 166 Flatbush Avenue at about 9:30 o’clock yesterday morning when Mayor Gaynor, walking down from his home and heading in the direction of the Long Island Railroad station, came along.  The Sweeper did not recognize the Mayor.  Whistling blithely, Abraham raised another cloud of dust.  It settled upon the distinguished pedestrian, and the bright morning turned to one of gloom for Abraham.

The Mayor beckoned to a traffic policeman.  The policeman hastened to the spot and took everything in with a single glace — Abraham, the broom, and the dust on the mayor’s coat and hat.  Saluting his Honor, he grimly handed to the offending Abraham a summons to appear in the Butler Street Court.
Editor’s Note:  Lese majeste is defined as acrime, especially high treason, committed against the sovereign power or an offense that violates the dignity of a ruler.


Peiper’s Passions:

Nothing happening in the world of property insurance this week.  We do, however, have a classic Court of Appeals case to discuss.  You may have heard the old adage “if ain’t broke…don’t fix it.”  With all due respect, the Court of Appeals has fixed a problem that, frankly, never occurred to me needed fixing.  On the other side of the coin, it is acknowledged that the Court appears to be taking an opportunity to nip a potential problem in the proverbial bud. 

In Caldwell, defense counsel paid $10,000 to a physician to appear for trial testimony.  While five figure payouts for expert medical testimony is sadly no longer surprising in personal injury cases, here the good doctor was called as a fact witness.  Indeed, rather than opining on injuries, causation and the like, the witness merely confirmed that a note in the emergency room records was accurate.  The Court acknowledged in the opinion that it was “troubled” by the excessive payment extended to the witness.  To address the issue, the Court has now empowered trial judges to make a determination as to whether a witness payment was disproportionate.  If so, trial judges are advised to instruct the jury to consider whether the fee is disproportionate.  If they likewise find it problematic, the jury is then requested to make a determination as to whether the payment had an impact on the witness’ testimony.

I have always felt that juries were not impacted by the disclosure that Doctor “X” received $15,000 to provide testimony.   Frankly, depending on the witness, it either served as an affirmation of his or her credentials ---or---cut against their credibility.  It did not, however, occur to me that the jury needed the judge to tell them what they already knew.  By referencing the compensation, the Court (one may argue) has already acknowledged that the witness fee is/was questionable.  The prejudice, by way of the instruction, is/will be unmistakably highlighted. 

And maybe….just maybe…that’s the point! 

Our court system is the protector of the time honored jury trial.  We can all agree that payment of $10,000 to lay witnesses sets a dangerous precedent.  If $10,000 is the going rate to read a note, how much is fair for a witness of a car accident, or a slippery condition on a supermarket floor?  What if the witness was an investment banker?  What if he or she was a tax accountant and the trial was in April.   What if they were a coverage lawyer --- what payment wouldn’t be disproportionate? 

As you know, we have a system to compel witnesses to testify.  A subpoena fee, and mileage, will work just fine.  If you want to provide more, that’s fine, but keep it reasonable. 

And maybe, upon further consideration, that is the right answer.

Regardless of how you come down, the decision in Caldwell reminds me of one other truth…far more personal than anything discussed in that case.   If I had it to do over again, I would have been Pre-Med instead of Pre-Law!

Finally, recall that in the last issue I indicated that I have the honor of chairing a webinar for DRI regarding emerging issues in Hurricane Sandy claims evaluation/litigation.  Within the first weeks of the Storm, several outlets provided initial programs aimed at triaging the unprecedented amount of claims facing the insurance industry.  Now that a few months have passed, and we have a better sense of the issues, claims and risks uncovered/created by Sandy, the perspective for dealing with these issues has changed.  It is with this in mind that we have created the Catastrophe Cleanup Webinar which is set for broadcast on March 26, 2013.  In addition to the issues facing carriers and coverage lawyers in the Northeast, we will also provide unique references to lessons learned from the fallout of Hurricane Katrina. 

Obviously, more information will be forthcoming in the weeks to follow.   We just ask that you consider our program, and save the date just in case.  If you have any questions or want further information in the interim, please do not hesitate to drop us a line. 


Steven E. Peiper
[email protected]


The Suffragettes Fight Back a Century Ago:

Olean Evening Times
October 15, 1913
Suffragettes Make Attack on Golf Links

London  Feb. 15 — Suffragettes again transferred their attention to the golf links today. The putting greens on the famous Sandwich golf course were dug up in the absence of the watchman, and inscriptions of "votes for women" were smeared over the bunkers. The directors of the club have called a meeting for the purposes of adopting resolutions condemning woman suffrage.


Earl’s Pearl -- Claims Ethics Presentation:

We know that many states are incorporating ethics requirements in training programs for insurance claims professionals on an increasing basis.  As part of our ongoing Training and outreach efforts, we have prepared a flexible 2-3 hour training module for Ethics for Insurance Professionals.  The training program includes claims intake and review, dealing and communications with insureds and their counsel, claims handling tips and recommendations, ways to minimize bad faith claims and extra-contractual liability, settlement negotiations and claim resolution, and documenting and closing the claim file and dealings with the insured and claimant.

It is a fast-paced, flexible program designed to satisfy either a 2- or 3-hour ethics requirement.
If you are interested in having us make this presentation to your staff, please contact a member of the Coverage Pointers team.


Earl K. Cantwell
[email protected]


Highlights of This Week’s Issue:

Dan D. Kohane
[email protected]

  • The Court of Appeals accepted an application to review the Fourth Department’s decision in this case, reported below:

Actual Knowledge of Policy Terms Months Prior to a Loss Dooms Insured’s Attempt to Sue Its Agent/Broker for Negligence

  • Questions of Fact Existed Concerning Cedent’s Allocation Decisions in Settlement of Asbestos Claims
  • Under Additional Insured Endorsement, “Caused By” is Given Same Meaning as “Arising Out Of”; Thousands Flee
  • Undefined Term “Employee” is Ambiguous because it Might Mean an Employee Working outside the Scope of Employment so Employment Exclusion is Ambiguous
  • SUM Insured Who Failed to Seek Carrier’s Consent to Settle Loses Rights to SUM Benefits; Delay by Carrier in Raising that Breach is of No Consequence
  • Three Month Delay in Disclaiming, Without Excuse, Invalidates Disclaimer
  • Claim Against MVAIC Premature Where Identity of Driver of Car Driven By Defendant Appears to be Known by Plaintiff
  • Unclear Whether OCIP Would Bar Subrogation Claims Between Parties
  •  “I Gave Notice to My Broker” is Not an Acceptable Excuse for Not Reporting.  Late Disclaimer in Non-Bodily Injury Case May or May Not Be Prejudicial
  • In Lead Paint Coverage Litigation, Exposure by Two Sets of Children in Same Apartment during Two Separate Tenancies, Still Considered One Occurrence; Non-Cumulation Clause Disallows Stacking of Coverage


Michael P. Scott-Kristansen

[email protected] 

  • Physician’s Speculation about Plaintiff’s Slothfulness is Insufficient to Meet Defendants’ Burden
  • Summary Judgment Improper Where Plaintiff Creates Triable Issue
  • Defendant Not Entitled to Summary Judgment on Permanent Consequential Limitation and Significant Limitation Categories
  • Evidence of Joint Degradation, Without More, Is Insufficient Where Defendant Submits Evidence that Injury Was Preexisting
  • Plaintiff’s Deposition Testimony and Affidavit from Chiropractor Based on Three Year Old Examination Insufficient to Create Triable Issue
  • Plaintiff’s Experts’ Affirmations Created Triable Issue Where They Conflicted with Defendant’s Experts’ Affirmations


Margo M. Lagueras
[email protected]


  • Insurer’s Wage Loss Calculations Correct and Policy Exhausted
  • Is Manipulation Under Anesthesia (MUA) a Medical or a Chiropractic Procedure?
  • No-Fault Benefits Properly Payable for Aggravation of Pre-Existing Conditions



  • Plaintiff’s Failure to Respond to EUO Requests Precludes Objections
  • Psychologist’s Peer Review Found Not to Be in Admissible Form


Steven E. Peiper

[email protected]
Court of Appeals

  • Appearance Fees Provided to Lay Witnesses Can Give Rise to Special Jury Instruction


Appellate Divisions

  • Plaintiff’s Attempt to Sue Predecessor –in-Interest are Dismissed for Lack of Jurisdiction, and Precluded by Operation of the Workers’ Compensation Law
  • Act or Omission Language in Contract Governs Scope of Indemnity Obligations


Cassandra A. Kazukenus
[email protected]

  • A Bill Permitting an Insurer to Rescind/Retroactively Cancel Policy in Limited Circumstances Involving Fraud
  • Amend SUM Coverage for Ambulance Services and Volunteer Fire Departments


Katherine A. Fijal

[email protected]

  • Court Finds Questions of Fact on Agent’s Duty and Insured’s Duty to Read


Jennifer A. Ehman
[email protected] 

  • Injured Party is a Proper Defendant in Declaratory Judgment Action
  • Two and A Half Year Delay in Providing Notice is Late as a Matter of Law
  • No Coverage Where Policy Lacked Additional Insured Endorsement and Plaintiff Not Named as an Insured


Bad Faith

  • Avoid Bad Faith; Stay in Touch


Earl K. Cantwell

[email protected]



Hey, don’t forget that Coverage Pointers can now be delivered to you by smart-phone app.

