Volume XIX, No. 6 (No. 489)
Friday, September 8, 2017
A Biweekly Electronic Newsletter
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 hope not, but if you do, call us because we love situations! This is a first, this issue is being sent from a JetBlue flight, taking me home from the Big Easy to Buffalo, via JFK. As my flight home doesn’t arrive until past midnight, I thought we’d try the Fly-Fi network and see what happens.
Prayers from those in the eye of the storms. Thank goodness we have a solvent, attentive and always-ready insurance industry standing by to help those in need.
I bring you greetings from New Orleans where I have been presenting on Emerging Homeowners Risks at the PLRB Regional Adjusters Conference. I thank Agnes Wilewicz for taking the laboring oar in crafting this issue of Coverage Pointers.
This is a light issue; regular readers know that the courts are very quiet in the summer particularly in late August through September. Normally, an issue may review 25 to 30 appellate decisions That slows down to a trickle at this time of year, but you can be certain that we’ve covered every appellate decision released in NY over the past two weeks.
DRI Northeast Regional Claims Conference
I am pleased to announce I will be speaking at the upcoming Northeast Regional Claims Conference, November 2, 2017, in Hartford, CT.
Victoria (Vicki) Roberts, Vice-President and Counsel at Meadowbrook Insurance Group and I will be speaking at the seminar on November 2nd at 2:05 PM on additional insured and contractual discovery and inspection issues. The topic is descried as follows:
Risk Transfer: Tag, You’re It!
Agreeing to defend can be the single most expensive proposition of a claim. This presentation will explore management and strategy when faced with potential liability exposure based on contractual promises and obligations. Differentiating between contractual indemnity and additional insured obligations is a critical distinction that governs the determination of how this ultimately affects the paying party. The direction and outcome of a claim can be greatly affected by the employment of certain endorsements, such as those requiring privity, causation, and findings of negligence.
The NE Regional Conference is a one-day program designed for insurance executives, claims professionals, and outside counsel in the Northeast who specialize in insurance coverage and casualty claims. The program is intended to provide insightful education and training on some of the most important claims issues facing the insurance industry today. Be part of the interactive networking luncheon organized by DRI, which has moderated table discussions on a variety of topics ranging from claims-handling dilemmas to emerging issues, that you want to learn more about.
I encourage you to make your hotel reservations at the Hilton Hartford as soon as possible, as the room block is limited and is expected to fill up quickly. For reservations, contact the hotel directly at 860-728-5151 and mention the Northeast Regional Claims Conference to take advantage of the group rate of $189 single/double. The conference block rate expires on October 12, 2017, and after that date there is no guarantee that the rates will not go up.
Come join us in Hartford for great CLE and wonderful networking opportunities!
Ewell's Universe:
Dear Subscribers:
I hope you enjoyed your Labor Day weekend. Here’s a question. Where an insured is in an automobile and is the victim of a drive-by shooting, would he or she be able to recover uninsured motorist benefits?
For those who do not know, underinsured motorist coverage provides compensation to a driver or passenger who is injured by an uninsured driver. Underinsured motorist coverage is generally written to require that the injury sustained by the insured be caused by an “accident.”
If you answered “no”, you may be right. If you answered “yes,” you may be right. The answer depends upon which state you are in. Is a drive-by shooting an intentional act? It would be difficult to disagree. However, would it matter whether the drive-by shooting is an accident from the perspective of the insured? Courts across the country have not uniformly answered this question. As of today, two viewpoints have been adopted by the courts.
Under the first view, the question of whether a loss results from an “accident” is answered from the perspective of the insured. This is the law in New York. See, e.g., State Farm v. Langan, 947 N.E.2d 124 (2011). Iowa, Montana, New Hampshire and others also follow this view. Under the second view, an injury resulting from a willful act is no accident because the harm had been intended. This is the view of Vermont, Nebraska, Washington and others.
Maine recently considered these two views and ultimately chose the second option, which indicates that there is a growing split across the nation on how to determine whether an “accident” occurred. In states such as Maine, courts refuse to stretch the meaning of the word “accident” to intentional torts. As a result, insurance coverage is narrower in these states. Other courts have decided to look at the loss from the perspective of the insured to determine whether there was an “accident.” Insurance coverage in these states is considerably broader, and insurers will be called upon to defend and indemnify more claims and suits.
For each claim where there is an intentional tort or arguably intentional conduct, it is important for insurance claims professionals, executives, and attorneys to consider whether the state where the suit is brought takes a strict view of the term “accident” by looking at the nature of the act itself, or whether that state looks to the perspective of the insured. Answering the question of whether there was an “accident” will greatly aid in determining an insurer’s duty to defend and/or indemnify in such cases.
Until Next Time,
John
John R. Ewell
World War I Insurance Bill:
The New York Times
New York, New York
08 Sep 1917
TAKE UP INSURANCE BILL.
Speedy House Action Expected on
Measure Advocated by the President
WASHINGTON, Sept. 7.—The Administration’s $176,000,000 Soldiers’ and Sailors’ Insurance bill was taken up in the House today with the leaders determined to dispose of it as speedily as possible. Considerable opposition to the bill’s optional insurance features, opposed by private insurance companies, is anticipated, but its passage without material change is expected.
Representative Adamson of Georgia, in charge of the bill, opened the debate with a detailed explanation of its provisions. At President Wilson’s request, Mr. Adamson will seek to have a $10,000 maximum optional policy, reduced in committee to $5,000, restored.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
We are right back into the swing of things here, and just as the temperatures cool down the courts are heating right back up. With no major holidays or breaks from now until Thanksgiving (one long weekend doesn’t count), it is full speed ahead in the weeks to come. You can count on reams of decisions coming down the pike as everyone recovers from summer. Indeed, here in the Wide World of Coverage, our own Second Circuit has already restarted and issued two new coverage decisions for your edification. Both brief, but you know what they say about brevity.
First, in LaptopPlaza v. Starr Indemnity, the court had the opportunity to analyze whether a trailer parked at the insured’s location was a “warehouse” per the policy terms. That trailer had been stolen off the property, and the policy provided coverage for merchandise stored in warehouses and/or locations off the insured’s premises. Unfortunately, this incident did not involve such facts. First, the trailer was not a “warehouse”. By any definition, a warehouse generally is a building used for storage. A trailer is not a building. Moreover, it is used to transport merchandise, not really to store it. Finally, though there was coverage for materials stored off-site, here the trailer was at the insured’s premises (i.e. right on site). Thus, no coverage to be had.
Second, we have Cybercreek Entertainment v. U.S. Underwriters. In this very brief opinion, the Second Circuit addressed a lower court’s dismissal of an insured’s claim against its carrier, for failure to state a cause of action. This is rather unusual as there is great deference to general pleadings and permitting people their opportunity in court. However, here the insured made a number of fatal errors. First, it was clear that the breach of contract stemmed wholly from the insured’s cancelation of the policy. Yet, the policy terms were incorporated by reference within that pleading and the court held that they unambiguously permitted the insurer from doing just that. Moreover, the insured did not seek leave to amend their complaint until far too late in the game – when they made it all the way up to the Second Circuit. Not having pressed the issue earlier, they were precluded. Not only was there “no coverage for you”, but no day in court to hash It out either.
