Coverage Pointers - Volume XIX, No. 16

Volume XIX, No. 16 (No. 500)

Friday, January 26, 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.  They come in all shapes and sizes.  Our goal is to empower you to take on challenges without fear or confusion.


We are pleased to provide you with our 500th issue of Coverage Pointers, our bi-weekly newsletter that we have published continually since July 8, 1999.


The headlines in the newspapers on that day included ones indicating that Hillary Rodham Clinton was starting a “listening tour” to explore a New York Senatorial bid, a report on a Florida jury verdict against the tobacco industry and a discussion about a $1 trillion federal budget surplus.  An article in one newspaper indicated that there were about 800 million pages of information on the World Wide Web.  By 2016, the indexed web contained at least 4.63 billion pages of information and over a 1.3 billion websites.


Times change.


I thank our talented editorial staff for their continuous and unwavering contribution to this ongoing labor of love. 


As far as we know, we were the first law firm in the nation to publish regularly an electronic coverage newsletter.


Congratulation to Jonathan Dachs:


Jonathan Dachs, partner in Shayne, Dachs, Sauer & Dachs, LLP is one of the leading coverage lights in New York State.  We congratulate him on his selection as the recipient of the John E. Leach Memorial Award, to recognize outstanding service and distinguished contributions to the legal profession as a member of the New York State Bar Associations Torts, Insurance and Compensation Law Section. That award was presented at the New York State Bar Association’s Annual Meeting in New York City this week. 


Five Hurwitz & Fine partners have received that award since its inception in 1994.


Guest Columnist

We are pleased to thank a guest author, Michael Savett of Clark & Fox for summarizing a Second Department opinion in which he was successful.  The Bachir decision involving a suit limitation in a Lloyds policy. You’ll find his contribution in my column..  You can contact him at [email protected].



PLRB Claims Conference:


We hope to see you in Orlando for the PLRB Claims Conference.  The dates:  April 15-18.  Info: Click here.


John Hanlon from Selective and I will be speaking on our favorite topic, Additional Insured, Contractual Liability and Risk Transfer.


Dying to see your editor in a YouTube video telling you why you should attend? Click here.


A Good Defense Spoiled:


From our toxic torts guru Chris Potenza, an adverse spoliation decision in an asbestos case addressing the foreseeability of future litigation.  J-M Manufacturing Company had purchased the former Johns-Manville asbestos pipe product line in the 1980’s, destroyed records for this line of business in the 1990’s, and the first claim of injury from this pipe came in 2000. 


While this decision is fact based and somewhat unique to an asbestos defendant (who took over the product line of a well-known bankrupt asbestos supplier Johns-Manville) given the long latency period between exposure and injury, I certainly foresee that this decision could have some spillover into other areas of product liability. It’s always best to stick with a well-established document retention policy and not take the risk that a jury would be given the impression that something untoward was done to curtail future litigation.   Juries just don’t like that.  


01/18/18         In re New York City Asbestos Litigation, Warren v J-M Manufacturing

Appellate Division, First Department

Spoliation Charge Given against Successor to Asbestos Product Line of Johns-Manville

The First Department affirmed the trial court order that granted plaintiff's motion for spoliation sanctions against defendant J-M Manufacturing Company, Inc. (JMM). 


In or around the 1990's, JMM lost and destroyed numerous bankers’ boxes containing the records of the manufacture, sale, and marketing of pipe, which contained asbestos, a line of business it purchased from Johns-Manville in the 1980s. Although the first claim by an end user for personal injuries was not made with regard to that pipe until 2000, plaintiff adduced evidence that JMM was on notice that the records might be needed for future litigation, and thus JMM's behavior constituted spoliation. JMM was well aware of the long history of personal injury claims arising from other Johns-Manville asbestos-containing products, and the Worker's Compensation claims filed by individuals who worked in the manufacture of the pipes at issue.


JMM contemplated the possibility of litigation, having entered into a litigation cooperation agreement with Johns-Manville at the time it purchased the pipe business, and internal memos from the 1980's show that executives and lawyers at JMM discussed the risk-benefit of continuing the product line, as well as the possibility that its insurance carriers would withdraw liability coverage for the product. Accordingly, the motion court did not abuse its broad discretion in directing that the jury be charged with an adverse inference at the time of trial.


Insurance Fraud, a Century Ago:


New-York Tribune

New York, New York

26 Jan 1918


Three Arrested in Plot

To Collect False

Insurance Claims


Trio Sent to Tombs on

Charges Involving $14,000


Morris J. Harmelin, an insurance broker, of 500 Broadway, Bayonne, and Israel and David Weinberger, wholesale butchers of the same town, were arrested yesterday in the Broadway Central Hotel and locked up in the Tombs on complaint of S. J. Rosenblum, an insurance adjuster, of 80 Maiden Lane, who charges that the trio attempted to defraud the Philadelphia Life Insurance Company of $10,000 and the New Jersey Insurance Company of $4,000 by filing fraudulent claims.


Mr. Rosenblum also says that Harmelin had had complaints filed against him involving policies amounting to $500,000 in Philadelphia and New Jersey companies.  District Attorney Swann, who is investigating the complaint against Harmelin and the Weinbergers, believes this case to be only one phase of a nation-wide conspiracy to defraud big insurance companies.


According to Assistant District Attorney Joab H. Banton, Harmelin and his associates in July 1917 took out a $10,000 policy with the Philadelphia company and a $4,000 policy with the New Jersey company in the name of Ignatz Weinberger, of 56 Willett Street, Manhattan an uncle of Israel and David.


The insured man was represented as being fifty-seven years old, Mr. Banton says, although it is believed that He was really sixty-seven.  On January 5, he died suddenly and was buried the following day.  His widow, named as beneficiary, said that she did not know he was insured.  The claim was placed in the hands of Mr. Rosenblum.


On January 17, Mr. Rosenblum complained that the two Weinbergers and Harmelin had attempted to bribe him into passing the claim without further investigation.


These men, he said, had no legal interest in the claim apart from notes amounting to $14,000, the total amount of the insurance, which they said they held as creditors of the dead man.


Tessa’s Tutelage:


Dear Readers:


This week we have two cases involving appeals that are somewhat confusing.  Largely because it is surprising that an appeal was ever filed.  The first involves a case where the No-Fault carrier did not insure the car involved in the motor vehicle accident against which it brought a claim.   A different No-Fault provider covered the car.  Inexplicably, Plaintiff continued to pursue this action to the Second Department.  Unsurprisingly, the Plaintiff was unable to rebut the evidence that someone else insured the car.   


Our second case involves a defendant that failed to submit opposition papers to a motion to dismiss.  Defendant was unable to come up with a reasonable excuse at the lower court, and was similarly stumped in the Second Department.  I suppose the take away from both these cases is that sometimes you don’t need to beat a dead horse. 


Hope you have wonderful week.



Tessa R. Scott

[email protected]


Verdicts for the Defense:


Press and Sun-Bulletin

Binghamton, New York

26 Jan 1918


Non-Suit Verdicts in Two Actions



Cortland, January 26 – The jury in the case of T. D. Cross of Highland Falls versus the proprietors of the Cortland House, on trial in the Supreme Court Thursday, rendered a verdict of no cause for action. Cross claims that on May 28, 1917, while a guest at the Cortland House, he received a shock of electricity when turning on an incandescent light and with thrown a considerable distance and remained in an unconscious condition for three hours. As a result of the shock he claimed he had suffered permanent injuries. Both sides called physicians and electricians to give expert testimony.


The slander action of Mrs. Hattie M. Burdick against Mrs. Mabel Gardner, formerly neighbors in DeRuyter, resulted in no cause of action



Ewell's Universe:


Dear Subscribers:


The law fixes a certain time for a party to bring lawsuit, typically referred to as a statute of limitations. After the statute of limitations has passed, the claim is time-barred and the court will refuse to hear it. To ease the impact of such a harsh rule, some states have enacted “savings statutes.”


A savings statute generally allows the plaintiff or a similar person to re-file an otherwise time-barred claim. It acts as a grace period and is typically six months or a year. Although savings statues vary from state to state, certain requirements have to be met. In order for a savings statute to apply, the parties and damages sought in the new action must be substantially the same as those in the original action.


Why does this matter? Good question. Oklahoma recently considered whether an insurer could benefit from a savings statute.


The insured sustained injuries in a car accident and sued the tortfeasor. After the insurer paid her uninsured/underinsured motorists benefits, she decided not to pursue her suit against the tortfeasor. When the insured voluntarily discontinued her suit, the insurer pursued subrogation against the tortfeasor. However, one problem stood in the way. The statute of limitations had run. In an attempt to make the claim timely, the insurer argued that the subrogation action was timely under Oklahoma’s savings statute.


The trial and appellate court held that the savings statute did not apply since the insurer was not the same party in the original action, i.e., the insured. In an interesting decision, Oklahoma’s highest court ruled that the subrogated insurer could benefit from the savings statute, and as such, the subrogation action was timely. It reasoned that given the unique nature of subrogation—that the insurer stands in the shoes of the insured—it made sense to apply the savings statute to the insurer, deeming the subrogation action timely.


Although Oklahoma reached this result, it is unlikely that New York would agree. New York’s saving statute, found at CPLR 205(a), and is substantially different. New York’s saving statute does not apply where the original lawsuit was voluntarily discontinued. Had a New York court been presented with these same facts, it is unlikely that it would allow a subrogated insurer to benefit from the savings statute where the insured voluntarily discontinued its case against the tortfeasor.


However, perhaps there remains an argument that CPLR 205(a) would extend the time for an insurer to bring a subrogation action in other circumstances. See, e.g., Wells Fargo Bank, N.A. v Eitani, 148 AD3d 193, 208 (2nd Dept 2017) (Levanthal, J., dissenting) (“the majority's rationale would appear to allow an insurer to apply CPLR 205(a) to toll the statute of limitations where the insurer seeks subrogation”).


Time will tell.


