Coverage Pointers - Volume XIX, No. 26

Volume XIX, No. 26 (No. 511)

Friday, June 15, 2018

A Biweekly Electronic Newsletter

 

Hurwitz & Fine, P.C.

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Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874

         

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Melville, New York 11747

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© Hurwitz & Fine, P. C. 2018
All rights reserved
 

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

 

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

 

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

 

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

 

Dear Coverage Pointers Subscribers:

 

Do you have a situation?  We love situations. We thank you for your loyalty, your readership and your calls.  We gets lots of them and they often start with a discussion about a “situation”.  Some are from clients, some are from readers, and we enjoy them all.  Calls come from insurers, from corporate folks, from brother and sister lawyers who need a bit of direction or referral.  We are always pleased to hear from subscribers.  We’ve been doing this for a bit and enjoy the exchanges.

 

How long?  Well, this is the 26th and final issue of our 19th year of publication.  It’s hard to imagine that our next issue will be Volume 20, No. 1.

 

And while I am at it, I urge you to consider subscribing to our sister publications, Labor Law Pointers, edited by Dave Adams (contact him at [email protected]) and Premises Pointers edited by Jody Briandi (reach her at [email protected]) .

 

As always, you’ll find a group of very interesting cases in the attached issue.  In one, the homeowner’s son strangled his girlfriend and knocked her in the head. He was convicted of first degree assault after a jury trial, which meant that he was found guilty of intentionally assaulting her with intent to cause injury.  Of course, a claim was asserted for unintentional injury.

 

In the civil lawsuit, it was alleged that in addition to the assault, her injuries were compounded by some premises defect which caused her to trip and fall and a negligence claim was alleged. 

 

So hopeful I was when the court held: 

 

We agree with plaintiff that McCabe's intentional actions cannot be magically transformed into negligent ones merely by defendant's allegations trying to recast them. McCabe's conduct that rendered defendant partially incapacitated was his criminal, intentional actions, which cannot be downgraded to mere negligence through artful pleading. 

 

But alas, when it came to the premises claim, the Third Department directed State Farm to defend it.  Hey, it could have happened that way … That’s State Farm v. McCabe.

 

In another, the Second Department reminded insurers of their obligation to advise their insureds, promptly, if they learn of new reasons to deny coverage, not previously known when a coverage position letter was first sent.  Raise it or waive it.  You’ll find that ruing in the Mazl decision.

 

In Brian’s column, you’ll find an interesting discussion about claims for bad faith. There is a split in the Appellate Departments on whether a plaintiff, turned judgment creditor, can proceed against an insurer for bad faith without an assignment from the policyholder or insured.

 

Introducing Jerry Marti:

 

We scour the countryside for new talent all the time.  We are pleased to welcome Jerry Marty to the H&F Team.  Jerry will be assuming the responsibility of the No Fault column, covering substantive no fault decisions from courts and arbitrators. 

 

Jerry began his career as a Prosecutor in the Queens District Attorney’s Office working for D.A. Richard Brown. While he was there, he handled Domestic Violence cases and conducted the initial investigation of sex crimes for the Special Victims Bureau.  He was then promoted to the Homicide Investigations Bureau, sharpening his writing skills with the Appeals Bureau and arguing before the Appellate Division, Second Department.

 

After leaving the Queens District Attorney’s office in 2002, Jerry began working for a boutique firm in Mineola, NY handling almost exclusively no-fault cases. He tells me that he did not know what no-fault was during the interview, but was hired anyway.  It was a small firm - just him, the partner and a closet for an office.  While there, he tried about a dozen no-fault cases to verdict in Civil Courts, primarily in Queens.  He also conducted fraud investigations by conducting examinations under oath, as well as attaining dismissal of SUM claims in arbitration.

 

Within two years, he was hired as a Team Leader for the No-Fault practice group at Travelers, formerly located on Whitehall Street in downtown Manhattan before moving mid-town near 47th Street and Lexington Avenue.  While there, he mentored and trained a group of attorneys starting out their legal careers. In particular, Jerry instituted a trial training program geared for no-fault attorneys in the NYC office.  He also handled his own caseload of no-fault cases, including winning a summary judgment motion that established the mailing procedure on Travelers denial forms, and resulted in a published decision (Presutto v. Travelers). This ended up impacting thousands of cases since the mailing was handled by the central hub in Norcross, Georgia. In addition, he tried about eleven no-fault cases to verdict, winning ten of them.  I asked him about his experience at Travelers:

 

At Travelers, I would eventually take part in the “Attorney of the Day” program, where I would be on call once per month to answer any questions from claims handlers on no fault issues. But, I would also make it a point to call the Unit Managers once per month to inquire about their issues and offer help, as well as volunteering to provide a seminar on no-fault issues.  This established a strong relationship with the claims unit, and as a result, I was picked from a national group of attorneys to participate in a trial training program at Travelers Headquarters in Hartford, CT in 2007.  It was a one week exercise performing a mock trial.  On the basis of my videotaped closing argument, I was informed by senior management at the closing banquet that I was being instantly promoted and placed on track for major cases.  I chose Buffalo.

 

In Buffalo, I was promoted three times in six years ending my career there as Senior Counsel. During that time, I tried small and bigger cases to verdict, attained summary judgment on a handful of cases, achieved outright dismissals on SUM arbitrations, and successfully argued before the Appellate Division, Fourth Department. I handled a variety of cases including auto, SUM claims, premise, and some construction, a little no-fault, among others.

 

We are delighted to welcome him to the team and his column, yet to be named, will be in the issue.  We are still debating the column name, always the most difficult question.  We are considering “Marti’s Memoirs” but have rejected both “Jerry’s Jestings” and Marti’s Mishigas”.

 

California Supreme Court Holds Insured Entitled to Coverage under CGL Policy for Negligent Hiring:

 

We thank our good friends at Traub Lieberman Straus & Shrewsberry LLP including Rich Traub, Meryl Lieberman and the author of this piece, Brian Margolies, for permitting us to republish this interesting article on a very recent California Supreme Court case.  Brian can be reached at [email protected] for more information

 

In its recent decision in Liberty Surplus Ins. Corp. v. Ledesma & Meyer Constr. Co.,2018 Cal. LEXIS 4063 (Cal. June 4, 2018), the Supreme Court of California addressed the question of whether an insured’s negligent hiring, retention and supervision of an employee who intentionally injured a third-party can be considered an occurrence under a general liability policy.

 

The insured, L&M, was the construction manager on a project at a middle school in California. It was alleged that one of its employees sexually abused a thirteen year old student during the course of the project. The student later brought a civil suit against L&M based on its negligent hiring, retention and supervision of the employee-perpetrator.

L&M’s general liability insurer, Liberty, denied coverage on the basis that because the underlying incident was not accidental, the derivative negligence claims against L&M necessarily were not caused by an occurrence either.  In the ensuing coverage litigation, the United States District Court for the Eastern District of California held in Liberty’s favor, reasoning that L&M’s hiring, supervision and retention of the employee were not the injury-causing acts.  On appeal, the United States Court of Appeals for the Ninth Circuit elected to certify this question to the California Supreme Court.

 

In considering the question, the Court began its analysis by revisiting the distinction between coverage for a perpetrator of sexual assault and the employer of the perpetrator, as explained in its 2010 decision in Minkler v. Safeco Ins. Co. of America, 49 Cal. 4th315 (Cal. 2010).  Minklerestablished that while the perpetrator is not entitled to coverage for his or her misconduct, L&M’s allegedly negligent hiring, retention, and supervision were independently tortious acts” and therefore had to be considered independently for coverage.  The Court agreed that the district court properly distinguished between the perpetrator’s liability and L&M’s liability, but failed to properly analyze the facts.

Specifically, the Court rejected the district court’s analysis on the issue of causation.  Coverage for L&M, explained the Court, turned “on whether the damages for which the insured became liable resulted – under tort law– from covered causes.” (Emphasis in original.). That is, the inquiry must be whether the insured’s conduct is a “substantial factor” in bringing about the plaintiff’s injury.  While the district court found that L&M’s alleged negligence was too attenuated to be the cause of the plaintiff’s injury, the Court disagreed, citing to numerous California decisions in which an employer’s negligence can be considered a substantial factor in a sexual molestation claim, so long as the negligence is the starting point of the series of events leading to the act of molestation.  The Court found that L&M’s negligence was, in fact, the starting point for the underlying misconduct.

 

After distinguishing numerous cases relied on by Liberty and the district court, the Court discussed the societal implications of allowing coverage for the derivative claims against employers resulting from sexual abuse committed by employees.  The Court did not see a public policy reason that would preclude coverage for such claims.  On the contrary, it recognized economic and practical reasons for allowing such coverage, explaining:

 

Liberty’s arguments, if accepted, would leave employers without coverage for claims of negligent hiring, retention, or supervision whenever the employee’s conduct is deliberate. Such a result would be inconsistent with California law, which recognizes the cause of action even when the employee acted intentionally.  The requirements for liability of this kind are not easily met, but they are well established.  Absent an applicable exclusion, employers may legitimately expect coverage for such claims under comprehensive general liability insurance policies, just as they do for other claims of negligence.

 

What’s Old is New Again – a Discussion about National Health Insurance, a Century Ago:

 

Detroit Free Press

Detroit, Michigan

15 Jun 1918

 

HEALTH INSURANCE AROUSING INTEREST

 

Already Nine States Are

Investigating the Subject by Expert Commissions

 

BY IRVING FISHER

 

Professor of Political Economy,

Yale University

 

We ought to establish a national department of health as one of the consequences of this war.  The movement for a national department of health has received a great stimulus in England, where after three years of experience with war people are becoming alarmed.  They are making investigations.  They are finding that their negligence has been extremely costly.  They have examined the conditions of women in munitions factories and have found the fatigue of long hours and dangerous conditions are really impairing the womanhood of Britain.

 

We ought to establish health insurance throughout the nation, preferably by national action if that be possible, but, as it probably is not, then by state action.  We are the one great industrial nation that does not have health insurance.

 

One of the necessaries, or at any rate one of the great engines, for an efficient democracy is, I believe, health insurance.  I think there is no question that a large part of the patriotism in Germany, the devotion of the people to their government, is based on what the government has done for the people.  Undoubtedly it is true, and it is a burning shame, that the people are being exploited; and that this, with characteristic foresight, was the view of the autocracy of Germany when health insurance was established.  They were trying to make the men contented to stay at home, that there might be more than better fighting units.  But that fact is no argument against health insurance.  On the contrary, in a democracy, it is an argument in favor of it.

 

John’s Jersey Journal:

 

Dear Subscribers:

 

BREAKING NEWS!

New Jersey Senate Passes Bad Faith Bill!

 

The New Jersey Senate passed a bad faith bill entitled the “New Jersey Insurance Fair Conduct Act”. It is still working its way through the legislature. If enacted, it would allow insureds to sue their insurance company for “unreasonable delay” or “unreasonable denial of a claim” for payment of benefits under an insurance policy.

 

Where a plaintiff establishes bad faith delay or denial, the plaintiff would be entitled to:

 

  1. Actual damages;

  2. Prejudgment interest;

  3. Reasonable attorneys’ fees;

  4. Reasonable litigation expenses; and

  5. Treble damages.

     

The most significant of these is treble damages, which are, by nature, a penalty. A treble damages award is a damages award that is THREE TIMES the amount of actual damages. For example, if the Bill becomes law and a carrier is found to have wrongly denied coverage for a $100,000 first-party property claim, plaintiff would recover $100,000 in actual damages, interest, attorneys’ fees and costs, plus $300,000 in treble damages. It is not hard to imagine how this quickly this would add up. Opponents of the bill have stressed that it would cause insurance premiums throughout New Jersey to skyrocket.

 

The drafters of the Bill spent more time crafting the penalties section than actually addressing the substance of the Bill. The Bill does not define or quantify what constitutes “unreasonable delay”. The Bill also does not define what an “unreasonable denial” means.

 

The Bill appears to be primarily directed to “first-party claimants”, which are defined. In its current form, it does not appear to create a bad faith cause of action for third-party claimants.

