Coverage Pointers - Volume XIX, No. 24

Volume XIX, No. 24 (No. 509)

Friday, May 18, 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

 

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Lake Placid, NY 12946

Phone: 518-523-2441

Fax: 518-523-2442

 

www.hurwitzfine.com

© 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. 

 

I am heading to Washington DC this weekend for my first meeting as a member of the American Law Institute.  There should be an interesting discussion about the ALI Restatement of Insurance.  I’ll report next issue.

 

Conflicts and Referrals and the Silver Platter:

 

I was honored to be awarded the Strubinger Award by the Association of Defense Trial Lawyers at its recent meeting in Austin and the FDCC Connect Award by the Federation of Defense & Corporate Counsel in 2017.  Both of those awards are for referring business to excellent lawyers.  Through the FDCC, ADTA, the Canadian Defence Lawyers and the Harmonie network we have the pleasure of referring good work to lawyers throughout the United States, Canada and Europe and we do so with joy and delight.  We are able to find great lawyers for clients who need representation in jurisdictions where they haven’t identified able and competent counsel. 

 

Another reason we refer business is when he have conflicts that preclude us from handling a matter.

 

We welcome the opportunity to refer business.

 

We also welcome the chance to help you if you have a conflict and need backup.  For insurers and businesses, we respect your choice of other counsel, of course.  But IF your panel counsel is conflicted out of a matter – coverage, construction accident, motor vehicle, professional liability, premises, whatever, feel free to call on us.  We are positioned to help you throughout New York State and New Jersey.

 

And for other counsel, with law firm mergers and a shrinking number of insurers, lawyers often find themselves as potentially adverse to good current clients.  If we can help you on a conflict, we would be delighted, and then hand back the client to you on a silver platter.

 

Seasonal Greetings:

 

We send spring greetings from the north shore of Lake Erie on a beautiful warm and calm evening.  It’s the kind of day for which we wait.

 

This week’s issue is chock full of interesting cases – additional insured issues continue to abound along with others worth reading. 

 

There’s a curious case involving the definition of an “accident” in a claim for uninsured motorist coverage. Assume that the claimant is struck by a motorist who intentionally runs into her car. Assault?  Sure.  Is that motor vehicle coverage available for an assault?  One would think no.  Is the assaulting driver uninsured for his assaultive behavior?  Sure.  All that is easy.  In fact, there’s a Second Circuit case in Agnes’ column where just that finding was upheld.

 

But what happens if the claimant now files for uninsured motorist coverage?  Was she injured in an auto “accident”?  The Court of Appeals has previously ruled “yes” because the injuries were unexpected, and thus “accidental” from the claimant’s perspective.  Now an appellate court has said the answer is “no” if the clamant is applying for benefits from MVAIC, the state-sponsored Motor Vehicle Accident Indemnification Corporation.  Same conduct, virtually the same policy language but a completely different result.

 

On the AI side we have a case involving Tishman and Travelers, where the First Department gave meaning to an AI endorsement providing coverage only for derivative liability of the named insured’s conduct.  Carrier’s take notice of the language and consider using it, if it is your intention to limit the breadth of an endorsement.

 

When does a building collapse? You’ll find a great case on that issue in Steve’s column.

 

Jen’s Gems:

 

Greetings!  I am currently sitting at my desk looking out the window.  Happy to report that winter has finally loosened its grip on Buffalo and it is mid-seventies and sunny.  This weekend we have my daughter, Ella’s 6th birthday party.  I still cannot believe she is six.  For the past few months, she has been begging me to get her ears’ pierced as her birthday present.  She used a line that I am sure I will hear about a zillion times over the next decade, “all of my friends have their ears pierced.”  She then explained that she and “Kendall” were the only girls in her class without pierced ears.  I was going to point out the inherent contradiction in her argument, but I left that alone. 

 

Nonetheless, drawing on the type of parenting we all practice, I tried to figure out how old I was when I got my ears pierced (at seven), and then decided it didn’t screw me up so I agreed to take her.  Admittedly, I was also a bit hesitant because Ella has the lowest pain threshold known to man.  Taking her to the doctor’s office for shots has always been epic and often requires me to set aside at least 10 minutes for her to cry and lay on the floor of the waiting room while the pain subsides.  With this in mind, I still took her, but gave the woman doing the piercing the instruction that they should pierce both ears at once.  I am happy to report, she did pretty well.  It was only when she was sitting in the chair and they were trying to make sure the dots were even that she got a bit squeamish.  After the earrings were in, per her norm, she only screamed hysterically for about ten minutes, yelling “it hurts so bad” through the mall before she stopped and then asked if we planned on doing any shopping.  Kids…

 

In terms of my column this week, I report on a trial court case from New York County, Touro Coll. v. Arch Specialty Ins. Co.  This is a post-Burlington decision, and I really think it shows the appropriate manner for handling tenders now.  And, admittedly, it is not too different from the pre-Burlington world.  If the allegations in the complaint raise the possibility that the named insured’s act or omission were a proximate cause of the loss, the carrier has to defend.  But, where the duty to indemnity goes to the actual facts of the underlying matter, indemnity is often premature. 

 

Hope everyone has a nice weekend.

 

Until next issue…

 

Jen

Jennifer A. Ehman

[email protected]

 

Soldiers Insurance – 100 Years Ago in WW I:

 

The Wall Street Journal

New York, New York

18 May 1918

 

Senator J. Hamilton Lewis will introduce bill extending soldiers’ insurance scheme to all Government employees and all workmen employed in war work.  Life insurance men are much concerned over the proposed legislation and think that such a step is tantamount to the assassination of private insurance business. 

 

Tessa’s Tutelage:

 

Dear Readers:

 

Last week I went to a hatchet throwing event.  If you have ever met me, I probably don’t look like the kinda gal that would be comfortable throwing … well anything.  I wish I could say “You can’t judge a book by its cover” because I am not particularly adept at throwing anything.  However, the hatchet throwing instructor was patient and after many, many tries I finally landed my hatchet inside the target. That moment was momentous enough for me; however, something even better happened!  Someone approached me and said “hey are you the Tessa from Tessa’s Tutelage?”  After that, I signed autographs and had my picture taken … okay that didn’t happen.  Nonetheless, it was so nice to meet a CP reader!

 

This week we have a multitude of good cases.  My favorite was Hillside Comprehensive Pain Mgmt., P.C. v MVAIC. Plaintiff commenced an action to recover no-fault benefits, and Defendant failed to appear for trial. Oops.  A judgment was entered against Defendant with a significant interest amount, which had run for nearly nine years.  Thereafter, Defendant hoped to save its skin.  Defendant moved to vacate the order and the Civil Court denied its motion.  The Civil Court took pity on Defendant and modified the interest by tolling it.  Plaintiff appealed this portion of the Civil Court’s order.   The Second Department determined that the portion of the order that Plaintiff objected to was not appealable.  This portion of the order was not a result of a party’s motion, it was instead a sua sponteSua Sponte is a fancy way of saying the Court made the motion. As such, the only way for the Plaintiff to move against this portion of the order was to move to vacate the order.  If that motion was denied, only then, could the plaintiff appeal.  Lots of procedural hoops.

 

Tessa

Tessa R. Scott

[email protected]

 

A Century Ago – Batavia’s Peeping Tom – Is He Still at Large:

                                                  

Democrat and Chronicle

Rochester, New York 

18 May 1918

 

Batavia Has “Peeping Tom.”

 

Batavia, May 17.—Batavia has a “peeping Tom” who has been annoying residents on Bank street for the past few evenings.  In fact there are two men who have been scared by them, claiming they look nearly alike.  They have been reportedly seen around the residences of City Attorney Kinsey, Councilman Prentice, City Assessor Grinnell and other places.  The police have been notified and are on the watch out for them. 

 

John’s Jersey Journal:

 

Dear Subscribers:

 

Can working on items on the “honey do list” land a person in a coverage dispute? Why yes, it can. That is exactly what happened in today’s coverage case from New Jersey.

 

Jaishanka Arnala’s wife wanted him to buy some shrubs and plant them around their house. Arnala decides to accomplish this by renting a U-Haul. He also decides it’s a good idea to bring a friend along to help.

 

Arnala drives his car to U-Haul and rents a van. Rather than leave his car at the U-Haul facility, Arnala decides to drive the car home. He then asks his friend to drive the U-Haul and meet at Arnala’s house. The friend, driving the U-Haul, gets into an accident and allegedly injures another motorist. The injured motorist then sues Arnala claiming that he was vicariously liable for the accident. Arnala had an auto policy, which provided liability coverage to him for accidents arising out of the ownership, maintenance or use of any auto.

 

The question is did the accident arise out of Arnala’s “use” of the U-Haul van?

 

  • Arnala was not driving the U-Haul van.

  • He was not a passenger in the vehicle.

  • At the time of the accident, Arnala was in his car—an entirely separate vehicle.

     

Despite this, the trial court held that the accident arose out of Arnala’s “use” of the U-Haul. The court deemed him to be a “competent acquirer of the vehicle being used”. Talk about twisting interpretation of the policy to find coverage! Historically, New Jersey has taken a pretty broad view on what constitutes “use” of an auto. This case stretches the interpretation of “use” of an auto even further.

 

Notably absent from the decision is any discussion of prior precedent on the issue. Rather, this part of the Appellate Division’s decision is paragraph-long quotes from the trial judge’s opinion, with a follow-up sentence that the appellate court agrees.

 

Had these facts arose in New York, we doubt that a New York court would have reached this conclusion. New York generally does not take such an expansive view of “use” of an auto.

 

I hope that everyone had a nice Mother’s Day. We took mom out for breakfast at Letchworth State Park, which is renowned for its breathtaking scenery. It is commonly referred to as the Grand Canyon of the East. If you are ever nearby, it is well worth the trip. The weather was overcast so, unfortunately, we did not get to spend too much time in the park. Looking forward to going back this summer to go whitewater rafting.

 

‘Til Next Time,

 

John

John R. Ewell

[email protected]

 

Loafing Equality?

 

Times Herald

Olean, New York

18 May 1918

 

LOAFER CONSTERNATION

 

The anti-loafing bill is a law, and as soon as the Governor proclaims it, there will be reason or consternation among the tired army of every-day loafers.  It is rather humiliating to note that the law refers only to “able bodied males.”  Are there no loafing females?

 

Peiper ‘s Perils:

 

Greetings, and welcome to spring.  We know the bulk of you have been there for the past 6 weeks so.  For Western New Yorkers, though, spring arrived about 10 days ago. 

 

With regard to the column this week, we note a big first party case out of the First Department.  The issue is the Collapse Coverage “extension”, and the very limited definition of collapse found therein.  The policyholder bar hates this provision, and to be candid we can understand their frustration.  Nevertheless, words have meaning.  When that meaning is clear, as the First Department says it is here, those words have to be applied as they are written.  Good for the First Department.  Good for words. 

 

Pardon my brevity this week, as I’m working with very inconsistent internet.  No, I’m not typing this note from some far away land.  Apparently, my house, smack in the middle of suburbia, is also an internet dead zone – at least today.  A night without streaming, and my children will survive.  If this stretches until the weekend, I fear the familial fabric will be damaged irreparably.  Any of you relate to this lament?  Yeah, I thought so.

 

That’s it for now.  See you in two weeks.

 

Steve

Steven E. Peiper

[email protected]

 

The Feds Chase Down Insurance Fraud 100 Years Ago:

 

The Richmond Item

Richmond, Indiana

18 May 1917

 

INSURANCE FRAUDS ARE UNCOVERED

BY FEDERAL AGENTS

 

(By Associated Press)

 

Cincinnati, O., May 17.—Insurance frauds running into thousands of dollars are alleged in an arrest made here today by the Cincinnati police, for the United States government.  The prisoner is Stanley Meerfield, an agent for an insurance company of Cincinnati.

 

Meerfield is 33 years old.  The charge on which he is held is “using the mails to defraud.”

 

The investigation leading to the arrest included inquiries in several towns outside of Ohio, according to federal authorities.  It is alleged that the insurance agent, learning of lapsing policies, kept up premium payments and then collected the principal through reporting the death of the insured person.  To support the death claims, it is alleged, signatures of undertakers, clergymen, doctors and friends of the supposedly deceased person were used fraudulently.  It is alleged that even the notary public seal of Illinois was used improperly.

 

Hewitt’s Highlights: 

 

Dear Subscribers:

 

Since our last edition, my oldest turned nine years old. His superhero party was a success. My boys are deep into their baseball season and having fun. They are also playing soccer and are busy with Cub Scouts and Church Choir.

 

As for serious injury cases, several cases involve a party seeking to overturn a jury verdict which rarely works as long as the jury had a reasonable basis for its decision. In one case, plaintiff’s expert examined plaintiff six months after the accident. Despite this delay, the Court upheld the jury’s verdict finding in favor of plaintiff, as the expert found significant range of motion deficits.  In another case, the court did not overturn a jury’s verdict in favor of defendant where even the trial judge’s notes said the plaintiff’s serious injury testimony was not compelling. A final case involves a reminder that in a rear vehicle collision, the rear vehicle has the burden of coming up with a non-negligent reason for the collision.

