Coverage Pointers - Volume XIX, No. 23

Volume XIX, No. 23 (No. 508)

Friday, May 4, 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. 


For those who know me best, you understand that my summer respite is in Canada.  My wife Chris and I have a summer home on the north shore of Lake Erie, just across the border from Buffalo.  My commute to work, from Canada, including crossing the international border and clearing customs, runs between 17 and 25 minutes, which is less than half the time it takes on the A Train from Howard Beach to High Street and the Eastern District courthouse.  We are at “Crescent Dreams” also known as the “Land of the Blue Martinis” from mid-April to mid-October.  As I write this I am looking out at the Lake.  It’s a wonderful thing.  For those who are traveling in this direction during the extended summer, know that we love visitors.


Coverage Team Expanded – Introducing Eric Boron:


We are delighted to have hired and introduce the newest member of our Coverage Team, Eric Boron, our 14th member. Eric comes with years of coverage and trial experience from another firm here in Buffalo and adds more depth and complexion to our bench. He will be handling all aspects of coverage analysis and litigation in state and federal courts. He concentrates in both first and third party coverage matters, and has also regularly engaged in complex civil litigation matters. 


With decades of experience in state and federal courts handling trials and appeals in a wide range of matters, including insurance coverage disputes, as well as other contract disputes, motor vehicle negligence, premises liability and strict liability matters, Eric provides valuable versatility to the firm.  He recently litigated first-party insurance coverage cases to verdict before juries in the states of New York and Vermont.


Prior to joining Hurwitz & Fine, P.C., he worked in midsize Buffalo-based law firms as a civil litigator and insurance coverage attorney, and prior to becoming a lawyer he was a Vice President of a major national bank where he was responsible for compliance and quality control issues throughout the northeastern United States.


Eric enjoys reading baseball history books and biographies.  He is an avid golfer and distance runner.  He and his wife have traveled in recent years to both Italy and the Holy Land, and a Fall 2019 return trip to Italy is in the works.  Coming from a family of educators, he enjoys both teaching and learning.


We’ll give Eric’s first note to readers top billing this week:


Boron’s Benchmarks:


Dear Subscribers:


Well into my ninth day on the job now with this marvelous firm, why wait any longer to write my first column for Coverage Pointers? 


You should know I am delighted to have joined Hurwitz & Fine, a firm I have admired from afar for quite some time.  Those of you who have met Dan, Steve, Agnes, Jen and the rest of the Coverage Team no doubt appreciate, as I do, that they are not only great coverage attorneys, but fun folks to be with to boot! 


For starters, there was a notable development last month in the area of auto insurance coverage, specifically collision damage coverage.  By way of background, beginning in 2014 collision repair shops around the country began commencing similar actions, in various federal district courts, alleging major auto insurers were violating the federal Sherman Antitrust Act and various state laws by conspiring to suppress amounts insurers were obligated to pay on collision damage claims.  The virtually mirror-image cases were consolidated for pretrial purposes in the U.S. District Court, Middle District of Florida, Orlando Division. During the ensuing years, there have been multiple rounds of the auto insurers’ moving to dismiss the cases on the basis of improper pleading by the collision shops, and getting those dismissal motions granted, and then the collision shops presenting amended complaints, which have nonetheless also been dismissed for failure to have been properly pled.  Some commentators have gone on record as saying it appears the Court has become skeptical of the collision repair shop claims, but who am I to judge…I’ve only been here nine days. 


In any event, on an appeal to the U.S. Court of Appeals, Eleventh Circuit, the repair shops finally had a breakthrough in 2017, when a three-judge panel at the Eleventh Circuit ruled in a 2-to-1 decision that the shops’ most recent round of amended complaints were sufficiently pled to allow the cases to continue forward.  But on April 6, 2018, the insurers’ petition for rehearing of the shops’ appeal by the entire Eleventh Circuit, en banc, was granted.  The ultimate Eleventh Circuit en banc hearing of the shops’ appeal is currently scheduled for October 22, 2018, so it likely may be a while before the next development, but yours truly will be monitoring this and will provide updates.


I also offer for your consideration a case from the Court of Appeals of Nevada taking seriously and applying, as good and impartial jurists ought to, the axiomatic rule of insurance policy interpretation often cited but not always rigorously applied, that a court should not rewrite unambiguous policy provisions so as to increase an insurer’s legal obligations against the expressed intent of the parties to the insurance contract.  The case concerns an insured’s claim made against her homeowners’ policy for injuries the insured suffered when she was struck as a pedestrian by a car, while walking out in the area of her community mailbox.  The district (trial) court granted the insurer summary judgment, and the Court of Appeals of Nevada affirmed, noting that while the policy provided coverage for bodily injury damages to a third party, it expressly excluded from coverage bodily injuries to a resident of the insured home, which the insured plaintiff was, and the exclusion was expressed in clear and unambiguous language. Similarly, the policy’s exclusions of motor-vehicle-caused injuries from coverage was also found to apply, and to be clear and unambiguous.  There is really nothing earth-shattering in this decision, but when you’ve only been on the job nine days, reassuring things, like the warm welcome and support I have received from everyone at Hurwitz & Fine, are most appreciated.        


I hope this material may be helpful in or for your work, and by all means feel free to go on to review the further discussion in the attached issue.


Hoping you have a great next couple of weeks,



Eric T. Boron

[email protected]


Kudos to Steve Peiper and Jody Briandi, who were elected to the firm’s Board of Directors.  Hurrah!


New Jersey Coverage Decisions Now a Part of Coverage Pointers:


Of course, Eric was awarded a column in Coverage Pointers as a signing bonus.  Boron’s Benchmarks will cover high court appellate coverage decisions from the 49 other states in the union and may include the occasional Canadian decision as well.  John Ewell had the non-New York high court beat before Eric’s assumption of those duties.  John, admitted to practice in the Garden State, starts his new column today, focusing on New Jersey decisions – it is aptly titled: John’s Jersey Journal.


If your company has staff following New Jersey coverage matters, tell them to contact John ([email protected]) or me ([email protected]) and ask to be included on our mailing list.


Handle Labor Law Claims or Premises Claims?


Subscribe to Labor Law Pointers (contact Dave Adams at [email protected]) and Premises Pointers Jody Briandi ([email protected]) and we’ll keep you up to date.


This Issue:


All kinds of interesting cases in this week’s mammoth issue (quoting Agnes).


  • Know much about Risk Retention Groups?  If not you may be surprised to find out that RRG’s organized in other states may not have to follow the disclaimer rules in Insurance Law 3420(d)(2).  We have a case on that. 

  • Ever consider the importance of “alter ego” companies?  Is there an opportunity to have a lawsuit against a company that didn’t directly hire the plaintiff dismissed based on the exclusivity of the Workers Compensation Law?  We have two cases dealing with alter-egos in today’s edition.

  • New York’s highest court focuses on statute of limitations for no fault claims against self-insured benefit providers and settles a long-standing dispute on that issue.

  • David Zizik from Sulloway & Hollis provides some insight on an interesting 93A claim from Massachusetts.

  • Is an owner’s agent able to secure indemnity when not specifically named?  You’ll find a case dealing with that issue.

  • Do you live for cases about the breadth of Additional Insured clauses?  We have one of those as well.


One Hundred Years Ago – Cursing Flag Leads to Justifiable Homicide:


Times Herald

Olean, New York

04 May 1918




Retired Mariner, Acquitted,

Gets Ovation from Soldiers.


Honolulu., May 3.—A jury after deliberating six minutes here acquitted Henry Allen, a retired sea captain, who on April 14 last shot and killed S. J. Walker for cursing the American flag.


Immediately after his acquittal Allen was surrounded by American soldiers, who draped him with a flag and formed a bodyguard about him as he left the court.


Walker, while dying, admitted he had been shot after he had condemned the United States and expressed the wish that all American soldiers in Europe would be killed.


Tessa’s Tutelage:


Dear Readers:


Inexplicably, I have somehow come down with ANOTHER cold … just when the weather feels like spring.  As such, I will keep this note short.  There is a Court of Appeals Decision to consider this week.  The important take away?  What is the proper Statute of Limitations to be applied where you have a self-insured carrier bus? The Court of appeals says 3 years (it was not a unanimous decision). You will note this is a shortened SOL (6 years).  Take a read – I look forward to your questions and opinions.


Stay healthy out there!



Tessa R. Scott

[email protected]


Separating Church from Theatre During War Time:


Santa Cruz Evening News

Santa Cruz, California

04 May 1918


Pew Empty

Movies Full;

War For Him


SACRAMENTO, May 4.—That the people of Sacramento, generally, are slow to awaken to the seriousness of the war and that they prefer to be entertained rather than to give deep and prayerful thought to the great struggle, was the assertion made by Rev. Harvey V. Miller, during his sermon at the Sacramento First Congregational church Sunday night.


“In every mail I receive,” said Rev. Miller, “I am asked to place war appeals before my people.  Other ministers are asked to do the same.  But how can we do it when the people refuse to come where we can make the appeals?  Go to the churches of Sacramento tonight and you will find only a handful of people in each church.  But the theaters are crowded.”


Rev. Miller, who has been thinking seriously of entering the Y.M.C.A. war service, intimated that unless there is a better response on the part of the people he will resign his place in September and enter upon active war service.


John’s Jersey Journal:


Dear Subscribers:


The sun has set on Ewell’s Universe. As you may know, I previously reported on insurance law cases decided by the high courts of the other 49 states as well as national trends in insurance law. That torch has now been passed to Eric Boron. Eric will be covering those topics in his column called Boron’s Benchmarks.


So what am I going to talk about? That’s a good question. I will now be reporting on insurance law decisions from New Jersey. Why New Jersey? Because our firm handles New Jersey insurance coverage matters. I am admitted to practice in both New York and New Jersey, and am experienced handling New Jersey coverage matters. Whether the claim is an uninsured or underinsured motorist claim, a first-party property claim, or a casualty claim brought against a homeowners or commercial general liability policy, or some other policy form. If you have a situation arising in New Jersey, or potentially implicating New Jersey law, feel free to give us a call. As Dan says, we love situations and we would be happy to help out.


We have two decisions today. The New Jersey Supreme Court recently ruled that uninsured motorist carriers do not have to intervene in tort actions involving phantom vehicles. A phantom vehicle refers to a car known to be involved in an accident, but the plaintiff is ultimately never able to sufficiently identify the driver or owner of the vehicle to haul them into court. In this particular case, one of the involved drivers was known and the other drove away. The New Jersey plaintiffs’ bar filed an amicus brief arguing that the New Jersey Supreme Court should rule that in phantom driver cases, UM carriers must intervene and become a party in the tort action. In other words, the UM carrier would assign counsel and point the finger at the known defendant.


The Court rejected this. Had the court went the other way, UM carriers would have found themselves defending every John and Jane Doe operating the phantom vehicle that contributed to their insured’s car accident. Across the state, this would have increased the LAE (loss adjustment expenses) that UM carriers would incur. Instead, UM carriers can, at their option, seek to intervene and become a party to limit their exposure as necessary.


In our second case, the New Jersey Appellate Division applied the long-standing rule that a material misrepresentation on an insurance application is grounds for disclaimer. There, an attorney applied for professional liability insurance coverage. On the application, he denied any knowledge of potential malpractice claims that could be asserted against him. The carrier established that this was, in fact, false. At the time he completed his insurance application, the attorney had testified at a deposition that he was concerned with potential claims against him. Therefore, the Appellate Division affirmed the grant of summary judgment to the carrier, upholding the denial of the malpractice claim.


The summaries of these cases, which can be easily copied into claims notes, are in the attached issue. I am looking forward to reporting on New Jersey cases in John’s Jersey Journal. See you in two weeks!


‘Til Next Time,



John R. Ewell

[email protected]


You May Not Divorce Him, was the Tenor of the Case:


The New York Times

New York, New York

04 May 1918




Appellate Division Orders New trial

of Opera Singer’s Case.


A decree of divorce obtained by Mme. Margarete Matzenauer, the Metropolitan Opera contralto, from Edoardo Ferrari-Fontana. opera tenor, was reversed yesterday by the Appellate Division of the Supreme Court and a new trial in the case was ordered. One of the grounds for the reversal was the fact that a New York lawyer who went to Rome in behalf of Mme. Matzenauer "besmirched himself by hiring himself out as a private detective."


Mme. Matzenauer, who married the tenor while they were singing together in Buenos Aires, lived with him for about three years, during which time they sang together here and abroad. They have one child.  Their married life was somewhat stormy, due to a clash of artistic temperaments, the husband contending that one point of difference was over the present war since he is an Italian and his wife is an Austrian.  They separated two years ago, and Mme. Matzenauer sought grounds for a divorce. 


One of her allegations was that Fontana in Rome went to a hotel with two young women and took a room near them.  He testified that they were the daughters of a family friend, and that he was in the hotel solely in the role of protector.


Peiper’s Pause:


We start this week by heralding the arrival of another first party lawyer to our fold.  Eric Boron brings years of both coverage and litigation experience, and is a veteran of many first party battles over that time.  We’re delighted to have him with us, and we trust you’ll soon feel the same way. 


