Coverage Pointers - Volume XIX, No. 3

Volume XIX, No. 3 (No. 486)

Friday, July 28, 2017

A Biweekly Electronic Newsletter


Hurwitz & Fine, P.C.

1300 Liberty Building

Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874


Long Island Office:

535 Broad Hollow

Melville, New York 11747

Phone: 631-465-0700

Fax: 631-465-0313

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

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


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


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


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


Dear Coverage Pointers Subscribers:


Do you have a situation?  We love situations.  We embrace them, we help resolve them.  Have one?  Give any one of us a call and we’ll work through it with you.


Now, welcome, welcome to another edition of your Coverage Pointers!  This week finds Dan circumnavigating the world (ok, an exaggeration – he’s just in Europe), so this version has been lovingly prepared by your other editors Jen Ehman and Agnes Wilewicz (that’s me).  We hope to have done even half as excellent a job as Dan does every other week.


This time around, we bring you another CP chock-full of up-to-date case summaries, legislative updates, and some of the latest news from our coverage team.  Any questions?  All of our contact information is listed in the cover notes below, as well as in the edition itself, which is the document attached.


Though summer vacation season is in full swing, now is the time to start thinking about booking some continuing education for the fall.  Does your company or firm have an interest in a lunch-and-learn coverage update seminar?  We have dozens of potential presentations that might interest you and your team, from hour-long briefings to all-day courses.  We can even customize the materials for your particular needs.  Drop us a line, and we would be happy to work with you to make it happen.  We always love putting faces to names and meeting with our coverage colleagues.


Let us know!  We are here for you.


Kohane’s Coverage Corner:


I take the role of a columnist today, leaving major responsibility for this issue to Agnes Wilewicz and Jen Ehman.  I will receive my copy of the newsletter in Montreux, Switzerland, where I am attending the FDCC Annual Meeting.  Time zone changes provide production challenges, so for once, you can’t blame me for the content!


I want to write to you about two bills that have passed both houses of the New York State Legislature and are heading to the Governor for his approval or veto.  They deserve your attention.


American Law Institute:


I was honored by election to membership in the American Law Institute this week, one of 58 elected nationwide. 


Venue Bill Heading to Governor’s Desk – Urging Letter Writing Campaign to Ask Governor to Veto – Talking Points:


RE:     A. 8032 (Rosenthal)/S. 6031 (Ranzenhofer)


For those not schooled on the topic of “venue”, rules relating to venue tell the courts and litigants where they may bring a lawsuit over a party over which they can secure jurisdiction.  It is “forum shopping” or foreign selection legislation.


Current venue rules have been in place for many years and for state court civil cases involving non-municipal defendants, there is a statute that provides venue protocols. CPLR 503(a) derives from the old Civil Practice Act and the basic venue rules have remained virtually unchanged for well over 50 years.  There is no evidence that the rules, easily and readily understandable, need to be changed.  The statute provides clear instructions to parties and to the court as to where civil lawsuits may be commenced:


CPLR 503 (a) Generally. Except where otherwise prescribed by law, the place of trial shall be in the county in which one of the parties resided when it was commenced; or, if none of the parties then resided in the state, in any county designated by the plaintiff. A party resident in more than one county shall be deemed a resident of each such county. (emphasis added).


So, if the plaintiff lives in the Bronx (or a defendant resides there), she or he can bring a personal injury case in that county, assuming jurisdiction can be obtained over the defendants.  However, if there is an accident in the Bronx but none of the parties reside there, the lawsuit cannot be commenced in the Bronx, but only in one of the counties where a party resides (unless none reside in New York State).


It provides neither advantage nor disadvantage to any party, although the plaintiff has the option of selecting the proper venue where it feels it may have the greatest chance of success.  It requires that a lawsuit must be filed where at least one of the parties resides and, if a party resides in more than one county, any proper county can be selected.


The statute provides a rule that is easy to understand and provides a logical nexus between the parties and the jurisdiction.  It guarantees that at least one of the parties to the lawsuit has a regular and important connection to the jurisdiction where the jurors will be selected.


The bill identified above, strongly supported by the plaintiff’s bar, which passed both houses in the waning days of the legislative session without the opportunity for debate, does nothing but open the courts to forum shopping.  It adds a provision to allow the suit to be filed in the “county in which a substantial part of the events or omissions giving rise to the claim occurred.”  The terms are completely undefined and give the plaintiff, who selects venue, the opportunity to choose virtually any county with any connection, no matter how tenuously connected to the incident giving rise to the litigation.

What does the phase “substantial part of the events or omissions giving rise to the claim” mean?  Most importantly, what kind of disadvantage can this legislation impose on New York residents?

  • An Albany logistics company is asked by a Bronx resident to deliver goods from Albany to Chautauqua County and in Mayville there is an accident with a Chautauqua County pedestrian.  The pedestrian sues the Albany driver in the Bronx because a “substantial part of the events” took place there.

  • A Chemung County products manufacturer purchases parts from a Brooklyn supplier and installed those parts improperly in a Chemung County manufactured product.  The product is sold to a Monroe County resident who was injured.  Can the case be properly venued in Kings County, even though the parts were perfectly made and the Brooklyn supplier is not a party?

  • An auto accident occurs in Monroe County involving a Suffolk County resident passing through Rochester on the way to visiting friends in Buffalo.  With insurance coverage issues involved, the auto insurer, with its home office in New York City, sues the declaratory judgment action in Monroe County where the accident occurred, surely permissible under the proposed amendments.  

  • A local business in Clarence, New York, sells a bicycle tire to a Clarence resident.  She is using the tire in a charity race in Queens when she had a flat tire and is injured.  This bill, if adopted, would permit her to sue the company in Queens, simply because the accident occurred there.

Parties are not without remedy to change venue, if there is a real need.  CPLR Section 510 provides a protocol and a solution, if there is a real reason to change venue.


The court, upon motion, may change the place of trial of an action where:


1.   the county designated for that purpose is not a proper county; or

2.   there is reason to believe that an impartial trial cannot be had in the proper county; or

3.   the convenience of material witnesses and the ends of justice will be promoted by the change.


What if a plaintiff claims some sort of corporate or top down policy or practice leading to the harm?  How will the courts determine where the “events or omissions” took place?  How will they measure whether they were a “substantial part?”  In a products liability case, will the plaintiff be able to bring the lawsuit in a jurisdiction far from where he or she or the defendants reside, simply because one component of the design work took place in a distant county?

Venue rules, which instruct where disputes are to be resolved, should not be a means to expand forum shopping.  Like forum selection clauses, which are negotiated venue-selection clauses, they “should be enforced because they provide certainty and predictability in the resolution of disputes.”  Brooke Group Ltd. v. JCH Syndicate 488, 87 N.Y.2d 530, 640 N.Y.S.2d 479 (1996); LSPA Enterprise, Inc. v. Jani–King of New York, Inc., 31 AD3d 394, 817 N.Y.S.2d 657 (2nd Dept.2006).

The New York State Trial Lawyers memorandum in support compares the proposed amendments to the federal venue rules (28 USC § 1391(b) (2)), but the comparison is misguided.  That statute provides that:

(b)   Venue in General.—A civil action may be brought in

  1. a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;
  2. a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or
  3. if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court’s personal jurisdiction with respect to such action. (emphasis added)

Again, the state venue statute provides:


CPLR 503 (a) Generally. Except where otherwise prescribed by law, the place of trial shall be in the county in which one of the parties resided when it was commenced; or, if none of the parties then resided in the state, in any county designated by the plaintiff. A party resident in more than one county shall be deemed a resident of each such county. (emphasis added)

Under the federal approach (if one was to compare residency in 62 counties to residence in four judicial districts), the plaintiff cannot select his home district, simply by virtue of his or her residency.  Under the present state scheme, the plaintiff already has that advantage, not provided to the federal litigant.  Accordingly, a Bronx County resident can sue a personal injury case involving a Broome Country driver and a St. Lawrence County defendant in the Bronx, simply by virtue of residence.  That choice would not be available to a federal litigant.

Accordingly, the state venue provisions are already more robust and plaintiff-friendly than the federal venue rules.  Further changes are not necessary.

There is little question but that the proposed change would result in a spike of case filings in notoriously plaintiff-friendly jurisdictions (e.g., Bronx, Kings, Erie).  These jurisdictions already have huge case loads and the change would disproportionately burden them further.  It would also work to the detriment of litigants, who would experience delays in waiting for trial.  That is not an inconsequential matter on wrongful death, contract and property damage cases that subject defendants to 9% pre-judgment interest.  