Stay healthy because health is everything.

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:


As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts.  The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.

If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.

You will find back issues of Coverage Pointers on the firm website listed above.

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
Michael’s Mini-Missives on Serious Injury
Margo’s Musings 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]

02/14/13       Voss v. Netherlands Insurance Company
Court of Appeals
The Court of Appeals accepted an application to review the Fourth Department’s decision in this case, reported below:

06/14/12 Voss v. Netherlands Insurance Company
Appellate Division, Fourth Department
Actual Knowledge of Policy Terms Months Prior to a Loss Dooms Insured’s Attempt to Sue Its Agent/Broker for Negligence
Plaintiff maintained its business at a commercial warehouse that it also, presumably, owned. From the decision of the Court, it is revealed that plaintiff’s facility sustained water damage on at least three different occasions. It was alleged that all three water damage incidents resulted in a cessation of plaintiff’s business. The first two of these shutdowns resulted in business interruption payments of $3,197 and $30,000, respectively. The final incident did not result in a business interruption payment because it appears that plaintiff never “re-started” operations.

Plaintiff commenced the instant lawsuit against Netherlands (as BI carrier) and CBI (as agent/broker). With respect to its claim against CBI, plaintiff argued that CBI handled all of its insurance procurement needs. Thus, plaintiff reasoned that the CBI had breached its obligations when it failed to procure sufficient business income coverage on the premises. In so arguing, plaintiff noted that it had previously questioned the sufficiency of the coverages obtained by CBI.

However, CBI assured plaintiff the amounts of coverage procured were appropriate, and CBI acknowledged that it would re-assess plaintiff’s insurance needs as the company evolved over time.

CBI moved to dismiss plaintiff’s claims on the basis that it owed no legal duty to plaintiff. Plaintiff opposed CBI’s motion on the basis that it had usurped plaintiff’s control over its insurance program, and as such a “special relationship” between the companies was consummated. Moreover, plaintiff argued that CBI’s decision to obtain $75,000 in business interruption coverage in Policy Term 1 and 2, coupled with CBI’s decision to obtain only $30,000 of business interruption coverage in Policy Term 3 established CBI’s breach of its obligations.

The Appellate Division began by noting that it was convinced that, at a minimum, a special relationship may have existed between plaintiff and CBI. However, even if CBI owed a duty to plaintiff, there was no viable claim presented in the instant lawsuit. Plaintiff argued, in essence, that CBI failed to procure an appropriate amount of coverage in Policy Term 3. In dismissing plaintiff’s Complaint, the Court noted that plaintiff was in possession of the actual policy for months prior to the loss. As such, relying upon the old adage that an insured is deemed to know what coverage they have, the Court reasoned that if plaintiff had an objection to the amount of coverage procured by CBI said objection had to have been raised well prior to the loss event.

Moreover, even if CBI had breached an obligation to the plaintiff, and plaintiff had timely raised the issue, there was still no claim. As noted above, Netherlands did not issue payment under Policy Term 3, and issued substantially less than the limits of Policy Terms 1 and 2, respectively. Accordingly, even if CBI had been negligent, its negligence was not the proximate cause of any loss sustained by plaintiff.

We note that Justice Carney penned a well-reasoned dissent in this matter.

Essentially, Justice Carney noted that it was incongruous for the Court, on one hand, to note that CBI had usurped plaintiff’s insurance program, and, on the other hand, state that the plaintiff still had an obligation to read its policy. If, in fact, CBI had taken that role for plaintiff, it follows that CBI should be required to look out for plaintiff’s concerns.

In addition, Justice Carney also noted that an insured need not return to operations in order to qualify for coverage. Accordingly, it appears that Justice Carney also did not concur with the majority’s assessment that CBI’s negligence, if any, was a proximate cause. Indeed, Justice Carney noted that the measure of potential damages against CBI was the amount of total business income losses when measured against the amount of procured coverage. In light of this, Justice Carney would have denied CBI’s motion on a question of fact.

02/07/13       United States Fidelity & Guaranty Co. v. American Re-Insurance Co.
Court of Appeals
Questions of Fact Existed Concerning Cedent’s Allocation Decisions in Settlement of Asbestos Claims
Plaintiff settled asbestos claims on behalf of its insured for nearly a billion dollars.  After the settlement was complete, it sought to recover a share of the payment from its reinsurers including defendant. 

The reinsurance treaty at issue contained what is often referred to as a “follow the fortunes” clause.  This clause ordinarily bars challenge by a reinsurer to the decision of a party in the plaintiff’s position (often referred to as the “cedent”).  This rule usually creates little risk of unfairness because the interests of the cedent and reinsurer are normally aligned as both want the cheapest settlement possible.  However, there are exceptions.  Defendant asserted here that the way the settlement was allocated was unfair. 

Under the reinsurance treaty, the first $100,000 of every loss must be borne by plaintiff, and the second $100,000 by the reinsurers.  Notably, the policy plaintiff issued had a $200,000 per claimant limit. 

The court held that while a cedent’s allocation decisions are entitled to deference this is not to say that they are immune from scrutiny.  Thus, the court held that a reinsurer is bound only by a cedent’s “good faith” decisions.  In other words, object reasonableness should determine the validity of an allocation.  The court made a point of noting that reasonableness does not imply disregard of a cedent’s own interest as it is not a fiduciary of the reinsurer; rather, a cedent’s allocation must only have been legitimate. 

Here, the court found questions of fact concerning whether two of the cedent’s allocation decisions were reasonable:  (1) that all of the settlement amount was attributable to claims within the limits of plaintiff’s policies, and none of it to the claims that plaintiff acted in bad faith; and (2) that claims by claimants suffering from lung cancer had a value of $200,000 each, while certain other claims had values of $50,000 or less. 

With regard to the bad faith claims, the decision to allocate nothing to these claims was beneficial to plaintiff as bad faith claims were not covered by reinsurance.  In the court’s opinion, this decision was potentially unreasonable in light of evidence that plaintiff had taken a very aggressive stance in refusing to admit, for almost a decade, that it had ever written liability insurance that covered the asbestos claimants’ claims - - a position it abandoned at a late stage of the coverage litigation, in the face of strong proof that coverage existed.  Further, the evidence tended to show the plaintiff knew, well before it admitted, that it owed coverage.  With this evidence, there was a possibility that when the coverage case went to trial plaintiff could be faced with a large verdict on these claims. 

Further, the court noted that in allocating the settlement it could be found that plaintiff assigned inflated values to claims other than the bad faith claims (i.e., to claims covered by reinsurance).  Specifically, in allocating its settlement payments, plaintiff classified the claims according to the disease which claimant suffered.  The most serious diseases such as mesothelioma were allocated the $200,000 cap, but lung cancer was also valued at the cap; yet, at early stages of litigation, an expert retained by the asbestos claimants estimated liability for each lung cancer claim at under $100,000.  The court felt that it could be found that lung cancer claims were priced at an unreasonably high level, and included value that should have been attributed to the bad faith claims. 

On this same line of thought, the court noted that some of the claims falling below the reinsurers’ $100,000 retention amount were undervalued.  For example, plaintiff assigned value of $50,000, $20,000 and $20,000 to the claims of sufferers from asbestosis, pleural thickening and “other cancer,” respectively.  If some of the value of the lung cancer claims were reassigned to these less serious claims, the result would be to decrease the reinsurers’ liability.

In light of these findings, the court modified the order of the Appellate Division.    

02/14/13       National Union Fire Ins.  v. Greenwich Ins. Co.
Appellate Division, First Department
Under Additional Insured Endorsement, “Caused By” is Given Same Meaning as “Arising Out Of”; Thousands Flee
This was a case involving an additional insured (AI) endorsement.