When last we met, I mentioned a discussion I was leading about how the policyholder bar attacks the claims process.  As part of my discussion two weeks ago, I spent some time discussing the appraisal process.  Perhaps it’s just me, but I’ve seen an uptick in lawsuits referencing a demand for appraisal. Right on time, this past week saw the unveiling of an insured filing a Petition to Compel Appraisal (per Article 75).  This is a troubling trend.  The appraisal process can be a useful way to get wayward adjustments across the finish line.  It gives both insured and carrier finality to the process, and avoids protracted litigation over value disputes.  For those wondering, let me break it to you, judges are rarely interested in ACV of personal property!  I understand, all too well, an insurer’s trepidation with the appraisal process, but we all must note (and understand) it’s been around since the dawn of NY Insurance Law and it isn’t going away anytime soon.


It has been settled law for more than 100 years that the appraisal process does not create an alternative mechanism for policy interpretation.  Any such attempt to co-mingle value issues with a coverage determination should be, and are, consistently rebuked by the Courts.  With this in mind, why are we seeing an increase in demands for appraisal where there is clearly a coverage dispute at issue.  While it adds pressure, perhaps artificially so, on the claims process, I have yet to see a demand (proper or improper) have a major impact on how an insurer adjusts a loss.  It’s more of a rhetorical question, as I frankly don’t have an answer.  Any thoughts on this issue would be greatly appreciated. 


We also highlight an interesting decision out of the Appellate Division, First Department this week.  In the Houston Casualty Company case reviewed in this weeks “Potpourri,” the Court appears to be open to the possibility of further eroding the long standing “special relationship” rule which has governed insured/broker claims for the past two decades.  While the Court did not grant judgment against the broker, it does permit claims to advance past the Motion to Dismiss stage which, perhaps, might be bellwether of things to come.  Something at the very least, to keep an eye on moving forward. 



Steven E. Peiper

[email protected]


Insurance Man Not Completely “With It” – Tell Us It Ain’t True – 100 Years Ago:


New York Herald

New York, New York

04 May 1918


Insurance Man Declared Unable to Manage Estate


A Westchester county Sheriff’s Jury yesterday declared Edward Fitch Beddall, a wealthy resident of Larchmont, incompetent to look after his large estate, because of senility.


Mr. Beddall, who is 78 years old, has been the representative in this country for the Royal Insurance Company of Liverpool during the last fifty-five years.  He received a salary of $20,500 a year, and the English officers of the corporation have sent word that they will continue to pay this salary as long as he lives.


Mrs. Edward Kirkpatrick Beddall, his daughter-in-law, testified that he is in very feeble health and that he weeps frequently.  She said he insisted on writing to his deceased wife in “Care of St. Peter, Heaven.”

Editor’s Note:  Mr. Bedall died on December 18, 1918.


Hewitt’s Highlights: 


Dear Subscribers:


Since last we “met,” we have hit a heat wave on Long Island. It is in the 80s and pushing 90 degrees. Flowers, leaves, plants, etc., are sprouting and blooming all around. Along with the arrival of spring, and the associated rushing around to see baseball or soccer games of the children, my oldest son turns nine years old next week!  He plans an Avengers birthday party for about fifteen of his friends at the local amusement park, and a family party at home with all the relatives. He also gets a school party. Not to sound old, but back in my day, there was one party for both family and friends. You played pin the tail on the donkey or hot potato, and you had sandwiches or pizza.  Simpler times.


On the serious injury front, there are several cases of note. One reminds us that in a battle of experts, the court is going to find an issue of fact. As to range of motion, plaintiffs must show some objective evidence of limitations and it is not enough for their expert to opine there is a limitation without pointing to a scan or comparing a test of the range to the norm.   Plaintiff’s experts must also explain any evidence of degeneration. Otherwise, if the defendant’s expert finds degeneration is present or a pre-existing injury, they will win on summary judgment.


Until next time,


Robert Hewitt

[email protected]


Women Lawyer Wins Capital Case:



New York Herald

New York, New York

04 May 1918


Woman Lawyer Wins Murder Case.


Orizia Rocotta, who was defended by Miss Elizabeth Blume, lawyer, was acquitted last night in Newark of the murder of Joseph Venuta, who was shot February 16.


Wilewicz’ Wide-World of Coverage:


Dear Readers,


Greetings from sunny Southern California! I’m here at the ABA Tort Trial and Insurance Practice Section Conference, and though yesterday the weather was nicer in Buffalo than here (by more than 10 degrees), the sun finally came out and it has been glorious. Meanwhile, the conference has been fantastic. The panels of speakers have been astounding, and I have met so many wonderful insurance industry representatives. This evening there is the TIPS 85th anniversary gala at Paramount Studios, complete with back lot tours – very Hollywood. I’ve said it before and I’ll say it again, if you’re at all interested in getting involved with the ABA, publishing in a national magazine, or attending one of their conferences, do drop me a line and we can help you get involved.


This week, the Second Circuit gave us a case discussing the federal interpleader statute. Interpleader is a litigation tool wherein a carrier (or other entity holding a big pile of money) can pay funds, such as policy limits, into the court and have the interested parties duke it out amongst themselves. In complex litigation, or life insurance as was the case here, this can be invaluable and save a carrier tremendous amounts of both time and money. Rather than litigating in a declaratory judgment action, the funds are deposited with the court (also stopping the clock running on any interest, as they get placed in a statutorily-imposed interest-bearing account) and the carrier walks away. Check out the decision, as it’s fairly brief but provides some guidance on this underutilized tool.


Finally, a warm welcome to our newest edition, Eric Boron! We’re thrilled to have him here and very pleased that he’s already hit the ground running upon arrival. Check out his column this week, and every other week to come.


That’s it for now. Take care,



Agnes A. Wilewicz

[email protected]


A Century Ago – Major League Games to be Played on Sundays:


Hartford Courant

Hartford, Connecticut

04 May 1918





Pittsburgh, Pa.. May 4.—Changes In the playing schedule of the National and American baseball leagues to permit playing of Sunday games in the East were considered here today by President Ban B. Johnson of the American League, President John K. Tener and Secretary John B. Heydler of the National League and Barney Dreyfus, president of the Pittsburgh club and a member of the original joint schedule committee of the two major leagues.  The schedule changes are contemplated to permit the New York National and American teams and the Brooklyn team to play Sunday ball at Harrison, N.J.


Editor’s Note: In 1917, the New York Giants and Cincinnati Reds played the first Sunday game ever at the Polo Grounds, New York's home field. However, after the game both managers, John McGraw and Christy Mathewson, were arrested for violating the blue laws. Judge Francis Xavier McQuade found them not guilty.


The following year, Sunday baseball was legalized in Cleveland, Washington, D.C., and Detroit. One year after that, New York legalized baseball games on Sunday, and baseball teams that played in New York (the New York Giants, the New York Yankees, and the Brooklyn Dodgers) were allowed to have home games on Sunday.


Barnas on Bad Faith:


Hello again:


By the time you read this note I will be Deep in the Heart of Texas for a fun long weekend with two of my best friends in Austin, the “Live Music Capital of the World.”  I have never been to Austin and was surprised to learn that Austin is the 11th largest city in the United States, which makes it only the fourth largest city in Texas (Houston, San Antonio, and Dallas).  It appears there are a number of places and sites to see, including the Texas State Capital, 6th Street, the LBJ Presidential Library, and the University of Texas.  I’ve been told that there might be a decent watering hole or two around the city as well.  If you’ve ever been and have any recommendations feel free to drop me a line.


We go back to the fertile bad faith state of Florida in my column this week.  The Cawthorn case is an interesting one from the United States District Court, Middle District of Florida.  In Florida, an excess judgment or the equivalent thereof is an essential element of a bad faith claim for failure to settle.  In Cawthorn, the insurer provided a defense to the insureds and had tendered the policy limits.  Eventually, there was a consent judgment in the underlying action, but the insurer was not a party to that judgment and refused to sign it.  The Court concluded that the consent judgment was not the functional equivalent of a required excess judgment, and thus the bad faith claim could not proceed.


I also have a guest column from our friend David Zizik from Sulloway & Hollis, PLLC.  David details a case in which he successfully argued a motion to dismiss a plaintiff’s Chapter 93A/176D bad faith claims in a wrongful death action on an issue of first impression in Massachusetts.  Be sure to check it out.


Have a nice weekend.


Signing off,



Brian D. Barnas

[email protected]


It was Only 100 Years Ago – Racially Based Help Wanted Ads Ran Regularly:


The Baltimore Sun

Baltimore, Maryland

04 May 2018




CHAMBERMAID – White Woman for Chamber Work and Waiting; good home; excel. wages.  Apply 2355 Eutaw Place. Ph. Mad. 6404


Altman’s Administrative (and Legislative) Agenda:  


Greetings, Dear Readers.   Spring has sprung! Here on LI, anyway. My esteemed colleagues upstate tell me that it snowed there this week. Here, it’s in the mid 80’s and sunny.  Spring!  When men’s fancies turn to thoughts of baseball. Well, the Mets run at first place was nice while it lasted.  Hello again, Medical Mets, and welcome back to “they'll all need surgery, won’t they?”


In administrative news, and likely spurred by the upcoming hurricane season, New York’s Department of Financial Services issued a Circular Letter setting forth directives to carriers regarding disaster preparedness.



Howard B. Altman

[email protected]


Good Bye to Crutches:


Democrat and Chronicle

Rochester, New York

04 May 1918




Artificial Limbs So Cleverly made

Legless Men Walk Easily


There need be no legless soldiers to hobble pitifully along the streets after this war. An American army surgeon has devised a new type of artificial leg which can be manufactured by Uncle Sam for about $25 and which will almost perfectly reproduce the action of a natural leg, even if the soldier has only a stump left.  It means good-by to crutches, declares the New York Evening Post.


This remarkable triumph of American inventive genius was described at the New York Academy of Medicine by Major P. B. Magnuson, medical reserve corps, a member of the surgeon general’s staff.


The artificial leg described by the surgeon is the invention of Major David Silver, another medical reserve officer, formerly a practicing physician in Pittsburgh.


"This artificial leg is of a type far ahead of anything that has been developed abroad as a result of the war," Major Magnuson said. "It is a better substitute for a natural leg than the government has ever been able to obtain heretofore for $100 each, and it can be made for a quarter of that price.  In this one thing alone Doctor Silver has earned his salary as major."


The invention has been successfully used by a man with both legs amputated. Crutches are unnecessary. The foot has a jointed instep and a rubber base, which produces the natural movements with astonishing success. Major Magnuson asserted that it would be hard to guess that a man was wearing the support after he was practiced in its use.


Artificial hands and wrists were also described.


Off the Mark:


Dear Readers,


Spring has finally sprung!  Feeling the warmth of the sun has put me in good spirits.  I booked a camping trip for Memorial Day weekend and the kids are very excited.  The wife is also excited as she doesn’t have to go.


Not much happening in the world of construction defect cases recently.  This edition discusses another case from the US District Court for the Eastern District of Pennsylvania.  Although this case examined the collapse provision contained in a homeowners’ policy, the Court’s interpretation of the collapse language was interesting.  In Desvarieux v. Allstate Prop. & Cas. Ins. Co., the plaintiffs sought coverage under their homeowners’ policy for damages due to the collapse of a wall of their home caused by deterioration, construction defects, and possibly leakage from a cracked pipe.  The Court examined the policy’s collapse provision under the Additional Protection section and found that although the collapse provision requires a covered collapse to be sudden and accidental, it did not require the causes for such a collapse to be sudden and accidental.  Similarly, the Court found that the Escape of Water Condition required the physical loss, i.e., the collapse, to be sudden and accidental, but not the escape of water.  Based on this language, the Court concluded that the policy provides coverage under the Additional Protection section for a sudden and accidental collapse caused by the non-sudden escape of water from a plumbing system.  Because issues of fact remained as to whether the escape of water from the cracked pipe caused the collapse, the Court denied the defendant’s motion for summary judgment.


Until next time …



Brian F. Mark
[email protected]


Object Matrimony:


The Pittsburgh Press

May 4, 1918


Would you marry lonely widow worth $50,000?  Write Mrs. W.K. Hill, 14 E. Sixth Street, Jacksonville, Fl.


Editor’s note:  $50,000 in 1918 had the buying power of $900,000 today.  While I could not find anything on Mrs. Hill, on Google Maps, I note that there is presently a drive-through bank at the same location.  Perhaps, then, she still lives there!


Wandering Waters


I hope all of you have had a wonderful week. I am happy to announce spring has finally arrived in Buffalo.  It is exciting to wake up in the morning to a low of 40 degrees.


Further, the NBA playoffs are still entertaining.  The first round playoff match between the Cavs and Pacers was one to remember.  The Pacers played the Cavs much better than expected.  Leading up to this series, LeBron has not lost a single first round playoff game in the last few years. Despite LeBron’s past dominance, the Cavs needed seven games to eliminate the Pacers. Currently, the Cavs are playing the Toronto Raptors in which the Cavs have a one game lead.


With that being said, welcome to another issue of Wandering Waters.  This week we have one case from the United States District Court, Southern District of New York.  Further, we have one case from the Northern District of Illinois Eastern Division, which applies New York law.   I hope you enjoy.  


Until next time…. 



