Coverage Pointers - Volume XIX, No. 2

Volume XIX, No. 2 (No. 485)

Friday, July 14, 2017

A Biweekly Electronic Newsletter


Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874


Long Island Office:

535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

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

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


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


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


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


Dear Coverage Pointers Subscribers:


Do you have a situation?  We love situations. 


Do you celebrate Bastille Day?  If so, Happy Bastille Day.


Forty Years is a Long Time to do Anything:


Today is my 40th anniversary at Hurwitz & Fine, P.C., starting as a law clerk back on July 14, 1977, during the summer between my first and second year of law school.  As I was completing my first year, I pulled out a copy of Martindale-Hubbell and sent out poorly typed resumes (prepared on a portable Smith-Corona) to several local firms, none of which I knew.  In May, I received a call from a Sheldon Hurwitz, who had a firm with two other lawyers.  He had been in partnership with his brother and another fellow when I sent in the resume originally, but he and his brother had gone their separate ways.


I appeared at the Law Offices of Sheldon Hurwitz, spent a few minutes with Mr. Hurwitz talking about our common experiences in the New York State Legislature, and returned home, hoping for a call. None came.


So, I started some kind of odd research project and did that for about two months.  One fine evening in July 1977, I received a call from Mr. Hurwitz, asking me what I knew about products liability; he needed a trial brief for federal court.  I knew little about federal court and less about products liability (which I readily admitted) but offered that I was a quick learner.


He invited me to come down to his new law firm, Hurwitz & Fine.  He and his friend Bob Fine had opened a litigation and business firm on June 1. I reported to the office on July 14, 1977 (about 45 days into the firm’s history).  It had four lawyers and me. 


I have never left.


There have been many offers and opportunities but if it ain’t broken, why try to fix it?  A lifer.  Not too many of us have stayed in the same place that long.  Forty years, from age 24 to 64. 


Shelly Hurwitz passed away in 2002. Bob Fine is still with us and is still an important part of the firm. Both men taught me the importance of being a professional, to strive for excellence in all we do, to give back to the community and the profession and to teach others.  Ann Evanko, my good friend and classmate, has managed the firm with class and style for the past several years, with an eye always looking to the future.


I have been blessed with partners with whom I have shared time for many, many years.  The insurance coverage and litigation teams are second to none.  The business and transactional lawyers are the best of the best.


And my friends and clients, my colleagues in professional organizations in the U.S., Canada and Europe, have made this journey so very sweet.


Anyway, I’m certain that I will not be here for another 40 but I’m not leaving quite yet. 


Thanks all.


Additional Burlington Kudos to IFG’s Peter Williams


In our June 30, 2017 issue we talked about the promotion and advancement of the Burlington decision.  We should have also offered congratulations to Peter L. Williams, AIC, Regional Claim Manager at IFG. Pete handled this case at the IFG/Burlington office for seven long and strategic years and deserves credit and applause.  Atta-professional!


NFJE Greetings:


I am proud to serve on the Board of Directors of the National Foundation for Judicial Excellence, and I am in Chicago for its annual symposium for state appellate judges.


Sheriff Swords’ Murderer – 100 Years Ago:


Weekly Town Talk

Alexandria, Louisiana

14 Jul 1917





            New Orleans, July 9.—Hilaire Carriere, the slayer of Marion L. Swords, sheriff of St. Landy parish, was Saturday taken from the Louisiana state penitentiary and carried to New Orleans, where he will be kept for safekeeping. 


            The state penitentiary management is tearing down the cells in which Carriere has been held as prisoner.  The prison management will use the dormitory system in the state penitentiary in the future.  Such a system would not do for Carriere.  Sheriff Frontenot and Deputy Sheriff Horne of St. Landry came and took the noted prisoner to New Orleans.  He will be kept there until his death warrant is signed by Governor Pleasant, when he will be returned for execution. 


            A perfect specimen of health, and calm in manner, Carriere sat in a cell in the parish prison here Saturday afternoon and between puffs from a pipe, said:


            “What’s the use of taking about it—it’s all over now.”

Editor’s Note:  this murder tale is a story worth reading.


Jen’s Gems:


At this point, you can tell the summer is in full swing as the number of e-mails I receive each day temporarily lessens.  A nice time to catch your breath and do all those things you have been meaning to do for far too long.


We had a great time in Toronto the other week.  If you have never been to the Toronto zoo, it was fabulous and enormous.  I have to say we probably saw about a third of all the animals and exhibits.  We also made the rookie mistake of telling the girls that the zoo had a splash pad (amazing, right?) which they could go in after we went along with my oldest telling me frequently that she was really, really hot. 


In terms of my column this week, I am reporting on a trial court case involving permissive use, American Country Ins. Co. v Umude.  The named insured stayed at his mother’s house one night placing the only set of keys to his vehicle in his suit pocket.  The next morning he receives a call from the police that his brother has been in an accident and that he should come to the local hospital.  At that point, the named insured goes to retrieve his keys, notices they are missing and also notices that his car is missing.  He files a police report documenting the lack of permission.  His brother is charged with unauthorized use, and the named insured then gave an EUO again advising of the lack of permission.  Despite this evidence, the trial court initially determines that the evidence is essentially irrelevant because the carrier failed to issue a timely disclaimer on these grounds.  Recognizing what permission does to the definition of insured, and is a question of coverage, the carrier moves to reargue.  That motion is granted, and upon reargument, summary judgment is granted in favor of the carrier.  While not a shocking outcome, this is a good case to consider what type of evidence needs to be submitted to support the lack of permission.  In this case, the carrier had some pretty strong proof:  police report, criminal charges and EUO testimony.


Well, until next issue…





Jennifer A. Ehman

[email protected]


The Supreme Court is Currently Considering the Constitutionality of Gerrymandering – a Century Ago, the Same Issues were being Debated:


The Sun

New York, New York

14 Jul 1917




A Complaint Based on Their Irrational



            TO THE EDITOR OF THE SUN—Sir:  Can you explain to me why it is necessary to divide this city into Assembly districts having such absurd shapes?


            I presume the regular Assembly districts are the ones being used for the drafts exemption boards, and in one of to-day’s morning papers a description is given of each district.  I enclose herewith two sample diagrams traced from a map of New York city, and I ask you whether such divisions in a city where most of the streets run at right angles are not ridiculous.


            No wonder that on June 5 thousands of young men had difficulty in finding where they were to register, particularly as no maps were furnished to the registration officials, an omission which I trust will not occur when the exemption boards get to work.


New York, July 13                                        L.W. Relyea


The districts are political units, laid out to insure the largest possible advantage for the party in power when they are set up.  The political geographer makes as many safe districts for his own friends as he can under the Constitution, and his efforts result in the amazing irregularities now brought to our friend’s attention.


Tessa’s Tutelage:


Dear Readers:


Last week we had our first tie as a softball team.  We are about seven games in with no wins, if that gives you any indication of our prowess on the field.  Our luck appears to be turning because this week’s game got rained out.  I am going to call that success because you just can’t lose a game you don’t play ... right? I am somewhat optimistic that our players will take this week off to cross train and, more importantly, recruit any able-bodied friend who is willing to play.  If anyone has any softball suggestions, feel free to send them my way. 


This week there wasn’t anything new to cover from the Courts so we have two arbitration cases that are a little different. Notably, the Respondents in these cases were more successful than the H&F softball team this season.   Arbitrator Bargnesi’s decision concerns the prescription of an expensive medicine to treat knee pain.  The important part here is that an insurance provider cannot deny reimbursement due to the cost of a treatment alone. In this case, the peer review doctor noted that not only were there other less expensive medicines available, the less expensive medicines were generally more effective.  Once the insurance company could establish that the medicine was known to be less effective they had met their burden.  Applicant was unsuccessful in demonstrating the medical provider’s rationale for prescribing this particular drug, and Respondent’s denial was upheld.  Of course, this might have turned out differently if Applicant had a good reason for using this particular drug.  Of course, if I come across a case like that, I will let you know.   Arbitrator Brown considered a case where chiropractic care records established that treatment was not helping the injured party.  In fact, it appeared the injured party was getting worse with treatment.  Applicant tried, unsuccessfully, to argue that there was some evidence that Plaintiff benefitted from the care.  However, in the face of the peer review and the notes from the service provider, Applicant’s efforts were unavailing. 