The AI endorsement issued applies only if there is a written contract or agreement. The carrier claimed that the only written contract in effect at the time of the injury was for material only and thus inapplicable.  The court rejected that argument because the contract stated that the party “agrees to provide materials and/or perform services".

The AI endorsement applied to bodily injury caused, in whole or in part, by Associated's acts or omissions or the acts or omissions of those acting on Associated's behalf in the performance of Associated's ongoing operations for plaintiff NVR, Inc.  The court broadly interpreted the term “”caused” to be not materially different than “arising out of'" which focuses "not on the precise cause of the accident but the general nature of the operation in the course of which the injury was sustained".  The court finds that if the accident arises out of the work, causation (despite the language in the endorsement) need not be determined.

Associated, the subcontractor, then contended that it was an additional insured under the policy that third-party defendant issued to the general contractor, Draper.  However, this language covers only vicarious liability and that was not a contention here.
Editor’s note:  Now that’s just nonsense, although we see a trend out there approving nonsense.

One endorsement uses the term “arising out of” and the other says “caused by”.

Why give those terms the same meaning when they are not the same terms?  The word cause has meaning. The courts are ignoring that meaning.

Basically, the court is rewriting the AI endorsement, in this editor’s opinion.  Why should the courts take the term “caused” out of an endorsement that uses it?

02/13/13       Essex Ins. Company v. George E. Vickers, Jr., Enters, Inc.
Appellate Division, Second Department
Undefined Term “Employee” is Ambiguous because it Might Mean an Employee Working outside the Scope of Employment so Employment Exclusion is Ambiguous
On June 25, 2005, Pinon, an employee of Paul Michael, sustained serious injuries during his lunch break, when he dove into shallow water at a nearby beach and broke his neck.  After being denied Workers' Compensation coverage on the ground that his accident did not occur in the course of his employment, Pinon sued Vickers and Lynn and each sought coverage under an Essex policy.

Essex disclaimed and refused to defend or indemnify Vickers and Lynn based on the employee exclusion which, it asserted, applied regardless of whether the employee was acting within the scope of his employment at the time the accident occurred.  It also argued that the Lynn defendants were not additional insureds at the time of the accident.

The Second Department finds that the exclusion was ambiguous, as there is no definition of the word "employee" in the policy, and one reasonable interpretation of the terms of the policy is that the parties did not intend for a worker acting outside the scope of his employment to be considered an employee' within the meaning of the employee exclusion.  In addition, where, as here, "the injuries occurred away from the employer's premises, it might well [be] determined that that action did not arise out of and in the course of the employment"

Because the employee exclusion could "even potentially" be inapplicable, the plaintiff is obligated to defend its insured. The Lynn defendants met their prima facie burden on that branch of their cross motion which was for summary judgment on their counterclaim, inter alia, for reformation of the policy for the coverage period from March 26, 2005, through March 26, 2006, to include them as additional insureds, by "showing a mutual mistake by clear and convincing evidence" . This evidence included the request in Vickers' application for the 2005-2006 policy renewal to provide coverage to the Lynn defendants as additional insureds, the absence of evidence that the plaintiff refused the request, and the fact that the plaintiff previously granted a written request by Vickers to add the Lynn defendants as additional insureds to the initial 2003-2004 policy.

Lynn also established that Essex did not properly cancel or conditionally renew the policy under Insurance Law § 3426 and thus the terms could properly be changed.

Here, notwithstanding the plaintiff's contention to the contrary, the renewal quotation for the coverage period from March 26, 2004, through March 25, 2005, which stated that the policy included "no additional insureds," was ambiguous, as it failed to mention the Lynn defendants specifically, and provided no "specific reason or reasons for" conditioning renewal upon the removal of the Lynn defendants as additional insureds.   As such, the renewal quotation was insufficient to constitute proper notice under Insurance Law § 3426(e)(2).
Editor’s Note:  Circular reasoning, for sure.

02/13/13       Travelers Home Ins. Co. v. Kanner
Appellate Division Second Department
SUM Insured Who Failed to Seek Carrier’s Consent to Settle Loses Rights to SUM Benefits; Delay by Carrier in Raising that Breach is of No Consequence
Kanner, hurt when her bicycle collided with a car, sued driver/owner.  The accident was on June 5, 2010 and the suit was commenced on September 24 of the same year.

A year later, on September 23, 2011, GEICO, the tortfeasors' insurer, tendered the full amount of its policy to Kanner in full settlement of her claim against its insureds. Three days later, Kanner executed a document releasing GEICO and its insureds from any further liability.

Kanner filed a SUM claim with her own carrier, Travelers.  Not surprisingly, Travelers denied coverage.  When a demand for arbitration was filed, Travelers moved to stay arbitration because Kanner had failed to ask for consent to settle under Condition 10 of the SUM policy.

Kanner argued that her counsel had informed Travelers that Kanner was pursuing a claim against GEICO's insureds, specifically advising Travelers that counsel was awaiting a response from the GEICO adjuster as to the adjuster's authority to offer the policy limits in settlement of the underlying action.  Kanner further argued that Travelers provided no proof of prejudice, and that Travelers' disclaimer was made in violation of Insurance Law § 3420.

The lower court found, wrongly so that a delay is disclaiming precluded Travelers’ right to deny coverage.  The Second Department reversed.

A reading of Insurance Law § 3420 indicates that the reference to notice means notice of the insured's claim, not notice of a settlement.  Here, Travelers does not contend that it was prejudiced by Kanner's failure to provide timely notice of her claim pursuant to Insurance Law § 3240, but by her failure to obtain Traveler's consent prior to settling the underlying action, in violation of the consent-to-settle provision in the policy.

Here, there is no dispute that Kanner executed a general release without Travelers consent so Kanner has forfeited rights to SUM benefits.  Plain and simple.
Editor’s Note:  Doubtless, the right decision.  The SUM policy provisions speak for themselves.

02/13/13       Scottsdale Ins. Co. v. Utica First Ins. Co.
Appellate Division, Second Department
Three Month Delay in Disclaiming, Without Excuse, Invalidates Disclaimer
There was an August 17, 2007, construction accident in which an employee of the Sunburst was hurt.  Sunburst had been hired by Vasca Siding as a subcontractor to perform certain work at the premises.

Utica insured Sunburst and first received notice of the accident on August 31, 2007, from the property owners.  On September 11, 2007, Utica sent a letter to the attorney for the property owners disclaiming coverage.  Three months later, in December, Scottsdale, which insured Vasca, demanded that Utica defend and indemnify Vasca.  Utica did not disclaim coverage until late February.

Scottsdale and Vasca brought this action to obtain coverage from Utica. The lower court found that Utica failed to timely disclaim coverage in response to Scottsdale's demand.  Utica contended, on appeal that its September 11, 2007, letter to the property owners disclaiming coverage effectively constituted a timely disclaimer to Vasca since Vasca had been named as a copy recipient of that letter.  However, Utica did not raise that contention before the lower court so it cannot be raised in the appeal.

The February letter in response to Scottsdale's December 28, 2007, was untimely and there was no adequate explanation for the delay in responding, and since the grounds for disclaimer had been apparent to Utica since September 2007.

02/13/13       Acosta-Collado v. Motor Vehicle Accident Indem. Corp.
Appellate Division, Second Department
Claim Against MVAIC Premature Where Identity of Driver of Car Driven By Defendant Appears to be Known by Plaintiff

Claim against MVAIC.  Petitioner was riding a bicycle in Queens and was struck by a car backing out of a driveway.  While the car left the scene, witnesses secured the license plate and make and model of the car.  It turns out that the vehicle was registered to Sarmiento and insured by Allstate.

Allstate denied the petitioner's claim for no-fault benefits, which claim mistakenly, contained an incorrect accident date.  Petitioner then sued Sarmiento and then filed a claim with MVAIC claiming that the car was uninsured.

Action against MVAIC dismissed.  Petitioner failed to sustain his burden of demonstrating that the accident was one in which the identity of the owner and operator was unknown or not readily ascertainable through reasonable efforts.  If he loses the personal injury action, he may be able to come back to MVAIC.

02/07/13       Allianz Global Risks, et al v. Tishman Construction Company
Appellate Division, First Department
Unclear Whether OCIP Would Bar Subrogation Claims Between Parties

Tishman was a general contractor for a Yeshiva University construction project.  Tishman entered into a subcontract with Sirina to install the fire protection system.  It is claimed that a sprinkler component failed, leading to water damage in the building.  Yeshiva made a claim under its property policy with Allianz and it was paid $550,000 to cover the loss.