Larry E. Waters

[email protected]


Headlines from this week’s issue, attached:


Dan D. Kohane
[email protected]


  • As the Court of Appeals Said Before, the term “With Whom You Agreed” in Additional Insured Endorsement Requires Privity for AI Status

  • Non-domiciliary Risk Retention Group Need Not Comply with Section 3420(d)(2).  Big Win for RRG’s

  • Parties were Not Aggrieved by Default Judgment on Coverage Entered Against Another Insured

  • Since Party Seeking Indemnification under Construction Contract was Not Specifically Mentioned, it Does Not Get Benefit of Indemnity Provisions. Likewise, Since Contract did Not Name that Party as One who Should Be Provided Additional Insured Status, that is Not Provided Either

  • “Alter-Ego” Companies Can Rely Upon the Exclusivity of Workers Compensation Law.  Two Cases Examine “Alter Egos”

  • Alter Ego of Plaintiff’s Employer Gets Benefits of Exclusivity of Workers Compensation Law and Cannot be Sued by Employee



Robert E.B. Hewitt III

[email protected]


  • Plaintiff’s Affirmed Report from Her Orthopedic Surgeon Found Significant Limitations of Range of Motion which caused an Issue of Fact

  • Defendant’s Experts Found No Objective Evidence of Injury while Plaintiff’s Expert Found Range of Motion Limitations But Not Based on Any Objective Examination

  • Plaintiff Failed to Address Evidence of Pre-Existing Degeneration



Tessa R. Scott

[email protected]




  • The Insurance Company Was Not Required To Pay No-Fault Medical Benefits

  • Self Insureds Not Bound By The Six Year Statute Of Limitations



Steven E. Peiper

[email protected]




  • Fraudulent ALE Statements Results in Loss of Coverage; Failure to Timely File Proof of Loss is also Fatal




  • Annual Advice and Statement Reliance Creates Possibility of Special Relationship? 

  • Indemnity Clause Does Not Apply to Unnamed, Unidentified Agent of Owner

  • Additional Order Compelling Search for  Communication Involving a Specific E-Mail Address is a Permissible Exercise of Trial Court’s Discretion



Agnes A. Wilewicz

[email protected]


  • Second Circuit Holds that Interpleader of Funds Was Proper Relative to Contested Life Insurance Policy and Allows Further Parties to Intervene



Jennifer A. Ehman

[email protected]


  • Carrier Must Defend 9/11 Litigation; Unclear Whether Pollution Exclusion Would Apply to All Claims



Brian D. Barnas

[email protected]


  • Consent Judgment to which Insurer was Not a Party did not Constitute an Excess Judgment or its Equivalent as Necessary for Bad Faith Claim

  • GUEST COLUMN: Massachusetts Court Dismisses 93A/176D "Bad Faith Claims v. Auto Insurers


John R. Ewell

[email protected]


  • New Jersey’s High Court Rejects Rule Suggested by Plaintiffs’ Bar, Holds That Uninsured Motorist Carriers Are Not Required to Intervene In “Phantom Vehicle” Cases

  • No Coverage For Malpractice Claim Where Attorney Made Material Misrepresentation on Insurance Application



Howard B. Altman

[email protected]


  • Department of Financial Services Circular Letter on Disaster Claims

Brian F. Mark

[email protected]


  • US District Court Held Policy’s Collapse Provision did not Require Cause of Collapse to be Sudden and Accidental, But Denied Summary Judgment Due to Existence of Issue of Fact as to Causes of Collapse



Larry E. Waters
[email protected]


  • Court Grants Plaintiff’s Motion for Summary Judgment When Insurer Does Not Have Standing to Enforce a Provision in a Settlement Agreement Between Plaintiff and the Other Insurers 

  • Under New York Law, the Exclusions Within the Relevant Policies Do Not Bar Coverage for the Claims 



Eric T. Boron

[email protected]


  • Court of Appeals of Nevada Affirms Summary Judgment for Insurer, Refraining to Rewrite Homeowners’ Policy


Earl K. Cantwell
[email protected]


  • A Good Case Explaining the UCC “Battle of the Forms”



An early Happy Mother’s Day and happy spring.


Keep those cards and letters coming in.  We love hearing from you.





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

Eric T. Boron

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

Eric T. Boron

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

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
John’s Jersey Journal

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

Wandering Waters

Boron’s Benchmarks

Earl’s Pearls


Dan D. Kohane
[email protected]


05/03/18       Turner Construct. Co. v. Endurance American Specialty Ins. Co. Appellate Division, First Department

As the Court of Appeals Said Before, the term “With Whom You Agreed” in Additional Insured Endorsement Requires Privity for AI Status

The Dormitory Authority of the State of New York (DASNY), the owner of the project, retained plaintiff Skidmore Owings & Merrill, LLP (“Skidmore”) to provide architectural services. Skidmore entered into a contract with plaintiff Turner Construction Company  (“Turner”) for construction management services. DASNY also entered into a contract with KJC Waterproofing, Inc. (“KJC”) for the performance of all the roofing and exterior waterproofing work. KJC subcontracted the installation of the garden roofing to Plant Fantasies (“Plant”), the underlying plaintiff's employer, by a written purchase order.


Pursuant to the DASNY-KJC contract, KJC procured insurance coverage from Endurance along with an excess liability policy from defendant Everest National. Turner and Skidmore commenced this coverage action against Endurance and Everest, seeking a declaration that, inter alia, Endurance was obligated to defend and indemnify them as additional insureds under the Endurance policy.


The Endurance policy included the following additional insured endorsement:




WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization with whom you agreed, because of a written contract or written agreement or permit to provide insurance such as is afforded under this policy, but only with respect to your operations, your work or facilities owned or used by you." (Emphasis added)


As we have previously decided in Gilbane Bldg. Co./TDX Constr. Corp. v St. Paul Fire & Mar. Ins. Co. (143 AD3d 146 [1st Dept 2016], affirmed by the Court of Appeals on March 27, 2018 (_ NY3d_, 2018 NY Slip Op 02117 [2018]), wrote the court, this language, which interprets the phrase "because of a written contract" in conjunction with the preceding phrase "with whom you [the named insured] agreed," is susceptible to only one meaning: that to obtain additional insured status, plaintiffs, Turner and Skidmore, were required to have a direct contract with Endurance's named insured, KJC. Because neither Turner nor Skidmore had such an agreement with KJC, they do not qualify for coverage under the language of the additional insured endorsement and Endurance was not obligated to defend or indemnify them in the underlying action.


05/03/18       Nadkos, Inc. v. Preferred Contractors Ins. Co.

Appellate Division, First Department

Non-domiciliary Risk Retention Group Need Not Comply with Section 3420(d)(2).  Big Win for RRG’s

It was a good week for Preferred Contractors Insurance Company RRG (“PCIC”).  Two big wins.  On this one, we send kudos to our friend Diane Bucci.  


The issue on this appeal, and one of first impression for the state courts, is whether a risk retention group's (RRG) failure to comply with the provision of Insurance Law § 3420(d)(2), requiring a timely notice of disclaimer, constitutes an unfair claim settlement procedure, prohibition of which is permitted under the federal Liability Risk Retention Act of 1986 (LRRA) (15 USC § 3901, et seq.). The First Department agreed with PCIC that a foreign RRG, such as PCIC, does not need to comply with Insurance Law § 3420(d)(2) because it is preempted by the LRRA.


This insurance coverage dispute arose out of a May 27, 2015 construction accident. The property was owned 596 E19 Partners, LLC (“owner”) which hired Nadkos, Inc. as general contractor. Nadkos entered into a subcontract with defendant Chesakl Enterprises, Inc. (“subcontractor”) to perform the structural steel work. Chesakl hired Vafaev as a sub-subcontractor; he allegedly fell and was injured while performing work under his subcontract.


Pursuant to its subcontract with Nadkos, Chesakl obtained general liability insurance from PCIC, a RRG, naming the owner and Nadkos as additional insureds. In July 2015, Vafaev commenced the underlying personal injury action against the owner, Nadkos, the subcontractor and a principal of Nadkos, alleging negligence and violations of Labor Law §§ 200 and 241(6).


On August 25, 2015, Colony Insurance Company, the commercial general liability insurer of Nadkos, tendered the underlying lawsuit to Chesakl and PCIC for defense and indemnification. On September 1, 2015, PCIC denied coverage to Chesakl on the basis of several policy exclusions. On November 16, 2017, PCIC disclaimed coverage to Nadkos based on the same exclusions.


The following day, Colony advised PCIC that it had not timely disclaimed as required by Insurance Law § 3420, and therefore PCIC had waived any coverage defenses as to Nadkos under its policy. Later that day, PCIC responded that it is a RRG organized under the laws of Montana, with a Montana choice of law provision in the policy that renders New York Insurance Law § 3420 inapplicable. PCIC further maintained that its policy is excess, with no duty to defend.


Nadkos commenced this action seeking a declaration that PCIC is obligated to defend and indemnify it, in addition to seeking reimbursement for incurred costs of defense and any indemnity payments made.


Under the LRRA, the chartering state can regulate the formation and operation of RRGs and preempts most ordinary forms of regulation by the nondomiciliary states. Therefore, the LRRA "sharply limits the secondary regulatory authority of nondomiciliary states over risk retention groups to specified, if significant, spheres".


One of the "significant spheres" that the LRRA permits non-domiciliary states to regulate is compliance with unfair claim settlement practices of that state (see 15 USC § 3902[a][1][A]). New York Insurance Law § 5904(d), which closely mirrors the LRRA, expressly requires foreign RRGs to "comply with the unfair claims settlement practices provisions as set forth in [Insurance Law § 2601]."


Insurance Law § 2601 provides seven types of acts that, "if committed without just cause and performed with such frequency as to indicate a general business practice, shall constitute unfair claim settlement practices; one of these is (6) failing to promptly disclose coverage pursuant to [Insurance Law § 3420(d)]." It is undisputed that PCIC is a RRG formed and functioning under the LRRA and domiciled in Montana. Accordingly, section 5904(d) governs the imposition of regulations on PCIC's operations in New York.


Nadkos contended that Insurance Law § 2601 includes a violation of Insurance Law § 3420(d)(2) as an unfair claim settlement practice and therefore is a permissible regulation of an RRG.  However, the court found that this claim did not have merit. The clear language of Insurance Law § 2601 is unambiguous with respect to this issue. Nadkos argued that Insurance Law § 2601 only refers to Insurance Law § 3420(d) in its entirety and does not delineate between sub-sections (d)(1) and (d)(2). However, the use of the word "disclose," if applied to both subdivisions (1) and (2) of section 3420(d), would render the term superfluous.  Section 3420(d) sets forth time requirements for an insurer to "confirm" liability limits and "advise" when sufficient identifying information is lacking (i.e., disclose information), while subdivision (2) sets forth time requirements for an insurer to "disclaim" coverage (i.e., make a determination to deny coverage).


It is clear that the terms "disclose" and "disclaim" have distinct meanings and that the term "disclose" as used in section 2601(a) does not include the disclaimer of available coverages within Insurance Law § 3420(d)(2).


It is clear from the legislative history of the LRRA that "Congress intended to exempt [risk retention groups] broadly from state law requirements that make it difficult for risk retention groups to form or to operate on a multi-state basis".


This heightened standard requirement – to disclaim promptly – in New York impairs an RRG's ability to operate on a nationwide basis "without being compelled to tailor their policies to the specific requirements of every state in which they do business".  As Congress has chosen to limit the power of nondomiciliary states to regulate RRGs, the LRRA clearly preempts Insurance Law § 3420(d)(2).


05/02/18       Preferred Contractors Ins. Co. RRG v. Nuway Interior Corp.

Appellate Division, Second Department

Parties were Not Aggrieved by Default Judgment on Coverage Entered Against Another Insured

In February 2014, Preferred Contractor Insurance Company (“PCIC”) commenced a declaratory judgment action seeking a judgment that it was not obligated to defend or indemnify Nuway Interior Corp. (“Nuway”) in an underlying action. The parties to the underlying action were named; nobody appeared and PCIC moved for a default. In an order entered August 27, 2015, the Supreme Court granted that branch of the plaintiff's motion which was for leave to enter a default judgment against those defendants declaring that it is not obligated to defend or indemnify Nuway in the underlying action. The defendants Foundations Interior Design Corporation and 50 Varick, LLC (hereinafter together the appellants), appeal from that order.


The Second Department found that those parties (Foundation and 50 Varick) were not aggrieved by the default judgment because they never asked for relief below. 

Editor’s Note: What are they to do now?


04/26/18       Nicholson v. Sabey Data Center Properties, LLC

Appellate Division, First Department

Since Party Seeking Indemnification under Construction Contract was Not Specifically Mentioned, it Does Not Get Benefit of Indemnity Provisions. Likewise, Since Contract did Not Name that Party as One who Should Be Provided Additional Insured Status, that is Not Provided Either

The subcontract between Cirocco and Sabey Construction, Inc. neither identified Select as an "agent" nor included Select in the entities identified in the indemnification provision. Thus, it did not "spell out" an obligation on Cirocco's part to indemnify Select, and no such obligation will be read into it. If the parties intended to cover someone as a potential indemnitee, they had only to say so unambiguously.


Moreover, the subcontract did not "expressly and specifically" state a requirement that Cirocco name Select as an additional insured under an insurance policy. The entities that Cirocco was required to name as additional insureds were listed in exhibits to the subcontract; Select was not included among those entities.


04/27/18       Buchwald v. 1307 Porterville Road, LLC

Appellate Division, Fourth Department

“Alter-Ego” Companies Can Rely Upon the Exclusivity of Workers Compensation Law.  Two Cases Examine “Alter Egos”

Perhaps this review and the next, the Second Department’s decision in Clarke should have been summarized in Steve’s Potpourri column, but sometimes, when I see unusual matters repeatedly coming up in conversation, I’m compelled to write. 


