Coverage Pointers - Volume XIX, No. 15

Volume XIX, No. 15 (No. 499)

Friday, January 12, 2018

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


Lake Placid Office

2577 Main Street

Lake Placid, NY 12946

Phone: 518-523-2441

Fax: 518-523-2442

© Hurwitz & Fine, P. C. 2018
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 like them even when we are on vacation.


It’s been a very difficult week at the firm.  One of my partners and his wife suffered the unspeakable tragedy of losing their son.  Hug those near to you and do not fail enjoy every single moment you have with those you love.  Please keep his family in your prayers.


I bring you greetings from Scottsdale, Arizona, where your editor has been hiding out from the cold since just after Christmas.  It’s worked, because it was sub-zero temps in Buffalo and over 70 in the desert, virtually over the last two weeks.  Of course, I’ve chatted with some of you over the last couple, because vacation or not, we’re here to help.  Thanks to the attorneys back home for carrying out, quite ably, in my absence.


New Legal Talent at H&F:


We’re delighted to welcome two new lawyers to our staff, Ashmita Roka and Larry Waters.  Both Ashmita and Larry clerked for us during law school so we know the superb quality of legal acumen they bring to the firm.  Both are joining our litigation team with Larry joining the Coverage Team as well.  That brings our Coverage Team to 14 lawyers, to better serve our clients’ needs. 


Introducing:  Larry Waters:


Larry is an associate in the firm’s Insurance Coverage and Health Law practice groups where he focuses his practice in insurance coverage analysis, research, drafting motions, pleadings and briefs, as well as in analyzing court cases and conducting research in governance law, HIPAA requirements and public health law issues. He has experience drafting pre-trial motions, drafting pleadings in State and Federal Court, drafting memoranda in support of summary judgment in Federal Court. 


Active in public policy and public health issues, Mr. Waters volunteered his time at the University at Buffalo School of Law Civil Liberties and Transparency Clinic where he conducted legal research on topics such as the Privacy Act of 1974 and the Administrative Procedure Act, drafted Freedom of Information requests, drafted complaints for Federal Court, developed media strategy, and conducted client interviews.


He served as a legal intern for the Disability Advocacy Project at Neighborhood Legal Services where he assisted in client screening, drafting memos, observing administrative hearings, assisted in securing medical and vocational records, and in analyzing Social Security Disability and Social Security Income claims. He also interned in the New Castle County Office of Law in Delaware where he summarized depositions, analyzed court cases, conducted legal research on topics including the Brady rule and disorderly premise violation, retrieved tax notices and coordinated office supply ordering.


Larry earned his Juris Doctor from the University at Buffalo Law School where he was Executive Technology Editor of the SUNY Buffalo Intellectual Property Law Journal; served as President of the Black Law Students Association; Treasurer of Women of SUNY Buffalo Law and of the Trial Advocacy Group; and served as Director of Community Involvement/Public Service for the Holistic Law Group. He earned his Bachelor of Arts in Criminal Justice at the University of Delaware where he made Dean’s List and was a member of the Sociological Club, Alpha Kappa Delta and the National Society of Collegiate Scholars.  


A member of the New York State, Erie County and Minority Bar Associations, in 2017, he was awarded the John L. Hargrave Law Student Award by the Minority Bar Association.


He’s an avid basketball fan, to boot.


We also welcome Larry to the Coverage Pointers staff.  He will be writing on New York State federal district court coverage decisions.  The temporary column title is Wandering Waters but we welcome recommendations for alternative names for Larry’s column.


Introducing:  Ashmita Roka:


Ashmita focuses her practice in the defense of construction accidents and medical malpractice claims as a member of the firm’s New York Labor Law and Medical Malpractice defense teams. She has experience drafting pleadings, handling discovery demands and responses, summary judgment motions, motions to compel, motions in limine, depositions, case management and strategy sessions, as well as legal research experience.


On the personal side, Ashmita speaks Nepali, Hindu, Spanish, French and English.  She was born in Nepal where she spent her formative 14 years; She loves traveling, cooking, reading, and writing; and for the past five years, she has been going to 10 day silent meditation retreats.  Ashmita love animals. When she was in college, she adopted a pit bull and her name is Daisy.


Prior to joining Hurwitz & Fine, P.C., Ashmita served an intensive judicial externship with the Honorable Patrick H. NeMoyer in the Appellate Division Fourth Department where she performed research and drafted reports for the Court on civil and criminal appeals, such as downward departure from SORA hearing, summary judgment motion, ineffective assistance of counsel, and harsh and severe sentencing. She also reviewed and synthesized the record on appeal for relevant facts needed for the Court’s opinion. She also served a judicial internship for the Honorable E. Jeannette Ogden of the Supreme Court Eighth Judicial District where she performed research, drafted decisions, and edited draft opinions on a wide variety of civil motions, such as personal injury, contract breach, attorney fee disputes, and patent jury instructions. There she also observed summary judgment motions, trial proceedings, and summary jury trial. 


Ashmita also served a judicial externship with the New York State Division of Human Rights for Administrative Law Judge Martin Erazo. There she reviewed and synthesized trial transcripts, evidence, and relevant facts needed for the Judge’s decision and drafted legal opinions and conducted legal research on issues, such as unlawful discriminatory practices relating to employment and public accommodation in violation of N.Y. Exec. Law, Art. 15.

Extensively well-traveled and multilingual, Ms. Roka served as a law clerk in Ecuador, published articles on the multicultural experience of studying abroad while at the Institute of American University in France, worked as a Human Rights Fellow with multinational investigative teams on child sex tourism and child abuse in Thailand, and worked in New York City as an interpreter on legal issues for Nepali clients for venerable NYC law firms including Willkie Farr & Gallagher LLP, Skadden, Arps, Slate, Meagher & Flom LLP, and Frankfurt Kurnit Klein & Selz. Ms. Roka earned her Juris Doctor from the University at Buffalo Law School where served as Articles Editor for the Buffalo Human Rights Law review, worked as a research assistant for a book on the Trans-Pacific Partnership and was selected as the Student Commencement Speaker. There she was awarded Best Petitioner’s Brief in the Frederick Douglass Regional Moot Court and also competed in the Charles S. Desmond Intermural Moot Court. She earned her Bachelor of Arts in Public Policy at William Smith College.  


Welcome both! 


You’ll find some interesting cases in our first issue of 2018, our 499th overall, including a Progressive case where the court found that an assault was accidental for the purposes of insurance coverage.


As Published in National Underwriters’ publication, Property Casualty 360o:


New York accident? Sending a coverage letter? Out-of-state insurers take heed




New York’s highest court has dramatically expanded the breadth of the law that establishes the minimum requirements for liability insurance policies in the state.


The Attorney-Client Privilege—an Expansive View


In this issue, we bring you an extra treat, a case summary from our own Andrea Schillaci, who chairs our Commercial Litigation Team.  Andrea, who can be reached at [email protected], brings an unusual case expanding attorney client privilege in the insurance milieu, in a time when courts are limiting the use of that privilege


11/21/17         Dansko Holdings v. Benefit Trust

United States District Court, Eastern District of Pennsylvania

Attorney Client Privilege Can Protect Communications between Non-lawyers

The United States District Court for the Eastern District of Pennsylvania held that communications between BTC, its insurance carrier and its insurance broker are protected by attorney-client privilege despite the attorney neither authoring nor receiving the communications. This case involves a suit alleging fraud in the inducement. Dansko asserted that defendant intentionally misrepresented itself by failing to disclose that it was under investigation by the Department of Labor.  Dansko moved to compel production of documents pertaining to the DOL investigation and defendant refused asserting that the documents are protected by the attorney-client privilege and work-product doctrine—even where there is no attorney involved—because the information was created for purposes of maintaining insurance coverage.

Attorney-Client Privilege


In addressing BTC’s claim that their documents are protected by attorney-client privilege, the court agreed that most of their emails were protected by the attorney-client privilege. The court reasoned that when a suit is brought by a third party an anomalous relationship exist among the attorney, the insured and the insurance carrier by virtue of the insurance contract.


The court held that several emails were privileged communications as they pertained to the initial notice of BTC’s potential claim to their insurance carrier, while other emails involved information about BTC’s insurance policy relating to their settlement with the DOL.  Following the reasoning in Serano v. Appalachia, LLC, 298 F.R.D. 271 (2014), the Dansko court determined the communications between the insured, the insurance carrier and its broker were “necessary for the purposes of providing or procuring representation in order to maintain coverage and effectuate strategy and tactics of counsel.” The court reasoned that an attorney’s ability to give sound legal advice is dependent upon an assessment of the claim and other information relayed to the client by the insurance carrier. 


Work Product Doctrine


In addressing BTC’s assertion that their documents were protected by the work-product doctrine, the court held that the email correspondences detailing the status of the DOL investigation and the prospective settlement agreement were prepared in anticipation to trial. Moreover, the court reasoned that investigations by regulatory agencies are sufficient grounds to anticipate litigation and therefore their documents were afforded protection as attorney work product.


Jen’s Gems:


Greetings!  And, Happy New Year!