 

In addition, the Bill also allows insureds to assert a private cause of action against insurers for any perceived violation of the New Jersey Unfair Claims Settlement Practices Act (“UCSPA”), N.J.S.A. 17:29B-4. The UCSPA defines certain activities as unfair and deceptive acts or practices in the business of insurance including, among other things, misrepresentations and false advertising of policy contracts, false information and advertising generally, defamation, unfair discrimination, unfair claim settlement practices and failure to maintain complaint handling procedures.

Currently, only the New Jersey Department of Banking and Insurance can prosecute such claims. However, if this bill is enacted, insureds would able be to sue insurers for claimed violations of the UCSPA. If the insured successfully established a violation, the insurer would be slammed with the super penalties above including treble damages.

 

The impact of this bill if enacted cannot be understated. A copy of the Bill is available here.

 

Currently, the Bill is not law. It passed the Senate and will next be considered by the New Jersey General Assembly. If the Bill passes the General Assembly, it will then go to the governor. If the governor signs the bill or does not act on it within 45 days, it becomes the law in the State of New Jersey. The Bill would take effect immediately.

 

This is a bill that carriers should keep an eye on. I will be tracking the progress of this bill and keep you informed. I will report back whether the bill makes it through the Assembly. Should you wish to discuss the bill, feel free to write or call us.

 

Turning to the courts, the New Jersey courts issued two insurance law decisions. Both are UIM cases. The cases were straightforward and can be summarized as:

 

  • No UIM coverage for ATV accident because the ATV was designed primarily for off-road use.

  • UIM carrier is entitled to setoff for any amount insured recovers from tortfeasors and their liability insurer.

     

The cases are discussed in further detail in the attached issue.

 

‘Til Next Time,

 

John

John R. Ewell

[email protected]

 

They Made Them Stronger, 100 Years Ago: a Fall of 2000 Feet Leads to Broken Nose:

 

The York Daily

York, Pennsylvania

15 Jun 1918

 

AVIATOR O’BRIEN FALLS 2,000 FEET;

NOSE BROKEN

 

San Antonio, Texas, June 14.—Lieutenant Pat O’Brien, of Momence, Ill., British Royal Flying corps, who survived a battle with four German airplanes, was taken prisoner, leaped from a moving truck, wandered more than two months through enemy territory and who finally reached Holland and safety, tonight is suffering a broken nose, caused by the second fall of his adventurous career, which, according to observers, resulted when he took liberties with a student training type of airplane at Kelly Field.

 

Apparently O’Brien’s only injury after a 2,000 foot fall in a nose-dive was a broken nose.

 

Peiper’s Pleadings:

 

My kids tell me that they have 3 ½ days left in the school year.  The calendar tells me this too.  My eyes, however, tell me last day of real school was several weeks ago.  I’m not saying I haven’t enjoyed multiple nights in the sans air conditioned auditorium at the school over the past month, but I am also not saying I’m disappointed summer is upon us either.

 

With summer, of course, comes the inevitable slowdown from the courts.  If so, we ease into summer with a bang in this issue.  The First Department tackles a timely first party issue that we’ve been seeing with increasing frequency.  For whatever the reason, the policyholder bar has increased its push for appraisal.  The tactic is obvious as they wish to avoid formal litigation.  However, the law of NY has always been that where legitimate coverage issues remain unresolved, the appraisal process cannot begin without the consent of the carrier.  The Court, rightly so, applied existing law and blocked the latest attempt to use the appraisal process as a sword to circumvent policy defenses.

 

We’re not saying we opposed to creativity.  On the contrary, we’re always appreciative of good lawyering.  With this in mind, we’d encourage you to review the Third Department’s decision in Lamela.  In that case, counsel for Owner/GC smartly managed the litigation to ship ALL of its exposure to the injured party’s employer.  This was the case even though the GC might have actually had some active negligence.  How’d they do it…read inside. 

 

The Third Department’s opinion was bang on, though.  While it applied the contractual indemnity claim in favor of the Owner, as it was entitled to do, the Court also recognized that plaintiff’s employer still had a right to prosecute common law claims against potentially negligence parties.  This includes, perhaps, the GC.  All in all, good lawyering and an excellent decision.  Kudos abound. 

 

Lastly, the Appellate Division revisits an unpopular issue.  Folks, listen.  If you have a new client, you must at least discuss the possibility of insurance coverage.  Make it part of your intake.  Regardless of the type of file.  If you don’t, you’re asking for a malpractice claim.  Avoid it by simply asking the question.  Pa-lease! 

 

Steve

Steven E. Peiper

[email protected]

 

Someone’s been Smoking Something …

 

The Tacoma Times

Tacoma, Washington

15 Jun 1918

 

HOLY SMOKES!

(United Press Leased Wire)

 

SEATTLE, June 15.—Sounds fishy, but it’s an honest to goodness fact!

 

Ed Tobacco and Second Tobacco, from Durham, Wash., walked into Red Cross headquarters here yesterday and signed up for full membership. Five minutes later Mrs. Orta Smoke, from Eagle Gorge, fluttered in.  Mrs. Smoke is superintendent of Red Cross distribution here. 

 

Hewitt’s Highlights: 

 

Dear Subscribers:

 

Happy early Father’s Day to all the fathers out there. I hope you get to enjoy some rest and some time with the children. As the father of two young boys, it’s exhausting but also rewarding.

 

The First and Second Departments were busy with the serious injury threshold cases since the last time. We have a case involving whether the serious injury threshold applies at all to a vehicle that hit the bucket of an excavator that was parked on the highway. There are also several cases involving degeneration found by defendants’ experts, which makes their prima facie case, and you can see the cases where plaintiff’s expert addressed that, and raised an issue of fact, or failed to address it leading to summary judgment for defendants. You have a case where the court felt that the expert’s opinion that the range of motion limitations was self-imposed was not good enough to make a prima facie case as the basis for this opinion was unexplained. Finally, you have a case where the plaintiff’s expert opinion that the accident imparted “tremendous energy” was excluded from evidence before a jury.

 

Until next time,

 

Rob
Robert Hewitt

[email protected]

 

Say It isn’t So – Licensing Drivers a Century Ago?

 

Middletown Times-Press

Middletown, New York

15 June 1918

 

Will Discuss the Licensing

of All the Auto Drivers

 

The examination and licensing of all automobile drivers in New York State will be one of the principal subjects of discussion at the semi-annual meeting of the New York State Automobile Association, in this city, June 26 and 27.  The demand for such action as would assure safe motor driving is becoming insistent throughout the state and it is highly probable the New York State Automobile Association will declare itself on the examination and licensing of automobile drivers.

 

Wilewicz’ Wide-World of Coverage:

 

Dear Readers,

 

So, the FIFA World Cup has finally started and the contests are shaping up to be super exciting. The groups are well balanced and for once there does not appear to be a “group of death” that would knock out any stellar team (un)necessarily. I always love this time, every four years, and I am not shy to admit that I watch every single game. Though my productivity does admittedly dip a little for a few weeks (don’t tell the boss!), my family and friends get so involved in the match ups that it’s hard to do much else with all of the international texting that goes on until mid-July.

 

In any event, on the coverage front, the Second Circuit recently issued an interesting one. In Certain Underwriting Members of Lloyds v. State of Florida, they took up the issue of whether there should be a different standard in reviewing arbitration awards, when the panel members are either neutral or party-appointed. In this reinsurance dispute, Lloyds sought to vacate an award entered against it because of the purported partiality of one of the three arbitration panel members. That panel had, as per contract, included one party-appointed person from each side, and one neutral. The party-appointed one from the insured had not fully disclosed his business relationships with that insured however, and Lloyds believed that to be grounds to vacate. The Second Circuit held instead that while a neutral is held to a higher standard, a party-appointed arbitrator de facto acts as an advocate for that party on the panel. Unless there’s some egregious issue, such as failure to disclose a personal stake in the outcome or partiality that has some prejudicial effect on the award, they don’t have to disclose every single connection necessarily. It was interesting, since the Second Circuit had never analyzed this issue before.

 

See you in two weeks! Go Biało-czerwoni!

 

Agnes

Agnes A. Wilewicz

[email protected]

 

Not Six Cents!

 

 

Buffalo Evening News

Buffalo, New York

15 Jun 1918

 

COUNCIL AGREES TO 6-CENT

FARE TO AVERT WALKOUT

 

Mayor Issues Statement it is Temporary

Arrangement Subject to P.S.C. Order

Men Discuss New Wage Rate

With Company

 

Buffalo is riding on street cars today instead of walking because the council late last night gave its consent to the International Railway company to charge six-cent fares. The company, in turn, granted its employees a wage Increase, so the walkout ordered for this morning at 4 o'clock was averted.

 

The increases allowed by the company do not meet the demands of the men, however, and conferences between the union leaders and President E. O. Connette were resumed at 11 o'clock this morning. William B. Fitzgerald, who conducted the car men's strike here several years ago and later represented them in the wage proceedings, is participating in the discussions. He is an officer of the International union. If the company and men cannot agree on further demands, the controversy will be submitted to the war labor board.

 

Mayor Buck issued a statement this morning giving the reasons which moved the council to approve the mediator's recommendations. Concessions were obtained, he says, and the consequences of a walkout had to be considered.

 

Corporation Counsel Rann, City Attorney Pierce and Attorney Killeen for the railway met today to go over the proposed agreement, which will be submitted to the council Monday for formal approval. After being passed there, directors of both the traction and the railway companies will have to act upon it.

 

The proposed agreement merely fixes a temporary fare. It leaves a "just and reasonable” fare to be determined by the Public Service commission. This may be six cents or more. Chairman Hill of the commission said today the first question to be decided is, if the board will proceed, if it decides the city has no power to give it jurisdiction to act in this case without legislative approval.

 

Barnas on Bad Faith:

 

Hello again:

 

The Warriors swept the Cavaliers, Justify swept the Triple Crown, and Ovi won his first Stanley Cup and, apparently, has been drunk ever since.  Luckily, while these sporting events are winding down, the World Cup is just getting started.  I can’t wait to watch the USA compete on the biggest stage in soccer ... or not.  I’ll be rooting for the Three Lions since our guys couldn’t even qualify this time around.  At least we were awarded the World Cup in 2026.  They have to put us in that year.

 

We finally have the New York bad faith decision that I have teased in this space a couple of times.  In the Corle case the Fourth Department considered whether the underlying plaintiff’s bad faith claim was barred by res judicata.  You see, the underlying plaintiff had obtained a judgment against Allstate’s insureds after Allstate denied coverage, and then started a direct action pursuant to Insurance Law § 3420.  However, at the time of that direct action, the insureds had not yet assigned their rights to a bad faith claim under the policy to the judgment-creditor.  Plaintiff wound up succeeding on the direct action.  Thereafter, the plaintiff obtained an assignment from the insureds and commenced a bad faith action against Allstate.

 

The Fourth Department held that the bad faith action was not barred by res judicata because the plaintiff did not have standing to assert a bad faith claim in the direct action. The court concluded a direct action under Insurance Law § 3420 (a)(2) and (b)(1) is limited to recovering the policy limits of the insured’s policy.  A judgment-creditor can bring only a bad faith claim against the insured as part of a direct action if it has obtained an assignment of the insured’s rights under the policy.  Here, the plaintiff had not obtained the assignment until after the direct action. 

 

The decision by the Fourth Department creates a department split with the First.  In a case called Cirone, the First Department ruled that “plaintiffs' failure to litigate the bad-faith claims in the Insurance Law § 3420 action against Tower bars litigation of those claims in this action, as both sets of claims arise from the same series of transactions.”  It will be interesting to see how this split plays itself out over the coming months and years.

 

I also have a case from Colorado where the Colorado Supreme Court held that the statute of limitations applicable to penalty-type statutes does not apply to statutory bad faith claims made against insurance carriers.

 

Have a nice weekend.

 

Signing off,

 

Brian

Brian D. Barnas

[email protected]

 

Scofflaws Unite:

Times Herald

Olean, New York

15 Jun 1918

 

THREE ARRESTED FOR

ILLEGAL TRAIN RIDING

 

Six Lads Lectured by Justice

Keating for Stoning City

Incandescent Lights

 

J. Brown, 35, of New York City, Felix Gates, 45, and Floyd Cherry, 35, of Beacon, were taken into custody this morning early for illegal train riding.  The men are held at the city jail until more information in regard to their identity can be obtained.