‘Til Next Time,



John R. Ewell

[email protected]


Wonder if She is Still Looking – Asking for a Friend:



The Tacoma Times

Tacoma, Washington

26 Jan 1918


            WOULD you marry lonely widow worth $80,000?  Write Mrs. W. K. Hill, 14 E. Sixth St., Jacksonville, Fla.


Peiper’s Position:


A relatively quiet week on the Potpourri beat gives me a chance to get something off my chest.  A couple of months ago, I was honoured to have the opportunity to speak to a Canadian Defense Organization about the differences between State and Federal courts.  In that discussion, we addressed the substantive and procedural differences between the two courts and compared both to the Canadian system.  However, the threshold question, we would propose, is where do you want to be. 


There are, of course, reasons for and against a diversity removal.  There are, likewise, excellent judges in both courts (and a number of not so excellent judges in both systems).  Removal to federal court, however, does provide a litigant with a Case Management plan that will, in most cases, result in faster and more complete discovery.  It also affords expert discovery. 


Removal, however, also results in the forfeiture of interlocutory appeal. When dealing with complex legal issues, the loss of the ability to present your arguments to a panel of jurists can be a significant disadvantage.  Conceding the opportunity to have your argument subject to the deliberation of four or five Appellate Judges (before the conclusion of the case) is an opportunity that should not be given up with due deliberation.


There are reasons for, and against, removal in any case.  We’d simply posit that regardless of the decision made, it should be made with consideration of all factors in place. 


That’s it for now.  We close out this week by noting that it is National Irish Coffee Day so…ummm…yeah…nuff’ said. 



Steven E. Peiper

[email protected]


War Diet:


Reno Gazette-Journal

Reno, Nevada

26 Jan 1918





WASHINGTON, Jan. 26.—The food problem in allied countries has assumed so serious an aspect that President Wilson feels it necessary to request the American people to practice food conservation on a more intensive plan.  The formal request will be embodied in a White House proclamation to be issued tonight announcing the 1918 plan of action of the food administration.


The present situation in the allied countries was presented bluntly to the government in a cablegram last night from Lord Rhondda, the British food controller, who declared, “it now lies with America to decide whether or not the Allies in Europe shall have enough bread to hold out.” 


Hewitt’s Highlights: 


Dear Subscribers:


We only have one case this week, from the First Department. The issue in that case was whether the injuries were degenerative, as defendant claimed, or caused by the accident, as plaintiff claimed. Defendant’s submitted evidence plaintiff had been in two prior car accidents, and medical reports that she had degenerative changes, which caused her range of motion issues.  Plaintiff raised an issue of fact, however, because of the submission of reports that she had recovered from her earlier injuries and because of examinations occurring two weeks after the current accident that showed decreased range of motion.  Specifically, she also was able to show evidence of a new herniated disc in her spine that was not accounted for by defendant’s experts.


I hope you are enjoying the winter. It was very cold here but has gotten warmer. I hope that next time there will be more cases to report on.


Until next time,


Robert Hewitt

[email protected]

Women Empowerment – a Century Ago:


New-York Tribune

New York, New York

26 Jan 1918


Women as Jurors


The introduction of a bill at Albany to qualify women as jurors may be a hasty attack upon a rather complex problem.  But the problem is one that must be attacked, and the sooner the public begins to consider it the better.  The women of New York have now complete political equality with men.  They have the right to expect, and, what is more, the state has the right to demand, that they share in the jury labors of our courts.  The burden and the duty are the necessary consequences of their new status and privilege.


A whole array of vexed problems is involved in the practical workings of the change.  Some of them are undoubtedly not as vexed as our worried males would think.  The spectacle of men and women, twelve of them, locked up together to debate a verdict is horrifying only to those sheltered souls who have never seen a woman stenographer.  Nor do we fear an increased leniency, a new sentimentalism, in the attitude of women jurors.  There are plenty of sentimental women—almost as many as there are sentimental men.  But most women have a cold-blooded attitude toward the guilty, especially the guilty of their own sex, that is rather appalling to men.  The murder of husbands and lovers may well cease to be a comfortable sport with women jurors to look the facts in the eye.


Wilewicz’ Wide-World of Coverage:


Dear Readers,


Diving right in this week, as the Second Circuit issued a couple of lengthy but excellent coverage decisions covering different types of policies. Fully summaries, as well as links to the cases themselves are attached.


First, in Beazley Insurance v. ACE American, the Second Circuit took up the issue of whether NASDAQ’s issues and technical problems with offering the Facebook IPO were covered losses under its directors’ and officers’ policies. After investors sued for losses incurred due to the glitches, the exchange’s errors and omissions policy picked up, but coverage was also sought under the D&O policy, since NASDAQ’s officers were also sued in the fiasco. At issue was the fact that the D&O policy contained a “professional services” exclusion, which contained a number of undefined terms, including “customers” and “professional services”. In the end, the court found neither of these terms ambiguous, citing analogous (though not directly on point) industry case law. Thus, no coverage. It’s a well-written opinion – links in the attachment.


Second, in Citizens Insurance v. Risen Foods (issued the same day as Beazley), the Second Circuit next looked at the carrier’s duty to disclaim on a CGL policy relative to a motor vehicle accident. There, following a terrible car crash, the insured put its commercial auto, businessowners, and umbrella CGL carriers on notice. The commercial auto picked up and paid, but coverage was also sought as to the businessowners and umbrella carrier (who had issued both policies under the same policy number). That carrier only disclaimed as to the umbrella policy, without reference to the primary businessowners policy. Long story short, however, it did not matter. Where there is no coverage in the first instance, as is the case for auto accident claims asserted under most standard CGL policies, there is no duty to timely disclaim coverage or risk waiver. Thus, the carrier did not have to provide coverage, despite the lateness or lack of disclaimer.


That’s it for now. Until next time!



Agnes A. Wilewicz

[email protected]


Some Things are Different:  Praising those who Pick Up Hitchhikers:


The Buffalo Commercial

Buffalo, New York

26 Jan 1918




The suggestion that automobile drivers stop to pick up persons waiting on street corners for cars has the backing of the secretary of the automobile club and the chairman of the city traffic ordinance committee.  It has also the approval of almost every car rider who has stood and cooled his heels and every other portion of his anatomy anywhere from ten minutes to an hour on an arctic morning.


Autoists point out that they have always been willing to furnish rides, but have been so frequently repulsed, particularly when extending this courtesy to women, that they have begun to sour on the practice.  They say many women become highly indignant when asked to accept a ride, and refuse with considerable display of hauteur.


Once turned down in this manner the car driver is chary in his future invitations.  But possibly the experiences of many women waiting for cars may have served to alter their excessive feeling of reserve.  Let’s hope so.


But, anyway, the autoists have never found any reluctance on the part of men to accept an invitation to ride.  If the women turn them down, why not take on the men?


Barnas on Bad Faith:


Hello again:


I was lucky enough to spend some time with my girlfriend in Florida over the Martin Luther King Jr. Day weekend.  A couple days in the Florida sun really hits the spot in the middle of what has been a classic Buffalo winter.  We always enjoy our time down in Fort Lauderdale and can’t wait to go back.


Speaking of Florida, the first case in my column comes from up the coast in Seminole County.  In Landers, the court concluded that the insured could proceed with a bad faith case against State Farm, even though it filed the statutory civil remedy notice while the appraisal process was pending.  The court noted that the statutory CRN requirement is designed to give an insurer time to cure an alleged bad faith violation by the insured.  Preventing an insured from filing a CRN before coverage and liability have been conclusively established would frustrate the purpose of the statute by further delaying the time necessary to assess and pay out claims and discouraging insurers from taking timely, independent action on claims.  Accordingly, the court held that once the appraisal process is complete and a legally sufficient CRN has been provided, the conditions precedent to filing a statutory bad faith claim are met, even if the CRN was filed while the appraisal process was ongoing.


The Veilleux case is a bad faith case from the United States District Court for the District of Connecticut.  The plaintiff sued Progressive after it allegedly refused to provide coverage for a judgment that plaintiff had obtained against its insureds in a personal injury action.  Among the causes of action asserted were claims that Progressive breached the implied covenant of good faith and fair dealing.  The court held that plaintiff stated a cause of action for violation of the implied covenant of good faith and fair dealing based upon the allegations that Progressive denied the claim with no colorable basis for doing so and on a pretextual basis.


Enjoy your weekend.


Signing off,



Brian D. Barnas

[email protected]


Separation of Male and Female Voters?


The New York Times

New York, New York

26 Jan 1918




Suffrage Leader Opposes Separate

Polling Places for Women.


Mrs. James Leea Laidlaw, Acting Chairman of the New York State Woman Suffrage Party, issued a statement yesterday attacking a bill introduced in the Legislature by Senator George A. Slater of Westchester, providing for separate polling places for men and women at Peekskill, N.Y.


“The mildest thing to be said about this legislative proposal,” said Mrs. Laidlaw, “is that it shows a very inhospitable spirit toward the new women voters.  Indeed, we consider any attempt to classify the women’s votes as such as hostile and un-American.  It only shows the absolute need of unceasing vigilance on the part of our Legislative Committee.”


Altman’s Administrative (and Legislative) Agenda:  


Greetings, Dear Readers,


My birthday is this week; I am turning 40-something, so I will celebrate by eating as if I am 20-something, than waking the next day feeling like 50-something.   But, ya’ gotta’ live a little, so, eating my way through NYC – here I come!


Today, I bring you the Department of Financial Services new guidelines regarding the sale of mobile device insurance. With new cell phones costing as much as some used cars, the move makes sense.



Howard B. Altman

[email protected]


The Brooklyn Daily Eagle

Brooklyn, New York

26 Jan 1918




The Political Forum of Brooklyn, Inc., had indorsed Frank P. Buonora for appointment as Deputy Street Cleaning Commissioner in Brooklyn.  Buonora is a member of U.S. Marshal Power’s organization in the Twenty-third A. D. and was chairman of the Democratic Italian Campaign Committee of East New York.