Thanks for reading. Any editing mistakes and typoes in this issue are entirely mine.
We’ll be back in two weeks!
Agnes
Agnes A. Wilewicz
He’s Dead. Now What? Life Insurance Battles a Century Ago:
The Oneonta Star
Oneonta, New York
08 Aug 1917
WIDOW SEEKS TO RECOVER.
Mrs. Alice Williams Asks For Full
Amount of Insurance Policy.
Mrs. Alice Williams, widow of the late Ernest Williams, has instituted a proceeding to recover the full amount of an insurance policy for $5,000 carried by her late husband upon his life. The policy originally made the widow the beneficiary, but afterward he had it changed making it payable to his estate. According to his will two-thirds of the estate goes to his favorite niece, Miss Dorothy Williams, of this city, a daughter of Mrs. Mildred Williams. The widow is represented in the proceedings by Arthur E. Conner, Esq., of Walton with Judge L. F. Raymond of Franklin as counsel. The executors of the estate are Mrs. Williams, the widow, and James L. Clark, the Sidney banker. The estate is represented by Gibbs, Holmes, Waterman Holmes. Hon. Charles C. Flaesch of Unadilla is the special guardian of the niece who is not of age.
There was a hearing in the proceedings before Surrogate Huntington yesterday and a further hearing was adjourned to Tuesday, September 18, at which time it is expected that the evidence will be taken. The case is an interesting one and it is understood that the widow claims an interest in the policy in addition to her rights as the widow.
Off the Mark:
Dear Readers,
The Labor Day barbeques are over and a new school year on Long Island has begun. My two boys had their first day of school this week and are happy to be back. Our family trip to South Carolina last week already seems like a distant memory. The trip went well and, to my surprise, the kids were excellent in the car.
This edition discusses two recent construction defect cases, both of which examine the duty to defend. The first case is from the District of Nevada. In Assurance Co. of America v. Ironshore Specialty Ins. Co., the plaintiff insurance companies defended numerous construction defect lawsuits brought against various construction companies. The plaintiffs sued the defendant, Ironshore Specialty Ins. Co., alleging that Ironshore also owed a duty to defend. Based on the policy language, Ironshore’s duty to defend was triggered only if the construction companies were sued for “sudden and accidental” damages. Although the underlying complaints alleged construction defects, there were no allegations that the damages were caused by a sudden accident. The plaintiffs argued that because it was theoretically possible that an accident was caused by an alleged defect, Ironshore should have defended the insureds until it was clear that there was no coverage. The Nevada District Court noted that although the duty to defend was broad, it was not limitless. A possibility that there could later be a potential for coverage is not the same as an existing potential for coverage, which is required to trigger the duty to defend. As the underlying complaints did not allege, or even suggest, that a sudden accident occurred, Ironshore’s duty to defend was not triggered and summary judgment was granted in its favor.
The second case is from the Eastern District of Pennsylvania. In Northridge Village, LP v. Travelers Indemnity Co. of Connecticut, the plaintiffs sought insurance coverage from the defendants relative to an underlying construction defect action. The Court examined the duty to defend as well as what constitutes an “occurrence” under Pennsylvania law. Based on the case law reviewed, the Court held that the term “occurrence” in the defendants’ CGL policies does not include faulty workmanship and that the definition of “occurrence” excludes negligence claims premised on faulty workmanship. As the allegations in the underlying complaint stemmed solely from faulty workmanship, the Court held that such claims are not “accidents” and thus, not “occurrences” under the CGL policies. Accordingly, the Court found that the defendants had no duty to defend the plaintiffs relative to the underlying action.
Until next time …
Brian
Brian F. Mark
[email protected]
Then and Now: Wrongful Death Verdict:
Greensboro Daily News
Greensboro, North Carolina
08 Sep 1917
VERDICT FOR $6,000 WAS
AGREED UPON BY COUNSEL
Judge Announced This Yesterday in the
Case of Mrs. Henley vs. the Carolina Power and Light Company
Negotiations covering several days resulted yesterday in the announcement of an agreed verdict in the case of Mrs. Verda R. Henley, administrator for Frank Henley, vs. the Carolina Power and Light Company. Mrs. Henley was suing for $25,000 for the death of her husband, a former employee of the defendant company. He was electrocuted near Raleigh while on duty. The verdict agreed upon was $6,000.
Hewitt’s Highlights:
Dear Subscribers:
School days, school days, dear old golden rule days. My grandmother used to sing that to me when I went back to school. Yesterday, my two boys went back to school, first grade and third grade. They were very excited to meet their teachers, see friends they have not seen since June and find out who was in their class. My wife was a nervous wreck for them. She also went back to school as she teaches English as a Second Language in Elementary School. So far, they are happy with school which makes us happy.
The summer season has come to an end. Trips to the beach and pool are over. Stores have long turned to Halloween costumes and decorations for fall. There was not much activity on the serious injury front. Two formulaic cases that just go through the standard and a third case in which an issue of fact was found because the defendant’s own doctor found 25% range of motion limitations and causation. As Fall begins to hit us, more decisions should be issued.
Until next time,
Rob
Robert Hewitt
Canada Debates Suffrage:
Poughkeepsie Eagle-News
Poughkeepsie, New York
08 Sep 1917
Canada Debates
Woman Suffrage
Ottawa, Ont., Sept. 7.—The Liberal opposition in the Canadian parliament held a meeting today and decided to ask the enfranchisement of all women. The war-time election act introduced by the government yesterday would extend the franchise only to the female relatives of Canadian soldiers over-seas. It was pointed out at the opposition meeting that this would not give the vote to the female relatives of hundreds of thousands of men to be gathered under conscription for they would be in Canada and not overseas when the election is held.
In support of their amendment the opposition proposes to take the position that there are thousands of women who, while not represented at the front, are engaged in war work and should have voting power. It also was proposed that, if the government should attempt to put the franchise bill through by cloture, the Liberals would leave the chamber in a body as a protest.
Barnas on Bad Faith:
Hello again:
It’s a big week at the local football stadium. On Tuesday, U2 rolled the Joshua Tree Tour into town and played an amazing show that I’m pretty sure half of our office, myself included, attended. This Sunday marks the Bills’ home opener against the Jets, two teams that are not exactly expected to play a lot of good football this year. Yours truly will be out at the stadium for that as well, as we have renewed our Bills season tickets once again. The quest for a franchise quarterback prospect in the 2018 NFL Draft kicks off this Sunday.
I have a case in my column that literally hits close to home this week. The Violet Realty case arises out of a fire that took place in a building connected to the building that houses our Buffalo office. The Court concluded that the insured’s bad faith claim was duplicative of its breach of contract claim and dismissed the bad faith cause of action. Claims for violation of Insurance Law 2601 and General Business Law 349 were also dismissed.
Adams and Miller are two more cases in the series of Connecticut foundation collapse cases that we have been following in this space. Interestingly, the decisions were rendered on the same day by the same Judge. The court concluded that Miller and Adams were not entitled to coverage under their homeowners’ policies for the cracking to their concrete foundations caused by a chemical reaction within the concrete. As such, their bad faith claims were dismissed as well.