What’s an “alter-ego” company and why do we care?


Because of the exclusivity created by the Workers’ Law, injured employees may not sue their employers except under very limited circumstances.  Why not? The employer provided WC benefits and Section 29 of the Workers Compensation Law establishes that as an exclusive remedy for the employee (as to the employer).  Of course, the injured workers can sue others responsible for their injuries.


The question then is whether they can sue companies related to their employer, companies that are not quite their employers but related to them.  And, if they do, can those defendants raise the exclusivity of workers compensation as a defense and get the action dismissed.  “Well,” say the courts, “defendants that are “alter-egos” of the employer can raise the exclusivity defense”. What’s an “alter ego” you may ask?  Here’s the first of the two cases that discuss this important issue.


Buchwald commenced this action seeking damages for injuries he allegedly sustained when he fell from the hayloft of a barn located on property owned by 1307 Porterville Road (“1307”). Buchwald was employed by Fox Run Horse Farms, LLC (Fox Run), which leased the property from 1307 and operated a horse farm business on the property. Fox Run moved for summary judgment dismissing the complaint, contending that 1307 and Fox Run were alter egos and, as a result, plaintiff's action against defendant was barred by the exclusive remedy provisions of Workers' Compensation Law §§ 11 and 29 (6).


As a general rule, when employees are injured in the course of employment, their sole remedy against their employer lies in their entitlement to a recovery under the Workers' Compensation Law.  The protection against lawsuits brought by injured workers also extends to entities which are alter egos of the entity which employs the plaintiff.


A defendant may establish itself as the alter ego of a plaintiff's employer by demonstrating that one of the entities controls the other or that the two operate as a single integrated entity. Factors relevant to the determination of that issue include:

  • whether the two entities share a common purpose,

  • have integrated or commingled assets,

  • share a tax return,

  • are treated by the owners as a single entity,

  • share the same insurance policy,

  • share managers or are owned by the same person.


    Additional factors include whether the alter ego,

  • has any employees,

  • whether the alter ego leases property pursuant to a written lease or pays rent to the plaintiff's employer, and

  • whether one entity pays the bills for the other even if those bills are for the benefit of the nonpaying entity.


    Here, the court concludes that 1307 established as a matter of law that it was the alter ego of Fox Run. Defendant and Fox Run were single-member-owned LLCs that were created on the same day for a single purpose, to operate a horse stable business.  Both had the same individual owner, reported their taxes on the same tax return and shared the same insurance policy.  They shared a common set of financial books and had no separate accounting or tax reporting.


    In addition, 1307 had no employees and was formed solely for the purpose of owning the premises upon which plaintiff's employer operated its horse farm. Fox Run leased property from no one other than 1307, there was no written lease agreement, and Fox Run did not pay any rent to defendant. Finally, Fox Run's owner paid defendant's property taxes as well as the operating expenses of the property.


    Those facts establish that defendant, which had no employees, was controlled by the individual that controlled plaintiff's employer and that the two entities functioned as one company.


    04/25/18       Clarke v. First Student, Inc.

    Appellate Division, Second Department

    Alter Ego of Plaintiff’s Employer Gets Benefits of Exclusivity of Workers Compensation Law and Cannot be Sued by Employee

    In November 2012, Clark, an employee of First Student Management, LLC (“FSM”) was hurt when she fell due a defective condition at FSM’s place of business.  She sued First Student, Inc. (“FSI”), the company that owned the premises seeking damages for negligence. Discovery proceeded, and the FSI moved for summary judgment dismissing the amended complaint. The defendant contended that FSI and FGM were functionally the same entity with respect to the exclusivity provisions of the Workers' Compensation Law.  (see Workers' Compensation Law §§ 11, 29[6]).


    Generally, employees injured in the course of their employment may recover against their employers only under the Workers' Compensation Law.  It’s an exclusive remedy if the employer provides Workers Comp benefits.


    The exclusive remedy provisions also bar employees from seeking damages from "alter egos" of their employers. The alter ego rule applies when one of the entities in question controls the other or when the two entities operate as a single integrated entity. A mere showing that the entities are related—by, for example, sharing officers or ownership—is insufficient.


    However, here, FSI, the property owner, established, prima facie, that it was an alter ego of the Clark’s employer. FSM, by submitting evidence that, among other things, in addition to owning the premises, it was the sole owner and manager of the limited liability company that was the plaintiff's employer, that the plaintiff's employer was formed to provide bus drivers for the defendant's pupil transportation business, and that the two entities shared the same Workers' Compensation insurance policy. In opposition, the plaintiff failed to raise a triable issue of fact. Accordingly, the Supreme Court should have granted the defendant's motion for summary judgment dismissing the amended complaint.



Robert E.B. Hewitt III

[email protected]


05/03/18       Henry v. Carr

Appellate Division, First Department

Plaintiff’s Affirmed Report from Her Orthopedic Surgeon Found Significant Limitations of Range of Motion which caused an Issue of Fact

The Appellate Division held that defendant established that plaintiff did not sustain a serious injury involving significant or permanent consequential limitations of use of his cervical spine or lumbar spine through the affirmed report of her expert orthopedist, who found normal ranges of motion and no objective evidence of traumatic injury in the subject body parts, and opined that any injury to these body parts had resolved. Defendant also submitted post-accident treatment records that indicated that plaintiff did not have limited range of motion. However, defendant's expert did not raise any issue as to causation, since he acknowledged that the accident caused the resolved cervical and lumbar spine injuries.


In opposition, plaintiff raised an issue of fact as to his claimed lumbar spine injury through the affirmed report of his orthopedic surgeon, who examined plaintiff on several occasions, both shortly after the accident and more recently, and observed significant limitations in range of motion, as well as positive results on objective tests for lumbar injury.  In addition, plaintiff's radiologist averred that his MRI revealed conditions of the lumbar spine discs. The orthopedist's post-accident findings of limitations in range of motion conflict with the medical records submitted by defendant, raising an issue of fact, particularly since symptoms may vary in severity over time. Although plaintiff was not required to address causation, his orthopedist did address the fact that plaintiff had suffered a prior lumbar spine injury, noted that plaintiff had fully recovered from that injury before the subject accident, and opined that plaintiff's current conditions were causally related to the accident.


As to the claimed cervical spine injury, however, plaintiff failed to submit evidence sufficient to raise an issue of fact as to whether any sprain or strain caused by the accident involved significant or permanent consequential limitations in use. His physician did not examine the cervical spine at any time, and plaintiff effectively abandoned his claim of cervical spine injury by failing to address it in his opposition to defendant's motion.


04/19/18       Rosario v. Cablevision Systems

Appellate Division, Second Department

Defendant’s Experts Found No Objective Evidence of Injury while Plaintiff’s Expert Found Range of Motion Limitations But Not Based on Any Objective Examination

Plaintiff alleges that he suffered serious injuries to his spine and right shoulder as the result of a motor vehicle accident. Defendants established that plaintiff did not suffer serious injuries to his cervical or lumbar spine through the reports of a neurologist and orthopedist who found full range of motion in those allegedly injured body parts and no objective evidence of injury. In addition, after review of a pre-accident MRI report of plaintiff's lumbar spine, the orthopedist opined that the lumbar spine injuries were the result of a prior work injury.  However, as to plaintiff's right shoulder, defendants' orthopedist found limitations in two planes of range of motion, and thus they failed to meet their burden of showing that plaintiff did not suffer a serious injury involving significant or permanent limitations in use of his right shoulder. Although the orthopedist alluded to medical records showing that plaintiff's shoulder condition was chronic, he did not clearly or unequivocally opine as to lack of causation. Accordingly, since defendants did not meet their prima facie burden, the burden of proof never shifted to plaintiff on this injury


In opposition, plaintiff failed to raise an issue of fact as to whether his lumbar spine injuries were causally related to the accident, since his examining physician failed to address the degenerative findings in his own medical reports or the evidence of a preexisting injury. Plaintiff also failed to raise an issue of fact as to whether he sustained a serious injury to his cervical spine. Although his physician found deficits in range of motion in these body parts, plaintiff failed to demonstrate that these deficits were related to any objective medical evidence of injury, such as an MRI. Since plaintiff failed to raise an issue of fact as to whether his spinal injuries were caused by the accident, he cannot recover for such injuries


Although defendants' expert did not examine plaintiff until more than two years after the accident, defendants established that plaintiff did not suffer a 90/180-day claim by relying on his deposition testimony that he was not confined to either his bed or home after the accident, and was confined to bed and home for less than 90 days following his shoulder surgery.


04/19/18       Andrade v. Lugo

Appellate Division, First Department

Plaintiff Failed to Address Evidence of Pre-Existing Degeneration

Defendants made a prima facie showing that plaintiff did not sustain a serious injury to her cervical spine or lumbar spine as a result of the accident, by submitting the expert report of an orthopedic surgeon and by relying on plaintiff's own medical records. The surgeon opined that plaintiff's own MRI reports and the operative report of her right shoulder showed preexisting degenerative conditions not causally related to the accident, including multilevel degenerative disc disease in the spine, and a large anterolateral spur and extensive fraying in the shoulder.


In opposition, plaintiff failed to raise an issue of fact as to causation of any of her claimed injuries. Plaintiff's orthopedic surgeon opined that her conditions were causally related to the accident, but failed to refute or address the findings of preexisting degeneration in plaintiff's own medical records, or explain how the accident, rather than her preexisting conditions, was the cause of the alleged spinal and shoulder injuries. With respect to plaintiff's claimed right shoulder injury, although her doctor's operative report recited that there were "no degenerative findings," the same report included findings of a large spur and extensive fraying. The doctor did not dispute that those conditions set forth in his operative report were degenerative or address those conditions at all in his report. Thus, plaintiff's doctor's opinion that the shoulder condition is causally related to the accident was too conclusory to raise an issue of fact.


Defendants met their prima facie burden with respect to plaintiff's 90/180-day claim by demonstrating that plaintiff's alleged injuries were preexisting and unrelated to the accident. Plaintiff, who was already limited in her activities due to knee replacement surgery and other conditions, failed to raise an issue of fact as to whether any condition causally related to the accident rendered her incapacitated for at least 90 days of the first 180 days following the accident.



Tessa R. Scott

[email protected]




05/03/18       Hereford Ins. Co. v. Lida's Med. Supply

Appellate Division, First Department

The Insurance Company Was Not Required To Pay No-Fault Medical Benefits

When an individual submits a personal injury claim for motor vehicle no-fault benefits, the insurance company may request that the individual submit to an IME, and if the individual fails to appear for that IME, it "constitutes a breach of a condition precedent vitiating coverage".


Here, plaintiff (the insurance company) established its entitlement to judgment as a matter of law by submitting the letters sent to each claimant notifying them about the date, time, and location of the initially scheduled IME and a second scheduled IME and affidavits of service for these letters. Plaintiff also submitted affidavits from each medical professional assigned to conduct the scheduled IME, with each stating that the medical professional was in his or her office at the date and time of the scheduled IME, the respective claimant failed to appear, the appointment was kept open until the end of the day, and at the end of the day, the medical professional filled out the affidavit acknowledging the nonappearance.


Because Hereford sent the notices scheduling the IMEs prior to the receipt of each of the claims, the notification requirements for verification requests under 11 NYCRR 65-3.5 and 65-3.6 do not apply. Furthermore, plaintiff was not required "to demonstrate that the claims were timely disclaimed since the failure to attend medical exams was an absolute coverage defense”.


05/01/18       Contact Chiropractic, P.C. v. New York City Tr. Auth

Court of Appeals

Self Insureds Not Bound By The Six Year Statute Of Limitations

The eligible injured party, Butler, sustained personal injuries in a motor vehicle accident involving a NYC bus on which she was a passenger. The bus did not have no-fault coverage and instead was self-insured with respect to that risk.


Defendant moved for an order to dismiss the complaint "based on [plaintiff's] failure to commence the action within the three-year statute of limitations." In opposition to the motion, plaintiff maintained that the six-year statute of limitations controls this case. The gravamen of this case is whether the obligation is contractual or statutory in nature.  This case is markedly different from many no-fault cases because it involves a self-insured entity. Justice Stein, agreed with the majority but made it clear, this case does consider whether “insurance companies who issue contractual insurance policies covering no-fault claims are subject to a three- or six-year statute of limitations”.


The Appellate Division granted defendant's subsequent application for leave to appeal to this Court and certified this question for our review: "Was the decision and order of the [Appellate Division], which determined that an action to recover first-party benefits from a party which is self-insured is subject to a six-year statute of limitations, properly made?" The Court of appeals determined it was not.


The Court of Appeals concluded that the three-year statute of limitations as set forth in CPLR 214 (2), which governs disputes with respect to penalties created by statute, should control this case.  The Court of Appeals opined that no-fault benefits in dispute are not provided by a contract with a private insurer. Instead defendant has met its statutory obligation by self-insuring. No-fault is a creature of statute. In the absence of private law requiring defendant to pay first-party benefits (that is, in the absence of a contract for insurance), the only requirement that defendant provide such remuneration to the assignee as a result of the accident appears in relevant parts of the Vehicle and Traffic Law and the Insurance Law. Consequently, the source of this claim is wholly statutory, meaning that the three-year period of limitations in CPLR 214 (2) should control this case.