 

Officer Cole arrested six young boys this morning, who live in South Olean, for alleged breaking of the City lights in that district.  The residents of that portion of the city claim that the young men have been stoning the incandescent lights there and as a result the district is in darkness a greater share of the time.  The boys taken this morning were severely reprimanded by Justice Keating and discharged.

 

“There are more connected with this destructiveness”, the Judge said, “And we intend to have it stopped.”

 

Altman’s Administrative (and Legislative) Agenda:  

 

Greetings, Dear Readers.   Happy Father’s Day to all who are celebrating.  I will be spending it with my parents – Dad on the grill, me baking cookies – because everything is better with dessert.

 

In administrative news, the Department of Financial Services (DFS) finalized its new proposed SUM bill, which means the public notice and comment period is now open. The notice and comment period will expire on July 30, 2018. Given that the bill impacts new policies issued after June 16, this may render any comments received that date essentially moot, but, to borrow a baseball analogy, it’s always better to do down swinging.

 

Howard

Howard B. Altman

[email protected]

 

Babe Ruth Gets “Also Ran” Press:

Detroit Free Press

June 15, 1918

 

Pinch Hitter Robs Red Sox of Victory

Pete Johns Triples with Two On, Two down in Ninth

And St. Louis Wins, 5 to 4

 

With the score 4 to 3 in Boston’s favor, in the ninth with two men on base and two out, Pete Johns, pinch hitting for Sothoron tripled passed Strunk, scoring Godson and Austin and giving a 5 to 4 victory over Boston in the first game of the series today.

 

Rut’s bat drove in three of Boston’s runs

.

Editor’s note:  Johns played in 189 games during his two years in the Majors, 1915 with the White Sox and 1918 with the St. Louis Browns. He had two lifetime triples, one in each of those two years (this was his 1918 triple).  He never hit a Major League home run and ended up with a lifetime batting average of .196.  Ruth did a little better.

 

Off the Mark:

 

Dear Readers,

 

My kids are really enjoying the nice weather and are spending every minute they can outside, which is fine by me.  I love being outside.  As the end of another school year draws near, they are counting down the days until no more homework.  My wife and I are looking forward to that too.

 

This edition of “Off the Mark” examines a recent construction defect case from the US Court of Appeals for the Third Circuit.  In Lenick Constr., Inc. v. Selective Way Ins. Co., the US Court of Appeals affirmed the District Court’s holding that the defendant insurer had no duty to defend or indemnify its insured in an underlying construction defects action involving a condominium development.  The claims asserted against the insured sounded in breach of contract and indemnification. 

 

In determining whether a duty to defend existed, the Court of Appeals reviewed the policy language and the underlying complaint against the insured to determine whether the allegations triggered coverage.  The insured acknowledged that under Pennsylvania law, there is no occurrence when the complaint alleges only property damage from poor workmanship to the work product itself, but argued that the complaints identified property damage that was unrelated to the insured’s work.  In reaching its decision, the Court relied on prior case law holding that damages that are a reasonably foreseeable result of the faulty workmanship are not covered, even when such damage occurs to areas outside the work provided by the insured.  Although the various complaints asserted that others may be liable for the property damage, they did not allege that the insured should be held liable for the faulty products or poor workmanship of others and that the insured’s own faulty workmanship was the only legal theory under which the insured could be found liable.  As such, the Court affirmed the District Court’s decision holding that the insured had no duty to defend or indemnify its insured in the underlying action.

 

Until next time …

 

Brian

Brian F. Mark

 

Object Matrimony – Such a Deal!:

 

The Pittsburgh Press

June 15, 1918

 

AMERICAN GIRL. Presbyterian, 35 years, living alone; worth $5000 will marry honest man who can give reference.  Write Box 233 East End Press office.

 

 

Wandering Waters

 

Welcome to another issue of Wandering Waters. I hope all of you have had a wonderful week.

 

After a great year of basketball, the season ends on a rather low note.  The Warriors swept the Cavs in four games.  After the exciting and magnificent performance by LeBron James in game one, the remaining games lacked any sense of excitement.

 

Nevertheless, the news for the NBA moves from on the court to off the court.  Free agency is quickly approaching, with some big names searching for new homes.  The biggest catch of them all is LeBron James.  As the best player in the world, he has many suitors including the Lakers, Heat, Sixers, Rockets, and the Spurs.  Of course, the Cavs have a chance to retain his services as they can pay him the most money.  It will be interesting to watch where LeBron ends up as his presences not only makes any NBA team an instant contender but also brings a significant economic boost to that city.    

 

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

 

Until next time…. 

 

Larry

Larry E. Waters

[email protected]

 

Ford Had a Different Idea:

 

The Vicksburg (Mississippi) Herald

June 15, 1918

 

Ford Vigorously Assailed

 

Detroit, Mich.  The announcement in Washington yesterday of Henry Ford of Detroit that he would accept the nomination for United States Senate to succeed William Alden Smith, if tendered to him, was met in Michigan today by statements from two former governors who had previously announced their candidacy …

 

Editor’s Note:  Ford lost in a Republican primary election to businessman Truman H. Newberry and then, switching parties, ran against Newberry as a Democrat in the general election and lost again.

 

Boron’s Benchmarks:

 

Dear Subscribers:

 

Father’s Day is this coming weekend.  Thinking about the blessing my three kids have been to me gets me sentimental.  Yes, this is possible even for a coverage lawyer.

 

Covering the high courts’ beat for Coverage Pointers throughout the 49 states not named New York involves reviewing breaking high court decisions issued all over the United States.  My case reading is done here at our flagship Buffalo, New York, office, but I sometimes get to wondering what life beyond insurance coverage is like in these other states.  There’s Iowa, for example.  Wish I knew more about it.  Never had the privilege of visiting.  Would love to see the Field of Dreams movie site in Dyersville, Iowa - with my kids if at all possible! I do know the names of some Iowa places from having been a chorus member in the musical The Music Man in high school.  We sang a song that referenced Dubuque, Des Moines, Davenport, Marshalltown, Mason City, Keokuk, Ames, and Clear Lake.  The song was called “Iowa Stubborn”.

 

Apparently, the parties in the Walnut Creek Townhome Association v. Depositors Insurance Company case I’ve selected for your consideration must have at least a touch of that “Iowa Stubborn” in their blood, since their property coverage dispute about appraisal rights has been fought all the way up to the Supreme Court of Iowa.  At issue in the case was whether roof shingles suffered covered damage when struck by hail.  The insurer’s expert said no.  The insured’s expert said yes.  The insured exercised its right to an appraisal under the commercial insurance policy at issue.  The three-person appraisal panel determined there was covered damage to the roof shingles from the hail strikes, as part of determining the amount of the loss.  The appraisal award stated the appraisal would not include an evaluation or determination of coverage, but the Supreme Court of Iowa held the property damage causation determinations made by the appraisal panel are binding. 

 

I presume the Court’s ruling that factual causation issues may be decided through the appraisal process was disappointing for the Iowa insurance lawyers involved.  I hope those lawyers can keep the ruling in perspective. You can’t win them all.  Insurers can at least take solace in the fact that the court did say that resolving coverage questions remain the court’s exclusive domain, and the case was remanded for the district court to determine to adjudicate coverage exclusions for prior deterioration and defective shingles under the policy’s anti-concurrent causation provision.  But still, the court did not view damage causation issues as coverage questions off-limits for the appraisal panel.  Perhaps “having a catch” with a loved one sometime soon will help those Iowa insurance lawyers get over this result.  After all, as the character Moonlight Graham says in the movie Field of Dreams, “[W]e just don't recognize life's most significant moments while they're happening.”  That reminds me - I need to locate our old ball gloves and a couple of decent balls in the garage over the next couple of days… 

  

Here’s hoping this material may be helpful in or for your work.  Happy Father’s Day to all you fathers out there, and have a great next couple of weeks.

 

Regards,

 

Eric

Eric T. Boron

[email protected]

 

Highlights of this week’s issue, which is attached:

 

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]

 

  • While there is No Coverage for Injuries Caused by an Intentional Assault (as Determined by a Criminal Jury Verdict), there Could be Coverage for Additional or Exacerbated Injuries Sustained Either Prior or Subsequent to the Assault
  • SUM Arbitrator’s Award Finding that Injuries Did not Result from Auto Accident not Irrational, Even if Same Carrier had Paid No Fault Benefits for Same Accident
  • Once Carrier that Undertakes Defense, Learns of Grounds to Deny Coverage, it Must Advise the Insured of that Position or be Equitably Estopped from Doing So Later

 

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

Robert E.B. Hewitt III

[email protected]  

 

  • Video of Incident Properly Excluded where not Authenticated
  • Plaintiff Raised an Issue of Fact as to Serious Injury to the Cervical and Lumbar Regions
  • Defendant’s Expert Failed to Explain Why He Felt Significant Range of Motion Limitations Were Self-Imposed
  • Defendant’s Expert Finding that Injuries Fully Resolved Was Enough to Demonstrate a Prima Facie Case
  • Issue of Fact as to Whether Injuries Attributable to Pre-Existing Conditions
  • Issue of Fact as to Whether Serious Injury Exists
  • Plaintiff’s Expert Needs to Address Defendant’s Expert’s Supported Conclusion that the Shoulder Injury Was Degenerative
  • Plaintiff’s Expert Needs to Address Defendant’s Expert’s Supported Conclusion that the Shoulder Injury was Degenerative
  • Motor Vehicle Accident  in which Plaintiff’s Vehicle Struck the Bucket of a Parked Excavator on a Public Highway Fell under the Serious Injury Threshold
  • Defendants’ Experts Opined Injuries Had Resolved and Plaintiff Had Full Range of Motion
  • Defendants’ Experts Found Degenerative Injuries, But Plaintiff Raised Issue of Fact

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

 

  • Existence of Coverage Dispute Precludes Initiation of Appraisal Process

 

Potpourri

 

  • Failure to Advise of Potential Coverage Can Lead to Legal Malpractice Claim
  • Plaintiff’s Inaction is Not a Defense to Oppose Defendant’s Motion to Amend
  • Defense Strategy to Seek Indemnity of Non-Negligent Owner did not Preclude Indemnitor from Seeking Contribution from Potentially Negligent GC

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

  • Second Circuit Holds that Standard for Vacating Arbitration Award Differs if Arbitrators were Neutral or Party-Appointed, as per Agreement

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

  • Trial courts all quiet…

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

  • Bad Faith Claim by the Underlying Plaintiff was not Barred by Res Judicata because the Underlying Plaintiff did not have Standing to bring a Bad Faith Cause of Action against the Insurer at the Time it Commenced a Direct Action under Insurance Law § 3420
  • Statutory Claim for Unreasonable Delay or Denial of Insurance Benefits is not governed by the One-Year Statute of Limitations for Penalties

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

  • New Jersey Appellate Division Confirms No UM/UIM Coverage For ATV Accident
  • New Jersey Federal Court Applies Long-Standing Rule that UIM Carriers Are Entitled to Credit for Any Amount Recovered from Tortfeasor’s Liability Insurer

 

ALTMAN’S ADMINISTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

  • DFS New Proposed Supplemental Uninsured Motorist (SUM) Bill

 

OFF THE MARK
Brian F. Mark

[email protected]

 

  • US Court of Appeals Holds Insurer had no Duty to Defend or Indemnify its Insured in Underlying Action Where Insured’s Own Faulty Workmanship was the Only Legal Theory Under Which the Insured Could be Held Liable

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

  • Plaintiff’s Motion to Remand Declaratory Judgment Action to State Court Denied
  • Plaintiff’s Motion to Dismiss Defendant’s Counterclaim Denied Because the Disputed Terms of the Written Contract Were Ambiguous

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

  • Property Insurance: Factual Loss Causation Issues May Be Decided Through the Appraisal Process

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

 

  • Alleged Potential Liability of Adjustors for Bad Faith

 

 

Next issue begins our 20th year of publication. Who woulda thunk?