This has certainly been an eventful few weeks here in Buffalo with our Buffalo Bills making the playoffs for the first time since 1999.  I joke that approximately 60% of the male population of Buffalo cried on New Year’s Eve (the day they clinched).  This included my husband although I am sure he would not be crazy about me sharing that information to a few thousand people.  And, I am sure he would want me to clarify that it was only a few tears.  But, as they say, easy come easy go.  The Bills were then knocked out in the first round.  Not easy being a sports fan in this town.  But, I am glad that we opted not to make the investment to go down to Jacksonville to see it in person. 


In terms of my column this week, I report on an interesting decision from our trial courts were the judge issued an order directing three excess carriers to advance defense costs relative to a criminal prosecution and SEC action.  Worth a read.


Until next issue….



Jennifer A. Ehman

[email protected]


A Century Ago:  I’ll Huff and I’ll Puff and I’ll…


Buffalo Evening News

Buffalo, New York

12 Jan 1918


A Man Blown Off 150 Ft. Roof

By Gale; Lands in Field Unhurt


George J. Fischer of 361 Walnut Street, of the Curtiss Airplane Company, made his first flight this morning, a feat that no aviator, no matter how daring, would risk in such a gale.  Furthermore, according to Fischer, who had no previous training as an aviator, and who weighs 221 pounds, it is going to be his last flight, so far as he is concerned.  Here is now it happened, according to his story:


Fischer and a number of Curtiss employees were loaned temporarily to the contractors building the additional to the American Radiator plant, near Hertel and Elmwood Avenues.  The men have been laying the roof of the plant.  The roof at the rear end is about 150 feet high, Fischer says.


“When we got to work this morning the wind was blowing so hard we decided we could not work,” he said.  “I had left some tools on the roof that night before, so I went up there to get them.  I had just picked up a hammer when a terrific blast of wind whirled me around.  I could not stand against it and was force to run towards the end of the building.  Suddenly the wind lifted me off my feet and the next thing I knew I was being carried off into space.


“I was so frightened that I shut my eyes tight and spread out my arms.  It took my breath away from me.  I felt a bump, and to my astonishment, I found I was standing in afield.  I looked around and there was the plant.  It seemed a mile away.  A negro came running up and asked me if I was hurt.  I told him no and started to plow back to the building.  I was so shaken up by it all that I quit for the day.


“I don’t care to fly again—at least not that way.”


Tessa’s Tutelage:


Dear Readers:


This year has already gotten off to a good start – the Buffalo Bills finally made it to the playoffs! Although we didn’t win, the fact that the Bills got there at all was a pretty excellent surprise. It sort of feels like pigs have flown and the possibilities are endless. In fact, it is 60 degrees in Buffalo in January -- hell may have frozen over. Some may call me a Pollyanna, but even a loss in the playoffs seems like a huge change in luck. At the end of the day, the one thing I really appreciate about Buffalo sports is the eternal optimism of the fans.  The Bills Mafia will enthusiastically and meaningfully tell you that “next year is the year.”  So, maybe next year we will make the playoffs again (and Tom Brady will retire). For all the remaining playoff teams (except the Patriots), I wish you luck!



Tessa R. Scott

[email protected]


Life-Shortening Beer?


The Wall Street Journal

New York, New York

12 Jan 1918




William Jennings Bryan said in a temperance address in Kankakee:


“We temperance people should make no rabid, exaggerated or false claims.  With the truth we can win and easily win.  Inaccuracies only harm us.


“A temperance lecturer once ruffled up his hair and roared:


“‘Every glass of beer a man drinks shortens his life one week.’


“‘Question!’ shouted a stout, red-faced chap in the gallery.  ‘Question!’


“‘Well, what’s your question, friend?’ said the lecturer.


“‘Did I understand you to say, sir, that every glass of beer a man takes shortens his life a week?’


“‘That’s what I said.  Why?’


“‘Oh, nothing,’ said the stout chap, ‘only I’ve been doing a little mental arithmetic, and I find I ought to have been dead 650 years ago.’”—Washington Star.


Ewell's Universe:


Dear Subscribers:


Yesterday was a special day. My girlfriend was admitted to the New York State Bar. I had the privilege of watching her sign the roll of attorneys and take the attorney oath. It was a long-awaited day after years upon years of preparation. Long hours of studying, countless classes, difficult exams—the most important and most difficult being the bar exam. All of this culminates into admission as an attorney. More than being able to sign court documents and argue before judges, it is an honor that allows one to fully serve his or her clients by providing advice and counseling on the law as well as representation in court. I am very excited for her to join in the same profession I enjoy.


Ashmita Roka and Larry Waters, associates of the Firm, were also admitted to the New York State Bar yesterday. Congratulations to you both!


Today, I am back in the office considering insurance coverage. When I have a complex coverage question, I often ask others to weigh in. I find it to be helpful way to work through a coverage analysis. Turns out … so do the courts. The case discussed in my column puzzled the Supreme Court of Connecticut—to the point where they asked two additional justices to weigh in.


The issue was primarily whether a business exclusion applied in a factually unique case, but the court also addressed a more important consideration. It considered whether it is against public policy in Connecticut to insure punitive damage awards resulting from “personal and advertising injuries”, such as false imprisonment, false arrest, malicious prosecution, libel, slander, and privacy invasions. The long-standing law in Connecticut was that punitive damages were uninsurable. This case took a different turn.


A woman had recently begun working for a construction company. The construction company’s office was located in the owner’s home. One day, as she was working, an armed intruder broke in and demanded that she open a safe in the home. The intruder tied her up and demanded access to the safe. Pasiak, the owner of the construction company, arrived home. At which point, the intruder attacked Pasiak. A scuffle ensued, and during the scuffle the intruder’s mask was ripped off. Pasiak immediately recognized the man to be one of his lifelong friends. Pasiak demanded that the intruder untie the woman. However, once the woman was untied, Pasiak refused to let her leave or call the police for several hours. The woman was finally allowed to leave and reported the incident to the police. The attacker was convicted of criminal charges. In addition, the woman filed a tort action against Pasiak alleging false imprisonment and emotional distress. The jury awarded her compensatory damages and punitive damages against Pasiak.


At the time of the incident, Pasiak had a homeowners policy with a personal umbrella. Despite operating a construction company, he had no commercial general liability policy.  The personal umbrella carrier denied coverage pursuant to a business exclusion in the policy. It argued that the woman would not have been at Pasiak’s house, but for her employment with him. The Connecticut Supreme Court found that the location where the incident occurred was not determinative. Upon review of the record, the Court could not determine as a matter of law whether the incident arose out of the insured’s business pursuits. It remanded to the trial court for a new trial, including findings of fact relating to the business exclusion.


More importantly, the Connecticut Supreme Court considered whether public policy barred coverage for punitive damages when the policy covered the intentional tort of false imprisonment. The Court reasoned that the policy already insured the intentional act of false imprisonment. As such, coverage was already provided for intentional or reckless conduct.


The Court held that where a policy covers intentional torts, such as false imprisonment, it is not against public policy to insure punitive damages. The decision suggests that insurers in Connecticut who provide coverage for “personal and advertising injury”—such as false imprisonment, false arrest, malicious production, libel, slander, and privacy invasions—will be liable for punitive damage awards against their insureds.


If Connecticut insurers do not wish to cover punitive damages for these claims, they should consider adding a punitive damage exclusion to their policies. The exclusion should explicitly state that the coverage provided by the policy does not cover punitive damages for “personal and advertising injury”, and expressly state that punitive damage awards for false imprisonment, false arrest, malicious production, libel, slander, and privacy invasions are not covered.


‘Til Next Time,



John R. Ewell

[email protected]


100 Years Ago:  Training the Disabled:


The Oneonta Star

Oneonta, New York

12 Jan 1918




Oregon University to Re-Educate

Victims of the War.


Re-education of men crippled in the war is a problem that the University of Oregon is anticipating and one for which preparation already is being made.  A committee of representatives of the departments of psychology and education has been appointed to make a careful study of the most practical methods of re-education and to make recommendations for the establishment of such courses of study as are deemed advisable.


The special problem for the committee is to devise ways of educating men for new pursuits after they have been crippled in such way as to make their former occupations impossible. 


Peiper’s Pontifications:


We start of 2018 with a bang.  As mentioned above, yesterday saw the official welcoming of Larry Waters and Ashmita Roka to the rolls of the New York State Bar.  It's a day they will remember (or is it rue) in the years to come.  Fear not, we did not require them to work on their admission date. All pomp and circumstance aside, they are fully on board and we are delighted to have them.  


Mr. Waters, in fact, has already logged his first win.  Yes, it was an unopposed motion, but he handled it with the savvy poise of an attorney far more seasoned than his hour or two of post-admission experience might suggest.  With the win, Larry has now matched the litigation win total of some of more senior Members of this law firm.  Undefeated, of course, ain't too bad of a career record. 


In all seriousness, both Ashmita and Larry were law clerks with the firm.  We've had the pleasure of watching their experiences grow from second year law students, to full-time test studiers, to nervous test waiters, and now to full-fledged attorneys.  They have earned their place at the firm, and we're certain you'll enjoy working with them in the years that come.  


Not much happening these past two weeks with respect to decisions.  We do note an interesting ruling regarding expert disclosure, and how it can seriously impact dispositive motions.  While not always the case, Scheduling Orders are, in fact, Orders. As such, when a court sets a deadline for expert disclosure one might be wise to adhere to it.  


That's it for now.   


P.S. Ashmita - Waters is already 1-0.  You're officially on the clock. 