Allianz now commences a subrogation action against both Tishman and Sirina.  Both the contractor and subcontractor move to dismiss the lawsuit claiming that the action is barred by the antisubrogation rule, since under an AIG Owner Controlled Insurance Program (OCIP); Yeshiva is bound to pay the first $1,000,000 in damages.  Defendants argued that if the subrogation action is allowed to proceed, Allianz, Yeshiva’s carrier, will essentially be recovering from Yeshiva, since the University is self-insured for first one million dollars.

Court finds that at this stage there are questions of fact as to whether the AIG policy provides coverage to the two contractors for this loss.  Potentially the work product exclusions apply.

02/01/13       Penn Millers Ins. Co. v. C.W. Cold Storage, Inc.
Appellate Division, Fourth Department
“I Gave Notice to My Broker” is Not an Acceptable Excuse for Not Reporting.  Late Disclaimer in Non-Bodily Injury Case May or May Not Be Prejudicial
Thruway Produce (“Thruway”) had a contract with C.W. Cold Storage (“Storage”) under which Storage stored apples that Thruway had sold to a subsidiary of Milnot for later processing into baby food.  Following the discovery of rodenticide in apples that Thruway had allegedly supplied to the subsidiary, Milnot sued Thruway seeking damages for the economic losses that it sustained from the recall of products potentially containing rodenticide that had already been processed and shipped. Thruway impleaded Storage.

Storage was insured by Penn Millers (“Penn”) under an agribusiness property and commercial general liability insurance policy.  Penn reserved its right to disclaim coverage but nevertheless undertook Storage’s defense in the third-party action.

In February 2011, Penn started this action seeking a judgment declaring that it has no duty to defend or indemnify Storage on various grounds, including, as alleged in the first cause of action, Storage’s failure to give plaintiff timely notice of a covered occurrence.

Dispositive motions were made with Storage arguing that it gave timely notice of the occurrence and that Penn is estopped from effectively disclaiming coverage by its delay in so notifying defendant.

The Fourth Department found that Penn met its initial burden on the motion by establishing that defendant did not provide it with notice of a potential claim until more than four months after the latest rodenticide incident and offered no reasonable excuse for its failure to provide such timely notice.  Notice given to the broker did not constitute notice to Penn, despite the belief of Storage’s president.

However, the court found that triable issues of fact remain with respect to the effectiveness of Penn’s disclaimer of coverage such that it cannot be determined, as a matter of law, whether plaintiff is obligated to defend and indemnify defendant under the policy.  Since this is not a bodily injury case, and the claim only involves economic injury, the timeliness, and thus effectiveness, of an insurer's disclaimer is not governed by Insurance Law § 3420 (d) (2) but rather is governed by the common law, "under [which] prejudice must generally be established as the result of an unreasonable delay in disclaiming before an insurer will be estopped from asserting noncoverage".

Here, Storage contends that it was prejudiced by plaintiff's delay in disclaiming coverage, notice of which was made on the eve of trial in the third-party action and after its defense had been given over to Penn.  Although the reservation of rights letters allowed it to preserve its defense under the policy until the facts warranting disclaimer became clear" it could not delay in exercising those rights to the detriment of the insured

The presumption of prejudice that may attach to a late coverage disclaimer is inapplicable here because plaintiff has not retained control of Storage’s defense to final judgment or to a settlement.

02/01/13       Nesmith v. Allstate Insurance
Appellate Division, Fourth Department
In Lead Paint Coverage Litigation, Exposure by Two Sets of Children in Same Apartment during Two Separate Tenancies, Still Considered One Occurrence; Non-Cumulation Clause Disallows Stacking of Coverage
This was a lead paint non-cumulation coverage case.  Wilson had three consecutive policies with Allstate, covering property in Rochester, the first commencing in November 1991.  That policy had a per-occurrence limit of $500,000.  In 1993, two children were exposed to lead paint in the home and the family moved out shortly thereafter.  That family started a lawsuit as did the family of two children of a subsequent tenant who were also exposed to lead in the same apartment.  While the second case was pending, the first settled for $350,000.

Allstate argued that under the non-cumulation clause in the policy, there would only be $500,000 for all the lead exposures in the apartment, so it offered the remaining $150,000 in the second case.  The plaintiffs in the second case and Allstate agreed to have the court determine the amount of coverage and that if the court found that the non-cumulation clause limited the coverage to $150,000, they would take it and if not, they would recover the full $500,000.

The policy provision at issue states:

Regardless of the number of insured persons, injured persons, claims, claimants or policies involved, our total liability under the Family Liability Protection coverage for damages resulting from one accidental loss will not exceed the limit shown on the declarations page.  All bodily injury and property damage resulting from one accidental loss or from continuous or repeated exposure to the same general conditions is considered the result of one accidental loss.

In the Hiraldo case, the Court of Appeals had earlier interpreted the same clause and finding that the language would not permit the limits of three consecutive policies to be added together.

The mere fact that the property owners therein renewed their policy for two additional policy periods does not permit the plaintiffs to recover more than a single policy limit.  And, based upon the clear language of the policy at issue here, the number of claims and claimants does not require the insurer to pay more than its single policy limit.

The question before the court was whether the exposure to different children to lead paint in the apartment over different tenancies is still considered to have resulted from “continuous or repeated exposure to the same general conditions.”  The court sided with the insurer.

The evidence establishes that the lead paint that injured the second set of children is the same lead paint that was present in the apartment when the first set of children lived there.  Inasmuch as the claims arise from exposure to the same condition, and the claims are spatially identical and temporally close enough that there were no intervening changes in the injury-causing conditions, they must be viewed as a single occurrence within the meaning of the policy.


Michael P. Scott-Kristansen
[email protected] 

02/14/13       Pezzino v. Woodruff
Appellate Division, Third Department
Physician’s Speculation about Plaintiff’s Slothfulness is Insufficient to Meet Defendants’ Burden
The Third Department upheld the lower court’s grant of summary judgment in defendants’ favor with respect to all the serious injury categories alleged by plaintiff except the 90/180-day category.  The defendants failed to meet their burden as to the 90/180-day category because they relied on an examining orthopedic surgeon’s report that acknowledged the plaintiff was under a medical restriction from work for at least five months after the accident and only contravened this acknowledgement with an “unsupported speculation that plaintiff may not have diligently sought a new job.”

The plaintiff in turn failed to meet its burden with respect to the remaining categories, including permanent loss of use, permanent consequential limitation of use, and significant limitation of use.  The plaintiff’s evidence did not establish “‘total loss of use’” for the purpose of the permanent loss of use category.  A report from plaintiff’s treating physician stating that plaintiff had some restricted motion and partial disability of a “‘mild degree,’” was insufficient to meet the plaintiff’s burden for the remaining categories.

02/06/13       Caputo v. Gutman
Appellate Division, Second Department
Summary Judgment Improper Where Plaintiff Creates Triable Issue
In the lower court, a defendant’s motion for summary judgment was granted declaring the plaintiff did not suffer a serious injury.  The defendant met her burden of establishing a prima facie case that the plaintiff did not suffer a serious injury to the cervical region of her spine.  The Second Department held that summary judgment was improperly granted, however, because the plaintiff submitted evidence that raised a triable issue concerning serious injury.

02/06/13       Vaughan-Ware v. Darcy
Appellate Division, Second Department
Defendant Not Entitled to Summary Judgment on Permanent Consequential Limitation and Significant Limitation Categories
The grant of a defendant’s motion for summary judgment was reversed on appeal.  Defendant submitted competent medical evidence that the injuries to the lumbar region of plaintiff’s spine were not serious injuries.  Plaintiff, however, submitted evidence creating a triable issue of fact as to whether the injuries to the lumbar region of her spine were serious injuries under the permanent consequential limitation of use and significant limitation of use categories.

02/05/13       Moore v. Almanzar
Appellate Division, First Department
Evidence of Joint Degradation, Without More, Is Insufficient Where Defendant Submits Evidence that Injury Was Preexisting
The First Department affirmed the grant of defendant’s motion for summary judgment on the basis that plaintiff did not suffer a serious injury to her cervical and lumbar spine, shoulders, and knees under the permanent and significant limitations categories. Defendant established a prima facie case that plaintiff’s injuries were not caused by the accident by submitting evidence that the injuries were caused in a prior accident and a radiologist’s and orthopedist’s reports stating that the MRI films revealed a chronic preexisting condition, not traumatic injury.