 

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]
 

Jerry Marti

 

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]

 

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

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]

 

06/14/18       State Farm Fire and Casualty Co. v. McCabe

Appellate Division, Third Department

While there is No Coverage for Injuries Caused by an Intentional Assault (as Determined by a Criminal Jury Verdict), there Could be Coverage for Additional or Exacerbated Injuries Sustained Either Prior or Subsequent to the Assault

On August 9, 2014, Rebekah was visiting her then boyfriend, McCabe, and McCabe’s mother’s home. McCabe, nice guy that he was, physically assaulted her, strangled her with a rope and struck her head.  He was convicted, after a criminal jury trial, of first degree assault and criminal possession of a weapon in the fourth degree.

 

Rebekah then sued McCabe and his mother, alleging, among other things, that McCabe rendered her partially incapacitated and, while in that condition, she tripped and fell due to a defective condition on the property.

 

State Farm was mom’s homeowner’s carrier and denied coverage, claiming that the injuries did not arise out of an “occurrence” and were not covered by an exclusion for intended injuries or willful and malicious acts.

 

Generally, when an insurer seeks to disclaim coverage on the basis of an exclusion, the insurer will be required to provide a defense unless it can demonstrate that the allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations are subject to no other interpretation.  An insurer may avoid coverage under a policy's intentional acts exclusion only if the insurer establishes as a matter of law the absence of any possible legal or factual basis to support a finding that the bodily injury at issue was, from the insured's point of view, unexpected and unintended.

 

State Farm raised collateral estoppel in support of their motion: "that the identical issue was necessarily decided in the prior action and is decisive in the present action," and that "the party to be precluded from relitigating an issue must have had a full and fair opportunity to contest the prior determination”.

 

The jury's verdict finding McCabe guilty of assault in the first degree and strangulation in the first degree necessarily included findings that McCabe intended to cause serious physical injury to defendant, intended to impede her breathing or circulation, applied pressure to her throat or neck and caused her serious physical injury by means of a deadly weapon or dangerous instrument.   

 

The intent required in the criminal action would be sufficient to establish the intent element of the insurance policy exclusion as long as they relate to the same conduct. In the underlying action, defendant alleged, among other things, that McCabe permitted and failed to remedy a tripping hazard in a doorway and exacerbated the dangerous condition by obstructing the doorway with a couch and other items, and defendant tripped and fell into a cement wall, causing her serious injuries. Defendant also alleged that McCabe negligently engaged in an activity that rendered her partially incapacitated, then did not exercise reasonable care to obtain prompt medical attention, hold or support her as she attempted to walk through the doorway, or warn her of the dangerous condition.

 

The court agreed with State Farm that McCabe's intentional actions cannot be magically transformed into negligent ones merely by defendant's allegations trying to recast them. McCabe's conduct that rendered defendant partially incapacitated was his criminal, intentional actions, which cannot be downgraded to mere negligence through artful pleading. On the other hand, the court found that some of Rebekah’s allegations addressed McCabe's actions prior to the assault, such as failing to maintain the property by permitting a tripping hazard, and his alleged actions after the assault, such as failing to obtain medical care and allowing defendant to ambulate in an incapacitated state without adequate assistance.

It was claimed that she may have suffered additional injuries due to this negligent conduct, or her injuries from the assault may have been exacerbated by this negligent conduct.

 

To establish the convictions, it was unnecessary for the jury to have made findings regarding whether McCabe created a tripping hazard, allowed defendant to walk on her own after he had rendered her partially incapacitated or failed to seek medical help for her after the criminal assault. Hence, the issues as to insurance coverage and exclusions are not identical to the issues decided in McCabe's criminal trial, and defendants here did not have a full and fair opportunity in the criminal trial to address some of the issues regarding McCabe's negligence allegedly committed before and after the criminal assault.

 

As to mom, the carrier did not disclaim coverage and State Farm needs to defend and indemnify her.

 

06/13/18       O'Neill v. GEICO Insurance Company

Appellate Division, Second Department

SUM Arbitrator’s Award Finding that Injuries Did not Result from Auto Accident not Irrational, Even if Same Carrier had Paid No Fault Benefits for Same Accident

On August 2, 2012, a car owned and operated by O’Neill was struck in the rear by a vehicle owned and operated by Channer.  Both vehicles were insured by GEICO.  O’Neill sued Channer, obtained summary judgment in that action, and then settled the case for $25,000, the full limit of the Channer policy.

 

O’Neill then filed a SUM (underinsurance claim) against her own policy with GEICO, seeking to recover $275,000.  GEICO denied the claim, asserting that the injuries were not caused by the motor vehicle accident.  O’Neill then filed a demand for arbitration.

 

A SUM arbitration hearing was held where the SUM arbitrator reviewed all the medical records, including an IME report.  The arbitrator concluded that the injuries claimed were not the result of the motor vehicle accident and denied SUM benefits.

 

O’Neill challenged that determination in an Article 75 proceeding, claiming that the decision by the SUM arbitrator was arbitrary, capricious, irrational, and beyond the scope of the arbitrator’s authority.  It was claimed that GEICO had paid no fault benefits and thus could not claim that the injuries were unrelated to the accident.

 

The Second Department noted that judicial review of arbitration awards is extremely limited. However with respect to compulsory arbitration, the court can look to see whether the award has “evidentiary support” and cannot be “arbitrary and capricious”.

 

Here, the Second Department found that the award was not arbitrary and capricious and the fact that arbitrator ignored the fact that GEICO had paid no-fault benefits, did not warrant vacatur of the award. At most it was an error of law.

 

06/06/18       Mazl Building, LLC,  v. Greenwich Insurance Company

Appellate Division, Second Department

Once Carrier that Undertakes Defense, Learns of Grounds to Deny Coverage, it Must Advise the Insured of that Position or be Equitably Estopped from Doing So Later

In January 2006, the Mazi retained nonparty Rovatele Elevator, Inc. (“Rovatele”) to perform an elevator renovation project in a Mazi-owned building . Rovatele obtained an insurance policy from Greenwich that named Mazi as an additional insured pursuant to an indemnification agreement between the Mazi and Rovatele. In March 2006, the Mazi assigned its rights under the indemnification agreement to another entity (‘the “plaintiff”).

 

In October 2006, Samaroo allegedly sustained injuries while working on the elevator renovation project. He sued Mazi and others. In February 2008, Greenwich agreed to defend and indemnify Mazi in connection with the underlying action. Thereafter, Greenwich learned of the plaintiff’s assignment of its rights under the insurance policy and, hence, learned of a defense to coverage as early as 2009. However, Greenwich continued to defend the plaintiff in the underlying action for almost four more years, without reserving their rights to disclaim coverage. In 2013, after jury selection in the underlying action, Greenwich disclaimed coverage on the basis that, contrary to what they had believed when they originally accepted the tender for a defense and indemnification, the plaintiff was not an additional insured under the insurance policy at the time of the accident. Ultimately, the plaintiff paid $250,000 to settle the claim against it in the underlying action.

 

The plaintiff commenced this action, inter alia, seeking declaratory relief and to recoup the $250,000 it paid to settle the claim against it in the underlying action. The plaintiff argued that Greenwich was equitably estopped from denying coverage since they had knowledge of the facts that supported the disclaimer but failed to disclaim coverage until almost four years after attaining that knowledge.

 

The plaintiff established, prima facie, that Greenwich was estopped from denying coverage.  Although the defendants learned by 2009, at the latest, of the plaintiff's pre-accident assignment of its rights under the indemnification agreement, pursuant to which the plaintiff had previously been an additional insured under the insurance policy, the defendants continued to control the plaintiff's defense in the underlying action and had knowledge of the facts constituting the basis of their denial of coverage for almost four years before issuing their coverage disclaimer. Since the Greenwich did not reserve its rights to disclaim coverage, estoppel barred them from denying coverage under the circumstances of this case.

 

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

Robert E.B. Hewitt III

[email protected]  

 

06/13/18       Torres v. Hickman

Appellate Division, Second Department

Video of Incident Properly Excluded where not Authenticated

The plaintiff alleged that the defendant's vehicle struck her vehicle in the rear. In her trial testimony, the plaintiff described the impact of the accident as "very hard." The plaintiff presented the testimony of an orthopedic surgeon who examined the plaintiff shortly after the accident and found that the range of motion in the plaintiff's right shoulder "was diminished and painful." The orthopedic surgeon further testified that his records of the plaintiff's visits in 2012 listed no numerical values for the plaintiff's range of motion, and that he did not compare her range of motion to what would be considered a normal range of motion. The Supreme Court precluded the plaintiff's orthopedic surgeon from testifying that the accident imparted "tremendous energy" to the plaintiff's vehicle. The plaintiff moved to enter into evidence a 30-second portion of a surveillance video recording of the accident taken by a security camera at a business adjacent to the accident scene. A "tech supervisor" employed by the business testified that he installed and maintained the security camera, but that he did not record the original video, nor did he copy the relevant portion of that video on to the disc that was proffered as evidence. He similarly did not know how the master recording was edited to produce the 30-second excerpt on the disc, and he did not testify that the excerpt was a true and accurate depiction of a portion of the master recording or that it depicted the entire recorded event in question. He also lacked any firsthand knowledge of who prepared the subject disc, or of how and when it was supplied to the plaintiff's attorneys. The Supreme Court precluded the video evidence, citing problems with its authentication and chain of custody.

 

The jury unanimously found that the plaintiff did not sustain a serious injury under the permanent consequential limitation of use, significant limitation of use, or significant disfigurement categories of Insurance Law § 5102(d). The Appellate Division held that contrary to the plaintiff's contention, the Supreme Court providently exercised its discretion in precluding the proffered surveillance video excerpt. Where the videographer is not called as a witness, the video can still be authenticated with testimony that the video truly and accurately represents what was before the camera, which did not occur here. Here, given the inability of the witness to testify regarding the editing of the master recording and the accuracy of the video excerpt, and his lack of personal knowledge as to the creation of the proffered disc and how it came into the possession of the plaintiff's attorneys, it was not properly authenticated.

 

Additionally, the Appellate Division held that the plaintiff's orthopedic surgeon was properly precluded from testifying that the accident imparted "tremendous energy" to the plaintiff's vehicle, since the witness was not a biomechanical engineer, and since he failed to quantify the amount of energy involved.

 

06/13/18       Rivera v. Alvarado

Appellate Division, Second Department

Plaintiff Raised an Issue of Fact as to Serious Injury to the Cervical and Lumbar Regions

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 accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) and that, in any event, the alleged injuries were not caused by the accident. In opposition, however, the plaintiff raised a triable issue of fact as to whether she sustained serious injuries to the cervical and lumbar regions of her spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d) as a result of the accident. No facts were given.

 

06/13/18       Rivas v. Hill

Appellate Division, Second Department

Defendant’s Expert Failed to Explain Why He Felt Significant Range of Motion Limitations Were Self-Imposed

The plaintiff commenced this action to recover damages for personal injuries that he alleged he sustained in a motor vehicle accident that occurred on June 23, 2012, at or near the intersection of Motor Parkway and Express Drive North in Hauppauge. The Appellate Division held the defendants failed to meet their respective prima facie burdens 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 failed to submit competent medical evidence establishing, prima facie, that the plaintiff did not sustain a serious injury to the cervical and lumbar regions of his spine under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). Two of the defendants' experts found significant limitations in the range of motion of the cervical and lumbar regions of the plaintiff's spine and failed to adequately explain and substantiate their beliefs that the limitations were self-imposed. Further, the defendants' evidentiary submissions demonstrated the existence of a triable issue of fact as to whether the alleged injuries to the cervical and lumbar regions of the plaintiff's spine were caused by the accident.Since the defendants failed to meet their respective prima facie burdens, it was unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact.

 

06/13/18       Narkolayeva v. Curtin

Appellate Division, Second Department

Defendant’s Expert Finding that Injuries Fully Resolved Was Enough to Demonstrate a Prima Facie Case

This action arises from a motor vehicle accident that occurred on May 2, 2014, at or near the intersection of Stewart Avenue and Wetherill Road in Nassau County.  The Appellate Division held that the defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendant submitted, inter alia, competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine had fully resolved and did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, however, the plaintiff submitted evidence raising a triable issue of fact as to whether she sustained a serious injury to the cervical and lumbar regions of her spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d).