Steven E. Peiper

[email protected]


Drug Company Lawsuits Aren’t New


The Brooklyn Daily Eagle

Brooklyn, New York

12 Jan 1918


Mrs. Lozell Sues Orangine

Chemical Co. for $2,000.


Mrs. Olga Lozell of 1186 Bleecker Street, Ridgewood, started suit before Justice Van Siclen in the Queens County Supreme Court yesterday against the Orangine Chemical Company, a New Jersey corporation, with offices in this city and a factor in Chicago.  She asks $2,000, claiming that she was made ill on March 1, 1916, by taking one of the headache powders prepared by that company.


Mrs. Lozell testified that when she put the powder in her mouth it tasted so badly that she did not swallow any of the drug.  Soon after she became ill.  Noel Campbell of 303 South Street, Jamaica, a chemist, testified yesterday that one of the powders submitted to him contained bichloride of mercury.  Witnesses for the company denied that bichloride of mercury is ever used in any of its preparations.  

Editor’s Note:  the following day’s papers reported a verdict for the defendant.


Hewitt’s Highlights: 


Dear Subscribers:


A new year and a new column on serious injury. However, only the First Department has issued decisions for this edition. Both cases made similar points. The cessation of treatment is not dispositive on the serious injury threshold if such treatment is explained. One explanation accepted is that treatment would not make the plaintiff any better. Another lesson this week is that a plaintiff must address reports from defendant’s experts that injuries were pre-existing and degenerative. It is not enough to opine the injuries are new, but the claims of degeneration must be dealt with.


Hope your 2018 is a good one.


Until next time,


Robert Hewitt

[email protected]


Insurance Ads, Just a Little More Colorful 100 Years Ago:


Great Falls Tribune

Great Falls, Montana

12 Jan 1918


INSURANCE—“See me before you burn.”  Geo. P. Mallon, 2 Dunn block.  Fone 8102.


Wilewicz’ Wide-World of Coverage:


Dear Readers,


Happy New Year! And welcome to our newest columnist and newly-admitted colleague Larry Waters! We are very excited to continue to expand our coverage team and thrilled that Larry will be joining us here in CP. His beat will cover the federal trial courts in New York, so stay tuned for the latest developments.


Now, this week in the Wide World, in Zahoruiko v. Federal Insurance, the Second Circuit issued a brief but to-the-point decision about late notice under Connecticut law. There, an insured under a D&O policy failed to provide notice of the case to the carrier not just after default was entered, but 15 months after that default was entered against him. The carrier’s inability to investigate (let alone the entry of default) categorically prejudiced the insurer. Thus, it was entitled to a declaration of no coverage on that ground. 


Until next time! Stay warm (unless you’re in Australia – then stay inside!).



Agnes A. Wilewicz

[email protected]


Buffalo Pickpockets:


The Buffalo Commercial

Buffalo, New York

12 Jan 1918





Acting because of an epidemic of pocket picking now prevailing in the city, Judge Hager in city court yesterday imposed a limit sentence of 100 days upon Joseph Dewes, 21 years old of 186 Dodge Street, charged in the testimony given against him with being a chronic pickpocket.  Held finally on the charge of being a professional “dip,” after being arrested and released for lack of evidence in one case, the youth stated to the judge that the police wanted to railroad him to prison, but the court was unimpressed.  


Barnas on Bad Faith:


Hello again:


This note comes to you from Buffalo where the Bills have finally ended the playoff drought and it is currently a balmy 60 degrees outside.  Unfortunately, this heat wave is going to be short lived, much like the Bills playoff appearance, as the high on Saturday is supposed to be 13 degrees.  Weather is weird.


Yesterday our firm had two brand new attorneys admitted to practice law at the Appellate Division, Fourth Department, in Rochester.  Hearty congratulations to Larry Waters, Esq., and Ashmita Roka, Esq., on their big day.  Be sure to look for Larry’s Coverage Pointers column where he will cover decisions about insurance coverage from federal district courts around the country.


This week I have the Andrews case in my column.  Andrews is a case from the Third Circuit applying New Jersey law.  The plaintiffs’ home sustained storm-related water damage in the summer of 2012.  While that claim was being adjusted, Hurricane Sandy hit and caused groundwater flooding at the home.  Merchants paid the storm-related water damage, including the policy’s $10,000 mold coverage limit, but denied coverage for water damage and resultant caused by groundwater.  Plaintiff’s brought an action for breach of contract and the duty of good faith and fair dealing.  Merchants eventually succeeded on summary judgment.  Merchants properly paid the claim based upon the storm-related damage and mold and properly denied the ground water claim.  The bad faith claim was also dismissed because there was no coverage under the policy and Merchant’s properly investigated and paid the covered portions of the claim in satisfaction of its obligations under the policy.


Signing off,



Brian D. Barnas

[email protected]


Reading Was Fundamental – a Century Ago


The Kingston Daily Freeman

Kingston, New York

12 Jan 1918




Why Inventor Edison is Blamed for

Decline of Custom.


Edison is most to blame for the decline of the pleasant and profitable old custom of reading aloud, according to the Omaha News.  The electric light, affording convenient illumination for every book or paper in the family, started it.  Substitution of the phonograph and moving picture as a means of entertainment did even more. 


Good poetry can never be fully appreciated until it is read aloud, even to one’s self.  Whitman and Swinburne, for instance, are not poetry at all without the magical sound of the syllables.  The better the poetry the more it is improved by correct and leisurely reading. 


But the principal gain lies in drawing the family together and in educating the children.  Not even hard study will improve the spoken vocabulary of a child so much as listening to good literature and taking a turn in reading.  The “hard words” become easy and common when father or mother can help with pronunciation and definition.


Altman’s Administrative (and Legislative) Agenda:  


Greetings, Dear Readers.  I hope your New Year is off to a good start.  Here on Long Island, we are digging out from our first blizzard of the year, snow piled everywhere.  It reminds me of when I was kid and played King of the Mountain, climbing up towering piles of dirtied snow, before tumbling down to land safely, but wetly, at the bottom.


Today, I bring new regulations from the Department of Homeland Security on searching of smart phones. 



Howard B. Altman

[email protected]


Suffrage, and a Shortage of Men, May Lead to Women On Juries:


Buffalo Evening News

Buffalo, New York

12 Jan 1918




The war has reduced the number of men available for service as jurors. Which leads one to the speculation as to whether women of this State, now that they have received the vote, will ere long gravitate toward the jury boxes.


If women are made eligible for such service it will be interesting to see how they perform the service.  We wonder if they will take the same course as those men who daily besiege the office of the commissioner and seek exemption by resorting to all sorts of excuses and devices.


We believe women would make excellent jurors taken as a whole.  In the case of a woman on trial for crime women jurors would have a hundred clues to character and conduct that would escape a man and be imperceptible to him.


And what an opportunity for meting out justice would be presented to them when passing upon one of their own sex. Certainly we should not be treated to exhibitions of emotional leniency which men jurors have often times shown. 


Off the Mark:


Dear Readers,


After last week’s blizzard, the deep freeze on Long Island seems to be finally lifting.  While I know the cold temps will be back soon, it’s nice to feel my fingers and toes again.


This edition discusses a construction defect case from the Court of Appeals of Louisiana, Fifth Circuit.  In Dorsey v. Purvis Contr. Grp., LLC, the plaintiff claimed that the renovation work performed by the defendant following damage to her home sustained during Hurricane Katrina was not performed in a workmanlike manner.  The Louisiana Court of Appeals examined the plaintiff’s allegations and the terms of the commercial general liability policy issued to the defendant and held that as the damages alleged by the plaintiff directly resulted from the defendant’s work, such claims were specifically excluded under the work product and damage to your work exclusions of the defendant’s policy.  Additionally, the Court held that the plaintiff’s mold claim was specifically excluded under the policy’s fungi or bacteria exclusion and that the plaintiff’s claims of fraud, false advertising, and misrepresentation related to the defendants incorrect claim of being a state licensed general contractor did not fall within the policy’s definition of “personal and advertising injury” and thus were not covered under the terms of the policy.  Accordingly, the Court affirmed the trial court’s granting of summary judgment in favor of the defendant’s insurance carrier.


Until next time …



Brian F. Mark
[email protected]



Wandering Waters [Temporarily assigned column name; looking for recommendations]


I am very excited to say finally that I am an attorney.  Very recently (i.e. yesterday), I was finally admitted to practice law in the state of New York.  Through the support of family, friends, and coworkers, I have finally achieved a lifelong dream.  I am excited to join officially Hurwitz & Fine as an associate attorney.  I look forward to providing updates on New York federal court cases. 


Until next time . . .