The holding here does not reduce the no-fault liability or obligations of self-insurers, or curtail the substantive no-fault rights of injured parties or their assignees as against such self-insurers. "Statutes of limitations are considered procedural because they are deemed as pertaining to the remedy rather than the right.” Therefore, applying the three-year statute of limitations set forth in CPLR 214 (2) does not alter the substantive protections afforded under the no-fault law to those with a claim against a self-insurer.



Steven E. Peiper

[email protected]




05/01/18          Otsego Mut. Fire Ins. Co. v. Dinerman

Appellate Division, First Department

Fraudulent ALE Statements Results in Loss of Coverage; Failure to Timely File Proof of Loss is also Fatal

Otsego commenced the instant declaratory judgment action after it discovered Sally Dinerman was requesting reimbursements for living expenses that she did not incur.  Although the requests were de minimis in the Courts estimation, they were nevertheless in violation of the policy’s “Misrepresentation, Concealment or Fraud” condition.  As a result, Ms. Dinerman’s coverage under the policy was extinguished.


While Ms. Dinerman’s actions terminated her rights to coverage, her spouse, Ira, was unaffected.  Unfortunately for Mr. Dinerman, he failed to submit a Proof of Loss within 60 days of Otsego’s request. Failure to timely produce a Proof of Loss is an absolute defense, and here resulted in the vitiation of coverage for him.


It is noted that Ms. Dinerman’s apparent fraud did not impact Mr. Dinerman’s challenge to reform the liability portion of the policy.  However, notwithstanding his ability to challenge the policy, the Court ruled that the language was not ambiguous but rather had “definite and precise meaning, unattended by danger of misconception.”




05/03/18          Houston Cas. Co. v. Cavan Corp. of NY

Appellate Division, First Department

Annual Advice and Statement Reliance Creates Possibility of Special Relationship? 

In a matter which started as a declaratory judgment action, Cavan eventually commenced a third-party action against its broker, Ducey, which sought recovery due to Ducey’s malpractice.  The trial court granted Ducey’s motion to dismiss, but the Appellate Court unanimously reversed. 


In finding that Ducey may be liable to Cavan, the Court noted that a broker may be liable  “if the policy obtained does not cover a loss for which the broker was contracted to provide insurance, and the insurance company refuses to cover the loss.”  Further, the Court also advised that a broker may also be liable if he or she fails to “inform [the insured] of the definitions and terms of the…policy and its potential effect on coverage.”  In this case, Cavan noted that it met annually with its broker and it relied upon the broker’s advice. 


Peiper’s Point -  This evolution of broker liability has been ongoing for several years, but this marks a dramatic development.  Here, the Court is essentially stating that a broker may be liable if it procures a policy which does not respond to a particular loss. Note that this decision is in response to an appeal of a motion to dismiss, but it nevertheless portends of a troubling future for agents/brokers.


More unsettling for our friends in the broker market, is the fact that the decision appears to further erode the “special relationship” standard that used to govern broker liability for failure to advise.  Under the Murphy v Kuhn decision, an insured had to establish significant relationship, over years of advising, with the broker.  Now, it appears that the Court might consider an annual meeting and the statement from the insured that it relied upon its broker for advice. 


04/26/18          Nicholson v. Sabey Data Center

Appellate Division, First Department

Indemnity Clause Does Not Apply to Unnamed, Unidentified Agent of Owner

After being named as a defendant, Sabey commenced a third-party action against Select.  Select, in turn, commenced a second third-party action against Cirocco seeking contractual indemnity.  Select’s claim arose from a contract executed between Sabey and Cirocco.  Notably, Select was not a party to that contract, nor otherwise identified therein.  Select attempted to argue that it was Sabey’s “agent”, and thus entitled to protection under the clause (we presume the indemnity clause purported to indemnify Sabey’s unnamed agents).


In affirming the trial court’s decision to dismiss Select’s claims, the Court noted that the indemnity provision at issue did not “spell out” Cirocco’s obligation to Select.  If Select wanted indemnity per the terms of the agreement, it should have ensured that such a right was explicitly conferred.  Here it was not, and as such no right of indemnity existed.


In addition, the Court also rejected Select’s argument that Cirocco failed to procure insurance.  The Sabey/Cirocco contract identified specific entities for whom Cirocco was required to purchase insurance, and Select was not listed in that group.


04/26/18          STB Investments Corp. v. Sterling & Sterling, Inc.

Appellate Division, First Department

Additional Order Compelling Search for  Communication Involving a Specific E-Mail Address is a Permissible Exercise of Trial Court’s Discretion

Sterling sought discovery from STB concerning communications related to the issuance of a certain insurance policy.  In response, plaintiff responded that they had previously produced all documents in its possession.  Sterling responded by requesting that STB be compelled to expand its search for an e-mail address involving the “producer who produced the disputed coverage.”


On appeal, the Court agreed that expanding the search was an appropriate exercise of the trial court’s discretion. In addition, the Court also agreed that Sterling was not entitled to a more intrusive search where it had not established such additional terms were within a “line of inquiry…[which]…will avail them of any useful information.”  



Agnes A. Wilewicz

[email protected]


04/16/17       New York Life Insurance Company v. Seema Sahani

United States Court of Appeals, Second Circuit

Second Circuit Holds that Interpleader of Funds Was Proper Relative to Contested Life Insurance Policy and Allows Further Parties to Intervene

In 2001, New York Life (NYL) issued a $250,000 whole life insurance policy to the decedent (unnamed in the decision), who designated an individual named Singh (an Indiana citizen) as the sole primary beneficiary. In 2007, the decedent married Sahani (a New York citizen) and shortly thereafter transferred ownership of the policy to her. Decedent also designated Sahani as the first beneficiary and Singh as the second. In 2007, NYL also issued a $1 million term life insurance policy on decedent’s life to Sahani, who was both the owner and sole primary beneficiary of the policy. The decedent signed the operative documents naming Sahani owner of both policies. In 2013, the decedent and Sahani divorced. In 2014, the decedent died without a will. Both Sahani and Singh made claims to NYL under both policies.


NYL tried to interplead the balance of the funds directly into the court in order to avoid litigating with the parties. An interpleader action is a valuable tool when funds are contested but the amount in dispute is not. It brings all parties to the table and once the funds are deposited with the court, the carrier can leave the case. The court here explained: “The federal interpleader statute confers original jurisdiction on federal district courts if:  (1) ʺ[t]wo or more adverse claimants, of diverse citizenship . . . , are claiming or may claimʺ entitlement to ʺmoney or property of the value of $500 or more,ʺ  and (2) ʺthe plaintiff has deposited such money or property . . . into the registry of the court, there to abide the judgment of the court, or has given bond payable to the clerk of the court in such amount and with such surety as the court or judge may deem proper . . . .ʺ  28 U.S.C. § 1335(a).  ʺIt is well established that the interpleader statute is ʹremedial and to be liberally construed,ʹ particularly to prevent races to judgment and the unfairness of multiple and potentially conflicting obligations.ʺ”


However, a dispute arose as to whether there was indeed jurisdiction at all. Singh had argued that there was no jurisdiction until the money was paid into the court. While it was not, the case had to be dismissed and could not proceed. Moreover, since the estate and Sahani were both New York citizens, there was an issue with whether there was actually diversity in the case, which is another requirement for federal jurisdiction. Ultimately, however, the carrier did pay the money into the court. Thus, the court held, any defects were then immediately cured. Further, the interpleader statute has to be read broadly. While typically you need complete diversity of citizenship in federal court, the interpleader statute just requires minimal diversity. Since that existed in this case, the matter could proceed. Finally, the estate was interested in intervening in the action, and the court permitted that.



Jennifer A. Ehman

[email protected]


04/23/18       National Union Fire Ins. Co. of Pittsburgh, PA v. Burlington Ins.

Supreme Court, New York County

Hon. Marcy Friedman

Carrier Must Defend 9/11 Litigation; Unclear Whether Pollution Exclusion Would Apply to All Claims

This decision arises out of  post 9/11 litigation.  Burlington  issued a commercial general liability policy to a company called Mayore Estates, LLC (“Mayore”).  Mayore owned a 34-story building in lower Manhattan.  Mayore was named in certain personal injury actions resulting from clean-up work performed at its property following the disaster on September 11, 2001. 


As many of you know, the World Trade Center litigation was consolidated before the Southern District of New York.  In September 2005, Burlington received a copy of the Master Complaint in the federal court action, which alleged injuries to a plaintiff class relating to post 9/11 clean-up activities.  The Master Complaint alleged that plaintiffs sustained injuries at both the trade center and at surrounding buildings identified in “Check-Off Complaints.”  Mayore was identified in 51 Check-Off Complaints. 


Burlington disclaimed any duty to defend or indemnify on the basis of a pollution exclusion.  As a result, National Union, who issued the excess policy, stepped down and provided a defense.  Ultimately, National Union brought this action to recoup certain amounts it paid in the defense of Mayore and to settle claims. 


Burlington moved for summary judgment in this action.  The central dispute was the scope of the Total Pollution Exclusion and whether the dispersal of toxins and other matter as a result of the World Trade Center disaster constitutes pollution within the meaning of that exclusion.  Citing to the Court of Appeals decision Belt Painting Corp. v. TIG Insurance Co., the parties were generally in agreement that this type of exclusion would apply to “traditional” or “classic” environmental pollution.  They disagreed as to whether the World Trade Center dispersal constituted such pollution.  In Belt, the Court of Appeals concluded the exclusion was ambiguous and did not apply to injuries caused by the inhalation of paint fumes in an office the insured was painting and stripping.  The court noted however, the in Belt the Court of Appeals was not called upon to, and did not, articulate comprehensive  criteria for determining whether pollution qualifies as classic or traditional environmental exclusion for purposes of insurance policy exclusions. 


The court reasoned that while the attack on the World Trade Center may have resulted in an environmental disaster, and while the World Trade Center emissions contained materials that would undoubtedly qualify as environmental pollutants, the event that resulted in their dispersal was unprecedented.  It also pointed to allegations in the complaints concerning violations of the labor law and claimed failures to provide proper safety equipment.  In response, Burlington had argued essentially that it was irrelevant how the allegations were pled since none of the damage would have occurred but for the pollutants.  Despite this argument, the court concluded that given the extensive allegations of lack of workplace safety, and consistent with our decisions on this issue, Burlington did not meet its heavy burden that the dispersal of pollutants, standing alone, caused the plaintiffs’ injuries.  Accordingly, it found that Burlington had a duty to defend, but trial issues of fact existed as to the extent which National Union was entitled to indemnity.


The court then considered Burlington’s secondary argument that the asbestos exclusion applied.  Consistent with its discussion of the population exclusion, the court held that Burlington likewise failed to show that all of the plaintiffs; injuries were within that exclusion. 


Next, the court considered the argument that the occurrences did not fall within the Burlington policy period, since it went into effect a month after 9/11.  In rejecting any such argument,  the court pointed to allegations in the Master complaint that  plaintiffs ingested and breathed the harmful toxins during the entire time of the cleanup. 


Lastly, the court dismissed an argument by Burlington that it wasn’t provided proper notice of 21 of the 51 Check-Off Complaints.  The court pointed to the contents of Burlington’s coverage letters in which they acknowledge the contents of the Check-Off Complaints were essentially the same as those in the Mater Complaint, which Burlington had disclaimed coverage for dating back to 2005.  Accordingly, in its view, any further notice to Burlington was excused as futile.



Brian D. Barnas

[email protected]


04/27/18       Cawthron v. Auto-Owners Insurance Company

United States District Court, Middle District of Florida

Consent Judgment to which Insurer was Not a Party did not Constitute an Excess Judgment or its Equivalent as Necessary for Bad Faith Claim

Cawthorn and his friend Ledford were driving home to North Carolina, returning from a spring break vacation in Florida.  Ledford was driving near Daytona Beach in a 2007 BMW owned by his father’s business.  In route, Ledford fell asleep and crashed the car into a concrete barrier.  Cawthorn suffered serious injuries resulting in paralysis from the waist down.  He was 18 years old at the time.


The car was insured under an Auto-Owners policy issued to Ledford’s father’s business, which provided $1 million in primary coverage and $2 million in umbrella coverage.  Within two weeks of receiving the claim, Auto-Owners determined that its insureds were at fault for the accident.  Upon learning that Cawthorn was paralyzed, a reserve for the policy limits was set.  Auto-Owners attempted to negotiate the claim and obtain Cawthorn’s medical records pre-suit but were largely unsuccessful.  Eventually, Cawthorn hired an attorney who sued the father’s business.  After receiving initial medical documentation, Auto-Owners tendered the $3 million in coverage.  The tender was rejected.


Auto-Owners hired one attorney to represent Ledford and another to represent his father’s company.  Both Ledford and the company hired personal counsel as well.  After mediation, a settlement was discussed, which would have included a $33 million consent judgment with Auto-Owners paying the policy limits.  Auto-Owners agreed that it would pay its policy limits and continue to defend Ledford, but declined to be a party to a consent judgment.


A settlement agreement was eventually reached, but Auto-Owners did not sign.  Pursuant to the agreement, Ledford agreed to a $30 million consent judgment against him and Auto-Owners would tender $3 million for a full release of the father’s’ company.  Cawthorn in turn agreed not to record the consent judgment against Ledford and to deliver Ledford a full and complete satisfaction of the consent judgment regardless of the outcome of a future bad faith suit.  Thereafter, Auto-Owners tendered the policy limits, which were finally accepted.  On December 20, 2016, the state court entered the consent judgment and Cawthorn filed a bad faith action against Auto-Owners.