Hope you have a lovely weekend,



Tessa R. Scott

[email protected]


Horrors: A May-December Civil Wedding:


The Sun

New York, New York

14 Jul 1917






Church Ceremony Performed,

Disarming Teacher’s Critics 


            It became known yesterday that Miss Grace C. Strachan, District Superintendent of Schools, and young Timothy J. Forsythe, who were married by a justice of the peace in Vermont last Good Friday, were remarried at St. Augustine’s Roman Catholic Church, Sixth Avenue and Sterling Place, Brooklyn, by the Right Rev. Mgr. Edward W. McCarty last Tuesday.


            It was only recently that the Rev. John L. Belfort, rector of the Roman Catholic Church of the Nativity in Brooklyn, sharply criticized Mrs. Forsythe for being “married by a justice of the peace and on Good Friday.”


Editor’s Note: “Young” Timothy was 16 years Grace’s junior


Ewell's Universe:


Dear Subscribers:


It’s nearing the end of July, which for me means my air conditioner is on high. For recent law graduates, it means … the bar exam. Soon, hundreds of recent graduates from near and far will be lining up outside the Buffalo Convention Center to sit for the New York State bar exam. My girlfriend will be one of them. I’m very proud of how smart she is and how hard she has been studying. I know she will do well. Best of luck Erin!!!


Turning to this week’s column, courts across the country are…. QUIET. It took quite a bit of searching to find even one case this week. We have a case from New Hampshire’s high court, which is a reminder that ambiguity in an insurance policy will be construed against the insurance company. Even where the insured and insurer both argue reasonable interpretations of the policy, the contract will be construed against the insurer. The facts are somewhat terrifying in this case. Particularly, if you or anyone you know has ever had surgery at a hospital. In that case, a hospital worker was aware he had Hepatitis C. He also had a penchant for stealing fentanyl, a strong pain reliever and anesthesia. Apparently, the worker stole syringes of fentanyl that were intended to be injected into patients just before surgery. He injected the drug into himself and refilled the syringe will saline (salt water). The needle and syringe was then placed back on the cart to be given to the patient. The patient was in for a double dose of trouble. Not only did the patients not receive anesthesia, they contracted Hepatitis C. The affected patients sued the hospital, and our case today addresses the coverage issues involved, which ultimately reached the New Hampshire Supreme Court.


‘Til Next Time,



John R. Ewell

[email protected]


Courting – Down Mexico Way:


The Walnut Valley Times

El Dorado, Kansas

14 Jul 1917




Must Be Possessed of Unlimited

Patience for Courtship is

Slow and Difficult Process.


            This is the manner of courtship in Mexico, says the World Outlook.  A young man sees a young lady on the street whom he admires, and follows her home.  Having reached her casa, he begins to “play the bear.” by walking back and forth in front of the house or standing on the street with his eyes fixed upon her window, for hours at a time, day and night alike.


            The Mexican young woman is coy, and, even if greatly interested, she will remain back of the curtain. By the slightest movement of the curtains or blinds she gives sign that she is not entirely indifferent.  After a day or two she may even show her face or wave her hands as a further mark of encouragement, and, after several days, she may appear on the balcony for a few moments.  If she goes to church the lover is probably not far behind, and an occasional smile or glance from her eyes of midnight is given him as a reward for his faithfulness.  Next come daily salutes and smiles when the lover appears.  Flowers in which notes are concealed are sent by the aid of the water carriers or charcoal vendors.


Phillips Federal Philosophies:


Hello, All:


Month two of running, consistently anyway, and I’ve already completed sixteen “ZombiesRun” missions. If you haven’t tried this particular running app, it’s a helpful motivational tool – exercise or become dinner for the undead.  It also allows me to continue to answer the question, “Do you run?” with “Only when chased.”**  Although it did make for an awkward conversation with my doctor when I explained that my tendonitis probably resulted from trying to escape zombie jurisdiction.


Speaking of jurisdiction (please, we both know I’ve had worse segues), the district court in Oshetski v Allstate Ins. Co. considered what constituted a “direct action” against an insurer for the purpose of diversity jurisdiction.  The plaintiffs there sought remand back to state court based on 28 U.S.C. § 1332(c), which in less than elegant language states “in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of” every state of which the insured is a citizen.  The district court explained that this rule does not apply to suits against the insurer based on its alleged independent wrongs.


**Bonus points if you get the iconic 80s movie reference.


As always, thanks for reading.



Jennifer J. Phillips

[email protected]


Women in the Military in WW I – Not Likely:


The Manhattan Daily Nationalist

Manhattan, Kansas

14 Jul 1917




Writes a Letter Asking to Enlist In

the United States Army


            Muncie, Ind.—The following letter has been received by Sergeant Joseph R. Finney of the local recruiting station:


Union City, Ind.

Captain Finney, Army Recruiting Office, Muncie, Ind.:


Dear Sir—I sent in my application to the army recruiting office several months ago and I was told to write you about it. I wish to join the United States Army.  Whatever way you may see fit to use me I shall be willing to give you my best service.  My present position is clerking in a grocery store.  Now, if you see any way to use me let me know.  If it is to be on the firing line I am willing even to go there.  Hoping to hearing from you soon, I am, sincerely yours.



R. R. 2, Union City, Ind.


            Sergeant Finney, after an investigation, said the young woman who sent the letter is a pretty girl who clerks in a country grocery near Union City and that she is in earnest about desiring to be a soldier or to enter the army in any capacity.  Sergeant Finney has written to her that he has not the authority to enlist women for any purpose, but that she might find army work with the Red Cross association. 


Peiper’s Protestation:


Greetings, or perhaps Bonjour, from beautiful Quebec City where I am attending the IADC’s annual conference.  There may be no more hospitable spot in North America to complain about the personal injury bar, or lament the repeated unfairness to which the insurance industry is subjected.   While I may be overstating the prevailing thoughts of my colleagues a bit, it is nice to be surrounded by so many fair-minded, correct, lawyers. 


Enough of my poor French, alas, more pressing things must be addressed.  We are disappointed to report another disturbing development out of the Appellate Division, Fourth Department.  In the Lobello decision which we review below, the Court decided to overrule it’s long-standing, and as far as we can tell, undisturbed precedent on the two-year suit limitation clause.  As most people who actually bother to read this column already know, first party policies have long required that a lawsuit be filed within a certain time from the loss.  The standard fire policy found in Insurance Law 3404 provides a two year suit limitation, and that has surely become the standard in New York for the past 100 years.


For nearly all of those 100 years, it has been understood that date of loss meant, well, exactly what it said.  You know, the date the loss of the property actually happened.  Since most folks know the loss happened the moment it occurred, it follows that, again, two years is not a difficult time period to meet.


The appellate courts from around the State have stated with unanimity the term “date of loss” was unambiguous.  Until, that is, July 7th. The Court, in its Lobello decision sees a distinction that, apparently, has evaded its colleagues for years, and in so doing has caused a major headache for all of us. 


It is a three hour ride from Rochester to Albany.  We’d imagine this case already has requested the Uber.  We’ll keep a close eye on this one, and let you know the moment anything changes.



Steven E. Peiper

[email protected]


Political Instability:


The New York Times

New York, New York

July 14, 1917




            LONDON, Saturday, July 14.—(Received in New York at 3:30 A. M.—A dispatch to The Morning Post from Amsterdam says that rumors current that Emperor William has abdicated in favor of his son, Prince Joachim, are unconfirmed and must be taken with all reserve. 


