Coverage Pointers - Volume XIX, No. 1

Volume XIX, No. 1 (No. 484)

Friday, June 30, 2017

A Biweekly Electronic Newsletter

 

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874

         

Long Island Office:

535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

 

www.hurwitzfine.com

© Hurwitz & Fine, P. C. 2017
All rights reserved
 

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. 

 

In some jurisdictions, newsletters such as this may be considered Attorney Advertising.

 

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.

 

 

Dear Coverage Pointers Subscribers:

 

Do you have a situation?  We love situations. 

 

We wish you the best for the July 4th weekend and Canada Day 150 celebrations.

 

Introducing – Volume 19:

 

We welcome you to the first issue of our 19th year of continuous publication of Coverage Pointers.  A special thanks to the great staff of editors, without whom this work of love could not be on the streets.

 

Post-Burlington Strategies – It’s Time for That Roundtable:

 

The chatter around every risk-transfer water cooler in New York is the Burlington decisionFor those who missed it – and there aren’t many risk-transfer/additional insured aficionados who have – on on June 6, Court of Appeals ruled that the term “caused by” in blanket additional insured endorsements means “proximately caused by”.  It is narrower than “arising out of”, contrary to previous Appellate Division rulings finding that the terms were practically synonymous.  If you didn’t see our summary of the ruling –in a special issue of Coverage Pointers – issued almost immediately after the decision was released, here is a link to that publication.

 

There are a number of issues left unresolved by Burlington including whether the term “acts or omissions” requires a finding of negligence, whether “in whole or in part” limits AI coverage to derivative liability, how the decision impacts on the duty to defend (which is likely governed by BP Air), and most importantly, WHAT NOW?

 

For example, have you considered:

 

  • How will Burlington guide your response to the next tender you receive asking for additional insured coverage?

  • How does Burlington impact on decisions made last month or last year, where you have agreed to provide additional insured coverage because the plaintiff was an employee of the named insured (but the named insured did nothing to cause the accident)?

  • How will the issue of proximate case be resolved, particularly in cases where your named insured is the subcontractor but you have assumed the defense of the owner or general contractor and discontinued the third party action?

 

The Hurwitz & Fine, P.C. coverage team is here to help sort out strategies.  We’ve already been peppered with questions (yes, situations) and have participated in roundtables with decision makers up and down the line.

 

Whenever you’re ready to talk about this, let’s set up a time to chat.

 

P.S. One of the architects of Burlington is my long-time friend and client, Mike McMyne, Senior Vice President and Chief Claims Officer for the IFG Companies (which includes Burlington Insurance Company).  Mike just announced his retirement after 38 years as a claims professional. Mike has always understood the importance of the industry, of creating precedent and of selecting the right test cases.  Best of luck to you, Mike.  I am sure that we will remain in touch.

 

Sister Publications – Free Subscriptions:

 

Labor Law Pointers:          A monthly publication covering Labor Law §§240(1), 241(6), 200 and construction litigation, generally.  To subscribe, contact Dave Adams at [email protected].  

 

Premises Pointers:            The latest member of our Pointers publications, this monthly publication covers premises negligence, retail, restaurant and hospitality litigation, homeowner liability, dog/bite animal liability claims, swimming pool and recreation claims and a whole lot more.  Contact Jody Briandi to be added to the subscription list: [email protected].

 

FDCC Insurance Industry Institute:

 

The Federation of Defense & Corporate Counsel (FDCC) will be holding its biennial Insurance Industry Institute in NYC from November 8 through 10.  The FDCC puts on great programs, and its insurance conference is always one of the best.

 

The program begins with a reception at the Sheraton New York Times Square on Wednesday evening, November 8, followed by a full day of programming on Thursday and a half day session on Friday. This program brings together industry leaders, senior insurance executives, and their counsel to examine key insurance issues.

 

More information can be found at: http://www.thefederation.org/page/2017i3

 

Atta-lawyers Awarded:

 

Here’s to Steve Peiper and Jen Phillips, who teamed up for two victories in the appellate courts.  The Court of Appeals decision in the Papa case is particularly significant as it reaffirms the vitality of the ground water exclusion in the property policy.

 

Oh My:  Insurance Ad – 100 Years Ago:

 

Times Herald

Olean, New York

30 Jun 1917

 

ABRAMS & SONS

 

Offices: Olean and Allegany, N.Y.

OFFICE ALWAYS OPEN

Established 1880

 

See the man with the White Cravat.

From the Sage of Tram Hollow:

There was a young man from Corning

Who would not go home until morning,

And when he got there,

Found his wife on the stair,

And wished he had given her warning.

 

Editor’s Note: Abrams & Sons was an insurance agency located in Olean, New York, south of Buffalo.  I am not sure when it was formed but found newspaper articles in the Olean newspapers dating back to the 1880’s.  In 1932, the agency was sold to Messrs. Both & Branch.  A Mr. Hendrix joined five years later and the agency became Both, Branch & Hendrix. Michael Hendrix has been its president since 1984.

 

Jen’s Gems:

 

Greetings!

 

Hope everyone has a happy and safe 4th of July!  My husband and I decided to use this weekend to take the girls up to Toronto for a few days.  We have been talking about doing it for a while (it is less than two hours from Buffalo), but it seems as if we never found a good weekend until now.  Assuming the weather cooperates, our plan is to hit the zoo on Sunday, and the aquarium the following day.  My youngest daughter loves “fishees,” as she calls them, so we think she will enjoy it.  We are also celebrating our 7th wedding anniversary.  Amazing how times flies.  It feels like only yesterday, before the kids, that we used to spend these anniversary weekends in nice restaurants with cocktails.  Now we spend them at the zoo and aquarium.  But, I can't lie, I don’t miss those early days that much.

           

In terms of my column this week, I report on a trial court decision arising out of a Super Storm Sandy claim.  As often happens in these losses, the dispositive motions became a battle of experts and resulted in the court tossing up its hands and finding a question of fact.  Nevertheless, it is worth a read especially if you want a review of the anti-concurrent causation argument.    

 

Again, hope everyone has a nice holiday!

 

Until next issue...

 

Jen

Jennifer A. Ehman

[email protected]

 

Which Way Should I Go?  Either Way, I’m Dead  -- 100 Years Ago:

 

The Oneonta Star

Oneonta, New York

30 June 1917

 

WISHES TO BE SHOT

RATHER THAN HANGED

 

IS THE CHOICE OF SALE LAKE CITY MAN

 

Salt Lake City, Utah, June 20. – Howard De Weese, sentenced to death for the slaying of his wife last September, has chosen to be shot rather than hanged at the law’s hands, July 6.  He is resigned to his fate and says he hopes that no steps will be taken to gain a new trial or a reprieve.

 

The laws of Utah provide that a person sentenced to death may choose the way to die.  Before deciding upon being shot, De Weese asked a prison guard questions relative to the caliber of the bullets, stating that he did not want the marksmen to “play” with him, but to make death instantaneous.

Editor’s  Note:  Mr. De Weese got his wish.  He was executed by firing squad on May 24, 1918.

 

Tessa’s Tutelage:

 

Dear Readers,

 

Sometimes advice doesn’t hit home until much later.  This is the case with something my Contracts professor told us our first day of class.  He instructed us to “run through the finish line” in law school.  This is the sort of advice that seems sort of a painfully obvious observation without much value.  In true Liam O’Melinn fashion, he did not explain what he really meant at any point.  Reading one of our no-fault decisions for the day, I found myself having a moment of clarity about his advice.  

 

In Sharp View Diagnostic Imaging, we see a sort of battle of affidavits.  The problem is the affidavits were half effective.  The plaintiff had an affidavit that was sufficient to show that the claim had been timely and properly mailed, however, it failed to show that the claim had not been timely denied (which was a part of their argument).  Defendant’s affidavits were sufficient to demonstrate a proper foundation for the consideration of certain documents, however, they failed to establish Defendant’s right to summary judgment.  None of the affidavits in this case did what they set out to do, and they certainly did not “run through the finish line.”  They merely signed up for the race. 

 

I hope you all have a lovely weekend with plenty of fireworks and sun, preferably not at the same time.

 

Tessa

Tessa R. Scott

[email protected]

 

Help Wanted:

 

Democrat and Chronicle

Rochester, New York

30 June 1917

 

Wanted: young lady about twenty years of age as Underwood operator in fire insurance office; must be good penman and have had at least three years’ office experience.  O-76, this office.

 

Ewell's Universe:

 

Dear Subscribers:

 

There is a split across the nation regarding whether an insurer is required to prosecute affirmative claims on behalf of its insured. Some jurisdictions such as New Jersey, Wyoming, and Texas follow the rule that an insurer is not required to bear the cost of prosecuting counters on behalf of the insured. In contrast, courts in other jurisdictions, such as Illinois, Pennsylvania, and the District of Columbia have required insurers to prosecute affirmative counterclaims in certain instances. This week, the State of Massachusetts considered the issue as a matter of first impression and decided which camp it belongs. Massachusetts decided that an insurer is only required to defend against claims, and has no obligation to prosecute affirmative counterclaims on behalf of its insured.

 

This is also the law in New York State. The New York Supreme Court, Appellate Division has held that insurers have no duty to prosecute affirmative claims. P.J.P. Mech. Corp. v. Commerce and Indus. Ins. Co., 882 N.Y.S.2d 34 (1st Dept. 2009). In that case, the First Department addressed the same issue. The First Department reviewed the standard form CGL policy and found that "there is nothing in the policy language that requires [an insurer] to … prosecute affirmative claims." The First Department further explained that: “The policy, when read as a whole, clearly states that [the insurer] had the duty to defend a suit, which means a proceeding brought against the insured, not by the insured. ‘Defend,’ by its clear import, does not envision affirmative litigation.”

 

As I finish writing this note, I’m heading out to see my favorite band, Third Eye Blind, perform tonight. This will be my fifth Third Eye Blind concert, and I was fortunate enough to meet the band two years ago. To celebrate the 20th anniversary of their debut album, they are performing their entire debut album which came out in 1997. As I recall, I was in elementary school. As one can imagine, I’m very excited. Hopefully, it won’t rain.

 

‘Til Next Time,

 

John

John R. Ewell

[email protected]

 

How Dry We Will Be:

 

Star-Gazette

Elmira, New York

30 June 1917

 

WILSON’S STAND PRECLUDES

ACT AGAINST BEER

 

Prohibitionists Hold Conferences

Today but Belief Is That Only

Manufacture of Spirits Will Be Prohibited

by the Food Bill

 

Washington, June 30.—Organized prohibition forces conferred with “dry” senators and representatives today in an effort to determine their attitude on the “bone dry” prohibition legislation, modifications of which is asked by President Wilson to facilitate passage of the food control bill by the Senate.

 

After these conferences, the executive committee of the Anti-Saloon League is expected to draft a letter to the President announcing its decision.

 

Regardless, however, of any action the league may take, it was generally agreed that the President’s intervention had had the effect of preventing any interference with the manufacture of beer and light wines, and that the most prohibitionists can hope for at this session is legislation dealing only  with distilled beverages. 