In Opposition, plaintiff submitted some evidence of her own, but failed to establish a triable issue of fact.  Her expert orthopedist and radiologist both found degradation of her right shoulder in the MRI, but did not further address these findings.  In addition, the injury to her left shoulder was too minor to be significant.  Plaintiff did not submit recent figures quantifying the limitation to her range of motion in her knees or spine.  She also did not submit evidence to rebut the defendant’s preexisting injury evidence.

02/01/13       Heller v. Jansma
Appellate Division, Fourth Department
Plaintiff’s Deposition Testimony and Affidavit from Chiropractor Based on Three Year Old Examination Insufficient to Create Triable Issue
The Fourth Department held that defendant’s motion for summary judgment should have been granted.  Summary judgment should have been granted as to the significant disfigurement category because defendant succeeded in establishing prima facie that no reasonable person would regard the one and one-half inch scar on plaintiff’s leg as unattractive, objectionable, or the subject of pity or scorn.  Defendant submitted photographs of the scar and other evidence.  Plaintiff’s deposition testimony stating that she was bothered by the scar did not create a triable issue of fact.

The Court also held that summary judgment should have been granted as to the significant limitation of use category with respect to the injury to plaintiff’s cervical spine.  Defendant submitted an examining physician’s report stating plaintiff suffered a soft tissue strain, should recover fully in days or weeks, and suffered no restriction in her range of motion.  The report also stated that diagnostic testing revealed no objective evidence of injury related to the accident.  Defendant also submitted plaintiff’s deposition testimony in which plaintiff admitted she returned to work and daily activities within a few days.  In contrast, the plaintiff’s chiropractor’s affidavit did not create a triable issue of fact and was based on an examination completed three years before the affidavit was written.

01/31/13       Ortiz v. Salahuddin
Appellate Division, First Department
Plaintiff’s Experts’ Affirmations Created Triable Issue Where They Conflicted with Defendant’s Experts’ Affirmations
The First Department held summary judgment for defendant was improperly granted with respect to plaintiff’s claim of serious injury to her right knee.  However, the motion was properly granted with respect to plaintiff’s cervical and lumbar spine injuries.  As for plaintiff’s cervical spine injury, defendant pointed to the lack of objective medical evidence of an injury and plaintiff’s admission at an IME that her neck was now OK.  As for plaintiff’s lumbar spine injury, defendant submitted the affirmation of a physician which opined that the injury was pre-existing.  Plaintiff, in return, failed to submit any evidence of a recent examination showing significant or consequential limitations to her range of motion.

As for plaintiff’s right knee, certified medical records of a prior physician referring her for an MRI and referring her to a surgeon were enough to establish she sought medical treatment shortly after the accident.  The defendants satisfied their prima facie burden, entitling them to summary judgment, by submitting affirmations of a radiologist, neurologist, and orthopedic surgeon that stated there were no recent or acute trauma, normal ranges of motion, and only a degenerative injury to the right knee.  Plaintiff in turn created a triable issue of fact by submitting affirmations of a radiologist and an orthopedic surgeon.  The radiologist’s affirmation stated that an MRI shortly after the accident showed a tear in the meniscus.  The orthopedic surgeon’s affirmation, based on observations from surgery, an MRI, and multiple examinations, stated that he observed the tear and repaired it via arthroscopic surgery and that plaintiff’s movement limitations were permanent and caused by the accident.


Margo M. Lagueras
[email protected]


02/04/13       Elite Medical Supply of NY v MVAIC
Arbitrator Kent L. Benziger, Erie County
Insurer’s Wage Loss Calculations Correct and Policy Exhausted
The insurer denied reimbursement for an LSO brace, a cervical traction and a TENS unit based on policy exhaustion.  Applicant claimed that the insurer improperly calculated the offsets to the wage loss payments and that a balance remained on the policy. 

It was agreed that New York State Disability benefits are taxable if the employer pays the injured party’s disability insurance premiums because the benefits would then be part of the employee’s gross income.  However, if the injured party pays her disability insurance premiums through payroll deductions, which would mean they were paid with after tax dollars, then those disability benefits should be exempt from taxation.

11 NYCRR § 65-3.19(f)(3) provides that if New York State Disability benefits are taxable, the offsets should be deducted prior to taking the 20% offset.  However, if the disability benefits are not taxable, then the 20% offset is taken first directly from the $2500 maximum benefit, and the disability benefits subtracted from the resulting $2000. 

The arbitrator concluded that the insurer properly calculated the wage loss because the injured party paid for her disability premiums with after tax dollars.  As the total amount of both offsets and wage loss benefits must be applied to reduce coverage limits, and because it is well settled that an insurer is not required to pay a claim where the policy limits have been exhausted, Applicant’s claim was denied.  The arbitrator further noted that even if the insurer had improperly calculated the offsets, it would be the injured party, not the medical provider, who would have an action against the insurer for deducting too much for the wage loss claim.

02/01/13       The Novelli Wellness Center v Geico Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Is Manipulation Under Anesthesia (MUA) a Medical or a Chiropractic Procedure?
The insurer denied payment based on a Peer Review by Dr. Burrei, D.O., who concluded that the manipulation under anesthesia of the extremities was not medically necessary because, among other reasons, the medical records did not reflect any injury to the extremities.

Following the accident, the injured party came under the care of Dr. Gosy who diagnosed cervalgia and lumbago and prescribed medication and physical therapy.  Dr. The injured party also received a lumbar epidural steroid injection.  She then consulted with Applicant, Stephen Novelli, DC, who in turn referred her to Dr. Biddle. 

While the claim for MUA was made by Novelli Wellness Center, at the hearing chiropractor Novelli testified that Novelli Wellness Center is actually owned by Dr. Biddle and that it was Dr. Biddle who performed the MUA, with chiropractor Novelli assisting as the “co-attending doctor.”  It also appeared that the assignment of benefits was made to Dr. Biddle.  Therefore, on the issue of standing, the arbitrator concluded that the appropriate claimant would be Dr. Biddle, not Novelli Wellness Center.

At the hearing, chiropractor Novelli further testified that Dt. Biddle is an anesthesiologist and pain management specialist.  If the procedure was a medical manipulation rather than a chiropractic manipulation, the arbitrator further questioned whether chiropractor Novelli’s participation was even appropriate although conceding that the question might be moot given that chiropractor Novelli testified that he was not asserting a claim for his services.

Dr. Burrei’s Peer Review report also noted that, while imaging studies of the spine had been reviewed by Dr. Biddle and chiropractor Novelli, none of the extremities were reviewed prior to performing the MUA.  The arbitrator found Dr. Burrei’s report to be persuasive and upheld the denial.

01/31/13       RES Physical Medicine & Rehab. Services v. Nationwide Gen’l Ins. Co.
Arbitrator Douglas S. Coppola, Erie County
No-Fault Benefits Properly Payable for Aggravation of Pre-Existing Conditions
The insurer denied prolotherapy injections by Dr. Strutsovskiy based on an IME report by Dr. Giardino.  At the time of the accident, the injured party had been disabled for twelve years due to a construction accident.  He had undergone at least three lumbar and one cervical surgery.  While noting that the injured party walked with a limp, used a cane, was unable to stand and perform a Trendelenburg, had markedly reduced range of motion with no extension or lateral bending and was neurologically impaired, Dr. Giardino stated that the casual relationship was based on the aggravation of significant prior conditions rather than on the accident itself. 

At the hearing, the injured party testified that although he had significant prior injuries, until the accident he had been able to perform daily functions.  Following the accident, he underwent a year-long course of physical therapy and ultimately consulted with Dr. Strutsovskiy, undergoing prolotherapy and massage.  He testified that without the injections, he would have been completely housebound and credited the injections with making a significant improvement in his overall condition. 

The arbitrator found that the medical reports from Dr. Strutsovskiy and the testimony of the injured party sufficiently refuted the conclusions in Dr. Giardino’s report and noted that it is well-settled that no-fault benefits are payable for aggravations of pre-existing condition. 


01/14/13       Flatlands Medical, PC v State Farm Mut. Auto. Ins. Co.
Appellate Term, Second Department
Plaintiff’s Failure to Respond to EUO Requests Precludes Objections
Defendant established that the EUO scheduling letters and denial of claim forms had been timely mailed, that plaintiff had failed to appear at the scheduled EUOs and that, as a result, plaintiff had failed to satisfy a condition precedent to defendant’s liability under the policy of insurance.  Because plaintiff did not respond in any way to the requests, the trial court correctly did not consider the objections plaintiff raised regarding the EUO requests.  As such, on appeal the order was affirmed.