Hewitt’s Highlights: 


Dear Subscribers:


The Second Department issued a series of opinions this week that were not very helpful as they gave no facts in their opinion. The First Department gave a little more detail. In the first case, the plaintiff failed to establish an issue of fact because its expert did not compare plaintiff’s post-accident range of motion levels to a pre-accident standard. In the second, plaintiff failed to provide a medical opinion which rebutted defendant’s expert which said plaintiff’s injuries were due to arthritis not trauma. In another, plaintiff failed to get contemporaneous treatment to the knee.


Hope your summer is going well.


Robert Hewitt

[email protected]


OK, In Celebration of My 40th Year, What was on the Front Page the Day I Started Working at H&F?:


Democrat and Chronicle

Rochester, New York

14 Jul 1977


New York City Blacked Out


            NEW YORK – Electric power was blacked out in much of the metropolitan New York area last night, throwing millions of people into darkness.


            The blackout knocked out power in most of New York City and some upstate areas.


            Areas in New Jersey and Connecticut for the most part weren’t affected. 


            The blackout appeared similar to the one which 11 years ago darkened much of the nation’s eastern seaboard, but appeared to be on a smaller scale.


            Clocks stopped last night at 9:34 EDT.


            Police in New York City put all officers to work, and similar precautions were taken in other areas.


            New Yorkers streamed from apartments and office buildings into darkened streets and traffic came to a standstill.  There were glimmers of light in Manhattan skyscrapers which were able to turn on auxiliary power.


            But at Shea Stadium in Queens, where thousands of fans were watching a National League baseball game between the Mets and the Chicago Cubs the lights went out.  Broadway theaters stopped performances.


            Network television programming was affected as was service from the Associated press and United Press International.


            Late last night officials weren’t sure what caused the blackout.


            There was confusion at Consolidated Edison and other electrical suppliers in the Metropolitan area as officials sought to discover the cause of the blackout.


            Perhaps, coincidentally, yesterday was the first true summer day in the area, with temperatures in the mid-90s and humidity at 80 per cent.


Wilewicz’ Wide-World of Coverage:


Dear Readers,


I’m fresh of my mini-vacation to the great city of Hotlanta here, complete with souvenir mug from Jimmy Carter’s Presidential Library (we’re national park buffs) and the skin on my shoulders peeling in sloughs because I wanted to “get a little sun”. Serves me right, I suppose. I managed to ensure that my kid was fully protected, with multiple applications of both sun cream and spray, which only got into her eyes a couple of times, while I could not sleep for three days, couldn’t get enough burn cream to help, and looked like a lobster for the balance of the trip.


In any event, this week in the Wide World, we bring you a whirlwind of a case from the sunny state of Florida. Fresh off the presses from the Eleventh Circuit Court of Appeals, Stettin v. National Union involves a billion (with a “B”) dollar Ponzi scheme perpetrated by a lawyer and his firm.  For shame.  In this litigation, a mere sliver involving “just” $50 million in losses, the bankers who were involved made claims under their insurance policies. However, those policies included professional services exclusions that losses in connection with any insured’s performance of professional services, which were the allegations here. Since the court found that exclusion was unambiguous, it applied it as drafted. No coverage for you.


Enjoy this wonderful summer, everyone!


Until next time,



Agnes A. Wilewicz

[email protected]


Protect Those Sailors from Themselves:


Middletown Times-Press

Middletown, New York

14 Jul 1917





            Washington, July 14—Secretary of the Navy Daniels has announced that he has initiated a national campaign to eliminate every form of vice near naval training camps and stations.  Detailed data concerning gambling places, disreputable houses and saloons are being compiled by a small army of secret investigators, and Mr. Daniels expects to act as these reports come in.  The vicinity of the New York Navy Yard is being subjected to thorough investigation.  Secretary Daniels took up the question of lax morals in Philadelphia with the Governor of Pennsylvania. 


Barnas on Bad Faith:


Hello again: 


I bring you a brief note this week, as I am in the midst of a vacation in Myrtle Beach, South Carolina, with my girlfriend and her family, and I am drafting this missive while  sitting on a balcony gazing at the Atlantic Ocean. Apparently, Broadway at the Beach is  on the itinerary for today. Normally I'm not into such overtly touristy activities, but I could use a day out of the sun. After four straight days at the pool and beach, the sun is starting to take its toll, despite copious amounts of sunscreen. 


I have three cases in my column today. Camacho is an Eleventh Circuit decision affirming a lower court verdict of $8.1 million in bad faith damages against Nationwide. The linked decision is only two paragraphs, so take a look at the underlying decisions if you're interested in more than is included in the summary. Drop me a note if you would like copies of those decisions. 


I also have two New York law bad faith cases this week. In Hastings, the Second Circuit held that the insured's allegation that Evanston unreasonably denied its request for defense and indemnity was insufficient to support a bad faith claim. The court also concluded that an employer's liability exclusion in the policy did not apply to bar coverage. 


McBride is a Second Department first party case. The court held that the bad faith cause of action, which alleged that NYPIUA failed to properly inspect and appraise the damage, was not duplicative of the breach of contract cause of action. The decision is light on facts, but this seems a bit odd to me since inspecting and appraising claimed damage is what an insurer is required to do under the insurance contract. Isn't that duplicative of a breach of contract cause of action?


Signing Off,



Brian D. Barnas

[email protected]


A Rapist Sentenced to Death:

The Paris Morning News

Paris, Texas

14 Jul 1917





            Dallas, July 13.—Walter Stevenson, convicted assaulter, must die.  He must die for his brutal criminal assault on a pretty young stenographer in North Dallas on the night of last June 25.  A jury assessed this punishment at 2:04 o’clock this Friday, July 13, 1917.  Only one ballot was taken by the jury.


            As Deputy District Clerk Newton read the jury’s verdict, Stevenson, with bowed head, turned deathly pale.  As the clerk read the last words of the verdict two deputy sheriffs assisted Stevenson from the court room to a little elevator in the back part of the Criminal Courts building, where he was rushed to his cell four flights above.  None of his relatives were in court.  None of his personal friends were aside him.  He spoke not a word and as he was ushered from the crowded room his eyes were turned to the floor.  When escorted into the cells of the jail he said nothing to fellow prisoners.


Praise for Jury


            While Stevenson was being taken from the courtroom, District Attorney Mike T. Lively turned to Judge Pippen and asked permission to speak a few words to the jury.  His request was granted. 


            “Gentlemen of the jury,” he began, “I want to thank you on behalf of the law-abiding citizenship of this state.  I want to thank you on behalf of pure and virtuous womanhood of this Southland for this righteous verdict.  It is a verdict that will meet with the approval of every one who knows the facts of this case.  I want to thank you in conclusion for your patience and promptness.” 


Editor’s Note:  That Man and his Abettors were Put to Death a Year Later:


The Daily Free Press

Carbondale, Illinois

25 May 1918




Leonard Dodd and Walter Stevenson

Executed at Dallas, Tex.—One Takes Poison


            Dallas, Tex., May 25.—Leonard Dodd and Walter Stevenson were hanged in the county jail yard for assault on a young woman in June, 1917.  Dodd, in a final effort to defeat the hangman, took poison during religious services held for the condemned men.  He was discovered, however, and prompt action of physicians prolonged his life until he paid the penalty for his crime.


Off the Mark:


Dear Readers,


I hope everyone is enjoying their summer and staying cool.  I do not have any trips coming up, which is fine by me.  I can finally get some yard work done and get to enjoy some quality time outside with my kids.  It’s great when I can do both at the same time.  Last weekend, my six year old helped me replace a few sections of fence, which was long overdue.  He really enjoyed being my helper and was actually helpful.  I’m still impressed.