Enjoy the kickoff of the NFL season and Go Bills!
Signing off,
Brian
Brian D. Barnas
Peiper’s Picayunes
Another week, and we still await something interesting from the first party side of things. Truth be told, the “pickens” remain slim. We do report on two interesting tort cases this week. The first addresses the proof a plaintiff must adduce to establish a negligent security cause of action against his or her landlord. The second addresses the prior written notice rule that often saves the proverbial bacon of the municipalities.
If, by the way, you still haven’t signed up for Premises Pointers, you should. While we grab the occasional tort case here, the Potpourri portion of this column is usually dedicated to third-party practice type issues. Jody Briandi, and the rest of the writers for that publication, dive farther deeper into the depths of premises liability that you’ll ever see in this space. You can reach Jody, and get on the distribution list, at [email protected] (but, of course, you already knew that).
On the training front, September brings us to one of the best programs of the year for New York claims professionals. The New York Bar Association once again offers its annual Law School for Claims Professionals. This year’s dates and locations are:
New York City | September 13, 2017
New York City | September 13, 2017
Syracuse | September 19, 2017
Albany | September 26, 2017
Long Island | September 27, 2017
To register, or find out more information, please feel free to visit:
If, by chance, you’re inclined to attend the Albany program, please stop by and say hello. I have been once again been given the opportunity to participate in the program, and always look forward to it. This year’s topic, for me at least, is Auto Insurance Claims (with a focus on Staged Accidents and Fraud). Hope to see you there.
Lastly, today marks the start of the NFL football season. September 7th, too, marks National Salami Day and National Beer Lovers Day.
Serendipity is a beautiful thing, no?
That’s it for now. Go Chiefs!
Steve
Steven E. Peiper
A Dog’s Life – 100 Years Ago:
New York Herald
New York, New York
08 Sep 1917
DOG AND $500 BEQUEATHED.
Syracuse Man Gets Money if He
Cares for Pet of Mrs. House
Special Dispatch to The Sun
SYRACUSE, N.Y., Sept. 7.—Mrs. Henrietta House of New York leaves her pet dog Trouble to James G. Forsyth of Syracuse with $500 on condition that he take the dog and give it the best of care, food and treatment as long as he lives, in her will filed for probate this afternoon. Forsyth will accept both.
Mrs. House’s will was drawn on her death bed last July in a New York hospital, with two trained nurses as witnesses. With the exception of several diamond pins and other personal articles the $500 comprises the bulk of the estate.
Tessa’s Tutelage:
Dear Readers:
As summer winds down, the pumpkin spice lattes come out and people gleefully send their kids off to school. In a few short weeks that also means the courts will be back at it full steam. Next edition I am anticipating that we will have a whole host of cases to cover.
This week we have an arbitration case from Arbitrator Gillian Brown concerning medical necessity and what each party needs to provide to an Arbitrator to substantiate their case. In the land of litigation we have the battle of the affidavits. As you will see, oftentimes when you have competing affidavits the court has no choice but to find a question of fact. As you know, when there is a question of fact summary judgment is not appropriate.
My best,
Tessa
Tessa R. Scott
No Mail for the Disloyal?:
The Brooklyn Daily Eagle
Brooklyn, New York
08 Sep 1917
NO MAIL FOR DISLOYAL
Washington, D.C., September 8—Closing the mails to disloyal citizens is under consideration by the Post Office Department and the Department of Justice as another step in the Government’s campaign to wipe out disloyalty and sedition.
Altman’s Administrative (and Legislative) Agenda:
Greetings, Dear Readers
I hope you had a wonderful Labor Day weekend. While I mourn the passing of summer, I am comforted by the prospect of apple picking, pumpkin picking and baking lots of cookies and pies. Anyone wishing to visit our LI office is welcome to partake of the bounty!
Today, I bring you New York’s Department of Financial Services new Circular Letter, offering guidance for treatment of substance abuse, including opioid addiction.
Howard
Howard B. Altman
Highlights from This Week’s Issue:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
-
For only the second time in 18 years, not a single general interest coverage decision from any New York appellate court in the past two weeks.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
-
Plaintiff Raised Issue of Fact under Permanent Consequential Use and Significant Limitation of Use Categories
-
Defendant’s Own Expert Found 25% Range of Motion Limitations and Causation
-
Plaintiff Raised Issue of Fact under Permanent Consequential Use and Significant Limitation of Use Categories
TESSA’S TUTELAGE
Tessa R. Scott
Litigation:
-
Where there are questions of fact, summary judgment is not appropriate
Arbitration:
-
After Respondent establishes lack of medical necessity, Plaintiff must have relevant and admissible evidence for rebuttal
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
-
Common Law Liability for Inadequate Security Does Not Attach to Landlord without Proof of Foreseeability of the Criminal Act
-
Failure to Remove Snow/Ice Does Not Preclude Summary Judgment for Town where the Case was Governed by a Prior Written Notice Law
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
-
Second Circuit Holds that Stolen Storage Trailer not a “Warehouse” for Coverage Purposes, Thus not Covered by Endorsement for Goods and Merchandise in Warehouses (NY Law)
-
Second Circuit Finds no Error in Early Dismissal of Insured’s Claim Against Carrier Where Unambiguous Cancellation Provisions in Policy Preclude Relief (NY Law)
JEN’S GEMS
Jennifer A. Ehman
-
On the road again, nothing to report here.
BARNAS ON BAD FAITH
Brian D. Barnas
-
Deteriorating Concrete Foundation not Covered under Homeowners Policy
-
Take Two: Deteriorating Concrete Foundation not Covered under Homeowners Policy
-
Duplicative Bad Faith Claim Dismissed
EWELL’S UNIVERSE
John R. Ewell
-
Maine Rules that Auto Insurance Does Not Cover Drive-by Shooting
ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA
Howard B. Altman
-
New York’s Department of Financial Services issues Circular Letter on Insurance Coverage for Treatment for Substance Abuse and Opioid Addiction
OFF THE MARK
Brian F. Mark
[email protected]
-
US District Court (NV) Grants Insurer Summary Judgment in a Declaratory-Judgment Action Finding that there is no Duty to Defend
-
US District Court (NJ) Grants Insurer Summary Judgment in a Declaratory-Judgment Action Finding that Faulty Workmanship does not Constitute an “Occurrence” and, as such, there is no Duty to Defend
EARL’S PEARLS
Earl K. Cantwell
-
Recent Cases on CGL Insurance Coverage for Construction Defects
All for now. Keep those cards and letters coming in,
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]
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
ASSISTANT EDITOR
Jennifer A. Ehman
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
Michael F. Perley
Jennifer A. Ehman
Agnieszka A. Wilewicz
Edward B. Flink
Patricia A. Fay
Brian D. Barnas
Howard B. Altman
Brian F. Mark
John R. Ewell
Diane F. Bosse
Joel R. Appelbaum
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]
Michael F. Perley
Robert E. Hewitt, III
Brian D. Barnas
NO-FAULT/UM/SUM TEAM
Jennifer A. Ehman, Team Leader
Patricia A. Fay
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Diane F. Bosse
Topical Index
Hewitt’s Highlights on Serious Injury
Tessa’s Tutelage
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
Barnas on Bad Faith
Ewell’s Universe
Altman’s Administrative (and Legislative) Agenda
Off the Mark
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
For only the second time in 18 years, not a single general interest coverage decision from any New York appellate court in the past two weeks.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
08/30/17 Baulette v. L & N Car Service, Inc.