Larry E. Waters

[email protected]



Headlines in this Week’s Issue, Attached:


Dan D. Kohane
[email protected]


  • Carrier Fails to Provide “Evidence” to Justify a Stay of Uninsured Motorist Arbitration.  Attorney’s Affidavit is not Evidentiary Proof
  • Binding Bid Proposal Constituted “Written Contract” Requiring Additional Insured Status, Triggering Endorsement
  • Assault was “Accidental” from Victim’s Perspective for Purposes of Uninsured Motorists Coverage


Robert E.B. Hewitt III

[email protected]


  • Plaintiff’s Doctor Must Address Preexisting Degenerative Conditions
  • Cessation of Treatment is Not Necessarily Dispositive



Tessa R. Scott

[email protected]


  • Plaintiff Sufficiently Rebutted Defendant’s Evidence Which Demonstrated Lack of Medical Necessity
  • Civil Court’s Decision Grant Of Partial Summary Judgment, In Effect, Resulted In An Undeserved Win For Plaintiff
  • Defendant’s Expert Should Be Allowed To Testify, Even If It Is Not The Doctor That Prepared The Peer Review



Steven E. Peiper

[email protected]


  • Unexcused Failure to Timely Disclose Expert Witnesses Results Preclusion of Expert Proof
  • Negligence Trigger in Contractual Indemnification Clause Means What it Says



Agnes A. Wilewicz

[email protected]


  • Second Circuit Determines that Insured’s 15-Month Delay in Providing Notice, and Following Default Judgment, Constituted Prejudice Sufficient for Carrier to Disclaim on Late Notice (Connecticut Law)



Jennifer A. Ehman

[email protected]


  • Court Directs Excess Insurers to Advance Defense Costs



Brian D. Barnas

[email protected]


  • Insurer did not Breach the Duty of Good Faith and Fair Dealing where there was No Coverage under the Policy and it Properly Investigated and Paid Covered Portions of the Claim


John R. Ewell

[email protected]


  • Connecticut’s High Court Holds That Insurance Coverage for Punitive Damages Awarded for “Personal and Advertising Injuries” Is Not Against Public Policy



Howard B. Altman

[email protected]


  • New DHS Directive: Border Search of Electronic Devices


Brian F. Mark

[email protected]


  • Louisiana Court of Appeals Holds that Insurer had no Duty to Defend or Indemnify its Insured Relative to Construction Defects claims Based on Policy Exclusions



Larry E. Waters
[email protected]


  • Southern District Grants Summary Judgment to Century Surety on its Declaratory Judgment Claim as Against Additional Insureds and also Grants Default Judgment to Century Surety on its Claim for Declaratory Judgment as to Defendant EM Windsor Construction Inc.
  • Western District Denies Plaintiff’s Motion to Remand Case to State Court. 


Earl K. Cantwell
[email protected]


  • Arbitration Waiver ~ Choose Arbitration Timely and Wisely



All the best.  I’ll be back at the home office on Monday.  In the meantime, hope that the snow storm predicted for Friday night does not impact on my flight back on Saturday.





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]  


Twitter:           @kohane








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

Dan D. Kohane
[email protected]



Agnes A. Wilewicz

[email protected]



Jennifer A. Ehman

[email protected]


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

Brian D. Barnas

Howard B. Altman

Brian F. Mark

John R. Ewell

Larry E. Waters

Diane F. Bosse

Joel R. Appelbaum


Steven E. Peiper, Team Leader
[email protected]


Michael F. Perley

Edward B. Flink

Brian D. Barnas

Howard B. Altman

James L. Maswick


Jennifer A. Ehman, Team Leader
[email protected]

Patricia A. Fay

Tessa R. Scott


Jody E. Briandi, Team Leader
[email protected]


Diane F. Bosse

Topical Index

Kohane’s Coverage Corner

Liening Tower of Perley

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
Ewell’s Universe

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

Wandering Waters

Earl’s Pearls


Dan D. Kohane
[email protected]


01/10/18       Government Employees Insurance Company v. Tucci

Appellate Division, Second Department

Carrier Fails to Provide “Evidence” to Justify a Stay of Uninsured Motorist Arbitration.  Attorney’s Affidavit is not Evidentiary Proof

On February 1, 2014, Tucci was driving his vehicle, when he was involved in a motor vehicle accident. The vehicle was insured by GEICO.  He claimed that while he was driving, an unknown car tried to pass him on the roadway and struck the left from section of his vehicle, causing him to lose control, hit the guardrail and flip four times.


On January 7, 2015, Tucci demanded arbitration of his claim for supplementary uninsured/underinsured motorist (‘SUM”) benefits from GEICO. GEICO commenced a proceeding seeking a permanent stay of arbitration. GEICO claimed that that Tucci failed to satisfy a condition precedent to arbitration as required by the insurance policy, namely, reporting the accident to the police within 24 hours or as soon as reasonably possible, and that there was no evidence of actual physical contact with a hit-and-run vehicle. Physical contact is necessary when there is a hit-and-run vehicle involved.


The lower court granted the application for a temporary stay, conducted a “framed issue hearing”, and after same granted the petition to permanently stay arbitration.


On appeal, the court held that GEICO had failed to show the existence of evidentiary facts regarding Tucci's failure to satisfy the reporting requirement or whether there was physical contact with a hit-and-run vehicle, since, as to those issues, it only provided the unsupported, conclusory assertions of its attorney. Accordingly, the Supreme Court should not have granted a temporary stay of arbitration and directed a framed-issue hearing.


01/09/18       Netherlands Ins. Co. v. Endurance American Specialty Ins. Co.

Appellate Division, First Department
Binding Bid Proposal Constituted “Written Contract” Requiring Additional Insured Status, Triggering Endorsement

The additional insured endorsement to the subject general liability policy affords coverage to "[a]ny entity required by written contract ... to be named as an insured." The "Bid Proposal Document" for the construction project in which the underlying personal injury action arose is such a written contract. The proposal names the parties and the "Total agreed price," contains the dated signatures of the parties immediately below the agreed price, and incorporates by reference "the approved plan for the entire project," stating that all work is to be completed in strict accordance with the approved plan and with the plans and specifications prepared by the architect. Although the parties may have intended to execute a more formal agreement later, the proposal constitutes a binding agreement.


That agreement required the contractor to obtain a policy naming the owner as an additional insured.


01/04/18       Progressive Advanced Ins. Co. v. Widdecombe
Appellate Division, Third Department
Assault was “Accidental” from Victim’s Perspective for Purposes of Uninsured Motorists Coverage

Germain left a bar after consuming a number of alcoholic beverages and got into the driver's seat of his parked car. Concerned that Germain was not

fit to drive, Widdecombe, an acquaintance of Germain, left the bar and tried to persuade Germain to come back inside the bar. Widdecombe attempted to stop Germain from operating the car by placing his foot inside the open driver's door and reaching to grab the keys, which were in the ignition. However, Germain managed to start the engine and put the car in drive, causing it to move forward, trapping Widdecombe and dragging him for approximately 20 feet, resulting in injuries to his leg.


Germain appeared to be uninsured at the time of the incident so Widdecombe filed a claim for uninsured motorist benefits under a supplementary uninsured/underinsured motorist (hereinafter SUM) endorsement in his policy with Progressive.


Progressive disclaimed coverage and commenced this proceeding to stay the uninsured motorist arbitration. The company argued that Germain was not uninsured as his vehicle was insured at the time of this incident by respondent Hartford and alternately, that Widdecombe's injuries were the result of intentional acts and were, therefore, not due to an accident within the meaning of the SUM coverage.


After Hartford was joined in the lawsuit, a framed-issue hearing was held and Hartford established that it did not provide coverage to Widdecombe.  However the court found that the injuries were not caused by an accident, but by intentional acts.


Widdecombe's policy included SUM coverage, for which he paid a premium, providing for payment of "all sums that the insured . . . shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury . . . caused by an accident arising out of such uninsured motor vehicle's ownership, maintenance or use". The term "accident" is not defined in the policy.   For purposes of an uninsured motorist endorsement, when an occurrence is — from the insured's perspective — "unexpected, unusual and unforeseen," it qualifies as an "accident".


The intentional assault of an innocent insured is an accident within the meaning of his or her own policy.


Thus, whatever Germain's intent and criminal liability, this incident was an accident from Widdecombe's perspective. Contrary to petitioner's contention, Widdecombe's uncontroverted testimony established that the incident "happened so fast" and, after he attempted to grab the keys, Germain said that "he was going to cut [Widdecombe's] leg off" and, as Widdecombe tried to get his leg out of the car, Germain "threw the car in drive" and "screeched" away, dragging Widdecombe. This event "was clearly an accident from the insured's point of view," since having his leg trapped and being dragged was sudden and "unexpected, unusual and unforeseen".


Robert E.B. Hewitt III

[email protected]


01/02/18       Wenegieme v. Harriott

Appellate Division, First Department

Plaintiff’s Doctor Must Address Preexisting Degenerative Conditions

Plaintiff was entitled to rely on medical records submitted by Defendant in support of his motion which showed multiple bulging discs and a herniated disc. Since the records were properly before the court and not disputed by defendants, plaintiff could use them to show objective evidence of injury. Plaintiff demonstrated the existence of significant limitations in spinal range of motion, both shortly after the accident and recently, through the affirmed report of her treating physiatrist, who also opined that plaintiff's limitations were causally related to the accident. Although plaintiff had a gap in treatment, that was not dispositive as her physician told her that after 11 months of therapy any further treatment would be palliative in nature. Moreover, her physician stated that her condition remained persistent throughout treatment.