 

Phillips Federal Philosophies:

 

Hello, All:

 

I recently started running, having found that my current schedule seems to preclude my timely arrival at my favorite Pilates and yoga studios.  The idea is, of course, you don’t need any fancy equipment or special classes.  Those of you who run are now laughing at me, because you know that I have by now purchased new sneakers, inserts, socks (why didn’t any of you tell me about those socks), iPhone armband, wireless headsets, and ice cream…..  Ok, that last one was on the list anyway.

 

This week’s case jumped out at me because summer is when one’s thoughts turn to sailing and sunshine and, of course, arbitration.  In AGCS Marine Ins. Co. v. Hymel & Assocs., the Southern District of New York considered whether a named insured and the non-signatory corporate owner of a yacht were both bound by an arbitration clause in the yacht’s insurance policy.  Ultimately the court found that the name insured was bound, but not the corporate owner, stating that the insurers’ “agency argument, much like the Lucy Belle's fractured hull, does not hold water.”

 

As always, thanks for reading.

 

J.

Jennifer J. Phillips

[email protected]

 

Life’s Not Worth Much:

 

Democrat and Chronicle

Rochester, New York

30 June 1917

 

WIDOW OF MAN SHOT

DEAD TO HAVE $2,000

 

Mrs. Lucia Simonetti’s Due,

Jury Decides

 

A verdict of $2,000 was awarded to Mrs. Lucia Simonetti, of No. 7 La Salle street, against Nicola Mastrella by a sheriff’s jury yesterday.  Mrs. Simonetti’s husband, Tony, was killed on September 25th of last year when working at Smith and Walnut streets.

 

Mastrella, a walking delegate for a laborers’ union, demanded that Simonetti pay his dues.  Simonetti asked for an extension of time, which was refused.  To avoid a strike, the contractor told Simonetti he must either pay his dues or quit, which so enraged Simonetti that he attacked Mastrella with a pick.  Mastrella killed the man with a revolver shot.  He was arrested, but the Grand Jury did not indict him.  The widow brought suit to recover $20,000 for assault.  Judgment was given to her by default.  Daniel Forsyth was attorney for her.

Editor’s Note:          $2,000 in 1917 dollars equates to about $41,620 in 2017 dollars.

 

Peiper’s Practicum:

 

As we enter the coming doldrums of summer, we are delighted to offer a full plate of decisions this issue.  Of particular importance, it gives us great enjoyment to report on the Court of Appeals' decision in Papa v Associated Indemnity. With the steady hand of our own Jen Phillips in support, we were able to hold back what would have been a very detrimental decision in the first party world.  With this last week's decision, the ground water exclusion is again safe. 

 

The CP team also had a hand in the Second Department's decision in March Associates v Peerless.  Good things come to those who wait, and this decision is proof of that saying.  Briefs were submitted nearly three years ago, and the appeal was argued in February of 2016.  It is proof positive of how busy the docket is in the Second Department, and also their commitment to issuing thoughtful decisions.  It also points out, however infrequently, that yours truly is capable of actually writing an appellate brief as the matter was fully submitted BP (Before Phillips).  

 

And, to close out this week, speaking of good things and waiting, this weekend I will be making a trek to Cleveland to see U2.  I have never seen U2, and quite honestly was rather ambivalent about it.  My wife, on the other hand, missed the 1987 Joshua Tree tour due to some (to her mind at least) objectionable and arbitrary parenting.  She's been lamenting the loss for the past thirty years, and I've had the pleasure of listening to her tale of misfortune for much of the past two decades.  Needless to say, ambivalence is not the adjective I'd use to describe her thoughts about this coming Saturday.  Here's hoping for a "Beautiful Day"

 

That's it for now.  See you from One Tree Hill, or, in two weeks. 

 

Steve

Steven E. Peiper

[email protected]

 

Death Worth $2,000 (above) but Breach of Promise to Marry Suit worth $225,000?

 

The Catholic Advance

Wichita, Kansas

30 Jun 1917

 

A young woman in New York has just won a verdict of $225,000 in a breach of promise suit against a giddy and fickle suitor of 84, who jilted her.  She ought to find in that verdict quite a solace for her lacerated affections and considers herself lucky that she missed the old gent. 

Editor’s Note:          The judge reduced the verdict against multi-millionaire John Bernard Manning, a New York banker to $125,000 (101 Misc Rep 123).  The plaintiff, Honora May O’Brien, age 29 and his secretary, accepted $100,000 ($2,081.000 in today’s dollars) in settlement thereafter to avoid appeals.  Mr. Manning died in 1918 and by that time Honora O’Brien had married a John Daly.  What happened to the Dalys thereafter?  They had enough money to live happily ever after.

 

Hewitt’s Highlights: 

 

Dear Subscribers:

 

We have a number of serious injury cases this edition. Several of the cases have defendant’s failing on their motion for summary judgment where there is a conflict between experts as to whether there is a degenerative injury or a traumatically caused one. In some of the cases, defendant’s own expert cited plaintiff’s medical records which had the conflicting viewpoint. One reminds us that the independent medical examination report must be sworn to under penalties of perjury or it will not be considered competence evidence.  Another case reminds us that jury verdicts are hard to overturn and will not be overturned if the jury, as is their right, finds one expert more credible than another. In another interesting case, an issue of fact was found where a school bus driver crashed into a building, causing injury, after suffering a medical emergency. The bus driver’s aide had remarked “you must have had another seizure,” raising an issue of fact as to whether the medical emergency was unforeseen.  

 

On a personal level, I am celebrating my 40th birthday today, enjoying the beginnings of summer, and looking forward to the Fourth of July.

 

Have a Happy Independence Day,

 

Rob
Robert Hewitt

[email protected]

Editor’s Note:  Happy birthday Rob!

 

And this was the Biggest Personal Injury Verdict in New Jersey?

 

Pittston Gazette

Pittston, Pennsylvania

30 June 1917

 

RECORD JURY VERDICT

 

Newark, N.J., June 30.—The biggest verdict for personal injury damages ever rendered in New Jersey by a jury in a United States court was given this morning in favor or Robert J. McKibben, and is for $38,400.  McKibben was a brakeman employed by the Philadelphia & Reading Railway, and lost a leg and an arm at Port Reading, N.J., in February 1913.  It was claimed the accident was due to a faulty brake beam.

 

McKibben sued in the United States District Court in New York City, and a jury there awarded him $32,500.  The United States Supreme Court put the verdict aside on the ground that service of the complaint upon the president of the railroad was improper.  The service was made while he was attending a banquet, which is against the Federal rules, which state that service may not be made during a social function.  The Supreme Court also ruled the suit was improperly brought in New York, because the Philadelphia & Reading did not operate there. 

 

Wilewicz’ Wide-World of Coverage:

 

Dearest Readers,

 

Today’s missive is once more necessarily brief. As I write this, I’m already late to catch a flight to the great city of Hotlanta for a brief respite in the heat and sun. I’ll be visiting with my claims manager father and broker mother, so no doubt fun coverage discussions will be had, as usual. Happy Fourth of July to all!

 

This week in the Wild World of Coverage, we bring you a doozy. One that great minds could not reconcile. In the First Department’s Matter of Midland, the court addressed whether a pollution exclusion barred coverage for a lead paint claim out in Nebraska. Some of the claimed exposure related to lead emissions and some to lead paint flakes. While first, and rightly, noting that pollution exclusions do not apply to lead exposure claims, the court then held that they did here. Sort of. Not really. But no coverage for you either way. Pollution exclusion actually applies. Honestly, I’m perplexed. We recommend a reading of the brief opinion (link in the attachment) and welcome thoughts of clarification. In any event, we’re looking forward to the inevitable appellate briefs and arguments so that we can figure out what’s going on in this case.

 

Agnes

Agnes A. Wilewicz

[email protected]

 

Barnas on Bad Faith:

 

Hello again:

 

As any regular reader of this publication surely knows, we spend quite a bit of time traveling around New York State and beyond on the coverage team here at Hurwitz & Fine.  We are fortunate to have a statewide and nationwide practice.  As such, it is often necessary to get on a plane to head to a court appearance, mediation, or conference.  Indeed, sometimes we will have more coverage attorneys at Gate 7 of the Buffalo Airport at 5:00 am than we do at the office.

 

Our most common destination by far is New York City.  There are two options to get to New York City from the Buffalo Airport:  jetBlue and Delta.  Most of us choose jetBlue.  For the last couple of years, there has been an interoffice competition to see who can reach jetBlue’s “Mosaic” status first.  Mosaic, for those of you who don’t know, is jetBlue’s frequent flyer status.  To achieve Mosaic status one must either fly 30 segments (a round trip flight is two segments) in a year with 12,000 flight points or obtain 15,000 flight points in a calendar year.

 

After some creative gaming of jetBlue’s various promotions, and 28 segments, I managed to rack up the requisite 15,000 flight points.  On June 17, 2017, I was the first one in the office to reach Mosaic for the year.

 

In the past, the coverage team would just talk amongst itself about our progress toward Mosaic.  However, this year, much to my surprise, I received a trophy, the “Hurwitz & Fine, P.C. Mosaic Award.”  The trophy is about six inches tall with a “gold” plane on a black base.  A true work of art.  As if receiving the trophy was not enough, I received it in front of the entire office and had to give a speech on the spot, which was sufficiently embarrassing.  While I forgot to thank my parents for helping me accomplish this unprecedented honor, I did remember to thank Dan, so that’s something.

 

Apparently I’m the fourth different attorney in the office to be first to Mosaic status in the last four years.  I’m thinking for next year I’m going to get the base of the trophy engraved with the names of the previous winners and years, kind of like the Stanley Cup.  The future winner can decide if he or she wants to parade it around the office holding it in the air and screaming after winning.  I elected not to.

 

This weekend I will be driving, not flying, to Cleveland to see U2 on The Joshua Tree Tour.  I didn’t get the chance to see the original tour supporting The Joshua Tree, so I’m pretty excited to get another chance 30 years later.  The exciting part of this version is the band is playing the album in full.  While most casual U2 fans are surely looking forward to hearing songs like Where the Streets Have No Name, With or Without You, and I Still Haven’t Found What I’m Looking For, I’m dying to hear some of the rare tunes off of side two like Red Hill Mining Town and Exit.  Here’s hoping for an Achtung Baby 30th anniversary tour in a couple years so that we can finally hear Acrobat live.  Fingers crossed.

 

Enjoy your weekend and have a Happy Fourth of July.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

A Dissent with Heart:

 

Judge Rowan Wilson is one of the more recent appointees to New York’s highest court, the Court of Appeals.  He was the lone dissenter in a statute of frauds matter decided by a 5-1 vote, Judge Fahey writing the majority.

 

He concludes his dissent with this wonderful language:

 

Accordingly, much as it pains me to dissent from a beautifully written majority opinion, I must.

 

Altman’s Administrative (and Legislative) Agenda:  

 

Greetings, Dear Readers. Happy Fourth of July!  I hope you have a wonderful holiday with (legal) fireworks, barbecues, and the company of friends and family.  As for me, I’ll be taking Chaya for afternoon tea at the Plaza Hotel to celebrate her birthday.  I also bought her a few gifts (a surprise!), and this issue of Coverage Pointers.  I know what you’re thinking: birthday gifts, afternoon tea and Coverage Pointers? She is quite the lucky woman, yes, Dear Readers?  Happy Birthday, Chaya! 