 

06/13/18       Iam v. Santanieollo

Appellate Division, Second Department

Issue of Fact as to Whether Injuries Attributable to Pre-Existing Conditions

No facts were given. The defendants 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 accident. The Appellate Division held that 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 accident. In opposition, however, the plaintiff raised a triable issue of fact as to whether the injuries at issue were attributable to pre-existing conditions or were causally related to or exacerbated by the subject accident.

 

06/13/18       Burks v. Godino

Appellate Division, Second Department

Issue of Fact as to Whether Serious Injury Exists

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

 

06/07/18       Aquino v. Alvarez

Appellate Division, First Department

Plaintiff’s Expert Needs to Address Defendant’s Expert’s Supported Conclusion that the Shoulder Injury Was Degenerative

Defendants met their initial burden through the affirmed reports of their medical experts who found no objective evidence of serious injury to the cervical spine, lumbar spine, and left shoulder, and concluded that any observed conditions were not causally related to the accident. In particular, their orthopedist opined that the findings made by plaintiff's orthopedic surgeon following arthroscopic surgery on the shoulder, including a "rather prominent spur," synovitis, and bursitis, indicated that plaintiff had a degenerative labral tear and impingement, and no causally-related pathology. Defendants also relied on the report of an emergency medical specialist who concluded that plaintiff's post-accident hospital records were inconsistent with any traumatically-induced injuries, and showed no clinical signs of shoulder injury.

 

In opposition, plaintiff raised an issue of fact as to her cervical and lumbar spine by submitting affirmed reports of her treating physicians who found range of motion limitations, objective evidence of injury, such as bulging discs shown on MRI films, and opined that these injuries were causally related to the accident Since defendants did not present any evidence of preexisting injuries to the cervical and lumbar spine documented in plaintiff's own medical records, nothing further was required of plaintiff in opposition to the motion as to those claims However, as to plaintiff's claimed shoulder injury, her doctors' conclusory opinions of a causal relationship were insufficient to raise an issue of fact. They did not address her surgeon's operative findings, including the "very extremely large bone spur" and synovitis, and explain why these findings were not degenerative or were not the cause of the shoulder conditions for which she had surgery.

 

06/07/18       Hayes v. Gaceur

Appellate Division, First Department

Plaintiff’s Expert Needs to Address Defendant’s Expert’s Supported Conclusion that the Shoulder Injury was Degenerative

Plaintiff alleges that she suffered serious injuries to her cervical, thoracic and lumbar spine, both shoulders and left knee, as a result of an accident that occurred when defendants' vehicle hit the side of her vehicle. Defendants satisfied their prima facie burden of demonstrating that plaintiff did not sustain any serious injury by submitting the reports of a neurologist and orthopedist, who found full range of motion in all parts and opined that plaintiff's injuries had resolved. Defendants also submitted a radiologist's report opining that the MRI of plaintiff's cervical spine was normal and showed no traumatic injury, and the emergency medicine expert, who opined that plaintiff's hospital records were inconsistent with her claimed serious injuries.

 

In opposition, however, plaintiff raised an issue of fact as to her claimed cervical spine, shoulder and left knee injuries through the report of her treating orthopedic surgeon. The physician examined plaintiff the day after the accident and on several occasions thereafter. He found limitations in range of motion of her cervical spine the day after the accident and on recent examination; he examined plaintiff's shoulders and left knee within a month after the accident and found limitations in range of motion at the initial examination and recently In addition, he personally reviewed the MRI examinations of plaintiff's cervical spine, shoulders and left knee, and opined that they revealed objective evidence of injuries caused by the accident, rather than by degeneration

 

Defendants' argument that plaintiff had a "gap" in treatment was not raised by defendants in their motion papers, when plaintiff would have had an opportunity to respond by submitting proof in support of her testimony that she received extensive treatment. Defendants' experts did not review any medical records, but plaintiff's physician affirmed that he reviewed medical records that demonstrated that plaintiff received continuing treatment after the accident. Accordingly, defendants' argument was waived and is unsupported by the evidence.   Defendants were entitled to dismissal of plaintiff's 90/180-day claim, based on the allegation in her bill of particulars that she was incapacitated from work for approximately four days after the accident, and her deposition testimony that she was confined to bed and home for approximately five weeks after the accident and was able to continue with work and studies in the relevant period.

 

06/07/18       Lazarri v. Qualconn Construction LLC

Appellate Division, First Department

Motor Vehicle Accident  in which Plaintiff’s Vehicle Struck the Bucket of a Parked Excavator on a Public Highway Fell under the Serious Injury Threshold

Plaintiff alleges he sustained serious injuries to his lumbar spine as the result of an accident in which his vehicle struck the bucket of a parked excavator/backhoe that was protruding into the roadway. The excavator was leased to defendant Qualcon, who was performing work for defendant Consolidated Edison. The Appellate Division found that the serious injury threshold applies because the action is between "covered persons.”  Defendants' excavator does not fall under the "self-propelled caterpillar or crawler-type equipment while being operated on the contract site" exclusion to the term "motor vehicle." While it is a "self-propelled caterpillar or crawler-type equipment", it was being operated on a "public highway," adjacent to and encroaching into the road on which plaintiff was driving. In addition, the accident arose out of the "use or operation" of the excavator, as the excavator was the "instrumentality" that produced plaintiff's injuries.  The fact that it was not being operated and was unattended at the time of the accident does not preclude application of the statute, as it was only temporarily parked during ongoing construction work.

 

With respect to the seriousness of plaintiff's injuries, the Appellate court found that defendants met their prima facie burden of demonstrating that plaintiff did not suffer a serious injury to his lumbar spine causally related to the accident. Defendants submitted the affirmed reports of a neurosurgeon and radiologist who both opined that the MRI and other radiological studies revealed existence of severe chronic degenerative disease and absence of a traumatic injury. Defendants also relied on plaintiff's testimony and medical records admitting his long-term history of degenerative lumbar spine conditions.

 

In opposition, plaintiff raised triable issues of fact sufficient to defeat summary judgment through the affirmation of his neurosurgeon. Contrary to defendants' contention, a certificate of conformity was not required since the physician is licensed to practice in New York and signed the affirmation in New York. The neurosurgeon acknowledged plaintiff's documented history of lower back problems, and explained that the accident aggravated plaintiff's preexisting conditions, causing new post-accident symptoms of bilateral weakness, urinary dysfunction and spinal instability that were not previously present and required emergency surgery. He concluded that the accident caused "significant deterioration." His findings, based on his review of the pre- and post-accident medical records, and his treatment of plaintiff, adequately ruled out the prior degenerative changes as the cause of the injuries. The neurosurgeon raised an issue of fact as to the existence of an injury involving "significant" limitation of use, which required surgical intervention. Plaintiff addressed his cessation of treatment after the surgery, and his neurosurgeon provided a qualitative assessment of plaintiff's continuing limitations in use of his lumbar spine during his recent examination of plaintiff.

 

06/05/18       Sosa-Sanchez v. Reyes

Appellate Division, First Department

Defendants’ Experts Opined Injuries Had Resolved and Plaintiff Had Full Range of Motion

Defendants met their initial burden by submitting the affirmed reports of a neurologist, an emergency medicine specialist, and a radiologist. Defendants' neurologist found full range of motion in plaintiff's spine and normal results on diagnostic tests, and opined that plaintiff's alleged injuries had resolved. Defendants' expert in emergency medicine opined that the records of plaintiff's emergency room visit demonstrated that any claimed injuries could not be causally related to the subject accident, and defendants' radiological expert opined that plaintiff's spinal conditions, including osteophytes and bony overgrowth, were degenerative in nature, and unrelated to the accident.

 

In opposition, plaintiff failed to raise an issue of fact. Plaintiff submitted his own unaffirmed MRI reports, which showed bulging and herniated discs, but also documented degenerative conditions such as bony ridge and spur formations and loss of disc hydration. Plaintiff's physician provided only a conclusory opinion that plaintiff's injuries were caused by the accident, without addressing the preexisting and degenerative conditions documented in plaintiff's own MRIs or explaining why plaintiff's current reported symptoms were not related to the preexisting conditions.

 

06/05/18       Holloman v. American United Transportation, Inc.

Appellate Division, First Department

Defendants’ Experts Found Degenerative Injuries, But Plaintiff Raised Issue of Fact

Defendants satisfied their initial burden of showing that plaintiff did not suffer serious injury to her cervical and lumbar spine through the affirmed report of their neurologist, who found normal ranges of motion and no objective evidence of injury. Defendants also submitted the affirmed report of a radiologist, who opined that the bulging discs and focal disc protrusions shown on the MRI films were symptomatic of chronic degenerative disc disease, unrelated to the accident.

 

In opposition, plaintiff raised an issue of fact through the affirmed report of her physiatrist, who found continuing range of motion limitations in the cervical and lumbar spine and causally related plaintiff's conditions to the accident Plaintiff's physiatrist adequately addressed the issue of causation by opining that the injuries were the direct result of the accident, and offering a different, yet equally plausible, explanation for them.

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

 

05/31/18       Louati v. State Farm Fire & Cas. Co.

Appellate Division, First Department

Existence of Coverage Dispute Precludes Initiation of Appraisal Process

The case has its origins in a water damage loss at plaintiff’s home.  If the water was resultant from a burst pipe, as alleged, the loss is covered.  However, it appears that State Farm is challenging the origin and cause of the loss on the basis that it might actually be excluded by the policy.  Thus, plaintiff and State Farm have a genuine controversy regarding the application of coverage to the loss.

 

In addition, the Court also advises that plaintiff and State Farm are also in a dispute regarding the extent of damage caused by the loss.  To wit, what needed to be replaced as a result of the damage. 

 

Without resolution of the coverage dispute, plaintiff nevertheless asserted a demand for appraisal.  When the carrier denied the appraisal request, plaintiff commenced the instant proceeding seeking to compel State Farm’s participation.  The Court agreed that the extent of the damage was an appropriate question for appraisal.  However, the Court also noted, and therein cited the long established rule, that coverage issues relating to the disputed damage must be resolved first.  Thus, with a standing coverage dispute, the demand for appraisal was premature and improper.

 

Peiper’s Point – We’re seeing this with increasing frequency.  Policyholders are seeking to circumvent the contractual provisions of the policy by arguing carriers must submit to appraisal.  The rule has been, and continues to be, coverage disputes are resolved first, at law, prior to damages appraisals. 
 

Potpourri

 

06/14/18       Cohen v. Sive, Paget & Riesel, P.C.

Appellate Division, First Department

Failure to Advise of Potential Coverage Can Lead to Legal Malpractice Claim

Plaintiff, apparently, commenced this legal malpractice claim after his underlying insurance claim was denied for failure to proffer timely notice.  From what we can gleam from a very short opinion, plaintiff maintains that his attorney should have advised him of the condition precedent requiring prompt notice of a claim.

Defendant maintained that regardless of whether they failed to advise of the notice requirement, any such failure was not a proximate cause of the loss of coverage as plaintiff’s notice was late prior to engaging counsel.  Unfortunately, the Record did not conclusively establish when notice could have been provided in relation to retention of counsel.  On this basis, defendant’s motion was denied.

 

Peiper’s Point – Lest there be any remaining debate.  If you are retained as counsel, it is your duty to search for, or the very least discuss, possible insurance coverage with new clients.  Failure to do so, as this case illustrates can lead to major problems.

 

06/07/18       Cent. Amusement Int’l, LLC v. Lexington Ins. Co.

Appellate Division, First Department

Plaintiff’s Inaction is Not a Defense to Oppose Defendant’s Motion to Amend

Plaintiff sought reversal of the trial court’s decision to permit Lexington to amend its Answer.  Plaintiff alleged that the change in the pleading was prejudicial because it was now time-barred from seeking relief via a professional malpractice claim against its engineer (we were not advised as to what the amendment changed). 