Historically in Florida, an excess judgment was required to maintain a bad faith case.  However, exceptions to this were carved out.  These include Cunningham agreements between insurers and claimants to try the bad faith claim first and Coblentz agreements, which arise where the company fails to defend the insured, and the insured and injured party may enter into an agreement settling the claim and allowing the injured party to pursue a bad faith claim.


The Court determined that the bad faith claim must fail because there was no excess judgment or functional equivalent.  Auto-Owners was not a party to the $30 million settlement agreement.  The consent judgment did not constitute an excess judgment for the purposes of a third party bad faith claim.  In addition, the agreement did not constitute a Cunningham agreement because the damages were stipulated to before the bad faith claim was brought.  Without an excess judgment, or its functional equivalent, the bad faith claim lacked an essential element and was summarily dismissed.




04/09/18       Dworska v. Forney

Massachusetts Superior Court

Massachusetts Court Dismisses 93A/176D "Bad Faith Claims v. Auto Insurers

On April 9, 2018 David Zizik, on behalf of his insurer client, prevailed on a motion to dismiss plaintiffs’ Chapter 93A/176D “bad faith” claims in a wrongful death action on an issue of first impression in Massachusetts: Under the Standard Massachusetts Automobile Insurance Policy, can the insurer lawfully condition payment of the policy limits on the release of claims against a defendant driver who was neither the policyholder nor a member of the policyholder’s household named on the declarations page of the policy, but was allegedly operating the vehicle with the policyholder's implied consent and therefore covered under the policy? 


The Court answered in the affirmative. Because the policyholder paid premiums for indemnification and defense for himself, specified operators, and permitted users of the insured vehicle, and because the duty to defend extends to a permitted driver (even though not named on the policy), the carrier has an obligation to seek a release on the operator’s behalf as a condition of settlement. The carrier’s requirement that the plaintiffs release him prior to paying the policy limits was therefore not in bad faith.


The Court went further: “[E]ven if l am in error in construing [the carrier’s] duties under the policy, [the carrier] did not violate G.L. c. 93A and G.L. c. 176D on the facts presented. If an insurance company has a reasonable and good faith belief that it is acting appropriately, and there is no clear, applicable precedent that would inform the company that it is in error, then the company's action, even if ultimately held to be based on a misinterpretation of the law, would not be an unfair settlement practice” (citations omitted).  The case is Donald Dwarska v. Gary Forney, et al., Commonwealth of Massachusetts, Superior Court, Civil Action No. 1679CV0149.


David Zizik is a member of Sulloway & Hollis, PLLC, a New England regional law firm.  David represents insurers on coverage and bad faith defense matters in Massachusetts, Rhode Island and other New England states. If you’d like a copy of the court’s 14-page decision in the Dwarska case, contact David directly at [email protected] or (401) 421-1238.


John R. Ewell

[email protected]


04/17/18       Krzykalski v. Tindall

New Jersey Supreme Court

New Jersey’s High Court Rejects Rule Suggested by Plaintiffs’ Bar, Holds That Uninsured Motorist Carriers Are Not Required to Intervene In “Phantom Vehicle” Cases

This case arises out of a car accident in Florence Township, New Jersey. The car driven by plaintiff Mark Krzykalski was in the left lane traveling north, and the car driven by defendant David Tindall was directly behind plaintiff’s car. As the left-lane traffic proceeded through an intersection, a vehicle in the right lane driven by John Doe unexpectedly made a left turn, cutting off the cars in the left lane. Plaintiff was able to stop his car without striking the vehicle in front of him. Defendant, however, was unable to stop in time and rear-ended plaintiff’s vehicle.


Plaintiff was never able to identify the driver of the vehicle that cut him off. That vehicle was a “phantom vehicle”, a vehicle that was known to be involved in an automobile accident but never sufficiently identified as to permit the owner or operator to be hauled into court. Plaintiff suffered serious injuries in the accident and filed an uninsured motorist (“UM”) claim against his automobile insurance carrier. Plaintiff sued defendant and John Doe for negligence. In defendant’s answer, he asserted third-party negligence as a defense, included cross-claims for indemnity and contribution from any co-defendants, and demanded fault allocation against any defendants that might settle before trial.


The UM carrier chose not to intervene in the lawsuit. At the conclusion of the trial, over plaintiff’s objection, the trial court included John Doe on the verdict sheet and instructed the jury to allocate fault between defendant and John Doe in the event that both parties were found negligent. The jury found defendant three percent negligent and John Doe ninety-seven percent negligent. Ultimately, the jury awarded plaintiff $107,890 in damages. As such, defendant was order to pay $3,200. The Appellate Division affirmed and Plaintiff appealed to the New Jersey Supreme Court.


On appeal, the New Jersey Supreme Court addressed whether a jury should be asked to apportion fault between a named party defendant and a known but unidentified defendant (“John Doe”). It further addressed whether the plaintiff’s uninsured motorists (“UM”) carrier must intervene in that action.


The New Jersey Supreme Court held that:


parties known to be at least in part liable should be allocated their share of the fault, even when unidentified. In such cases, known but unidentified parties may be allocated fault even though recovery against those parties will be possible only through the plaintiff’s UM coverage.


The court reasoned that John Doe was the operator of a motor vehicle involved in plaintiff’s accident, who cannot be identified. By requiring that automobile insurance policies include UM coverage, the New Jersey Legislature has acknowledged and prepared for precisely such circumstances. Stated simply, “phantom vehicles” driven by known but unidentified motorists that play a part in an accident presumptively may be allocated fault in accordance with New Jersey’s joint tortfeasors statutes and comparative negligence statutes.


The New Jersey Association for Justice (plaintiffs’ bar) filed an amicus brief, arguing that the New Jersey Supreme Court should adopt a bright-line ruling requiring joinder of a plaintiff’s UM carrier in motor vehicle cases where there is a known and identified defendant driver and a phantom vehicle. The Court rejected this.


The New Jersey Supreme Court held that the UM carrier who will ultimately cover any damages attributed to “phantom vehicles” is not required to intervene and become a party to the negligence suit. In this case, plaintiff’s UM carrier received notice of the litigation and had the option to intervene and participate at trial in an effort to limit its exposure. The Court held that there was no reason to require the UM carrier’s participation where it chose not to do so.


05/01/18       Ironshore Indemnity v. Pappas & Wolf, LLC et al

Superior Court of New Jersey, Appellate Division

No Coverage For Malpractice Claim Where Attorney Made Material Misrepresentation on Insurance Application

Ironshore filed a declaratory judgment action against its insureds, Pappas & Wolf and Matthew S. Wolf (the “Pappas Defendants”), seeking a judicial determination there was no insurance coverage for an underlying legal malpractice claim due to a misrepresentation on the insurance application.


After the carrier filed its complaint, the firm assigned their rights to a receiver (the “Receiver”) who was previously appointed in an action against the attorney's former client. The Receiver filed an answer and counterclaim, which sought a judicial determination that the insurance policy provided coverage for the underlying legal malpractice claim. Thereafter, both parties moved for summary judgment. The trial court granted the carrier’s motion for summary judgment and denied the Receiver’s cross-motion for partial summary judgment.


On appeal, the Receiver (on behalf of Pappas Defendants) contends the judge erred by determining that Pappas Defendants made the material misrepresentation in the renewal application. On the renewal application, Pappas & Wolf were asked the following question:


After inquiry, does any firm member know of any circumstance, situation, act, error or omission that could result in a professional liability claim or suit against the firm or its predecessor firm(s) or any current or former member of the firm or its predecessor firm(s)?


Pappas & Wolf responded “no”.


In New Jersey, an attorney will not have access to insurance coverage to respond to claims from injured third-parties, or clients, if the professional liability insurance policy has been rescinded due to the attorney’s misrepresentations of material fact in the policy application.


The Appellate Division reviewed the record and concluded that the Pappas Defendants made a material misrepresentation in the renewal application. At a deposition nine months before Wolf filled out the renewal application, he testified that he was concerned about a claim being asserted against him as an attorney. The Appellate Division found that the attorney made a material misrepresentation on the policy and that the misrepresentation justified Ironshore’s denial of coverage. Therefore, the Appellate Division affirmed the grant of summary judgment to Ironshore.


* Disclaimer: This is an unpublished decision which has precedential value in only limited circumstances.



Howard B. Altman

[email protected]


Department of Financial Services Circular Letter on Disaster Claims

As hurricane season approaches, New York’s Department of Financial Services issued  a Circular Letter urging carriers to better prepare for disaster claims.

When a disaster occurs in New York, DFS provides the Governor and the New York State Office of Emergency Management (“SOEM”) with information regarding the amount and extent of losses, damages, injuries, and deaths resulting from the disaster.  Based on this information, the Governor determines whether and when to request a federal disaster declaration and how to prioritize the deployment of state assets.

DFS posits that the insurance industry is a key resource in providing early assessments of losses, damages, personal injuries, and deaths arising from disasters, whether insured or uninsured, and in determining the appropriate response to the disaster.  DFS thus urges carriers to “assist the Department with obtaining necessary information before, during, and after a disaster.”

DFS asks that carriers provide the following information:

A.       Before a Disaster

1.       Pre-Disaster Data Survey

DFS directs carriers to respond to a “pre-disaster data survey”, to permit it (DFS) to identify which carriers insure the greatest number of policyholders, so that DFS will know which carriers to contact for disaster information when one strikes.  The survey, issued pursuant to Insurance Law § 308, is available in full online

With regard to private passenger and commercial auto physical damage lines of insurance, the survey requests the number of motor vehicles covered and the number of policies in-force broken down by county.  For the purpose of this survey, “motor vehicle” is used in the broadest sense to mean any vehicle covered by the private passenger and commercial auto physical damage lines of insurance, including automobiles, trucks, trailers, vans, motorcycles, and all-terrain vehicles. With regard to the non-motor vehicle lines of insurance listed above, the survey requests the amount of insurance in-force (gross exposure) and the number of policies in-force broken down by county.

The Department will use the responses it receives to apportion corporate emergency access system adjuster cards as described in Supplement No. 1 to Circular Letter No. 8 (2007).

2.       Business Continuity and Disaster Response Plans

DFS asks carriers to perform regularly a business impact analysis to predict the consequences of disruption of a business function and process as a result of a disaster, and to gather information needed to develop recovery strategies. The business impact analysis should identify the operational and financial impacts resulting from the disruption of business functions and processes and should consider the following, at a minimum, as relevant:  (a) the point in time when a business interruption would have a greater impact, such as a particular season or the end of the month or quarter; (b) the amount of time before which the business interruption would have an operational or financial impact; (c) the operational and financial impact of physical damage to buildings; damage to or breakdown of machinery, systems, or equipment; restricted access to a site or building; a utility outage; damage to or loss or corruption of information technology; and absenteeism of essential employees; (d) resources needed for the business to continue to function at varying levels of disruption; and (e) potential for dissatisfaction or defection by policyholders, contract holders, insureds, third-party claimants, and health service providers (collectively, “customers”).

B.       After a Disaster

1.       Disaster Liaisons

After a disaster, the Superintendent may contact designated addressee disaster liaisons representing addressees with the greatest amount of direct written premiums in the disaster area.  Disaster liaisons should be prepared to participate in the state’s disaster response plan as follows:

  • the Department will arrange a conference call of the selected disaster liaisons, where possible, following the occurrence of a disaster to discuss the disaster’s magnitude and the scope of IEOC activation plans;

  • upon activation of the IEOC, disaster liaisons or their designees will be expected to staff the IEOC at the Department’s offices in Albany or New York City or an alternative location, as appropriate;

  • the Department will provide a fully-equipped IEOC at one of the aforementioned locations;

  • the Department will continue to coordinate communications through ongoing teleconference calls in order to plan staffing of the IEOC, discuss with each addressee’s disaster liaison the addressee’s disaster operations, review each addressee’s disaster response plan, and discuss disaster operations and emerging issues; and

  • disaster liaisons or their designees may be expected to remain on duty at the IEOC as determined by the Superintendent in consultation with the insurance industry.

    Disaster liaisons should:

  • be members of the addressee’s disaster response team or manager-level employees who are familiar with addressee protocols and have access to critical information;

  • provide coverage data and claim statistics as requested by the Department;

  • be knowledgeable about addressee internal information systems and sources and authorized to access such systems, so that applicable, timely information can be provided to SOEM, the New York City Office of Emergency Management, and other emergency responders via the Department; and

  • be prepared to remain on duty during the hours when the IEOC is operating, normally from 7:00 a.m. to 6:00 p.m., or for such time periods as necessary to assist with the effective management of the disaster.  Depending on the level of the disaster, this may be a seven-day-per-week commitment.

    2.       Post Disaster Coverage Data and Loss Statistics

    After a disaster, the Department will contact disaster liaisons, as needed, who should provide the Department with coverage data and claim statistics.  The Department may request the data and statistics on an on-going basis as necessary.

    3.       Insurance Adjuster Temporary Permits

    Insurance Law § 2108(n) permits the Superintendent to issue a temporary permit to a person to act as an independent adjuster for an authorized insurer “in order to facilitate the settlement of claims under insurance contracts involving widespread property losses arising out of a conflagration or catastrophe common to all such losses.”  The Superintendent may issue a temporary permit for a term not exceeding 120 days.  The authorized insurer on whose behalf the person will be adjusting claims must execute and file with the Superintendent a written application for the temporary permit, and must certify that the person who will be doing the adjusting is qualified by experience and training to adjust claims.