Appellate Division, Second Department
Plaintiff Raised Issue of Fact under Permanent Consequential Use and Significant Limitation of Use Categories
The defendants met their prima facie burden of establishing 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 appellants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine and to the plaintiff's left shoulder 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 raised a triable issue of fact as to whether he sustained serious injuries to the cervical and lumbar regions of his spine and to his left shoulder under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d). No facts are given.
08/30/17 Greenidge v. United Parcel Service, Inc.
Appellate Division, Second Department
Defendant’s Own Expert Found 25% Range of Motion Limitations and Causation
The plaintiff commenced this action to recover damages for personal injuries she allegedly sustained on December 9, 2010, as the result of a motor vehicle accident while was a passenger in a car owned and operated by the defendant Quincy Campble, which was allegedly struck from owned by the defendant United Parcel Service, Inc.
Following discovery, the plaintiff moved for summary judgment on the issue of liability against the UPS defendants. In support, she submitted the deposition testimony of herself and of Campble, which established that they were in a stopped car in the left lane of the Brooklyn-Queens Expressway when their vehicle was struck in the rear by Earl's vehicle. The plaintiff also submitted the deposition testimony of Earl, who testified that, just before the accident, Campble's vehicle suddenly changed lanes in front of his vehicle and then braked suddenly, leaving Earl no time to react.
The UPS defendants cross-moved for summary judgment dismissing the complaint insofar as asserted against them 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. In support, they submitted, inter alia, the affirmed report of a neurologist, who examined the plaintiff and found range-of-motion deficits in the cervical region of her spine of up to 25 percent. The UPS defendants also submitted an affirmed report from a second neurologist, who examined the plaintiff and concluded that there was a "causal relationship" between the plaintiff's injuries and the accident.
A plaintiff in a personal injury action who moves for summary judgment on the issue of liability has the burden of establishing, prima facie, both that the defendant was negligent and that he or she was free from comparative fault. A rear-end collision with a stopped or stopping vehicle establishes a prima facie case of negligence on the part of the operator of the rear vehicle, requiring that operator to come forward with evidence of a nonnegligent explanation for the collision in order to rebut the inference of negligence. The inference of negligence may be rebutted by proof that the accident was caused by the lead vehicle's abrupt change of lanes in front of the rear vehicle, and then slowing down or coming to a sudden stop.
Here, the appellate division held that although the plaintiff submitted evidence that Campble's vehicle was stopped when it was struck in the rear by Earl's vehicle, she also submitted evidence that Campble's vehicle changed lanes abruptly in front of UPS's vehicle and then came to a sudden stop. Under these circumstances, the plaintiff's submissions failed to eliminate triable issues of fact as to whether UPS was negligent, and thus, she failed to establish her prima facie entitlement to judgment as a matter of law on the issue of liability against the UPS defendants. Accordingly, the Supreme Court should have denied the plaintiff's motion for summary judgment on the issue of liability against the UPS defendants.
However, the Appellate Division found the Supreme Court properly denied the UPS defendants' motion for summary judgment dismissing the complaint insofar as asserted against them 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 UPS defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The papers submitted by the UPS defendants failed to eliminate triable issues of fact as to whether the plaintiff sustained a serious injury to the cervical region of her spine under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) as a result of the accident. Since the UPS defendants failed to meet 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
08/30/17 Mateo v. Vazquez
Appellate Division, Second Department
Plaintiff Raised Issue of Fact under Permanent Consequential Use and Significant Limitation of Use Categories
The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and 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). In opposition, however, the plaintiff raised a triable issue of fact as to whether he sustained a serious injury to the cervical and lumbar regions of his spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d).
TESSA’S TUTELAGE
Tessa R. Scott
Litigation:
08/25/17 Gentlecare Ambulatory Anesthesia Servs. v Country Wide Ins.
Appellate Division, Second Department
Where There Are Questions of Fact, Summary Judgment is not Appropriate
In this action by a provider to recover assigned first-party no-fault benefits, plaintiff appeals from an order of the Civil Court which denied plaintiff's motion for summary judgment and granted defendant's cross motion for summary judgment dismissing the complaint.
The Court reviewed a similar case, Island Life Chiropractic, P.C. v Country Wide Ins. Co., in consideration of its determination. In Island Life, defendant asserted that there was no coverage for the accident because plaintiff's assignor's insurance policy had been cancelled prior to the accident. In support of its position, defendant submitted several affidavits. The Court concluded that the affidavits were insufficient because they did not describe the mailing process involved with a notice of cancellation. As a result, defendant failed to establish that the notice of cancellation had been mailed to the insured. However, one affidavit was sufficiently detailed to establish, a different argument. Defendant had argued that it had not received the claim form at issue. Before you get all excited, Plaintiff countered with an affidavit of its own. Obviously, there was a question of fact with regard to who mailed what and summary judgment could not be granted.
In Gentle Care, the Court similarly denied defendant’s motion for summary judgment. Although it did not speak to the facts of Gentle Care, one can deduce that the same issues were in play for both cases.
Arbitration:
09/04/17 Amherst Medical v Unitrin Advantage Insurance
Gillian Brown
After Respondent Establishes Lack of Medical Necessity, Plaintiff Must have Relevant and Admissible Evidence for Rebuttal
This claim arises from a motor vehicle accident where the injured party or EIP was the belted driver of a vehicle which was struck in the front end by another vehicle which failed to yield the right of way. She began chiropractic care approximately two weeks after the accident. The EIP was prescribed a lumbosacral orthotic and a multi-modality unit - a type of interferential stimulator. On the check-box format letter of medical necessity, the prescribing chiropractor indicated that the items were being prescribed to "decrease pain," "decrease muscle spasms," "increase overall function." Respondent retained the services of Dr. John Gaiser, DC, as its peer reviewer.
Dr. Gaiser’s report indicated no positive testing and found that several months of chiropractic care had done nothing to assist in resolving her condition. He noted no restrictions in her ranges of motion, and he noted that the claimant had lost no time at work as a result of the accident. He found no causally-related disability, and provided a factual basis for his conclusions, and a medical rationale. His examinations revealed, in short, that the claimant received no benefit from her chiropractic treatment, that she had stopped it herself several weeks prior to the IME, and that she required no further chiropractic care or durable medical equipment.
Claimant did not provide any records which rebutted Dr. Gaiser's conclusions. Claimant submitted nothing which showed that the chiropractic treatment or the durable medical equipment was having either a palliative or a curative effect, and no meaningful rebuttal to the Gaiser IME.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
08/30/17 Golub v Louris
Appellate Division, First Department
Common Law Liability for Inadequate Security Does Not Attach to Landlord without Proof of Foreseeability of the Criminal Act
Plaintiff sustained bodily injuries during the course of an armed robbery at their apartment. Subsequently, they commenced the instant suit against the owner of the apartment complex. The Record establishes that the robbers entered the premises by breaking a basement window. From there, the assailants were able to access a garage which provided direct access to the plaintiff’s backdoor. Because the door could not be locked from inside the apartment, the plaintiff’s alleged that defendant’s negligence in securing the apartment was the cause of the robbery.