01/14/13       Quality Psychological Servs., PC v New York Cent. Mut. Fire Ins. Co.
Appellate Term, Second Department
Psychologist’s Peer Review Found Not to Be in Admissible Form
In support of its motion, defendant submitted a peer review from its psychologist and plaintiff objected that it was not in admissible form.  The trial court agreed because, pursuant to CPLR 2106, a psychologist cannot affirm the truth of the statements in the report.  Although the report contained a notary public’s stamp and signature, it did not contain the attestation that the psychologist had been duly sworn and appeared before the notary.  As such, the report was not in admissible form.

However, the trial court erred in granting plaintiff’s cross motion because, even though plaintiff demonstrated that the claim had not been paid, it failed to demonstrate that defendant had failed to deny the claim or that the denial was insufficient.  Therefore, on appeal, plaintiff’s cross motion was also denied.


Steven E. Peiper
[email protected]
Court of Appeals

02/07/13       Caldwell v. Cablevision Sys.
Court of Appeals
Appearance Fees Provided to Lay Witnesses Can Give Rise to Special Jury Instruction
Plaintiff sustained injury when she allegedly fell while due to a defective condition caused by defendant Communication Specialists, Inc. (CSI).  CSI, who had been contracted to install fiber optic cable in the plaintiff’s neighborhood, dug trenches in the roadway as part of the process of running the cable.  When plaintiff fell, the trenches had been backfilled, but no repaved.

During discovery, however, it was revealed that the emergency room report indicated that plaintiff advised she had fallen over her dog.  At trial, defendant subpoenaed the treating emergency room physician to appear as a fact witness.  Defendants did not seek expert medical advice from the physician, but rather only wanted to confirm that the note in plaintiff’s chart was accurate. 

On cross-examination, however, plaintiff’s counsel uncovered the fact that the physician was promised $10,000 to appear at trial.  Plaintiff’s counsel then moved to strike the testimony, or, in the alternative, have the Court offer a curative instruction regarding the fact the doctor’s testimony was procured at an exorbitant rate.  In support of their position, plaintiff’s counsel argued that the doctor’s testimony could have been secured, via subpoena, for $15.00 plus $0.23 per mile.  In opposition, the defense argued that there was no maximum fee that could be provided to a cooperating fact witness and they were simply compensating the witness for his time from work. 

The Court advised that it would not issue a tailored instruction relative to the physician’s fact testimony.  Rather, the Court indicated that it would provide the standard bias charge.  The litigants were also instructed to address the issue as part of their respective closings.  The final determination, however, was left to the jury.

Although the Court of Appeals acknowledged that there was no statutory maximum for securing someone’s testimony, it stated that it was troubled by the amount the witness received.  Particularly where, as here, there was very limited time and preparation needed.  Accordingly, the Court ruled that the Trial Judge should have issued a special jury instruction which acknowledged that a fact witness may be compensated for lost time.  However, it was part of the jury’s responsibility to determine whether the compensation provide was disproportionate to the testimony provided.  If the compensation is disproportionate, the Court held that the Trial Judge should have then charged the jury to determine if the disproportionality of the compensation influenced the witness’ opinion. 

Notably, despite the fact that the Trial Judge should have provided a curative instruction, the Court held that the mistake amounted to nothing more than harmless error.  Accordingly, the jury’s verdict was affirmed in its entirety.

Appellate Divisions

02/13/13       Phillips v. Bovis Lend Lease
Appellate Division, Second Department        
Plaintiff’s Attempt to Sue Predecessor –in-Interest are Dismissed for Lack of Jurisdiction, and Precluded by Operation of the Workers’ Compensation Law
Plaintiff was employed by New York Presbyterian Hospital when he was injured.  At the time of the incident, there was an ongoing construction project at the Hospital.  As a result, plaintiff commenced a personal injury action against Bovis, Universal Building Supply and Society Hospital of New York. 

Rather than appearing in the matter, Society responded that it had merged with Presbyterian in 1998.  Thus, at the time of the incident, it was survived only by its successor-in-interest, Presbyterian.  As plaintiff accepted workers’ compensation benefits from Presbyterian, Society argued that an action against it was barred by Section 11 of the Workers’ Compensation Law. 

Plaintiff eventually moved for a default against Society, and Society cross-moved for summary judgment.  The Second Department, in affirming the Trial Court, noted that Society, as a business concern, did not exist on the date of plaintiff’s injury.  Moreover, any action against Society would have had to been brought against Presbyterian as the successor-in-interest.  As argued by Society, that fact would have triggered the exclusive remedy provisions of Section 11. 

02/01/13       Landahl v. City of Buffalo and U&S Services
Appellate Division, Fourth Department
Act or Omission Language in Contract Governs Scope of Indemnity Obligations
Although addressed above, we quickly rehash the background of this loss.  Plaintiff was employed by Industrial Power at a jobsite located within Buffalo’s City Hall.  Industrial Power was retained to perform work at the jobsite by the project manager, U&S Services.  Plaintiff, who sustained injury when he slipped and fell on an allegedly defective marble step, commences a Labor Law action against the City of Buffalo and U&S Services. 

On the basis of the subcontract between the two, U&S Services commenced a third-party action against Industrial Power which sought an award of contractual indemnification.  At the close of discovery, U&S Services moved, in part, for an award of contractual indemnification against Industrial Power.  Industrial Power opposed the motion on the basis that the contract provision at issue was impermissibly vague. 

In awarding contractual indemnity to U&S Service, the Court noted that contractual indemnity provision explicitly applied where “an on-the-job injury [was] caused by an act or omission of IPL in the performance of that agreement.”  Importantly, the Court went on to note that it was Industrial Power’s responsibility to establish that the loss was not caused by its own act or omission.  Where, as here, Industrial Power could not reach that burden, it could not defeat plaintiff’s motion for summary judgment.

Peiper’s Point – Just a quick note on this one.  Note, that the default is that the contract contemplated the indemnity claim.  Under such circumstance, at least in the eyes of the Fourth Department, the burden shifts to the proposed indemnitor to establish that loss was not, in fact, within the contemplated scope of the indemnity agreement.  It would seem to us that, as the movant, U&S Services should have had to bear this burden. 


Cassandra A. Kazukenus
[email protected]


A Bill Permitting an Insurer To Rescind/Retroactively Cancel Policy In Limited Circumstances Involving Fraud
This bill was introduced and passed by the Senate last year as well.  This legislation seeks to add a new section to the Insurance Law §3455 which would allow cancellation of an automobile liability policy within the first 60 days of the inception of a new policy if the initial payment is not honored by a bank or credit card company because of the unauthorized use of the accounts or if the account does not exist.  If someone is injured and would have been entitled to coverage if the policy had not been cancelled will be entitled to recover under his/her own policy.  If the injured person is uninsured, he/she will be able to recover under the MVAIC as long as the injured person did not participate in any fraudulent activity.  MVAIC will not be allowed to subrogate against the cancelling insurer.

This legislation also seeks to amend Insurance Law §3420(d)(2) requiring an insurer to disclaim coverage as soon as reasonably possible where an insurer is disclaiming coverage because the policy was cancelled/rescinded.  This would apply to claims for death or bodily injury arising out of a motor vehicle accident, including any claim for injuries under an uninsured motorist endorsement by any occupant or other person involved in a staged accident who is without knowledge of the staging or fraudulent intent of the accident.


Amend SUM Coverage for Ambulance Services and Volunteer Fire Departments
This legislation would amend Insurance Law §3420 to include a new paragraph applying to policies that provide SUM coverage for fire vehicles.  This paragraph require every policy that insures a fire department, fire company, ambulance service or voluntary ambulance service must provide SUM to an individual employed by or who is a member of the above mentioned groups and who is injured by an uninsured/underinsured motor vehicle while acting in the scope of their duties for these entities.  This will not apply to those vehicles not covered under the policy.


Katherine A. Fijal
[email protected]

02/05/13       Ambroselli v. C.S. Burrall & Son, Inc.
United States District Court – Western District of New York
Court Finds Questions of Fact on Agent’s Duty and Insured’s Duty to Read
The plaintiff, Frances Ambroselli, owned a Victoria era house in Cohocton, New York, which she operated as the Villa Serendipity Bed and Breakfast from 1999 until it burned down on October 11, 2010.