    Insurers should maintain adequate New York-licensed independent adjuster staff to respond to all events short of a major catastrophe.  Consistent with the legislative intent of § 2108(n), the Department will issue temporary permits only for infrequent and widespread conflagrations or catastrophes that have caused severe loss or damage for a large number of New Yorkers.  Furthermore, given its limited scope, a temporary permit enables its holder to adjust claims solely related to the conflagration or catastrophe for which the insurer requested the permit as noted on the application and during the specific time frame for which the permit is valid.

    An insurer may submit an application for a temporary permit as soon as a conflagration or catastrophe causing widespread property losses occurs and before a formal governmental disaster declaration has been made.  An insurer may complete an application online.  An insurer that completes an application on-line will receive the temporary permit by email or facsimile.

    4.       Hurricane and Windstorm Deductibles

    An insurer should notify the Department whenever the insurer activates, or intends to activate, a hurricane or windstorm deductible.  The insurer should notify the Department by sending an email to the disaster department or sending a facsimile to the attention of Geoff Morse or John Capuano at (518) 486-1503.

    C.       New York Information Network

    On May 3, 2002, the former Insurance Department issued Insurance Circular Letter No. 12 (2002) establishing the New York Information Network (“NYIN”).  The NYIN is the main conduit through which the Department will communicate intelligence reports and other critical but sensitive information on terrorism to the New York insurance community.  As part of the NYIN, addressees’ chief executive officers (“CEOs”), or their equivalent, should designate a primary and secondary intelligence or information officer using the form available.  The primary intelligence or information officer will serve as the sole liaison for all terrorism-related intelligence and information.  This person will be responsible for providing the Department with any such intelligence or information.  In instances where the Department needs to communicate sensitive information to addressees, the Department will initiate the communication through the NYIN and information will be directed to the primary intelligence or information officer only.  The secondary intelligence or information officer will serve as the back-up liaison when the primary intelligence or information officer is unavailable. The Department will contact the secondary intelligence or information officer when critical information must be relayed to the addressee and multiple attempts to contact the primary intelligence or information officer have failed.

    DFS directs questions concerning this circular letter to Ashbert Carrington, Senior Insurance Examiner, by telephone at (212) 480-4702, by mail to the attention of Ashbert Carrington, Senior Insurance Examiner, at the New York State Department of Financial Services.

    Brian F. Mark

    [email protected]


    04/26/18       Desvarieux v. Allstate Prop. & Cas. Ins. Co.

    U.S. District Court for the Eastern District of Pennsylvania
    US District Court Held Policy’s Collapse Provision did not Require Cause of Collapse to be Sudden and Accidental, But Denied Summary Judgment Due to Existence of Issue of Fact as to Causes of Collapse

    This declaratory-judgment action arises out of a claim by homeowners for coverage under their homeowners policy relative to damage caused when the front wall of their home collapsed.  Plaintiffs, Jocelyn Desvarieux and Frantz Jean, commenced an action alleging that defendant Allstate Property & Casualty Insurance Company (“Allstate”) breached their home insurance policy ("the policy") by denying coverage for the damage.  Allstate moved for summary judgment, asserting that it properly denied coverage because the collapse was not covered by the policy.


    On May 3, 2013, Desvarieux was sitting in the kitchen of her home when she heard a cracking noise followed by a boom in the front room.  After walking towards the noise, she saw that the front wall of the home had collapsed.


    Desvarieux notified Allstate of the collapse and submitted a claim under to the policy. Following notice, Allstate hired a structural engineer, David Daniels, P.E., to determine the cause of the collapse.  On May 24, 2016, Daniels issued a report concluding that the stone front wall failure in the home was sudden and accidental.  He also found that the evidence indicated that the collapse was due to long term deterioration.  Based on this determination and the policy's provisions regarding collapses, Allstate denied coverage.


    Desvarieux subsequently hired her own engineer, Charles N. Timbie, P.E., who found that there was no triggering event that caused the wall to collapse.  The damage had been developing since the building was constructed.  The front wall was improperly constructed in that the mortar did not have adequate strength and the wall was not properly toothed into the side walls and party wall or tied into the floor systems.


    In June 2017, Timbie issued a second report after investigating a wet soil condition that was discovered during the reconstruction of the home's front wall.  He explained that it had been discovered that the soil pipe from the toilet in the basement bathroom to the main in the basement floor had significantly ruptured allowing the waste and storm water to flow into the soil along the front wall.  Cycles of saturation and draining of the soil caused building subsidence.  Removal of the paneling in the basement revealed settlement of a front portion of the party wall at the toilet room.  He concluded that the collapse was the result of improper construction, but also found that the ruptured sewer pipe was a significant contributing factor in the settlement of the wall and the wall collapse.


    Allstate also arranged for Daniels to re-inspect the home to determine whether the broken sewer pipe had contributed to the collapse.  In July 2017, Daniels found that although photographs appeared to show a crack in a cast iron pipe found under the basement floor, the crack was small and would only allow a small amount of liquid to exit the pipe when the basement bathroom was used.  Daniels concluded that the additional inspection of the property and the review of the numerous supplied photographs did not provide any evidence which would change his initial conclusion of the cause of the front wall collapse.  As a result, Allstate continued to deny coverage.


    During discovery, Timbie testified that he agreed with Daniels's findings that the collapse was the result of long-term deterioration.  However, he also stated that the deteriorated condition of the home was aggravated by the broken pipe discovered during construction.  He explained that water had been released through the cracked pipe over a period of years and caused the front wall to settle.  He testified that the predominant cause of the collapse was defective construction and deterioration of the wall.


    The Additional Protection section of the Allstate policy states:


    11. Collapse

    We will cover at the residence premises:

    a) the entire collapse of a covered building structure;

    b) the entire collapse of part of a covered building structure; and

    c) direct physical loss to covered property caused by a) or b) above.

    For coverage to apply, the collapse of a building structure

    specified in a) or b) above must be a sudden and accidental direct

    physical loss caused by one or more of the following:

    a) a loss we cover under Section I, Coverage

    C — Personal Property Protection. . .


    Section I, Coverage C — Personal Property Protection states:

    We will cover sudden and accidental direct physical

    loss to the property described in Coverage C —

    Personal Property Protection, except as limited

    or excluded in this policy, caused by:

    . . .


    13. Water or steam that escapes from a plumbing,

    heating or air conditioning system, an automatic fire

    protection system, or from a household appliance

    due to accidental discharge or overflow. . .


    Section I of the Policy also contains a subsection titled,

    "Losses We Do Not Cover Under Coverage A,

    Coverage B and Coverage C."  The first part of that

    subsection states that the policy does "not cover

    loss to the property described in Coverage A —

    Dwelling Protection or Coverage B — Other

    Structures Protection consisting of, or caused by"

    certain conditions, including:

    A.3. Seepage, meaning continuous or repeated

    seepage or leakage over a period of weeks,

    months, or years, of water, steam or fuel . . . from a

    plumbing . . . system. . . ..

    A.4. Collapse, except as specifically provided in

    Section I — Additional Protection under item 11,



    The subsection also contains a Predominant Cause

    Exclusion, stating: the policy does "not cover loss to the

    property described in Coverage A — Dwelling

    Protection or Coverage B — Other Structures

    Protection when:"

    1) there are two or more causes of loss to the

    covered property; and

    2) the predominant cause(s) of loss is (are)

    excluded under [the Collapse or Seepage



    The subsection includes a Surface Water Exclusion as

    well, stating: "We do not cover loss to the property

    described in Coverage A — Dwelling Protection,

    Coverage B — Other Structures Protection or

    Coverage C — Personal Property Protection

    consisting of or caused by":

    3. Water or any other substance on or below the

    surface of the ground, regardless of its source. This

    includes water or any other substance which exerts

    pressure on, or flows, seeps or leaks through any

    part of the residence premises.


    In its motion for summary judgment, Allstate argued that the policy does not cover the collapse because it was caused by deterioration, which is not one of the specific covered causes set forth in the Collapse Provision of the Additional Protection section. Allstate further argued that the Escape of Water Condition does not apply because the escape of water had to be sudden and the evidence showed that the escape of water from the cracked pipe in Desvarieux's basement was cyclical.  Allstate also claimed that even if the Escape of Water Condition applied, coverage was still excluded based on the Seepage Exclusion, the Predominant Cause Exclusion, and the Surface Water Exclusion.


    In opposition, Desvarieux argued that the collapse should be covered by the Escape of Water Condition because Timbie found that the water from the cracked pipe contributed to the collapse and the Escape of Water Condition did not clearly and unambiguously require the escape of water to be sudden.  Desvarieux also argued that the Seepage, Predominant Cause, and Surface Water Exclusions did not preclude coverage because they apply only to Coverages A, B, and C, not the Additional Protection Section.


    The Court found that although the Collapse Provision clearly and unambiguously requires a covered collapse to be sudden and accidental, it did not clearly and unambiguously require the causes for such a collapse to be sudden and accidental.  Similarly, the Court found that the Escape of Water Condition required the physical loss, i.e., the collapse, to be sudden and accidental, but not the escape of water.  Based on this clear and unambiguous language, the Court concluded that the policy provides coverage under the Additional Protection section for a sudden and accidental collapse caused by the non-sudden escape of water from a plumbing system.


    The Court also concluded that the Seepage, Predominant Cause, and Surface Water Exclusions did not apply to the Collapse Provision in the Additional Protection Section.


    The Court noted that the policy clearly and unambiguously states that these exclusions apply to Coverage A, Coverage B, and Coverage C. The policy does not state that these exclusions apply to the Additional Protection section, which is separate from and independent of those other sections of coverage.


    Allstate argued that the above exclusions applied to a collapse caused by the escape of water because the Escape of Water Condition includes an exception for other limitations and exclusions in the policy.  However, the Court found that that exception clause applies only to the types of Coverage C Property subject to the Escape of Water Condition, i.e., personal property set forth in Coverage C with the other limits and exclusions set forth in the Allstate policy.  Any other reading would be unreasonable because the Escape of Water Condition would be meaningless if the Seepage and Water Exclusions applied and nullified it.  Allstate also argued that it was unreasonable not to apply the policy's exclusions to the Additional Protection section because it would mean that intentional acts otherwise excluded in the policy would be covered in the Additional Protection section.  The Court noted that the Collapse Provision and other similar provisions in the Additional Protection section, however, require the loss to be "sudden and accidental," thereby ensuring that intentional acts of loss will not be covered.  Because the policy provides coverage for collapse caused by the non-sudden escape of water from a plumbing system and because issues of material fact remain as to whether the escape of water from the cracked pipe caused the collapse, the Court denied Allstate's motion for summary judgment.



Larry E. Waters
[email protected]


04/18/18       Olin Corporation v. Lamorak Insurance Company, et al

United States District Court, Southern District of New York

Court Grants Plaintiff’s Motion for Summary Judgment When Insurer Does Not Have Standing to Enforce a Provision in a Settlement Agreement Between Plaintiff and the Other Insurers 

Plaintiff Olin Corporation (“Olin”), defendant Lamorak Insurance Company (“Lamorak”) and defendants Certain Underwriters at Lloyd’s London and Certain London Market Insurance Companies (collectively the “London Market Insurers”) all moved for summary judgment.  Olin commenced this action over three decades ago, in which it sought insurance coverage for environmental contamination at specific manufacturing sites. In 2010, Olin filed a Third Amended Complaint against Lamorak seeking indemnity for remediation costs and other sums related to five environmental sites pursuant to certain excess general liability policies.


Three of the Lamorak Policies issued to Olin covered the period of January 1, 1970 to January 1, 1973, with coverage available for the five environmental sites referenced in  the Third Amended Complaint. Each one of the Lamorak Policies contained a “Condition C”, which provided a “prior insurance” and a “continuing coverage” provision. 


Despite the other insurers settling, Lamorak is the only Olin Insurer that did not settle its claims with Olin. Accordingly, Olin and Lamorak were the only parties that tried the issue of coverage for the five environmental Sites in the year 1970. 


Previously, the second circuit had ruled that the Olin’s insurance policies were occurrence policies and property damage occurred “as long as contamination continues to increase or spread and includes . . . contamination . . . [based upon] passive migration . . . .”  Further, it was held that “Condition C” in Lamorak’s policies required Lamorak to pay for damages based on a “pro rata” allocation of liability.  


In its decision the court first considered Olin and Lamorak’s motions was for summary judgment. The main point of contention between Olin and Lamorak is how to account for Olin’s settlements with its prior insurers in recalculating the judgment.  The court rejected Lamorak’s argument that the Court should set off its liability by the pro rata shares of the settled insurers.  The court found Lamorak’s argument was contrary to the court’s previous ruling as the Second Circuit applied a pro tanto setoff. In addition, the court found Lamorak did not meet its burden to demonstrate that the settlement includes certain sites and policies that did not accrue liability.  The court found that Olin’s general approach to calculating how much of the settlement payments could be properly allocated to the Five Sites was reasonable.  Specifically, the court adopted Olin’s first proposed method of approximating how much of the settled insurers paid in exchange for releases from any potential indemnification claims relating to the Five sites. Olin’s first proposed method was the ratio of settled policy limits at the Five Sites compared to the settle policy limits at all settled sites.