 

In affirming the trial court, the Appellate Division noted that plaintiff, in its own right, had the opportunity to investigate and evaluate the potential culpable conduct of its contractors.   This included its engineer.  As it never sought to prosecute an action against its engineer, even after Lexington’s defense became clearer with the disclosure of an expert report, plaintiff could not claim surprise or prejudice.

 

In so holding, the First Department also affirmed the trial court’s denial of plaintiff’s motion to renew where no new evidence was proffered in the application.

 

06/14/18       Lamela v. Verticon

Appellate Division, Third Department

Defense Strategy to Seek Indemnity of Non-Negligent Owner did not Preclude Indemnitor from Seeking Contribution from Potentially Negligent GC

Plaintiff was injured when he fell from a scissors lift while in the course of his employment with Lamela.  At the time of the incident, Satin was the owner of the premises and Verticon served as the General Contractor.  Accurate Refrigeration was a subcontractor who, in turn, retained Cooler Panel as a sub-subcontractor.  Unfortunately, Cooler’s employees were constructing a wall which collapsed.  The collapse struck the scissors lift and thereby “precipitated plaintiff to the ground” where he no doubt “sustained serious, severe and permanent injuries.” 

 

At the time of the incident, Accurate was insured by Hartford.  That policy also provided additional insured status to Verticon (GC) and Satin (owner).  Hartford retained counsel to represent Accurate, and separate counsel to represent Verticon and Satin.  Not surprisingly, the injured party was awarded summary judgment under his Labor Law 240(1) cause of action, and subsequently all parties agreed to final settlement of $3.2 million dollars with plaintiff.  Under the agreement, Verticon and Satin would pay $2,1999,999 of the loss.  Accurate contributed $1.00, and Cooler’s contributed $1,000,000. 

 

Lamela, as the injured party’s employer, was not a party to the settlement.  Counsel for Lamela, nevertheless, was present when the settlement was put on the record, and voiced objection at that time. 

 

After payments were finalized, Verticon and Satin immediately sought reimbursement from Lamela in a third-party action for contractual indemnity.  While there was a finding of fact as to Verticon’s potential negligence, Satin had been found to be negligence free (we presume).  As such, when summary judgment motions were filed it was ONLY Satin who moved for contractual indemnity against Lamela.  The trial court found that Satin, indeed, was entitled to summary judgment, and awarded recovery against Lamela. 

 

On appeal, while the Appellate Division reviewed several arguments presented by Lamela, most of which were made for the first time on appeal and thus not before the court, the trial court’s decision was affirmed.  The Third Department noted that the language of the indemnity provision was clear, and the fact was that it applied to the circumstances at bar. 

 

However, the Court was obviously aware of the strategy employed by Hartford vis-à-vis Satin.  The Court noted that while Satin was entitled to contractual indemnity, Lamela still had cross-claims for common law contribution/indemnity against Verticon, Cooler and Accurate.  Thus, while Lamela was responsible for its indemnity obligations to Satin, there was nothing prohibiting Lamela for its day in court seeking apportionment of the award among and between Cooler, Accurate and Verticon. 

 

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz

[email protected]

 

06/07/18       Certain Underwriting Members of Lloyds v. State of Florida

United States Court of Appeals, Second Circuit

Second Circuit Holds that Standard for Vacating Arbitration Award Differs if Arbitrators were Neutral or Party-Appointed, as per Agreement

Insurance Company of the Americas (“ICA”) insures workers compensation claims in the construction industry. Certain Underwriting Members of Lloyds of London (“Underwriters”) in turn provided ICA with second and third layer reinsurance coverage under a series of treaties. These treaties each contained an arbitration clause requiring that disputes be adjudicated by a panel of three members: one party-appointed arbitrator for each party and one neutral umpire. The only contractual qualification of the party-appointed members of that panel was that the arbitrators would “be active or retired disinterested executive officers of insurance or reinsurance companies or Lloyd’s London Underwriters”. Each party bore the cost of their own pick and ex parte communications were permitted.

 

When ICA requested over $12.5 million in coverage, stemming from numerous construction site injury claims it had paid out, Underwriters disclaimed and ICA sought to arbitrate. At the arbitration organizational meeting, each arbitrator was called to disclose pre-existing or concurrent relationships with a party. ICA’s choice vaguely discussed some tenuous prior dealings with ICA. However, after the fact it turned out that he had actually considerably more extensive pre-existing and concurrent relationships with ICA representatives. When the matter was litigated and Underwriters sought to vacate the award (that had been granted in ICA’s favor), at first the court sided with the Underwriters. Indeed, the district court thought that those undisclosed relationships were found to have been significant enough to demonstrate evident partiality.

 

However, the Second Circuit thought otherwise. Indeed, a neutral arbitrator is assessed under a different standard than a party-appointed one. Where a neutral arbitrator’s evident partiality would be sufficient grounds to vacate an award, a party-appointed one is essentially a de facto advocate for the party who chose him. They are supposed to be advocates for their side, but this is balanced by the presence of a multi-person panel. The rules that apply to neutrals do not apply in the same way to party-chosen individuals. Moreover, since arbitration is a creature of contract, courts must hold parties to their bargain. “Parties are free to choose for themselves to what lengths they will go in quest of impartiality, including the various degrees of partiality that inhere in the party-appointment feature.” Here, the parties chose how the panel would be selected. The only baseline limit to partiality could be said to be whether any undisclosed relationship was material and violated the arbitration agreement. For instance, if an arbitrator did not disclose the fact that they had a personal or financial stake in the outcome, or if the partiality had some sort of prejudicial effect on the award, that might be a problem. Otherwise, an award should not be set aside. Thus, the Second Circuit sent the case back down for further review in light of this set-forth standard.

 

JEN’S GEMS

Jennifer A. Ehman

[email protected]

 

Trial courts all quiet…

 

BARNAS ON BAD FAITH

Brian D. Barnas

[email protected]

 

06/08/18       Corle v. Allstate Insurance Company

Appellate Division, Fourth Department

Bad Faith Claim by the Underlying Plaintiff was not Barred by Res Judicata because the Underlying Plaintiff did not have Standing to bring a Bad Faith Cause of Action against the Insurer at the Time it Commenced a Direct Action under Insurance Law § 3420

Plaintiff Colin Corle was accidently shot by Jeoffrey Lee Bauter Teeter, who was insured under a policy issued by Allstate.  James Corle commenced a proceeding on behalf of Colin against Teeter and his father.  Allstate disclaimed coverage, asserting that the shooting as not a covered loss under the policy.  Corle ultimately obtained a judgment in excess of $350,000.

 

Corle then brought a direct action against defendant as an injured person/judgment creditor under Insurance Law § 3420 (a)(2) and (b)(1). In that action, the court determined that the accidental shooting was a covered loss under the insurance policy and awarded Corle the $50,000 policy limits of the Teeters’ liability policy.

 

Thereafter, the Teeters assigned all of their rights and claims against defendant to the Corle who commenced this action alleging that defendant disclaimed coverage in bad faith.  Allstate moved to dismiss, arguing that the action was barred by res judicata and that the Complaint failed to state a cause of action.

 

The Fourth Department concluded that dismissal was not warranted based on res judicata.  The court determined that the failure of Corle to litigate the bad faith claim in the prior direct action did not bar litigation of that claim.  The court concluded that an injured party commencing a direct action under Insurance Law § 3420 (a)(2) and (b)(1) is limited to recovering the policy limits of the insured’s policy.  However, if the insured assigns his or her rights under the insurance contract to the injured party/judgment creditor, then the injured party/judgment creditor may simultaneously bring a direct action against the insurer pursuant to Insurance Law § 3420 (a) (2) along with any other appropriate claim, including a bad faith claim, seeking a judgment in a total amount beyond the insured’s policy limits.

 

Here, when Corle commenced the direct action, the Teeters had not yet assigned their rights under the insurance contract.  As a result, Corle did not have standing to bring a bad faith claim.  Accordingly, the court concluded that the doctrine of res judicata did not apply.

 

Importantly, the Fourth Department noted that the First Department has held otherwise under similar facts in Cirone v. Tower Ins. Co. of N.Y.  However, the court declined to follow the First Department’s ruling in Cirone.

 

The court also concluded that the motion to dismiss the bad faith claim should not have been dismissed for failure to state a cause of action.  The facts alleged in the Complaint sufficiently stated a cause of action for bad faith.

 

05/29/18       Rooftop Restoration, Inc. v. American Family Mutual Insurance

Supreme Court of Colorado

Statutory Claim for Unreasonable Delay or Denial of Insurance Benefits is not governed by the One-Year Statute of Limitations for Penalties

Denish and Betty Jo Chastain held an insurance policy issued by the defendant, American Family.  On August 30, 2013, the Chastains submitted a claim to American Family for hail damage to their roof.  American Family inspected the Chastains' home and on September 3, 2013, estimated that the cost to repair the hail damage was less than the policy's $1000 deductible.  The Chastains disagreed with American Family's estimate and subsequently assigned their claim against American Family to their contractor, the plaintiff in this case, Rooftop.

 

On May 13, 2014, Rooftop sent American Family an estimate which indicated that the cost to repair the hail damage was approximately $70,000.  On May 28, 2014, American Family re-inspected the Chastains' home and increased its estimate of the covered damage to approximately $4000.  American Family sent the Chastains a payment for approximately $3000-$4000 less their $1000 deductible—on May 30, 2014.

 

More than one year later, on September 11, 2015, Rooftop filed a complaint against American Family in Denver District Court asserting two claims for relief: (1) breach of contract; and (2) unreasonable delay or denial of insurance benefits under section 10-3-1116(1).  American Family removed the case to federal district court and moved for partial summary judgment, arguing that Rooftop's statutory claim for unreasonable delay or denial of insurance benefits under section 10-3-1116(1) was barred by the one-year statute of limitations provided in section 13-80-103(1)(d).

 

The one-year statute of limitations in section 13-80-103(1)(d) applies to "[a]ll actions for any penalty or forfeiture of any penal statutes."  In this instance, after consulting an intimately related provision of state law, the court concluded that the legislature did not intend for the one-year statute of limitations found in section 13-80-103(1)(d) to apply to section 10-3-1116(1).

 

The Colorado Supreme Court paid particular attention to the interplay between the one-year statute of limitations, section 13-80-103(1)(d), and the accrual statute, section 13-80-108.  The accrual statute provides that a cause of action for penalties shall be deemed to accrue when the determination of overpayment or delinquency for which such penalties are assessed is no longer subject to appeal.  A cause of action under section 10-3-1116(1), however, never leads to a determination of overpayment or delinquency.  Thus, if such a claim is deemed a cause of action for penalties in the meaning of section 13-80-108(9), the claim would never accrue, and the statute of limitations would be rendered meaningless.  Consequently, it appears that the legislature considered a defining feature of a cause of action for penalties to be a determination of either overpayment or delinquency and that defining feature is conspicuously absent from a cause of action under section 10-3-1116(1), where an insured must only file a complaint alleging that an insurer delayed or denied the payment of insurance benefits without a reasonable basis.

 

Accordingly, the court held that the one-year statute of limitations found in section 13-80-103(1)(d) does not apply to a cause of action brought pursuant to section 10-3-1116(1).

 

JOHN’S JERSEY JOURNAL
John R. Ewell

[email protected]

 

06/01/18       Barnes v. USAA Ins. Co.

Superior Court of New Jersey, Appellate Division

New Jersey Appellate Division Confirms No UM/UIM Coverage For ATV Accident

Plaintiff, a minor, was a passenger on the back of the ATV that was driven by her friend and owned by her friend’s parents. The ATV was speeding on a public road and then went up and over a berm at the end of a drainage basin, which was utilized as a ramp.

 

The vehicle became airborne resulting in plaintiff’s ejection from the vehicle on to the ground. Plaintiff sustained injuries, and filed a UIM claim under her parent’s insurance automobile policy with USAA. The automobile policy stated that: “Uninsured Motor Vehicle and Underinsured Motor Vehicle do not include any vehicle or equipment: . . . 4. Designed mainly for use off public roads while not on public roads.”