There doesn’t seem to be much happening lately in the area of construction defect coverage.  I only came across one case that discussed construction defect coverage.  In ProBuilders Specialty Ins. Co., RRG v Valley Corp., B., the United States Court of Appeals for the Ninth Circuit reviewed the district court’s jury instructions regarding certain construction defect exclusions and found that the district court properly instructed the jury on exclusions (M), J(5) and J(6).  With regard to exclusion (M), the court stated that California cases have consistently held that coverage does not exist where the only property damage is the defective construction, and damage to other property has not occurred.  With regard to exclusions J(5) and J(6), the court held that the Appellants reading of the exclusions to exclude coverage only for work that is merely defective to be too narrow. 


Until next time …



Brian F. Mark
[email protected]



And Last but not Least, a Poetic offering from Altman’s Administrative (and Legislative) Agenda and a Celebration of Free Speech:

Greetings, Dear Readers,


I hope you all had a wonderful Fourth of July with your friends and family. This week found yours truly monitoring a trial in a building fire case in Manhattan. Hot time, summer in the city.  With that, and Congress taking summer holiday, there is no news on the legislative front. So instead, I bring you a poem:


May summer find you on the beach

Ice cold beverage within reach,

Instead of spending days in court

Focused on some an errant tort.


Plaintiff droning on and on

While jurors wish that they were gone

And I, Dear Reader, doth deserves

To watch out for my client’s reserves


Taking notes in full, no doubt

While the jurors zoning out

But this weekend, a reward:

Something fun to look forward:


A local fair just down the street

Bursting with my favorite treats:

Sausage, peppers, zeppoles

Nachos doused in cheddar cheese


I will gorge, and I will feast

And fear no weight gain in the least

Where will it go, this weight, displaced?

If there's a God, my ex's waist. 



Howard Altman

[email protected]



Headlines from the Attached Issue:


Dan D. Kohane
[email protected]


  • In a Pre-Prejudice Statute Case, Four Months to Give Notice of Accident was too Long


Robert E.B. Hewitt III

[email protected]


  • Plaintiff’s Physician Did Not Compare Range of Motion Measurement to Preaccident Standard

  • Medical Evidence Showed Right Knee Injury Due to Arthritis Not Trauma

  • No Proof of Contemporaneous Treatment to Confirm Injuries Related to Accident

  • The Defendants Failed to Address the 90/180-Day Category of Injury

  • The Defendants Failed to Address the 90/180-Day Category of Injury

  • Plaintiff Raised Issue of Fact about Injuries



Tessa R. Scott

[email protected]




  • Medical records evidencing no improvement or worsening conditions cannot rebut lack of medical necessity

  • The Cost Of A Medicine Alone Is Not A Basis For Denial



Steven E. Peiper

[email protected]


  • “Date of Loss” Trigger in Two Year Suit Limitation Clause is Ambiguous, Even Though it Never Was Before….Thousands Flee

  • Porch Roof is Not a Building Structure, and thus Outside the Scope of Collapse Coverage



Agnes A. Wilewicz

[email protected]


  • Eleventh Circuit Holds that Professional Services Exclusion Applies to Bar Coverage for $50 Million Loss Following Lawyer’s Ponzi Scheme (FL Law)



Jennifer A. Ehman

[email protected]


  • Court Recognizing Prior Error in Determining that Timely Denial was Required Where the Operator did not have Permission to Use the Vehicle; Upon Reargument, Error is Noted and Summary Judgment Granted to Insured



Brian D. Barnas

[email protected]


  • Unreasonable Denial does not Amount to Bad Faith

  • Eleventh Circuit affirms $8.1 Million Bad Faith Verdict

  • Insureds’ Cause of Action Alleging that NYPIUA Failed to Properly Inspect and Appraise their Claimed Damage was not Duplicative of their Breach of Contract Claim



Jennifer J. Phillips

[email protected]


  • Diversity and Direct Actions


John R. Ewell

[email protected]


  • New Hampshire Justices Finds Ambiguity in Excess Policy Where Insured and Insurer Both Raise Reasonable Interpretations of the Policy



Howard B. Altman

[email protected]



  • In court this week.

Brian F. Mark
[email protected]


  • US Court of Appeals Upholds District Court’s Jury Instructions Regarding Construction Defect Exclusions



Earl K. Cantwell
[email protected]


  • When Does an Occurrence Occur?


The next issue will have a slightly European flavor to it.



Dan D. Kohane

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202


Office:            716.849.8942

Mobile:           716.445.2258

Fax:                716.855.0874

E-Mail:            [email protected]  


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

Dan D. Kohane
[email protected]



Agnes A. Wilewicz

[email protected]



Jennifer A. Ehman

[email protected]


Dan D. Kohane, Chair
[email protected]


Steven E. Peiper, Co-Chair

[email protected]

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Edward B. Flink

Patricia A. Fay

Jennifer J. Phillips

Brian D. Barnas

Howard B. Altman

Brian F. Mark

John R. Ewell

Diane F. Bosse

Joel R. Appelbaum


Steven E. Peiper, Team Leader
[email protected]


Michael F. Perley

Robert E. Hewitt, III

Jennifer J. Phillips

Brian D. Barnas


Jennifer A. Ehman, Team Leader
[email protected]

Patricia A. Fay


Jody E. Briandi, Team Leader
[email protected]


Jennifer J. Phillips

Diane F. Bosse

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Tessa’s Tutelage
Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith
Phillips’ Federal Philosophies

Ewell’s Universe

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

Earl’s Pearls


Dan D. Kohane
[email protected]


07/11/17       Neighborhood Partnership Housing Devel. v. Everest National

Appellate Division, First Department 

In a Pre-Prejudice Statute Case, Four Months to Give Notice of Accident was too Long
This was a pre-prejudice statute case.  Notification to defendant of the underlying accident approximately four months after insured learned of the accident does not comply with the requirement of the insurance policy that the insurer be notified of an occurrence "as soon as practicable"; it constitutes late notice as a matter of law


Even if the insured and nonparty Enterprise Capital Partners were distinct entities, Enterprise's knowledge of the underlying accident, which occurred in August 2007, is imputed to insured.  The insured had no employees of its own, but paid the salaries of Enterprise employees who worked on its behalf. One of these employees was present at the August 30, 2007 construction meeting at which the underlying injury was reported but notice was not given to the insurer until December 28, 2007.


Insurer’s disclaimer of coverage on the ground of late notice was reasonable and timely. It was issued to plaintiff on January 29, 2008, two weeks after insurer received the written statement in connection with its investigation.


Robert E.B. Hewitt III

[email protected]


07/0617        Campbell v. Wendt

Appellate Division, First Department

Plaintiff’s Physician Did Not Compare Range of Motion Measurement to Preaccident Standard

Defendant met his prima facie burden of showing that plaintiff's claims of pain and headaches did not constitute a serious injury causally related to the 2009 motor vehicle accident. Plaintiff's treating physician's unaffirmed opinion that the accident exacerbated the chronic conditions was insufficient.


To the extent plaintiff's claimed new injury of occipital headaches could constitute a serious injury within the meaning of Insurance Law § 5102(d), plaintiff failed to provide any evidence of such injuries. Nor did her physician compare plaintiff's measured range of motion in her cervical and lumbar spines to a preaccident standard, and thus any claimed deficits could not be properly assessed to see whether they are significant.


07/06/17       Santos v. Manga

Appellate Division, First Department

Medical Evidence Showed Right Knee Injury Due to Arthritis Not Trauma

Defendants made a prima facie showing that the 71-year-old plaintiff had preexisting degenerative conditions in her right shoulder, lumbar spine and cervical spine, which were reflected in her own MRI reports. Since plaintiff submitted no medical evidence to refute defendants' initial showing as to those body parts, defendants' motion to dismiss those claims should have been granted.