 

New on the legislative front, the Senate released its draft health care law, the “Better Care Reconciliation Act”, to replace the Affordable Care Act. The proposed Bill, like its House of Representatives counterpart, seeks to repeal the Affordable Care Act’s individual mandate, and allows States to “opt out” of the Affordable Care Act’s requirement that insurers cover “essential health benefits”.  The Senate bill adds a new provision which would allow insurers to impose a six-month waiting period on an enrollee who had had a gap in coverage of 63 days or more. Waiting period to purchase an AK47, bad. Waiting period to purchase health insurance, good.  Thank you, Congress!

 

Howard

Howard B. Altman

[email protected]

 

Off the Mark:

 

Dear Readers,

 

Happy Independence Day!  I hope everyone has a safe and enjoyable Fourth.  I’m looking forward to hitting the beach and enjoying some barbeques.  Last weekend I fished in my first largemouth bass tournament.  Although my fishing partner and I did not win, we did catch some nice fish.  Other than having to get up at 3:00 a.m. and receiving a vicious sunburn, it was a great experience.

 

In this edition, I bring you a construction defect case from the United States District Court for the District of Colorado discussing the duty to defend.  In Auto-Owners Ins. Co. v. High Country Coatings, Inc., Auto-Owners Insurance Company (“AOIC”) commenced a declaratory-judgment action seeking a declaration that it did not owe a duty to defend or indemnify its insured, High Country Coatings (“HCC”) relative to an underlying action involving construction defect claims.  The court applied the “complaint rule” and determined that the allegations in the underlying complaint might fall within the coverage of the AOIC policy, thus triggering a duty to defend.  Although, AOIC raised a number of policy exclusions to defeat coverage, the court held that the relied-on exclusions were inapplicable based on the allegations in the underlying complaint.  Because the complaint rule results in a duty to defend if it is even remotely possible that there is coverage, the exclusions did not defeat AOIC’s duty to defend HCC.

 

Until next time …

 

Brian

Brian F. Mark
[email protected]

 

Headlines from the Attached Issue:

 

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

 

  • SUM Coverage Not Available for Police Office Injured in Unmarked Car

  • Where Insured Asked for Higher Limits on Renewal but Paid Premium Only for Lower Limits, Cancellation Notice Effective.  Policy Not “Severable”.

  • Question of Employment Status Results in Reversal of Plaintiff’s Common Law Indemnification Award

  • High Court Denies Leave to Appeal in “Close” Additional Insured Case

  • Insurer’s Unreasonable Delay in Dealing with Claims is Considered a Repudiation of Coverage, thus Excusing Policyholder from Cooperating or Seeking Consent to Settle


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

Robert E.B. Hewitt III

[email protected]

 

  • Plaintiff Raised Issue of Fact under Permanent Consequential Use and Significant Limitation of Use Categories

  • Juries Entitled to Believe One Expert over another Conflicting Expert

  • Issue of Fact Where Experts Disagreed as to whether Injuries Were Degenerative or Traumatic

  • Issue of Fact where Defendants Own Expert Found Limitations of Motion in Spine

  • Plaintiff Had Only Minor Range of Motion Limitations and Inconsistency in Medical Records Was Not Explained by His Expert

  • Plaintiff’s Own Records Showed that Her Injuries Were Pre-Existing Degenerative Conditions

  • Defendant’s Submitted Evidence from Plaintiff’s Doctors Which Called into Question Whether or Not the Injuries Were Traumatic or Degenerative

  • Issue of Fact as to whether Driver Suffered an Unforeseen Emergency Medical Episode

 

TESSA’S TUTELAGE

Tessa R. Scott

[email protected]

 

  • An Affidavit, Establishing Half of Your Burden, Doesn’t Go the Distance.

  • Policy Exhaustion Must be Established at the Time the Claims were Deemed Complete

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Court of Appeals

 

  • High Court Affirms Unambiguous Language of Water Exclusion

 

Appellate Division

 

  • Excess Insurer has Standing to Pursue Equitable Indemnification from Primary Carrier

  • Voluntary Discontinuance of Initial Action Bars Second Action Alleging New and/or Continue Discrimination Claims

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • In a Lead Contamination Case, Court Holds that Where One Source of Pollution Is Excluded and a Second Source is Not Excluded, the Entire Claim is Barred per the Pollution Exclusion (That Is Not Applicable) – Wait, What?

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Dueling Expert Affidavits Result in Question of Fact on Super Storm Sandy Claim

  • Trial Court Find Denial Letter Timely and Applies Subsidence Exclusion

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • Insureds were Not Entitled to Recover Damages for Emotional Distress as Consequential Damages

  • Plaintiff’s Complaint Contained Sufficient Factual Allegations to Sustain a Cause of Action for Consequential Damages caused by Geico’s Bad Faith

  • Failure to Investigate Plaintiff’s Treatment that Occurred after Allstate’s Expert’s Opinion was rendered could Support a Finding of Bad Faith

  • Jury Reasonably Concluded that Allstate Acted in Bad Faith by Failing to Settle Claim within Policy Limits

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

  • Arbitration Yacht-zee

 

 

EWELL’S UNIVERSE
John R. Ewell

[email protected]

 

  • Insurers Have No Duty to Prosecute or Pay for Affirmative Counterclaims, Says Massachusetts High Court

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

  • Health Care Legislation

 

 

OFF THE MARK
Brian F. Mark
[email protected]

 

  • Colorado Federal Court Finds Duty to Defend in Construction Defect Action

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

  • Excess Insurer’s Settlement Options:  The Good, the Bad and the Ugly

 

That’s about it.  Enjoy the holiday weekend and remember those who have fought for our independence and those who continue to fight for our freedom.

 

 

Dan D. Kohane

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

 

Office:            716.849.8942

Mobile:           716.445.2258

Fax:                716.855.0874

E-Mail:            [email protected] 

Website:         www.hurwitzfine.com 

Twitter:           @kohane

LinkedIn:       www.linkedin.com/in/kohane

 

 

 

 

 

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


NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

ASSOCIATE EDITOR

Agnes A. Wilewicz

[email protected]

 

ASSISTANT EDITOR

Jennifer A. Ehman

[email protected]

 

INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]

 

Steven E. Peiper, Co-Chair

[email protected]
 

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Edward B. Flink

Patricia A. Fay

Jennifer J. Phillips

Brian D. Barnas

Howard B. Altman

Brian F. Mark

John R. Ewell

Diane F. Bosse

Joel R. Appelbaum

 

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

 

Michael F. Perley

Robert E. Hewitt, III

Jennifer J. Phillips

Brian D. Barnas

 

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

Patricia A. Fay

 

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

 

Jennifer J. Phillips

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Tessa’s Tutelage
Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith
Phillips’ Federal Philosophies

Ewell’s Universe

Altman’s Administrative (and Legislative) Agenda
Off the Mark

Earl’s Pearls

 

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

 

06/29/17       U.S. Specialty Insurance Co. v. DeNardo

Appellate Division, Third Department
SUM Coverage Not Available for Police Office Injured in Unmarked Car
On September 26, 2013, DeNardo, a detective with the Town of Poughkeepsie Police Department, was injured when his unmarked police car collided with another vehicle. Coincidentally, both DeNardo and the other vehicle were insured by GEICO.

 

Poughkeepsie was covered under an insurance policy issued by US Specialty (“USS”). DeNardo advised USS that it intended to file a supplementary uninsured/underinsured motorist (“SUM)” claim under the Town’s policy.

 

USS sent along the forms, reminding DeNardo that he needed prior consent to settle under Condition 10 of the SUM endorsement.

 

A couple of years later, USS apprised DeNardo’s lawyer that, consistent with the Court of Appeals' decision in Matter of State Farm Mut. Auto. Ins. Co. v Fitzgerald (25 NY3d 799 [2015]), the police vehicle that respondent was operating at the time of the accident was not a "motor vehicle" for purposes of SUM coverage and, therefore, respondent was not an insured under the terms of the SUM endorsement.

 

Later, DeNardo filed the claim for arbitration and USS filed a motion to permanently stay.

 

The SUM endorsement to the Town's insurance policy defines the term "insured," in relevant part, as "[a]ny other person while occupying . . . [a] motor vehicle insured for SUM under this policy." The policy does not define the term "motor vehicle," but the Court of Appeals has made clear that, in the absence of a contract provision to the contrary, the definition of "motor vehicle" set forth in Vehicle and Traffic Law § 388 (2) controls for purposes of both uninsured motorist coverage

 

Inasmuch as "fire and police vehicles" are expressly excluded from the definition of a motor vehicle under Vehicle and Traffic Law § 388 (2) it necessarily follows that  the police vehicle operated at the time of the accident did not fall within the scope of the SUM coverage provided under the Town's policy with petitioner. Therefore, there was no contract to provide SUM coverage.  End of story.

 

DeNardo argued that an unmarked police vehicle is a land vehicle which is submit to compulsory insurance and therefore qualifies for SUM coverage.

 

“All well and good,” sayeth the Third but the SUM endorsement uses the term “motor vehicle” and the Vehicle & Traffic Law excludes police cars from the definition of motor vehicle.  The fact that USS waited two years to advise that the policy didn’t cover the claim did not estop the insurer from denying coverage.  Coverage cannot be created where it does not exist.

 

06/28/17       Garcia v. Government Employees Insurance Company

Appellate Division, Second Department

Where Insured Asked for Higher Limits on Renewal but Paid Premium Only for Lower Limits, Cancellation Notice Effective.  Policy Not “Severable”.

This was an action to recover the amounts of an unsatisfied judgment pursuant to the “Direct Action” statute, Insurance Law § 3420(a)(2)

 

Garcia, was injured when he was struck by a vehicle in a parking lot in Brooklyn. He sued the owner, Rakowski and the permissive driver, Danielson.  Garcia obtained a judgment against both and received a partial satisfaction of that judgment,

 

Garcia sought to recover the unsatisfied portion of it from GEICO who issued a personal umbrella policy to Rakowski, the owner. Garcia claimed that the umbrella policy was in effect when Rakowski's vehicle struck him. GEICO disagreed, claiming that the policy had been cancelled and after 30 days went by, Garcia commenced this direct action.

 

GEICO contended that Rakowski's umbrella policy had been cancelled for nonpayment of premium, effective at 12:01 a.m. on May 19, 2006, only a few hours before Rakowski's vehicle struck Garcia.

 

In support of its motion, GEICO submitted evidence that in August 2005, Rakowski, who had a coverage limit of $1,000,000 for the period ending October 10, 2005, requested, and received, a renewal policy, for the period from October 10, 2005, to October 10, 2006, with a coverage limit of $2,000,000. Rakowski also added a rental property to the policy for that period. The increase in the coverage limit from $1,000,000 to $2,000,000 resulted in a $199 increase in the premium.