 

Until next time,

 

Rob
Robert Hewitt

[email protected]

 

Battling the Germans – How Do Submarine Losses Impact Insurance?

 

The Wall Street Journal

New York, New York

18 May 1918

 

HAVE U.S. DESTROYERS

SCARED SUBMARINES?

 

Atlantic Submarine Activity Deceases and Mediterranean

May be Resumed—The Harpagus Torpedoed—Deviation

Clause in War Risk Policies

 

Insurance men are inclined to attribute the decline in the number of submarine attacks to the help of the American fleet in the Atlantic war zone.  It is expected, however, that the activity will be resumed in the Mediterranean.

 

The Harpagus, a British vessel chartered to the Fabre Line, was torpedoed on May 9.  New York underwriters have only just received the report.  The vessel was bound for Marseilles and was attacked about ten miles from its destination.  The hull would be worth at least $1,500,000, on a deadweight tonnage of 7,500 tons and a conservative market value of $200 a ton.  The value of cargo would be several times higher than this.  A considerable portion was carried by New York underwriters.  Recently there has been a comparative freedom from loss in the Mediterranean.  The rates, however, were maintained at 10% to 15%.  The Harpagus risk was 10%.

 

A point of insurance interest developed by questions in the British Parliament, when attention was drawn to the loss of two ships that were ordered to leave a port without discharging cargo.  In one case a consignment of 1,500 tons of foodstuffs was part of the lost cargo and in the other, 2,500 tons of foodstuffs.  Owing to the congestion at certain British ports, ships after arriving have been instructed to proceed to another port to discharge cargo.  As the usual war risk insurance only covers cargo and hull to a specified port they are without covering between the two ports, unless a special deviation clause is inserted into the policy.  In case of destruction under such conditions, underwriters say the loss would fall on the shippers and ship-owners.

 

Wilewicz’ Wide-World of Coverage:

 

Dear Readers,

 

It suddenly feels like we skipped over spring and went directly from snow in May to summer two weeks later. I won’t complain, but I will cut this missive short so that I can go get my tech-addicted kid outside for a walk before the rains come this weekend.

 

Now, jumping right in, this week in the Wide World of Coverage we have a Second Circuit case involving a road rage incident in Manhattan. In Hough v. USAA Casualty, an insured was driving up Sixth Avenue to meet with former NYS governor Mario Cuomo, of all people, when he was stopped by a construction worker managing traffic. The insured grew increasingly impatient at being made to wait, particularly when he saw no construction vehicles entering or exiting the property. He thus started to creep toward the worker, and did not apply the brakes until after he hit him. The insured eventually pled guilty to misdemeanor assault in the third degree. Coverage litigation ensued and the ultimate issue was whether there was even an accident in the first instance. The court held that since the insured never applied the brakes, indeed, he did not even attempt to apply them until after he hit the worker, there was no accident. With no unintentional or unforeseeable event, there was no coverage in the first instance.

 

Until next time!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

Help Wanted – Experience with Three-Inch Shells a Must:

 

Buffalo Evening News

Buffalo, New York

18 May 1918

 

Help Wanted; Female

 

Factory Work

 

MUNITION

 

Girls with some experience on 3-inch shells; good wages; steady work; excellent conditions, in new factory.

 

Automatic

Transportation Company

Main St. and Hertel Ave

 

Barnas on Bad Faith:

 

Hello again:

 

With the Sabres season long over and my Raptors mercilessly eliminated from the playoffs by Lebron once again it is pretty much all baseball all the time in my house these days.  While my Blue Jays are off to a plucky 21-20 start, the vast majority of my baseball attention is focused on the New Hampshire Fisher Cats of the Eastern League.  New Hampshire is Toronto’s AA team and the current squad on which Vladimir Guerrero Jr. is playing.  Most casual fans of baseball over the last 20 years will remember Vladimir Guerrero the rocket armed, power hitting, free-swinging outfielder who starred for the Montreal Expos and Los Angeles Angels of Anaheim and is going into the Baseball Hall of Fame this summer.  Young Vlad is a stocky, 19-year-old third baseman who is currently tearing up the Eastern League with a .415/.459/.696 slash line.  He’s also got 7 home runs, more walks than strikeouts, and 40 rbis in just 34 games.

 

It seems pretty clear that Jr. is too good for AA.  Most national prospect junkies have him rated as the best prospect still in the minor leagues, and most baseball experts think that he is ready to hit in the MLB already.  Here in Buffalo, we have the Bisons who are the Blue Jays AAA affiliate.  I’m selfishly hoping Vladdy Jr. gets to spend some time here in AAA before he makes his way up to the majors, even if the Jays could use his bat in the lineup right now.

 

I have two cases in my column this week.  The Quick Response case touches on the Mighty Midgets rule.  As you may know, it has long been the law in New York State that an insured is not entitled to attorney’s fees incurred in bringing an affirmative action against its insurer to settle its rights to coverage under the policy.  Since the Court of Appeals decisions in Bi-Economy and Panasia, some policyholders have argued that attorney’s fees are recoverable as consequential damages resulting from a breach of the implied covenant of good faith and fair dealing.  This argument has been routinely rejected by courts and was rejected again by the Northern District of New York in Quick Response.  However, the Court noted a limited exception to the rule if the carrier has denied coverage in such bad faith that no reasonable carrier would, under the given facts, be expected to assert it.  The court concluded there was a question of fact as to whether this exception applied and declined to grant Cincinnati’s motion for summary judgment dismissing the demand for attorney’s fees.

 

The Deitz case from the Ninth Circuit is a case applying Montana bad faith law.  There, the underlying plaintiff obtained a $15,000 verdict against Geico’s insured, and judgment was entered in his favor on April 18, 2013.  He appealed the verdict to the Ninth Circuit and Supreme Court unsuccessfully.  Then, on July 5, 2016, he filed a third party bad faith complaint against Geico.  Unfortunately for Mr. Deitz, and his attorney, Montana statutory bad faith has a one year statute of limitations and common law bad faith has a three year limit.  Thus, both claims were time barred as they accrued the date the judgment was entered in the district court.  Always check your statute of limitations.  You don’t want to be SOL.

 

Have a nice weekend.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

Zionists in Palestine, a Hundred Years Ago:

 

The New York Times

New York, New York

1918 May 18

 

ZIONISTS WANT TEACHING

 

Dr. Weizmann Says Some Power

Should Hold Palestine in Trust

 

LONDON, May 17. (via Ottawa)—Speaking at an official dinner to the Governor of Jerusalem, Dr. Chaim Weizmann of London, head of the Jewish Administrative Commission, said Jewry was returning to Palestine to build up a great moral and intellectual centre.  Zionists desired to create conditions under which the development of the Jewish people would not be a detriment to any of the great communities already established in Palestine.  All fears expressed openly or secretly by the Arabs that they would be ousted from their present position were unfounded.

 

The Jews, said Dr. Weizmann, did not intend to take the supreme political power into their hands after the war.  Jews and Arabs alike had watched the fate of Albania and Russia.  Modern self-government needed a long and hard apprenticeship under trained and trustworthy teachers, and the Zionists desired that supreme political authority in Palestine be vested in one of the civilized democratic powers.  This Power should hold Palestine in trust until self-government became practicable. 

 

Jewry would choose that power and would announce its opinion thereon after the war.  Zionists did not believe that internationalization of Palestine or any form of multiple political control could be tolerated. 

 

Altman’s Administrative (and Legislative) Agenda:  

 

Greetings, Dear Readers.  

 

Well, we’re halfway through May, and my beloved NY Mets have won two games all month. That is not a joke. They won two games.  All month.  Anyone want to start a GoFundMe and buy a hitter or eight? GoFundMets?

 

In other news, I am taking my mother to see Jackson Browne in concert Friday night and, because Mom prefers vegetarian food, we are going to a vegan restaurant beforehand. I, who consider bacon a crucial food group, am going to a restaurant that features “massaged kale.” I can only hope the massage makes it taste better. It certainly couldn’t taste any worse.  #KaleIsRabbitFood.

 

In administrative news, the Department of Financial Services (DFS) released a new regulation regarding New York State Senate Bill S7288, pertaining to SUM coverage, which goes into effect on June 16, 2018. This regulation is being issued on an emergency basis, meaning there is limited opportunity to weigh in with the DFS at this time. 

 

Howard

Howard B. Altman

[email protected]

 

Say it A’int So!  Deflasking Liquor:

 

The Brooklyn Daily Eagle

Brooklyn, New York

18 May 1918

 

NO BOOZE IN FLASKS

 

In order to conform both in letter and spirit with the Government prohibition against the sale of liquor to men in uniform, the members of the Retail Liquor Dealers’ Association of the Rockaways, including in its membership all the liquor dealers in the Fifth Ward of the Borough of Queens, have unanimously adopted a resolution prohibiting all members of the association from selling any liquor whatever in flasks. 

 

Off the Mark:

 

Dear Readers,

 

The past week has been quite eventful for my oldest.  He had his spring concert on Monday and hit double digits on Wednesday.  I can’t believe he’s already 10.  Time sure does fly by.

 

It remains quiet on the construction defect front.  This edition discusses a case from the US District Court from the District of Massachusetts, which involved a ceiling collapse caused by a combination of defective construction and decay.  In Easthampton Congregational Church v. Church Mut. Ins. Co., the plaintiff sought coverage under their policy for damages due to the ceiling collapse.  The Court examined the policy’s collapse provision and the applicability of the policy’s general exclusions for defective construction and decay and determined that because the insured established coverage under the additional coverage for collapse provision, the general exclusions were inapplicable.

 

Until next time …

 

Brian

Brian F. Mark
[email protected]

 

Catholics and Jews Need Not Apply?

 

Fitchburg Sentinel

Fitchburg, Massachusetts

18 May 1918

 

Help Wanted—Female

 

AMERICAN PROTESTANT woman for general housework.  Address L 35, Sentinel.

 

 

Wandering Waters

 

Welcome to another issue of Wandering Waters. I hope all of you have had a wonderful week.  With spring in full swing, everyone appears to be in a better mood.

 

As you are aware, Wandering Waters provides a quick update on the NBA Playoffs.  Celtics fans are rejoicing today.  Heading into Game Three on Saturday, the Celtics hold a two game lead against the Cavs in the Eastern Conference Finals.  Although history has taught us never to count out LeBron James, this series appears to be different.  Despite LeBron playing well in Game Two, the Celtics won by a considerable margin.  The Cavs are in serious trouble of elimination.

 

With that being said, this week we have one case from the United States District Court, Eastern District of New York, and one case from the United States District Court, Southern District of New York. I hope you enjoy,

 

Until next time…. 

 

Larry

Larry E. Waters

[email protected]

 

Boron was Around, 100 Years Ago:

 

The Gettysburg Times

May 18, 1918

Man’s Components Parts

 

Man is the most complex mechanism is the cosmos.  There enter into his constitution eighteen or more simple bodies, namely hydrogen, oxygen, nitrogen, carbon, sulfur, fluoride, chlorine, bromine, iodine, phosphorous, arsenic, silicone, calcium, magnesium , sodium, manganese, aluminum, vanadium and boron.

 

Now, speaking of Boron:

 

Boron’s Benchmarks:

 

Dear Subscribers:

 

Under any circumstances, crossing the finish line of a 26.2 mile marathon race with a race bib number pinned to you is a memorable experience.  I still remember the feeling of crossing that line at the end of my first marathon, on a hot and sultry June Sunday morning back in 1995, in Cleveland, Ohio.  Getting to the finish while still energized and in running mode, without a limp or a blister, makes it an exhilaratingly memorable experience. On Sunday morning of the upcoming Memorial Day weekend, I’ll be cheering on my son-in-law, Mike Honsberger, at the Buffalo Marathon. The finish line of the Buffalo Marathon happens to be located just a block from our downtown Buffalo, New York, office. Mike has a bunch of 13.1 mile half-marathons under his belt, and considering the many long-run workouts, including a 25-miler he did a couple of Saturdays ago, I am confident he has a great chance to feel exhilarated crossing the finish line of his very first marathon. 

 

From high courts of the great states of Wisconsin and Florida come informative decisions issued within the past seven days.

 

Wisconsin convenience store security guard punches store patron twice in the face.  Was this an “occurrence” triggering the store’s CGL liability coverage?  The Supreme Court of Wisconsin says no... 