Editor’s Note:  Wonder what his campaign platform might have been.



Off the Mark:


Dear Readers,


The moderate weather on Long Island continues.  Last weekend I was able to take the kids to the park and let them get some much needed fresh air and exercise.  For once, they didn’t put up a fight at bedtime.  It was a win for everyone.  Hopefully, we get some more nice weather next weekend.


This edition discusses a construction defect case from the District Court for the District of Minnesota.  In Westfield Ins. Co. v. Miller Architects & Builders, Inc., the defendant insurer sought a declaration that it owed no duty to defend or indemnify its insured relative to an underlying arbitration asserting claims of damages due to construction defects.  The insured, it turn, sought a declaration that it was entitled to recover the attorney’s fees it expended in the arbitration and the fees incurred in defense of the coverage action.  The District Court examined the underlying claims and the relevant policy language and determined that the insurer did indeed owe a duty to defend.  As the insurer breached its duty to defend, the insured was entitled to recover its defense costs, including attorney’s fees, from the time of its tender to the present time, which included the fees and costs incurred in defending the coverage action.


I hope everyone that watches enjoys the Superbowl.  As I don’t like either team, I hope it’s a good game.  If not, hopefully the commercials are entertaining.


Until next time …



Brian F. Mark
[email protected]


Object: Matrimony:


Vancouver Daily World

Vancouver, British Columbia, Canada

26 Jan 1918


            WHO’LL WRITE A JOLLY, GOOD-looking, healthy, wealthy maiden?  Enclose stamp.  Lillian Sproul, Station H, Cleveland, O. Box  5-1-9


Wandering Waters


I cannot believe it has been two weeks since I was admitted to practice law in the wonderful state of New York.  I am learning quickly two weeks flyby when you are practicing law.  This week Wandering Waters features two cases from the Southern District.  Hope you enjoy.      



Larry E. Waters

[email protected]


Omniscient Ad by Essick Insurance – 100 Years Ago


The Evening News

Harrisburg, Pennsylvania

26 Jan 1918




Full Rates—No Rebates—

Money’s Worth


We write every form of desirable to reliable insurance.


Just now we will specialize on Automobile Insurance.


There are several forms of protection for Automobilists; liability property damage, collision full, collision limited, fire valued, fire non-valued, theft, personal injury of owner, loss of use of automobile because of fire or collision.


A contract of Insurance always should be read and studied to avoid misunderstanding.


It must be admitted that some policies contain enough provisions to feed a whole regiment.


An AEtna contract is clear and definite but policy terms are sometimes not understood.


Note the “Liability” means indemnity for claims for injury to persons, “Property Damage” insurance covers claims for damaging the property of others, “Collision” covers damage to the car insured.  There are two forms of fire insurance, “valued” and “non-valued.”  The “non-valued” is lower in cost but is subject to reduction for depreciation.


AETNA Agents are well versed in all matters concerning policy conditions and are to be found in every city, town and hamlet ready to serve policyholders no matter where they may hail from.


Every policyholder should always carry his identification card; it guarantees attention from any AETNA Agent.  The AETNA does business in all states.


The Harrisburg General Agency covers seventeen counties and is a fully equipped “Service Station” for policy writing and adjusting.


Confidentially, if you know of any guys who always buy cheap, I can tell them where to get automobile fire insurance for 60¢ per hundred even if the car is seven years old.  While going down go all the way.


Circulars and attendants will be found at the AETNA booth at the automobile show—Command us for service.


Choose the best.


When in doubt stay out.


William S. Essex, General Agent



Editor’s Note – Mr. Essick May Have Had a Premonition – 12 Years Later, We Read of his Demise in an Auto Accident:


Harrisburg Telegraph

Harrisburg, Pennsylvania

15 Dec 1930





The Estate of William S. Essick, insurance man who died in the Harrisburg hospital, Friday evening from injuries when struck by an automobile was estimated to be $13,800 with the filing of his will at the Dauphin county courthouse today.  Joseph W. Essick a son, Reading, is named executor.



Headlines in our 500th issue, attached:



Dan D. Kohane
[email protected]


  • Claim Resulting from Trip Over Suitcase Unloaded from Bus Arises Out of “Ownership, Maintenance or Use” of Auto, and Covered by Auto Policy.  Hundreds Flee.

  • Suit Limitation in Lloyds Policy Upheld and Enforced

  • In Errors and Omissions Claim Against Insurance Agency and Auto Insurer for Insufficient Underinsured Coverage, Defendants Failed to Establish that they Procured SUM Coverage Requested by Insured. Summary Judgment Denied

  • Request for Defense under Supplementary Payment Provisions of the Policy Denied because Conditions for Coverage Not Satisfied



Robert E.B. Hewitt III

[email protected]


  • Plaintiff’s Doctor Must Address Preexisting Degenerative Conditions



Tessa R. Scott

[email protected]


  • Defendant Established That the Accident Did Not Involve a Vehicle It Insured

  • A Party Must Provide a Reasonable Excuse for Its Failure to Submit Opposition Papers



Steven E. Peiper

[email protected]


  • Poor or Underwhelming Papers are Not a Reason for a Motion to Renew



Agnes A. Wilewicz

[email protected]


  • Second Circuit finds NASDAQ’s Claim for Coverage under D&O Policy Relative to Facebook IPO not Covered, as Barred by Professional Services Exclusion

  • Second Circuit holds that CGL and Umbrella Carriers Had No Duty to Disclaim, and Thus Their Disclaimer was Not Untimely, Where There Was No Coverage in the First Instance for Motor Vehicle Accident Claim



Jennifer A. Ehman

[email protected]


  • Named Insured’s Default in Underlying Action Results in Obligation to Defend and Indemnify Additional Insured

  • Court Dismisses Lawsuit Bought By GC’s Carrier Seeking Co-Insurance for Owner; Where GC’s Carrier Won’t Concede Coverage for the Owner, Question of Priority is Premature





Brian D. Barnas

[email protected]


  • Civil Remedy Notice was Legally Sufficient even though the Appraisal Process under the Policy was Ongoing

  • Insured’s Bad Faith Claims Survived Motion to Dismiss based on Allegations that Insurer Denied Coverage with no Colorable Basis for doing so and on a Pretextual Basis


John R. Ewell

[email protected]


  • Oklahoma’s Savings Statute Applies to Subrogated Insurers, Giving Insurers One Year to Revive Lawsuits Commenced by Their Insured



Howard B. Altman

[email protected]


  • Wireless Communications Equipment Insurance



Brian F. Mark

[email protected]


  • US District Court Finds that Insurer Owed its Insured a Duty to Defend Relative to Underlying Arbitration Asserting Claims of Construction Defects



Larry E. Waters
[email protected]


  • Coverage Not Available for Non-cooperating Insured

  • Coverage Not Available for Insured Due to the “Entrustment Exclusion”


Earl K. Cantwell
[email protected]


  • False Claims Act



Thanks for your loyalty and readership.  See you on February 9.




Dan D. Kohane
Hurwitz & Fine, P.C.

1300 Liberty Building
Buffalo, NY 14202    

Office: 716.849.8942

Cell:     716.445.2258
Fax:      716.855.0874

E-Mail:  [email protected]
H&F Website:


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

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]

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]


01/26/18       Peter Pan Bus Lines, Inc. v. The Hanover Insurance Company

Appellate Division, First Department

Claim Resulting from Trip Over Suitcase Unloaded from Bus Arises Out of “Ownership, Maintenance or Use” of Auto, and Covered by Auto Policy.  Hundreds Flee.

The insurance policy issued by defendant to Peter Pan provides coverage for damages owed because of, inter alia, " bodily injury' ... caused by an accident' and resulting from the ownership, maintenance or use of a covered auto.'" Regardless of whether the plaintiff in the underlying action, having arrived at her destination on a Peter Pan bus and seen the driver unloading the passengers' luggage, tripped over a suitcase while approaching her own suitcase or tripped on the curb while looking for her suitcase, her accident resulted from Peter Pan's use of the bus, a covered auto, and defendant is obligated to defend and indemnify Peter Pan in the underlying action.


Editor’s note:  We had a huge debate in our shop over whether this decision was or was not correct.  It’s why we’ve given it a “hundred’s flee” rather than “thousands flee” hashtag.  The unloading was completed.  What did the accident have to do with the unloading of the vehicle, especially if she fell over a curb?  If she as standing awaiting her luggage and she were hit by a passing bicyclist, would that also be covered under Peter Pan bus policy?  If she was standing there and Tinkerbell hit her over the head with a wand, would that be “use and operation”? 

Moreover, even if the allegations were sufficient to trigger a duty to defend, why did the court conclude that there is a duty to indemnify?


01/24/18       Bachir v. Lloyd’s of London

Appellate Division, Second Department
Suit Limitation in Lloyds Policy Upheld and Enforced
Guest Author: Michael Savett of Clark & Fox, who represented the insurers in the action
Affirming New York’s long-standing enforcement of insurance policy suit-limitation provisions, the Second Department upheld the dismissal of a group of Lloyd’s of London insurers from a lawsuit seeking payment for damages due to a fire loss at a Long Island restaurant.


On January 13, 2008, a fire occurred at the Bayville Lobster House, a property insured by the London syndicates. The insured submitted a claim that was denied because the policy had been cancelled weeks prior to the fire due to late payment of the policy premium.


In December 2010, the insured filed a Summons in the Supreme Court, Suffolk County naming its insurers, insurance broker and premium financing company but never filed a Complaint. The Summons was dismissed for lack of prosecution. Then in January 2014, the insured filed a Complaint in Nassau County against the same parties. The insured alleged that the insurer breached the insurance contract for failure to pay and that the broker and finance company acted fraudulently in not timely processing the premium payment.


The policy contained a suit-limitation clause requiring that actions under the policy must be brought within two years from the date of loss and, based on the timing of the filing; the insurer filed a motion to dismiss on that basis. The broker and finance company also filed motions to dismiss, albeit on different grounds: that the claim was time-barred under CPLR 205(a) for lack of prosecution of the prior action. The motion judge dismissed the action as to all defendants on the latter basis but did not address the insurer’s argument.