There are a variety of differences in state and federal procedural and evidentiary rules and if the goal is to draw them closer together, rather than implementing changes piecemeal to align with the Federal Rules, a much wiser policy approach is to charge a commission made up of all of the various stakeholders to study the state and federal rules and come up with recommendations. 

We would urge you to write to the Governor’s counsel suggesting that he veto this bill.  The letter would be addressed to:


Mr. Alphonso B. David

Counsel to the Governor

Executive Chamber

The Capitol

Albany, NY  12224


SUM Legislation on Its Way to Governor’s Desk – Automatic Coverage Unless Waived:


Currently, under the provisions of New York Insurance Law §3420(f)(1), uninsured motorists coverage is mandatory for every liability policy sold in New York State.  Supplementary uninsured and underinsured coverage (“SUM coverage”) is voluntary and optional and are added to the policy when requested by the policyholder pursuant to Insurance Law Section 3420(f)(2).


The legislature has proposed to alter the paradigm with the passage of S-5644-b, a bill heading to the Governor for consideration. 

In “sum,” SUM coverage will automatically be added to liability policies unless the policy holder, by written or electronically signed waiver, opts to remove that coverage or lower the limits.


Insurance Law Section 3420(f)(2-a) would be added to the existing law and provide as follows for new policies issued after the effective date (not renewals):


  • The policies would automatically provide SUM coverage, in an amount equal to the policy holder’s liability coverage limits.

  • Any insured would have the option of declining that coverage, or lowering the limits, through a written waiver signed, or electronically signed, subject to the provisions of the section.

  • The insurers will be required, as they are now, to annually advise policyholders about the availability of SUM coverage.  If an insured decides to reject that coverage, or select a lower amount, that choice must be on a written or electronic form submitted to the insurer.

  • The form advising the policyholder shall be in at least 12-point bold type and shall state:


  • If the insured executes the waiver, it shall apply to all subsequent renewals of coverage which extend, change, supersede or replace an existing policy issued to the named insured, unless changed in writing by any named insured.

  • The insurer is given the option of requiring that the SUM coverage be equal to the liability coverage.

  • Any such coverage can be provided in an umbrella or excess liability policy.

  • The act is to take affect the hundred and 80 days after it shall become a law and apply to new insurance policies and contracts issued on or after such effective date but then sunsets as of June 30, 2020.


You can be certain that if other states’ histories are instruction if the Governor signs this bill into law, there will be lots of litigation surrounding whether the “waivers” were or were not effective.


Save the Dates:


I did want to make you aware of several conferences, upcoming.  I’ll be on the faculty on all programs, on different topics.  Contact me for more information.


The DRI Northeast Regional Claims Conference,
November 2, 2017
Hartford Connecticut

This one-day regional seminar is designed for in-house insurer counsel, claim professionals and their managers, and outside defense counsel in the Northeast who primarily handle insurance coverage matters or property and casualty claims.  DRI will host a networking luncheon with moderated table discussions so you can discuss what matters most to you.  The program will be submitted for CE and CLE credit.


I will be speaking on additional insured and contractual risk transfer issues.


FDCC Insurance Industry Institute

November 8 – 10, 2017

New York City

The Federation of Defense & Corporate Counsel (FDCC) will be holding its biennial Insurance Industry Institute in NYC from November 8 through 10.


The FDCC puts on great programs, and their insurance conference is always one of the best.


The program begins with a reception at the Sheraton New York Times Square on Wednesday evening, November 8, followed by a full day of programming on Thursday and a half day session on Friday. This program brings together industry leaders, senior insurance executives, and their counsel to examine key insurance issues.  I am leading a panel on how US lawyers can work for and with European clients and counsel.

More information can be found at:


DRI’s Insurance Coverage and Practice Symposium

December 8-9, 2017

New York City

DRI’s Insurance Coverage and Practice Symposium is the foremost educational event for insurance executives, claims professionals, and outside counsel who specialize in insurance coverage. This year’s symposium will once again offer an unparalleled opportunity to engage with a distinguished faculty of insurance industry leaders, experts, and coverage lawyers on emerging issues, recent court rulings, national trends, and the future of insurance coverage law. In addition, the symposium provides exceptional networking events, as well as an opportunity to experience the wonder of New York City during the holiday season!


I will be speaking on special New York coverage problems.


Jen’s Gems:




Hope everyone is enjoying the summer.  Last weekend we took a trip out to my in-law’s cottage for my nephew’s 1st birthday.  Their cottage can only be accessed by boat and is located on a narrow sandbar that separates Lake Ontario and Sodus Bay, a spot my husband’s family use to camp on for years before they built the cottages.  For those not familiar with the area, Lake Ontario has been experiencing substantial issues with flooding this year.  It is amazing to see the impact on their property.  At this point, they have lost approximately 25 feet of the property on one side.  The hope is that if the weather stays relatively dry for the rest of the summer the water will continue to recede, but who knows considering the type of summer we have been experiencing.  Irrespective of that issue, my girls always have a blast out there.  They explore, swim in the lake and visit all of my in-law’s neighbors who have been spending their summers on the sandbar since they too were little.


In terms of my column, I report on a really interesting decision out of Supreme Court, New York County, State Ins. Fund v. Selective Ins. Co. of Am.  The case involves a lawsuit commenced by the State Fund (the Employer’s Liability carrier) against a mutual insured’s liability carrier.  The underlying loss involved an injury to the mutual insured’s employee.  Apparently, the liability carrier had issued a primary policy and umbrella coverage.  While acknowledging that the primary policy was triggered, coverage was denied under the umbrella policy on the basis that employee exclusion applied.  The question presented to the court was whether the employee exclusion did in fact apply.  In a perfect world, I would have sat down with a complete copy of the policy and a cup of coffee.  Unfortunately, it is not a perfect world, and we have to rely on the language citied by the court.  It appears that the umbrella coverage had an employee exclusion in the main coverage form, which contained an exception for losses covered under the underlying insurance, and a separate endorsement with a different employee exclusion.  Both endorsements contained the broad language advising the insured that no coverage would be afforded even if it was a claim to share damages or repay someone else who must pay those damages; but, only the exclusion in the main coverage form contained the exception (relative to losses covered by underlying insurance).  It appears the carrier sought to rely on the separate endorsement.  While the trial court seemed to agree that the language addressing any obligation to share damages or repay someone else applied in this circumstance, it still found coverage noting that, in its view, the policy did not contain a clear intent that if the loss was covered under the underlying insurance, that it could still be excluded under the umbrella coverage.  Again, worth a read (although, selfishly, I was hoping for a little more discussion of anti-subrogation-my true love)!


Until next issue….



Jennifer A. Ehman

[email protected]


The Times

Munster, Indiana

28 Jul 1917


Marriage Custom of Swiss.


               In some parts of Switzerland the maid of honor removes the bridal wreath at the church door and lights it with a taper, the bride in the meanwhile kneeling before the burning emblem of her maidenhood and saying a formal invocation for blessing on her married life, and it is held to be a very fortunate omen if the flowers flare up and burn quickly. 


Tessa’s Tutelage:


Dear Readers:


I have advised our softball players to stop praying for rainouts, even if it preserves our standing (14th/16).  We have had 3 rainouts this year, and I just don’t think Buffalo can take much more rain.  In fact, last week our game was cancelled due to a tornado (thankfully, it seems no one was hurt).  I cannot think of a summer where I didn’t have some semblance of a tan.  This year I am starting to resemble Morticia Adams.  I have heard rumors that this weekend will be sunny, but I won’t hold my breath.


This week the Court reminds parties that they must respond to discovery demands.  The first case defendant sent deficient notices to the plaintiff.  Usually that is a topic for discussion with the court; however, the Court didn’t want to hear it this time because Plaintiff simply didn’t respond to the notices.  The second case, the Plaintiff didn’t respond to any discovery demands.  As noted by the Court, it is pretty hard to defend yourself from an action when there simply aren’t any discovery responses.  


Hope you all are enjoying a little more sunshine than we have here.



Tessa R. Scott

[email protected]


The New York Times

New York, New York

28 Jul 1917


Some New Things In Dolls.