 

GEICO also submitted evidence that before the beginning of the renewal term, Rakowski made a $306 premium payment (the amount of the previous year's premium), but had not paid the additional $199 that was due for the increase in her coverage limit. Finally, GEICO submitted evidence that in November 2005, it had mailed Rakowski a notice informing her that her policy would be cancelled effective 12:01 a.m. on May 19, 2006, if she did not pay the remainder of the premium. The cancellation notice referenced Rakowski's policy number, which remained constant throughout the various policy periods.

 

Garcia argued that the payment of the previous year’s premium amount should have provided a $1,000,000 policy and that GEICO had failed to establish, prima facie, that it had validly cancelled the policy, whatever the limit of coverage.

 

The Supreme Court denied GEICO's motion, holding that there was a triable issue of fact as to whether Rakowski's umbrella policy was severable as to the limits of liability. GEICO appeals.

 

The Second Department found that the policy was not “divisible”.  When an insured has increased liability limits of an entire policy as of the inception date of coverage, but has not paid the full premium and the policy has thus lapsed, the policy is not divisible to provide coverage in a lesser amount than stated in the policy, at least where no different type of risk had been added to the policy

 

A strong two-judge dissent found a question of fact on severability.

Editor’s Note:  One can understand why the court is split on this one; it’s a close question although we would tend to support the majority’s view.

 

06/28/17       March Assocs. v. Peerless Ins. Co.

Appellate Division, Second Department

Question of Employment Status Results in Reversal of Plaintiff’s Common Law Indemnification Award

This case has its origins in a wrongful death action wherein decedent Grana fell from a ladder while working at a jobsite owned by Lowes Home Improvement.  March Associates served as the General Contractor for that work.  Pursuant to a contract entered into prior to the loss, March entered into an agreement with CMC Masonry to complete brick and mortar work at the jobsite.  Decedent at one point worked for CMC Masonry, but later worked for defendant Blue Ridge as well.  Blue Ridge was insured by both Excelsior Insurance Company (CGL) and Netherlands (Workers’ Compensation). 

 

The underlying matter was settled on the eve of trial with Netherlands Insurance Company contributing $1,000,000 toward the settlement through its Employers’ Liability policy (i.e., 1B coverage).  Netherlands also agreed to waive recovery of the lien it had asserted due to death benefits paid under the Workers’ Compensation side of the policy (i.e., 1A coverage). 

 

March’s carrier contributed an additional $300,000 to fully resolve plaintiff’s claims on behalf of decedent.  As part of the settlement, March agreed to discontinue its claims for common law and contractual indemnification pending against Netherland/Excelsior’s insured, Blue Ridge.  However, March reserved its rights to proceed with a concurrent Declaratory Judgment Action.

 

Thereafter, in the DJ Action, March moved for summary judgment against Netherlands seeking monies in addition to the $1,000,000 paid at settlement (the Netherlands policy was issued and delivered in NJ, and thus had a limit of $1,000,000).  March also moved for summary judgment against Excelsior on the basis that that decedent was not within the scope of his employment with Blue Ridge at the time of the incident.  As such, March argued it was entitled to common law indemnity against Blue Ridge, which, in turn, could be applied to either of Blue Ridge’s policies with Excelsior and Netherlands, respectively. 

 

At some point during motion practice, March abandoned its claim for additional coverage under the Netherlands policy, and focused solely upon ensuring its common law indemnity against Blue Ridge was covered by Blue Ridge’s CGL carrier, Excelsior.  Excelsior argued that (a) Blue Ridge was plaintiff’s employer at the time of the incident and thus coverage was precluded by operation of employers’ liability exclusion and (b) even if it was not his employer, March had not made a showing of common law indemnification. 

 

The trial court ruled that March was entitled to common law indemnity against Blue Ridge, and further that decedent was not employed by Blue Ridge at the time of the incident --- thereby placing the loss within Excelsior’s CGL coverage for Blue Ridge. The trial court based its opinion on Excelsior’s Answer which denied knowledge and information sufficient for a belief as to decedent’s employment status at the time of the fall, and further Excelsior’s statement in a Bill of Particulars that, upon information and belief, decedent was working as independent contractor when he fell. 

 

In denying March’s motion, and reversing the trial court, the Appellate Division noted that neither the “DKI” in Excelsior’s Answer, nor its subsequent Bill of Particulars, amounted to a judicial admission that decedent was not in the employ of Blue Ridge.  Rather, the Court pointed to the existence of investigation materials, depositions, and workers’ compensation payments as further evidence of decedent’s potential employment by Blue Ridge.   

 

The Appellate Division, however, affirmed the trial court’s refusal to preclude March’s arguments.  Excelsior argued, inter alia, that March’s decision to discontinue a common law indemnity claim against Blue Ridge in the underlying action collaterally estopped March from prosecuting the same claim in the Declaratory Judgment action.  Without judgment against Blue Ridge, it followed no recovery could be made against Excelsior.  In denying, the Court ruled that the stipulation provided March the right to proceed in the DJ Action--- and such right included pursuing payment for its common law indemnity claim. 

 

In addition, the Court also noted that a question of fact remained as to decedent’s employer at the time of the fall.  As support for the denial, the Trial Court pointed to Blue Ridge’s Answer in the underlying action which denied decedent was its employee.  The Court appears to have ruled that Blue Ridge’s denial could be akin to an admission that decedent was not employed.

 

Finally, with regard to the actual common law negligence claim, the Court found a question of fact as to whether Blue Ridge was negligent. Blue Ridge was cited by OSHA for a violation of a safety regulation which “may be considered some evidence of negligence.”   

 

06/27/17       Chappaqua Central School Dist. v. Philadelphia Indem. Ins. Co.

New York State Court of Appeals

High Court Denies Leave to Appeal in “Close” Additional Insured Case

We reported on the March 22, 2017 Second Department decision in Volume XVIII, No. 20 of Coverage Pointers.  This was a good case for Court of Appeals review but leave was denied.  Here’s a review of the AD’s decision, as reported and here is a link to the Second Department’s decision:

 

Where Cafeteria is Leased, Accident on Non-Leased Stairway that Allows Access to Cafeteria Does Not Provide Landlord with Coverage as AI under "Managers, Landlords, or Lessors of Premises" Endorsement.  Thousands Ponder.

Brunsting was employed by the Chappaqua Children's Workshop, Inc. (“CCW”), which operated a children's after-school program in the cafeteria of the Robert E. Bell Middle School building (“school”), which was owned by the plaintiff Chappaqua Central School District (“CCSD”). CCSD leased the cafeteria to CCW for its after-school program pursuant to a written agreement. In January 2011, Brunsting allegedly was injured when she tripped and fell while descending an exterior staircase that led from the school down to its parking lot.

 

CCW was insured with Philadelphia Indemnity Insurance Company (“PIIC policy”) and CCSD had a liability insurance policy in effect with the New York Schools Insurance Reciprocal (“NYSIR policy”). Brunsting sued CCSD to recover damages for personal injuries (“underlying action”). NYSIR settled the underlying action for $200,000.

 

PIIC was timely notified of the underlying action in which the CCSD claim additional insured (“AI” status), but disclaimed coverage to CCSD as an additional insured on the grounds that Brunsting was not injured on the leased premises and because CCW was not responsible for maintaining or repairing the staircase. NYSIR and CCSD commenced this action seeking a declaration that PIIC is obligated to provide defense and indemnification in the underlying action.

 

The PIIC policy had an AI provision providing coverage for "Managers, Landlords, or Lessors of Premises" for "liability arising out of the ownership, maintenance or use of that part of the premises leased or rented to you".

Did the accident involving the staircase, not part of the leased premises, arises out of the use of the premises leased to CCW?

 

The phrase "arising out of" requires "only that there be some causal relationship between the injury and the risk for which coverage is provided".

PIIC established, prima facie, that it was entitled to summary judgment declaring that it is not obligated to defend and indemnify the plaintiffs in the underlying action. The additional insured provision unambiguously provided that CCSD was an additional insured, as a "Lessor," for liability "arising out of" the "ownership, maintenance or use" of the "premises leased" to CCW, namely, the cafeteria. It is undisputed that CCW leased only the cafeteria from CCSD, and that CCW had no duty to maintain or repair the staircase where the accident occurred. There was no causal relationship between the injury and the risk for which coverage is provided.

Editor’s Note:  A close one, indeed.  There appears a split in the Departments on this issue.

 

06/27/17       J.P. Morgan Securities Inc. v. Vigilant Insurance Company
Appellate Division, First Department

Insurer’s Unreasonable Delay in Dealing with Claims is Considered a Repudiation of Coverage, thus Excusing Policyholder from Cooperating or Seeking Consent to Settle
It was claimed that Vigilant unreasonably delayed “dealing” with its insured’s claims under various policies. The insurer consistently stated “that the various regulatory investigations and civil actions concerning plaintiffs' alleged late trading and marketing-timing transactions did not constitute claims under the contracts, and insistence that in any event disgorgement payments such as those demanded by the regulators were not insurable as a matter of law”  The First Department holds that these positions “constitute a denial of liability under the contracts that justifies plaintiffs' settlement of those claims without defendants' consent”.

 

Accordingly, plaintiffs did not breach their obligation to cooperate and in any event the insurer’s repudiation of liability for plaintiffs' claims also excuses the policyholder from cooperating.  A reservation of right letter does not change the results.

 


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

Robert E.B. Hewitt III

[email protected]

 

06/28/17       Back v. Finnegan

Appellate Division, Second Department

Plaintiff Raised Issue of Fact under Permanent Consequential Use and Significant Limitation of Use Categories

The defendants met their prima facie burden of establishing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the plaintiff's spine and left shoulder did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, however, the plaintiff raised a triable issue of fact as to whether he sustained serious injuries to his spine and left shoulder under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d). No facts were given.

 

06/28/17       Madtes v. Scher

Appellate Division, Second Department

Juries Entitled to Believe One Expert over another Conflicting Expert

The plaintiff commenced this action to recover damages for personal injuries resulting from a motor vehicle accident in which a vehicle operated by the defendant struck a vehicle operated by the plaintiff. The plaintiff alleged that, as a result of the subject accident, she sustained a serious injury to the cervical and lumbar regions of her spine, as well as to her right shoulder, under the significant limitation of use and permanent consequential limitation of use categories. The defendant conceded that she was 100% at fault in the happening of the accident, and the action proceeded to a jury trial on the issue of damages only.

 

However, the Appellate Court found that contrary to the plaintiff's contention, the verdict in favor of the defendant, finding that the plaintiff did not sustain a serious injury under the significant limitation of use and permanent consequential limitation of use categories, was not contrary to the weight of the evidence. A jury verdict should not be set aside as contrary to the weight of the evidence unless the jury could not have reached its verdict on any fair interpretation of the evidence. Where conflicting expert testimony is presented, the jurors are entitled to accept one expert's opinion and reject that of another expert 

 

06/22/17       Barreras v. Vargas

Appellate Division, First Department

Issue of Fact Where Experts Disagreed as to whether Injuries Were Degenerative or Traumatic

Defendants made a prima facie showing that plaintiff did not sustain a serious injury to her right shoulder by submitting the report of their radiologist, who opined that plaintiff's MRI showed longstanding degenerative tears and that there was no evidence to suggest that plaintiff sustained a traumatic injury. Defendants further demonstrated an absence of causation through the report of their orthopedist, who opined that plaintiff's post-accident medical records, which showed no complaints of right shoulder pain, were inconsistent with any claim of traumatic injury to her right shoulder. In addition, plaintiff did not seek treatment for her claimed right shoulder injuries until several months after the accident.