As to other injuries, Defendants made a prima facie showing that plaintiff's shoulder injuries were not causally related to the accident, but involved preexisting congenital and degenerative conditions, as reflected in her radiologist's MRI report. Plaintiff failed to raise an issue of fact. Her physician provided only a conclusory opinion that her right shoulder injuries were caused by the accident, without addressing the preexisting degenerative conditions documented in her own MRI, or explaining why her current reported symptoms were not related to the preexisting conditions 


12/28/17       Bux v. Pervez

Appellate Division, First Department

Cessation of Treatment is Not Necessarily Dispositive

Plaintiff alleged that he sustained permanent consequential and significant limitations in his cervical spine, lumbar spine and right shoulder as a result of the subject motor vehicle accident. Defendants made a prima facie showing that plaintiff's conditions were not causally related to the accident by submitting the affirmed report of a radiologist, who opined that the MRI films of the cervical spine, lumbar spine and right shoulder all revealed degenerative conditions that preexisted the accident. They also submitted the affirmed report of an orthopedist who found normal range of motion in the shoulder.


In opposition, plaintiff submitted his own medical records, which included an X-ray report of his spine showing extensive degeneration, but failed to submit any medical report explaining those findings. Thus, he failed to raise an issue of fact causally relating his claimed spinal injuries to the accident.


However, with respect to his right shoulder, plaintiff raised an issue of fact through the affirmed report of his orthopedic surgeon, who examined him within months after the accident and four years later. That doctor found limitations in range of motion at both examinations, and opined that the tears in plaintiff's right shoulder were caused by the accident, based on his examinations of plaintiff, his review of the MRI film and report, and the fact that plaintiff was asymptomatic before the accident.


Under the circumstances, plaintiff's cessation of physical therapy treatment was not dispositive. He provided other evidence concerning the causation and seriousness of his shoulder, and was not required to provide any particular proof of his inability to pay for costs associated with treatment.



Tessa R. Scott

[email protected]


12/28/17       Excel Surgery Ctr., L.L.C. v Hertz Claim Mgt. Corp

Appellate Term, Second Department

Plaintiff Sufficiently Rebutted Defendant’s Evidence Which Demonstrated Lack of Medical Necessity

Defendant submitted a sworn peer review providing a “factual basis and medical rationale for the reviewer's determination that there had been a lack of medical necessity for the services at issue.” Thus, the burden shifted to Plaintiff to rebut Defendant’s evidence.


Plaintiff was successful in its rebuttal.  Plaintiff submitted an affidavit by one of the chiropractors who had performed the services at issue, which, as plaintiff argues on appeal, "meaningfully referred to defendant's peer review report and sufficiently rebutted the conclusions set forth therein" and, thus raised a triable issue of fact pertaining to medical necessity.


12/29/17       Forest Park Acupuncture, P.C. v NYCT MABSTOA

Appellate Term, Second Department

Civil Court’s Decision Grant Of Partial Summary Judgment, In Effect, Resulted In An Undeserved Win For Plaintiff

Plaintiff moved for summary judgment and defendant cross-moved for summary judgment dismissing the complaint. The Civil Court denied defendant's cross motion and stated that plaintiff's motion was "granted to the extent that plaintiff has established the proper submission of bills to defendant (with a reasonable justification for the late submission)," and that defendant had raised a triable issue of fact with respect to the nonpayment of the claims.

Defendant appealed the Order, arguing that Plaintiff had not established proper submission of the bills with a reasonable justification.


The Second Department concluded that “While the Civil Court purported to "grant" plaintiff's motion for summary judgment "to the extent that plaintiff has established the proper submission of bills to defendant (with a reasonable justification for the late submission)," this was not an award of partial summary judgment as contemplated by CPLR 3212 (e).” The Court found that the “granting of such a partial summary judgment motion, in effect, resulted in Plaintiff succeeding on all fronts. Thus, the Civil Court's finding that plaintiff has established the proper submission of bills to defendant was vacated.


Likewise, Defendant's cross motion arguing that Plaintiff did not submit the claim forms was similarly not established and could not be granted. 


12/29/17       Trimed Med. Supply, Inc. v GEICO Ins. Co

Appellate Term, Second Department

Defendant’s Expert Should Be Allowed To Testify, Even If It Is Not The Doctor That Prepared The Peer Review

Defendant's expert medical witness, who was not the expert who had prepared the peer review report upon which defendant's denial of plaintiff's claim form was based, should have been permitted to testify as to her opinion as to the lack of medical necessity of the supplies at issue, which testimony would be limited to the basis for the denial as set forth in the original peer review report.



Steven E. Peiper

[email protected]


01/11/18       Colucci v Stuyvesant Plaza, Inc.

Appellate Division, Third Department

Unexcused Failure to Timely Disclose Expert Witnesses Results Preclusion of Expert Proof

Plaintiff operated a nail salon out of a premises she rented from defendant.  Plaintiff alleges that she was forced to vacate the premises after years of problems associated with sewage backups and multiple floods.  In the current suit, she seeks business interruption damages.  In addition, she also seeks damages for bodily injuries she allegedly sustained from long term exposure to sewage and mold. 


As part of this litigation, the trial court issued a Scheduling Order which, inter alia, required expert disclosure to be exchanged on or before May 1, 2015.  Summary judgment motions were due on or before August 1, 2015.  We are advised that defendant complied with expert disclosure before the May 1st deadline.  Plaintiff, however, did not. 


When defendant moved for summary judgment in July of 2015, it proffered several expert opinions in support of its application.  After nearly a full year of adjournments and delays, plaintiff finally opposed the motion.  At that time, plaintiff submitted affidavits from a plumber, a certified technician and her physician.  Defendant objected to plaintiff’s opposition on the basis that plaintiffs should be precluded from offering expert proof due to their unmitigated failure to comply with the trial court’s scheduling directives. 


The trial court ruled that defendant met its burden by establishing a lack of proximate cause of plaintiff’s claimed injuries.  In so holding, the court also precluded any of the proffered testimony provided by plaintiff’s “experts” due to her failure to timely issue disclosures. 


In affirming the trial court, the Appellate Division, Third Department noted that the trial court is afforded broad discretion in discovery matters. Here, the Court ruled that plaintiff’s unexcused failure to adhere to basic discovery disclosure deadlines provided the judge with sufficient reason to preclude expert proof from later being submitted.  As such, the trial court’s rulings on admissibility of evidence were not an abuse of discretion.  Where, as here, defendant made a prima facie showing that plaintiff failed to establish proximate cause, and where, as here, plaintiff failed to offer any evidence in opposition, it followed that the trial court’s decision to grant summary judgment was correct.


1/10/18         Pena v 104 North 6th Street Realty Corp.

Appellate Division, Second Department

Negligence Trigger in Contractual Indemnification Clause Means What it Says

Plaintiff commenced the instant matter asserting damages for bodily injuries he allegedly sustained when he fell on the sidewalk in front of building owned by 104 North.  At the time of the incident, the premises was leased to YS Farm.  104 North asserted cross-claims for contractual indemnity against YS Farm pursuant to the lease executed between the parties. 


The trial court granted 104 North’s motion for contractual indemnity, and YS Farm instituted an appeal.  In reversing the trial court, the Appellate Division noted that the contract at issue only provided indemnity where YS Farm was negligent.  Here, because 104 North had not yet established YS Farm’s negligence, it followed that an award of contractual indemnification was premature. 



Agnes A. Wilewicz

[email protected]


01/05/17       J. Graham Zahoruiko v. Federal Insurance Company

United States Court of Appeals, Second Circuit

Second Circuit Determines that Insured’s 15-Month Delay in Providing Notice, and Following Default Judgment, Constituted Prejudice Sufficient for Carrier to Disclaim on Late Notice (Connecticut Law)

Federal Insurance had issued a director and officer liability insurance policy to Zahoruiko. In 2010, the insured was sued. Yet, they did not turn the case over to the carrier, nor did they so much as advise the carrier of the claim. Thereafter, default was entered against Zauoruiko. They still did not notify the insurer. Only about 15 months after the default was entered did they send the case to the carrier for coverage. Thereafter, coverage litigation ensued and made its way all the way up to the Second Circuit.


In a brief opinion, the high court determined that the carrier had been correct in disclaiming for late notice. Under Connecticut law (and similar law in many states), an insurer can be discharged from its coverage obligations pursuant to the “notice” provision of an insurance policy upon a showing of “(1) an unexcused, unreasonable delay in notification by the insured; and (2) resulting material prejudice to the insurer”. Moreover, on the other hand, the insured’s “duty to give notice does not arise unless and until facts develop which would suggest to a person of ordinary and reasonable prudence that liability may have been incurred, and is complied with if notice is given within a reasonable time after the situation so assumes an aspect suggestive of a possible claim for damages”.


Here, the court wrote, the insured’s delay in notifying its carrier was both unexcused and unreasonable. “When the action at issue was commenced against Zahoruiko in 2010, a reasonably prudent person would have understood that liability might be incurred. Moreover, when default was entered against Zahoruiko, he certainly would have known that he could be found liable. Nevertheless, Zahoruiko failed to notify Federal under on and a half years after the lawsuit commenced and 15 months after the default. Insofar as Zahoruiko argues that his untimely notice should be excused because the entity that sued him engaged in unscrupulous tactics, he fails to explain how that conduct prevented him from timely providing notice of the action to Federal.” Meanwhile, the carrier provided a sworn statement from its senior claim officer detailing its prejudice, which stemmed from the inability to investigate the claim. That, and certainly the entry of default, constituted prejudice under the law. Thus, the carrier was entitled to summary judgment declaring that there was no coverage for that claim.