               What is said to be the first American-made “moving eye,” or sleeping, doll that can be sold at retail as low as $1.50 will be put on the market here in the next few days.  Heretofore these dolls have been retailed at $2.50 and up, though there is a Japanese-made doll of this type that also can be sold over the counter at $1.50.  The Japanese doll is strung with elastic cord, however, while the American one makes use of steel wire springs, which insures longer “life.”  The Japanese doll is also about three times as heavy as the American due to the difference in the compositions from which they are made.  The wholesale price of the new American doll will be $10.50 a dozen.  A new thing in character dolls is a thirty-inch “Teddy,” in Khaki, that wholesales at $15 a dozen and retails around $2.50.


Ewell's Universe:


Dear Subscribers:


Those who follow my column know that I track the high courts across the nation and report on national trends in insurance law.  Today, we interrupt our usual broadcast to bring you a special notice on allocation of long-tail claims in New York federal courts. Just last week, the Second Circuit Court of Appeals issued a noteworthy decision addressing allocation and exhaustion in long-tail claims.  Remarkably, the Second Circuit adopted the same methodology handed down by the New York State Court of Appeals last year.


For those who do not know (or may need a refresher), long-tail claims are claims for personal injuries due to toxic exposure or property damage resulting from gradual or continuing environmental contaminations.  Asbestos exposure claims exemplify the former, and environmental cleanup claims the latter.  These types of claims present unique complications because they often involve exposure to an injury-inducing harm over the course of multiple policy periods, spawning litigation over which policies are triggered, how liability should be allocated among triggered policies and the respective insurers, and at what point insureds may turn to excess insurance for coverage.


As some of you may recall, in May of 2016, New York State’s highest court addressed the proper method of allocation in long-tail claims.  The namesake of the case was In re Viking Pump.  Viking Pump used asbestos in the manufacture of pumps.  Decades later, when bodily injury claims poured in, a dispute arose between Viking Pump and its insurers regarding how to properly allocate insurance coverage across several excess policies, totaling over $400 million in excess coverage.  The dispute centered primarily on two methods of allocation: all sums allocation or pro rata allocation.


All sums allocation, is essentially “joint and several liability,” it permits the policyholder to collect its total liability under any policy in effect during the periods that the damage occurred, up to the policy limits.


Under pro rata allocation, an insurer’s liability is limited to sums incurred by the policyholder during the policy period.  In other words, each insurance policy is allocated a “pro rata” share of the total loss representing the portion of the loss that occurred during the policy period.


The New York Court of Appeals rejected adopting a blanket rule mandating either all sums or pro rata allocation.  Instead, the Court of Appeals held that the policy language controlled the method of allocation.  Viking Pump made clear that where a policy does not contain a non-cumulation provision, pro rata allocation applies.  Where a policy contains a non-cumulation provision, all sums allocation will apply.


A related issue was, based on the method of allocation, whether horizontal or vertical exhaustion applied.  Under horizontal exhaustion, an insured is required to exhaust all primary and umbrella excess layers before tapping into any of the additional insurance policies.  In contrast, under vertical exhaustion, the insured can access each excess policy once the immediately underlying policies’ limits are depleted—even if other lower-level policies during different policy periods remain unexhausted.  Put simply, horizontal exhaustion is limit erosion by levels while vertical exhaustion is exhaustion by years. The New York Court of Appeals held that, where there is an all sums allocation, vertical exhaustion applies.  Based on prior state court precedent, where there is a pro rata allocation, horizontal exhaustion applies.


Why is this important, you ask?  Well, last week, the Second Circuit adopted the same exact methodology set forth in Viking Pump for determining allocation and exhaustion in long-tail claims.  In Olin Corp. v. OneBeacon, the Second Circuit summarized Viking Pump, cleaned up some conflicting federal precedent, and adopted Viking Pump wholesale.  Accordingly, Olin brings New York state court and federal courts in New York in harmony.  Going forward, both state and federal courts in New York will apply the same allocation and exhaustion principles in long-tail asbestos and environmental cleanup claims.


Not long ago, Agnes and I published an article, in DRI’s Covered Events, that discusses the impact of Viking Pump and what it means for insurers who issue insurance policies in New York (available here).  In that article, we walk through the decision and explain when all sums allocation applies and when pro rata allocation applies, as well as when vertical exhaustion applies and when horizontal exhaustion applies.  We also discuss how insurers can adapt to these rulings, and steer their policies to avoid the additional exposure from all sums allocation and vertical exhaustion.


Check it out!


Until Next Time,



John R. Ewell

[email protected]


The New York Times

New York, New York

28 Jul 1917




Department of Justice Investigates

Samples Suspected of Disease. 


               WASHINGTON, July 27.—Samples of court plaster distributed in Brooklyn, N.Y., by a German pain concern were turned over to the Department of Justice today by Secretary Redfield.  Charges have been made that Germans were spreading tetanus and other diseases in the United States through the distribution of surgical dressings.  The Department of Justice if making chemical analysis of court plasters sent to Washington from various parts of the country. 


               According to the Brooklyn man who sent the court plaster to Washington he was denouncing to an acquaintance anyone who would put germs in court plaster, and suggested that the Department of Commerce should analyze samples of court plaster.   


               “Well,” this acquaintance replied, “if they are analyzing court plaster they might as well analyze this.”


               Then he handed over a package of court plaster he said his wife had bought at a Brooklyn paint store.  This was the court plaster sent to Washington.  The man who gave the court plaster to the department’s informant said last night he had no reason to believe that it had been poisoned.  The proprietor of the paint store said he had bought it from a Manhattan advertising firm.  The court plaster was in a little paper package with the name of the pain dealer on it. 


Phillips Federal Philosophies:


Hello, All:


I’m headed to see a friend of mine in Chicago in a few weeks, and now that my running is moving at a steady pace (sorry), she has decided that it’s time for my first 5k (it would be her 47,826th).  Correctly anticipating my reluctance at potentially passing out in front of strangers 500 miles from my beloved couch, she came prepared with an appropriate first run – “Stan’s Donut 5k”.  Now, I don’t know who Stan is, or how good his donuts are (and be advised that’s Stan’s spelling, not mine), but my friend was absolutely correct that dangling pastry at the finish line was probably the only way of securing my participation.  Wish me luck. 


Like Stan’s donuts, the release agreement at the center of Ling v. Erie Ins. Co. was found to have a hole in it.  This week’s case from the Southern District of New York highlights the vast difference between a release of all claims “past and present” and a release of all “past, present, and future” claims arising from an occurrence.


And now I want a doughnut.


As always, thanks for reading.



Jennifer J. Phillips

[email protected]


New-York Tribune

New York, New York

28 Jul 1917


Russia’s Women Fighters

Took 102 Captives at Dvinsk


Department of Justice Investigates

Samples Suspected of Disease. 


               London, July 27.—Russia’s women’s “Legion of Death” took 102 prisoners, two of them officers, in their first battle on the Dvinski front, according to advices from Petrograd.  The women charged fearlessly over a shell-torn field after their men comrades had deserted and so shamed the disorganized forces that the tide of battle was turned in favor of the Russians.  A dozen of the battalion were wounded in the action, including the commander, and have been sent to Minsk to recover. 


               A dispatch to the Exchange Telegraph from Petrograd, dated Thursday, says:


               “Ensign Mlle. Vera Butchkareff, commander of the Russian women’s battalion, and Lieutenant Skrydlova, suffering from shock as a result of bursting shells, and about a dozen other members of the battalion who were wounded in the recent fighting, have been sent to Minsk.  When they reached Poltava they were welcomed by 100,000 citizens and solders, with a brass band and banners.


               “It is said the women attacked the Germans after the Russians had deserted, rushing forward impetuously and firing their rifles with deadly effect.  Their prisoners were greatly chagrined when they learned the sex of their captors.”


The Oneonta Star

Oneonta, New York

28 Jul 1917




Fast Running, Besides the Danger,

Piles Up the Coot.


               “The driver who persists in operating his motorcar at high speed may elude constables and police, says a writer in the Farm and Fireside, “but he cannot escape from the penalties which natural mechanical laws levy upon his car.  Here are ten reasons why it is expensive, dangerous and inconsiderate of others to speed:


               “Fires last about twice as long on a car that is driven at fifteen miles an hour as upon cars driven at thirty miles an hour.  Speeding generates heat, which is an enemy to rubber.


               “Driving a car around a sharp corner at twenty-five miles an hour does more damage to the tires than 200 miles of straight road work.  Excessive side pressure on tires may pinch the tubes, and it always strains the side walls of the casings.  