 

It’s called pleading into coverage.  Attorneys for plaintiffs suffering bodily injury from being punched/kicked/shot, etc., frequently and creatively allege in their complaints it was negligent rather than intentional behavior that caused plaintiff’s injuries.  Pleading into coverage seeks to avoid the application of exclusions from coverage for intentional acts and/or from assault and battery which are found in most commercial general liability policies.  Have a look at a case decided by Wisconsin’s highest court last week, Talley v Mustafa Mustafa, et al, in which the court in a de novo decision granted the insurer’s summary judgment motion. 

 

One good Florida assignment of claim rights leads to another…

 

After a covered loss has occurred, policyholders generally can assign the insurance benefits they’re entitled to receive in connection with that loss, despite language to the contrary in their policy.  Florida courts have a long history of enforcing post-loss assignments of policy benefits.  The rationale is that an insurance claim is a “chose in action” (i.e., a right to recover a debt or money) and is not the policy itself.  Therefore, a post-loss assignment of rights to recover claim benefits is not subject to a policy provision generally prohibiting assignment of the policy.  Nicon Construction v. Homeowners Choice informs us that Florida claimants are permitted to provide assignment of “any and all insurance rights, benefits, and causes of action” under their property insurance policies to multiple assignees.  The case is a quick and worthwhile read.

 

All in all, this week I’ve provided for your consideration one insurer win case and one insurer loss case.  The old saying is true - you can’t win ‘em all.  But please know that win or lose we promise to run the course with our best efforts for you.  We will persevere on your behalf no matter how the opposition chooses to litigate a case against us, regardless of the difficulties of any particular day in court, and despite the temporary roadblocks judges may set in our path.  Like marathons, each case we handle for you is a memorable challenge for us.  Here’s hoping that in the coming years we will cross more than a few finish lines hand in hand, exhilarated by the results we obtain together.  

  

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

Eric T. Boron

[email protected]

 

Headlines from the Issue Attached:

 

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

 

  • Accident which Occurred on Staircase, within Building, not Part of Premises Leased to Tenant, Did Not Trigger Additional Insured Coverage under Tenant’s Policy – This was an Easy One

  • When Making a Claim against MVAIC, Intentional Conduct by a Motorist is Not an Accident.  When Making a Claim against an Uninsured/Underinsured Motorists Carrier, Intentional Conduct by a Motorist is an Accident.  So there you go!

  • Additional Insured Endorsement Only Applicable for Named Insured’s Vicarious Liability, Not for Additional Insured’s Independent Negligence

  • Even though a Vehicle is Sold, the Seller Cannot Deny Ownership if it Does Not Remove the License Plates

 

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

Robert E.B. Hewitt III

[email protected]

 

  • Plaintiff’s Medical Witness Who Examined Plaintiff Six Months After the Accident and Testified to Plaintiff’s Reduced Range of Motion was Enough For A Jury to Find In Favor of Plaintiff

  • Jury Verdict Would Not be Set Aside When Lower Court’s Own Trial Notes Indicated Plaintiff’s Testimony was Not Compelling

  • Rear End Collision Shifts Burden to Defendant to Show a Non-Negligent Basis for the Accident

  • Plaintiff’s Physician’s Report from a Doctor Who Examined Him for the First Time Five Years after the Accident Could Not Provide an Issue of Fact to Defeat Motion

  • Plaintiff’s Expert Failed to Address Degenerative Conditions in Plaintiff’s Medical History Rendering His Conclusions Speculative

  • Court Credited Accident Reconstruction Expert Which Found Defendant’s Vehicle Crossed the Center Line of the Highway

  • Plaintiff’s Expert Found Objective Limitations on Range of Motion and Objective Results on Tests for Lumbar Injury

 

TESSA’S TUTELAGE

Tessa R. Scott

[email protected]

 

  • The Arbitrator’s Decision Was Rational And Based On The Evidence

  • The Plaintiff Failed To Establish That It Gave Proper Notice To The Eligible Injured Party

  • The Defendant Failed to Establish that the Notice of Rescission and Refund Check had Been Mailed to The Insured, Pursuant to NY Law

  • Plaintiff Could Not Directly Appeal the Portion of an Order that Came From a Sua Sponte Motion from the Court

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

 

  • Words Have Meaning; Where Building doesn’t “Abruptly Fall Down” Collapse Coverage is Not Triggered

 

Potpourri

 

  • GBL Claim with No Reference to Consumer Oriented Impact Dismissed for Failure to State a Cause of Action

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • Second Circuit Finds No Coverage Where Insured Intentionally Ran Someone Over in Road Rage Incident, Thus There Was No “Accident” Under the Policy

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Allegations in Complaint Trigger Duty to Defend Additional Insured; Determination on Indemnity Considered Premature

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • Bad Faith Claim and Demand for Attorney’s Fees Incurred in Affirmative Litigation against the Insurer Survives Summary Judgment

  • Third Party Bad Faith Claims in Montana Accrue on the Date of the Settlement or the Entry of Judgment on the Underlying Claim

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

  • New Jersey Appellate Division Takes Even Broader Interpretation of “Use” of an Auto

 

ALTMAN’S ADMINISTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

  • Regs on New SUM Amendments

 

OFF THE MARK
Brian F. Mark

[email protected]

 

  • US District Court Held Policy’s General Exclusions to be Inapplicable to Additional Collapse Coverage

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

 

  • Plaintiff May Bring a Direct Suit against the Insurer of a Diplomat

  • Petitioner’s Motion to Compel Arbitration Granted When Respondent’s Sole Counterclaim Falls within the Broad Arbitration Clause

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

  • Supreme Court Reverses Court of Appeals and Grants Summary Judgment for Insurer; Punches to Face Not an Accident, and Thus Not an Occurrence Which Would Trigger Coverage for Negligent Supervision of the Punching Employee Under a Businessowners’ Liability Policy

 

EARL’S PEARLS
Earl K. Cantwell
[email protected]

 

  • Policy Requirements for Additional Insured Coverage

 

All the best.

 

Dan

 

Dan D. Kohane

Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

 

Office:            716.849.8942

Mobile:           716.445.2258

Fax:                716.855.0874

E-Mail:            [email protected]  

Website:         www.hurwitzfine.com  

Twitter:           @kohane

LinkedIn:       www.linkedin.com/in/kohane

 

 

 

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


NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

ASSOCIATE EDITOR

Agnes A. Wilewicz

[email protected]

 

ASSISTANT EDITOR

Jennifer A. Ehman

[email protected]

 

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

 

Steven E. Peiper, Co-Chair

[email protected]
 

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Edward B. Flink

Brian D. Barnas

Howard B. Altman

Brian F. Mark

Eric T. Boron

John R. Ewell

Larry E. Waters

Diane F. Bosse

Joel R. Appelbaum

 

FIRE, FIRST-PARTY AND SUBROGATION TEAM
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

 

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

Tessa R. Scott

 

APPELLATE TEAM
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

 

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

 

05/16/18       Lissauer v. GuideOne Specialty Mutual Insurance

Appellate Division, Second Department

Accident which Occurred on Staircase, within Building, not Part of Premises Leased to Tenant, Did Not Trigger Additional Insured Coverage under Tenant’s Policy – This was an Easy One

This was a direct action brought by Lissauer against GuideOne, an insurer, to recover the amount of an unsatisfied judgment Lissauer obtained against a school, Beth Medrash Emek Halacha (hereinafter Beth Medrash) in a building it owned. Beth Medrash also owned and operated a synagogue within the building, and it leased space within the building to residential and commercial tenants. The plaintiff allegedly was injured when he fell while descending an exterior staircase of the building.

 

Lissauer sued Beth Medrash, certain related entities, and Yeshiva Sharei Hatzlucha, Inc. (“Yeshiva’), which owned and operated an elementary school pursuant to a sublease with a previous tenant (“lease”). The lease described the demised premises as "Apartment No. 6 located on the 2nd floor and space that was formerly apartments 1 and 2 on the first floor" of the building.

 

The Yeshiva had a liability insurance policy (“policy”) in effect with GuideOne, the defendant insurer that named Beth Medrash as an additional insured. The plaintiff obtained a default judgment against Beth Medrash in the underlying action, and subsequently commenced this action pursuant to Insurance Law § 3420(a)(2) against the defendant to enforce the additional insured provision of the policy to satisfy the judgment.

 

The additional insured provision named Beth Medrash as an additional insured "only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to [the Yeshiva]." The phrase "arising out of" requires "only that there be some causal relationship between the injury and the risk for which coverage is provided".

 

Lissauer failed to establish that the policy provided coverage to Beth Medrash as an additional insured for his injury. It is undisputed that the Yeshiva did not lease the staircase the plaintiff was descending when he fell, and that the plaintiff was not a student or invitee of the Yeshiva at the time of the accident. Therefore, there was no causal relationship between the plaintiff's injury and the risk for which coverage was provided.  Consequently, the plaintiff's injury was not a bargained-for risk.

Editor’s Note – with a thanks to our clerk, Ryan Maxwell, for digging up additional information not in the appellate decision:  It appears that the Yeshiva was merely a tenant in the building owned by Beth Medrash and Lissauer was performing independent study at Beth Medrash Emek Halacha. There were two exits, of which one directly entered/exited Beth Medrash and the other directly entered/exited the Yeshiva. Mr. Lissauer’s accident occurred by the Beth Medrash exit, and was not even on the stairs entering/exiting Yeshiva Sharei Hatzlucha. This was not a case where it is even a question as to whether the tenant leased the stairs that enter/exit their leased space. Not even close.

 

05/16/18       Castillo v. Motor Vehicle Accident Indemnification Corporation

Appellate Division, Second Department

When Making a Claim against MVAIC, Intentional Conduct by a Motorist is Not an Accident.  When Making a Claim against an Uninsured/Underinsured Motorists Carrier,  Intentional Conduct by a Motorist is an Accident.  So there you go!

This was a proceeding seeking leave to commence an action against the Motor Vehicle Law Accident Indemnification Corporation.

 

On June 18, 2012, Castillo, who was riding his bicycle, allegedly became involved in a dispute with a motorist. The motorist's vehicle allegedly collided with the petitioner. The motorist drove away, and his identity is not known. The petitioner commenced this proceeding pursuant to Insurance Law § 5218(c) for leave to commence an action against the Motor Vehicle Accident Indemnification Corporation (hereinafter MVAIC) to recover damages for his injuries.

 

The Supreme Court directed a framed-issue hearing on the issue of whether the incident was "intentional" conduct by the Castillo, the petitioner. After the hearing, the referee determined that the occurrence was not intentional on the part of the petitioner.

 

The MVAIC moved, in effect, for leave to reargue, contending that the proper issue was whether the incident was the result of intentional conduct by the motorist. 

 

Article 52 of the Insurance Law ("motor vehicle accident indemnification act") seeks to provide "for the payment of loss on account of injury to or death of persons who, through no fault of their own, were involved in motor vehicle accidents caused by" vehicles that, for a variety of reasons, are not covered by insurance. Article 52 does not cover incidents that are the result of intentional conduct by a tortfeasor, because those incidents are not caused "by accident" .

 

Thus, here, if the driver of the motor vehicle that injured the petitioner acted intentionally, the petitioner may not recover in an action against the MVAIC. In initially failing to direct a hearing on the issue of whether the motorist's conduct was intentional, the Supreme Court misapprehended the law.

 

The court drew an interesting distinction to a Court of Appeals case, State Farm Mut. Auto. Ins. Co. v Langan (16 NY3d 349). In Langan, a tortfeasor intentionally caused injuries to an innocent person who was an insured under an automobile insurance policy. Recovery was sought under the uninsured/underinsured motorist endorsement of that policy. The insurer denied coverage on the ground that the injuries resulted from the tortfeasor's intentional conduct and therefore were not the result of an "accident." The Court of Appeals held that where recovery was sought from the insurer under the insured's own policy, the determination of whether the incident constituted an "accident" was to be viewed from the perspective of the innocent insured, rather than of the tortfeasor: "the intentional assault of an innocent insured is an accident within the meaning of his or her own policy. The occurrence at issue was clearly an accident from the insured's point of view" .

 

Here, the petitioner was not seeking coverage from an insurance company, but from a state fund administered by the state.

Editor’s Note:  Sorry, either it ‘tis or it t’aint.

 

05/15/18       Tishman Technologies Corp. v. Travelers Indem. Co. of America

Appellate Division, First Department

Additional Insured Endorsement Only Applicable for Named Insured’s Vicarious Liability, Not for Additional Insured’s Independent Negligence

The complaint in the underlying action alleges that certain water damage occurred "as a direct and proximate result of the negligence of [BPAC], including its failure to adequately perform all plumbing and mechanical work ...; in failing to supervise and oversee all plumbing work performed by its sub-contractors ...; in failing to hire competent and experienced sub-contractors ...; and in failing to provide reasonable protection to prevent damage, injury or loss to [the] Plaintiff's property." The complaint also alleges a separate independent negligence claim against Adria Infrastructure LLC (Adria), BPAC's subcontractor.