 

The Appellate Division however found that plaintiff raised an issue of fact. Contrary to defendants' contention, plaintiff's emergency room records reflect contemporaneous complaints of pain, since X rays of the right shoulder were ordered at the time. Plaintiff's treating physician noted that plaintiff had undergone physical therapy in the months following the accident, and found that she had limited range of motion in her right shoulder. Her orthopedic surgeon observed rotator cuff and superior labral tears during surgery, measured range-of-motion limitations two years after the surgery, and provided a sufficient opinion, based on his treatment of plaintiff, his review of the MRI report, and his observations during surgery, that, although there were degenerative conditions in plaintiff's shoulder consistent with her age, the tears were causally related to the accident 

 

06/21/17       Souk Houng v. Beers

Appellate Division, Second Department

Issue of Fact where Defendants Own Expert Found Limitations of Motion in Spine

The defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants failed to submit competent medical evidence establishing, prima facie, that the plaintiff did not sustain a serious injury to the cervical region of her spine under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d), as one of their experts found significant limitations in the range of motion of the cervical region of the plaintiff's spine.

 

06/20/17       Cabrera v. Apple Provisions, Inc.

Appellate Division, First Department

Plaintiff Had Only Minor Range of Motion Limitations and Inconsistency in Medical Records Was Not Explained by His Expert

Appellate Division held defendants established entitlement to judgment as a matter of law in this action where plaintiff alleges that he suffered serious injuries to his spine and left knee as a result of a motor vehicle accident that occurred in January 2013. Defendants submitted an expert report of an orthopedist, who found full range of motion in those body parts and opined that the alleged injuries had resolved. The expert also opined that plaintiff's MRI reports of the spine were unremarkable and that the MRI report of the knee showed injuries that were not causally related to the accident. In opposition, plaintiff failed to raise a triable issue of fact. Plaintiff submitted no evidence of any medical examination after March 2013, and therefore did not demonstrate any permanent consequential limitation of use of any body part.

 

As to the cervical spine claim, plaintiff's treating physician found normal range of motion in February 2013, but some limitations a month later. The physician's failure to explain the inconsistencies between her findings of deficits before and after the findings of full range of motion, rendered her opinion speculative. As to the lumbar spine, plaintiff's treatment records showed that he had normal or near-normal lumbar spine range of motion within two months after the accident, which is insufficient to support a serious injury claim.

 

Regarding the left knee, plaintiff presented medical evidence of a lateral meniscal tear, which his physician stated was causally related to the subject accident. However, his physician failed to make any measurements of his knee, relying on unaffirmed records of his surgeon, which was impermissible. In any event, the last measurement found in the surgeon's records showed only a five-degree deficit in range of motion, which, again, was too minor in extent, degree and duration to support a serious left knee injury claim involving significant limitation of use.

 

As for the 90/180-day claim, defendants met their prima facie burden of refuting plaintiff's allegations in his bill of particulars that he was confined to bed for two months and home for six months after the accident, by submitting his deposition testimony that he stayed home for just two days after the accident and returned to work by May 2013. They also submitted the opinion of their expert, who opined that plaintiff's medical records did not demonstrate a knee injury caused by the accident or a spinal injury that would result in deficits. In opposition, plaintiff submitted no evidence to demonstrate he sustained a "medically determined" injury. Instead, his medical records show he was able to work shortly after the accident and that his left knee injury resolved within about two months after the accident.

 

06/20/17       Fernandez v. Hernandez

Appellate Division, First Department

Plaintiff’s Own Records Showed that Her Injuries Were Pre-Existing Degenerative Conditions

Defendants made a prima facie showing that plaintiff did not suffer significant or permanent limitations to her lumbar spine or knees as a result of the accident. Defendants submitted the affirmed report of an orthopedic surgeon who found normal ranges of motion, negative objective test results, and resolved sprains, strains, and contusions to those body parts. Defendants also relied on plaintiff's own medical records showing that the claimed injuries were the result of preexisting degeneration. In opposition, plaintiff failed to raise an issue of fact. Plaintiff offered no admissible medical evidence concerning her lumbar spine. Even if her unaffirmed medical records were considered, they acknowledged the existence of degeneration in her spine, but did not address the degeneration or explain why it was not the cause of any symptoms.

 

Further, the affirmed report of her orthopedist was insufficient to raise an issue of fact as to plaintiff's knees because the range of motion findings were not compared to any normal value. The finding of  tears, standing alone, without any evidence of limitations, was insufficient to raise a triable issue of fact as to whether a serious injury exists.  In addition, the orthopedist did not address the findings of degeneration found in plaintiff's own medical. Moreover, plaintiff failed to provide a reasonable explanation for her cessation of all medical treatment after a brief three-month course of physical therapy

 

Plaintiff did not plead a significant disfigurement claim and, in any event, defendants' expert found no scarring upon examination and plaintiff's own medical records show no evidence of scarring to the left knee that was "unattractive . . . [or] objectionable," much less "the subject of pity or scorn," as required to establish significant disfigurement. Lastly, defendants made a prima facie showing that plaintiff did not suffer a 90/180-day injury, given her admission in the bill of particulars that she was only confined to her bed or home for a period of five weeks.

 

06/16/17       Crane v. Glover

Appellate Division, Fourth Department

Defendant’s Submitted Evidence from Plaintiff’s Doctors Which Called into Question Whether or Not the Injuries Were Traumatic or Degenerative

The Appellate Division found that the lower court erred in granting defendants' motion with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury. Defendants' own submissions in support of their motion raise triable issues of fact with respect to those two categories. Defendants submitted an imaging study of plaintiff's lumbar spine, which showed a bulging disc at L4-5, and the affirmed report of the physician who conducted an examination of plaintiff on behalf of defendants and found that plaintiff had significant limited range of motion in flexion and extension. That study and report raise a triable issue of fact whether plaintiff had objective evidence of a serious injury.   Defendants also submitted plaintiff's medical records, which showed that plaintiff's chiropractor detected muscle spasms at L4-5, which also raises a triable issue of fact whether there was objective evidence of an injury. While the affirmed report of the physician who conducted the examination of plaintiff on behalf of defendants concluded that the disc bulge was "typically" consistent with degenerative disc disease, defendants also submitted medical records from one of plaintiff's treating physicians, which contained the physician's opinion that "it was” more likely than not" that plaintiff's lumbar spine complaints were caused by the motor vehicle accident. Furthermore, the affirmed report of the physician does not establish that plaintiff's condition is the result of a preexisting degenerative disc disease inasmuch as it fails to account for evidence that plaintiff had no complaints of pain prior to the accident.

 

06/16/17       Martinez v. Grimm

Appellate Division, Fourth Department

Issue of Fact as to whether Driver Suffered an Unforeseen Emergency Medical Episode

A school bus driver suffered an episode of syncope which caused her to suddenly lose consciousness and strike a building.  Defendants moved for summary judgment dismissing the complaint on the grounds that the driver suffered an unforeseen medical emergency that caused her to lose consciousness and that she could not be charged with negligence as a result thereof.

 

Grimm's primary care physician, opined, based upon her treatment history and tests performed upon Grimm as a result of the accident, that Grimm's loss of consciousness was caused by a previously undiagnosed condition known as "neurocardiogenic syncope" and that the event was sudden and unforeseeable. The Appellate Court rejected plaintiff's contention that the affidavit was not competent evidence because the physician did not specifically frame her opinions in terms of a "reasonable degree of medical certainty.” Defendants also submitted the deposition testimony of a bystander who immediately boarded the school bus after the impact in order to render assistance. In response to the driver's inquiry "What happened?" after she regained consciousness, the bystander heard the school bus aide respond: "You must have had another seizure."

 

It is well settled that the operator of a vehicle who becomes involved in an accident as the result of suffering a sudden medical emergency will not be chargeable with negligence as long as the emergency was unforeseen. Here, although defendants submitted evidence establishing that the driver experienced a medical emergency that caused her to suddenly lose consciousness while operating the school bus. The deposition testimony of the bystander, also submitted by defendants, raised a triable issue of fact whether the medical emergency was unforeseen by the driver.   Because the school bus aide's statement was made under the stress of excitement caused by the accident, it constituted an excited utterance admissible as an exception to the hearsay rule.

 

 

TESSA’S TUTELAGE

Tessa R. Scott

[email protected]

 

06/23/17       Sharp View Diagnostic Imaging, P.C. v GEICO Gen. Ins. Co.

Appellate Term, Second Department

An Affidavit, Establishing Half of Your Burden, Doesn’t Go the Distance.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff appeals from an order of the Civil Court which denied plaintiff's motion for summary judgment and granted defendant's cross motion for summary judgment dismissing the complaint. The court found that defendant had demonstrated that the limits of the applicable insurance policy had been exhausted.

 

Since the insurance policy at issue contains a provision that "[t]he policy and any amendment(s) and endorsement(s) are to be interpreted pursuant to the laws of Georgia," the substantive law of Georgia applies. However, New York's procedural laws control.

 

The affidavit of defendant's underwriter which was submitted in support of defendant's cross motion was sufficient to provide a foundation for the consideration of the annexed copies of the insurance policy and declaration page, which indicated that the policy had a $10,000 medical payment limit. However, that affidavit failed to establish defendant's entitlement to summary judgment dismissing the complaint.  That was because it failed to provide a foundation for the consideration of the annexed printouts—which purportedly show that the $10,000 policy limit had been exhausted.

 

Moreover, the Court noted that the insurance policy, entitled "Out of State Insurance," provides that when "the policy applies to the operation of a motor vehicle outside your state, we agree to increase your coverages to the extent required of out-of-state motorists by local law." The Court determined that defendant provided no information regarding the minimum financial responsibility required by the State of South Carolina. Thus, the Court held that defendant’s cross motion for summary judgment dismissing the complaint should have been denied.

 

Additionally, although the affidavit plaintiff submitted in support of its motion was sufficient to establish that the claim had been timely and properly mailed to defendant, the affidavit failed to establish that the claim had not been timely denied, or that defendant had issued a timely denial of claim that was conclusory, vague or without merit as a matter of law

 

Consequently, plaintiff failed to establish its entitlement to summary judgment.

 

The order was modified by providing that defendant's cross motion for summary judgment dismissing the complaint was denied.

 

 

06/23/17       Island Life Chiropractic, P.C. v Commerce Ins. Co.

Appellate Term, Second Department

Policy Exhaustion Must be Established at the Time the Claims were Deemed Complete

In this action appeals from an order of the Civil Court which granted defendant's motion for summary judgment dismissing the complaint.

 

Defendant's motion sought summary judgment on the ground that the amount of available coverage had been exhausted. Although the insurance policy had been issued in Massachusetts, defendant acknowledged that, pursuant to New York law, the insurance policy provided $50,000 in personal injury protection benefits. Defendant further contended that claims exceeding $50,000 had been received and that defendant had paid $50,000.