Hewitt’s Highlights: 


Dear Subscribers:


The dog days of summer struck us on Long Island as we hit a heat wave with high humidity.  Luckily, the kids were able to spend plenty of time swimming and my wife plenty of time in the air conditioning.  I am glad the swimming lessons have paid off. Since last we “met,” I became the proud Godfather of my nephew, my brother-in-law’s son.  His Baptism was a special day and he didn’t cry when the water was poured on his head.


As for serious injury cases this edition, we only have a handful. Several of them give very little in the way of facts, but remind us that every injury in the bill of particulars must be addressed in a defendant’s motion or it will not be successful.  In another case, an undisputed fracture of the leg was proof of a serious injury, and the plaintiff’s doctor was allowed to testify as to radiological films not in evidence.  In another, an owner of a vehicle could not escape on summary judgment when a mechanic got into an accident with his vehicle because the brakes failed.  The owner did not establish that he had properly maintained the brakes.


Until next time,


Robert Hewitt

[email protected]




Embezzlement and Diversion of

Funds Charged to Ferguson


               Austin, Tex., July 27.—Gov. Ferguson to-day was indicted by the Travis county Grand Jury on nine counts, seven charging misapplication of public funds, one division of public funds and one embezzlement.


               C. J. Bartlett, Secretary of State, was indicted on four counts, charging misapplication of public funds.


               C. J. Stowe, State Superintendent of Buildings and Grounds, was indicated on one count.


               C. O. Austin, Commissioner of Insurance and Banking, was indicted on four counts.


               The Speaker of the Texas House of Representatives last Monday called a special session for August 1 to consider whether articles of impeachment should be presented against the Governor.




In 1914, Ferguson was elected governor of Texas by running as an anti-prohibitionist Democrat.  He served from January 19, 1915 to August 25, 1917.


After being re-elected in 1916, Ferguson vetoed the appropriations for the University of Texas.  The veto was retaliation against the university because of its refusal to dismiss certain faculty members whom Ferguson found objectionable, including former Texas Lieutenant Governor and founder and dean of the University of Texas School of Journalism, William Harding Mayes, who had been an opponent of Ferguson for the Democratic party's nomination for governor in 1914.  The accusations against Mayes were that he used his ownership of newspapers, including the Brownwood Bulletin, to spread negative information about Ferguson.


This move spurred the drive to impeach Ferguson.  The chairman of the investigating committee, William H. Bledsoe of Lubbock, called for impeachment while sitting next to Ferguson.  Ferguson was indicted on nine charges in July 1917.  The Texas House of Representatives prepared 21 charges against Ferguson, and the Senate convicted him on 10 of those charges, including misapplication of public funds and receiving $156,000 from an unnamed source. The Texas Senate, many of whom had served under William Harding Mayes and with whom Mayes maintained cordial relationships, removed Ferguson as governor and declared him ineligible to hold office under Texas jurisdiction.


Still, Ferguson ran for governor in the 1918 Democratic primary, but he was defeated in the Democratic primary by his successor, William P. Hobby of Houston, previously the lieutenant governor.


He later became the First Gentleman of Texas.


Ferguson failed at his bid for the United States Senate in 1922, having lost in the Democratic runoff election to Earle Bradford Mayfield.  In 1924, Ferguson entered his wife Miriam in the Democratic gubernatorial primary.  She won, and with Nellie Tayloe Ross of Wyoming (whose grandson, Robert Ross is a faithful CP subscriber), they became the first female elected governors in the United States, both having followed husbands who had served earlier.  Nellie Tayloe Ross was the first female to assume the office of governor in the United States, being sworn in on January 5, 1925; Miriam Ferguson followed on January 20. She served two nonconsecutive two year terms as governor: January 20, 1925 – January 17, 1927, and January 17, 1933 – January 15, 1935.


Wilewicz’ Wide-World of Coverage:


This week, since you’ll find my missives and edits already sprinkled throughout this edition, the WWW itself will be brief.  I’m traveling myself, and writing this for you from yet another visit to lovely Long Island in between NYC court appearances.  The weather here has been similar to our own Upstate season, albeit just a few degrees warmer. This week, however, my friends and colleagues have noted that I brought the Northern chill down with me as it has been almost unseasonably cool suddenly and temporarily.  If only I had such power.


First, in the Wide World of Coverage, we recommend that you check out John Ewell’s column. Therein, he writes about a case that I would have otherwise covered (Second Circuit, environmental), but one that he also had a particular interest, since we recently published an article on the topic that case covers. That is, Olin Corp. v. OneBeacon discussed in detail allocation in long tail toxic tort cases, summarizing the recent Court of Appeals’ Viking Pump decision, while cleaning up some conflicting federal precedent, and adopting Viking Pump wholesale.  It’s a good read, so check it out.


Otherwise, we also bring you the Seventh Circuit’s decision in Westfield Ins. Co. v. National Decorating Service, Inc.  There, a painting contractor was alleged to have failed to apply a sealant to a condo block in Chicago, which then sustained water damage to a number of units.  Said contractor sought defense and indemnification from its insurer, who disputed coverage.  Long story short, in applying common coverage principles (defense is broader than indemnity; defense duty is triggered by allegations of a complaint), the court ultimately found that a defense had been triggered.  The broad pleadings had alleged at least some potentially covered damage, and that was enough. Indemnity was another story and likely premature, so that court punted on that end, to await determination of facts in the underlying.


That should tide you over for now.  The courts should be back in the full swing of things in a few weeks.


Until next time!



Agnes A. Wilewicz

[email protected]


Barnas on Bad Faith:


Hello again:


The end of July is normally one of my favorite times when it comes to sports.  The trade deadline in baseball is fast approaching, and I’m glued to my twitter feed looking for the latest rumors and buzz about potential deals.  It has been a pretty terrible year for my Blue Jays, but I always enjoy player movement in any sport.  It’s a bit harder to enjoy when your team is out of contention and potentially looking to sell off players you have grown to like.  NFL training camps are also opening up, with the Bills reporting to St. John Fisher College in Pittsford, New York.  However, I must confess I’m not quite ready for football in July.  Summer can slow down and stay a little while longer.


The Houston Casualty Company case in my column this week is an extra-contractual case from New York County Supreme Court.  This case continues a trend that we are seeing in cases across New York.  For years, courts have cited the decisions by the Court of Appeals in New York University and Rocanova to hold that insureds could not even state a claim for extra-contractual damages where the insurer’s conduct was not actionable as an independent tort.  The oft-discussed Bi-Economy decision altered this landscape by holding an insured could recover “consequential damages” based on an insurer’s breach of the implied covenant of good faith and fair dealing.  The Court of Appeals referred to these damages as contractual in nature.  However, the decision still opened insurers up to liability for damages in excess of the insurance limits.


The Houston Casualty Company case examined the differences between New York University/Rocanova and Bi-Economy in considering the insured’s motion to add a counterclaim for bad faith.  The court concluded that although the insured’s counterclaim for bad faith did not stand as an independent tort, the counterclaim could be used to assert a claim for consequential damages.  The court attempted to reconcile the difference by explaining that the claim in New York University was for punitive damages and the claims in Bi-Economy and in the case at bar were for consequential damages.


More and more, carriers are being subjected to bad faith claims for damages in excess of the policy limit where there is no independent tortious conduct involved, or even any allegation that there was any tortious conduct by the carrier.  The Houston Casualty Company case continues this trend.


Signing off,



Brian D. Barnas

[email protected]


Altman’s Administrative (and Legislative) Agenda:  


Greetings, Dear Readers.  As the dog days of summer come upon us, I will be puppysitting my parents’ goldendoodle, Barney.  Hi, Barney!  Who’s a good boy? (Barney is an avid CP fan, Dear Reader).


I regret to report that I had to break up with my girlfriend.  It broke my heart a bit, but, time heals all wounds, they say.


New on the legislative front, Congress voted to continue to discuss the possibility of possible changes to Affordable Care Act.  What does that mean?  Absolutely nothing.


Also new on the legislative front, New York’s State Legislature passed bill number A8032 (Assembly) and S06031 (Senate), and it has been sent to Governor Cuomo for his approval/signature.  The bill adds an additional ground for determination of venue under CPLR 503, permitting actions in “the county in which a substantial part of the events or omissions giving rise to claim occurred.”  The bill is vague (what is a “substantial part of events”?) and could allow plaintiffs greater latitude to forum shop.



Howard B. Altman

[email protected]


Off the Mark:


Dear Readers,


Summer is flying by.  I’m hoping to take a few overnight trips with the family in my VW camper before the summer is over.  Unfortunately, the van is still not ready for this season.  Although I usually do most of the work myself, I decided to bring it to a mechanic to handle a few time-consuming jobs.  Hopefully, I get it back soon as my kids have been asking about it.  There’s something about leaving the hustle and bustle of life behind for a few days and enjoying nature’s serenity. 