On appeal, the Second Department panel upheld the insurer’s dismissal on the grounds that both the initial Summons filed nearly three years after the fire and the Complaint filed six years after the loss were initiated well beyond the policy-mandated two-year limit. The Appellate Division reversed the trial court order as to the other defendants, concluding that the six-month savings period in CPLR 205(a) is not a limitation but a tolling provision, which has no application where the statute of limitations as to those defendants had not expired at the time the second action, was commenced.


Suit-limitation provisions like the one in the insurer’s policy are considered reasonable and enforceable by New York courts, superseding statutory limits when agreed to by contracting parties. The Appellate Division correctly followed precedent in upholding the insurer’s dismissal. Michael Savett of Clark & Fox represented the insurers in the action.


Editor’s Note:  Kudos to our guest author, Michael Savett of Clark & Fox for this successful appeal.  You can contact him at [email protected].


01/24/18       Giamundo v. Cleveland Dunn 2nd

Appellate Division, Second Department
In Errors and Omissions Claim Against Insurance Agency and Auto Insurer for Insufficient Underinsured Coverage, Defendants Failed to Establish that they Procured SUM Coverage Requested by Insured. Summary Judgment Denied.
While operating a vehicle insured by State Farm, Giamundo was injured when her car collided with a car operated by Dunn. Giamundo was unable to make a claim for underinsured motorist benefits (“SUM”) because Dunn’s vehicle had bodily injury liability limits equal to or greater than Giamundo’s. 


So, Giamundo brought an action against her insurance agent, the Sauter Agency and State Farm (“Agency”) alleging negligence for procuring and offering insufficient SUM coverage.

An insurance broker may be held liable under theories of breach of contract or negligence for failing to procure insurance upon a showing by the insured that the agent or broker failed to discharge the duties imposed by the agreement to obtain insurance, either by proof that it breached the agreement or because it failed to exercise due care in the transaction. 


Here, State Farm and the Agency submitted insufficient evidence that they procured the amount of coverage that the Giamundo engaged them to procure.


01/18/18       Douglas v. Mister Sports
Appellate Division, First Department

Request for Defense under Supplementary Payment Provisions of the Policy Denied because Conditions for Coverage Not Satisfied
Fordham is not entitled to coverage in the underlying action under the insurance policy LIG issued to International Pursuit of New York, Inc., because the conditions for coverage under the supplementary payments provision of the policy have not been satisfied.  The provision states that if LIG defends an insured (International) in a suit, it will also defend an indemnitee of the insured who is named in the suit (Fordham), if, inter alia, "the obligation to defend, or the cost of the defense of, that indemnitee, has also been assumed by the insured in the same insured contract' [lease agreement]." The lease agreement between Fordham as landlord and International as tenant requires International to indemnify Fordham for all liabilities "for which Fordham shall not be reimbursed by insurance." Thus, so long as Fordham has not exhausted its own insurance, International has no obligation under the lease to provide insurance coverage for it, and, accordingly, LIG has no obligation to provide coverage for Fordham under the terms of the supplementary payments provision of the insurance policy.


Another condition for coverage under the supplementary payments provision is that there is no conflict between the insured's interests and the indemnitee's interests. Given the allegation in the underlying action that the plaintiff tripped and fell due to a defective sidewalk condition, the conflict of interests between International as tenant and Fordham as landlord is evident.
Editor’s Note:  While the court was right and there was no obligation to defend under Supplementary Payments, the courts, lately, seem to conflate Supplementary Payments with Additional Insured status, and they should not. The agreement to defend under Supplementary Payments is not the same as additional insured coverage.  There is no obligation to “provide coverage” under these provisions.



Robert E.B. Hewitt III

[email protected]


01/18/18       Sanchez v. Oxcin

Appellate Division, First Department

Plaintiff’s Doctor Must Address Preexisting Degenerative Conditions

Plaintiff alleged that she suffered serious injuries to her cervical spine, lumbar spine, right shoulder, and right knee as a result of a motor vehicle accident that occurred in September 2013. Plaintiff underwent diagnostic arthroscopic surgery on her right knee in February 2014 and spinal fusion surgery on her cervical spine in April 2014.


The moving defendants relied on plaintiff's testimony that she had been involved in two earlier car accidents that resulted in injuries to her neck, back, and knees, and previous surgery on her knees in 2009. They also submitted the affirmed report of an orthopedist, MRI reports prepared by plaintiff's radiologists, and the unsworn report of a doctor/biomechanical engineer, who opined that the sideswipe accident could not have caused plaintiff's claimed injuries.


The orthopedist, without addressing whether plaintiff had normal range of motion compared with normal values, opined that his examinations showed that the affected parts were normal, except for the cervical spine, in which there were limitations that he attributed to preexisting degeneration and the fusion surgery undertaken for that condition. He opined, based on review of her medical records and consideration of her obesity, that all plaintiff's claimed injuries were preexisting and degenerative. The annexed MRI reports supported that opinion and established prima facie that plaintiff had preexisting degenerative conditions in her lumbar spine, right shoulder, and right knee, thus shifting the burden to plaintiff to address the evidence of degeneration shown in her own medical records.  However, the annexed MRI report of the cervical spine, which was the basis for the orthopedist's opinion, did not include any degenerative findings, although it confirmed the existence of a disc herniation with impingement and a disc bulge.


In opposition, plaintiff submitted the affirmed reports of a physiatrist who examined her two weeks after the accident and her orthopedic surgeon. Neither doctor adequately addressed the evidence of preexisting degenerative conditions. The orthopedist acknowledged plaintiff's previous accident but failed to provide an objective medical basis for determining that the meniscal tears he found were caused by the subject accident, rather than the earlier accident, degeneration, or plaintiff's weight.


Assuming that the burden shifted to plaintiff to address causation with respect to her cervical spine injury based on the engineer's unsworn report, since she did not object to its form, plaintiff raised an issue of fact through the reports of her physiatrist and orthopedic surgeon. The physiatrist documented limitations in range of motion upon examination shortly after the accident. The orthopedic surgeon also measured contemporaneous and continuing limitations, and opined that the cervical spine injury was caused by the subject accident, specifically noting that plaintiff had recovered from the injuries sustained in the earlier accident before incurring the current serious injuries. Plaintiff also submitted certified records of all treatment provided by the surgeon who performed the cervical spine surgery and, although not admissible, because unsworn, these records are consistent with the sworn expert report.  Since there is no medical or other evidence in the record indicating that plaintiff had a herniated disc in her cervical spine before the subject accident, nothing further was required of her in opposing the dismissal of her claim of serious injury to that part of her body.


Defendants met their prima facie burden as to the 90/180-day claim by submitting plaintiff's bill of particulars and deposition testimony, in which she admitted that she was not confined to her home and bed for the requisite period of time following the accident. Plaintiff did not raise an issue of fact in opposition.


As to liability, plaintiff established her entitlement to summary judgment as to liability. Her uncontested deposition testimony demonstrated that defendants Oxcin and Thelusme's vehicle sideswiped the vehicle in which she was a passenger when it suddenly tried to enter another lane of traffic. Oxcin, the driver, had a duty not to enter a lane of moving traffic until it was safe to do so and his failure to heed this duty constitutes negligence per se. Plaintiff's right to partial summary judgment is not restricted by any potential issue of comparative negligence between Oxcin and Thelusme on the one hand and defendant Latimer, the operator of the vehicle in which plaintiff was a passenger, on the other. Defendants submitted no evidence controverting plaintiff's account of the accident, and did address the issue on appeal.



Tessa R. Scott

[email protected]


01/12/18       One To One Rehab PT, P.C. v Allstate Ins. Co

Appellate Term, Second Department

Defendant Established That the Accident Did Not Involve a Vehicle It Insured

Plaintiff moved for summary judgment and Defendant opposed the on the ground that defendant did not provide insurance coverage for the vehicle in question on the date of the accident at issue. The lower court granted Defendant’s motion and Plaintiff appealed.


In support of its motion, Defendant submitted an affidavit by its employee who described the details of her search of defendant's records and stated that her search had revealed that there was no coverage by defendant for the vehicle in question on the date of the accident. The Court concluded that defendant's affidavit was sufficient to demonstrate that plaintiff's claims did not arise out of a covered incident. Plaintiff failed to provide evidence that refuted the affidavit. Thus, Plaintiff’s appeal was unsuccessful.


01/12/18       Zayas Physical Therapy, P.C. v Auto One Ins. Co

Appellate Term, Second Department

A Party Must Provide a Reasonable Excuse for Its Failure to Submit Opposition Papers

Plaintiff moved for summary judgment however, Defendant did not submit written opposition to the motion. By order the Civil Court granted the motion, stating that "[b]oth sides agreed [that plaintiff may enter judgment] and will not appeal the order." A judgment in the principal sum of $1,246.50 was entered pursuant to that order.


Thereafter, defendant moved to vacate the order and the judgment entered pursuant thereto, arguing that it had a reasonable excuse of law office failure for its default and a meritorious defense to the action. The Civil Court denied defendant's motion on the ground that defendant had failed to offer a reasonable excuse for its failure to submit written opposition to plaintiff's motion for summary judgment.


Defendant had the burden of establishing grounds sufficient to set aside a stipulation, and could not.



Steven E. Peiper

[email protected]


01/24/18       Constructamax, Inc. v Dodge Chamberlin Luzin Weber

Appellate Division, Second Department

Poor or Underwhelming Papers are Not a Reason for a Motion to Renew

Plaintiff filed a notice of motion to renew its opposition to a motion to strike its Complaint, and to permit it an opportunity to serve a late Note of Issue.  In denying the application, the Appellate Division noted that a motion to renew must be based upon new facts [or law] that was not previously identified.  In addition, a successful application to renew must also proffer a reasonable excuse for the absence of the material at the time of the initial application.