 

However, defendant failed to establish, as a matter of law, an exhaustion of the coverage limits of the insurance policy at issue, as defendant did not demonstrate that the policy had been exhausted at the time the claim at issue was complete. Thus, defendant did not establish its entitlement to summary judgment dismissing the complaint.

 

Accordingly, the order was reversed and defendant's motion for summary judgment dismissing the complaint is denied.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Court of Appeals

 

06/22/17       Papa v Associated Indemnity Corp.

Court of Appeals

High Court Affirms Unambiguous Language of Water Exclusion

In a unanimous opinion, the Court of Appeals affirmed the Appellate Division, Fourth Department’s earlier ruling that the Water Exclusion as found in plaintiff’s commercial property policy applied to preclude coverage for ground water which flooded the basement of plaintiff’s office. 

 

          02/10/17       Papa d/b/a Muir Lake Assocs. v. Assoc. Indemnity Corp

Appellate Division, Fourth Department

Water Exclusion Bars Coverage for Damaged Caused by Water Flowing into Basement of Insured Premises

Plaintiff’s basement was damaged by ground water which entered the premises through a cracked electrical conduit.  The parties agreed that the water constituted “ground water,” and that it entered through the foundation. 

 

The carrier denied the claim on the basis that the policy excluded coverage for losses occasioned out of water under the ground surface pressing on or flowing or seeping through foundations.  However, in denying under the main coverage form, the Associated also acknowledged the claim did fall within a limited coverage grant of $25,000 for losses caused by ground water.   

 

Plaintiff countered that the water actually entered through a conduit which ran through the wall.  As such, plaintiff argued that the water exclusion was ambiguous in that it could be read to apply only to water which entered directly through the wall--- as opposed to through a pipe/conduit which protruded through the wall. 

 

The Appellate Division held that the language was unambiguous, and noted that there was no disagreement that the water flowed through the wall.  As such, the loss fell within the scope of the exclusion.

 

Two judges dissented reasoning that the conduit removed the loss from the scope of the broader exclusion for water flowing through the foundation.  In addition, a second exclusion which removed coverage for doors, windows and other openings did not apply either.  The dissent, relying on the principle of ejusdem generis, held that “other openings” had to be akin to a door or window.  The conduit, they held, was not similar to the function of a door/window, and thus the “other openings” exclusion did not apply.

 

Appellate Division

 

06/28/17       Lexington Ins. Co. v Allstate Ins. Co.

Appellate Division, Second Department

Excess Insurer has Standing to Pursue Equitable Indemnification from Primary Carrier

The case arises out of a house fire.  The homeowner at the time of the fire was insured by Allstate.  The mortgagee, apparently, was insured by Lexington.  At the time of the fire, Allstate asserted that it previously cancelled the homeowners’ policy.  Left with no recourse, the mortgagee sought coverage under its own policy with Lexington. 

 

After adjusting the loss on behalf of the mortgagee, Lexington then commenced the instant action asserting that Allstate improperly cancelled the homeowner’s policy.  As such, if the policy is reinstituted, Allstate’s policy would be primary to any coverage afforded by Lexington. 

 

Allstate opposed Lexington’s position by arguing that, as an excess insurer, Lexington did not have standing to assert a claim against the homeowner’s insurer.  The Appellate Division rejected that argument, and noted that where an excess carrier makes a payment it would have otherwise avoided had the primary policy participated in the settlement it follows that the excess carrier has an equitable right to seek indemnification from the primary carrier.

Although Lexington was within its rights to challenge Allstate’s denial, the Court also ruled that it failed to meet its burden of establish how Allstate’s cancellation was improper.  Accordingly, the matter was remanded to the trial court for further proceedings.

 

06/27/17       Gropper v 200 Fifth Owner, LLC

Appellate Division, First Department

Voluntary Discontinuance of Initial Action Bars Second Action Alleging New and/or Continue Discrimination Claims

Previous to the instant action, Plaintiff commenced an action in Federal Court alleging violations New York Executive Law 296 and NYC Administrative Code 8-107(4).  The Federal Court action was withdrawn, with prejudice, on the eve of trial. Thereafter, plaintiff commenced an action in State Court which asserted “continuing” violations of the previously mentioned laws.  In addition, plaintiff asserted additional violations which he was aware at the time of the Federal Court action, but chose to not pursue at the time.

 

Defendant moved to dismiss the action based upon res judicata grounds.  In reversing the trial court, the Appellate Division noted that a voluntary discontinuance with prejudice amounts adjudication on the merits.  Thus, res judicata principles applied.  In so holding, the Court reminded us that res judicata does not revolve around whether the prior matter was litigated, but rather whether the party had a full and fair opportunity to litigate.  Here, as the discontinuance occurred after a year of litigation, and on the eve of trial, it was clear plaintiff had such an opportunity. 

 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

06/22/17       Matter of Midland Ins. Co.

Appellate Division, First Department

In a Lead Contamination Case, Court Holds that Where One Source of Pollution Is Excluded and a Second Source is Not Excluded, the Entire Claim is Barred per the Pollution Exclusion (That Is Not Applicable) – Wait, What?

The claimant here was a mining and smelting company operator, which sought coverage under four excess policies issued by Midland. The claim was for coverage relative to EPA clean-up of a residential area in Nebraska that had been contaminated by lead. Their policies contained relatively standard-form pollution exclusions. The court here noted correctly that pollution exclusions typically do not exclude damage resulting solely from lead.

 

Here, the court wrote: “In this case, not only did the damage result from different sources, i.e., lead emissions and lead paint, but, also, one source is excluded from coverage and the other is not. However, the damage resulting from either source is not readily divisible from the damage resulting from the other. The combined effect of the lead emissions and the lead paint was soil contamination - of the same soil. To the extent a particular area was contaminated solely by lead paint, it was not (and could not have been) included in the EPA's remediation efforts (see 42 USC § 9604). Moreover, claimant would not have had to pay for any damage - including lead paint damage - if not for the accompanying pollution (see 42 USC § 9607). Thus, the entire claim is barred by the pollution exclusions.”

Assoc. Editor’s Thoughts: What? Dan and I were so puzzled by this decision that we reached out to handling counsel. They did not know what to make of it either. We smell an appeal on the way perhaps?

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

06/20/17       Silvers v. New York Prop. Ins. Underwriting Assn.

Supreme Court, New York County

Hon. Manuel J. Mendez

Dueling Expert Affidavits Result in Question of Fact on Super Storm Sandy Claim

This decision arises out of a Super Storm Sandy claim.  Plaintiffs sought coverage for certain damage to their primary residence.  Defendant, their homeowners’ insurer, denied coverage for the loss relying on the water exclusion endorsement and the anti-concurrent causation clause. 

 

The parties disputed the causation of damages at the property.  Defendant contended that any damage caused by wind was minimal and fully compensated.  And, the remaining damage was the result of flooding or pre-existing.  Arguendo, if wind did cause damage to the property that was not already compensated for; the losses were caused in combination with water damage, and thereby excluded by the anti-concurrent causation language.  Plaintiffs argued, to the contrary, that wind and wind driven rain had caused damage to the property not previously compensated for by defendant. 

 

In considering the arguments, the court found that defendant failed to make a prima facie showing of entitlement to summary judgment.  The parties both annexed expert affidavits, and the experts sharply disagreed as to what portion and how severe wind and wind-driven rain contributed to the damages.  Thus, questions of fact existed. 

 

06/16/17       Reed Dr. Constr. Corp. v. Arch Specialty, Inc. Co.

Supreme Court, Queens County

Hon. Darrell L. Gavrin

Trial Court Find Denial Letter Timely and Applies Subsidence Exclusion

NYU retained a company called DPC to perform waterproofing at the premises.  DPC then subbed the excavation around the foundation to plaintiff who subbed another piece out to Matempa Corp.  The underlying action involved a Matempa employee who suffered injuries as a result of the collapse of a subterranean wall while he was working in an excavated trench at the jobsite. 

 

At the time of the incident, plaintiff was insured by Arch.  Following the incident, plaintiff placed Arch on notice of a claim.  In response, on October 30, 2013, Arch acknowledged receipt of the claim and disclaimed coverage citing the New York Limitation Endorsement.  It appears that a complaint was filed shortly thereafter, and Arch issued a revised disclaimed to plaintiff (on November 14, 2013) adding, as a basis, the Subsidence Exclusion.  During this time, Arch also received a tender from DPC and its carrier, and likewise issued a disclaimer, which was revised upon the filing of suit.  It appears that NYU was copied on these letters, but not those issued to plaintiff.  NYU tendered to Arch at the end of April 2014.  By letter dated July 17, 2014, Arch denied coverage again citing the New York Limitation Endorsement and Subsidence Exclusion.

 

This action was then brought, and Arch moved for summary judgment.  The court first addresses the challenges to timeliness of the disclaimers.  Specifically, NYU asserted that the two and a half month delay in issuing the denial after it tender was late as a matter of law.  Considering the arguments, the court found that Arch has proffered a credible explanation for the delay in its investigation of the facts, and in its explanation of the incorrect claim numbers utilized by the other parties, and the ensuing lack of notice to Arch. 

 

The court then considered the application of the subsidence exclusion.  In finding that it applied, the court noted that although “subsidence” (i.e., a gradual settling or sudden sinking of the Earth’s surface owning to subsurface movement of earth materials), was not the cause of the subterranean wall collapse herein, the additional language of the exclusion provision of said policy, unrelated to an event of subsidence, notably “or any other movement of land or earth regardless of whether such movement is a naturally occurring phenomena or is a made-made,” undeniably applied to the facts of the underlying incident which allegedly caused the personal injury.

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

06/27/17       Blakely v. USAA Casualty Insurance Company

United States Court of Appeals, Tenth Circuit

Insureds were Not Entitled to Recover Damages for Emotional Distress as Consequential Damages

The Blakelys own a home in Utah, which was insured under a USAA homeowners policy.  In August 2002, a fire broke out in the basement of the home after a flooring contractor applied a flammable sealant.  USAA ultimately repaired most of the damage to the home, but the Blakelys were dissatisfied with the repairs.  USAA refused to authorize additional expenses.  Almost three years after the fire, the Blakelys invoked their contractual right to an appraisal.  USAA paid the appraisal award in its entirety on December 5, 2005.

 

Nonetheless, the Blakelys filed suit against USAA alleging breach of contract and breach of the implied covenant of good faith and fair dealing among other things.  On this appeal, the court was considering whether the Blakelys advanced a theory of recoverable damages as part of their claim against USAA for breach of the implied covenant.

 

First, the Blakelys argued that USAA’s bad faith caused them emotional distress.  The Blakelys’ argument that USAA’s alleged misconduct aggravated Ms. Blakely’s preexisting high blood pressure was waived as the pleadings did not reference any particular physical injuries.  The court also concluded that the Blakelys’ alleged emotional distress damages were nothing more than the disappointment or frustration normally experienced during the insurance claim process.  Such damages are not recoverable under Utah law.  Finally, the Blakelys’ argument that they were distressed by living in their smoke damaged house for three years was rejected, as it was the Blakelys themselves who waited nearly three years to invoke the appraisal process.