As to plaintiff's claimed right knee injury, defendants' radiologist opined that the MRI films showed preexisting degenerative joint disease, and their orthopedist found full range of motion and opined that the post-operative diagnoses noted by plaintiff's orthopedic surgeon in his operative report were all consistent with an arthritic knee, not trauma. In opposition, plaintiff submitted only the affirmed report of a doctor who examined her the day after the accident, which was insufficient to demonstrate "significant" or "permanent consequential" limitations in range of motion. Plaintiff also failed to submit admissible medical evidence to rebut the opinions of defendants' experts that she had an arthritic knee.


07/06/17       Santos v. Traylor-Pagan

Appellate Division, First Department

No Proof of Contemporaneous Treatment to Confirm Injuries Related to Accident

Defendant established her entitlement to judgment as a matter of law by submitting the affirmed report of an orthopedist who found normal ranges of motion in the affected body parts i.e., the right elbow and wrist. Defendant was not required to submit the report of an expert neurologist as to plaintiff's claim of carpal tunnel syndrome in his right wrist, since it was not pleaded in the bill of particulars and was raised for the first time in opposition to the motion. In any event, defendant's orthopedist found normal ranges of motion in plaintiff's right wrist and elbow, no atrophy in the muscles of the hand, and that Phalen's sign was negative.


Plaintiff failed to raise a triable issue of fact as to whether his carpal tunnel syndrome was causally related to the accident. There needs to be at least a qualitative assessment of injuries soon after an accident. Plaintiff here was treated on the date of the accident and released from the emergency room at Westchester Medical Center, where he was diagnosed with a right elbow laceration, which was treated with three sutures. He never had any further medical treatment until he first saw an orthopedist 13½ months after the accident, and then allegedly had a few months of physical therapy, although there are no details of any such therapy in the record. He did not see a neurologist about his carpal tunnel syndrome until almost four years after the accident. That failed to provide contemporaneous objective evidence of injury to the knee.


07/05/17       Lerner v. Sha

Appellate Division, Second Department

The Defendants Failed to Address the 90/180-Day Category of Injury

The defendant failed to meet his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The papers submitted by the defendant failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the defendant failed to meet his prima facie burden, it was unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact. No facts were given.


07/05/17       Fils-Aime v. Colombo

Appellate Division, Second Department

The Defendants Failed to Address the 90/180-Day Category of Injury

Defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants' submissions failed to eliminate triable issues of fact as to whether the plaintiff sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the defendants failed to meet their prima facie burden, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact. No facts were given.


07/05/17       Heeja Yoon-Jeong v. Bhandari

Appellate Division, Second  Department

Plaintiff Raised Issue of Fact about Injuries

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



Tessa R. Scott

[email protected]




07/07/17       Croce v National Liability & Fire Ins.

Arbitrator Brown

Medical records evidencing no improvement or worsening conditions cannot rebut lack of medical necessity

Arbitrator Brown considered the medical necessity for chiropractic care provided to the injured party following a motor vehicle accident. Reimbursement for the services was denied based on an independent medical examination by Dr. Geoffrey Gerow, DC.


The injured party was already on SSD for existing neck and back injuries. After the subject motor vehicle accident he began treatment with the claimant, Dr. Croce.


Thereafter, upon request of Respondent the injured party was examined by Dr. Geoffrey Gerow. Dr. Gerow found that the injured party was getting worse with chiropractic care. Dr. Gerow recommended that chiropractic treatments be terminated.  His peer review report was the basis for Respondent’s subsequent denials.


Arbitrator Brown found that respondent had met its burden of proving lack of medical necessity by means of the Gerow report. Arbitrator Brown considered Dr. Gerow's examination to be “extremely thorough and comprehensive, and provided a factual basis for his conclusions.”


Thus, the burden shifted back to Applicant to present competent medical proof as to the medical necessity for the disputed billing by a preponderance of the credible evidence.  Arbitrator Brown found that Applicant had not met its burden.  Applicant’s counsel attempted to argue that there were signs of improvement in the injured party’s medical notes, however, that was unsupported by the record. As such the claim was denied.


07/03/17       Injured Worker’s Pharmacy v Geico Ins.

Arbitrator Bargnesi

The Cost of a Medicine Alone Is Not a Basis for Denial

This case arises out of a motor vehicle collision which occurred on December 1, 2014. The 44 year-old pedestrian allegedly injured her knees. She sought treatment and was given a prescription for Pennsaid to be applied twice a day.


An insurer's burden on the issue of lack of medical necessity includes establishing a factual basis and medical rationale for the lack of medical necessity of the health care provider's services. Dr. Weiss performed a peer review and concluded that the prescription for Pennsaid was not medical necessary.   He concluded that “The claimant had knee pain and no contraindications to oral anti-inflammatories were noted.” Furthermore, he noted that the Pennsaid was less effective and far more expensive than other types of medicine. 


Arbitrator Bargnesi reviewed his peer review and concluded that it established Respondent’s burden of proof.  Thus, the burden shifted to Applicant.  However, Arbitrator Bargnesi was not convinced by Applicant’s argument.  Applicant correctly argued that cost-effectiveness is not the standard of care however; the peer review report was not based entirely on costs.  It clearly established that other medication would be more effective. Applicant failed to provide any explanation as to why Pennsaid was prescribed rather than other more effective and less expensive alternatives. Therefore, Respondent's denial was upheld.



Steven E. Peiper

[email protected]


06/07/17       Lobello v New York Cent. Mut. Fire Ins. Co.

Appellate Division, Fourth Department

“Date of Loss” Trigger in Two Year Suit Limitation Clause is Ambiguous, Even Though it Never was Before….Thousands Flee

Plaintiff’s home was burglarized in 2009, and again in 2010.  After each event, the plaintiff notified his carrier.  The carrier denied both claims for unspecified reasons.  Thereafter, on September 30, 2011 (2 years and 6 days after the first burglary), plaintiff commenced the instant action.


At the completion of discovery, plaintiff moved to strike defendant’s Answer due to defendant’s alleged discovery violations.  Defendant cross-moved seeking a declaration that the 2009 claim was time barred due to the two year suit limitation clause. The court refused to grant the motion to strike, but did award $1,500 in sanctions, and further ordered redacted production of the 2010 claim file.  It also ordered unredacted claim notes from the 2009 loss, but denied plaintiff the opportunity to serve an amended Complaint.   The trial court also granted defendant’s motion to dismiss the 2009 loss claim from the action as time barred. 


In addressing the discovery argument first, the Court affirmed the trial court’s decision to institute a monetary sanction as opposed to the more drastic remedy requested by plaintiff.  The Court also affirmed the trial court’s denial of plaintiff’s motion for summary judgment based upon an alleged violation of Insurance Law 2601.  This is because Section 2601 does not provide a private cause of action.


The Appellate Division also affirmed the trial court’s denial of plaintiff’s attempt to assert a General Business Law 349 claim.  To establish a Section 349 claim, one must establish consumer oriented conduct, materially misleading documentation and an injury as a result of a deceptive act. 


The Court agreed with defendant that the instant dispute was a private contractual dispute, and thus did not give rise to a private cause of action under Section 349.  In other words, the Court held that plaintiff failed to establish the “consumer oriented” nature of the carrier’s conduct.  In so holding, the fact that the carrier previously denied coverage on the two year suit limitation clause was insufficient evidence. 


Finally, the Court reversed the trial court’s decision that dismissed plaintiff’s 2009 claim as untimely.  The Court acknowledged that the policy provided a suit limitation cause that required any legal action be “started within two years after the date of loss.”  The Court noted that the policy did not define the term loss, but does define “occurrence” as “bodily injury” or “property damage.” 


The Court goes on to acknowledge that the suit was instituted more than two years after the theft.  The carrier, not surprisingly, argued that date of loss meant exactly what it said; the date of the event causing loss of property.  Plaintiff argued the date of loss was the date of denial.  The Court, ignoring its own precedent (and that of the Court of Appeals) then determined that the term “date of loss” was ambiguous.  The Court also found a distinction between inception of loss and date of loss, and noted that only the language with “inception of loss” is subject to the protection of the two year suit limitation clause. 