Here, plaintiff apparently further elaborated on it motion, but offered no new evidence.  Even if new had evidence had been submitted, the Court noted the lack of any justification for its failure to properly support the initial motion.



Agnes A. Wilewicz

[email protected]


01/22/18       Beazley Insurance Company v. ACE American Insurance, et al.

United States Court of Appeals, Second Circuit

Second Circuit finds NASDAQ’s Claim for Coverage under D&O Policy Relative to Facebook IPO not Covered, as Barred by Professional Services Exclusion

The NASDAQ public stock exchange conducted an initial public offering (IPO) for Facebook in 2012. Almost immediately, NASDAQ encountered several technical difficulties which resulted in trades not being performed properly. Retail investors sued the stock exchange and eventually settled those claims for $26.5 million. At the time, the stock exchange maintained coverage towers for both errors and omissions (E&O) policies and directors’ and officers’ (D&O) policies. The claims were paid out under the E&O policies, but coverage was disclaimed under the D&O policies after NASDAQ’s officers were also personally sued.


In the D&O tower of coverage, ACE provided a $15 million layer (above a $2 million self-insured retention), for liability incurred by certain officers and directors for any “wrongful acts”. The ACE policy also provided coverage for losses NASDAQ became obligated to pay “by reason of a Securities Claim ... for any wrongful acts”. It also contained a “professional services exclusion” that provided that ACE “shall not be liable for Loss on account of any Claim ... by or on behalf of a customer or client of the Company [i.e. NASDAQ], alleging, based upon, arising out of, or attributable to the rendering or failure to render professional services”. On top of that, Illinois National issued an excess policy for an additional $15 million layer, which followed form with the ACE policy.


In short, the coverage issue was whether the professional services exclusion applied, where the terms “customer or client” and “professional services” were undefined in the policy. Notably, there was also no case law directly on point defining these terms in this type of context. Thus, the court had to look to extrinsic sources to determine appropriate meanings for these terms. To that end, the court looked to other federal law concepts in other, similar realms. In particular, trademark law was found to be robust in its analysis of these terms and provided a parallel for determining their custom and usage. To wit, “customers” of a stock exchange are commonly known to be the retail investors therein. Simple enough, and exactly what happened here.


As for “professional services”, the court noted that the carrier had to demonstrate that the claim arose out of the rendering of or failure to render professional services. Under New York law, a court has to make a determination by examining whether the asserted claim could succeed but for the excluded conduct. If no cause of action exists but for that conduct, the claim is based upon that conduct (i.e. professional services) and the exclusion applies. Here, it was undisputed that the claims arose from the design and operation of NASDAQ’s systems, which required special acumen and training of professionals, “such as that these activities constitute professional services”. Thus, in the end, the exclusion applied to bar coverage in that coverage tower.


01/22/18       Citizens Insurance Company v. Risen Foods, LLC, et al.

United States Court of Appeals, Second Circuit

Second Circuit holds that CGL and Umbrella Carriers Had No Duty to Disclaim, and Thus Their Disclaimer was Not Untimely, Where There Was No Coverage in the First Instance for Motor Vehicle Accident Claim

On April 29, 2013, a van owned by Risen Foods (a bakery) was being driven by an employee when it collided with a truck owned by Jason Tanner. Tanner suffered considerable injuries and fell into a coma. Following the accident, Risen notified its commercial auto carrier, State Farm, which provided a defense and offered nearly its entire policy limit to settle the case. Risen also had a business owners policy and an umbrella policy with Citizens, which both bore the same policy number. A few days after the accident, a co-owner of Risen also called Citizens and notified the carrier of the claim, “just to make sure you are on notice”.


A few weeks after notice was given, Citizens issued a coverage position letter denying coverage under its umbrella policy. A few months later, Tanner sued Risen, who then turned the suit over to Citizens. Citizens also again notified its insured that there was no coverage under the umbrella policy. Citizens then filed a declaratory judgment action seeking a declaration that there was no coverage for the claim under either the businessowners policy or the umbrella policy.


The Citizens policy contained auto exclusions which precluded coverage for any bodily injury arising from the ownership of any “auto” owned by any insured. The policy also contained an endorsement that did provide coverage for hired and non-owned vehicles in New York. While the carrier had not issued a disclaimer of coverage relative to the businessowners policy, the disclaimer it issued relative to the umbrella policy was indisputably “late”. That is, it was issued over 30 days following notice of the claim. However, the Second Circuit noted that there was no coverage in the first instance for the auto accident under either policy. Thus, New York timely disclaimer rule did not actually apply. Though the insured did provide proper notice as to both policies simultaneously (particularly where there was one claim phone number and both policies bore the same policy number), there was no coverage afforded in the first instance for an auto accident under the liability policies. Thus, the carrier had no duty to disclaim and there was no coverage for the claim.



Jennifer A. Ehman

[email protected]


01/19/18       BQE Industries, Inc. v. Starr Indemnity & Liability Co. et al

Supreme Court, New York County

Hon. Lynn R. Kotler

Named Insured’s Default in Underlying Action Results in Obligation to Defend and Indemnify Additional Insured

This motion arises out of a motion to renew/reargue filed by defendant, Starr Indemnity Liability and Casualty Company.  For reference, below is the original decision:


10/10/17       BQE Indus., Inc. v Starr Indem. & Liab. Co.

Supreme Court, New York County

Hon. Lynn R. Kotler

Court Finds Duty to Defend General Contractor Triggered; Indemnity to Await Resolution of Underlying Action – A Win for the Good Guys

On October 10, 2011, William Castilla allegedly sustained injury when he fell in the course of demolition; construction and/or renovation work at the Clemente Soto Velez Cultural Center as a result of a dangerous condition.  At the time of the accident, BQE was the general contractor on the project.  BQE had retained Dosanjh Construction to perform all roofing work, and retained Xaren Corporation to perform asbestos abatement work at the premises.  Both subcontracts included requirements that the subcontractors procure insurance with BQE and the Owner as additional insured parties.  


Castilla ultimately brought a lawsuit against BQE.  BQE tender its defense to Dosanjh and its insurer, Endurance, and Xaren and its insurer, Starr.  In response, Endurance’s third-party administrator disclaimed coverage stating that Dosanjh was off site on the date of the accident, and because coverage was excluded under the exterior work limitation endorsement.  Starr acknowledged receipt, but otherwise did not respond. 


BQE and Century (BQE’s insurer) then brought this declaratory judgment action.

In considering the parties’ dispositive motions, the court began its analysis by noting that the blanket additional insured endorsement in Endurance’s policy includes as an additional insured “[a]ny entity required by written contract…to be named as an insured but only with respect to liability arising out of your premises, ’your work’ for the additional insured, or acts or omission of the additional insured in connection with their general supervision of ‘your work.’”  BQE argued that Castilla was working in the course of his employment for Dosanjh at the time of the accident.  It directed the court’s attention to Castilla’s deposition testimony, a sign-in sheet, and BQE’s daily report from the date of the accident, and a determination by the Workers ’ Compensation Board that Castilla was an employee of Dosanjh.  In response, Endurance argued that the complaint did not allege by whom Castilla was employed, and there was no indication that Castilla’s accident arose out of Dosanjh’s work.  It further argued that the Workers’ Compensation decision was not binding as it was not a party to the matter, and further alleged Dosanjh did not have a full and fair opportunity to litigate employment given that he was not provided an interpreter until halfway through the proceedings.


Considering these arguments, the court noted that it was uncontested that BQE was “required by written contract…to be a named insured.”  The phrase “arising out of” as used in that endorsement requires only some causal relationship between the injury and the risk for which coverage is provided.  And, where the loss involves an employee of the named insured, who is injured while performing the named insured’s work under the subcontract, there is sufficient connection to trigger the additional insured “arising out of” endorsement.  With regard to the duty to defend, the court found a sufficient basis based on extrinsic evidence to trigger that obligation.  However, the court noted that since the claims in the underlying action are still being litigated, Endurance’s duty to indemnify must await the resolution of the underlying action, and the request at this juncture is premature.    


The court next considered whether Starr had a duty to defend and indemnify BQE.  Unlike the Endurance policy, Starr’s policy provides coverage to an additional insured for “bodily injury” “caused, in whole or in party, by…1.  Your acts or the performance of your ongoing operations for the additional insured.”  We argued that Xaren, as the asbestos contractor, stripped the roofing insulation from the roof, which exposed the terra cotta tiles underneath and that the following day, Castilla fell through the exposed terra cotta tiles on that roof.  Starr argued in response that there was no causal nexus between Xaren’s abatement work and the roof’s collapse, and that Xaren was not responsible for the poor condition of the roof.  Citing the recent Burlington decision from the Court of Appeals, the court noted that the language at issues requires more than “but for” causation.  Instead, proximate causation is required.  The Court also cited to BP A.C. Corp. v. One Beacon, which is a duty to defend case, which held that “[w]hen the duty to defend is at issue, a liability alleged to arise out of [the sub-subcontractor’s] ongoing operations is one ‘arising out of’ such operations within the meaning of the policy.” 


Relying upon the amended complaint in the underlying action, the court noted that it was alleged that Xaren performed construction and renovation work.  It was further alleged that the loss was due solely by reason of the carelessness, recklessness and negligence of defendants (including Xaren).  The court concluded that based on these allegations, Starr may eventually be obligated to indemnify BQE.  The court rejected any reliance on the Worth decision, noting that Xaren had not been absolved of liability in the underlying action here.


With regard to indemnity, the court again found that neither side was entitled to summary judgment at this stage.  But, of importance, the court noted that as Starr’s named insured’s answer was stricken in the underlying action as a result of a default, it admits all traversable allegations in the complaint.  Thus, Xaren has admitted that if Castilla sustained any or all of the injuries complained of, such injuries and damages were caused in whole or in part by the wrongful conduct of Xaren.  With that said the court concluded that since it had not yet been determined whether Castilla sustained any injuries or damages as a result of the accident, the motion for indemnity was in the court’s view premature. 