Jennifer A. Ehman

[email protected]


12/21/17       Freedom Specialty Ins. Co. v. Platinum Mgt. (NY), LLC

Supreme Court, New York County

Hon. O. Peter Sherwood

Court Directs Excess Insurers to Advance Defense Costs

This action arises out of a claim for coverage by defendants relative to a criminal prosecution by the United States Eastern District of New York (EDNY), a civil enforcement action by the SEC and a parallel civil action in Texas court. Defendants filed this motion seeking a preliminary injunction directing plaintiffs to advance their attorneys’ fees and costs in these actions, and an order staying any discovery pending resolution of the criminal prosecution and civil enforcement action. 


Defendants (defendants or “the insureds”) had obtained coverage under a primary directors and officers’ policy with a policy limit of $5 million, and four excess policies with limits of $5 million each.  With regard to the subject actions, the primary carrier acknowledged coverage, and advanced fees and costs which ultimately exhausted its policy limit.  The first excess insurer did as well.  This action was brought by the three remaining excess insurers.  They filed the action seeking a declaration that coverage was void under their policies based upon a breach of Warranty Statements. Specifically, they claimed the insured falsely represented on their applications that they were unaware of any wrongful act of any insured that might result in a claim.  They also relied upon the “Prior or Pending Demand or Litigation Exclusion” (“PPL Exclusions”) clauses which preclude coverage for claims arising out of any litigation which was pending as of the start of the policy period or substantially similar fact/event/proceeding upon which the action to which coverage is sought its based.   


Regarding the breach of Warranty Statements, the insurers submitted that certain information was not disclosed specifically allegations that the insureds were defrauding potential investors with material misrepresentations or omissions regarding the value of their assets and liquidity.  Specifically, the insurers noted that defendants received a subpoena in May 2015 from the U.S. Attorney for the Southern District of New York (SDNY) relating to an investigation against a former executive of the insureds, Murray Huberfeld, but failed to disclose that fact on their applications in November 2015.  In the courts’ view, no insured was charged with wrongdoing.  Rather, the Huberfeld matter involved the accusation that a bribe was paid to a public official. The subpoena referenced by the insurers did not concern and was not interrelated with any alleged scheme to defraud investors which was the subject of the EDNY Indictment and SEC Complaint. Thus, the subpoena did not involve a "Wrongful Act'' and did not result in a Claim against any Insured.


Regarding the PPL Exclusions, the excess insurers claimed that the indictment and the SEC action fall under an earlier non-covered time period and share a common nexus of facts and circumstances with those involved in the separate investigation of the executive.  The court likewise disagreed.  The PPL Exclusions turn on a comparison of facts and circumstances as alleged in the complaints.  Here, in the courts view, the insurers made no attempt to compare the facts and circumstances as alleged in the SDNY investigation commenced during the prior policy period with those alleged in the EDNY Indictment and SEC Complaint, both of which were commenced during the policy period. Thus, the insurers had not shown the PPL Exclusions to be applicable


The Court then went on to order the injunctive relief requested.  In its view, the insureds showed a likelihood of success on the merits.  Considering that fact, and the irrefutable harm they would suffer in the underlying litigation if defense costs were not advanced, the court held that until there was final adjudication of wrongdoing by the insureds, the excess policies remained in effect and the carriers were obligated to pay the defense costs. 


The court lastly agreed to stay discovery pending the outcome of the underlying criminal and civil proceedings. 



Brian D. Barnas

[email protected]


01/10/18       Andrews v. Merchants Mutual Insurance Company

United States Court of Appeals, Third Circuit

Insurer did not Breach the Duty of Good Faith and Fair Dealing where there was No Coverage under the Policy and it Properly Investigated and Paid Covered Portions of the Claim

Merchants issued a homeowners policy (the “Policy”) to Plaintiffs for their home in Linwood, New Jersey.  The Policy limited coverage for mold-related damage to $10,000. In addition, the Policy did not cover “Water Damage,” which meant that Merchants would not pay for damage caused by, among other things, water below the surface of the ground, including water which exerts pressure on, or seeps, leaks, or flows through a building, ... foundation, ... or other structure.


On June 29, 2012, a severe storm hit the area in which Plaintiffs lived.  On July 30, 2012, Plaintiffs filed a Property Loss Notice with Merchants for water damage, claiming a leak in the master bathroom.  Plaintiffs learned that water was leaking through the roof and that several shingles were missing from around the area above the bathroom.  Merchants’ adjuster, Tri-State inspected Plaintiffs' property on August 21, 2012.  In a letter to Merchants, Tri-State recommended paying for the roof repair, but stated that replacing the entire roof was “excessive.”  Tri-State ultimately recommended that Merchants pay Plaintiffs $6,457.06 for damages to their home, which included reimbursement for the roof repairs, and Merchants paid Plaintiffs that amount.


While Plaintiffs and Merchants were addressing the storm-related claim, Hurricane Sandy made landfall, and the crawl space located beneath Plaintiffs' house flooded as a result of groundwater.


Shortly before Sandy hit, Plaintiffs noticed mold in the master bathroom and a closet, which were both under the area of the roof where the shingles were missing.  After Sandy, and realizing that they had mold problems, Plaintiffs engaged Quality Air Care to test for mold throughout the house.  The results showed that the greatest concentration of mold was in the crawl space, which contained approximately 50 to 400 times more mold per cubic meter than other tested areas. 


Merchants then retained a second independent adjuster, McBrearty, to evaluate Plaintiffs' home. One of McBrearty's associates and an industrial hygienist from Briggs Associates (“Briggs”) inspected the home for mold.  Briggs's report stated that the highest concentration of mold spores was identified in the crawl space and that the results provide support for the conclusion that the elevated interior fungal concentration arose from the crawl space and not the attic.  McBrearty also stated that there could have been mold issues in the crawl space before Sandy, which Sandy exacerbated. McBrearty recommended remediation of the mold and an additional payment for Plaintiffs' roof so that the shingles would be “matching,” but not for any structural, water, or mold-related reason.


Plaintiffs submitted to Merchants an estimate for “renovations” to their home totaling $282,570.  Merchants sent Plaintiffs a check for $12,158.06 for the roof and other items listed in McBrearty's report, but did not include coverage for any mold damage. After a second inspection of the attic confirmed that mold was present, however, Merchants informed Plaintiffs that the Policy covered the mold damage in the attic and paid the Policy limit of $10,000.


Plaintiffs unsatisfied with the coverage provided by Merchants, claimed that they suffered health problems because of the mold and had to move out of the house until the mold problems were solved.  Plaintiffs also informed Merchants that, based on advice from their physicians and engineers, they decided to demolish and rebuild the house and had incurred various moving, storage, design, and construction costs.


Plaintiffs eventually filed a lawsuit against Merchants alleging breach of the insurance contract and breach of the duty of good faith by failing to promptly and reasonably investigate each claim, unreasonably delaying the investigation of claims, conducting the investigation in an adversarial manner such that Plaintiffs were harassed, failing to effectuate a fair and reasonable settlement, and forcing Plaintiffs to initiate litigation.


Plaintiffs’ breach of contract claim failed because Merchants paid the full $10,000 coverage limit for mold discovered in the attic.  In addition, there was no dispute that the other mold issues arose from water in the crawl space, which flooded during Hurricane Sandy as a result of groundwater.  Thus, the policy exclusion for water that seeps up from the surface or flows through a building.


Plaintiffs’ breach of the duty of good faith and fair dealing claim was also denied.  Under New Jersey law, a claimant who cannot establish that the policy was breached cannot prevail on a claim for an insurer's alleged bad faith refusal to pay the claim.  Moreover, Merchants responded to Plaintiffs' claims, paid the amounts owed under the contract, and did not disregard its obligations or unreasonably fail to investigate or settle Plaintiffs' claims.


John R. Ewell

[email protected]


12/19/17       Nationwide Mutual Ins. Co. et al. v. Pasiak

Supreme Court of Connecticut

Connecticut’s High Court Holds That Insurance Coverage for Punitive Damages Awarded for “Personal and Advertising Injuries” Is Not Against Public Policy

Pasiak operated a construction company. The sole office for the company was a room located in his home. Sara Socci was hired by Pasiak to perform duties as an office worker for the construction company and worked at that office in Pasiak’s home. During Socci’s second week of employment, while she was alone at the office performing her duties, a masked intruder carrying a gun entered the office and demanded that she open the safe. Unaware that a safe existed in the home, Socci could not provide the intruder with the safe’s combination. The intruder led Socci into a bedroom, where he tied her hands, gagged her, and blindfolded her. At one point, he pointed a gun at her head and threatened to kill her family if she did not give him the combination.

Pasiak returned home during the incident and was attacked by the intruder. During an ensuing struggle, Pasiak pulled off the intruder’s mask, revealing him to be Richard Kotulsky, a lifelong friend. After Pasiak made Kotulsky untie Socci, the three of them returned to the office, where a discussion continued between Pasiak and Kotulsky about a woman. Apparently, Kotulsky was angry with Pasiak because he believed that Pasiak had intimate relations with a woman with whom Kotulsky was involved.

Socci asked to leave, but Pasiak told her to stay and sit down. Pasiak refused to let her leave or call the police for several hours. Pasiak than put Socci in his vehicle and drove to meet a mutual friend, who advised them to call the police. Only then did he allow Socci to leave. Kotulsky was arrested and eventually convicted of various criminal offenses. The safe was never opened, and its contents were never divulged.