 

The commercial general liability insurance policy issued by Travelers to Adria defines an additional insured as follows:
 

The person or organization [required to be included as an additional insured, i.e., BPAC] does not qualify as an additional insured with respect to the independent acts or omissions of such person or organization. The person or organization is only an additional insured with respect to liability caused by your [Adria] work' for that additional insured.

 

BPAC does not qualify as an additional insured because its potential liability in the underlying action is for its own independent acts or omissions. In addition, BPAC does not qualify as an additional insured merely by virtue of the fact that there is a separate and independent negligence claim asserted against Adria even if Adria is ultimately found solely liable. BPAC would be an additional insured only if it were vicariously liable for Adria's negligence, a claim that is not asserted in the underlying complaint. Under these circumstances, BPAC is not an additional insured.

Editor’s Note:  Insurer’s take heed – if you want to limit coverage for the purported additional insured to vicarious liability for the named insured’s conduct, ONLY, here’s an AI clause that did just that.
 

Kudos and Attalawyers to my friends at Lazare Potter Giacovas & Moyle LLP, New York (Andrew M. Premisler of counsel) who represented Travelers in this successful appeal, securing a reversal of the lower court Order.

 

05/04/18       White v. Mayfield

Appellate Division, Fourth Department

Even though a Vehicle is Sold, the Seller Cannot Deny Ownership if it Does Not Remove the License Plates

This issue comes up frequently.  What are the consequences of not removing one’s license plates after selling a car?

 

White was a passenger in a car driven by Mayfield and that vehicle collided with another car.  White sued Mayfield for injuries.

 

Shortly before the accident, Mayfield's mother, Robertson, obtained insurance coverage for the vehicle and executed a bill of sale indicating that she had purchased the vehicle from defendant Buffalo Auto Rental, Inc. (“BAR”). On the day of the accident, however, the vehicle was still registered to and insured by BAR, and BAR's license plates remained on the vehicle. In her complaint, plaintiff alleged that both Robertson and BAR were the owners of the vehicle and were liable for Mayfield's reckless and negligent operation of the vehicle.

 

BAR moved for summary judgment dismissing the complaint against it, contending that it was not the legal owner of the vehicle and was not estopped from denying ownership.

 

BAR was indeed estopped from denying ownership of the vehicle as a matter of law. Even assuming, arguendo, that it was the intention of BAR and Robertson that Robertson was to be the legal owner of the vehicle after she executed the bill of sale and took physical possession of the vehicle the issue of legal ownership is not determinative. Whether or not BAR was still the owner of the motor vehicle at the time of the accident need not be determined; BAR, having left its registration plates on the motor vehicle, is estopped from denying its ownership. The fact that Robertson had obtained insurance for the vehicle does not mandate a different result inasmuch as the public policy reasons for the estoppel doctrine are not limited to issues of insurance.

 

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

Robert E.B. Hewitt III

[email protected]

 

05/16/18       Hiotidis v. Ramuni

Appellate Division, Second Department

Plaintiff’s Medical Witness Who Examined Plaintiff Six Months after the Accident and Testified to Plaintiff’s Reduced Range of Motion was Enough for a Jury to Find In Favor of Plaintiff

Defendant made a motion to overturn the jury verdict finding plaintiff sustained a serious injury under the permanent consequential limitation of use category of Insurance Law § 5102(d) and awarded $150,000 in damages.  At the trial of the action to recover damages for personal injuries, the plaintiff testified that the vehicle in which he was travelling was struck in the rear by the defendant's vehicle. A board-certified orthopedic surgeon who testified for the plaintiffs examined him approximately six months after the accident. The physician measured the range of motion of the cervical and lumbar regions of Spiro's spine and of his right shoulder, and found deficits of up to 33% in the cervical and lumbar regions of the spine and 38% in the right shoulder. The physician also reviewed x rays of each body part at issue. The physician testified that the motor vehicle accident was the cause of Spiro's injuries.

 

A motion for judgment as a matter of law pursuant to CPLR 4401 or 4404 may be granted only when the trial court determines that, upon the evidence presented, there is no valid line of reasoning and permissible inferences which could possibly lead rational persons to the conclusion reached by the jury upon the evidence presented at trial, and no rational process by which the jury could find in favor of the nonmoving party. As is usual in these motions, the Appellate Court found there was a valid line of reasoning and permissible inferences from which the jury could have concluded that plaintiff sustained serious injuries to the cervical and lumbar regions of his spine and to his right shoulder, and that those injuries were caused by the subject accident.

                                                                       

05/10/18       Stanford v. Rideway Corp.

Appellate Division, Second Department

Jury Verdict Would Not be Set Aside When Lower Court’s Own Trial Notes Indicated Plaintiff’s Testimony was Not Compelling

The plaintiff moved to set aside a verdict in favor of the defendant. The Appellate Division found that the trial court properly declined to set aside the verdict, giving deference to the jury's credibility findings and assessment of the evidence. The lower court’s own trial notes indicated that plaintiff's evidence as to her past pain and suffering was "not compelling." The Appellate Division found the jury was not required to credit plaintiff's description of the severity of her pain, and could reasonably have found that plaintiff's claims were inconsistent with the objective medical findings. The Appellate Division did not find the award of no damages for past pain and suffering deviated from what would be reasonable compensation. The Court also found Plaintiff waived her argument that it was improper for the jury to award her no damages given the court's finding that she had sustained a serious injury under Insurance Law § 5102(d) by failing to object to the jury charge on the ground that it did not instruct the jury that it was required to award damages for past pain and suffering, and failing to object to the verdict sheet, which instructed the jury to insert "NONE" if it did not make an award for pain and suffering based on the 90/180 category of serious injury. Plaintiff also waived her argument that the verdict was inconsistent in awarding damages for lost wages but not for past pain and suffering by failing to raise it before the jury was discharged.

 

05/09/18       Mulhern v. Gregory

Appellate Division, Second Department

Rear End Collision Shifts Burden to Defendant to Show a Non-Negligent Basis for the Accident

The plaintiff was a passenger in a motor vehicle that was struck in the rear, while stopped, by a vehicle owned by the defendant. The plaintiff commenced this action against the defendants to recover damages for personal injuries he allegedly sustained as a result of the subject accident. Subsequently, the plaintiff moved for summary judgment on the issue of liability. The defendants cross-moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The Appellate Division found the defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and thoracic regions of the plaintiff's spine and to his left shoulder did not constitute a serious injury under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). The defendants also submitted evidence establishing that the plaintiff did not sustain a serious injury under the 90/180-day category.

 

In opposition, however, the plaintiff submitted evidence raising a triable issue of fact as to whether he sustained a serious injury to the cervical and thoracic regions of his spine as a result of the subject accident. No basis is given.

 

As for liability, a rear-end collision with a stopped or stopping vehicle creates a prima facie case of negligence with respect to the operator of the moving vehicle and imposes a duty on the operator to rebut the inference of negligence by providing a non-negligent explanation for the collision. Here, the plaintiff met his prima facie burden by demonstrating, through the submission of his undisputed deposition testimony, that the defendants' vehicle struck the rear of the vehicle in which he was a passenger while the latter vehicle was stopped. The defendants did not oppose the plaintiff's motion and, thus, failed to raise a triable issue of fact in opposition. 

 

05/08/18       Polanco v. Holkmann

Appellate Division, First Department

Plaintiff’s Physician’s Report from a Doctor Who Examined Him for the First Time Five Years after the Accident Could Not Provide an Issue of Fact to Defeat Motion

The Appellate Division found defendant satisfied his prima facie burden of demonstrating that plaintiff did not sustain a serious injury to his lumbar spine as a result of the subject 2009 motor vehicle accident. Defendant submitted plaintiff's medical records, which included reports of MRIs of his lumbar spine, taken after a prior accident in 2000 and the subject accident in 2009, showing the same herniated disc. Defendant also submitted the report of an orthopedist, who found that plaintiff had full range of motion and negative test results in his lumbar spine. In opposition, plaintiff failed to raise an issue of fact as to whether his claimed lumbar spine injury was causally related to the 2009 accident. Plaintiff submitted, inter alia, the report of a doctor who examined him over five years after the accident, and provided only a conclusory opinion that plaintiff's limitations in range of motion were caused by the subject accident, without sufficiently addressing the preexisting conditions documented in plaintiff's medical records.

 

05/08/18       Hessing v. Carroll

Appellate Division, First Department

Plaintiff’s Expert Failed to Address Degenerative Conditions in Plaintiff’s Medical History Rendering His Conclusions Speculative

Defendant met her initial burden of showing the absence of a triable issue on whether plaintiff had suffered a "permanent consequential" or "significant" limitation of use of his cervical spine, by submitting the affirmed report of her radiologist who found that plaintiff's MRI revealed degenerative disc disease and no evidence of traumatic injury. Moreover, defendant relied on plaintiff's own medical records, which also reflected findings of degenerative disc disease or cervical arthrosis. His medical records further showed that he had full range of motion and resumed rigorous daily cross-training shortly after the accident, and, after several months of physical therapy, did not seek any treatment for his cervical spine condition in the following four years. The burden thus shifted to plaintiff to address the evidence of a preexisting degenerative condition and to provide a reasonable explanation for his cessation of treatment.

 

In opposition to defendant's prima facie showing, plaintiff failed to raise an issue of fact as to whether his cervical spine condition was causally related to the accident or constituted a serious injury. Plaintiff presented the opinion of a physician who examined him years after the accident and found range of motion deficits, which he attributed to cervical disc herniations caused by the accident. However, plaintiff's expert failed to causally connect these limitations or injuries to the accident, since he did not address or contest the findings in plaintiff's own medical records that he suffered from cervical arthrosis, or degenerative disc disease. Faced with these findings, plaintiff's examining physician's failure to explain why the accident, and not the degeneration, caused his condition, renders the opinion speculative, and entitles defendant to summary judgment. Plaintiff also failed to provide a reasonable explanation for his cessation of treatment, which supports the conclusion that he did not sustain a serious injury to his cervical spine

 

05/04/18       Vega v. Crane

Appellate Division, Fourth Department

Court Credited Accident Reconstruction Expert Which Found Defendant’s Vehicle Crossed the Center Line of the Highway

Partial summary judgment on negligence sustained for plaintiff. The accident reconstruction report, which was submitted by plaintiff in support of the cross motion, established that decedent's vehicle" crossed the center line of the highway and struck [plaintiff's] vehicle,' " and, in opposition, defendants failed to provide evidence of a nonnegligent explanation for the collision.

 

05/03/18       Henry V. Carr

Appellate Division, First Department

Plaintiff’s Expert Found Objective Limitations on Range of Motion and Objective Results on Tests for Lumbar Injury

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. Nevertheless, should plaintiff establish a serious injury of the lumbar spine at trial, he will be entitled to recover for other injuries causally related to the accident.

 

TESSA’S TUTELAGE

Tessa R. Scott

[email protected]

 

05/15/18       Matter of Amtrust Group v. American Tr. Ins.

Appellate Division, First Department

The Arbitrator’s Decision Was Rational and Based on the Evidence

Where an arbitration is compulsory pursuant to Insurance Law § 5105(b), "the arbitrator's findings are subject to closer judicial scrutiny” than a voluntary arbitration. The award must have evidentiary support and cannot be arbitrary and capricious. Here, petitioner did not meet its burden of establishing its entitlement to benefits. The arbitrator's finding was based upon petitioner's failure to comply with the PIP rules.  Petitioner did not have a proper payment ledger, which was a threshold issue. Thus, the arbitrator’s decision was rational and based on the evidence.

 

05/10/18       Global Liberty Ins. Co. v. New Century Acupuncture

Appellate Division, First Department

The Plaintiff Failed To Establish That It Gave Proper Notice to the Eligible Injured Party

Plaintiff sought a declaration of non-coverage based on the failure of defendant Davis to appear for two scheduled independent medical examinations (IMEs), which is a condition precedent to coverage.

 

Plaintiff sent an initial IME scheduling letter, and a re-scheduling letter, to both Davis and her attorney. After Davis failed to appear for the re-scheduled IME, plaintiff sent a third letter to the attorney, which indicated on its face that a copy had been sent to Davis. However, that the letters to Davis were sent to the wrong address. Thus, there was no reason for the attorney to know that Davis had not received notice of the re-scheduled IME and to tell her of the new IME date and location. Under these circumstances, the motion court properly found that plaintiff failed to demonstrate that it provided adequate notice, reasonably calculated to apprise Davis that her appearance at an IME at a specified date and location was required.

 

05/04/18       T & S Med. Supply Corp. v. Ocean Harbor Cas. Ins. Co

Appellate Division, Second Department

The Defendant Failed to Establish that the Notice of Rescission and Refund Check had Been Mailed to The Insured, Pursuant to NY Law

In this no-fault action, it was uncontested that the subject vehicle was insured by defendant under a Florida automobile insurance policy. According to an affidavit submitted by an employee of defendant's managing general agent, an investigation conducted after the accident revealed that, at the time the policyholder had applied for automobile insurance, she did not reside at the Florida address listed on her insurance application, and that the insured vehicle was not being garaged in Florida for the period stated on the application.