Lastly, the court confirmed that the Century policy issued to BQE is excess over the Endurance and Starr policies. 


On the motion to reargue, Starr sought to reargue that portion of the decision relating to the effect of the default judgment entered against Xaren, its insured in the underlying action.  Specifically, it claimed that the court erred when it stated that “if Castilla recovers against BQE, then Starr will be obligated to indemnify BQE” by virtue of Xaren’s default in the underlying action.  Starr maintained that Xaren’s default did not collaterally estop Starr from litigating Xaren’s liability in this action. 


The court found this argument identical to that previously made.  The court was not persuaded that this situation was different than the case law she relied upon because Starr purportedly didn’t refuse to defend its insured, but rather, couldn’t because of the its insured’s noncooperation.  The court pointed to the lack of case law cited by Starr for this proposition, and declined to parse such a distinction in otherwise clear black letter law on this point.  Moreover, the court noted that it was not persuaded by Starr’s arguments as Starr chose to withdraw counsel from the underlying action, and then the insured defaulted. 


With regard to the motion to renew, based upon Starr recently obtaining a judgment declaring that Starr did not owe coverage to Xaren based upon its non-cooperation, no moment was given to the argument as the judgment was obtained after the default was entered against Xaren.


Accordingly, the motion was denied. 

Editor’s Note:  A win for the H&F Coverage Team.


01/09/18       American Empire Surplus Lines Ins. v. Starr Surplus Lines Ins.

Supreme Court, New York County

Hon. Robert D. Kalish

Court Dismisses Lawsuit Bought By GC’s Carrier Seeking Co-Insurance for Owner; Where GC’s Carrier Won’t Concede Coverage for the Owner, Question of Priority is Premature

This decision arises out of a personal injury action brought against NYU Langone Medical Center (“NYU”).  The underlying plaintiff allegedly sustained injury while working in the course of his employment for a company called Pinnacle Environmental Corporation (“Pinnacle”) when the scaffold equipment he was on fell on his hand and trapped his arm.  The underlying plaintiff eventually brought suit against NYU and the scaffold company claiming common law negligence and Labor Law §§ 200, 240 and 241 violations. 


NYU retained East Coast Restoration (“ECR”) to serve as the general contractor on the project.  Following receipt of the complaint, NYU tendered its defense to ECR and its insurer, American Empire.  American Empire thereafter tendered the defense to Starr (Pinnacle’s insurer).  Starr accepted the defense of NYU based upon the Pinnacle policy with Starr, but did so under a reservation of rights and demanded that American Empire participate in a cost-sharing arrangement.


American Empire then brought this action.  It asserted that based upon the ECR/Pinnacle contract, the Pinnacle was required to defend, indemnify and hold harmless NYU and ECR from all claims and liability.  American Empire further submitted that Pinnacle was required to add both parties as additional insureds on Pinnacle’s commercial general liability policy.  It also asserted that the additional insured coverage provided to NYU under the Starr policy was primary to any coverage afforded to NYU under the American Empire policy.  American Empire concluded that its policy had not yet trigger, and pursuant to its own endorsement additional insured status was only provided where the bodily injury was caused “in whole or in part” by ECR’s acts or omissions.   


In response, Starr submitted that, as per the American Empire endorsements, the American Empire policy was to share equally with other primary insurance policies such as the Starr policy. 


The first issue considered by the judge was whether American Empire had a duty to defend.  The court began by analyzing the complaint.  Upon its review, it noted the absence of any allegation by American Empire that NYU was not an additional insured under its policy with ECR or that NYU was not entitled to defense in the underlying action paid for by American Empire.  Per the declaratory judgment complaint, American Empire was simply asking the court to make a declaration that Starr’s policy was primary to its policy, which presumes both have an obligation to defend.  Starr’s view was the companies would have to split defense costs until there was a final determination on liability, and that no determination could be made as to whether the American Empire policy triggered because NYU was not a party. 


The court then noted that although counsel for American Empire suggested that the court could just resolve the question of priority and leave the issue of its obligation to defend NYU open, the court declined to do so concluding that one never gets to the question of priority if there is no obligation to defend in the first place.  The court also mentioned that the underlying complaint was amended to add ECR as a party after this motion was filed.  Thus, it was the court’s view that it was being asked to render a decision on a complaint that was no longer operable. 


Ultimately, the court concluded that it was clear NYU was entitled to a defense in the underlying action as per the underlying construction contracts that were signed by the insured.  Whether any liability was to be placed upon NYU as per the actions of ECR or Pinnacle was yet to be determined.


Ultimately, the court reasoned at the issue of priority could not be determined in the posture of this case as it stands now because NYU was not present to defend against American Empire’s assertion.  Thus, the court found this matter should be dismissed and the parties could institute a new declaratory action including NYU as a party at a later date.



Brian D. Barnas

[email protected]


01/19/18       Landers v. State Farm Florida Insurance Company

District Court of Appeal of Florida, Fifth District

Civil Remedy Notice was Legally Sufficient even though the Appraisal Process under the Policy was Ongoing

In 2009, Phillip Landers's home sustained a loss from suspected sinkhole activity.  He submitted a claim to his insurer, State Farm Florida Insurance Company (“State Farm”).  State Farm hired SDII to conduct a subsidence investigation.  SDII verified that sinkhole activity was the cause of the damage, and State Farm admitted coverage.  SDll initially concluded that 975 cubic yards of grout needed to be injected into forty-nine holes around the home's perimeter.  SDII did not recommend underpinning.  After considering the report of a neutral evaluator, SDII amended its report to require an additional fifteen grout injection points.


Landers obtained an independent opinion from Reinhart.  In Reinhart's opinion, proper stabilization required underpinning.  State Farm provided Reinhart's report for review by the neutral evaluator.  The neutral evaluator concluded that underpinning was unwarranted.  While State Farm demanded appraisal under the policy to resolve the parties' disagreement over the amount of the loss, Landers agreed, pursuant to the terms of the insurance contract, to proceed with SDll's recommended repair plan, despite his belief that the repairs were inadequate.  State Farm placed its appraisal demand on hold while the stabilization repairs were made.  Further appraisal would be required to address cosmetic repairs to the home.


After the repairs were completed in September 2011, State Farm reiterated its request for appraisal of the cosmetic damage to the home.  The home continued to experience damage after repairs were completed.  As a result, Landers hired Sonny Gulati, a geotechnical engineer, to examine the property. I n January 2012, while Gulati's report was pending, Landers filed a civil remedy notice (“CRN”), alleging, among other things, claim delay, failure to promptly and properly investigate the claim, failure to adjust the loss, and the failure to tender policy limits.  Landers contended that the repairs were completed pursuant to State Farm's expert's recommendation, yet his home remained unlivable.  Landers demanded the immediate tender of the policy limits of $1,026,500.00 minus any prior payments that had been made so he could complete repairs to his home.  In response, State Farm requested that all issues be submitted to appraisal.


In March 2012, Landers brought suit against State Farm for breach of contract. In that suit, State Farm sought to compel appraisal, which was eventually granted.  In July 2014, the appraisal panel determined that the amount of loss exceeded the policy limits. State Farm tendered the policy limits in August 2014, without any deduction for the amounts previously paid.  Landers then brought a first-party bad-faith suit against State Farm, alleging ten purported violations of sections 624.155(1)(b)(1) and 626.9541(1)(i), Florida Statutes (2008), including allegations of claim delay and low-balling.  Landers contended that his damages always exceeded the policy limits and that State Farm acted in bad faith by delaying payment of the policy limits until after appraisal.


State Farm moved for summary judgment arguing that when Landers filed the CRN, there was no contractual amount due and no damages owed under the contract because a condition precedent to payment—determining the amount of loss through appraisal—had not been fulfilled.  Therefore, the CRN was not valid and Landers had no claim.


The court disagreed, finding that filing a CRN before the appraisal process is complete and damages are determined does not render the CRN a legal nullity precluding Landers’ bad faith claim.  In Florida, there are three prerequisites to filing a statutory bad-faith claim: (1) determination of the insurer's liability for coverage; (2) determination of the extent of the insured's damages; and (3) the required notice must be filed under section 624.155(3)(a).  The statutory CRN requirement is designed to give an insurer time to cure an alleged bad faith violation by the insured.  Preventing an insured from filing a CRN before coverage and liability have been conclusively established would frustrate the purpose of the statute by further delaying the time necessary to assess and pay out claims and discouraging insurers from taking timely, independent action on claims.  Accordingly, the court held that once the appraisal process is complete and a legally sufficient CRN has been provided, the conditions precedent to filing a statutory bad faith claim are met.


However, there was still a question of fact as to whether State Farm actually acted in bad faith.  Accordingly, the case was remanded for further proceedings.


01/18/18       Veilleux v. Progressive Northwestern Insurance Company

United States District Court, District of Connecticut

Insured’s Bad Faith Claims Survived Motion to Dismiss based on Allegations that Insurer Denied Coverage with no Colorable Basis for doing so and on a Pretextual Basis

Veilleux was an employee of G.D.S. Contracting Corp. (“G.D.S.”) in Berlin, Connecticut.  On September 8, 2006, a tractor and trailer owned by Central Auto or Central Rigging delivered an aerial lift to G.D.S. In the course of unloading the aerial lift from the tractor, which involved the operation of both the tractor and the trailer by, Veilleux suffered severe, serious, and permanent personal injuries while in the bucket of the aerial lift.  On or about September 3, 2008, the Plaintiff filed suit in Hartford Superior Court seeking recovery from Central Auto and Central Rigging.  On March 30, 2016, Veilleux entered into a stipulation with Central Auto and Central Rigging, upon which judgment entered on said date, wherein both companies stipulated to liability for the injuries suffered by Veilleux and to judgment in the amount $3,750,000, plus costs.