Socci commenced a tort action against Pasiak alleging false imprisonment, among others things, and claimed emotional distress. At the time, Pasiak was covered by insurance policies issued by the plaintiffs, including a homeowners policy covering bodily injury and a personal umbrella policy covering bodily injury and personal injury. He did not have a separate commercial liability policy.

The insurers provided the Pasiak with a defense in the tort action, but reserved their rights to contest coverage. The insurers then commenced a declaratory judgment action seeking a declaration that they had no duty to defend or indemnify Pasiak. The parties each filed competing summary judgment motions.

The primary issue on appeal was whether the business pursuits exclusion in the umbrella policy applied to bar coverage. On appeal, Pasiak contended that the Appellate Court improperly concluded that the false imprisonment of Socci was ‘‘[a]n occurrence arising out of the business pursuits . . . of an insured.’’ The Supreme Court of Connecticut agreed that the Appellate Court’s analysis was flawed, however, it concluded that the trial court’s analysis was flawed also. The Connecticut Supreme Court held that there was not sufficient evidence in the record to conclude whether the business pursuits exclusion applied as a matter of law. Specifically, the trial court made no separate factual findings with regard to the business pursuits exclusion. Therefore, the Supreme Court of Connecticut remanded the case for a new trial at which the trial court must resolve the factual issue of whether Pasiak’s false imprisonment of Socci arose out of his business pursuits in operating his company. How the trial court answers that question will determine whether Socci’s claim for false imprisonment was excluded from coverage under the business pursuits exclusion in Pasiak’s umbrella policy.

More importantly, the Supreme Court of Connecticut addressed whether it is against public policy to insure a tortfeasor for punitive damages. Historically, the rule in Connectict was that “a tortfeasor may not protect himself from liability by seeking indemnity from his insurer for damages, punitive in nature, … imposed on him for his own intentional or reckless wrongdoing.” However, in this case, the Court distinguished “personal and advertising injuries” as an exception to the rule. The Court explained that: 

where the company insures against liability for false arrest, false imprisonment, malicious prosecution, libel, slander, and invasion of privacy, [punitive] damages… almost necessarily will follow. It is not seemly for insurance companies to collect premiums for risks which they voluntarily undertake, and for which they actively advertise in competition with other companies, and then when a loss arises to say ‘It is against public policy for us to pay this award.’ ’’

The Court held that:


in the absence of a public policy … against providing such coverage, we conclude that, under the facts of the present case, the [insurers] are bound to keep the bargain they struck, which includes coverage for common-law punitive damages for false imprisonment.


Therefore, the trial court determines, after a new trial, that the business exclusion does not apply, then the insurers involved will be liable for the punitive damage award against Pasiak.



Howard B. Altman

[email protected]


On January 4, 2018, the US Customs and Border Patrol (CPB), through the Department of Homeland Security (DHS), issued a new directive  Directive No. 3340-049A (Jan. 4, 2018) titled Border Search of Electronic Devices, which governs Customs’ officials rights to search smart phones. You can view the complete directive at:


Part of the directive relates to attorneys’ phone, and implements safeguards to protect attorney-client privilege.  In short, once an attorney asserts the privilege, the CBP Associate/Assistant Chief Counsel office needs to get involved; the border patrol agent cannot decide on his own to ignore the assertion of privilege.  However, an attorney asserting the privilege may need to provide a privilege log to CBP, as opposed to being granted a carte blanche protection against the search of his/her phone.  Here are the pertinent sections:


5.2          Review and Handling of Privileged or Other Sensitive Material


5.2.1        Officers encountering information they identify as, or that is asserted to be, protected by the attorney-client privilege or attorney work product doctrine shall adhere to the following procedures.     The Officer shall seek clarification, if practicable in writing, from the individual asserting this privilege as to specific files, file types, folders, categories of files, attorney or client names, email addresses, phone numbers, or other particulars that may assist CBP in identifying privileged information.     Prior to any border search of files or other materials over which a privilege has been asserted, the Officer will contact the CBP Associate/Assistant Chief Counsel office.  In coordination with the CBP Associate/Assistant Chief Counsel office, which will coordinate with the U.S. Attorney's Office as needed, Officers will ensure the segregation of any privileged material from other information examined during a border search to ensure that any privileged material is handled appropriately while also ensuring that CBP accomplishes its critical border security mission. This segregation process will occur through the establishment of a Filter Team composed of legal and operational representatives, or through another appropriate measure with written concurrence of the CBP Associate/Assistant Chief Counsel office.     At the completion of the CBP review, unless any materials are identified that indicate an imminent threat to homeland security, copies of materials maintained by CBP and determined to be privileged will be destroyed, except for any copy maintained in coordination with the CBP Associate/Assistant Chief Counsel office solely for purposes of complying with a litigation hold or other requirement of law.


5.2.2        Other possibly sensitive information, such as medical records and work-related information carried by journalists, shall be handled in accordance with any applicable federal law  and CBP policy. Questions regarding the review of these materials shall be directed to the CBP Associate/Assistant Chief Counsel office, and this consultation shall be noted in appropriate CBP systems.


5.2.3        Officers encountering business or commercial information in electronic devices shall treat such information as business confidential information and shall protect that information from unauthorized disclosure. Depending on the nature of the information presented, the Trade Secrets Act, the Privacy Act, and other laws, as well as CBP policies, may govern or restrict the handling of the information. Any questions regarding the handling of business or commercial information may be directed to the CBP Associate/Assistant Chief Counsel office or the CBP Privacy Officer, as appropriate.


5.2.4        Information that is determined to be protected by law as privileged or sensitive will only be shared with agencies or entities that have mechanisms in place to protect appropriately such information, and such information will only be shared in accordance with this Directive.


* * *


In sum, the Directive does acknowledge that there is a need to provide heightened protection for confidential information on an attorney's phone.  However, any attorney dealing with this new provision will need document what is privileged and why, so attorneys may wish to plan ahead to avoid delays when flying.


Brian F. Mark

[email protected]


12/27/17       Dorsey v. Purvis Contr. Grp., LLC
Court of Appeals of Louisiana, Fifth Circuit
Louisiana Court of Appeals Holds that Insurer had no Duty to Defend or Indemnify its Insured Relative to Construction Defects claims Based on Policy Exclusions

In this action, the plaintiff homeowner, Irma Dorsey, filed suit against Purvis Contracting Group, LLC (“Purvis”), its insurer, Scottsdale Insurance Company (“Scottsdale”), and various subcontractors, for damages arising out of work performed during the renovation of her home following Hurricane Katrina.  She claimed that after her home was damaged during hurricane Katrina, she contracted with Purvis to rehabilitate and renovate her home.  In her petition, the plaintiff claims that some of the work was not performed as required under the contract and other work was not performed in a workmanlike manner. 


The plaintiff alleged that the HVAC system was not repaired properly; the wooden frame of her garage doors was not replaced; her front doors were not varnished or replaced; the plumbing lines repaired have burst or leaked; the exterior walls were not sufficiently insulated; one concrete stair is missing from the patio area; and the toilet and vent in her bathroom, the doorbell, and the garbage disposal have never functioned properly.  Plaintiff further alleged that Purvis misrepresented that he was a licensed general contractor rather than a licensed home improvement contractor.  She also claimed that her home had elevated levels of mold, which affected her health and caused mental distress.


Scottsdale filed a motion for summary judgment, asserting that plaintiff’s claims were excluded under the terms of the general commercial liability insurance policy issued to Purvis.  Scottsdale claimed that its policy excluded coverage for (1) plaintiff's claims for damage to Purvis' work product or the cost to remediate Purvis' work product; (2) the cost of reimbursement for incomplete work; (3) the cost to repair faulty work when the faulty work does not cause damage to other property; (4) plaintiff's claims of mental anguish, inconvenience, or loss of income; (5) any damages caused by fraud or unfair trade practices; and (6) plaintiff's alleged damages resulting from mold.


In opposition to the motion, the plaintiff claimed that she suffered: (1) an advertising injury arising out of Purvis' advertisement as a Louisiana state licensed general contractor and not a home improvement contractor; (2) personal injury, including mold exposure, mental anguish, and distress; (3) property damage to her home involving her plumbing, electrical, and HVAC systems, as well as the installation of an insufficient amount of insulation in her home and (4) the loss of use of her home during subsequent repair as a result of Purvis' incomplete and improper work performed.  In support of her opposition, the plaintiff attached various exhibits, which included the Home Improvement Contract, inspection reports, repair estimates, and excerpts from the Louisiana State Licensing Board of Contractors.


In reply, Scottsdale objected to the admissibility of the plaintiff’s exhibits attached to her opposition as same were not authenticated  by affidavit and did not fall within the list of admissible documents and evidence under Louisiana law.  Scottsdale also argued that the policy does not provide coverage for the alleged injuries arising from false advertisement or unfair practices.  Additionally, Scottsdale relied on its Material Published with Knowledge of Falsity exclusion, which provides that coverage is excluded for a "personal and advertising injury" arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity. Scottsdale again argued that its policy does not provide coverage for any of plaintiff's claims.