In July 2008 Hal Burrall met with Plaintiff to discuss procurement of coverage.  Burrall used a cost estimator program and measured the property to assist him in calculating the coverage for the property.  The cost estimate calculated by Burrall was approximately $435,000.  At the time Plaintiff had been insured by  a policy with Finger Lakes Fires & Casualty Company and had an actual cash value of $250,000, due to increase to $260,000 for the period 8/31/08 to 8/31/09.

Plaintiff agreed to purchase insurance from Burrall with a coverage limit of $435,000 for the dwelling, and personal liability coverage for $1,000,000.  The policy was issued by Vermont Mutual Insurance Company [“Vermont”].  In connection with the purchase Plaintiff signed a “Policy Limits Acceptance” form which stated that she accepted the policy limits applied for in the application and understood higher limits were available for an additional premium.  By signing the form the Plaintiff affirmatively stated that she declined higher policy limits.

After Vermont sent their own inspector to review plaintiff’s property it sent a copy of the policy to Plaintiff with a cover letter suggesting that she read the policy in its entirety and contact them if she had any questions.  The policy was renewed twice prior to the fire.  After the fire, Plaintiff learned that the policy was insufficient to cover the loss and brought suit against the Defendant alleging that Defendant was negligent in calculating the amount of insurance needed.

Defendant filed its motion for summary judgment arguing that absent agreement, insurance brokers and agents are generally not responsible for amounts of coverage.  Plaintiff responded by arguing that material issues of fact precluded summary judgment.  Plaintiff took the position that when Burrall calculated the coverage amount, he undertook a duty to estimate and recommend adequate coverage citing to Stevens v. Hickey-Finn & Co., 261 A.D.2d 300 (1st Dept. 1999). 

Defendant argued that Stevens was distinguishable because Ambroselli and Burrall did not have a long term relationship and spoke only infrequently.  Further arguing, that Plaintiff never requested that he procure full replacement value coverage and in New York the duty owed by an insurance agent to an insurance customer is ordinarily defined by the nature of the request a customer makes to the agent.

The Court found that the evidentiary proof raised material issues of fact as to whether Burrall took on the obligation to estimate the value of the premises so that it would be properly insured.  The Court determined that although Defendant makes much of the point that Plaintiff did not ask Burrall to estimate the value of her dwelling, he nonetheless voluntarily assumed that task, and plaintiff relied of Burrall’s estimate of coverage, which she argued woefully undervalued her property.  Accordingly, the court denied Defendant’s motion for summary judgment finding questions of fact as to whether Defendant fulfilled its duty to Plaintiff. 

The court next addressed the Plaintiff’s duty to read her policy.  Defendant argued that Plaintiff was chargeable with knowledge of the insurance policy, and therefore is presumed to have received the policy she desired and to have assented to its terms.  Plaintiff argued that Defendant’s position was without merit since its own agent specifically recommended the amount of coverage contained in the policy and Plaintiff relied on the agent’s recommendation.

The court agreed with Plaintiff noting that the New York Court of Appeals has not strictly followed the line of cases holding that once an insured has received his or her policy, he or she is presumed to have read and understood it  and cannot rely on the broker’s word that the policy covers what is requested.  American Bldg. Supply Corp. v. Petrocelli Group, Inc., 19 N.Y.3d 730 (2012).  The court believed that under the circumstances of this case receipt and presumed reading of the policy does not bar an action for negligence against the broker.

The court also disagreed with Defendant’s position that as an agent of a disclosed principal it was not liable to Plaintiff.  The court found there was a question of fact as to whether Burrall was acting with the scope of his agency with Vermont when he estimated the value of Plaintiff’s property. 



Jennifer A. Ehman
[email protected] 

02/04/13       Hermitage Ins. Co. v. Skyview & Son Construction Corp.
Supreme Court, New York County
Injured Party is a Proper Defendant in Declaratory Judgment Action
The underlying plaintiff was named as a defendant in this declaratory judgment action.  He immediately moved to dismiss for failure to state a cause of action. 

The court held that although the injured party was not in privity of contract with the insurer and had not yet obtained a judgment, he was still a proper in this case.  Where an injured party is not named, he or she can still be bound by the court’s determinations as to coverage irrespective of his or her absence.   Thus, defendant appropriately named the insured party because his rights and interests would be affected by the relief sought.

02/04/13       Illinois National Ins. Co. v. Arch Specialty Ins. Co.
Supreme Court, New York County
Two and A Half Year Delay in Providing Notice is Late as a Matter of Law
This is a pre-prejudice late notice decision.  Plaintiffs, as the insurers for the owner and general contractor, brought this action seeking to recover the half a million dollars it paid to settle the underlying action. 

On January 30, 2007, an employee of Waldorf was injured on a construction site.  Waldorf had been hired by the project’s general contractor to perform demolition work.  Eventually, the employee brought an action against the owner and general contractor, who then commenced a third-party action against Waldorf seeking contractual and common law indemnification. 

The court held that the owner and general contractor’s failure to place defendant, Waldorf’s insurer, on notice for over two and a half years was late as a matter of law.  Further, plaintiff’s excuse that it was unaware that its insureds qualified as additional insureds on defendant’s policy until receipt of a certificate of insurance was insufficient.  The court noted that the plaintiff did not explain why, in two and a half years’ time, defendant could not simply have asked its insureds to search their files for copies of certificates or insurance policies that would evidence additional coverage.  Nor in the courts opinion had plaintiff explained the steps it took to investigate insurance information and/or determine whether other coverage existed that was primary to its policy. 

12/26/12       Visto Realty Corp. v. Castlepoint Ins. Co.
Supreme Court, New York County
No Coverage Where Policy Lacked Additional Insured Endorsement and Plaintiff Not Named as an Insured
The underlying plaintiff alleged that he tripped and fall outside of a premises located at 1801 Edison Ave., owned by plaintiff and leased by Station Laundromat.  Specifically, he claimed to have tripped and fallen on a sidewalk flag that was raised up because of vegetation growing out of the sidewalk. 

Plaintiff brought this action seeking additional insured status under the terms of a CGL policy issued by Castlepoint to Station Laundromat. 

The only individuals or entitles that qualified as insureds under the policy were Station Laundromat, its officers, directors and employees.  The policy did not list any other insureds. 

The court held that plaintiff had failed to establish its right to coverage.  The only evidence submitted was: the lease and the certificate of insurance.  The lease only required Station Laundromat to indemnify plaintiff for any liability arising from a claim of bodily injury, and there was no mandate that Station Laundromat name plaintiff as an additional insured under the policy.  Further, the certificate of insurance was only issued as a matter of information, not proof of insurance.

Take Away:  The most interesting part of this decision was the court’s indication that the contract language, which stated that Station Laundromat agreed to “indemnity and save harmless [plaintiff] for and against any and all liability…arising from injury…to person…of any nature,” did not make Station Laundromat liable for defense costs just ultimate contractual indemnity; something consider when reviewing contracts.     

Bad Faith

01/31/13       Tran v. Nationwide Mutual Ins. Co.
United States Court of Appeals, Tenth Circuit
Avoid Bad Faith; Stay in Touch
Linh Tran was involved in a motor vehicle accident with an uninsured motorist.  At the time of the loos, Tran’s vehicle was insured under an auto policy issued by defendant to her father.  The policy contained a $25,000 limit for uninsured motorist coverage. 

Not long after the accident, a claim was submitted to defendant for property damage and personal injuries suffered by Tran.  Defendant acknowledged the claim, and sent a check for the vehicle’s damages.  Some months later, Tran retained a lawyer who contacted defendant.   Defendant then wrote to the lawyer asking for Tran’s medical records and lost wage information.  Numerous requests were made before Tran’s lawyer sent relevant medical records and itemized billing.  In the response, Tran’s lawyer also requested defendant tender the policy limits within thirty (30) days.  A serious of exchanges then took place concerning the amount of any settlement. 

Eventually, a letter was sent to defendant demanding the undisputed portion of the bodily injury claim.  The adjuster for defendant indicated that she was only required to pay the property damage portion, and that it was not industry practice to settle uninsured motorist claims piecemeal.  Defendant then sent a number of letters reiterating an offer of $18,000. 