In dismissing the case, the Appellate Division noted that landlords do have a duty to protect tenants against foreseeable criminal conduct. However, to establish foreseeability, the plaintiff must establish that the incident was “reasonably predictable” on the basis of previous occurrences or high criminal activity in the same proximate area. Without such a showing, liability never attaches to a landlord.
Here, of course, plaintiff could not meet its burden. Defendant, on the other hand, did establish that it had no notice of criminal activity prior to the incident in question.
08/30/17 Morreale v Town of Smithtown
Appellate Division, Second Department
Failure to Remove Snow/Ice Does Not Preclude Summary Judgment for Town where the Case was Governed by a Prior Written Notice Law
Plaintiff was injured when she slipped and fell in a park owned by the Town of Smithtown. There appears to be no dispute that plaintiff fell as a result of slipping on snow and ice at the park which had not been removed, or otherwise treated, by the Town.
Unfortunately for the plaintiff, however, the Town had previously enacted a “prior written notice” statute which required it to be placed on notice of a potentially hazardous condition before liability could attach. Here, in moving for summary judgment, the Town established through affidavits of the Town Clerk that no one had placed the Town on notice of the condition prior to plaintiff’s fall. Accordingly, the Appellate Division affirmed the trial court’s decision granting summary judgment.
In so holding, the Appellate Division recognized that an exception to the prior written notice rule arises when the Town creates the “hazard” through an “affirmative act of negligence.” Plaintiff argued that failure to monitor and remove snow/ice hazards from Town property was just that; an affirmative act of negligence. In rejecting this position, the Court advised that Town’s failure to recognize the condition, or remove it, was passive in nature. As such, it concluded that failure to remove snow/ice is does not amount to an affirmative act.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
09/01/17 LaptopPlaza, Inc. v. Starr Indemnity & Liability Company
United States Court of Appeals, Second Circuit
Second Circuit Holds that Stolen Storage Trailer not a “Warehouse” for Coverage Purposes, Thus not Covered by Endorsement for Goods and Merchandise in Warehouses (NY Law)
LaptopPlaza is a distributor of laptops and tablets. They have offices, trailers, and warehouses (presumably for those laptops), which were covered under a policy issued by Starr Indemnity. When one of their trailers were stolen, notably one which was parked at the premises of their warehouse facility, they sought coverage for the theft.
The policy at issue did provide coverage for goods and merchandise while temporarily detained in warehouses. The policy also provided for coverage for merchandise at locations excluding the insured’s premises. Here, however, the trailer was not parked at the premises, meaning it was in a warehouse nor was it off premises. Thus in determining coverage, the issue was whether the trailer would be considered a “warehouse”.
Litigation ensued and the matter went up to the Second Circuit. There, the court found that the trailer was not a “warehouse”. That term can be defined (using standard dictionary definitions) either as “a building used to store good and other items” or “a structure or room for the storage of merchandise”. The trailer was neither. “It is not a building”, the court wrote. Moreover, it was designed for transportation, and not just storage, of merchandise. Accordingly, there was no coverage for the claim.
The insured had argued that if it was not a warehouse, then it should still be covered as per the terms of a clause that “if the Assured shall store or warehouse any goods at locations (excluded the Assured’s premises) not listed [above], this insurance shall automatically apply for an amount not exceeding [schedule]”. However, the court noted, this provision expressly excluded things on the insured’s premises. The trailer in question was indisputably at the insured’s premises. Thus, no coverage.
08/31/17 Cybercreek Entertainment, LLC v. U.S. Underwriters Ins. Co.
United States Court of Appeals, Second Circuit
Second Circuit Finds no Error in Early Dismissal of Insured’s Claim Against Carrier Where Unambiguous Cancellation Provisions in Policy Preclude Relief (NY Law)
Cybercreek filed suit against its carrier USLI for damages stemming from the insurer’s cancellation of its insurance policy. Cybercreek’s federal complaint, however, failed to state a cause of action. Indeed, the insured only pled an alleged breach of contract and incorporated by reference the terms of the policy. However, the unambiguous cancellation provisions of the policy permitted the carrier to proceed as it had. Thus, the court dismissed the case.
The insured on appeal had argued that they should be able to amend their complaint to further allege claims such as unconscionablity. However, Cybercreek never actually sought leave to amend. They also never challenged the substance of the lower court’s ruling on the futility of such amendment. Since they never explained how an amendment would even help the complaint survive a motion to dismiss, their arguments all failed.
JEN’S GEMS
Jennifer A. Ehman
On the road again, nothing to report here.
BARNAS ON BAD FAITH
Brian D. Barnas
08/29/17 Miller v. Allstate Insurance Company
United States District Court, District of Connecticut
Deteriorating Concrete Foundation not Covered under Homeowners Policy
Miller insured her home with Allstate. Miller noticed visible cracking patterns in her basement walls. A structural engineer concluded that the basement walls were cracking due to a chemical reaction and that the chemical reaction would continue to deteriorate the walls rendering them structurally unstable.
Miller filed a claim with Allstate, who denied coverage. Miller filed a lawsuit against Allstate alleging, among other things, breach of contract and bad faith.
Allstate’s motion to dismiss the breach of contract claim was granted. Plaintiff did not allege a sudden and accidental loss covered by the policy. The complaint described the loss as a progressive deterioration that occurred over time. Plaintiff’s claim was also barred by policy exclusions for losses consisting of or caused by settling, cracking, shrinking, bulging or expansion of … foundations, walls, floors, roofs or ceilings. In addition, the additional coverage for collapse did not apply because there was no sudden and accidental collapse. The court specifically stated that the plaintiff could make a claim for coverage once some portion of the house collapsed.
Plaintiff’s bad faith claim was dismissed as there was no coverage for the loss under the policy.
08/29/17 Adams v. Allstate Insurance Company
United States District Court, District of Connecticut
Take Two: Deteriorating Concrete Foundation not Covered under Homeowners Policy
This case, decided on the same day by the same court and the same Judge as the Miller case discussed above, also dealt with a claim for coverage under a homeowners policy for damage to cracking basement walls caused by a chemical reaction in the concrete.
Allstate’s motion to dismiss the breach of contract claim was granted. Plaintiff did not allege a sudden and accidental loss covered by the policy. The complaint described the loss as a progressive deterioration that occurred over time. Plaintiff’s claim was also barred by policy exclusions for losses consisting of or caused by settling, cracking, shrinking, bulging or expansion of … foundations, walls, floors, roofs or ceilings. In addition, the additional coverage for collapse did not apply because there was no sudden and accidental collapse. The court specifically stated that the plaintiff could make a claim for coverage once some portion of the house collapsed.
Plaintiff’s bad faith claim was dismissed as there was no coverage for the loss under the policy.