The trial court agreed with Scottsdale that the exhibits attached to the plaintiff’s opposition were inadmissible and did not consider same in deciding the motion.  The court granted Scottsdale’s motion for summary judgment and dismissed all of the plaintiff’s claims against Scottsdale.  Thereafter, the plaintiff appealed the trial court’s decision.


The Louisiana Court of Appeals reviewed the record and found that the trial court correctly determined that the exhibits attached to the plaintiff’s opposition were inadmissible.  Next, the Court reviewed the terms of the Scottsdale policy.  In denying coverage, Scottsdale relied on the property damage exclusion, the work product exclusion, the damage to your work exclusion, the fungi or bacteria exclusion, the personal and advertising injury exclusion, and the material published with knowledge of falsity exclusion.  The Court noted that Louisiana law has recognized that commercial general liability policies are not intended as a guarantee of the quality of the insured’s products and work and such policies exclude damages to repair and replace the insured’s defective products or faulty workmanship.


The Court determined that as the damages alleged by the plaintiff directly resulted from the work Purvis performed, the plaintiff’s claims were specifically excluded under the work product and damage to your work exclusions of the Scottsdale policy.  The Court held that the plaintiff’s mold claim was specifically excluded under the policy’s fungi or bacteria exclusion.  Additionally, the Court held that the plaintiff’s claims of fraud, false advertising, and misrepresentation as a general contractor did not arise out of any of the offenses set forth in the policy’s “personal and advertising” coverage provision.  Therefore, such claims did not fall within the policy’s definition of “personal and advertising injury” and thus were not covered under the terms of the Scottsdale policy.  Accordingly, the Court affirmed the trial court’s granting of summary judgment in favor of Scottsdale.


Earl K. Cantwell
[email protected]


04/27/17       Legoland Discovery Centre (Dallas), LLC v. Superior Builders, LLC,

Court of Appeals of Texas, Fort Worth

Arbitration Waiver ~ Choose Arbitration Timely and Wisely

Legoland hired Superior Builders to construct water features for an entertainment center in Texas.  Legoland filed a motion to compel Superior’s claims to arbitration based on the parties’ contract.  The Trial Court denied the motion, holding that Legoland waived its right to arbitrate.  On appeal, however, this decision was reversed. 


To determine whether there was a waiver of arbitration, the Court considered several factors, including whether Legoland was the plaintiff or defendant; how much discovery and other pretrial activity Legoland had conducted; how long Legoland had waited to seek arbitration and the reasons for any delay; the amount of time/expense expended to date in litigation; whether Legoland had requested the Court to address claims on the substantive merits; and whether Legoland asserted affirmative claims for relief to the Court. 


In this case, Legoland was a defendant, and had conducted only “basic discovery” and routine disclosures.  On the other hand, Legoland did wait almost two years to compel arbitration after Superior filed suit.  The parties had also entered into a stipulated case management order, and Legoland had conducted discovery involving a number of subcontractors and only then moved to compel arbitration.  Legoland eventually settled with the subcontractors, and as soon as the subcontractors were out of the case, Legoland then sought arbitration of the main claims with Superior Builders. 


This case represents an instance where a party proceeded fairly far down the road of litigation without moving to compel arbitration based upon a contractual clause.  This was a close case, as the Trial Court deemed the arbitration clause waived, while the case was sent into arbitration by virtue of the appellate court ruling.


A timely motion or filing to initiate or compel arbitration is usually the best course of action. Participating to some extent in litigation or court proceedings may well waive or moot the arbitration clause.  If you put the arbitration clause in the contract, presumably you will want to utilize and enforce it.  If the case is destined for arbitration, court proceedings may not be helpful to the ultimate resolution or to the point. 



Larry E. Waters
[email protected]


11/29/17       Century Surety Co. v. EM Windsor Construction Inc., et al

United States District Court, Southern District of New York

Southern District Grants Summary Judgment to Century Surety on its Declaratory Judgment Claim as Against Additional Insureds and also Grants Default Judgment to Century Surety on its Claim for Declaratory Judgment as to Defendant EM Windsor Construction Inc.

On June 6, 2016, Century Surety filed a complaint seeking declaratory judgment that it is not obligated to provide coverage from the actions alleged in the Complaint filed by Mr. Paredes.  Century Surety issued a policy of insurance to Defendant EM Windsor Construction Inc., covering the period from December 6, 2012, to December 6, 2013.  The Policy contained an “Action Over Exclusion.”  The “Action Over Exclusion” provided no coverage for “bodily injury” to an “’employee’ of the named insured arising out of and in the course of (a) employment by the named insured; or (b) performing duties related to the conduct of the named insured’s business.”  Defendant Liberty Blue Group LLC (“Liberty Blue”), hired Defendant EM Windsor as a subcontractor for a construction project at 510 East 20th Street, New York, New York.  EM Windsor entered into a contractual agreement with Liberty Blue, in which EM Windsor was to provide Liberty Blue with additional-insured coverage under its Policy with Century Surety. 


Following this contractual agreement, on December 7, 2012, Mr. Ricardo Paredes, an employee of EM Windsor was allegedly injured when he “was lawfully and carefully working at the premises he was caused to fall from said ladder by reasons of the negligence of . . .” defendants Liberty Blue and the Ownership Entities (the “Paredes Action”).  After receiving an amended complaint from Mr. Paredes, Liberty Blue filed a third-party complaint in the Paredes Action against EM Windsor. 


On March 24, 2016, Century Surety sent a letter to EM Windsor, in which it reserved its rights to withdraw as counsel and seek reimbursement if it was found no coverage existed because Mr. Paredes was an employee of EM Windsor, at the time of alleged accident.  On April 21, 2016, Century Surety sent a second letter EM Windsor, in which it disclaimed coverage for EM Windsor “or any other person or party claiming coverage under the Century Policy for this matter.”  In addition, the April 21, 2016, letter explained “coverage is unequivocally denied to all parties based on application of the Policy’s Action Over Exclusion.”  Further, in a letter dated May 19, 2016, Century Surety advised Liberty Blue that, if it did not withdraw its request for indemnification and a defense, it would initiate a declaratory judgment. 


Here,  the court held the “Action Over Exclusion” applies to the Paredes matter.  The court noted the exclusion provision applied “whether the named insured may be liable as an employer or in any other capacity.”  Further, the court noted there was no genuine dispute at issue in the Paredes Action, as the Complaint specifically alleged that Mr. Paredes was lawfully and carefully working on a ladder at the construction site when he fell. 


Defendants attempted to argue that the “Action Over Exclusion” did not apply because Century Surety knew Mr. Paredes’ injuries stemmed from a car accident unrelated to his employment with EM Windsor.  In rejecting this argument the court emphasized that even if the Paredes Action were to defend by invoking the narrative posit that the facts outside the complaint identified by Defendants does not establish a reasonable possibility that the alleged claims falls within the policy coverage.  As such, the “Action Over Exclusion” squarely “applies to the claims asserted in the Paredes Action.” 


12/19/16       Romano v. American States Insurance Co., et al

United States District Court, Western District of New York

Western District Denies Plaintiff’s Motion to Remand Case to State Court

On or about August 8, 2015, defendant Jesse W. Parker and Plaintiff Alexander Romano suffered a single-car accident.  Alexander Romano allegedly suffered “serious injuries” as defined under section 5102(d) of the New York Insurance law.  Defendant Gary W. Parker was the owner of the vehicle.  American State Insurance Company (“ASIC”) disclaimed coverage on February 19, 2016, for Jesse Parker’s claim regarding Alexander Romano’s alleged injuries arising from the accident.  Plaintiff’s filed a complaint in New York state court seeking that ASIC defend and indemnify Jesse Parker for his liabilities related to Alexander’s injuries.  In response ASIC removed the action to federal court.


In the current action, Plaintiffs filed a motion to remand the case to state court.  Specifically, plaintiffs argued the jurisdictional requirement for complete diversity has not been satisfied.  In response, ASIC argued diversity of citizenship did exist.  In determine whether the diversity of citizenship existed, the court had to determine whether fraudulent joinder existed in this matter.  As the court noted, for fraudulent joinder “[t]he issue is not whether the plaintiff is likely to prevail against the non-diverse defendant, but whether the pleading sets forth any possible claim under state law.”


In applying this rule of law, the court determined that Defendant Amy Parker was fraudulently joined to the action.  In reaching such determination, the court noted, “[n]o relief is requested from Amy, and no cause of action can be divined against her based upon the allegations in the complaint.”  While, the allegations in the complaint did not sufficiently state a claim for vicarious liability as against Gary Parker as the owner of the vehicle, nor specifically, requested any form of relief Jesse Parker, the court still determined that Gary and Jesse Parker were not fraudulently joined.  In fact, the court concluded they were necessary parties to this action.


Nonetheless, the court realigned Gary and Jesse Parker as party plaintiffs.  The court noted based on the facts, “[i]t is in Gary’s and Jesse’s interests for ASIC, the insurer, to be required to pay from some or all of any potential judgment entered against them.”  Importantly, “it would be in Plaintiff’s interest for those funds to be available for Gary and Jesse Parker’s in satisfying any such judgment.  As such, Gary and Jesse Parker’s interest are aligned with Plaintiffs’ interest and are adverse to ASIC’s interest.  Further, the court noted the rule of unanimity may be excused because Amy Parker was fraudulently joined and Gary and Jesse Parker were misaligned. 

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