 

The Blakelys also argued that USAA’s bad faith forced them to invoke the appraisal process.  However, the policy expressly provided that each party was responsible for paying the costs of its own appraiser.  Thus, the court refused to override an express provision of the policy by granting the insureds the costs of the appraisal.

 

In addition, the Blakelys were not entitled to attorneys’ fees or consequential damages for the alleged diminution of their property’s value.

 

06/20/17       Dubovoy v. Government Employees Insurance Company

Supreme Court, Kings County

Hon. Francois A. Rivera

Plaintiff’s Complaint Contained Sufficient Factual Allegations to Sustain a Cause of Action for Consequential Damages caused by Geico’s Bad Faith

On October 14, 2012, Plaintiff was driving his automobile when he was struck in the rear by an automobile driven by Wright, causing him to sustain injuries.  At the time of the accident, Wright did not have any auto liability coverage.  Plaintiff commenced an action seeking $100,000 in SUM benefits under his auto policy with Geico.  Plaintiff’s complaint also contained a cause of action seeking damages based on Geico’s alleged bad faith in the handling of his claim.

 

Geico moved to dismiss the third cause of action, which sought consequential damages based on Geico’s bad faith handling of Plaintiff’s SUM claim.  The court concluded that Plaintiff’s complaint contained sufficient factual allegations to sustain a cause of action for consequential damages caused by Geico’s bad faith handling of the claim for SUM benefits.  The implied covenant of good faith and fair dealing cause of action, as alleged, was not duplicative of the Plaintiff’s breach of contract claim.

 

Geico also argued that Plaintiff’s SUM claim was subject to mandatory arbitration.  However, Geico did not move to dismiss pursuant based on arbitration pursuant to CPLR 3211(a)(5).  Thus, the court chose not to consider this argument for procedural reasons.

 

In addition, the court denied Geico’s motion for an order declaring that the maximum amount recoverable by Plaintiff was $100,000 pursuant to Insurance Law § 3420(f)(1).  The court determined that such a declaration would be premature.

 

06/19/17       Zubillaga v. Allstate Indemnity Company

California Court of Appeal, Fourth District, Division Three

Failure to Investigate Plaintiff’s Treatment that Occurred after Allstate’s Expert’s Opinion was rendered could Support a Finding of Bad Faith

Plaintiff was in a serious car accident on March 25, 2011, when another driver ran a red light and struck her car.  As a result of the accident, Plaintiff reported back pain.  Plaintiff had an automobile policy with Allstate that included UIM coverage with a $50,000 limit.  Plaintiff eventually settled the claim with the other driver for $15,000.

 

On November 10, 2011, Plaintiff’s attorney sent Allstate a demand for $35,000, based upon medical bills totaling $17,645.44 and his claim that Plaintiff would have lower back pain for the remainder of her 52 year life expectancy.  On November 29, 2011, Allstate offered to settle the matter for $9,367.  On April 4, 201, Allstate’s offer was rejected, and Plaintiff again demanded $35,000.  Allstate increased its offer to $10,000 after receiving an evaluation from a board certified orthopedic surgeon, but this offer was also rejected.

 

Plaintiff demanded arbitration and Allstate assigned counsel to handle the claim.  The discovery contained records recommending epidural steroid injections for Plaintiff’s pain.  In response, Allstate increased its offer to $12,084.  Allstate then retained a board certified orthopedic surgeon to conduct an examination of Plaintiff.  The examination was conducted in October 2012, and Allstate’s expert concluded that there was no indication that injections would be necessary.

 

In July 1013, Plaintiff’s counsel sent Allstate medical records demonstrating that Plaintiff had received an epidural steroid injection.  With this treatment, Plaintiff’s medical bills totaled $26,455.44.  On July 29, 2013, Allstate offered $14,500.  Thereafter, a September 2013 medical record recommended additional injections, which were estimated to cost $12,000 each.  Allstate never had its expert review the injection treatments and records.  Allstate’s final offer was $15,584.

 

The arbitration occurred in September 2013, and Plaintiff was awarded the $35,000 limit.  Plaintiff then sued Allstate for breach of contract and bad faith.

 

The Court of Appeal concluded that a reasonable jury could conclude that Allstate handled Plaintiff’s claim in bad faith.  The court rejected Allstate’s argument that it reasonably relied on its expert’s opinion that injections were not necessary in disputing the value of the claim.  The undisputed facts demonstrated that the expert’s opinion was rendered before Plaintiff had received an injection and before medical reports opining that Plaintiff would need future injections existed.  Allstate never consulted with its expert about these injections and opinions.

 

06/15/17       Madrigal v. Allstate Indemnity Co.

United States Court of Appeals, Ninth Circuit

Jury Reasonably Concluded that Allstate Acted in Bad Faith by Failing to Settle Claim within Policy Limits

Allstate appealed a jury verdict awarding approximately $14 million in damages based on Allstate’s bad faith refusal to settle under California law.  Allstate appealed the denial of its motion for judgment as a matter of law below.

 

Allstate argued that it could not be held liable for bad faith because the claimant’s policy limit demand was premises on a requirement that the insured disclose his assets, and it is undisputed that he never did.  However, the court concluded that the asset disclosure decision was not out of Allstate’s own control.  Thus, the court rejected Allstate’s argument that it could not accept the demand due to factors outside of its control.

 

Allstate also argued that it could not accept the claimant’s demand because it did not expressly release all insureds.  However, the court concluded that a reasonable jury could have concluded that the demand incorporated a condition that would have released all of the insureds Allstate deemed necessary for resolution of the claim.  Thus, it was not clear that Allstate would have violated its obligation under California law to protect all of its insureds by settling the claim.

 

Allstate also argued that it did not act in bad faith because it tendered its policy limits twice.  However, the court concluded that Allstate was unreasonable in rejecting a settlement offer before its policy limit offers were made.  Allstate rejected an offer at a time when its adjuster had: (1) found a previously-unidentified witness who contradicted the insured’s version of events and placed responsibility for the accident on the insured; (2) determined that the insured could also be liable under employer-employee liability; (3) received medical bills and information that led the adjuster and her colleagues to believe the insured's exposure could be well above the policy limits and had advised the insured of the same; and (4) declined to discuss or clarify potential compliance issues with the demand.

 

 

 

PHILLIPS’ FEDERAL PHILOSOPHIES

Jennifer J. Phillips

[email protected]

 

05/10/17       AGCS Marine Ins. Co. et al. v. Hymel & Assocs. et al.

Southern District of New York

Arbitration Yacht-zee

“The M/Y Lucy Belle is a 62 foot recreational motor yacht based in Slidell, Louisiana. In the summer of 2014, she was dropped while being lowered into the water by a marine travel lift, suffering a cracked hull and damage to her running gear. Her insurers dispute the amount, if any, that they must pay to repair the damage from the fall and have brought this petition to compel arbitration of the dispute before the American Arbitration Association in New York. The Respondents here are Mr. J.C. Hymel, the Lucy Belle's named insured, and Hymel & Associates, LLC, a limited liability company which owns the vessel.”

 

The named underwriters to a Pantaenius America Yacht Policy are the petitioners in this case. The individual named insured under the yacht policy and the corporate owner argue that the arbitration clause in the yacht policy is ambiguous as to the named insured, and the non-named corporate owner is not bound by the clause, which states:

 

“This insurance policy shall be governed by and construed in accordance with well-established and entrenched principles and precedents of substantive United States Federal Maritime Law, but where no such established and entrenched principles and precedents exist, the policy shall be governed and construed in accordance with the substantive laws of the State of New York, without giving effect to its conflict of laws principles, and the parties hereto agree that any and all disputes arising under this policy shall be resolved exclusively by binding arbitration to take place within New York County, in the State of New York, and to be conducted pursuant to the Rules of the American Arbitration Association.”

 

The district court applied the Federal Arbitration Act to resolve the petition to compel.  The court rejected the insurers’ arguments that the corporate owner, although not a signatory to the yacht policy, should nonetheless be compelled to arbitrate as an “insured” under the policy or under an agency theory.  “The text of the arbitration provision does not by its terms mandate that an insured that is not a party to the agreement must arbitrate. The arbitration provision requires, instead, that the parties to the agreement (‘the parties hereto’) submit to arbitration.  … There is also no other established rule that would require any insured under the Policy to arbitrate, regardless of whether or not they sign the relevant agreement, as suggested by Petitioners.”  The court further found that there was no evidence that the individual named insured “signed the Application as agent for [the corporate owner], rather than in his individual capacity.”  The fact that the named insured might not be legally able to collect insurance proceeds under the applicable Louisiana law for property he did not own was irrelevant to the issue of arbitration.  The court found that the arbitration clause was unambiguous: “On its face, the passage at issue reflects two separate agreements by the parties: one agreement concerns the substantive law that is to apply to interpretations of the Policy, and the second is the parties' agreement to arbitrate disputes arising under the Policy before the AAA.”

 

Finally, the court declined to reach the issues of which AAA rules should apply and where the arbitration should be held, inasmuch as these issues “undoubtedly fall within this broad delegation of decision making authority to the arbitrator, rendering these questions inappropriate for resolution by this Court.” 

 

 

EWELL’S UNIVERSE
John R. Ewell

[email protected]

 

06/22/17       Mount Vernon Fire Ins. Co. v. Visionaid, Inc.

Massachusetts Supreme Judicial Court

Insurers Have No Duty to Prosecute or Pay for Affirmative Counterclaims, Says Massachusetts High Court

The Massachusetts Supreme Court addressed whether an insurer’s duty to defend extends to a counterclaim brought by the insured.

 

Visionaid is a manufacturer of lens cleaning and eye safety products. It purchased an employment practices liability insurance policy from Mount Vernon, which covered, among other things, wrongful termination claims. In 2011, Visionaid discovered through a forensic audit that one of its employees, Gary Sullivan, appeared to have misappropriated several hundred thousand dollars of company funds. Visionaid immediately terminated Sullivan. In 2013, Sullivan sued Visionaid asserting, among other things, age discrimination and unlawful termination. Mount Vernon appointed panel counsel, Todd Bennett to defend Visionaid. Bennett did not file a counterclaim for misappropriation.

 

Visionaid informed Mount Vernon that if it did not prosecute the counterclaim, Visionaid would select independent counsel for its representation, at Mount Vernon's expense. Mount Vernon continued to maintain that the policy did not require it to prosecute the counterclaim for misappropriation of funds, arguing that the duty to defend did not include the duty to prosecute an affirmative counterclaim. Mount Vernon filed a complaint for declaratory judgment in the United States District Court for the District of Massachusetts, seeking a ruling that its duty to Visionaid did not require that it prosecute or pay for the prosecution of the counterclaim for misappropriation of funds. Visionaid filed a counterclaim seeking a judgment, inter alia, declaring that Mount Vernon's duty to defend included an obligation to prosecute Visionaid's counterclaim for misappropriation of funds. The District Court issued a judgment declaring that Mount Vernon's duty to defend Visionaid did not require it to prosecute the counterclaim for misappropriation of funds. Visionaid then appealed to the United States Court of Appeals for the First Circuit. That court certified the question to the Massachusetts Supreme Court.