 

Consequently, defendant had rescinded the policy pursuant to Florida Statutes, which permits the retroactive rescission of an insurance policy if there has been a material misrepresentation in the application for insurance.

 

While the substantive law of Florida applies, New York's procedural laws control.  In order to show that it properly rescinded a motor vehicle insurance policy, an insurer must demonstrate that it had given notice of the rescission to the insured and that it had returned or tendered all premiums paid, in accordance with Florida law, all in a reasonable time after the discovery of the grounds for avoiding the policy.  Here, defendant's motion papers failed to establish "actual mailing or ... a standard office practice or procedure designed to ensure that items are properly addressed and mailed." demonstrating that the notice of rescission and the refund check had been mailed to the insured, defendant failed to establish its entitlement to summary judgment.

 

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

Editor’s Note:  New York would not allow rescission of No Fault coverage, in most cases.

 

05/04/18       Hillside Comprehensive Pain Mgmt., P.C. v. MVAIC

Appellate Division, Second Department

Plaintiff Could Not Directly Appeal the Portion of an Order that Came From a Sua Sponte Motion from the Court

Plaintiff commenced this action in to recover assigned first-party no-fault benefits. Defendant served an answer, but failed to appear for trial.

 

An inquest was conducted on the trial date, and a default judgment awarding plaintiff the principal sum of $6,930.43 and interest in the amount of $14,801.32 was entered on March 1, 2016.

 

Shortly thereafter, defendant moved to vacate the default judgment, stay enforcement of the judgment, stay the restraint of any of its bank accounts or release any bank accounts that may have been restrained, and to dismiss the complaint. By order entered the Civil Court denied defendant's motion but, , modified the judgment by tolling the accrual of interest from March 5, 2007 through March 1, 2016 on the ground that an "inordinate amount of time" had passed, without explanation, between the inquest in 2007 and the entry of the judgment in 2016. Plaintiff appealed the modification.

 

The portion of the order which tolled the accrual of interest did not address a demand for relief made on notice to plaintiff and was, therefore, sua sponte (or a motion coming from the Court—not a party) Thus, that portion of the order is not appealable as of right. Plaintiff could have moved to vacate the order and “appealed as of right" when (or if) that motion was denied. 

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

 

05/10/18       Citizens Ins. Co. of Am. v. CMS Risk Management Holdings, LLC

Appellate Division, First Department

Words Have Meaning; where Building doesn’t “Abruptly Fall Down” Collapse Coverage is Not Triggered

Defendant’s building was inspected by the NYC Department of Buildings which led to a June 26, 2015 order provided that the premises were structurally unstable.  The order further advised that all tenants must immediately vacate the building.  Thereafter, on July 1, 2015, the Department of Buildings issued further violations which stated that the building was leaning, multiple joists were no longer load bearing and that the façade had cracked, bulged and was separating from the outside walls.  As such, defendant was directed to commence “immediate demolition operations.”

 

Defendants provided notice of the issue to their carrier, Citizens.  Upon review of the policy, Citizens denied the claim on the basis of the collapse exclusion. Citizens further noted that because the building did not fall down, it did not trigger the policy’s policy extension for “collapse coverage.”

 

On June 26, 2015, the New York City Department of Buildings (DOB) issued several violations to defendants, stating, among other things, that their five-story tenement building was "structurally unstable" and directing the tenants to immediately vacate the building as the condition of the building was "immediately perilous to life." On July 1, DOB issued another violation, stating that the building was leaning, that multiple joists had moved out of their pockets and were no longer load bearing, and that the building facade was cracked, bulging, leaning outwards, and separating from the side walls. The violation further directed defendants to commence "immediate demolition operations."

 

Specifically, the “Additional Coverage – Collapse” portion of the policy excluded coverage for that “part of the building which is in danger of falling down or caving in.”  The Collapse extension further precluded coverage for situations where the building had separated from another part of the building or showed evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.”

In response to plaintiff’s Complaint, defendants acknowledged that the building was in danger of falling down.  However, they also acknowledged that there “had been no ‘abrupt’ falling down or caving in.”  As such, defendant acknowledged that the building remained standing.  Further, defendant also appears  to have acknowledged that status of the building did not fall within the terms of the Additional Coverage – Collapse. 

 

On this basis, and in reversing the trial court, the Appellate Division noted that the building at issue did not fall within the scope of the Collapse coverage.  In so  holding, the Court further recognized that the terms of the Additional Coverage – Collapse were not ambiguous.

 

Potpourri

 

05/16/18       Bennett v. State Farm Fire and Cas. Co.

Appellate Division, Second Department

GBL Claim with No Reference to Consumer Oriented Impact Dismissed for Failure to State a Cause of Action

This decision has its origins in a loss arising from an alleged oil contamination incident at the plaintiffs’ residence.  State Farm acknowledged coverage for the incident, and retained H2M to shepherd the oil remediation process.  Apparently, the remediation efforts went awry because plaintiff commenced the instant action asserting claims of negligence and fraud.  In an amended Complaint, Plaintiff’s also asserted that the conduct at issue violated General Business Law 349 and constituted “gross negligence.”  Finally, plaintiffs also seek punitive damages against both State Farm and H2M.

 

Both defendants moved for summary judgment dismissing the GBL 349 claim, as well as the allegations of gross negligence and punitive damages.  The trial court concluded that the Section 349 claims were time barred, that claims for punitive damages were previously dismissed and thus inappropriate under the “law of the case theory.”  The trial court further noted that even if the claims were procedurally valid, they failed to state a substantive cause of action anyway. 

 

On appeal, the Second Department agreed that plaintiffs failed to state a cause of action under GBL 349. Although timely commenced within 3 years, plaintiffs did not assert that either State Farm or H2M “engaged in deceptive conduct that is consumer oriented.”  As such, plaintiffs’ Section 349 claims were properly dismissed. 

 

The Appellate Division reversed the trial court dismissal of the gross negligence claim.  Initially, the Court concluded that as the gross negligence allegation arose from the same “transactions or occurrences” that were timely pled, allegations of gross negligence related back to the initial filing. 

 

With respect to the substance, the Court noted that the Complaint asserts State Farm and H2M improperly backfilled over land that it knew was still contaminated and caused additional damage to adjoining landowners. Noting that allegations of “gross negligence” usually are questions of fact, the Court stated that here the allegations were sufficient to support the cause of action.

 

Because the “gross negligence” cause of action survived, it followed that plaintiffs’ claims for punitive damages were likewise sufficient.  This is because gross negligence can give rise to punitive damages.

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

05/11/18       Dennis Hough v. USAA Casualty Insurance Company

United States Court of Appeals, Second Circuit

Second Circuit Finds No Coverage Where Insured Intentionally Ran Someone Over in Road Rage Incident, Thus There Was No “Accident” Under the Policy

The facts in this case are critical: “Hough was working as a flag man on Sixth Avenue in Manhattan on the morning of August 3, 2000. Margulies was driving a car north on Sixth Avenue, on his way to a meeting with former Governor Mario Cuomo, and running late. Hough was managing traffic. Margulies was stopped by Hough, his car first in the line. Hough continued to hold traffic, even though it seemed no vehicles were entering or exiting the construction site. Margulies became increasingly impatient as he watched the traffic light at 23rd Street pass through two full cycles without seeing any trucks enter or leave the site. Margulies testified he made eye contact with Hough to communicate his intention to proceed when the light turned green regardless of Hough’s instructions. When the light changed to green, Margulies lifted his foot off the brakes and his car rolled forward slowly. Hough was not in Margulies’s lane when the car started moving forward, but stepped back into the lane when the car was about a car length away. Hough did not move, and the car continued to move forward. Margulies testified that he expected Hough to move, and thought Hough was staying put “simply to annoy” Margulies. Margulies continued to allow the car to move forward toward Hough, and did not apply the brakes until after the car hit Hough. Margulies saw Hough fall and get back up, stated he assumed Hough was unhurt, and continued up Sixth Avenue to his meeting. Margulies subsequently pled guilty to misdemeanor assault in the third degree under N.Y. Penal Law § 120.00(2).”

 

Hough sued Margulies for negligence in state court. Neither Margulies nor his carrier (USAA) defended the action, and thus a default judgment was entered in the amount of $4.8 million. Hough then sued USAA directly, as pursuant to the direct action statute of Insurance Law 3420. After Margulies filed for bankruptcy, Hough started an adversary proceeding seeking to find the debt declared non-dischargeable since Margulies had acted willfully, and also for USAA to be held liable since the incident was an “accident” under the policy.

 

At issue before the Second Circuit was whether the incident was indeed an accident, for if it was intentional there would be no liability coverage for it. In short, the court found that the incident had been intentional from the standpoint of the insured. Under New York insurance law, an injury is “intentionally caused” and thus not accidental if the “damages . . . flow directly and immediately from an intended act” rather than “a chain of unintended though expected or foreseeable events that occurred after an intentional act.” Here, Hough’s injuries “flowed directly and immediately from Margulies’s decision not to apply the car’s breaks until after the car struck Hough.” As such, this was no accident. Therefore, there was no occurrence for which there could be coverage.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

05/17/18       Tuoro Coll. v. Arch Specialty Ins. Co.

Supreme Court, New York County

Hon. Gerald Lebovits

Allegations in Complaint Trigger Duty to Defend Additional Insured; Determination on Indemnity Considered Premature

Touro College retained All Pro Construction (“All Pro”) to perform some interior renovation of the second floor of an office building located at 902 Quentin Road in Brooklyn.  The construction contract stated that All Pro would install drywall, ceilings etc.  It also provided that before commencing the work, it would deliver to Touro insurance certificates naming it and certain other entities as certificate holders and additional insureds under construction policies, such insurance “to include”:  all risk builder’s insurance and hazard insurance.

 

Pursuant to a separate purchase order, Touro hired T.R. Joy Associates, Inc. (“Joy”) to upgrade the security systems on the second floor of the building.  It was during the performance of this work that an employee of Joy allegedly sustained injury. 

 

The employee then brought suit against the college alleging, among other things, that while he “was working in an area which was under construction and/or renovation, building materials, to wit, sheet rock, fell on him casing his serious and permanent injuries” and that defendant “was negligent in failing to provide [the injured employee] with a safe place to work [and] in failing to safely store materials in a safe and orderly manner…”

 

Touro tender its defense and indemnity to All Pro and its insurer, Arch.  Arch rejected the tender on the basis that the complaint identified a slightly different address than the location where the work was to be performed, and that it had not yet been determined whether All Pro’s acts or omission caused the accident.  Of note, shortly thereafter, the injured plaintiff filed an amended complaint correcting the address of the project. 

 

Arch nevertheless maintained its position and this declaratory judgment action resulted.  Tuoro eventually moved for summary judgment seeking defense and indemnity under the Arch policy or, alternatively, to strike Arch’s answer due to certain delays in responding to discovery. 

 

The court began its decision by rejecting an argument made by Arch that a review of the construction revealed no requirement that All Pro obtain commercial general liability insurance, and in turn, the broad form additional insured endorsement in its policy was not triggered.  Relying on the English Oxford Living Dictionaries, the court found that while the world “include” may be used to imply that the items listed comprise the whole list, “it is also used in a non-restrictive way, implying that there may be other things not specifically mentioned that are part of the same category.”  Therefore, contrary to Arch’s reading of the contract, it did require that Touro be named as an additional insured on All-Pro’s policies including the one at issue here. 

 

The court then considered whether the loss was “caused, in whole or in part, by [All Pro’s] acts or omissions or the acts or omissions of [its] subcontractors.”  With regard to indemnity, the court found that it was premature since All Pro’s liability had not been determined in the underlying action.  To the contrary, the duty to defend was triggered.  The duty to defend is based upon the allegations in the complaint, and as it was alleged that the work site was not safe and that the injury was caused by unsecured sheet rock, and All Pro was tasked with installing drywall and maintaining a safe work environment, that obligation was triggered.  In other words, while it may be that All Pro’s act or omissions were not the proximate cause of the injured employee’s injuries, the allegations in the underlying action suggested a reasonable possibly of coverage, which triggers the duty to defend.

 

Lastly, the court considered and denied Touro’s request to strike Arch’s answer finding that the delay identified did not demonstrate conduct that was willful, in bad faith or contumacious.

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

05/14/18       Quick Response Commercial v. Cincinnati Insurance Company

United States District Court, Northern District of New York

Bad Faith Claim and Demand for Attorney’s Fees Incurred in Affirmative Litigation against the Insurer Survives Summary Judgment

Cincinnati issued a commercial property insurance policy to Charbonneau Properties, LLC which was effective from February 28, 2012 to February 28, 2013.  On August 9, 2012, Charbonneau sustained fire, smoke, and other damage to its property located at 2831 Route 9, Malta, Saratoga County, New York.  Shortly thereafter, Charbonneau entered into a contract with Quick Response for Quick Response to proceed with its recommended procedures to preserve, protect and secure the property.  The contract between Charbonneau and Quick Response provided that 18% annual interest would be assessed against Charbonneau on unpaid invoices and that Charbonneau would be responsible for attorney's fees expended in pursuing the payment of invoices.