 

Plaintiff argued that she was entitled to UIM coverage, arguing that the accident resulted from public road use. Alternatively, plaintiff contended that the issue of whether the accident occurred on a public road was a disputed material fact that should have been determined by a factfinder at trial. The trial court held that plaintiff was not entitled to UIM coverage because the accident did not happen on a public road.

 

On appeal, the Appellate Division refined the analysis by reviewing the particular policy language and then considering whether an ATV is a vehicle “designed mainly for use off public roads”. The Appellate Division reviewed the owner’s manual for the ATV. The owner’s manual made it clear that the vehicle was meant for off-road use, warned riders to "never operate an ATV on a public street, road or highway, including a dirt or gravel road" because “ATV tires are designed for off-road use.” The Appellate Division found that the ATV was designed for off-road use and that the accident did not occur on a public roadway. Therefore, the Appellate Division affirmed that there was no UIM coverage under the policy.

 

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

 

05/31/18       Parker v. USAA Ins. Co. and GEICO

U.S. District Court, District of New Jersey

New Jersey Federal Court Applies Long-Standing Rule that UIM Carriers Are Entitled to Credit for Any Amount Recovered from Tortfeasor’s Liability Insurer

Plaintiff Alvin Parker Jr. (“Parker”) was injured in an auto accident. Parker was driving his mother’s vehicle when another driver crashed into him. At the time, Parker’s mother had automobile insurance coverage with GEICO and Parker had automobile insurance coverage with USAA. It was undisputed that under the terms of the insurance policies, GEICO was the primary insurer and USAA was the excess insurer.

 

The other driver was determined to be at fault, and his insurance company settled with Parker for $100,000, which was the limit of the policy. The GEICO policy provided UIM coverage up to $100,000. Plaintiff’s USAA policy provided UIM coverage up to $300,000. The parties did not dispute that Parker is owed $200,000 beyond the $100,000 he received from the tortfeasor’s liability insurer. The two carriers disputed how that $200,000 would be apportioned. USAA argued for pro-rata allocation while GEICO contended that USAA was responsible for the entire $200,000.

 

GEICO moved for summary judgment arguing that it was not obligated to pay Parker anything. GEICO contended that it was entitled to a $100,000 credit due to $100,000 Parker recovered from the tortfeasor’s liability insurer (i.e., a credit up to the limits of the GEICO policy). As such, there would be zero UIM coverage under the GEICO policy. USAA argued, however, that the relevant portions of the GEICO policy require pro rata sharing between GEICO and USAA of UIM obligations. The fatal flaw in USAA’s argument was that it cited to the Other Insurance clause in the Uninsured Motorist coverage part. However, this case did not involve an uninsured motorist, but rather an underinsured motorist.

 

Moreover, New Jersey law concerning set-offs against UIM coverage supported GEICO’s position. In New Jersey, an UIM carrier is entitled to credit for any amount recovered by the insured from the tortfeasor or his/her liability insurer. The District Court granted summary judgment to GEICO and denied USAA’s cross-motion.

 

ALTMAN’S ADMINISTRATIVE (AND LEGISLATIVE) AGENDA

Howard B. Altman

[email protected]

 

DFS New Proposed Supplemental Uninsured Motorist (SUM) Bill

DFS has now finalized and published its new proposed Supplemental Uninsured Motorist (“SUM”) Bill.  The ppublic comment period expires on July 30, 2018. As the Bill goes into effect on June 16, 2018, however, this may render many comments moot. This, carriers or consumers wishing to comment may want to do so immediately.

 

DFS directs inquiries to Paul Zuckerman and references resources on its website.

 

You may also contact the New York  Insurance Association (NYIA) by contacting NYIA Director of Government Affairs, Javier R. Tapia.

 

The Senate version of the Bill, along with its prior amendments may be viewed at its web pages.

 

The final Assembly version may be viewed on its website as well.

 

As we reported, the Bill requires all insurance policies issued after June 16, 2018 to automatically include SUM coverage, unless the insured specifically requests to opt out. 

 

This regulation does not appear to grant carriers the option of rolling-up SUM to match BI coverage, despite the fact the Letter or Intent indicated that this option should be available.

 

The Bill will require 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. NB: The new law does not apply to commercial risk policies.

 

The law, as amended, provides, in part:

 

Section 60-2.0 is amended as follows:

 

§ 60-2.0 Preamble, definitions, and applicability.

 

(a) (1) Except as provided in paragraph (2) of this subdivision, this Subpart implements:

 

(i) Insurance Law section 3420(f)(2), which requires a motor vehicle liability insurer to provide, at the option of the insured, supplementary uninsured/underinsured motorists (SUM) insurance coverage to all policyholders in New York State; and

 

(ii) Vehicle and Traffic Law section 1693(3), which requires minimum

SUM coverage on all policies satisfying the financial responsibility requirements of that subsection.

 

(2) This Subpart also implements Insurance Law section 3420(f)(2-a), which requires an insurer that issues a motor vehicle liability insurance policy originally entered into on or after June 16, 2018, other than a commercial risk insurance policy, to provide SUM insurance for bodily injury, in an amount equal to the bodily injury liability insurance limits of coverage provided under the motor vehicle liability insurance policy, unless the first named insured declines the SUM insurance or selects a lower amount of coverage through a written, signed waiver; provided, however, the insurer may require that the insured’s SUM coverage limit equal the insured’s bodily injury liability insurance limit under the policy.

 

(b) This Subpart interprets Insurance Law sections 3420(f)(2), (2-a), and (5), and establishes a standard form for SUM coverage, in order to eliminate ambiguity, minimize confusion and maximize its utility.

 

***

 

(d) As used in this Subpart:

 

***

 

(2) commercial risk insurance means insurance against losses or liabilities arising out of the ownership, operation, or use of a motor vehicle, other than a motor vehicle predominantly used for non-business purposes when a natural person is the named insured under the policy, provided, however, that the use or operation of the motor vehicle by a transportation network company driver in accordance with Vehicle and Traffic Law Article 44-B shall not be included in determining whether the motor vehicle is being used predominantly for non-business purposes; and

 

(3) first named insured means 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.

 

(e) This Subpart applies to every insurance policy: (i) insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any natural person arising out of the ownership, maintenance and use of a motor vehicle, by the insured; and (ii) issued or delivered by any insurer upon any motor vehicle then principally garaged or principally used in this state.

 

***

 

Section 60-2.1(e) is amended, section 60-2.1(f) is relettered as (g), and new sections 60-2.1(f) and (h) are added as follows:

 

(e) Except as provided in subdivision (f) of this section:

 

(1) An insurer shall offer:

 

(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.

 

(3) An insurer may offer SUM limits that exceed the amounts specified in paragraph (1) or (2) of this subdivision.

 

***

 

(f)(1) With regard to a motor vehicle liability insurance policy originally entered into on or after June 16, 2018 other than a commercial risk insurance policy, an insurer shall provide SUM limits in an amount equal to the bodily injury liability insurance limits of coverage provided under the motor vehicle liability insurance policy unless a first named insured declines the SUM coverage or selects a lower amount of coverage through a written waiver signed by the first named insured, subject to the requirements of Insurance Law section 3420(f)(2-a)(B); provided however, the insurer may require that the insured’s SUM coverage limit be equal to the insured’s bodily injury liability insurance limit under the policy.

 

(2) A first named insured’s signed written waiver declining SUM coverage or selecting a lower amount of SUM coverage shall apply to all subsequent renewals of coverage and to all policies or endorsements that extend, change, supersede, or replace an existing policy issued to the first named insured, unless changed in writing by a first named insured.

 

(3) Whenever SUM coverage is declined, the policy shall provide the mandatory uninsured motorists (UM) coverage required by Insurance Law section 3420(f)(1).

 

***

 

The public comment period is open until July 30, 2018, however, as the law will apply to policies issued after June 16, 2018.

 

OFF THE MARK
Brian F. Mark

[email protected]

 

06/06/18       Lenick Constr., Inc. v. Selective Way Ins. Co.

United States Court of Appeals, Third Circuit
US Court of Appeals Holds Insurer had no Duty to Defend or Indemnify its Insured in Underlying Action Where Insured’s Own Faulty Workmanship was the Only Legal Theory Under Which the Insured Could be Held Liable

This declaratory-judgment action arises out of an underlying construction defects action involving the construction of a condominium development.  A number of entities, collectively referred to as Westrum, were hired as the general contractor for the 92-unit development, and it subcontracted with Lenick Construction, Inc. (“Lenick”) to perform rough and finish carpentry and to install paneling, windows, and doors provided by the developer.  Upon completion of the project, it was discovered that some units experienced water infiltration, leaks, and cracked drywall.

 

In the underlying action, the Villas at Packer Park Condominium Association sued Westrum alleging contract and warranty claims.  Westrum impleaded Lenick (and others), asserting claims for breach of contract and indemnification.

 

Soon after being named as a defendant, Lenick notified its insurer, Selective Way Insurance Company (“Selective”) of the claims, claiming that the commercial general liability (CGL) policy in effect when the defects were discovered entitled Lenick to defense and indemnification.  Selective initially denied Lenick's request, but eventually agreed to defend Lenick, subject to a reservation of rights.

 

In response to Selective’s reservation of rights, Lenick commenced a declaratory-judgment action seeking a declaration that Selective was obliged to defend and indemnify Lenick.  After removal to federal court, the parties filed cross-motions for summary judgment regarding Selective's duty to defend.  Selective also sought summary judgment on its duty to indemnify.  The District Court concluded that the allegations against Lenick were not covered under its CGL policy.  As such, the District Court held that Selective had no duty to defend or indemnify Lenick.  Thereafter, Lenick filed an appeal.

 

In determining whether a duty to defend existed, the Court of Appeals first reviewed the policy language to determine when it provides coverage, and then examined the underlying complaint against the insured to determine whether the allegations triggered coverage.

 

The Selective policy at issue insured against bodily injury and property damage caused by an "occurrence," which was defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."  Lenick argued that the pleadings established occurrences under Pennsylvania law in three ways: (1) the damage occurred to areas of the property on which Lenick did not work, (2) the damage was caused by work performed by other subcontractors, and (3) the damage was caused by defects in the materials that Lenick used rather than by its own faulty workmanship.  In response, Selective argued that Lenick's liability arises from its own faulty workmanship, which is not covered as an occurrence under the policy.

 

Lenick acknowledged that under Pennsylvania law, there is no occurrence when the complaint alleges only property damage from poor workmanship to the work product itself.  However, Lenick pointed out that the various complaints identified leaks, water infiltration, and cracked drywall, which were unrelated to Lenick's work.  Lenick argued that, if presented with this question, the Pennsylvania Supreme Court would find that "consequential damages beyond the work itself are 'occurrences' under CGL policies."  The Court of Appeals disagreed and noted prior case law holding that damages that are a reasonably foreseeable result of the faulty workmanship are not covered, even when such damage occurs to areas outside the work provided by the insured.  The Court further noted that as the Pennsylvania Supreme Court has not subsequently issued a contrary opinion, the case law referenced by the Court still controls.

 

With regard to Lenick’s second argument, the Court of Appeals disregarded the affidavits Lenick relied on and looked only at the allegations against Lenick in the underlying complaints.  The Court noted and agreed with the District Court’s findings that although the various complaints asserted that others may be liable for the property damage, they did not allege that Lenick should be held liable for the faulty products or poor workmanship of others and that Lenick's own faulty workmanship was the only legal theory under which Lenick, as opposed to other contractors or subcontractors, could be found liable.

 

Lastly, the Court of Appeals held that Lenick's argument that the property damage was caused by defects in the materials provided to it by the developer lacked support in the underlying pleadings.  The Court noted that Lenick pointed only to extrinsic evidence to support this argument.  Because the underlying pleadings did not contain allegations sufficient to support a claim that the windows, doors, and/or panels used by Lenick "actively malfunctioned, directly and proximately causing" the property damage to the project, the Court found that such an argument fails.  Accordingly, the Court affirmed the District Court’s decision holding that Selective had no duty to defend or indemnify Lenick relative to the underlying action.