The topic of construction defect coverage has been quiet lately.  Unfortunately, I did not come across any recent noteworthy decisions on point.  Could it be that the construction work has been on the mark?  Assuming that is not the case, I will continue to be on the look-out for interesting case law. 


Until next time …



Brian F. Mark
[email protected]


Headlines from the Attached Issue:


Dan D. Kohane
[email protected]


  • When Off-Road Vehicle was Used Off Insured Property, Accident Outside of Liability Coverage.   Sand Pit on Neighboring Property Not Used in Connection with Insured Location


Robert E.B. Hewitt III

[email protected]


  • Defendants Failed to Adequately Address All Claims in the Bill of Particulars

  • Plaintiff Created an Issue of Fact as to Whether Brain Injury Constituted Serious Injury

  • Owner of Vehicle Not Dismissed from Action Where He Did Not Show He Properly Maintained the Brakes Which Failed When Auto Shop Employee Drove the Vehicle

  • Plaintiff Had Undisputed Fracture of Her Fibula Which Constituted Serious Injury



Tessa R. Scott

[email protected]



  • Plaintiff’s Failure to Respond to Defective EUO Letters Barred Plaintiff’s Objection to Said Letters in his Summary Judgment Motion

  • All Parties are Entitled to F



Steven E. Peiper

[email protected]


  • On the road again.



Agnes A. Wilewicz

[email protected]


  • Seventh Circuit Holds That a Defense Duty Was Owed to Insured Contractor Where at least Part of the Pleadings Alleged Potentially Covered Property Damage, Even Where Indemnification Determination was Premature (IL law)



Jennifer A. Ehman

[email protected]


  • Court Finds Employee Exclusion No Applicable in Case Brought by Employer’s Liability Carrier Against CGL Carrier



Brian D. Barnas

[email protected]


  • Plaintiffs stated a Claim for Bad Faith by alleging that the Insured Failed to Respond to their Time-Limited Settlement Demand for Eleven Months


  • Bad Faith Counterclaim Seeking Consequential Damages was not Duplicative of Breach of Contract Claim



Jennifer J. Phillips

[email protected]


  • Direct Action after Claimant’s Release


John R. Ewell

[email protected]


  • Second Circuit Adopts New York Court of Appeals Holding on Allocation and Exhaustion Methods in Long-Tail Claims—Bringing New York State and Federal Courts In Harmony



Howard B. Altman

[email protected]


  • Health Care Reform: No News is No News

  • New York’s Proposed Procedural Reform


Brian F. Mark
[email protected]


  • Courts are quiet on the construction defect front.



Earl K. Cantwell
[email protected]


  • “Efficient Proximate Cause” May Extend Claims


That’s it for this week. We hope that this issue has lived up to Dan’s standards and expectations (any errors herein are indeed ours). He’s back in a couple of weeks to take back the reins. In the meantime, enjoy this glorious season everyone! We’ll see you all next time.


~ Agnes and Jen


Dan D. Kohane / Agnieszka Wilewicz / Jennifer Ehman

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]  


Twitter:           @kohane








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

Dan D. Kohane
[email protected]



Agnes A. Wilewicz

[email protected]



Jennifer A. Ehman

[email protected]


Dan D. Kohane, Chair
[email protected]


Steven E. Peiper, Co-Chair

[email protected]

Michael F. Perley

Jennifer A. Ehman

Agnieszka A. Wilewicz

Edward B. Flink

Patricia A. Fay

Jennifer J. Phillips

Brian D. Barnas

Howard B. Altman

Brian F. Mark

John R. Ewell

Diane F. Bosse

Joel R. Appelbaum


Steven E. Peiper, Team Leader
[email protected]


Michael F. Perley

Robert E. Hewitt, III

Jennifer J. Phillips

Brian D. Barnas


Jennifer A. Ehman, Team Leader
[email protected]

Patricia A. Fay


Jody E. Briandi, Team Leader
[email protected]


Jennifer J. Phillips

Diane F. Bosse

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Tessa’s Tutelage
Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith
Phillips’ Federal Philosophies

Ewell’s Universe

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

Earl’s Pearls


Dan D. Kohane
[email protected]


07/26/17       Chiarello v. Rio

Appellate Division, Second Department

When Off-Road Vehicle was Used Off Insured Property, Accident Outside of Liability Coverage.   Sand Pit on Neighboring Property Not Used in Connection with Insured Location

On July 18, 2007, the infant plaintiff Chiarello was hurt while operating an off road vehicle owned by Rio while visiting the Rio’s son at the Rio’s vacation home.

Chiarello was operating the vehicle in a sand pit located on a neighboring property, a half mile from the Rio's property, when the vehicle tipped over, allegedly causing him to be injured.


Encompass issued a homeowners' insurance policy that insured the Rio defendants' vacation home.  The policy excluded claims for bodily injury arising out of the use of an insured's motorized land conveyance designed for recreational use off public roads, which was not subject to motor vehicle registration, if an accident involving that vehicle did not occur on an insured location.


In June 2010, the injured plaintiff commenced an action against the Rios alleging that the accident occurred while operating the subject vehicle on the defendants' premises, and that the defendants were negligent with respect to the maintenance of their property. Encompass disclaimed coverage based on certain policy exclusions and the failure to timely notify it of the occurrence.  The Rios challenged the disclaimer in a declaratory judgment action.


After discovery was completed, Encompass moved for summary judgment, arguing that it did not owe a duty to defend or indemnify the Rios on the grounds that the location where the accident occurred was not the insured location and that the vehicle involved in the accident was not a recreational vehicle. The Rios argued that the area where the accident occurred was used by them such that it would be considered an insured location as that term was defined by the subject policy.


Here, Encompass established its prima facie entitlement to judgment as a matter of law dismissing the first cause of action by submitting deposition testimony demonstrating that the subject vehicle being operated by the injured plaintiff was excluded under the terms of the subject policy, as it was not a recreational vehicle and was not being operated on the defendants' property at the time of the accident. In opposition, the defendants failed to raise a triable issue of fact.


Contrary to the defendants' contention, there was no ambiguity in the language of the subject policy that would allow for the sand pit, situated on a neighboring property, where the accident occurred, to be considered an area used "in connection with" the insured location so as to raise a triable issue of fact as to whether the subject policy exclusion applied.


Robert E.B. Hewitt III

[email protected]


07/19/17       Adams v. Dora Cab Corp.

Appellate Division, Second Department

Defendants Failed to Adequately Address All Claims in the Bill of Particulars

The respondents failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The papers submitted by the respondents failed to adequately address the plaintiff's claims, set forth in the bills of particulars, that he sustained a serious injury to his head under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d), and that he sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the respondents did not sustain their prima facie burden, it was unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact. No facts were given.


07/19/17       Pendleton v. Bizzoco

Appellate Division, Second Department

Plaintiff Created an Issue of Fact as to Whether Brain Injury Constituted Serious Injury

Another case where no facts are given.  The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident by submitting competent medical evidence establishing that the alleged injury to the injured plaintiff's brain 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) and that, in any event, the alleged injury was not caused by the subject accident.  In opposition, however, the plaintiffs raised triable issues of fact as to whether the injured plaintiff sustained a serious injury to her brain under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d), and as to whether the alleged injury was caused by the subject accident 


07/19/17       D’Augustino v. Bryan Auto Parts, Inc.

Appellate Division, Second Department

Owner of Vehicle Not Dismissed from Action Where He Did Not Show He Properly Maintained the Brakes Which Failed When Auto Shop Employee Drove the Vehicle

An auto shop employee was driving a vehicle into the shop from the street to be inspected when it undisputedly failed to stop at a stop sign, and struck a vehicle being driven by the plaintiff. The injured plaintiff had the right of way to pass through the intersection, which had no traffic signal or sign on the street she was traveling on.  For her motion for summary judgment, she submitted a transcript of the defendant driver’s deposition, at which he testified that as he approached the stop sign, he pressed the brake pedal but it "went to the floor," and despite pumping the brake pedal "10, 15, 20 times," the vehicle did not stop. Defendants invoked the emergency doctrine, premised upon an allegedly sudden and unsuspected brake failure that occurred when he attempted to stop at the subject stop sign.