06/05/17       Conlon v Allstate Vehicle and Prop. Ins. Co.

Appellate Division, Second Department

Porch Roof is Not a Building Structure, and thus Outside the Scope of Collapse Coverage

Plaintiff insured’s home included an aluminum porch roof which extended off of the back of the house.  The porch roof/awning was supported by two poles, but otherwise did not contain any sides.  It presided over a simple concrete floor. 

The roof failed in February of 2014 due to the excessive weight of accumulated snow and ice.  As a result, plaintiff asserted a claim for damage to the porch roof/awning, alleged damage to the rear wall of the house, as well as the ground and personal property located directly beneath the porch roof/awning. 


While the porch was identified in the policy, it is noted that the policy also specifically excluded coverage for collapse unless the loss constituted an “entire collapse of a covered building structure.”  A “covered building structure” was defined as requiring both walls and a roof.  The policy further excluded loss to awnings, unless the loss was directly caused as a result of a “entire collapse of a building structure.”    


For some reason, defendant actually paid nearly $24,000 of the claim, including approximately $4,300 in damage to the “aluminum patio cover” or “awning.”  Plaintiff objected to the offer, and defendant sent a second representative to the premises.  At that time, it was determined that matter was not covered. 


At summary judgment, defendant argued that the loss was not covered because it was not caused by the collapse of a building structure.  Here, clearly, an open porch roof did not qualify as a building structure under the policy.  There was no collapse of a building structure, otherwise. In so holding, the Court rejected plaintiff’s arguments that defendant was estopped from disclaiming coverage.


Finally, it is noted the matter was remanded to the trial court for entry of judgment, and a declaration that the policy did not cover the collapse of the porch roof of damage to the personal property found thereunder.



Agnes A. Wilewicz

[email protected]


07/05/17       Herbert Stettin v. National Union Fire Ins. Co.

United States Court of Appeals, Eleventh Circuit

Eleventh Circuit Holds that Professional Services Exclusion Applies to Bar Coverage for $50 Million Loss Following Lawyer’s Ponzi Scheme (FL Law)

Attorney Scott Rothstein, through his law firm Rothstein Rosenfeldt Adler, orchestrated a Ponzi scheme that ultimately resulted in over a billion dollars of losses. This litigation in the Eleventh Circuit involved a fraction of that, approximately $50 million, relative to alleged conduct of certain executives at Gibraltar Private Bank and Trust Company, where the firm had accounts. Those executives had requested coverage under their insurance policies, but the carriers disclaimed. After the executives settled the claims and assigned their rights out, their bankruptcy trustees sought coverage again.


The carriers included National Union as the primary, with Twin City issuing a follow-form excess policy above that. At issue was the propriety of the carrier’s assertion that the policies’ Professional Services Exclusion applied. The policies did provide for coverage for “the Loss of any Insured Person arising from a Claim made against such Insured Person for any Wrongful Act of such Insured Person, except when and to the extent the Organization has indemnified such an Insured Person”. However, the policies precluded coverage as follows: “The Insurer shall not be liable to make any payment for Loss in connection with any Claim made against any Insured alleging, arising out of, based upon, or attributable to the Organization’s or any Insured’s performance of or failure to perform professional services for others, or any act(s), error(s) or omission(s) relating thereto.”


The Eleventh Circuit held that this exclusion indeed applied to preclude coverage, just as the trial court had before them. They reasoned that the phrase “any insured” must be read in context and “the professional services exclusion twice uses the phrase ‘any insured’, once referring to the claim made and once in referring to the professional services rendered. And that, we think, evinces an intent to create joint obligations.” Since an insured had undertaken an act that fell within the Professional Services Exclusion, it applied and there was thus no coverage.



Jennifer A. Ehman

[email protected]


06/29/17       American Country Ins. Co. v. Umude

Supreme Court, Bronx County

Judge Ben Barbato

Court Recognizing Prior Error in Determining that Timely Denial was Required Where the Operator did not have Permission to Use the Vehicle; Upon Reargument, Error is Noted and Summary Judgment Granted to Insured

On April 23, 2014, Amoghene Umude (“Amoghene”) owned a 2013 Cadillac Escalade, which he used as a limousine.  Late that night, he went to his mother's home in the Bronx where he spent the night.  His brother Mark also lived there.  Although Amoghene lived in Valley Cottage, NY, he was supposed to drive someone to the airport early the next day and, thus, he decided to stay with his mother.  Before going to sleep, he parked his vehicle outside his mother's home and placed the only keys in his suit pocket.  He then went to sleep.  Upon waking, he received a call from the police informing him that his brother Mark had been in an accident and that he should report to the hospital.  Amoghene then noticed that his car keys were not in his pocket that his SUV was gone.  Fearing that Mark had taken his vehicle and wrecked it, he reported to the hospital. Thereat, he learned that Mark had been involved in an accident involving multiple passengers.  Amoghen filed a police report indicating that he had not given Mark permission to use his vehicle, and Mark was charged with Unauthorized Use of Motor Vehicle in the First Degree (Penal Law § 165.08).


At the time of the incident, Amoghene’s vehicle was insured by American Country Insurance.  The policy listed Amoghene as the insured.  Subsection A of Section II of the policy entitled Liability Coverage stated:


[w]e will pay all sums an 'Insured' legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto.'

The foregoing subsection defined an "Insured" as Amoghene "for any covered 'auto,'" and "[a]nyone else while using with your permission a covered auto.’”


This decision arises out of a motion to reargue filed by plaintiff after its motion for summary judgment and a default judgment was denied on the basis that it failed to issue a timely denial of coverage and waived the ability to rely on the lack of permission.


Reargument was granted as the court recognized that based on controlling law and the evidence presented with plaintiff's prior motion, it did not have to timely disclaim.


And then, upon reargument, the court granted summary judgment.  It examined the request for dispositive relief finding that the evidence submitted established that the policy issued by plaintiff conditioned coverage on permissive use of the covered vehicle and that at the time of the accident Mark did not have Amoghene's permission to use the vehicle.  Thus, plaintiff established that this accident was never covered by the policy such that plaintiff was not required to timely disclaim coverage.  The court also resolved the tort question noting that Amoghene could not be held be vicariously liable to the defendants under the New York Vehicle and Traffic Law due to the lack of permissive use. 



Brian D. Barnas

[email protected]


07/10/17       Hastings Development, LLC v. Evanston Insurance Company

United States Court of Appeals, Second Circuit

Unreasonable Denial does not Amount to Bad Faith

Evanston issued a CGL policy to UPI, JH Rhodes, Facilities Realty Management, LLC and Hastings.  Cohen, UPI’s employee, commenced an action against Hastings, UPI, SWECO, and XYZ Corp. alleging that he was injured while operating Hasting’s machine in Hasting’s building.


Hasting’s tendered the action to Evanston and requested a defense and indemnification.  Evanston denied coverage based on the policy’s Employer’s Liability Exclusion.  Hasting’s commenced a declaratory judgment action against Evanston seeking a declaration that Evanston was obligated to defend and indemnify it in the Cohen suit.  Hasting’s also asserted that Evanston denied coverage in bad faith and sought punitive damages.


The Employer’s Liability exclusion in the policy provided in part as follows:


This insurance does not apply to any claim, suit, cost or expense arising out of bodily injury to


(1) an employee of the Named Insured arising out of and in the course of employment by any Insured, or while performing duties related to the conduct of the Insured’s business …


The Second Circuit concluded that there was an ambiguity in the policy language as to whether the Employer’s Liability Exclusion barred coverage for Hastings under the circumstances presented.  A fair reading of the Employer’s Liability Exclusion may only exclude coverage for injuries to “an employee of the Named Insured,” and in light of the Separation of Insureds clause, “the Named Insured” is Hastings.  On the other hand, another reasonable reading of the Employer’s Liability Exclusion, proposed by Evanston, is that “an employee of the Named Insured” may refer to employees of any of the Policy’s list Named Insureds given the exclusion’s broad definition of an ‘employee.” Because the court concluded that the policy language was ambiguous, the court construed the language in favor of the insured.  Thus, the court concluded as a matter of law that the Employer’s Liability Exclusion did not bar coverage.