Second, the court considered Lamorak’s argument to enforce the Judgment Reduction Provision in Olin’s settlement agreement with the London Market Insurers.  The court noted that Lamorak did not have standing to enforce the Judgment Reduction Provision in Olin’s Settlement Agreement if it was not a third-party beneficiary. The court concluded Lamorak did not have standing as Lamorak did not cite anything or suggest that such provision was intended to benefit them and the provision “expressly disclaims that any other person or entity has a legally enforceable right under the Agreement.”


Third, the court considered when the Court should calculate pre-and post-judgment interest on the judgment entered against Lamorak.  The court noted “interest is not a penalty but rather the cost of having the use of another person’s money for a specified period.”  As such, the court concluded that pre-judgment interest is properly calculated on the damages amount that Lamorak is ordered to pay after application of a set-off or judgment reduction. Further, the court concluded that post-judgment interest shall be applied only following the entry of the current judgment.


Next, the court considered the London Market Insurers’ motion for summary judgment seeking specific performance of the Judgment Reduction Provision in its settlement agreement with Olin.  The court noted that under New York law, to obtain specific performance four elements must be met.  The court found that “ordering specific performance was necessary to prevent Olin’s breach of the Settle Agreement.” The court reasoned that Olin’s argument that any breach is merely hypothetical supported its decision. Specifically, the court reasoned since  Olin was challenging the applicability of the Judgment Reduction provision, granting the London Market Insurers’ motion for summary judgment was necessary.  Further, the court rejected Olin’s argument that the London Market Insurers’ did not lack any remedy at law.  While the court noted that the benefit to the London Market Insurers’ under the Settlement Agreement was monetary, the court also acknowledged that London Market Insurers enjoyed the benefit to be release from liability for payment at a particular time and in a particular way. 


Lastly, the court considered Olin’s motion to strike the expert reports and opinions of Marc S. Scarcella. The court excluded portions of Mr. Scarcella report of which the opinions were irrelevant to any issue before the court.  However, the court denied Olin’s motion to exclude Mr. Scarcella’s declaration, which was attached to Lamorak’s motion for summary judgment. In denying Olin’s motion, the court reasoned that at the time Mr. Scarcella’s declaration was submitted, the legal issues on the motion for summary judgment were not decided.   


In sum, the court granted Olin’s motion for summary judgment, and London Market Insurers’ motion for summary judgment.  


04/20/18       Cushman & Wakefield, Inc. v. Illinois National Insurance

United States District Court, Northern District of Illinois, Eastern Division

Under New York Law, the Exclusions Within the Relevant Policies Do Not Bar Coverage for the Claims  

Plaintiff Cushman & Wakefield (“Cushman”) purchased a series of real estate professional liability insurance policies (the “policies”) from Defendants.  The policies were arranged in tiers with coverage provided when the lower tier policies were exhausted.  The Primary insurance policy issued by Nottingham, included a “Prior Knowledge Exclusion”.  


Defendant Illinois National Insurance Company (“Illinois National) was Cushman’s first-level excess insurer from 2009 to 2013.  The Illinois National Policies included an Endorsement #5.  Endorsement #5 provided in part that “[t]his policy does not apply to any Claim alleging, arising out of, based upon, resulting from, directly or indirectly, or in any way involving . . . (a) exercise of any authority or discretionary control by an insured with respect to any client’s funds or accounts, (b) any actual or alleged commingling of funds or monies   (c) an Insured selecting an investment manager, investment advisory or custodial firm; (d) any Insured advising as to, promising or guaranteeing the future value of any investment or any rate of return or interest; or (e) the failure of any investment to perform as expected or desired.”

The current decision stems from all Defendants separate motions for summary judgment which sought slightly different reliefs. Cushman moved for partial summary judgment requesting entry and order granting judgment on specific counts and dismissing specific affirmative defenses based upon the specific counts.  


In its analysis the court determined New York law applied to the policies at issue.  The court first noted that Illinois courts employ the “most significant contacts test” to determine which state substantive law applied for a contract.  Here, the court found several factors weighed in favor of applying New York.  Cushman was a corporation under New York law and had a principal place of business in New York.  In addition, the Policies at issue were addressed and delivered to Cushman’s headquarters in New York.  Further, the Policies were negotiated by Cushman’s insurance broker out of their offices in New York.  Moreover, Illinois National and fellow defendant Ace American Insurance (“Ace”) issued their policies from New York offices.  As such, the court concluded New York had the most significant contact.


Next, the court applied New York law to determine whether Endorsement #5 barred coverage.  In  its analysis the court noted that two reasonable interpretations exist as to Endorsement #5 provisions. National Illinois submitted regulatory filings in several states which included an “Investment Advisor Exclusion.”   In contrast, Cushman submitted their expert illustrating when Endorsement #5 would apply.  After considering the extrinsic evidence, the court concluded that Endorsement #5 did not bar coverage for the underlying claims.  The court reasoned that the Insurers failed to meet their burden and under New York law policy exclusions are given strict and narrow constriction with any ambiguity resolved against the insurer.  As a result of the Insurers’ failure to meet its burden the court could not accept Illinois National Illinois argument that Endorsement 5 pertained to activities other than those performed by an investment advisor.  Accordingly, the court concluded that Endorsement #5 did not bar coverage for the underlying claims.


Following a determination on Endorsement #5, the court considered the “Prior Knowledge Exclusion.”  National Illinois argued that such exclusion barred coverage. The court first determined that the “Prior Knowledge Exclusion” applied to the knowledge of any insured.  Applying New York law, the court noted that courts employ a two-pronged test.  First, the court considers the subjective knowledge of the insured.  Second, the court considers the objective understanding of a reasonable person with the same knowledge of the insured. Despite Illinois National arguing that Cushman appraisers knew as early as 2006, the court recognized even if Cushman appraisers had concerns it does not translate that they knew their actions were inherently misleading or that such activity would be the basis of the claim.  As such, the court found the “Prior Knowledge Exclusion” does not bar coverage.  


Further, the court considered the related claims issue. Illinois National argued that the underlying claims were related and therefore only the 2009-2010 policy was triggered. The court noted that New York law provides that “[t]o establish that a prior Claim is interrelated with a subsequent Claim, the Claims must share a sufficient factual nexus.”  In fact, the court acknowledged that the courts applying New York law have found sufficient factual nexus where the claims at issued had specific overlapping facts.  As such, the court found that the claims here were “unmistakably based on much more than a tenuous factual overlap.”  Accordingly, Cushman could have coverage under all applicable layers of the 2009-2010 policies.        



Eric T. Boron

[email protected]


04/20/18       Estela Villegas v. Farmers Insurance Group 

Court of Appeals of Nevada

Court of Appeals of Nevada Affirms Summary Judgment for Insurer, Refraining to Rewrite Homeowners’ Policy

Plaintiff Estela Villegas filed a claim with her homeowners' insurance company, respondent Farmers Insurance Group d/b/a Fire Insurance Exchange ("Fire Insurance Exchange"), for injuries sustained when she was struck by a car while walking near her community mailbox. Fire Insurance Exchange denied Villegas' claim and, thereafter, she sued for breach of contract and breach of the covenant of good faith and fair dealing. The district court granted summary judgment in favor of Fire Insurance Exchange based upon the plain language of applicable policy exclusions.


On appeal, Villegas argued district court erred by granting summary judgment because the policy's applicable exclusions contradicted other provisions, were ambiguous, and should be construed against Fire Insurance Exchange. In addition, Villegas argued the policy's separate structure provision covered bodily injury incurred in the area of the community mailbox.


The Court of Appeal of Nevada held there was no ambiguity in the applicable policy exclusions, stating an appellate court should not rewrite unambiguous provisions or rewrite an insurance policy so as to increase an insurer's legal obligations against the intent of the parties.


On appeal it was determined the homeowners' insurance policy at issue stated Fire Insurance Exchange will cover claims for bodily injury damages to a third party, but expressly excluded bodily injuries to a resident of the home. The language excluding bodily injury to a resident was held to be clear and unambiguous. Because the homeowners' policy exclusion was clear and unambiguous and Villegas did not dispute she was a resident of the home, the district court did not err in finding the exclusion applied.  Moreover, on appeal it was concluded that the policy’s exclusion provision regarding motor vehicle caused bodily injuries was likewise clear and unambiguous. Because the policy unambiguously excluded coverage for personal injuries caused by a motor vehicle and Villegas did not dispute that a motor vehicle caused her injuries, the district court did not err in finding that exclusion also applied.


Earl K. Cantwell
[email protected]


12/27/17       SSAB ALABAMA INC. v. KEM-BONDS, INC.

United States District Court, S.D. Alabama

A Good Case Explaining the UCC “Battle of the Forms”

This recent case provides an excellent primer on the legal analysis that must occur when purchase orders, invoices, and other documentation between commercial parties create confusion and even conflicting terms with respect to their agreement. SSAB ALABAMA operates a steel recycling mill and purchased a product known as tap hole sand from KEM-BONDS. SSAB ultimately claimed that in June 2016 defective product supplied by KEM-BONDS failed causing SSAB to suffer significant property loss, production delays, and lost profits. SSAB sued KEM-BONDS on grounds of breach of contract, breach of warranty, and an Alabama manufacturer’s liability doctrine. KEM-BONDS defended based on waivers of warranties and limitation of damages contained in its invoices, and that its invoices contained an enforceable limitation of liability provision. KEM-BONDS ultimately moved for summary judgment on the basis of those documents and defenses. The essential dispute was whether the language in the SSAB purchase orders or KEM-BONDS’ invoices governed the dispute, so that the litigation and summary judgment motion was essentially distilled into a classic “battle of the forms”.


Both SSAB’s purchase orders and KEM-BONDS invoices were essentially form documents containing pre-printed terms and conditions which did not materially vary from one order or shipment to the next. On summary judgment, KEM-BONDS sought to enforce the disclaimer of warranties and limitations of remedies contained in its invoices, while SSAB claimed those provisions did not become part of the agreement or were otherwise unenforceable.


The Court first noted that there were indeed “fundamental inconsistencies” between the purchase orders and the terms of the KEM-BONDS invoices. Section 2-207 of the Uniform Commercial Code is designed to address exactly this kind of scenario in which there is an exchange of printed purchase orders and acceptance forms often containing different language. The legal analysis must then evaluate the mismatched, conflicting terms of SSAB’s purchase orders and KEM-BONDS’ invoices.


First, the Court ruled that KEM-BONDS’ invoices and shipments of product operated as an acceptance of the offer set forth in SSAB’s purchase orders, even though those invoices stated different or additional terms from those in the purchase orders. Under the UCC, a written confirmation or other acceptance may operate as an acceptance even though it states terms additional to or different from the offer.


The next question is what becomes of the “additional terms” in KEM-BONDS’ invoices? Under the UCC, as between merchants (which was the case here) such additional terms in an acceptance MAY become part of the contract unless (a) the offer expressly limits acceptance to the terms of the offer; (b) those terms materially alter the offer; or (c) notice of objection to such additional terms is given within a reasonable time after notice of them is received. SSAB’s position, which the Court held to be correct, was all three of these exceptions operated here to prevent the additional terms in the KEM-BONDS invoices from becoming part of the parties’ contract.


The SSAB purchase orders specified in writing that acceptance of the order was expressly limited to the terms and conditions set forth in the order. Therefore, the additional terms contained in the KEM-BONDS invoices could not become part of the contract because the offer expressly limited acceptance to its terms. While the UCC does not require an offer and acceptance to exactly “mirror” each other as under traditional contract law, it does allow the offeror to control its offer and to some extent dictate the terms and conditions.


The Court also held that the additional terms such as disclaimer of warranties, limitation of remedies, and limitation of liabilities in KEM-BONDS’ invoices would have “materially altered” the parties agreement, and the Court held there was at least an issue of fact as to whether those provisions would have materially altered the parties’ agreement.


SSAB’s purchase orders further stated that SSAB gave notice that it objected to and rejected any terms or conditions contained in any document which were in addition to, different from, inconsistent with, or attempt to vary on of the terms and conditions of the purchase order. The Court deemed that this was sufficient “notice of objection” to such additional terms such that they did not become part of the agreement.


Therefore, KEM-BONDS was not entitled to entry of partial summary judgment enforcing its disclaimer of warranties and limitation of remedies and liability clauses.


As stated, although the UCC does not require an offer and acceptance to expressly and totally “mirror” each other, this case recognizes that the offeror still controls its offer and may limit terms and conditions of any acceptance.


To the extent commercial parties use various forms such as purchase orders, invoices, warranty forms, etc., these documents have importance and are of significance in a UCC context. It may be important and useful for a commercial entity to legally review its forms in an effort to put it in the best possible legal position in the event a dispute arises, such as the one in this case. It is often useful to have a legal review of your company’s business forms from the perspective of a dissatisfied customer or company unhappy with your product or services as to what potential arguments they may raise and how your forms can anticipate, limit, or perhaps even preclude litigation.


Although this case essentially held that KEM-BONDS was not entitled to partial summary judgment enforcing its contract language, and the case was referred to a U.S. Magistrate for further proceedings, if KEM-BONDS was not able to enforce its warranty limitations or limitation of remedy language, that would surely have a great (negative) substantive impact on KEM-BONDS’ ability to defend this case in any further proceedings or litigation.

Newsletter Sign Up