08/28/17 Violet Realty, Inc. v. Affiliated FM Insurance Company
United States District Court, Western District of New York
Duplicative Bad Faith Claim Dismissed
Plaintiff owns a 26-story commercial office tower in downtown Buffalo, New York, which was insured by Defendant. On February 20, 2015, the building suffered a fire that originated on the 15th floor, causing damage to numerous floors of the building.
On the day of the fire, Defendant sent representatives to observe the damage. Thereafter, Plaintiff hired an adjuster and began remediating the damage. Plaintiff’s adjuster initially estimated the damage at approximately $2.5 million, but that estimate did not include all of the repairs Plaintiff latter deemed necessary. The most recent estimate of the damage totaled almost $6.5 million. Defendant paid $2.2 million. Plaintiff also claimed $700,000 for lost rental income, which has not been paid by Defendant
Plaintiff sued alleging that Defendant failed to adequately investigate and improperly denied payment for required remediation. The causes of action alleged by Plaintiff were: 1 breach of contract; 2 breach of the covenant of good faith and fair dealing; 3 violations of New York Insurance Law § 2601; and 4 deceptive business practices in violation of New York General Business Law § 349.
Plaintiff’s bad faith claim was dismissed as duplicative of the breach of contract claim. Plaintiff’s factual allegations alleged only that Defendant failed to pay for all of the losses covered by the fire. There were no different allegations to support the bad faith claim. The court determined that Plaintiff’s reliance on Bi-Economy was misplaced. Plaintiff failed to plead any additional damages caused by the loss beyond those losses covered by the insurance policy. Plaintiff also did not plausibly claim that Defendant’s alleged delay in paying the loss created losses that would not otherwise be remedied by a full payment of the breach of contract claim.
Plaintiff’s claim for violation of New York Insurance Law § 2601 was dismissed because that statute does not provide a private cause of action.
Plaintiff’s General Business Law § 349 claim was also dismissed. Plaintiff raised no public, consumer-oriented concerns as required to state a § 349 claim. The litigation involved only a dispute concerning a private insurance contract. The contract was also negotiated by sophisticated parties and covered multiple properties owned by Plaintiff. Plaintiff also failed to allege any act of deception aimed at consumers.
EWELL’S UNIVERSE
John R. Ewell
08/29/17 Allocca v. York Ins. Co. of Maine et al.
Maine Supreme Judicial Court
Maine Rules that Auto Insurance Does Not Cover Drive-by Shooting
In January of 2014, Timothy Austin Davison, better known as Asti, was driving to Maine in his father’s sport utility vehicle (SUV). While driving down the interstate in Maryland, an assailant driving a pick-up truck began pursuing Asti and fired shots at Asti’s vehicle. The two vehicles crossed the state line into Pennsylvania, and the assailant rammed his truck into the SUV, pushing the SUV off the road onto the median. The assailant then turned around and approached Asti from the opposite side of the highway. The assailant pulled up next to Asti’s SUV in the median and, from his truck, fired multiple shots at Asti and drove away. Asti died of the gunshot wounds.
Asti was potentially covered under four insurance policies. First, Asti was the named insured on an automobile policy and a motorcycle policy issued by Allstate. Next, Asti’s father was the named insured on a York Insurance automobile policy covering the SUV that Asti was driving at the time he was killed. Finally, Asti’s mother was the named insured on a Horace Mann policy covering her vehicle.
Asti’s parents filed a complaint against Allstate, York, and Horace Mann in their individual capacities, and as personal representative of the Asti’s Estate seeking to recover uninsured motorist (UM) benefits based on several automobile insurance policies. The Estate sought payment of UM benefits from Allstate and York. Asti’s parents alleged that they are entitled to recover in their own right as statutory beneficiaries under the state wrongful death statute based on the UM coverage of their York and Horace Mann policies. All of these claims were based on an allegation that Asti’s death was caused by a hit-and-run driver.
Each of the insurers moved for summary judgment, asserting that the losses arising from Asti’s death are not covered by the UM provisions in the policies because his death was not caused by an “accident” and did not arise out of the “use” of a vehicle within the meaning of the policies or the UM statute. The Estate and Asti’s parents opposed. The trial court granted the insurers’ summary judgment motions, concluding that UM coverage applies only to the “reasonable and proper use” of an uninsured or hit-and-run vehicle and that the way the assailant used the vehicle he was operating did not constitute a proper use. Adjudicating the issue on that ground, the court did not reach the question of whether Asti’s death was “caused by an accident” pursuant to the uninsured motorist policies.
Maine’s high court reviewed the grant of summary judgment de novo. Each of the UM provisions in the policies required that, to be covered, the loss must be caused by “an accident.” Upon review of the record, the court found that Asti’s death was not unintended but rather was the result of the assailant’s deliberate and purposeful conduct. Maine’s Supreme Court concluded that Asti’s murder was not an “accident”, and therefore, that the loss is not covered by the UM protection included in any of the insurance policies. The Court explained that:
describing an intentional act—such as an intentional killing—as an “accident” stretches the plain meaning of that word too far. Instead, we find more persuasive the contrary view, that the plain and commonly understood meaning of an “accident” is an unexpected event.
The court rejected the Estate’s argument that the drive-by shooting was an accident from Asti’s perspective, stating: “[t]hat the insured himself may have been unsuspecting does not transform the intentional act—something as heinous as the murder of Asti—into an accident.” The Court then supported its holding with the following facts: the hit-and-run driver pursued Asti’s SUV; fired shots at it; rammed the SUV off the road; and then circled back in his own vehicle and fatally shot Asti. Therefore, Maine’s Supreme Judicial Court held that the loss occasioned by Asti’s death is not an accident that would invoke UM coverage. The court affirmed the summary judgment in favor of the insurers.
ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA
Howard B. Altman
Substance Abuse and Opoid Addiction Guidance
New York’s Department of Financial Services issued a Circular Letter on September 6, 2017, offering guidance on insurance coverage for treatment for substance abuse and opioid addiction. The Letter may be viewed in full at:
http://www.dfs.ny.gov/insurance/circltr/2017/cl2017_14.htm
The letter is directed to”all insurers authorized to write accident and health Insurance in New York State, Article 43 Corporations, Health Maintenance Organizations (“HMOs”), Student Health Plans …and Municipal Cooperative Health Benefit Plans”, and is intended to provide direction to insurers regarding coverage for treatment of substance use disorder (“SUD”), coverage of medication-assisted treatment, non-opioid treatment alternatives to pain management.
The Circular Letter reminds carriers that a Utilization Review (“UR”) agent must make a determination regarding a request for inpatient SUD treatment within 24 hours of receiving the request, if the request is submitted to the UR agent at least 24 hours before discharge from an inpatient admission. Editor’s note: This seems intended to dissuade the practice of “treat them and street them.” It requires carriers to act promptly to determine whether further inpatient treatment is warranted.
Further, an issuer must provide coverage for the inpatient SUD treatment while the determination is pending. The Superintendent of Financial Services (“Superintendent”) has received inquiries as to whether this provision applies only when the patient is discharged from an inpatient hospital admission. Insurance Law § 4903(c) and Public Health Law § 4903(3) are not limited to discharges from a hospital. Instead, the requirements for an expedited review of SUD treatment and coverage while the determination is pending apply to discharges from all inpatient facilities covered under the health insurance policy or contract, transfers between covered inpatient facilities, and continued stay requests for inpatient admissions, as long as the request for inpatient SUD treatment is submitted at least 24 hours prior to discharge from an inpatient admission.