In light of the court’s determination that Hastings was covered by the policy, Evanston was required to defend it in the Cohen action.


However, the court upheld the dismissal of Hasting’s bad faith claim.  There is a strong presumption against finding bad faith liability against in insurer under New York law.  The presumption against bad faith liability can be rebutted only by evidence establishing that the insurer’s refusal to defend was based on more than an arguable difference of opinion and exhibited a gross disregard for its policy obligations.  Hastings’s allegations of bad faith amounted to arguing that Evanston unreasonably denied Hastings a defense in the action.  This alone, however, does not rise to the level of egregious conduct needed to establish such a claim.


07/07/17       Camacho v. Nationwide Mutual Insurance Co.

United States Court of Appeals, Eleventh Circuit

Eleventh Circuit affirms $8.1 Million Bad Faith Verdict

Park, Nationwide’s insured, was involved in an auto accident that caused the death of Stacey Camacho on July 3, 2005.  Park’s policy with Nationwide had limits of $100,000 per occurrence and $300,000 per accident.  The police report obtained by Nationwide indicated that Park had failed to stop for a red light and had been arrested on suspicion of driving under the influence of alcohol.  Nationwide made a determination of probable adverse liability to Park, and sent him a letter indicating he faced potential liability in excess of the policy limits.  Nationwide concluded that the values of the claim exceeded the policy limits.


In February 2006, Nationwide presented Mr. Camacho and Nichols, the deceased’s mother, with a check for $97,000 in exchange for a general release.  The remainder of $3,000 was to be used by Nationwide to pay outstanding hospital bills.  Nichols and Mr. Camacho decided to consult with an attorney before accepting the offer.  After the attorney, Mr. McAleer, was retained, Nationwide sent a letter offering the policy limits in exchange for a general release.


On April 18, 2006, Mr. McAleer sent Nationwide a demand letter.  The demand letter’s subject line defined “our client” as Jesus Camacho, the Estate of Stacey Camacho.  The letter outlined the legal basis for liability against Mr. Park, contained a demand for the policy limits, and listed the damages incurred by Mr. McAleer’s clients.  The letter then offered to settle “the claim of Jesus Camacho for the policy limits of $100,000.”  The letter required the settlement check to be issued in only the names of Mr. Camacho and his attorney.  The demand expired in ten days.


Nationwide responded on May 1, 2006 and acknowledged receipt of the letter.  Nationwide requested a general release rather than the limited release proposed by Mr. McAleer.  Nationwide also sought documentation that Mr. Camacho was legally married and clarification on the status of the estate, and McAleer’s tax identification number.  A blank general release was enclosed.


In early May, Park agreed to accept a limited liability release to settle the claim.  Three weeks later, Nationwide authorized settlement for a limited release.  On June 26, 2006, Nationwide received a fax from McAleer advising that its May 1, 2006 proposal was under consideration.  McAleer then filed suit on behalf of Camacho on July 25, 2006.  On October 18, 2006, a $5.83 million dollar verdict was awarded.  Park assigned his claims against Nationwide to Mr. Camacho and the estate.


This case was tried before a jury from August 31, 2015 to September 8, 2015.  On September 8, 2015, the jury returned a verdict in favor of Plaintiffs finding that Nationwide “acted negligently or in bad faith in failing to settle the claims made by the Plaintiffs against Nationwide's insured, Seung Park.”  Nationwide moved for judgment notwithstanding the verdict.


The court below rejected Nationwide’s arguments that the April 18, 2006 settlement offer did not clearly offer to resolve the estate’s claim and that McAleer did not have apparent authority to settle claims on behalf of the estate.  The court below also concluded that a reasonable jury could find that Nationwide acted in bad faith by failing to timely respond to the April 18, 2006 demand.  Indeed, Nationwide did not contact Mr. McAleer at all during the pendency of the time-limited demand.


The court below also concluded that Nationwide’s insistence on a general release could have supported a finding of bad faith.  While it was undisputed that a general release offered the best protection for Nationwide’s insured, the limited release would have offered more protection than no release at all.  In addition, Nationwide did not communicate with its insured about the possibility of a limited release until after the offer to settle had expired.  The general release also contained an indemnity clause that limited Nationwide’s potential exposure.


The court below also concluded that Nationwide’s failure to accept the April 18, 2006 demand was the proximate cause of the excess verdict.


Accordingly, Nationwide was ordered to pay $5,730,000, the remaining principal of the excess judgment, and $2,405,873.29 in statutory interest.


On appeal, the Eleventh Circuit affirmed the final judgment of the court below in a two paragraph summary order.


07/05/17       McBride v. New York Property Insurance Underwriting Assoc.

Appellate Division, Second Department

Insureds’ Cause of Action Alleging that NYPIUA Failed to Properly Inspect and Appraise their Claimed Damage was not Duplicative of their Breach of Contract Claim

NYPIUA issued a policy of insurance insuring Plaintiffs’ hoe against certain named perils including “Windstorm” and “Explosion.”  The policy provided that “Explosion did not mean, among other things, “[b]reakage of water pipes.”


On February 23, 2013, a nor’easter struck the plaintiffs’ home and caused a failure of the plaintiffs’ electrical system.  The failure of the electrical system allegedly caused water pipes in the home to burst, which resulted in water damage.  NYPIUA denied the plaintiffs’ claim for recovery.


NYPIUA’s motion to dismiss the breach of contract cause of action asserted against it was denied.  The documentary evidence failed to conclusively demonstrate as a matter of law that a windstorm was not a direct or proximate cause of the claimed damage.  Further, the policy exclusion for the breakage of water pipes is only applicable to the named peril of "Explosion," and does not apply when a windstorm causes the subject damage.


NYPIUA’s motion to dismiss Plaintiffs’ cause of action for breach of the implied covenant of good faith and fair dealing was also dismissed.  The court held that the bad faith cause of action, which alleged that NYPIUA failed to properly inspect and appraise the damage, was not duplicative of the breach of contract cause of action.



Jennifer J. Phillips

[email protected]


07/06/17       Oshetski v. Allstate Ins. Co.

United States District Court, Southern District of New York

Diversity and Direct Actions

Allstate removed this action by its insured and her daughter against it to federal court based on the diversity of citizenship.  Plaintiffs moved to remand the action to state court, arguing that a finding of diversity of citizenship was precluded by 28 U.S.C. § 1332(c)(1), which provides that “in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of,” as relevant, every state of which the insured is a citizen. 


Plaintiffs’ complaint contained claims of breach of the insurance policy; breach of the covenant of good faith and fair dealing; a state law tort claim for negligent infliction of emotional distress and alleged violation of N.Y. General Business Law § 349.  In considering whether this constituted a direct action against Allstate, the district court relied on Second Circuit precedent recognizing that “because the § 1332(c) proviso is applicable when the insurer stands in the shoes of its legally responsible insured, who would traditionally be a defendant, the general rule is that the proviso does not affect suits against the insurer based on its independent wrongs: such as actions brought against the insurer either by the insured for failure to pay policy benefits or by an injured third party for the insurer's failure to settle within policy limits or in good faith.”


Accordingly, the district court concluded that this case was not a “direct action” within the meaning of the statute: “This certainly is not a case in which a party suffering injuries or damage for which another is legally responsible is entitled to bring suit against the other's liability insurer without joining the insured or first obtaining a judgment against him.” The motion to remand was denied.


John R. Ewell

[email protected]


06/22/17       Exeter Hospital, Inc. v. Steadfast Insurance Co.