 

After meeting on September 13, 2012 with Charbonneau and Quick Response to discuss the loss suffered by Charbonneau, Cincinnati made several requests to Quick Response for estimates of the damage.  In March 2013, seven months after Charbonneau sustained the loss at its property, Quick Response provided an invoice to Cincinnati for $1,761,857.87.  According to Cincinnati, because this estimate included work outside of the scope of damage that the parties agreed to at their September 13, 2012 meeting, as well as work done for another tenant at the building, it retained a restoration remediation company to review and audit the claim.  Subsequently, this restoration remediation company provided an audited invoice of $860,036.81, and Cincinnati paid at least $859,036.81 to Quick Response.

 

When the parties failed to reach agreement on an amount to settle the claim, Cincinnati issued a “demand for appraisal” pursuant to the policy.  Quick Response filed suit.  An umpire awarded Quick Response $1.5 million and Cincinnati then paid Quick Response the balance due.  Cincinnati filed a motion for summary judgment, arguing it was entitled to dismissal because Quick Response cannot recover interest or attorney’s fees.

 

The Court held that Cincinnati was not in breach of the insurance contract, but whether Cincinnati breached the implied covenant of good faith and fair dealing was in dispute.  The parties dispute, among other things, which party was responsible for delays in the project, whether certain work was approved, and whether certain costs were reasonable.

 

Cincinnati argued that Quick Response was not entitled to attorney’s fees.  It is well-established in New York that an insured may not recover the expenses incurred in bringing affirmative action against an insurer to settle its rights under the policy.  While consequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in the insurance context, courts have decided that attorney’s fees cannot be recovered as consequential damages.

 

However, an exception to the general rule exists where there has been an unreasonable, bad faith denial of coverage.  This requires a showing of such bad faith in denying coverage that no reasonable carrier would, under the given facts, be expected to assert it.  While the court acknowledged that there is a strong presumption against a finding of bad faith by an insurer, it declined to dismiss the claim for bad faith and attorney’s fees on summary judgment.

 

05/11/18       Deitz v. GEICO General Insurance Company

United States Court of Appeals, Ninth Circuit

Third Party Bad Faith Claims in Montana Accrue on the Date of the Settlement or the Entry of Judgment on the Underlying Claim

Dietz appealed from the district court’s dismissal of his claims for statutory and common law third-party insurance bad faith against Geico General Insurance Company (Geico).

 

In August of 2009, Geico’s insured, Hillary Bouldin, injured Dietz in a car accident. Ultimately, the matter proceeded to trial, where the jury awarded Dietz $15,000.00 in damages. On April 18, 2013, the Clerk of Court entered judgment in Dietz’s favor for this amount. Dietz appealed the jury verdict to the Ninth Circuit, which affirmed the jury verdict. Dietz then appealed to the United States Supreme Court, who affirmed the jury verdict on June 9, 2016.

 

On July 5, 2016, Dietz filed a complaint against Geico asserting a third-party bad faith claim under Montana’s Unfair Trade Practices Act (MUTPA) and a common law claim for third-party bad faith. The district court granted Geico’s motion to dismiss finding Dietz’s claims were time-barred because they accrued on April 18, 2013, when the district court entered judgment on the jury verdict in the underlying tort case.

 

The MUTPA provides that a third-party claimant must bring an action within 1 year from the date of the settlement of or the entry of judgment on the underlying claim.  The Court rejected Dietz’s argument that “entry of judgment” refers to anything other than the entry of judgment by the Clerk of Court or the district court at the conclusion of the trial court proceedings.  The “entry of judgment” triggering the statute of limitations occurred on April 18, 2013.  The MUTPA required Dietz to file his third-party statutory bad faith claim within one year of the April 18, 2013 entry of judgment in the underlying case. Thus, the claim was time-barred.

 

Dietz also challenged the district court’s dismissal of his common law claim for third-party bad faith. The statute of limitations for bad faith or breach of the covenant of good faith and fair dealing’ is the three-year statute applicable to torts.  All the allegations in Dietz’s complaint for common law bad faith accrued on or before April 18, 2013. These claims were also time-barred.

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

05/01/18       Citizens United Reciprocal Exchange v. Espinoza

Superior Court of New Jersey, Appellate Division

New Jersey Appellate Division Takes Even Broader Interpretation of “Use” of an Auto

Citizens United Reciprocal Exchange (“CURE”) issued an auto insurance policy to Jaishanka Arnala (“Arnala”). As used in the policy, the term “Insured” was defined, in relevant part as: “1. You … for the ownership, maintenance or use of any auto ...”

 

Arnala’s wife asked him to purchase some plants for their yard. Arnala decided to rent a U–Haul van and use it to pick up the plants at a garden store and take them to his house. He asked his friend, Jose Espinoza (“Espinoza”), to accompany him. The men drove in Arnala’s Volvo to the U–Haul facility and Arnala rented the van. He asked Espinoza to drive the van and follow Arnala back to his house as he drove in his Volvo. Their plan was to leave the Volvo at Arnala's house, and then go to the garden store in the van, buy the plants, and bring them back home. On the way to Arnala’s house, Espinoza was involved in an accident with Joseph Weber (“Weber”), who allegedly sustained injuries. Weber sued Espinoza, Arnala, and U-Haul. Weber alleged that Arnala was vicariously liable for the accident. Note: U-Haul owns it and Espinoza was driving it.

 

Arnala reported the accident to CURE. When Arnala requested a defense from CURE, CURE sent a reservation of rights letter to Arnala and did not provide a defense to Arnala. CURE filed a declaratory judgment complaint against Arnala, seeking a declaration that it owed no obligation to afford insurance coverage or a defense to Arnala. Arnala counterclaimed alleging breach of contract and breach of the duty of good faith and fair dealing.

 

A bench trial was held. Arnala asserted he was covered by the provision of the policy that said he was insured “for the ownership, maintenance or use of any auto.” He argued that he rented the U–Haul van to use to transport plants to his house and was using it for that purpose when Espinoza was driving it as part of the overall task. On the other hand, CURE alleged that because Arnala was not driving the van or in the van as a passenger, he was not entitled to coverage. The trial court judge accepted Arnala’s argument and ruled that Arnala was entitled to coverage.

 

Under New Jersey law, the “use” of an automobile denotes its employment for some purpose of the user. The word “operation” denotes the manipulation of the car's controls in order to propel it as a vehicle. Use is thus broader than operation. One who operates a car uses it, but one can use a car without operating it. The court found that Arnala was using the U-Haul for the purpose of obtaining plants at a local garden center to install at his home.

 

The trial court ruled that:

 

Arnala rented the U–Haul to accomplish a simple task—to effectuate domestic tranquility—he was going to get some large plants his wife wanted him to stick in the ground at their home. Had Arnala decided to leave his personal vehicle at the U–Haul location, and accomplish the task by having Espinoza drive the U–Haul with Arnala as the passenger, would Arnala's “use” of the vehicle been any less in the eyes of the insuring agreement? This court is of the opinion that whether the Insured is the driver, passenger or competent acquirer of the vehicle being used, it is within the ambit of “use” and the policy should respond thereto.

 

Appeal was taken to the Appellate Division. On appeal, CURE challenged the trial court’s ruling that the accident arose out of Arnala’s “use” of the U-Haul. The Appellate Division affirmed the “thoughtful written decision” of the trial court. There was a dispute over whether the declaratory judgment legal fees were necessary and reasonable. The Appellate Division remanded the case for further findings on the legal fee issue.

 

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

 

ALTMAN’S ADMINISTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

DFS has issued a new Regulation pertaining to New York’s new Supplemental Uninsured Motorist (“SUM”) Bill. The Regulation can be viewed at: https://www.dfs.ny.gov/insurance/r_emergy/re35d-text.pdf

 

The Bill requires all insurance policies issued after June 16, 2018 to automatically include SUM coverage, unless the insured specifically requests to opt out.  The new bill requires all new car insurance policies to provide SUM coverage equal to their own injury liability limit. This means that if an insured chooses $100,000 injury liability coverage, it will, by default, also have $100,000 in SUM coverage, unless the insured signs an opt-out waiver. Previous Insurance Law only required that this coverage was available, and insurance companies were not required to inform customers of its existence. The new law will only take effect on new policies issued after June 16 and will not affect pre-existing policies, or renewals of prior policies.

 

The DFS Regulation and the Bill it pertains to (Senate Bill S7288/Assembly Bill A8933) modifies Insurance Law section 3420(f), which requires a motor vehicle liability insurers to provide, at the option of the insured, SUM coverage.  Among the changes put forth in the Regulation are:

 

First named insured  is defined as  the individual specified first on the declarations page of a motor vehicle liability insurance policy, and the individual’s spouse, if the spouse is a resident of the same household and specified on the declarations page.”

 

The Regulation also requires carriers to offer the following:

 

(i) SUM limits, in a motor vehicle liability insurance policy with split limits, up to $250,000 per person per accident and, subject to such limit for one person, $500,000 per accident; or

(ii) A SUM limit, in a motor vehicle liability insurance policy with a combined single limit, up to $500,000 per accident.

(2) An insurer is not required to offer SUM limits in the motor vehicle liability insurance policy in the amounts specified in paragraph (1) of this subdivision, if, in lieu thereof:

(i) The insurer offers motor vehicle liability limits in amounts:

(a) greater than $100,000 because of bodily injury to or death of one person in any one accident, and, subject to such limit for one person, $300,000 because of bodily injury to or death of two or more persons in any one accident; or

(b) Greater than a combined single limit of $300,000 because of bodily injury to or death of one or more persons in any one accident; and

(ii) The insurer offers, in the motor vehicle liability policy:

(a) SUM coverage with split limits of $100,000 per person per accident and, subject to such limit for one person, $300,000 per accident; or

(b) SUM coverage with a combined single limit of $300,000 per accident; and

(iii) The insurer also makes available a personal umbrella liability policy with limits up to at least

$500,000, and the insurer provides SUM coverage in the umbrella policy so that the total SUM coverage in the motor vehicle liability insurance policy and the personal umbrella liability policy shall be up to at least $500,000.

 

            New York State Senate Bill S7288/Assembly Bill A8933, goes into effect on June 16, 2018. You can find the full Senate Bill at: 

https://www.nysenate.gov/legislation/bills/2017/s7288.

The Assembly Bill can be viewed at:

https://www.nysenate.gov/legislation/bills/2017/a8933.

As outlined above, The DFS Regulation regarding the Bill defines the "first named insured" as "the individual specified first on the declarations page of a motor vehicle liability insurance policy, and the individual's spouse, if the spouse is a resident of the same household and specified on the declarations page." (See §60-2.0(d)(3)). This definition of "first named insured" is much more expansive than indicated in the statute itself (see SUM bill §(2-a)(A)).

 

The Bill provides, in pertinent part:

 

Section 1. Paragraph 2-a of subsection (f)  of  section  3420           of  the insurance  law,  as added by chapter 490 of the laws of        2017, is amended to read as follows:

 

(2-a) (A) Notwithstanding paragraph two of this subsection, this paragraph shall apply to any new insurance policy  or  contract…entered into after the effective date of this paragraph.

 

This  paragraph  shall not be deemed to apply to any policies originally entered into prior to the effective date of this paragraph, but  renewed after  the effective date of this paragraph…

 

Any new insurance policy or contract  entered  into after  the  effective date of this paragraph shall, at the option of the FIRST NAMED insured, also provide  supplementary  uninsured/underinsured  motorists  insurance for bodily injury, in an amount equal to the bodily injury liability insurance limits of coverage provided under such  motor vehicle  liability  insurance  policy;  provided,  however, that [any] A FIRST NAMED insured may exercise the choice to decline such supplementary uninsured/underinsured motorists insurance or select a  lower  amount of  coverage  through a written waiver signed, or electronically signed, by such insured, subject to the requirements of subparagraph (B) of this paragraph…Upon written request by any insured covered by supplemental  uninsured/underinsured motorists insurance …the insurer of any other owner or operator of another motor vehicle against which a claim  has  been  made  for damages  to  the  insured  shall disclose, within forty-five days of the request,  the  bodily  injury liability insurance limits of its coverage provided under the policy or all bodily injury liability bonds.

 

The time of the insured to make any supplementary uninsured/underinsured motorist claim, shall be tolled during the period the insurer of any other  owner or  operator  of another motor vehicle that may be liable for damages to the insured, fails to so disclose its coverage. As a condition precedent to the  obligation  of  the  insurer  to  pay  under  the  supplementary uninsured/underinsured  motorists  insurance  coverage,  the  limits  of liability of all bodily injury liability  bonds  or  insurance  policies applicable  at the time of the accident shall be exhausted by payment of judgments or settlements.