The Circular Letter also reminds carriers of the prohibition, under Insurance Law §§ 3216(i)(30)(D), 3221(l)(6)(D), and 4303(k)(4) from requiring preauthorization for inpatient SUD treatment in facilities that are certified by the New York State Office of Alcoholism and Substance Abuse Services (“OASAS”) and participate in the issuer’s provider network. Editor’s note: This, too, seems geared towards ensuring patients receive treatment without any red tape.
These provisions also prohibit issuers from performing concurrent UR in facilities that are certified by OASAS and participate in the issuer’s provider network during the first 14 days of an inpatient admission provided the facility notifies the issuer of both the admission and the initial treatment plan within 48 hours of the admission.
Insurance Law § 4905(f) and Public Health Law § 4905(6) provide that an issuer may not conduct UR more frequently than is reasonably required to assess whether the health care services under review are medically necessary. The determination of how frequently an issuer should perform UR should take into account the type of service and level of care being provided. Additionally, the federal Mental Health Parity and Addiction Equity Act (“MHPAEA”), codified in 29 U.S.C. § 1185a, prohibits issuers whose policies or contracts provide medical and surgical benefits and mental health or SUD benefits from applying financial requirements, quantitative treatment limitations, and non-quantitative treatment limitations that are more restrictive than the predominant financial requirements or treatment limitations that are applied to substantially all medical and surgical benefits covered by the plan.
Insurance Law §§ 3216(i)(31), 3221(l)(7) and 4303(l) require policies or contracts that provide medical, major medical or similar comprehensive-type coverage to provide outpatient coverage for the treatment of SUD, including detoxification and rehabilitation services. Coverage may be limited to facilities in New York certified by OASAS or licensed by OASAS as outpatient clinics or medically-supervised ambulatory substance abuse programs and, in other states, to those which are accredited by the Joint Commission as alcoholism or chemical dependence substance abuse treatment programs. Therefore, issuers must provide coverage for medically necessary care that is provided at an opioid treatment program when all of the other terms and conditions of the policy or contract are met.
Requests for Medical Records to Perform Utilization Review
Insurance § 4905(g) and Public Health Law § 4905(7) provide that when making prospective, concurrent and retrospective determinations, UR agents may collect only such information as is necessary to make such determinations and may not routinely require health care providers to numerically code diagnoses or procedures to be considered for certification or routinely request copies of medical records of all patients reviewed. During prospective or concurrent review, a UR agent only may require copies of medical records when necessary to verify that the health care services subject to such review are medically necessary. In such cases, a UR agent only may require the necessary or relevant sections of the medical record. A UR agent may request copies of partial or complete medical records retrospectively. These provisions do not apply to health maintenance organizations.
Coverage of Medication-Assisted Treatment
The Circular letter also reminds insurers of the obligation to provide coverage for medication-assisted treatment for SUD. This stems from the Affordable Care Act (“ACA”) requires individual and small group health insurance policies provide essential health benefits (“EHB”) including prescription drugs. For example, carriers must afford coverage for methadone treatment to combat heroin addiction, or cover Narcan to combat overdose.
The letter encourages issuers to broaden their coverage of non-opioid alternatives to pain management, such as acupuncture, massage therapy, and yoga, or to provide rewards or incentives to insureds who participate in such alternatives to pain management, such as full or partial reimbursement of costs, through a wellness program set forth in the policy or contract.
For example, chiropractic care is a mandated benefit in New York. Insurance Law §§ 3216(i)(21), 3221(k)(11) and 4303(y) require policies or contracts that provide coverage for physician services in a physician’s office or that provide comprehensive-type coverage to provide coverage for chiropractic care provided by a doctor of chiropractic in connection with the detection or correction by manual or mechanical means of structural imbalance, distortion or subluxation in the human body for the purpose of removing nerve interference, and the effects thereof, where such interference is the result of or related to distortion, misalignment or subluxation of the vertebral column. Similarly, coverage for physical therapy must be included in all individual and small group policies or contracts, as it is an EHB under the ACA. In addition, Insurance Law §§ 3221(l)(3) and 4303(e) require issuers to make available coverage for physical therapy to large groups. Both chiropractic care and physical therapy may be beneficial to insureds as non-opioid alternatives to pain management.
Coverage of Substance Use Disorder Prevention
The Department also encourages issuers to consider expanding wellness programs to incorporate substance use disorder prevention programs as an additional opportunity to combat the continuing epidemic of opioid addiction and opioid overdose deaths. As stated above, wellness programs are not limited to the list of programs and services described in the statute. OASAS has providers that deliver a wide range of services including evidence-based education programs, skills development workshops, training sessions for parents, teachers, and other professionals, and positive alternative activities for youth. A wellness program that offers insureds incentives or rewards to participate in OASAS SUD prevention services, is permissible and encouraged by the Department as long as it is set forth in the policy or contract and complies with the requirements of Insurance Law § 3239.
The letter directs any questions regarding its scope to Thomas Fusco, Supervising Insurance Attorney, Health Bureau, New York State Department of Financial Services, Walter J. Mahoney Office Building, 65 Court Street, Room 7, Buffalo, New York 14202 or by e-mail at [email protected].
OFF THE MARK
Brian F. Mark
[email protected]
08/24/17 Assurance Co. of America v. Ironshore Specialty Ins. Co.
U.S. District Court for the District of Nevada
US District Court Grants Insurer Summary Judgment in a Declaratory-Judgment Action Finding that there is no Duty to Defend
This declaratory-judgment action arises out of a number of underlying construction defect actions. The plaintiff insurance companies provided coverage for 15 construction defect lawsuits brought against various construction companies. The construction company insureds were sued in 15 separate lawsuits, all of which alleged that the insureds caused property damage by failing to use reasonable care when building residential homes. The complaints vaguely alleged that the defects in the buildings caused damage. Although the insureds demanded that the defendant, Ironshore defend the underlying actions, Ironshore refused to do so, concluding that the lawsuits fell under an exclusion in Ironshore’s policy.
The Ironshore policy excludes coverage for “continuous or progressive injury.” The exclusion states that Ironshore’s policy does not cover any damages that existed “prior to the inception of this policy.” Under the policy, any damages caused by an insured’s work are deemed to be prior to the inception of the policy if the work was performed before the policy-start date. The Court found this exclusion to be problematic for the plaintiffs as it was undisputed that all of the construction work was performed prior to the Ironshore policies going into effect. The plaintiffs attempted to rely on an exception to the exclusion stating that the exclusion does not apply to “sudden and accidental” damage.