The Appellate Division noted that as a general matter, a driver traveling on a road controlled by a stop sign who fails to yield the right of way is in violation of Vehicle and Traffic Law § 1142(a) and negligent as a matter of law. Under the emergency doctrine, when an actor is faced with a sudden and unexpected circumstance which leaves little or no time for thought, deliberation or consideration, or causes the actor to be reasonably so disturbed that the actor must make a speedy decision without weighing alternative courses of conduct, the actor may not be negligent if the actions taken are reasonable and prudent in the emergency context.  When the driver of the offending vehicle in an automobile accident lays blame for the accident on brake failure, it is incumbent upon that party to show that the brake problem was unanticipated. The plaintiffs contended that the emergency doctrine defense asserted by the auto shop defendants, which is premised upon sudden and unsuspected brake failure, should be stricken based on spoliation of evidence, because it was undisputed that following the accident, but prior to commencement of this action, the shop discarded the brake lines that allegedly failed. The Appellate Division held that the plaintiffs improperly raise this issue for the first time on appeal and the issue does not involve a pure question of law since the nature and severity of the sanction depends upon a number of factors, including, but not limited to, the knowledge and intent of the spoliator, the existence of proof of an explanation for the loss of the evidence, and the degree of prejudice to the opposing party.


The Appellate Division, however, found that the auto shop defendants failed to establish their prima facie entitlement to judgment as a matter of law, since their own submissions failed to eliminate triable issues of fact as to whether the emergency doctrine applied and, if so, whether the driver acted reasonably under the circumstances of the emergency. Therefore, their motion for summary judgment should have been denied. No specifics were given as to what issues of fact remained.  

The Appellate Division also found that the owner of the vehicle’s motion for summary judgment was properly denied. He failed to establish proper maintenance of the vehicle’s brakes. Further, he failed to meet 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 accident.  The papers submitted by the owner failed to address the injured plaintiff's claims, set forth in the bill of particulars, of the exacerbation of preexisting injuries to the cervical region of her spine and left shoulder and that she sustained a medically determined injury or impairment of a nonpermanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident.  Again, no specifics are given.


07/13/17       Ahumada v. Drogan

Appellate Division, First Department

Plaintiff Had Undisputed Fracture of Her Fibula Which Constituted Serious Injury

This is an appeal of a decision that granted defendant’s motion to set aside a jury verdict that had awarded plaintiff $500,000 for past pain and suffering and $250,000 for future pain and suffering over ten years as against the weight of the evidence and as excessive.


The Appellate Division found the lower court properly directed a verdict in plaintiff's favor that he had suffered a fractured fibula, constituting a serious injury.  Defendant offered no evidence to dispute plaintiff's medical expert who found that he sustained such an injury, as shown on imaging tests, which defendant's expert testified he could not dispute.  Also, the Appellate Division found the lower court properly allowed plaintiff’s radiologist to testify regarding MRI films that were not in evidence where they had been subpoenaed and where defendant's expert had reviewed them but defendant chose not to call him to testify. The Appellate Division, without comment, disagreed with the trial court that the jury award should be reduced to $250,000 maximum and found it should be past pain and suffering of $300,000, and future pain and suffering to $150,000.



Tessa R. Scott

[email protected]




07/14/17       Bay LS Med. Supplies, Inc. v Allstate Ins. Co.

Appellate Term, Second Department

Plaintiff’s Failure to Respond to Defective EUO Letters Barred Plaintiff’s Objection to Said Letters in his Summary Judgment Motion

Plaintiff moved for summary judgment and defendant cross-moved for summary judgment dismissing the complaint on the ground that plaintiff had failed to appear for duly scheduled examinations under oath.  Defendant appealed from an order of the Civil Court which granted plaintiff's motion and denied defendant's cross motion.

The Court cited another case, Bay LS Med. Supplies, Inc. v Allstate Ins. Co. (50 Misc 3d 147), to support its decision.  In Bay, the Court rejected Plaintiff’s argument that he did not fail to appear for an EUO because the Defendant’s EUO letters were defective. The Court felt that although the letters were defective, plaintiff failed to respond in any way to the requests.  Thus, the Court determined that any objection to the letters would not be heard. 

07/14/17       TAM Med. Supply Corp. v. Country Wide Ins. Co.

Appellate Term, Second Department

All Parties are Entitled to Full Disclosure of all Matter Material and Necessary in the Prosecution or Defense of an Action

Plaintiff moved for summary judgment and defendant cross-moved for summary judgment dismissing the complaint and/or dismissing the action. The Civil Court denied plaintiff's motion and granted the branch of defendant's cross-motion seeking summary judgment.


The affidavit submitted by defendant stated that each claim had been received on July 31, 2012, but also stated that defendant had first received notice of the claims with the submission of the claims on July 10, 2012.  Thus, the record could not establish that the defendant timely served its notices. This was fatal to defendant’s motion for summary judgment.


However, plaintiff did not serve responses to defendant's discovery demands, and did not deny this failure in their motion for summary judgment. This is in direct contravention of the Civil Practice Rules in New York State which require "full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof."


In this instance, defendant denied the claim on the ground that the amount billed exceeded the amount permitted by the workers' compensation fee schedule.  Thus, the discovery demands to plaintiff were material and necessary to defendant's defense.


Accordingly, the order was modified by providing that the branch of defendant's cross-motion seeking summary judgment dismissing the complaint was denied and the branch of defendant's cross motion seeking, in the alternative, to strike the complaint and dismiss the action was granted to the extent of compelling plaintiff to provide responses to defendant's discovery within 60 days of the date of the order entered hereon, and by further compelling plaintiff to appear for an examination before trial within 30 days.



Steven E. Peiper

[email protected]


On the road again.



Agnes A. Wilewicz

[email protected]


07/20/17       Westfield Insurance Co. v. National Decorating Service, Inc.

United States Court of Appeals, Seventh Circuit

Seventh Circuit Holds That a Defense Duty Was Owed to Insured Contractor Where at least Part of the Pleadings Alleged Potentially Covered Property Damage, Even Where Indemnification Determination was Premature (IL law)

Around 2011, a newly constructed multi-story condo building in Chicago suffered significant water damage.  As happens, litigation ensued.  One of the contractors that had done work on the property, National Decorating Service (“National”), ultimately was alleged to have failed to supply an adequate coat of sealant to the exterior of the building which was said to have caused the damage.  National had been insured by Westfield, which disclaimed and filed a declaratory judgment action in order to elucidate coverage under the CGL policy it had issued to National.


The Insuring Agreement of the policy provided that Westfield would: “Pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.  We will have the right and duty to defend the insured against any ‘suit’ seeking those damages. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply.  ‘Property damage’ is defined as the ‘[p]hysical injury to tangible property, including all resulting loss of use of that property.’  Per the policy, the insurance only covers ‘property damage’ caused by an ‘occurrence,’ which is further defined as an ‘accident, including continuous or repeated exposure to substantially the same general harmful conditions.’  But, the policy does not define the term ‘accident.’”


In short, the pleadings against National had asserted causes of action for the following damages: (1) significant cracking of the exterior concrete walls, interior walls, and ceilings; (2) significant leakage through the exterior concrete walls, balconies, and windows; (3) defects to the common elements of the Building; and (4) damage to the interior ceilings, floors, interior painting, drywall, and furniture in the units.  At issue was whether these triggered either a duty to defend or to indemnify National as an insured.


Citing general principles of coverage common to many states (i.e. duty to defend determined by the allegations in the pleadings; no defense only when the pleadings fall entirely and squarely within an exclusion), the court here found that a defense obligation was owed.  While the condo unit owner’s property damage was insufficient to trigger the duty to defend, allegations of other damage to the building were sufficient to invoke the defense obligation.  The underlying complaint sufficiently alleged an “occurrence” and it alleged potentially covered property damage.  While the issue of indemnification was premature at this juncture, as further facts needed to be developed in the underlying case, a defense was owed to the insured.



Jennifer A. Ehman

[email protected]


07/13/17       State Ins. Fund v. Selective Ins. Co. of Am.

Supreme Court, New York County

Judge Ramos

Court Finds Employee Exclusion No Applicable in Case Brought by Employer’s Liability Carrier Against CGL Carrier

On February 11, 2008, an employee of All Waste was injured in scope of his employment while performing work at a construction site.  During the relevant time period, All Waste had a commercial general liability policy in place issued by Selective.  The policy had a primary limit of $1,000,000.  Selective also issued umbrella coverage, which afforded an additional $1,000,000.  The State Insurance Fund also insured All Waste pursuant to the terms of a Workers’ Compensation and Employers’ Liability Policy.