New Hampshire Supreme Court

New Hampshire Justices Finds Ambiguity in Excess Policy Where Insured and Insurer Both Raise Reasonable Interpretations of the Policy

Exeter Hospital (“Exeter”) hired a cardiovascular technician to work in its hospital. The technician had Hepatitis C. While working at the hospital, the technician stole syringes of fentanyl from patients scheduled for surgery inject himself. He would then refill the syringes with saline which was now tainted with his blood.  In 2012, the hospital discovered an outbreak of Hepatitis C infections among patients at the hospital. They traced the spread of the virus to the technician.  Ultimately, the technician was sentenced to 39 years in prison, and his actions resulted in numerous lawsuits against Exeter by affected patients.


During the relevant time period, Exeter was primarily insured through a Self–Insurance Trust Agreement (“SIT”), which provided professional liability coverage in the amount of $1 million per medical incident, with a $4 million annual aggregate cap. Exeter also maintained a policy with Steadfast, which provided excess health care professional liability coverage. The policy set the following limits on coverage: a specific loss limit of $20 million, a health care professional liability aggregate limit of $20 million, and a “Retained Limit” of $100,000.


The policy language at issue, provided that Steadfast “will pay on behalf of the insured those sums that the insured becomes legally obligated to pay as damages because of injury caused by a medical incident to which this insurance applies.” It further provided that Steadfast “will pay only such damages that are in excess of the Retained Limit specified in Item 4. of the Declarations or that are in excess of the applicable underlying limit, whichever is greater.” The term “Retained Limit” was not specifically defined in the policy; however, the policy's declarations listed the “Retained Limit” as $100,000. “Applicable underlying limit” was defined as “the total of all available limits of insurance for the underlying insurance plus any alternative insurance.”  “Underlying insurance meant the policy or policies of insurance listed in the Schedule of Underlying Insurance, forming a part of this policy.” “Alternative insurance meant any type of self-insurance or other mechanisms by which an insured arranges for funding of legal liabilities and is listed in the Schedule of Underlying Self–Insurance.” It was undisputed that Exeter maintained only alternative insurance—the SIT.


In August 2013, after Exeter had paid approximately $3 million in claims through the SIT, Steadfast accepted Exeter's tender of the defense of the remaining claims. In doing so, Steadfast informed Exeter that “each claimant constitutes a separate medical incident.” Steadfast further stated that, once Exeter's $4 million aggregate limit was exhausted, it would “pay only such damages that are in excess of the Retained Limit of $100,000. The Retained Limit is the minimum amount for which Exeter is liable for each and every claim, following exhaustion.” Exeter paid out its $4 million annual aggregate under the SIT. From Exeter’s perspective, the underlying policy was exhausted and, as such, Exeter was responsible for coverage under the policy.


However, Steadfast maintained that it would pay damages only in excess of the $100,000 retained limit for each medical incident. Steadfast notified Exeter that:


As Exeter has now exhausted its self-insurance aggregate limit of $4,000,000.00 there no longer exists an applicable underlying limit (because the underlying self-insurance is exhausted) to be compared to the Retained Limit for purposes of determining “whichever is greater.” Thus, for purposes of determining what portion of damages Steadfast is obligated to reimburse in connection with damages for a medical incident that are incurred post-exhaustion of the self-insured aggregate, the Retained Limit is necessarily the trigger as exhaustion of the underlying self-insurance means there is no longer an applicable underlying limit to compare to the Retained Limit.


Exeter objected and filed a declaratory judgment proceeding, seeking a declaration that it was not required to pay the “$100,000 retained limit per claim for those claims that settle or that are reduced to judgment after August 1, 2013.” Exeter subsequently moved for partial summary judgment, arguing that, pursuant to the policy, once it paid its $4 million annual aggregate, it did not have to pay the retained limit amount of $100,000 for each remaining claim. Steadfast opposed. The trial court denied Exeter’s motion and Exeter appealed.


The appeal reached the New Hampshire Supreme Court. Exeter argued that the policy could reasonably be construed as providing that once Exeter paid out the $4 million aggregate limit of its alternative insurance, Steadfast becomes liable for “those sums that [Exeter] becomes legally obligated to pay as damages because of injury caused by a medical incident to which” the policy applies.


However, the Court also found that the insurer offered a plausible interpretation. Steadfast argued that once Exeter has paid out the $4 million aggregate limit of its alternative insurance, coverage will not be triggered under the excess policy until Exeter’s damages exceed the $100,000 retained limit.


The Court found that both interpretations to be reasonable. Since the Court concluded that the policy language was subject to more than one interpretation, the court found the policy language ambiguous, and construed the policy in favor of Exeter.



Howard B. Altman

[email protected]


In court this week.


Brian F. Mark
[email protected]


6/16/17         ProBuilders Specialty Ins. Co., RRG v. Valley Corp., B.
United States Court of Appeals, Ninth Circuit
US Court of Appeals Upholds District Court’s Jury Instructions Regarding Construction Defect Exclusions

The Appellants appealed the district court’s partial judgment in favor of plaintiff ProBuilders Specialty Insurance Company, RRG.  The Appellants argued that the district court erred in refusing to give their proposed jury instructions on certain policy exclusions.  Unfortunately, the decision does not provide many facts.

The United States Court of Appeals for the Ninth Circuit found that the district court properly instructed the jury on exclusion (M) stating that California cases consistently hold that coverage does not exist where the only property damage is the defective construction, and damage to other property has not occurred.  The court held that the Appellant’s proposed instruction would extend coverage beyond the language of the exclusion as interpreted by California courts.  The court noted that any error in failing to provide the jurors a definition of “impaired property” was harmless in light of the ample evidence supporting the jury’s verdict.

The court also found that the district court properly instructed the jury on exclusions j(5) and j(6).  The court held that the Appellants reading of the exclusions to exclude coverage only for work that is merely defective to be too narrow.  Exclusion j(5) precludes coverage for “damage to…[a]ny real property…aris[ing] out of” work being performed by the insured or its subcontractors and exclusion j(6) precludes coverage for “damage to…[a]ny property that must be restored, repaired, or replaced” because the insured or its subcontractors incorrectly performed work on it.  The court stated that California courts have consistently given a broad interpretation to the terms “arising out of” or “arising from” in various kinds of insurance provisions.



Earl K. Cantwell
[email protected]


                     In re Diocese of Duluth, 565 B.R. 914

D. Minnesota

When Does an Occurrence Occur?

The big picture in this case is a religious diocese in Duluth, MN, struggling to financially survive multiple allegations of sexual abuse by priests. The underlying tort allegations forced the Diocese to declare Chapter 11 bankruptcy. The Diocese brought an adverse proceeding against several insurance companies. The Diocese sought declaratory relief, and subsequently filed a motion for partial summary judgment, to declare that the underlying negligence claims, i.e., the sexual abuse claims, were covered. The primary legal dispute revolved around the term “occurrence.” Specifically in dispute was the number and nature of events which triggered a covered occurrence.

The Diocese argued that occurrence was determined on a per-claim basis, triggered by the number of injuries during the policy term. The insurance companies interpreted occurrence to mean a single triggering event, which would limit coverage for the Diocese’s alleged continuous supervision of the priests (or lack thereof).

The Diocese argued that occurrence did not limit the insurance companies’ liability to one single event. Rather, the insurance policy was triggered by each separate occurrence, or each individual victim that was injured. The Diocese essentially argued that each act of abuse constituted a separate occurrence. The insurance companies argued that occurrence was one single triggering event, which would limit coverage for the Diocese’s alleged continuous “negligent supervision.” Therefore, occurrence should not be determined on a per-claimant basis.

The Court ultimately held for the Diocese, finding that it was evident, based on the facts, that there were numerous victims who had been abused by several priests. Therefore, the claims were covered and “occurred” on a per-claim standard.

The nature of this case was unique due to a Bankruptcy Court’s role in interpreting the insurance policies. The decision reflects the well accepted notion in contract interpretation that plain and generally accepted definitions of contract terms should control the meaning and outcome.

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