 

(B) In addition to the notice provided, upon issuance of a  policy  of motor vehicle liability insurance pursuant to regulations promulgated by the  superintendent,  insurers shall notify insureds, in writing, of the availability of supplementary uninsured/underinsured motorists coverage.  Such notification shall contain an explanation   of   supplementary uninsured/underinsured motorists coverage and the amounts in which it can be purchased. Subsequently, a notification of availability shall  be provided  at  least  once a year and may be simplified pursuant to regulations promulgated by the superintendent, but must  include  a  concise statement  that  supplementary uninsured/underinsured motorists coverage is available, an explanation of such coverage, and the  coverage  limits that  can  be purchased from the insurer. If an insured elects to reject supplementary uninsured/underinsured motorist coverage or select a lower amount of supplementary uninsured/underinsured  motorist  coverage  than the  bodily injury liability insurance limits of coverage provided under the insured's motor vehicle liability insurance policy, the selection of lower  supplementary  uninsured/underinsured   motorists   coverage   or rejection  of such coverage must be made on a written or electronic form provided to the FIRST NAMED insured.  Such form shall also advise that such coverage is equal to the insured's bodily injury liability limits under the motor vehicle liability insurance policy unless lower limits are requested or the coverage is rejected….

 

***

 

(ii)  An  insured's  written  waiver  shall  apply  to  all subsequent renewals of coverage and to all policies or endorsements  which  extend, change,  supersede,  or  replace  an existing policy issued to the named insured, unless changed in writing by any named insured.

 

(iii) The selection     of    lower    supplementary uninsured/underinsured motorists  coverage  or  the  rejection  of  such coverage  by  any  FIRST  NAMED insured shall be binding upon all insureds under such policy…

 

OFF THE MARK
Brian F. Mark

[email protected]

 

05/10/18       Easthampton Congregational Church v. Church Mut. Ins. Co.

U.S. District Court for the District of Massachusetts
US District Court Held Policy’s General Exclusions to be Inapplicable to Additional Collapse Coverage

This declaratory-judgment action arises out of a property damage claim resulting from a ceiling collapse.  On April 25, 2016, the ceiling in the Fellowship Hall of the Easthampton Congregational Church ("the Church") fell to the floor.  At the time of the loss, the Church was insured under a property insurance policy issued by Church Mutual Insurance Company (“Church Mutual”).  Following the loss, the Church promptly reported the ceiling failure to Church Mutual.

 

The Church Mutual policy (the “policy”) provides coverage for direct physical loss of or damage to Covered Property at the premises described in the Declarations Page caused by or resulting from any Covered Cause of Loss.  "Covered Causes of Loss" are defined as "Risks of Direct Physical Loss unless the loss is" excluded or limited.

 

Exclusion 2.j. excludes "loss or damage caused by or resulting from . . . Collapse, except as provided below in the Additional Coverage — Collapse."  The Additional Coverage — Collapse coverage part provides that "[t]he term Covered Cause of Loss includes the Additional Coverage — Collapse as described and limited in D.1. through D.5. below."  Paragraph D.1.a. defines "Collapse" as "an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose."  The parties agreed that the failure of the ceiling in the Fellowship Hall constituted a collapse within the meaning of the policy. 

 

Paragraph D.2. of the policy states that Church Mutual will pay for direct physical loss or damage to Covered Property, caused by collapse of a building or any part of a building that is insured under this Coverage Form . . ., if the collapse is caused by one or more of the following:

. . .

b. Decay that is hidden from view, unless the presence of such decay is known to any insured prior to collapse;

. . .

f. Use of defective material or methods of construction, remodeling, or renovation if the collapse occurs during the course of construction, remodeling, or renovation.  However, if the collapse occurs after construction, remodeling, or renovation is complete and is caused in part by a cause of loss listed in a. through e.; we will pay for the loss or damage even if use of defective material or methods, in construction, remodeling, or renovation, contributes to the collapse.

 

In addition to the general exclusion for collapse, Exclusion 3.c. excludes loss or damage caused by or resulting from "[f]aulty, inadequate, or defective . . . [d]esign, . . .[or] construction . . . of part or all of any property on or off the described premises." However, a preamble to Exclusion 3.c. provides that "if an excluded cause of loss that is listed in . . . 3.c. results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss."  Exclusion 2.d. excludes loss or damage resulting from "[w]ear and tear," and "[r]ust, or other corrosion, decay, deterioration, hidden or latent defect, or any quality in property that causes it to damage or destroy itself."

 

On May 3, 2016, Joseph Malo, a Forensic Engineer, inspected the church and the ceiling failure at the request of Church Mutual.   He concluded that the ceiling failure was the result of progressive failure of the fasteners used to attach the layers of ceiling to the ceiling joists due to the weight of the ceiling.  This failure could have taken years to occur.  He further concluded that the ceiling system was inadequately fastened to the structure and that the attachment system of the multiple types of ceiling to the original building was inadequate and did not have the capacity to support the weight of all the additional ceilings.

 

By letter dated May 19, 2016, Church Mutual denied coverage based on Malo's Report and Exclusion 3.c. for faulty, inadequate or defective construction.  Church Mutual’s disclaimer stated that "[i]t appears that the interior damage is a result of a constructional defect with the ceiling.

 

Following the coverage denial, the Church requested reconsideration of the denial based on the Additional Coverage — Collapse coverage part. By letter dated July 1, 2016, Church Mutual again denied coverage in reliance on Malo's Report. Church Mutual stated that the engineer determined that the cause of the collapse was the inadequacy of an attachment system and not due to any hidden decay of materials.  Based on this, Church Mutual advised that the additional coverage for collapse was not triggered.

 

By letter dated September 26, 2016, the Church responded to Church Mutual, arguing that that the loss was covered under the terms of the policy.  The Church argued that Exclusion 3.c. did not apply since the ceiling had lasted for more than 60 years, and even if it did, coverage was afforded under the Additional Coverage — Collapse coverage part for collapse caused by decay that was hidden from view and unknown to the insured prior to the collapse. 

 

By letter dated October 21, 2016, Church Mutual reiterated its denial of coverage, again arguing that Exclusion 3.c. applied because Malo's report concluded that the ceiling failure was the result of the attachment system not having the capacity to support the weight of all the additional ceilings that had been affixed to the original ceiling over the years.  Over time, the weight of the ceiling(s) eventually caused the nails (or some of them) to pull loose from the joists, resulting in a complete failure of the entire ceiling.  Moreover, Church Mutual denied that the failure of the ceiling was the result of decay, such as would trigger coverage under the Additional Coverage — Collapse coverage part because the collapse "was not caused by anything 'decaying'.   It was caused by design or construction means, methods, or materials that were inadequate to the task of securing the ceiling to the roof joists."

 

The parties cross-moved for summary judgment on the coverage issues.  In its motion, Church Mutual agreed that a collapse occurred within the meaning of the policy and conceded that if the Church can show that decay contributed to the collapse even in part, the collapse is covered under the Additional Coverage — Collapse coverage part. However, Church Mutual argued that the Church has failed to show that decay contributed to the collapse even in part, and, therefore, maintained that the Additional Coverage — Collapse coverage part was inapplicable. 

 

Because the parties agree that the loss constituted a collapse and that there is coverage if the Church can show that decay in part caused the collapse, the Court first examined the policy provision of Additional Coverage  — Collapse.  The Court reviewed the record to determine whether the Church produced evidence establishing that decay that was hidden from view and unknown to the Church contributed to the collapse.  Because the term “decay” was not defined, the Court looked to dictionary meanings, which include both the broader concept of a gradual deterioration or decline in strength or soundness and the narrower concept of organic decomposition or rot.

 

Based on the definition of decay, the Court determined that the Church had demonstrated that the failure of the ceiling was caused, at least in part, by a gradual deterioration or decline in strength or soundness.  The Court based its finding on the report from Malo and stated that the gradual decline in the strength of the connection between the building materials and the fasteners fits within the plain and ordinary meaning of the term "decay" when that term is construed to extend to gradual deterioration or a progressive failure in strength and soundness.  The Court noted that it was undisputed that the Church had no prior knowledge of the weakening of the connection between the nails and the surrounding building materials in the ceiling before the collapse and that the process would have been hidden since the failing connection between the wooden joists and the smooth-sided nails was in the ceiling.

 

Church Mutual argued against a finding of decay by relying on Malo's conclusion that the attachment system of the multiple types of ceiling to the original building was inadequate and did not have the capacity to support the weight of all three layers of ceiling material.  Church Mutual argued that this shows that the collapse was due to the use of "defective material or methods of construction, remodeling, or renovation," not decay, and, because the collapse occurred after construction, remodeling, or renovation was complete, it is not covered under the Additional Coverage — Collapse coverage part.  As the term “defective” was not defined in the policy, the Court again turned to the dictionary meaning and held that  "defective" implies something deficient, imperfect, or faulty.  Accordingly, the Court determined that the Malo Report established defective construction as Malo found that the attachment system was inadequate.  However, the Court noted that such a finding was irrelevant to the outcome because the policy provides that, for collapses occurring after construction, remodeling, or renovation is complete, as here, there is coverage under the policy if the collapse is "caused in part" by "decay" "even if use of defective material or methods, in construction, remodeling, or renovation contributes to the collapse."  Because the Church established that the collapse was "caused in part" by "decay," the loss is a Covered Cause of Loss for which Church Mutual agreed to pay even if defective construction also contributed to the collapse.  In other words, it was not only the excessive weight of the three layers of ceiling material that led to the collapse, but also the gradual degradation of the connection between the nails and the wooden joists.

 

Next, the Court turned to the applicability of Exclusion 3.c. for faulty, inadequate, or defective design or construction and Exclusion 2.d. for wear and tear or for any quality in property that causes it to damage or destroy itself.  Based on the express grant of coverage under the Additional Coverage — Collapse coverage part, the Court found the exclusions to be inapplicable.  In reaching its conclusion, the Court relied on a plain reading of the policy.  The policy provides that Church Mutual "will pay for direct physical loss of or damage . . . caused by or resulting from any Covered Cause of Loss."  The Additional Coverage — Collapse coverage part provides that "[t]he term Covered Cause of Loss" includes collapses resulting from "[d]ecay that is hidden from view, unless the presence of such decay is known to any insured prior to collapse." Thus, where an insured establishes that hidden decay contributed to a collapse, as the Church had done, the insured has established a "Covered Cause of Loss" for which Church Mutual is obligated to pay, notwithstanding the provisions of any of the policy's general exclusions.

 

The Court found that any other reading of the policy would result in inconsistencies between the general exclusions and the Additional Coverage — Collapse.  The Court noted that Exclusion 3.c. bars recovery for damage or loss caused by "defective . . . construction, . . .[and] materials used in . . . construction," while the Additional Coverage — Collapse specifically allows recovery for collapse caused by the "use of defective materials or methods, in construction" where such use combines with an enumerated "cause of loss."  Similarly, Exclusion 2.d., excludes loss or damage resulting from "[w]ear and tear," and "[r]ust, or other corrosion, decay, deterioration, hidden or latent defect, or any quality in property that causes it to damage or destroy itself" (emphasis added), while the Additional Coverage — Collapse specifically allows recovery for "collapse . . . caused by . . . [d]ecay that is hidden from view."  The Court’s reading of the policy avoids these inconsistencies.

 

In light of its analysis, the Court denied Church Mutual’s motion and granted the Church’s motion for summary judgment, holding that the loss in question was covered by the Additional Coverage — Collapse coverage part of the policy.

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

05/08/18       Nefeteri Green v. First Liberty Insurance Corp.

United States District Court, Eastern District of New York

Plaintiff May Bring a Direct Suit against the Insurer of a Diplomat

Plaintiff’s car was struck by a jeep driven by Mr. Suazo. The jeep was owned or leased by the principality of Monaco and registered to Monaco’s permanent representative to the United Nations.  Plaintiff brought a suit directly against the Defendant, which had issued a liability insurance policy for the jeep.  Plaintiff suit was brought under Section 7  of the Diplomatic Relations Act of 1978. Defendant moved to dismiss the Complaint for failure to state a claim.

 

The court began the discussion with a review of the Diplomatic Relations Act, which provides that someone injured by certain diplomatic personnel can sue the alleged tortfeasor’s liability insurer directly in federal court, and that such suit is tried without a jury and is not subject to the defense that the insured is protected by diplomatic immunity.  The court noted, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual material, accepted as true, to state a claim to relief that is plausible on its face.”