The plaintiffs commenced this declaratory-judgment action against Ironshore alleging that Ironshore owed a duty to defend. Notably, the plaintiffs did not dispute that Ironshore’s policies provide no coverage for the underlying judgments against the insureds. Instead, they argued that because the underlying complaints were so vague, there was, at one point, a potential for coverage, which potentially triggered Ironshore’s duty to defend. Based on the policy language, Ironshore’s duty to defend was triggered only if the construction companies were sued for “sudden and accidental” damages. Although the underlying complaints alleged construction defects, there were no allegations that the damages were caused by a sudden accident. The plaintiffs argued that because it was theoretically possible that an accident was caused by an alleged defect, Ironshore should have defended the insureds until it was clear that there was no coverage.
The Nevada District Court examined the duty to defend and held that although the duty to defend was broad, it was not limitless. “An insured may not trigger the duty to defend by speculating about extraneous facts regarding potential liability.” The allegations in a complaint must create a current potential of coverage, not merely raise a theoretical possibility that a potential for coverage could exist in the future. A possibility that there could later be a potential for coverage is not the same as an existing potential for coverage, which is required to trigger the duty to defend. The Court held that an allegation that is so vague that it could possibly encompass covered allegations in the future is not enough. Here, not only did the underlying complaints contain no actual allegations that a sudden accident occurred, there was not even the suggestion of an accident. As the underlying complaints alleged that the insureds defectively built homes before Ironshore’s policies started and the Ironshore polices specifically exclude coverage for such claims, it was held that Ironshore had no duty to defend and summary judgment was granted in its favor.
08/31/17 Northridge Village, LP v. Travelers Indemnity Co. of Connecticut
U.S. District Court for the Eastern District of Pennsylvania
US District Court Grants Insurer Summary Judgment in a Declaratory-Judgment Action Finding that Faulty Workmanship does not Constitute an “Occurrence” and, as such, there is no Duty to Defend
This declaratory-judgment action arises out of construction defects associated with the development of a “Planned Community”. The plaintiffs recorded declarations for a number of lots, which were then sold to construction contractors. The construction contractors constructed houses and sold them to individual owners. The plaintiffs also constructed “Common Facilities” (e.g., roads, curbs, fences) for the benefit of the “Community Association”, a non-profit corporation that operates as a homeowners association.
The construction of the Planned Community was evaluated by the Community Association, which revealed numerous defects and deficiencies. Thereafter, the Community Association sued the plaintiffs and the construction contractors over the development and construction of the Planned Community alleging deficient construction. The defendants denied coverage and refused to defend the plaintiffs in the underlying action, which prompted this declaratory-judgment action.
The defendants issued general liability insurance policies to the plaintiffs, which state that coverage applies to “bodily injury” and “property damage” only if caused by an “occurrence”. “Occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The policies also contain an exclusion entitled Real Estate Development Activities – Completed Operations. The exclusion bars coverage for “property damage” that is included in the “products-completed operations hazard” and that arises out of any “real estate development activities” by or on behalf of any insured.
The defendants denied coverage on the grounds that construction defects and their foreseeable consequences do not constitute an “occurrence” under the CGL policies and even if there was an “occurrence”, the policy exclusions preclude coverage.
Under Pennsylvania law, an insurer has a duty to defend an insured if the underlying complaint against the insured potentially comes within the ambit of the policy’s coverage. The courts in Pennsylvania follow the “four corners rule” considering only the allegations in the underlying complaint. An insurer has a duty to defend if there is “any possibility that coverage has been triggered,” and the insurer can cease coverage only when “it becomes absolutely clear that there is no longer a possibility that the insurer owes its insured a defense.”
The Court examined how Pennsylvania courts and the United States Court of Appeals for the Third Circuit have interpreted the term “occurrence” and noted that the courts have consistently held that claims based on faulty workmanship do not amount to an “occurrence”, and thus do not trigger an insurer’s duty to defend. The Court also noted that the same conclusion has been reached in cases where the faulty work results in foreseeable damage to property other than the insured’s work product. Allegations recast as negligence claims also do not constitute an “occurrence”.
Based on the case law reviewed, the Court held that the term “occurrence” in the defendants’ CGL policies does not include faulty workmanship and that the definition of “occurrence” excludes negligence claims premised on faulty workmanship.
In reviewing the underlying complaint, the Court found that the allegations stemmed solely from faulty workmanship. The Court held that such claims are not “accidents” and thus, not “occurrences” under the CGL policies. Accordingly, the Court found that the defendants had no duty to defend the plaintiffs relative to the underlying action. The Court further held that even if the defendants’ duty to defend had been triggered; coverage is precluded based on the “Real Estate Development Activities” exclusion. Accordingly, the Court granted summary judgment in favor of the defendants.
EARL’S PEARLS
Earl K. Cantwell
Recent Cases on CGL Insurance Coverage for Construction Defects
One issue that continues to affect construction defect litigation is whether a claim for faulty workmanship constitutes an “occurrence” under standard CGL policy language. Many other policy terms and definitions may also come into play, including the definitions of damages, property damage, “your work” and your work exclusions, and a liability or arising by virtue of a contractual relationship. However, one of the core issues is usually whether or not a construction defect claim constitutes an accidental “occurrence”.
It appears still that the majority rule continues to be that faulty workmanships/construction defect standing alone is not a covered occurrence under a CGL policy. Other courts have noted a trend in recent case law to construe the term “occurrence” to include unforeseeable damage to non-defective property arising from faulty workmanship.
By way of a quick survey, the following recent cases found there to be a covered occurrence and hence coverage:
New Jersey – Cyprus Point Condominium Association, Inc. v. Adria Towers, LLC, 143 A.3d 273 (N.J. 2016);
Iowa – National Surety Corp. v. Westlake Investments, LLC, 880 N.W.2d 724 (Iowa 2016);
Montana – Employers Mutual Casualty Co. v. Fisher Builders, Inc., 371 P.3d 375 (Montana 2016).
In point of contrast, several recent cases have skewed to the traditional “majority” rule that construction defects do not constitute an accidental occurrence within the meaning of a contractor’s CGL policy:
Nebraska – Drake–Williams Steel, Inc. v. Continental Casualty Co., 883 N.W.2d 60 (Nebraska 2016);
Arkansas – Columbia Insurance Group, Inc. v. Cenark Project Management Services, Inc., 491 S.W.3d 135 (Arkansas 2016);
California – Navigators Specialty Insurance Co. v. Moorefield Construction, Inc., 212 Cal. Rptr.3d 231 (Cal. Ct. App. 2016).
Another development is that, given the tortured and conflicting decisions among the courts, legislation is being enacted to clarify and define the issue. For example, the outcome in the Cenark case listed above would have been different under a new statute passed in Arkansas in July 2011 which mandates that the definition of an occurrence includes property damage or bodily injury resulting from faulty workmanship. However, the claim in Cenark arose prior to the adoption of the statute.
In short, there is still a disparity of approaches among the states, with most applying one of four general principles: Property damage to defective work is an occurrence; Property damage to other property, including an insured’s non-defective work, is an occurrence; Only damage to third-party property arising out of defective work is an occurrence; Defective work is not an occurrence, whether due to the definition of occurrence or considerations of breach of contract or foreseeability.
Courts which continue to resist coverage for construction defects under CGL policies still often approach the issue from the point of view that a CGL policy is intended to be a third-party liability insurance policy, not a “performance bond” or warranty for the construction work.