 

WANDERING WATERS

Larry E. Waters
[email protected]

 

06/04/18       Perez v. Foremost Insurance Company and Charles Barling

United States District Court, Western District of New York

Plaintiff’s Motion to Remand Declaratory Judgment Action to State Court Denied

Plaintiff was injured when she slipped and fell while stepping out of the bathtub at her mother’s apartment, which was owned by Defendant Charles Barling (“Barling”). New York State Supreme Court awarded Plaintiff a net verdict of $75,000 against Barling with costs and disbursements of $1,951.50.  On June 20, 2017, the court entered judgment in the aggregate amount of $76,951 with interest on the judgment awarded at 9 percent per year from May 26, 2017.

 

Following the State Court’s decision, Plaintiff commenced this declaratory judgment action in state court against Barling and his insurance company, Defendant Foremost Insurance Company (“Foremost”).  Prior to this declaratory judgment action, Foremost declined liability coverage.  On October 3, 2017, Foremost removed this declaratory judgment action to federal court.  On October 31, 2017, Plaintiff moved for remand to state court on the basis that the amount in controversy did not exceed $75,000 exclusive of interest and costs and the “rule of unanimity” was not satisfied.

 

In analyzing Plaintiff’s first argument, the court noted that “[i]n declaratory judgment actions, the amount in controversy is measured by the value of the object of the litigation.”  Plaintiff argued since the court’s verdict was only $75,000 and that $1,951.50 was awarded in costs and disbursements, the amount in controversy was not met.  The court rejected this argument.  The court reasoned that the disbursements and costs at issue were those incurred in the underlying state action and were included in the judgment now at issue.  The court concluded that the costs are considered in determining the jurisdictional amount.  Accordingly, the amount in controversy exceeded $75,000. 

 

Next, the court considered Plaintiff’s second argument that Foremost did not satisfy the “rule of unanimity” upon removal.  Plaintiff contended that Barling’s interests are not aligned with hers because Barling and Plaintiff were adversaries in the underlying state case and are adversaries in the pending state appeal.  Further, Plaintiff contended that the “rule of unanimity” was not satisfied as Barling did not consent to removal.  In opposition, Foremost argued that Barling should be realigned as a plaintiff since Barling and Plaintiff’s interest are shared and therefore the “rule of unanimity” would be satisfied. 

 

In its analysis the court noted Courts are permitted to realign parties to ensure that the case truly involves the kind of adversarial relationship constitutionally required in a case or controversy in federal courts.  Further, the court noted that the “normal alignment of parties in a suit seeking a declaratory judgment of non-coverage is Insurer versus Insured and Injured Party.”  Given the case law available, the court rejected Plaintiff’s argument because Barling and Plaintiff’s interest were aligned.  The court reasoned that Plaintiff’s success in the declaratory action would be to the benefit of Barling. 

 

In sum, the court denied Plaintiff’s motion to remand because the amount in controversy and the “rule of unanimity” requirements were met for proper diversity jurisdiction.

 

06/11/18       AmTrust North America, Inc., et al v. KF&B, Inc.

United States District Court, Southern District of New York

Plaintiff’s Motion to Dismiss Defendant’s Counterclaim Denied Because the Disputed Terms of the Written Contract Were Ambiguous

In July 2011, Plaintiff AmTrust North American, Inc., (“AmTrust”) and Defendant KF&B, Inc., (“KF&B”) entered into a written contract for KF&B to serve as the program manager and underwriter for one of AmTrust’s insurance programs.  During the course of the relationship, the parties amended two parts of the written contract several times including the documents titled “Managing Producer Agreement” (“MPA”) and the “Addendum to Managing Producer Agreement Number 1” (“Addendum”).   

 

The current controversy arose out of the “Program Name/Subject Business” section of the Addendum Endorsement 2.  Two terms were undefined including the “dedicated program manager” and “AmTrust’s Specialty Program segment.”  KF&B’s Amended Counterclaim alleged that the term “dedicated” meant exclusive and the term “AmTrust Specialty Program” referred to the KF&B’s Limousine and Taxi Program. 

 

AmTrust moved to dismiss KF&B’s Counterclaim for failure to state a claim upon which relief can be granted.  Specifically, AmTrust put forth two points for dismissal.  AmTrust first argued that the MPA and Addendum as amended do not include an exclusivity provision.  Second, AmTrust argued that even if the contract does not require exclusivity, the Counterclaim does not allege any conduct that would violate such provision.

 

The court began its analysis by noting, “ambiguity is determined by looking within the four corners of the documents, [and] not to outside sources.”  AmTrust argued that the meaning of Endorsement 2 of the Addendum did not create an exclusivity provision as KF&B alleged.  In support, AmTrust argued two points. First, AmTrust argued that the Addendum Endorsement 2 does not contain any language modifying the MPA.  Second, AmTrust argued that the meaning of “dedicated program manager” is defined in the provision, which obligated KF&B to submit all Subject Business to AmTrust.  Further, AmTrust contended that pursuant to Addendum Endorsement 2 AmTrust had exclusive rights to KF&B’s business.

 

Despite agreeing that AmTrust’s interpretations of the subject provisions was the more natural reading of the contractual language, the court concluded that the contract language cannot be deemed unambiguous on its face.  The court reasoned that KF&B offered a plausible argument for an alternative interpretation.  The court accepted that “dedicated” could be given its ordinary meaning as “exclusively allocated to or intended for particular purpose.” 

 

The court glossed over AmTrust’s alternative argument that “even if it did agree to give KB&F some sort of exclusivity right none of AmTrust’s alleged conduct violates that purported commitment.” The court reasoned that since it previously concluded that the meaning of the subject provision is ambiguous, the court could not conclude that the same provision unambiguously sanctions AmTrust’s alleged conduct. 

 

In sum, the court denied AmTrust’s motion to dismiss the Amended Counterclaim.  

 

BORON’S BENCHMARKS

Eric T. Boron

[email protected]

 

06/01/18       Walnut Creek Townhome Assoc. v. Depositors Insurance Co.

Supreme Court of Iowa

Property Insurance: Factual Loss Causation Issues May Be Decided Through the Appraisal Process

The Supreme Court of Iowa ruled the trial court erred in disregarding an appraisal award’s determination of the amount of the insured’s loss for roof shingles damaged by a hailstorm.  The Supreme Court held that appraisers may determine the factual cause of damage to insured property to ascertain the amount of the loss, and that the appraisal panel’s determination of damage causation issues is binding on the parties.  

 

The decision did reiterate that “[C]overage questions are for the court.” The case has been remanded for adjudication of coverage exclusions. 

 

The appraisal held to be binding on the parties only considered the extent of hail damage to the shingles.  The appraisal did not address the extent of pre-existing shingle damage/defect, which would be excluded from coverage through the insurance policy’s anti-concurrent cause provision. That issue remains to be decided at the district court on remand.

 

The section of the Supreme Court of Iowa’s opinion labeled “Analysis” provides an overview of the insurance policy provision and case law applying the standard policy language.  Notably, the appraisal provision in the Iowa Code is based upon the 1943 New York Standard Fire Policy adopted in most states.  The decision recites that the only states that have not adopted the New York Standard Fire Policy are Massachusetts, New Hampshire, Minnesota, and Texas. 

 

The Supreme Court of Iowa noted “courts across the country are divided as to whether, in determining the ‘amount of loss’ pursuant to appraisal provisions like the one here, appraisers may consider questions of causation.” The court determined that although “some” courts (citing decisions from Illinois, Alabama, and Mississippi) view causation questions as off-limits for appraiser because determining causation is within the exclusive purview of the courts, the “better-reasoned cases” recognize appraisers necessarily address causation when determining the amount of loss from an insured event.  Perhaps not surprisingly, two of the three so-called “better-reasoned cases” were decided by courts in Texas and Minnesota, states which have not adopted the New York Standard Fire Policy.      

 

New York coverage geeks will recall that pursuant to New York’s Insurance Law § 3408(c), a property insurer or an insured can petition the court, notwithstanding policy provisions, demanding appraisal.   The statute indicates that appraisers shall determine the “amount of the loss.”  Notably, lobbying efforts from the plaintiffs’ bar led to the New York Legislature amending the statute in 2014 to permit appraisers to decide the “extent of the loss or damage.” In doing so, New York’s Legislature also acknowledged that an appraisal is only appropriate to determine issues relating to damages, and that “an appraisal shall not determine whether the policy actually provides coverage for any portion of the claimed loss or damage.” No surprise that more and more insureds in New York, egged on by their public adjusters and/or attorneys, are aggressively pursuing appraisal, even in cases where coverage was disputed by the insurer.

 

Yours truly believes that notwithstanding the recent statutory amendments, under New York law when insureds assert the only issue to be decided is the scope of damages, BUT there are in truth unresolved issues relating to the cause of the loss, a court should require that policy coverage issues be resolved before the parties can seek an appraisal. This is because it remains well established in New York that coverage issues cannot be decided in an appraisal. After all, New York’s Insurance Law § 3408(c), begins by saying, “[I]n the event of a covered loss…”, setting forth language that clearly conditions the submission of a dispute to appraisal on a determination that the loss claimed is in fact covered by the insurance policy.  

 

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

 

03/26/18       Keodalah v. Allstate Insurance Company  

Court of Appeals, Washington State

Alleged Potential Liability of Adjustors for Bad Faith

This case arising from a relatively routine motor vehicle claim established that in the State of Washington an insurance adjuster might have potential personal liability for “bad faith” under that State’s bad faith statute and Consumer Protection Act.

 

Keodalah and a motorcyclist were involved in a collision which injured Keodalah and killed the motorcyclist. Keodalah had Allstate insurance with underinsured motorist coverage (“UIM”) and the motorcyclist was uninsured. The Seattle police department investigated the collision and found that the motorcyclist was at fault. Allstate also investigated the collision finding that the motorcyclist was at fault. Keodalah requested Allstate to pay him the limit of his UIM policy ($25,000), but Allstate refused. Keodalah sued Allstate on the UIM claim and the case actually proceeded to a jury trial wherein Allstate contended that Keodalah was 70% at fault. The jury, however, determined the motorcyclist to be 100% at fault and awarded Keodalah $108,000.

 

Keodalah then filed a second lawsuit against Allstate AND the claims adjustor including for violations of the Washington bad faith statute and Consumer Protection Act violations. Allstate moved to dismiss the complaint, the trial court granted the motion by dismissing the claims against the adjustor personally, but the case was then certified for review by the Appellate Court. The two issues presented to the Appellate Court presented “unresolved” legal questions on which other courts had divided. The result of this decision, however, was that the trial court ruling was reversed and, at least potentially, Keodalah might have personal claims against the adjustor based on the Washington bad faith statute and the Consumer Protection Act.

 

With respect to the bad faith statute, it imposes a duty of good faith “on all persons” involved in insurance, including the insurer and its representatives. Some courts had interpreted this statute to permit claims against corporate and insurance adjusters, but others did not. The Court here held that the statute imposes a duty of good faith on corporate and individual insurance adjusters seemingly honoring the strict language of the statute.

 

Likewise, the Court then reviewed the claims under the Consumer Protection Act. The key point in dispute was whether a contractual relationship or privity was required in order for a consumer / customer to assert a claim under the CPA. The Court ruled that the plaintiff did not need to show the existence of a contractual relationship with the adjuster in order to assert a CPA claim.

 

This case was decided on a preliminary motion to dismiss and ruled that under the referenced statutes the plaintiff potentially had a claim against the adjustor personally. This case did not dispose of or completely adjudicate such claims, but ruled as a matter of law and statutory interpretation that the statutes contained broad enough language to assert potential individual liability against the adjustor.

 

This case also represents the importance of examining specific state laws and regulations when defending or analyzing bad faith claims since they can contain a wide variety of language, provisions, penalties, definitions, etc.

 

This case also represents the extreme level to which bad faith claims are currently being asserted against insurance companies even in this case to asserting a potential claim against the adjustor involved personally. In retrospect, it must be considered whether paying the policy limits of $25,000 on the UIM coverage might have avoided a great deal of litigation and negative outcome and precedent.

 

This case also stands as an advice and warning in analyzing and defending bad faith claims to consider the extent of potential regulatory and statutory sanctions against the carrier and the adjustor, such as loss of authority to operate, loss of license, monetary fines and penalties, and the like, that may exist in a given jurisdiction.  

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