Following the incident, the All Waste employee brought suit against the property owners claiming violations of New York Labor Law.  The owners tendered their defense to Selective as additional insureds under the Selective policy. 


In response, Selective issued a reservation or rights letter advising that it would provide a defense and indemnification up to the limits of the primary policy.  If damages should be awarded in excess of this policy limit, any primary coverage issued to the owners directly would have to be made available before the umbrella coverage would apply. 


Thereafter, Selective, representing the owners, brought a third-party action against All Waste seeking recovery for all common-law indemnity and/or contractual indemnity claims.  Selective, through a letter captioned “Partial Disclaimer,” agreed to defend and indemnity All Waste for its contractual indemnification claim up to the limit of its primary coverage, but purported to deny coverage under the umbrella policy for the contractual indemnification claims, and common law indemnification and contribution claims on the basis of an employee exclusion. 


Selective then commenced a second third-party action on behalf of All Waste and Selective against the SIF claiming that it was a co-insurer with Selective and as a result was required to reimburse on-half of the disbursements, costs, reasonable attorneys’ fees, and expenses incurred in the defense.


The case ultimately settled for $11.5 million.  Selective paid its $1 million primary policy limit on behalf of the owners, and the SIF contributed the remaining $10.5 million.  SIF and All Waste, however, reserved their right to bring a DJ action regarding the denial of coverage to All Waste under the umbrella policy based on the employee exclusion. 


The focus of the decision was on the construction of the Selective umbrella policy.  The main policy form contained an employee exclusion, which provided that this insurance did not apply to “bodily injury” to “[a]n employee of the insured arising out of and in the course of employment by the insured.”  It then stated that “[t]his exclusion applies whether the insured may be liable as an employer or in any other capacity, and to any obligation to share damages with or replay someone else who must pay damages because of the injury.”  However, the exclusion contained an exception stating that the exclusion would not apply “to the extent that coverage is provided for the insured by ‘underlying insurance.’” 


The umbrella policy also contained a separate endorsement which had similar language excluding coverage for injuries to employees along with any claims for contribution, but removed the exception.


As support for its position that the separate endorsement applied, Selective cited to Monteleone v. Crow Const. Co., 242 AD2d 135 (1st Dept. 1998), which found no coverage for the contractual indemnification claims asserted against the insured.   While the court acknowledged that the Monteleone decision involved identical language, the court was persuaded by SIF’s argument that the separate endorsement did not address or negate coverage under these circumstances, where there is was coverage under the underlying policy and the underlying insurance has been exhausted. 


The court agreed that, when looking at the plain language of the Selective policy, it provided coverage for this type of claim, where the underlying limits have been exhausted.  And, when analyzing the separate endorsement, it must be read in conjunction with the policy, giving full effect to the terms of the policy when those altered by the endorsement.  In the court’s view, it was not clear that the intent of the endorsement was to negate coverage for this type of claim. 


Lastly, SIF argued that Selective was barred under the anti-subrogation doctrine from passing along the risk to All Waste.  In considering this argument, the court held that as the claim is covered under the terms of the umbrella policy, the anti-subrogation doctrine is applicable. 


Accordingly, summary judgment was granted in favor of SIF. 



Brian D. Barnas

[email protected]


07/20/17       Ellington v. Cure Auto Insurance

Superior Court of New Jersey, Appellate Division

Plaintiffs stated a Claim for Bad Faith by alleging that the Insured Failed to Respond to their Time-Limited Settlement Demand for Eleven Months

Cure’s insured Ellington rear-ended an automobile occupied by four people.  Ellington’s liability policy provided coverage with limits of $25,000/$50,000.  The occupants of the vehicle filed a personal injury action against Ellington.


Ten months after the personal injury action was filed, counsel sent a demand letter to Cure asking for the policy limits and detailing the significant injuries to the plaintiffs.  Cure was given 30 days to respond to the demand.  Cure failed to respond to the demand for approximately 11 months.  At that time, Cure tendered its policy limits, but the plaintiffs rejected the offer.  A counter-offer was made for the policy limits together with an assignment of Ellington’s claims against Cure for breach of its fiduciary obligations to Ellington.  Cure initially resisted any settlement containing an assignment of benefits.


Cure paid the policy limits into court, and agreed to assign Ellington’s bad faith claim.  The plaintiffs and Ellington then sued Cure, who moved to dismiss.


The court concluded that the plaintiffs stated a claim for bad faith against Cure.  The complaint alleged that Cure disregarded an opportunity to settle the case within its policy limits and waited 11 months to respond to a time limited offer.  These allegations state a claim that Cure delayed unreasonably in investigating and dealing with the claim asserted against its insured.  The complaint also sufficiently alleged that the value of the personal injuries plaintiffs’ claimed clearly exceeded the limits of the policy.


07/14/17       Houston Casualty Company v. Cavan Corporation of NY, Inc.

Supreme Court, New York County

Judge Lebovits

Bad Faith Counterclaim Seeking Consequential Damages was not Duplicative of Breach of Contract Claim

Cavan moved to amend its answer to add counterclaims for bad faith and violation of General Business Law (“GBL”) § 349.  Although Cavan’s counterclaim for bad faith could not stand as an independent tort, the court held that the counterclaim could be used to assert a claim for consequential damages.  The court relied on Acquista and Bi-Economy, and distinguished New York University because the claim in therein was for punitive, not consequential, damages.


Turning to the GBL claim, the court held that Cavan could not assert a counterclaim pursuant to GBL § 349.  The contract at issue was between an insurance company and a construction company with equal bargaining power.  Furthermore, Cavan entered into the contract using an insurance broker.  Thus, both parties to the contract were relatively sophisticated entities with equal bargaining power.  As GBL § 349 was intended to protect smaller businesses and individual customers, Cavan’s GBL claim failed.



Jennifer J. Phillips

[email protected]


07/19/17       Ling v. Erie Ins. Co.

United States District Court, Southern District of New York

Direct Action after Claimant’s Release

This insurance coverage dispute involves a judgment creditor’s direct action against an insurance company.  Erie Insurance issued a contractors’ policy to general contractors Kellam Clark and Service Junction LLC.  Plaintiff Ling commenced an underlying action against these contractors and Edmund Neal, who is described as either an employee or volunteer worker for the contractors, for damages to Ling’s apartment as a result of an allegedly bungled kitchen renovation.  Erie defended the contractors against the suit, but disputed that it had an obligation to defend or indemnify Neal under the policy.  Neal ultimately defaulted.


Erie settled the underlying litigation with Ling on behalf of the contractors.  As quoted by the district court, the release stated that “Ling discharges and forever releases Service Junction, Clark, and Erie, their predecessors, parents, subsidiaries, co-ventures, affiliates, officers, directors, members, agents, servants, employees, representatives, heirs, administrators, executors, successors, assigns, insurers, attorneys, law firms, and legal counsel, past and present, from any and all rights and claims, demands, actions, and/or suits of whatever kind or nature whatsoever, known or unknown, arising from, in connection with, or as a consequence of Ling's contractual or other relationship with Service Junction and/or Clark (and in particular the work performed by Service Junction and/or Clark for Ling at Ling's residence located at 220 E. 5th St. Apt. 2W, New York, New York 10003), the Undisputed Claims, the Disputed Claims, the Ling action, and the Erie action including his counterclaims therein (the “Ling Release”).”


Ling subsequently obtained a default judgment against Neal and then commenced the instant action against Erie pursuant to New York Insurance Law § 3420(a)(2), which permits claimants such as Ling to commence an action directly against an insurer “under the terms of the policy or contract for the amount of [a judgment obtained against an insured] not exceeding the amount of the applicable limit of coverage under such policy or contract.”  Erie moved to dismiss the action pursuant to Federal Rule of Civil Procedure 12(b)(6), i.e. for failure to state a claim.


The district court rejected Erie’s argument that Ling’s earlier release of all claims “past and present” arising out of his relationship with the contractors precluded his present action based on the default judgment against Neal.  Despite the broad wording of the release, the district court found that the 3420 claim against Erie had not yet accrued when the release was executed – that instead, that claim subsequently accrued when the judgment was entered against Neal and a statutorily required 30 day waiting period had expired during which that judgment remained unsatisfied.  The release, however, covered only “past and present” claims as opposed to past, present and future claims. Therefore even broadly construed to apply to Ling’s direct claims against Neal, the release did not prevent Ling’s subsequently accruing claim against Erie based on the default judgment.  Further, because the complaint sufficiently alleged Neal was an insured under the policy, dismissal for failure to state a claim on that ground was inappropriate.