At the time of Veilleux's injuries, Central Auto and Central Rigging were both insured by Progressive.  Central Auto's policy provided $750,000 in coverage.  Central Rigging's policy provided $1 million in coverage.  Veilleux alleged that Progressive failed to provide him with coverage for his injuries.  Veilleux also alleged that Progressive breached the implied covenant of good faith and fair dealing.


Progressive sought dismissal of the good faith and fair dealing claims, arguing that they failed to allege bad faith.  Veilleux alleged that Progressive denied coverage for Central Auto despite a clear mandate to do so under the Federal Motor Carrier Safety Act.  This allegation, liberally construed, stated a claim against Progressive for refusing to honor the policy despite the fact that the company should have known of its obligation to provide coverage.  Thus, he averred that Progressive failed to live up to its obligations despite lacking any colorable basis for doing so.  Although it was a close call, the Court determined these allegations stated a plausible claim for violation of the implied covenant of good faith and fair dealing.


Turning to Central Rigging, Plaintiff alleged that Progressive willfully and intentionally denied coverage on a pretextual basis.  This was sufficient too was sufficient to state a claim for violation of the implied covenant of good faith and fair dealing.


John R. Ewell

[email protected]


12/05/17       State Farm Mutual Auto. Ins. Co. et al. v. Payne

Supreme Court of Oklahoma

Oklahoma’s Savings Statute Applies to Subrogated Insurers, Giving Insurers One Year to Revive Lawsuits Commenced by Their Insured

On January 23, 2012, Tori Ukpaka sustained injuries arising out of a car accident. On January 3, 2014, just within the applicable two-year statute of limitations, Ukpaka filed a negligence claim against the other driver in the accident, Nicolas Payne. Ukpaka was insured with State Farm. Shortly after Ukpaka commenced the lawsuit against Payne, State Farm paid Ukpaka $38,500 pursuant to her policy for uninsured/underinsured motorist coverage. Ukpaka then decided not to pursue her claim against Payne and moved to voluntarily dismiss that lawsuit. The suit was dismissed without prejudice on January 14, 2015—approximately one year after the statute of limitations had run.

Two months later, in March of 2015, State Farm sued Payne raising the same negligence claim as Ukpaka, only this time the named plaintiff was State Farm Mutual Automobile Insurance Company as subrogee of Tori Harvey Ukpaka. State Farm argued in its petition that its action was timely in light of Oklahoma’s “Savings Statute,” 12 O.S. § 100. The Savings Statute gives “the plaintiff” up to one year from the date of a non-merits-based termination in which to re-file an otherwise time-barred claim. Payne countered in a motion for summary judgment that State Farm could not avail itself of Oklahoma’s Savings Statute because it was not a plaintiff in the original action, and that its claim is thus time-barred. The district court granted Payne’s motion, and the Court of Civil Appeals affirmed.

Oklahoma’s Savings Statute provides:

If any action is commenced within due time, and a judgment thereon for the plaintiff is reversed, or if the plaintiff fail in such action otherwise than upon the merits, the plaintiff, or, if he should die, and the cause of action survive, his representatives may commence a new action within one (1) year after the reversal or failure although the time limit for commencing the action shall have expired before the new action is filed.

To avail itself of the statute, State Farm needed to show: (1) that the original action was timely, (2) that the action terminated for some reason other than its merits, (3) that State Farm qualifies as one of the parties entitled to revive the action, and (4) that the new action is substantially the same as the original.

The parties did not dispute that Ukpaka's original action was timely and its voluntary dismissal was a termination for reasons other than the merits. On appeal, the Oklahoma Supreme Court considered whether: (1) State Farm qualifies as one of the parties entitled to revive the action; and (2) whether the action State Farm asserted was substantially the same as Ukpaka's?

Under the plain text of the Savings Statute, there are two classes of person entitled to the benefit of the statute: “the plaintiff” and “his representatives” as survivors of the plaintiff. State Farm did not claim to be a representative survivor of Ukpaka; thus, the only way it could proceed under the savings statute is if it could qualify as “the plaintiff.” Payne argued that the court should narrowly construe that term and limit it to only those that participated as plaintiffs in the original action.

In Oklahoma, whether a subsequent plaintiff qualifies as “the plaintiff” for purposes of the Savings Statute focuses not on whether the subsequent plaintiff is identical to the one before, but on whether the parties are “suing in the same right.”

In subrogation, the insurer “steps into the shoes of the plaintiff.” The insurer takes the claim of the plaintiff/insured subject to all legal and equitable defenses which the tortfeasor may have against the plaintiff and acquires no rights greater than those of the plaintiff. The subrogated insurer brings the same cause of action as the plaintiff/insured, to recover damages arising from the same injuries as the plaintiff/insured. In short, the subrogated insurer maintains a suit in its own name to redress wrongs done to its insured. As such, the Oklahoma Supreme Court held that a subrogated insurer is “substantially the same, suing in the same right” as its plaintiff/insured for purposes of the Oklahoma Savings Statute.

The Court supported its reasoning, noting that the decision was consistent with its treatment of subrogees for purposes of statutes of limitations generally. In Oklahoma, even though a subrogated insurer does not gain its right to sue until the date it pays on the loss, it nevertheless shares the same accrual date as the insured for purposes of the statute of limitations. Thus, in this case, where State Farm did not establish its right to sue until 2014, the statute of limitations still began to run against it from the date of the accident in 2012. The Court held that “[i]f subrogated insurers should be bound to the same temporal fate as their insureds under the statute of limitations, they should also benefit from the same graces under the savings statute.” Therefore, in light of the relationship created through subrogation, a subrogated insurer is “substantially the same” as its insured for purposes of the savings statute, and is permitted the same one-year grace period in which to revive a claim originally brought by its insured.

The Court also found that the claim State Farm sought to revive was the same as the original action. State Farm named the same defendant. It alleged the same January 23, 2012, accident. It cited Payne's negligence as the legal basis for the action. It asked for redress of the same property and bodily-injury damages incurred by its insured. The Oklahoma Supreme Court reversed the judgment of the trial court, granting victory to State Farm.


Howard B. Altman

[email protected]


Wireless Communications Equipment Insurance:


On January 3, 2018, the Department of Financial Services (DFS) issued Circular Letter No. 1, governing the sale of wireless communications equipment insurance and service contracts. You can view the complete letter at:



The purpose of the circular letter is to identify and provide guidance with respect to certain improper practices in connection with the sale wireless communications equipment insurance and service contracts.   We all recall the days of buying a big screen TV or computer, and the salesperson would pressure us to by the extended warranty for another $200 or so.  What they were selling, of course, was insurance policies, the terms of which you’d rarely be given, and, if given, would be unlikely to read. 


Now as cell phones and tablets escalate in price, the same practice is being used in the sale of these devices. DFS had received complaints over the years regarding these practices. These improper practices include:


(1) the tying of wireless communications equipment insurance with the sale of a service contract or other non-insurance benefit;


(2) deviation by wireless communications equipment insurers from filed rates;


(3) compensating unlicensed employees of an insurance agent licensed under Insurance Law § 2131 (“limited licensee”) based upon the sale of insurance;


(4) the failure of insurers to comply with Insurance Law § 3425 or 3426, for individual policies, and § 3449, for group policies (which govern policy cancelation and non-renewal);


(5) the failure of limited licensees to give all the notices required by Insurance § 2131 and other applicable notices, including the producer compensation disclosure notice under 11 NYCRR 30 (Insurance Regulation 194); and


(6) the use of unfiled trade or assumed names by insurers or limited licensees.


Brian F. Mark

[email protected]


01/19/18       Westfield Ins. Co. v. Miller Architects & Builders, Inc.
U.S. District Court for the District of Minnesota
US District Court Finds that Insurer Owed its Insured a Duty to Defend Relative to Underlying Arbitration Asserting Claims of Construction Defects.

This declaratory-judgment action arises out of an underlying arbitration stemming from construction defects in the construction of a luxury apartment complex.  The defendant, Miller Architects & Builders, Inc. (“Miller”) was hired by IRET-Cardinal Point LLC (“IRET”), a real estate trust, to build a two-building luxury apartment complex.  IRET ultimately terminated Miller due to faulty construction and poor design.  IRET then commenced arbitration against Miller under the terms of the parties’ contract. 


Miller tendered IRET’s allegations to its insurer, plaintiff Westfield Insurance Company (“Westfield”).  Westfield determined that it had no duty to defend or indemnify Miller in the arbitration.  Westfield then commenced this declaratory-judgment action seeking a declaration that it had no duty to defend or indemnify Miller in the arbitration.


Westfield moved for summary judgment on its duty to defend and Miller cross-moved for partial summary judgment claiming that Westfield’s breach of its duty to defend entitled it to recover the attorney’s fees it expended in the arbitration and the fees incurred in defense of the coverage action.


In the arbitration, IRET alleged 65 separate damage claims.  However, the parties based their arguments on five broader categories of claimed damage.  The Court agreed that the coverage issue could be decided by examining the five categories of damages.


The five categories of claimed damages are:


  1. Water intrusion damage caused by Miller’s subcontractor defectively installing the roof of one building, which resulted in electrical problems and damaged some finishes in the building.


  2. Damage to concrete support beams caused by Miller’s subcontractor drilling holes in them.


  3. Damage to the parking ramp because the ramps themselves were constructed at an improperly steep angle with no transition ramp.

  4. Foundation problems allegedly caused by an unstable foundation.

  5. Loss of use because of the delay necessary to correct the defective work.


In examining the coverage issues, the Court noted that an insurer’s duty to defend is to be determined by comparing the allegations in the underlying complaint with the relevant policy language.  An insurer has a duty to defend all claims even if only one of the claims is arguably covered by its policy.  The insurer carries the burden of demonstrating that each claim asserted falls outside the policy.


The Westfield policy is a standard Commercial General Liability policy providing insurance for those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” that is caused by an occurrence.  Under exclusion j(5), the policy excludes from coverage “property damage” to that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations.  Under exclusion j(6), the policy excludes from coverage “property damage” to that particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.  Exclusion j (6) does not apply to “property damage” included in the “products-completed operations hazard.”  Under exclusion (l), the policy excludes from coverage “property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.”  Exclusion (l) does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.  The “products-completed operations hazard” provides coverage from damage “arising out of … “your work” unless the “work … has not yet been completed or abandoned.”  The policy deems “your work” to be completed when all of the work called for in the contract has been completed.