 

The Massachusetts Supreme Court reviewed the policy at issue, which obligated Mount Vernon to "defend" Visionaid against any "Claim" i.e., "any proceeding initiated against [Visionaid] . . . seeking to hold [Visionaid] responsible for a Wrongful Act." While the meaning of "Claim" was defined in the policy, the policy was silent on the definition of the term "defend." Visionaid argued that “defend” was ambiguous, claiming that the duty to "defend" could be understood as meaning anything a reasonable defense attorney would do to reduce the liability of the insured. The Court disagreed.

 

The Massachusetts Supreme Court found that, in common usage, "defend" means to "deny or oppose the right of a plaintiff in . . . a suit or wrong charged." The Court concluded that the plain meaning of “defend” is clear, stating that “the essence of what it means to defend is to work to defeat a claim that could create liability against the individual being defended.” Focusing on the language of the policy, the Court determined that the policy required Mount Vernon to "defend" Visionaid in any claim "first made against [it] during the Policy Period," and nothing more. Accordingly, the Court held that where an insurance policy provides that the insurer has the “duty to defend any claim” initiated against the insured, the insurer's duty to defend does not require it to prosecute affirmative counterclaims on behalf of its insured.

 

ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

Health Care Legislation

Last month, the U.S. House of Representatives passed the American Health Care Act, H.R. 1628 ("AHCA") to repeal and replace the Affordable Care Act (“ACA”).  This week, the Senate proposed its own health care legislation, the “Better Care Reconciliation Act” (“BCA”).

 

The nonpartisan Congressional Budget Office ("CBO") released its analysis of the legislation this week.  If you’re into numbers, you can read CBO’s report in full here:

 

https://www.cbo.gov/publication/52849

 

The CBO found, among other things, that the BCA could leave tens of millions Americans uninsured (slightly better than the 23 million left uninsured by the House of Representatives’ version).  According to the CBO the Better Care Reconciliation Act would increase the number of people who are uninsured by 22 million in 2026, with 15 million uninsured by 2018.  See https://www.cbo.gov/publication/52849

 

The Senate bill is largely mirrors its House counterpart, including allowing insurers to use age as a factor in setting premiums.   Under the Affordable Care Act, the premium that an insurer may charge to a 64 year-old in the individual or small group market may be no more than three times the premium the insurer charges to a 21 year-old.  Under the House and Senate bills, that ratio would increase from 3:1 to 5:1 for plan years beginning on or after January 1, 2018. In addition, a state could apply for a waiver that would allow it to set a higher ratio.  Thus, seniors could pay more than five times the premium paid by younger persons.

 

In addition, the Senate Bill, like the House version, allows States to opt out of requiring coverage for the Affordable Care Act’s Ten Essential Health Benefits.  The Essential Health Benefits are: outpatient care; Emergency services; Hospitalization;  Pregnancy, maternity, and newborn care (both before and after birth); Mental health and substance use disorder services;  Prescription drugs; Rehabilitative services and devices; Laboratory services; Preventive services;  pediatric services, including oral and vision care (but adult dental and vision coverage aren’t essential health benefits).[1]

 

The Senate adds one key change from the House version: It allows an insurer in the individual market to impose a waiting period of six months on an enrollee who had had a gap in coverage of 63 days or more during the preceding 12 months. The original Senate bill repealed the individual mandate but left nothing in its place to encourage healthy people to enroll in the individual market.

 

The Senate bill also makes large cuts to Medicaid, and uses the money that would be used to fund Medicaid to fund tax cuts to wealthiest Americans: The Bill would nullify taxes that the Affordable Care Act imposed on the wealthiest individuals in order to fund Medicaid subsidies.   CBO predicts that the legislation would decrease federal deficits by a total of $321 billion over a decade.  For an analysis of the tax cuts, see: 

 

 https://www.nytimes.com/2017/06/22/upshot/shifting-dollars-from-poor-to-rich-is-a-key-part-of-the-senate-health-bill.html

 

https://www.washingtonpost.com/news/wonk/wp/2017/03/07/the-massive-tax-cuts-for-the-rich-inside-the-gop-health-care-plan/?utm_term=.7ad1436ce856

 

In sum, the Senate Bill is the same as the House version, except it adds a provision allowing carriers to impose a six-month waiting period before coverage for an uninsured enrollee becomes effective.  The goal is to address the coverage gap left by the House version, which ended the ACA’s “individual mandate”, but left no protocol in place for the temporarily uninsured to obtain coverage.

 

 

OFF THE MARK
Brian F. Mark
[email protected]

 

6/12/17         Auto-Owners Ins. Co. v. High Country Coatings, Inc.
U.S. District Court, District of Colorado
Colorado Federal Court Finds Duty to Defend in Construction Defect Action

High Country Coatings (“HCC”), a subcontractor that applies floor coatings, retained Brinkman Construction (“Brinkman”) to install epoxy and urethane coatings and joint caulking on concrete floor slabs in a hangar at Loveland Airport in Colorado.  After HCC finished its work, Brinkman and the project owner, Otter Aviation (“Otter”) discovered that the coating HCC applied started to bubble.  Brinkman and Otter demanded that HCC replace its coating.  Eventually, HCC agreed to do so under a “Floor System Agreement”, which required the supplier of the original floor coating to supply a different coating to the job site.

 

Prior to signing the Agreement, HCC submitted a claim to its general liability insurance carrier at the time, Liberty Mutual, for “damages” at Loveland Airport.  HCC then procured a one year policy with AOIC, which became effective approximately two months before HCC began the replacement work under the terms of the Agreement.  HCC completed the new coating, which also allegedly bubbled, during the AOIC policy period.  Brinkman, through its insurance carrier, Zurich American Insurance Company (“Zurich”), demanded that HCC replace the floor coating.  This time, HCC refused to do so.  Zurich then sued HCC in Arapahoe County District Court alleging that HCC relied on improper floor testing, failed to let the floor slab properly dry out before performing its work and that both of HCC’s floor coatings damaged the Airport hangar’s concrete floor (“underlying action”).

 

In this declaratory-judgment action, Auto-Owners Insurance Company (“AOIC”) sued both HCC and Zurich alleging it has no duty to defend or indemnify HCC in the underlying action.  At the time of its answer, HCC moved for partial summary judgment, arguing that AOIC has a duty to defend it in the underlying action.

In analyzing whether AOIC had a duty to defend HCC in the underlying action, the court looked to the “complaint rule”.  Under the “complaint rule”, a court must read the complaint in the underlying action and the relevant insurance policy to determine whether the facts alleged against the insured “might fall within the coverage of the policy.”  Although the court examined an exception to the complaint rule, it ultimately held that the complaint rule applied in this case, which resulted in a duty to defend by AOIC.

 

In opposing HCC’s motion, AOIC relied on three exclusions contained in its policy.  The first exclusion (exclusion k) relied on excludes “property damage” to “your product arising out of it or any part of it.”  The second exclusion (exclusion l) relied on excludes “property damage” if it arises out of HCC’s work or any part of it and if it is “included in the ‘products-completed operations hazard’”, which means that damages to HCC’s work that occur after the work at issue was fully completed are not covered.  Lastly, AOIC relied on an exclusion (exclusion m) that excludes coverage for “impaired property” arising out of a defect, deficiency, or inadequacy in HCC’s work.  “Impaired property” is defined as tangible property other than HCC’s product or its work “that cannot be used or is less useful because” it either: (a) “incorporates” HCC’s product or work “known or thought to be defective, deficient, inadequate, or dangerous; or (b) because HCC failed to fulfill the terms of a contract or agreement.  Furthermore, in order to constitute “impaired property” it must be true that such property can be restored to use by either “repair, replacement, adjustment, or removal of” HCC’s product or work or by HCC fulfilling the terms of its underlying contract or agreement.

 

Upon review of the exclusions relied on by AOIC, the court determined that none of the exclusions definitively brings Zurich’s claims out from under the scope of the parties’ policy and therefore AOIC has a duty to defend HCC in the underlying action.

 

The court found that the exclusions pertaining to damages to HCC’s property or work are inapplicable as the main allegation in the underlying action is that HCC caused damages to Otter’s property (i.e. concrete slabs) rather than HCC’s own “work” or part of it (i.e. the coating).  The court noted case law holding that “if some of the allegations in the complaint may fall within the policy coverage while other allegations do not, the insurer must defend against the entire complaint because there may be some basis on which the insurer is ultimately liable.”  Because the complaint rule results in a duty to defend if it is even remotely possible that there is coverage, the exclusions do not defeat AOIC’s duty to defend HCC.

 

The court also found the impaired property exclusion to be inapplicable for two reasons.  The first reason was because the exclusion can reasonably be interpreted to “apply only to instances where property has not been physically injured,” and based on the allegations made in the underlying action, that is not true.  The second reason was because the exclusion can be interpreted not to apply where, as here; there is damage to physical property other than HCC’s work product.

 

As AOIC was found to owe a duty to defend HCC in the underlying action, HCC’s motion for partial summary judgment was granted.

 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

 

03/21/17       Teleflex Medical Incorporated v. National Union Fire Insurance Company of Pittsburgh, Pa.
Ninth Circuit Court of Appeals

Excess Insurer’s Settlement Options:  The Good, The Bad and the Ugly

This recent case discusses considerations and options available to excess insurers in the context of settlement negotiations, and raises points and issues that are good, bad, and ugly.

 

The insured sued its excess insurance carrier for refusing to either contribute $3.75 Million towards settlement of claims, or assume defense of the case.  The case had a complicated underlying factual history involving competing claims and counterclaims between the insured and a competitor with respect to patent infringement, trade disparagement, and false advertising claims.  Eventually, a settlement was discussed where the insured’s primary insurance company would contribute its full $1 Million policy limits which would have required National Union, the excess insurer, to contribute $3.75 Million to complete the settlement.  National Union declined to consent to the proposed settlement without offering to take up the defense, and the insured eventually sued National Union. 

 

National Union moved for summary judgment, arguing that it had an absolute right to veto the settlement, but the trial court denied the motion for summary judgment.  The case proceeded to trial and a jury awarded the insured $3,750,000 in contract damages, $1,200,000 in attorneys’ fees, expert fees and costs, and prejudgment interest of $1,113,987.  The Court then denied National Union’s motion for a new trial and/or for a judgment to be entered in its favor.

         

The “good” involved in this case is that the Court noted and applied California law which lays out a fairly predictable groundwork concerning the options an excess liability insurer has when presented with a proposed settlement of a covered claim that has been approved by both the insured and the primary carriers.  Under California law, the excess insurer has three options:  (1) approve the proposed settlement; (2) reject it and take over the defense; or (3) reject it, decline to take over the defense, and face a potential lawsuit by the insured seeking contribution towards the settlement and related damages.  In such a potential lawsuit, as in this case, the insured may be entitled to reimbursement if the excess insurer was given reasonable opportunity to evaluate the proposed settlement, the settlement was reasonable and not the product of collusion and the excess insurer rejects the settlement and declines to take over defense of the case.  So the “good” in this case is that California law is fairly straightforward in presenting and defining the available options. 

 

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