The district court dismissed Ling’s claims under New York General Business Law § 349, which prohibits deceptive business practices.  The court found that “[n]either the text nor the purpose of Section 3420 suggests that the legislature intended to authorize victims such as Ling to bring a claim for deceptive practices on behalf of their tortfeasor.”  Further, Ling failed to sufficiently allege “consumer oriented” conduct, a necessary element of a 349 claim.


John R. Ewell

[email protected]


07/18/17       Olin Corp. v. OneBeacon Am. Ins. Co.

United States Court of Appeals, Second Circuit

Second Circuit Adopts New York Court of Appeals Holding on Allocation and Exhaustion Methods in Long-Tail Claims—Bringing New York State and Federal Courts In Harmony

Olin, a large chemical manufacturing company, brought a coverage action against its insurers, including OneBeacon, seeking indemnification for environmental contamination at Olin manufacturing sites throughout the United States. This appeal arose out of contamination at five Olin manufacturing sites.


The Court considered two issues: first, the proper method for allocating loss at each site when the damage continued across a number of years and, second, whether OneBeacon could reduce the limits of its liability by any other prior insurance policies within the same layer of coverage.


OneBeacon issued Olin three excess umbrella insurance policies during the pertinent period.  OneBeacon’s policies provided up to $20 million in coverage, in excess of $300,000, per occurrence.  The OneBeacon policies provided coverage for “all sums which the Insured shall be obligated to pay by reason of the liability . . . imposed upon the Insured by law . . . for damages, direct or consequential and expenses . . . on account of . . . Property Damage . . . caused by or arising out of each occurrence . . . .”


An “occurrence” was defined as “an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally result[s] in . . . property damage . . . during the policy period.”  Each OneBeacon policy also contained a condition on coverage known as a “noncumulation” clause.


The court noted that while this case was pending, the New York Court of Appeals issued its decision in In re Viking Pump, Inc., 52 N.E.3d 1144 (N.Y. 2016). The Second Circuit found that Viking Pump was dispositive as to certain issues presented on appeal, including the methodology of allocation and whether vertical or horizontal allocation applies. The Court summarized the New York Court of Appeals decision in Viking Pump, and then proceeded to apply it.


The Second Circuit found that the primary layer of coverage had been exhausted, triggering OneBeacon’s excess policies.  Pursuant to Viking Pump, the Court next reviewed the OneBeacon policies and found that the policies contained a non-cumulation provision.  Accordingly, as dictated by Viking Pump, the Court held that all sums allocation applied.


The Second Circuit then turned to the question of whether vertical or horizontal exhaustion applied. The Court again looked to Viking Pump, and held that “Because OneBeacon’s policies call for all sums allocation … the New York Court of Appeals’ decision in Viking Pump dictates vertical exhaustion where the all sums approach is the proper method for allocation…” As such, the court explained that Olin “may simply tap a particular tower of its insurance program triggered by an occurrence and proceed up the tower upon depletion of the policies within each layer of coverage.”


The Second Circuit vacated the trial court judgment and remanded for entry of a new damages judgment following the methodology dictated by Viking Pump.  In other words, the Second Circuit adopted the same methodology for allocation and exhaustion set forth by the New York Court of Appeals in Viking Pump.  Going forward, both New York State courts and federal courts in New York will apply the same methodology as to allocation and exhaustion in long-tail claims.



Howard B. Altman

[email protected]


Health Care Reform: No News is No News

The US Congress voted this week to continue to debate health care legislation.   What this means is that, at least for the time being, it will neither repeal the Affordable Care Act, nor pass either the House or Senate versions of the American Health Care Act or Better Health Care Act we wrote about in prior issues. Your author, Dear Reader, thinks they will have to go back to the drawing board, since none of the fixes proposed thus far were acceptable to a sufficient enough number of lawmakers to pass.


New York’s Proposed Procedural Reform

New York’s State Legislature passed bill number A8032 (Assembly) and S06031 (Senate), and the Bill has been sent to Governor Cuomo for his approval/signature.  The Bill adds an additional ground for determination of venue under CPLR 503, permitting actions in  “the county in which a substantial part of the events or omissions giving rise to claim occurred.”  The Bill is being supported by the plaintiffs’ bar and the New York State Trial Lawyers’ Association.


CPLR 503 currently provides:


503. Venue based on residence. (a) Generally. Except where otherwise prescribed by law, the place of trial shall be in the county in which one of the parties resided when it was commenced; or, if none of the parties then resided in the state, in any county designated by the plaintiff.  A party resident in more than one county shall be deemed a resident of each such county…


The new Bill, if signed by the Governor, will add a provision permitting venue to be placed in  “the county in which a substantial part of the events or omissions giving rise to claim occurred.”  While this is logical on its face (seeming to allow venue where an incident occurred), it does not simply state “where the incident occurred,” but instead broadly and somewhat vaguely allows venue where a “substantial part of events or omissions” occurred.   In your author’s opinion, this is too broad, and allows too easily for forum shopping by plaintiffs.


Brian F. Mark
[email protected]


Nothing to report this issue…



Earl K. Cantwell
[email protected]


04/27/17       Xia v. ProBuilders Specialty Insurance Company RRG

Supreme Court of Washington

“Efficient Proximate Cause” May Extend Claims

This case asked the court to clarify the applicability of a broad pollution exclusion to a claim based on negligent installation of a hot water heater that released carbon monoxide into a residential home.  The primary question was whether the pollution exclusion included carbon monoxide, and whether that exclusion precluded coverage where the cause of the loss was a covered “occurrence.” 


The Washington Supreme Court, relying on an “Efficient Proximate Cause” analysis, found coverage to exist under the policy, in effect overriding the pollution exclusion. 


The insured’s home had an exhaust vent installed for a hot water heater that was not installed correctly and discharged carbon monoxide into the residence.  ProBuilders (the homeowners’ carrier) denied coverage based on two exclusions – the pollution exclusion and a “townhouse” exclusion.  The Trial Court entered summary judgment in favor of ProBuilders largely on the basis of the townhouse exclusion.  The intermediate appellate court held that the townhouse exclusion did not apply, but that the pollution exclusion did.  The Washington Supreme Court disagreed with both lower courts and ruled in favor of the insured finding coverage.  The essential basis for the ruling was that, under relevant Washington insurance law, an “Efficient Proximate Cause” analysis essentially made the non-covered pollution exclusion into a covered loss because of primacy in time and causation.


The Court used a somewhat new phrase (to me), the “Eight Corners Rule”, in initially ruling that the eight corners of the complaint AND the policy normally define and dictate coverage.  Under Washington law, the rule of Efficient Proximate Cause provides coverage where a covered peril sets in motion a causal chain, the last link of which may be an uncovered peril.  If the initial event, the “Efficient Proximate Cause”, is a covered peril, there is coverage regardless of whether subsequent events are excluded under the policy. 


ProBuilders argued that application of this doctrine would essentially read out the pollution exclusion.  This was not persuasive to the Court.  The Court noted that a polluting occurrence happened when the hot water heater emitted toxic levels of carbon monoxide into the home.  However, the polluting occurrence only happened because of and after an initial covered occurrence, which was negligent installation of the hot water heater that typically does not pollute when properly installed.  In essence, the pollution exclusion was “trumped” by the prior efficient proximate cause doctrine. 


There were several opinions written in the case, including a dissent that would have enforced the pollution exclusion and denied coverage.  The dissent would have affirmed the appellate court holding.  The dissent would not have extended the efficient proximate cause rule to this case.  The essential basis for this position was that extending the efficient proximate cause rule would contradict the plain language of the absolute pollution exclusion. 


This was a legally complicated case, as referenced by three different court decisions at the three different levels of judicial review.  Amicus briefs were also filed in the case on behalf of the insurance industry and policyholders, indicating that significant insurance principles, and eventually dollars, were at stake.  The lower court initially ruled in favor of the insurance company on the basis of the townhouse exclusion, which approach was rejected by the intermediate appellate court which relied upon the pollution exclusion, which was rejected by the Supreme Court.  Even at the Supreme Court level, there were three separate decisions addressing all or part of the analysis. 


The end result is that using the “Efficient Proximate Cause” analysis, a potentially non-covered loss subject to the pollution exclusion was held to be a covered loss because it set in motion the causal chain of events that led to the loss, even if in that chain of events non-covered or excluded occurrences contributed to the loss. 


Newsletter Sign Up