Tran’s response was to file this action, and move for summary judgment on her claim of breach of contract and bad faith.  The court disagreed with Tran’s argument that defendant’s delay in paying her undisputed economic damages was unreasonable and constituted bad faith.  Tran’s lawyer sent defendant a packet of information that included some medical bills and records. In the enclosure letter, the lawyer demanded defendant “tender [Ms.] Tran's policy limits within thirty (30) days of receipt of this letter.”  Within a week of receiving this demand for the policy limits, defendant made a settlement offer approximately $3,000 more than the amount of her economic damages.  Within one week of the initial offer, defendant made a second offer approximately $7,000 more than the amount of her economic damages.  These were both rejected by Tran’s lawyer.

Over the next eight months, defendant sent Tran’s lawyer eight letters confirming its $18,000 settlement offer and stating that it would be willing to reevaluate the claim if there was additional information.  The undisputed evidence revealed an effort by the parties to resolve both components of the personal injury claim, i.e., the economic and non-economic damages. 

In light of this evidence, the court agreed with the district court's conclusion that no reasonable jury could conclude that defendant acted unreasonably in withholding payment.  There was no genuine dispute as to any material fact that defendant’s delay in payment was based on a legitimate dispute as to the value of Tran’s claim.

Take Away:  The message of this decision for carriers is to stay in touch.  When letters go unanswered, follow up on them. 

Earl K. Cantwell
[email protected]


In today’s changing and turbulent legal world, one of the remaining and best ways to insulate and isolate documents and information from third party discovery is to wrap it in a cloak of attorney-client privilege.  Courts still respect and enforce the privilege, will deny discovery and legal use of privileged documents, and certainly allow for severe editing or redaction of documents based upon the privilege.  However, the privilege can be waived by intentional or inadvertent disclosure in discovery or otherwise, a lesson learned in the case of Fidelity National Financial, Inc. v. National Union Fire Insurance Company of Pittsburgh, 2012 WL 4443993(S.D. California, September 25, 2012).

Victims of a Ponzi scheme sued Chicago Title because a San Diego investment advisor used client money and forged signatures on numerous fraudulent escrows at Chicago Title. Fidelity National, the parent company of Chicago Title, submitted two claims arising out of this affair to its insurer, National Union.  On the first claim, Fidelity had a $15 Million professional liability policy.  On the second claim, Fidelity also had a $15 Million “financial institution bond” to insure against employee dishonesty, forgery, etc. Although the bases for liability were different, these claims obviously arose from a common set of facts and circumstances, and information pertinent to the professional liability claim would also likely be relevant to the first party bond claim and vice versa.

Fidelity prepared a position memo to National Union concerning the professional liability claim wherein Chicago Title’s attorneys discussed, inter alia, the involvement of a company escrow agent in the scheme, noting some “red flags” in audits of her files.  Fidelity sent this memo to National Union, but asked the insurer to set up a “wall” between the professional liability claim and the bond claim.

National Union ultimately agreed to pay defense costs in the Ponzi scheme lawsuits under the professional liability policy.  Fidelity then sought sanctions against National Union in District Court for refusing to return the memo written on the professional liability claim.  Fidelity also asked the Court to bar National Union from using that memo in litigation which continued over the bond claim.  The Federal Court denied the motions.

The Court said that Fidelity had used the memorandum and other documents from investigation of the professional liability claim, which would otherwise be privileged, in support of its claims on the financial institution bond.  The Court ruled that Fidelity could not “selectively use” certain documents from the liability claim file to support its theories of recovery or contest defenses on the bond claim.  The Court ruled that Fidelity waived the attorney-client privilege with regards to the memorandum when it voluntary provided it to National Union.  Since National Union did not “improperly obtain” the memorandum, and the attorney-client privilege was waived, National Union would not be barred from using the memorandum in the litigation wherein, presumably, National Union would use the memorandum, inter alia, to show that Chicago Title knew about but ignored “red flags” in audits of underlying escrow files.

This case represents a good example where investigation of one claim arising from a loss may affect other first party and third party claims.  This case supports the best practice of separating third party and first party claims files since the policies, interests, claims, and information that may go into those claim files may have different purposes, connotations, and results.

The attorney-client privilege is still one of the best ways to prevent and bar disclosure of information and its use at trial, but caution must be taken to avoid intentional or inadvertent disclosure of privileged documents and material.  One possible protection here would have been for Chicago Title to agree to submit a position paper or report to the insurance company (prepared in whole or in part by its attorneys) upon an agreement by the insurance company that it was being submitted for settlement purposes, and not to consider it a waiver or forfeiture of attorney-client privilege but something submitted for informational purposes.  Even if a document or material may be in fact attorney-client privileged, releasing or disclosing that information to third parties, even if helpful for a certain purpose, may result in an inadvertent waiver of the privilege in discovery and other contested legal claims or proceedings down the road.

Courtesy of the FDCC Website

02/05/13       Anastasia v. General Casualty Company of Wisconsin
Supreme Court of Connecticut
UIM Carrier Entitled to Set Off Even Punitive Damages from Amounts Owed Its Insured for Claim Under Policy
Plaintiff had an insurance policy issued by the defendant that provided underinsured motorist coverage up to a maximum of $250,000. Plaintiff was involved in a motor vehicle accident with a drunk driver that crossed the center line, collided head on and then fled the scene. Plaintiff suffered significant injuries, and the tortfeasor had liability coverage of $100,000. Suit was filed which included claims for compensatory damages, common-law punitive damages and exemplary damages.

Before trial, the parties entered into a settlement agreement for $415,000. One hundred thousand dollars was paid to the plaintiff under the available liability policy, to settle the plaintiff's negligence claim for compensatory damages, and $315,000 was paid personally by the tortfeasors to the claim for common-law punitive damages and exemplary damages due to the alleged conduct of the tortfeasor.

The defendant filed a motion for summary judgment, claiming that it was entitled to a setoff equal to the amount of the entire settlement, to which the plaintiff objected. The trial court granted the motion and rendered judgment in favor of the defendant. The applicable Connecticut regulation permits insurers to reduce the amount payable pursuant to a claim for uninsured or underinsured motorist coverage “to the extent that damages have been ... paid by or on behalf of any person responsible for the injury....” The plaintiff's policy, on the other hand, provided that the defendant may reduce its underinsured motorist liability by “all sums ... [p]aid because of the ‘bodily injury’ by or on behalf of persons or organizations who may be legally responsible....” (Emphasis added.) Thus, the policy language differs from that in the regulation.

The plaintiff argued that the regulation only allows the defendant to reduce its underinsured motorist liability by the $100,000 designated as compensatory damages that the plaintiff received from the Mitsocks' liability insurer.

However, the Supreme Court determined that the plain meaning of the term “damages,” encompasses common-law punitive damages and that, therefore, the regulation permits an insurer to offset its underinsured motorist liability by an amount equal to any punitive damages paid to an insured by a party responsible for the injury. Accordingly, the Court determined that the use of “all sums” in the limitation provision of the plaintiff's insurance policy corresponds in all material respects to the use of “damages” in the regulation. Thus, the Court concluded that the trial court properly determined that the policy language in the present case is unambiguous and substantially congruent with the regulation.
Submitted by: James B. Thompson Jr. (Thompson Goodis Thompson Groseclose Richardson and Miller PA)

02/04/13       City of New Haven v. Insurance Co. of State of Pennsylvania
Second Circuit Court of Appeals
Court of Appeals affirms District Court Summary Judgment for Insurer that Excess Insurance Policy Does Not Cover Claims because of the Fellow Employee and Workers Compensation Exclusions

The City of New Haven was seeking coverage of its liability for claims asserted against the City by the estate and conservator of officers involved in an automobile accident. Its liability carrier invoked two provisions of the Policy: (1) the Fellow Employee Exclusion, which states that the carrier “will not defend or pay under this Policy for claims or suits against [the insured] ... [a]rising out of the liability of your employee for bodily injury to another of your employee(s) injured in the course of his or her employment,” and (2) the Workers' Compensation Exclusion, which states that the carrier “will not defend or pay [New Haven] under this Policy for claims or suits” for which New Haven “may be held liable under any workers' or unemployment compensation law, disability benefits law or any similar law.”

Arguing that these provisions do not control, New Haven made two principal arguments. First, it contended that because its employees, who are additional insureds under the Policy, would be entitled to claim coverage in their own right despite the apparent bar of the Fellow Employee Exclusion, New Haven itself is entitled to bring this action on their behalf. Second, the City contended that the Fellow Employee Exclusion is unenforceable as against the public policy set forth in the Connecticut Statutes. The Court was not persuaded by either argument and upheld the lower Court's decision to grant summary judgment to the carrier.
Submitted by: James B. Thompson Jr. (Thompson Goodis Thompson Groseclose Richardson and Miller PA)

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