 

The court side stepped Defendant’s argument that under New York law an injured party may not bring a direct action against an alleged tortfeasor liability insurer without first obtaining a judgment against the actual tortfeasor without first obtaining a judgment against the actual tortfeasor.  The court noted that the critical inquiry was whether the plaintiff could bring a direct action under Section 7 of the Diplomatic Relations Act without first obtaining a judgment against the actual tortfeasor.  The court recognized that the Diplomatic Relations Act does not restrict a plaintiff from brining a direct action under Section 7 of the Diplomatic Relations Act only when they cannot sue the tortfeasor’s home country.  Accordingly, after a review of the text and purpose of Section 7 of the Diplomatic Relations Act, the court concluded that Plaintiff did not need to obtain a judgment against Mr. Suazo or Monaco’s permanent representative to the United Nations before bringing a direct action against the Defendant.

 

Further, the court rejected Defendant’s argument that diplomatic immunity was inapplicable to personal injury actions arising from traffic accidents in New York state. The court acknowledged that the Court of Appeals has long recognized that “a diplomat who drives a vehicle negligently is immune from suit under Federal law.  In sum, the court dismissed Defendant’s motion to dismiss for failure to state a claim. 

 

05/02/18       Insurance Company of the State of PA v. Miami-Dade County

United States District Court, Southern District of New York

Petitioner’s Motion to Compel Arbitration Granted When Respondent’s Sole Counterclaim Falls within the Broad Arbitration Clause

Miami-Dade County (the “County”) secured from the Insurers deductible buyback workers’ compensation and guaranteed cost general liability policies for a project commenced by American Airlines in 1989. The policies provided coverage from December 31, 2007, through December 31, 2012. The policies’ premiums were to be decided after the policy ended by using the actual, not the estimated premium basis. During the negotiation, the County agreed to sign a Payment Agreement, which provided in part that “any disputes must be submitted to arbitration.” 

 

On October 19, 2017, Insurers asked the County to arbitrate the dispute over the remaining balance. The County declined to arbitrate.  On November 28, 2017, Insurers served a demand for arbitration. On January 4, 2018, the County filed a response with a single counterclaim alleging that the Insurers breached the Policies by failing to perform annual audits.  On January 5, 2018, the County filed a motion to stay arbitration and transfer the action to the Southern District of Florida. On January 19, 2018, Insurers opposed the County’s motion to stay arbitration and to transfer venue and the Insurers moved to compel arbitration on the County’s sole counterclaim. 

 

The court began its discussion with a review of the Federal Arbitration Act (“FAA”). The court noted that two considerations are factor when deciding if a dispute is “arbitrable.”  The factors are: (1) whether the parties agreed to arbitrate and if so, (2) whether the scope of that agreement encompasses the claims at issue.  The court noted further that a similar standard applicable for a motion for summary judgment should be applied when deciding a motion to compel arbitration.

 

In its analysis, the court first concluded that there was no dispute that the arbitration clause in the Payment Agreement was valid or that the Insurer’s claim for additional payment was subject to arbitration. Next, the court concluded that the County’s counterclaim fell within the scope of the arbitration clause.  The court reasoned that since the arbitration clause was broad, there was no indication that the parties intended to limit the scope of the arbitration clause.  Accordingly, the County’s counterclaim that the Insurer’s failed to comply with its obligation to conduct annual audits, fell within the scope of the broad arbitration clause. 

 

Further, the court concluded that a stay of the proceedings was appropriate since all claims were referred to arbitration.  Moreover, the court concluded that the motion to transfer venue to the Southern District of Florida should be denied since the County failed to dispute that the Southern District of New York is the proper venue for the enforcement of the arbitration clause at issue.  

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

05/11/18       Talley v. Mustafa Mustafa         

Supreme Court of Wisconsin

Supreme Court Reverses Court of Appeals and Grants Summary Judgment for Insurer; Punches to Face Not an Accident, and Thus Not an Occurrence Which Would Trigger Coverage for Negligent Supervision of the Punching Employee under a Businessowners’ Liability Policy

At issue was whether a business-owners liability policy covers a negligent supervision claim arising out of an alleged employee’s intentional act of physically punching a customer in the face.  The pertinent fact pattern according to the Supreme Court of Wisconsin is as follows.  Plaintiff Archie A. Talley alleged in his complaint that he walked into Mustafa’s store to buy beer, and while he was inside the store, Mustafa’s security guard, Keith Scott, punched him in the face twice. Talley left the store and called police to report the assault. Talley was taken to the hospital where he was treated for a broken jaw.  Multiple defendants were eventually sued by Talley over his bodily injuries.

 

Plaintiff Talley sued Mustafa, the owner of the store, the store itself, and the store’s insurer, alleging, among other things, that his injuries were the result of negligent supervision by the store of its security guard.  In opposing the insurer’s motion for summary judgment, Talley argued that the two punches he absorbed to his face constituted covered occurrences under the store’s business-owners liability policy. 

 

The court held in granting the insurer summary judgment that the business-owners liability policy at issue covers bodily injury caused by an occurrence, “which is defined as an accident”. The court found it indisputable that the security guard acted intentionally when he punched the plaintiff in the face, stating the punching “was not an accident”.  Moreover, the court further ruled, “[W]hen a negligent supervision claim rests solely on an employee’s intentional act of assault and battery without any separate basis for a negligence claim against the employer, no coverage exists.” 

 

A win for the good guys, who received the assistance of an amicus curiae brief filed on behalf of the Wisconsin Insurance Alliance. Kudos to the defense team’s work in achieving the reversal.

 

05/11/18       Nicon Construction, Inc. v Homeowners Choice

District Court of Appeal of Florida, Second District

Reversal of Summary Judgment for Insurer; Trial Court Erred in its Interpretation of Assignment Language

In April 2012 a pipe burst in Richard Prager's home. In exchange for immediate emergency services, Mr. Prager provided assignments of benefits from his property insurance policy with Homeowners Choice to two firms: B&M Clean, LLC, for water and debris removal; and, Nicon, an asbestos remediation provider. Later that year, when Mr. Prager discovered additional water damage, he provided further assignments of benefits to B&M Clean and Nicon.  Both B&M Clean and Nicon eventually sued Homeowners Choice as assignees of Mr. Prager for breach of the insurance contract, alleging Homeowners Choice failed to pay all benefits due under the policy.

 

Homeowners Choice obtained summary judgment in the Circuit Court for Hillsborough County against Nicon, after persuading the Circuit Court that Nicon's assignment was invalid, because before Mr. Prager provided the assignment to Nicon, he had already assigned all the benefits for this loss to B&M Clean. In granting summary judgment to the insurer, the Circuit Court focused on a portion of the assignment Mr. Prager executed to B&M Clean, whereby he assigned "any and all insurance rights, benefits, and causes of action under my property insurance policy" to B&M Clean. The Circuit Court reasoned that because of this language, Mr. Prager had no further rights under the policy left to assign to Nicon.

 

The District Court of Appeal of Florida saw it differently, concluding the Circuit Court erred in its interpretation of Mr. Prager’s assignment to B&M Clean.  While acknowledging that in construing a contract – in this case the assignment – the intent of the parties should be determined from the words of the contract as a whole, the District Court of Appeal determined it should also “consider the conditions and circumstances surrounding the parties and the objects to be obtained in executing the contract”, relying on a 1944 decision of the Supreme Court of Florida.  Taking the circumstances surrounding the parties into consideration, the District Court of Appeal held that it was “evident” that Mr. Prager was assigning to B&M Clean all his rights under the policy to payment for the services performed by B&M Clean—not all his rights to payment for the entire covered property insurance claim.  Accordingly, the subsequent assignment to Nicon was valid, and it was error for the Circuit Court to enter summary judgment in favor of Homeowners Choice against Nicon. 

 

EARL’S PEARLS
Earl K. Cantwell
[email protected]

 

04/02/18       Selective Insurance Co. of America v. Boy Scouts of America

United States District Court, Eastern District of Pennsylvania

Policy Requirements for Additional Insured Coverage

In this case, the District Court had to decide whether defendants who were named in a personal injury action were additional insureds under a policy issued by Selective Insurance. On competing motions for summary judgment, the Court held that there was no additional insurance coverage because requirements for blanket additional insurance coverage had not been satisfied.

 

A student at Keystone College was injured participating in activities at the Goose Pond camping ground in Pennsylvania. He sued the Boy Scouts, North Eastern Pennsylvania Council (“NEPC”), and Keystone College. Keystone was covered under the Selective Insurance policy. Prior to the accident, the North Eastern Pennsylvania Council had sent Keystone a letter requesting a current copy of their insurance liability certificate in the amount of at least $2 Million naming NEPC as an additional insured. However, as these things go, Keystone did not forward a copy of its liability certificate, and also failed to request that Selective name the defendants as additional insureds under the policy.

 

The policy did contain a “blanket” additional insurance clause which would make a person or organization an additional insured with whom the named insured has agreed in a written contract to be added as an additional insured. However, the policy expressly stated that the extension of coverage did not apply unless the written contract or agreement had been executed prior to the bodily injury or property damage.

 

Selective Insurance commenced this action seeking a declaration that the defendants in the personal injury case were not entitled to coverage under the Keystone policy as additional insureds. Both parties filed motions for summary judgment, and the Court agreed with Selective Insurance and declined to find coverage. The “sole question” before the Court was whether the personal injury defendants were additional insureds under the Keystone / Selective policy.

 

The Court ruled first that the defendants were not additional insureds under the policy because neither the Boy Scouts nor the NEPC had been actually named as additional insureds under the policy. It was “undisputed” that Keystone College had failed to request that Selective name those defendants as additional insureds under the policy. Therefore, the defendants’ only hope of additional insurance coverage was under the “blanket” additional insurance clause.

 

The Court next ruled that, because there was no contract or agreement signed by Keystone as the named insured as the additional insurance clause required, the defendants were not covered as insureds under the blanket additional insurance clause.

 

The Court reviewed and interpreted the insurance contract as a question of law, determining the intent of the parties as manifested by the language of any written instrument. The blanket additional insured endorsement provided that the written agreement obligating Keystone College to name NEPC as an additional insured had to be signed by both Keystone and the NEPC. This did not occur, and the Court held that the “automatic” insurance coverage was not triggered under the contract because Keystone College did not sign any underlying agreement. The policy required the signature of both parties to the agreement – the named insured and the purported additional insured - and here the named insured Keystone College never signed the alleged agreement and therefore the defendants were not additional insureds under the policy.

 

The defendants raised several arguments to the contrary including that Keystone allegedly ratified the existence of a contract which would include the additional insured coverage. However, the Court held that the primary question was not whether a contract existed, but whether all conditions precedent were satisfied to trigger “automatic” additional insured coverage under the policy. The Court held that one condition precedent, the execution of a written agreement by both parties to the agreement, had not been fulfilled. The Court ruled that, although it could be argued that a contract existed between Keystone College and the Boy Scouts, the Court held that was not enough ~ there had to be a mutually executed / signed contract to trigger coverage under the policy.

 

The defendants also argued that the signature requirement was not applicable because testimony allegedly established that an express agreement had been reached between Keystone College and the defendants. The Court rejected this argument on the basis that the policy is the polestar for determining whether the additional insurance coverage was triggered. The policy stated that before such coverage was triggered there must be a written agreement signed by both the named insured and any additional insured. The Court also (significantly) stated that, for its part Selective Insurance had never indicated, through words or conduct, that it was waiving or ignoring the policy’s signature requirement. Again, because Keystone College had not signed the alleged agreement the signature requirement was not satisfied, and the additional insured coverage was not operative. Therefore, Selective Insurance’s motion for summary judgment seeking a declaration of no coverage was granted.

 

This case is an example of diligent, even demanding, adherence to the policy with respect to the existence and scope of additional coverage. The Court held that the “polestar” for determining coverage is the policy, and the policy condition of a signed written agreement between the named insured and a contractual additional insured was plainly stated and just as plainly not satisfied.

 

This case also represents an example of reading an endorsement or policy language completely since, on its face, the additional insured clause would have granted coverage to any person or organization with whom Keystone College had agreed in a written contract be added as an additional insured. However, there was no such true written contract and further language in the policy incorporated that express signed contract requirement. Arguments of waiver and acceptance were not availing which meant that coverage was not extended, even though parties may have acted as if there was a signed written agreement, and that additional insurance coverage was in force. This is one reason, for example, why if Keystone College had given the Boy Scouts a Certificate of Insurance that would not have been dispositive because the terms of the underlying policy language and endorsement had not been fulfilled. If a party seeks additional insured coverage, they should not only get the Certificate of Insurance but also the actual endorsement or policy provision AND then READ IT and make sure any requirements (notices, written contract, approvals, etc.) are met.

 

The decision does not discuss whether the personal injury defendants, the Boy Scouts of America, et al., might have had other insurance applicable to the underlying personal injury claim other than the alleged additional insurance coverage under Keystone College’s policy. A third-party defendant was listed as United Educators Insurance and that entity may have had some coverage to defend and potentially indemnify Keystone College.

 

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