Upon its review of the above policy language, the Court concluded that the Westfield policy excludes from coverage all damage caused by defective work, unless the damage was caused after the insured’s work was completed.  Even if the work was completed, damages are still excluded unless the work was performed by a subcontractor.  The Court noted that it was undisputed that Miller’s subcontractors’ work caused most, if not all, of the five categories of damage.


In its motion for summary judgment, Westfield argued that the Court should apply the business risk doctrine to the policy provisions.  Under the business risk doctrine, commercial insurance policies are interpreted to exclude coverage for damage caused by conduct that would constitute breach of contract, faulty construction, and the like.  The Court rejected this argument holding that the business risk doctrine arose out of a previous version of the standard CGL policy.  The newer policy and the exclusions discussed above replaced the prior form.  The Court held that it need not resort to the business risk doctrine when examining the policy’s provisions.


Westfield also argued that the damages IRET claimed in the underlying arbitration are not “occurrences” within the meaning of the CGL policy.  The Westfield policy defines “occurrence” as an accident, including continuous or repeated exposure to substantially the same general harmful conditions.  Minnesota law defines “accident” as an unexpected, unforeseen, or undersigned happening or consequence from either a known or an unknown cause.  The Court noted that even if discovery in the underlying arbitration reveals that Miller’s subcontractors knowingly or intentionally deviated from design specifications, the deviation is still unintended and an “accident” from Miller’s perspective.  The Court further noted that as the policy acknowledges, damage caused by the work of a subcontractor is not excluded from coverage.  As such, the Court found that Westfield owed a duty to defend Miller in the underlying arbitration.


Westfield conceded that if the claims fell within exclusion (l), the claims would be covered, but argued that the exclusion did not apply because Miller’s work on the project was not complete and therefore, the products-completed operations hazard did not apply in the first instance.  Westfield claimed that Miller’s departure from the project was a termination for cause.  However, the evidence demonstrates that the termination was for convenience, not cause.  The Court held that because Miller completed its obligations to IRET, its work was completed for the purposes of the products-completed operations hazard, and the subcontractor exception applies.  As at least some of IRET’s claims arose out of the work of Miller’s subcontractors, those claims are arguably covered by the policy.  Accordingly, the Court found that Westfield had a duty to defend Miller in the arbitration.


Miller sought a ruling that Westfield breached its duty to defend and owes Miller the costs and fees it expended in defending the arbitration and defending the coverage action.  As the Court determined that at least some of the claims in the arbitration were arguably covered, the Court concluded that Westfield breached its duty to defend and Miller was entitled to recover its defense costs, including attorney’s fees, from the time of its tender to the present time.  The Court held that those costs included the fees and costs incurred in defending the coverage action.



Larry E. Waters
[email protected]


01/19/18       Fernandez v. Philadelphia Indemnity Insurance Company

United States District Court, Southern District of New York       
Coverage Not Available for Non-cooperating Insured

In June 2012, Plaintiff purchased and added a 1962 Chevrolet Impala (the “Impala”) to an existing auto insurance policy issued by Philadelphia Indemnity Insurance Company (“PIIC”).  The policy covered risk in multiple states but the Plaintiff domiciled in New York State.  Subsequently, on July 1, 2014, Plaintiff reported the Impala stolen.  At the request of PIIC, Plaintiff submitted documents including a November 20, 2007, bill of sale of the Impala.  On March 1, 2017, PIIC moved for summary judgment seeking dismissal of Plaintiff’s complaint in its entirety with prejudice on the grounds that Plaintiff’s conduct violated the Fraud Provision and breached his duty to cooperate under the Policy. 


In assessing PIIC’s entitlement to summary judgment, the Court first had to determine which state law applied.  Ultimately, the Court applied New York law despite the policy covering risks in multiple states.  The Court reasoned that in such circumstances the Plaintiff’s current domicile is the most important factor in determining which state law applies.  As a result, New York law applied in this matter.  


In assessing Plaintiff’s lack of cooperation, the Court found PIIC satisfied the three-part test established by the New York Court of Appeals in determining whether an insured has violated a cooperation provision in an insurance policy.  Specifically, the Court determined PIIC’s efforts were diligent and reasonably calculated to bring forth Plaintiff’s cooperation by sending multiple letters and following up even after Plaintiff failed to respond.  In addition, the Court found Plaintiff’s attitude was one of “willful and avowed obstruction” as Plaintiff provided PIIC with false documents.  Plaintiff attempted to argue the documents produced were not fraudulent.  However, the Court rejected this argument.  The Court reasoned, “Plaintiff implicitly represented to PIIC that the documents he submitted were bona fide, when in fact they were fabricated.” 


Further, the court rejected Plaintiff’s contention “that his misrepresentations were not material.”  In rejecting this contention, the court explained that “a subject relevant and germane to the insurer’s investigation as it was then proceeding is considered material.” As such, the court found Plaintiff’s implicit representations that the bill of sale and invoices were genuine was particularly relevant and germane to PIIC’s investigation.  In sum, the Court granted PIIC’s motion for summary judgment based upon Plaintiff’s willful violation of the Cooperation Condition under the policy. 


01/18/18       Winking Group, LLC v. Aspen Am. Ins. Co.

United States District Court, Southern District of New York
Coverage Not Available for Insured Due to the “Entrustment Exclusion”
On July 20, 2001, Plaintiff leased 75 East Broadway (the “premises”) to Ming Dynasty, Inc., which in turn sub-leased the premises to East Market Inc.(“East Market”).  Plaintiff consented to East Market’s occupancy of the premises and admitted it had initially entrusted the premises to East Market.  East Market was evicted from the premises on or about January 10, 2015.  In addition, on January 10, 2015, the premises were vandalized.  On January 23, 2015, Plaintiff filed an insurance claim with Aspen American Insurance Company (“Aspen”).  Aspen investigated the claim and was informed by Plaintiff’s representatives that East Market caused the damage to the premises.  Following its investigation, on August 12, 2016, Aspen denied Plaintiff’s coverage claim based upon the “entrustment exclusion” within the policy.  The policy’s “entrustment exclusion” provided no coverage for “dishonest or criminal act by you, any of your partners, members, officers, managers, employees (including leased employees), directors, trustees, authorized representatives, or anyone to whom you entrust the property for any purpose . . . .”  Plaintiff commenced this lawsuit against Aspen alleging breach of insurance contract.  Subsequently, Aspen moved for summary judgment. 


The parties did not dispute the validity of the “entrustment exclusion.”  In fact, the Court noted New York courts have held that exclusions for the dishonest acts or persons to whom the insured entrusts its property are enforceable.  Instead, Plaintiff argued: (1) that it is disputed whether East Market vandalized the premises and (2) even if East Market vandalized premises it was after Plaintiff had revoked its entrustment. The Court rejected both arguments.


In rejecting the first argument, the Court noted the undisputed evidence showed East Market vandalized the premises.  In particular, the Court highlighted statements from Plaintiff’s representatives stating East Market was responsible and admitting whoever vandalized the premises had a key.  In addition, Plaintiff’s representatives admitted only East Market had access to the premises.  Further, the court highlighted the allegations made by Ming Dynasty that East Market and its principals caused damage to the premises. 


In rejecting the second argument, the Court was not persuaded by Plaintiff’s contention that the “entrustment exclusion” did not apply because Plaintiff terminated its entrustment by evicting East Market from the premises.  Rather, the court found the “entrustment exclusion” applies broadly and included no language indicating the parties intended to limit its application to acts occurring before the conclusion of the parties’ legal relationship.  In addition, the Court reasoned it was sufficient that the vandalism was casually related to Plaintiff’s initial entrustment of the premises to East Market because of the plain reading of the “entrustment exclusion.”  Further, the Court found no legal authority to support Plaintiff’s proposition that East Market’s formal eviction is legally relevant to the scope of the “entrustment exclusion.”  In sum, the Court held the “entrustment exclusion” applied and granted Aspen’s motion for summary judgment. 


Earl K. Cantwell
[email protected]


06/06/17       U.S. ex rel. Dana Curtin v. Barton Malow Co.

U.S. District Court, Western District of Louisiana 

False Claims Act

If confronted by a claim under the federal False Claims Act (and there are some similar state statutes), you should analyze the claim and take advantage of several available defenses.  A first task is to consider the particulars of the claim and determine if it really is a False Claims Act case. 


The relator in this case charged the defendant with installing non-warranted roofing material on a federal construction project.  The claim was that this led the contractor to present “false claims” for payment to the government.  The company filed a motion to dismiss which was granted. 


Essentially, the relator claimed that the company was installing “Blue Skin” underneath the roof whose warranty was expired or had been invalidated.  The basic claim was that the Blue Skin used on the project was covered by a warranty; the contractor installed the product knowing the warranty was expired, and then billed the government for installation work. 


However, the issue was deemed to be largely a question of non-compliance with the contract, and under the False Claims Act the claim must be material to the government’s payment decision.  What the Court held was that the non-compliance was a relatively minor or general breach of contract, or a regulatory violation, that did not rise to the “materiality” threshold of the False Claims Act.    The case was therefore dismissed with prejudice. 


This case held that a “garden variety” breach of contract claim may not qualify as a False Claim for payment.  In addition, the “false claim” must be part of an application or presentation to the government for payment, and be reviewed or relied upon by the government in approving and making payment.  From an analytical point of view, the claim should be more akin to a fraud claim than a simple breach of contract or warranty.  


Other cases have dismissed False Claims Act claims because there was no false claim presented, the claim must be an actual charge or request for payment to the government, and only actual damages or overpayments by the government are recoverable.  In any event, the “falsity” must be “material” and relevant to the government’s decision and obligation to make payment.  

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