Coverage Pointers - Volume XIX, No. 7

Volume XIX, No. 7 (No. 490)
Friday, September 22, 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 love situations

I had the honor and pleasure of presenting on ethical issues facing insurers, at the PCI Eastern General Counsel Conference in Philadelphia this week.  Wonderful people and a great program.  My thanks for the invitation and appreciate the good feedback from so many.

I was scheduled to speak at the PLRB Regional Adjusters Conference in Jacksonville in early October but that conference was canceled due to hurricane damage and related travel issues.  Insurance claims folks have their work cut out for them over the next few months as they help families and businesses rebuild.  For those who ever wonder about the importance of the work they do, take heart that it is the industry and its employees that stand up and take the brunt of catastrophe clean up.  Thank you for the service you provide.


ALI Restatement of Liability Insurance:

A special thank you to my friend Mike Aylward, Senior Partner at Morrison Mahoney LLP for allowing me to reprint his excellent review of the status of the ALI Restatement.  It is worth reading and expressing your opinion on the subject to the ALI Reporters.  You can scroll below to read it or if you don’t want to wait, click here.


Northeast Regional Claims Conference, November 2, 2017, in Hartford, CT:

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!


DRI - 2017 Insurance Coverage and Practice Symposium:

I encourage you to join me at this year’s Insurance Coverage and Practice Symposium (“ICP”) which will take place on December 7-8, 2017, in New York City at the Sheraton New York Times Square.  If you have not attended ICP in the past, give some thought to doing so this year as the conference provides unparalleled educational and networking opportunities for insurance executives, claims professionals, and outside counsel. 

I have linked the presentation topics which will be put on by a distinguished faculty of insurance industry leaders, experts, and coverage lawyers.  Those presentations include what is going on in some of our more problematic insurance coverage jurisdictions, ethical considerations in defending the uncooperative insured, emerging issues under claims made and reported policies, covered and uncovered damages issues, and number of occurrences (among others).

As in years past, ICP 2017 will afford attendees with industry-leading networking opportunities and events, including Dine Arounds and Networking Receptions.  There is also no better time to experience New York City that during the holiday season. 

If you register soon, you will be able to take advantage of early registration discounts and secure a room at the Sheraton (the rooms will fill up quickly).  Here are important links to the seminar:

Seminar Registration Page:  

Seminar Brochure:  

Hotel Registration:

I will be presenting on special New York insurance problems at the DRI NYC program..

Note:  You may be entitled to free registration.  Any DRI member employed as a claims professional by a corporation or insurance company, who spends a substantial portion of his or her professional time hiring or supervising outside counsel in the representation of business, insurance companies or their insureds, associations or governmental entities in civil litigation, will be entitled to free attendance at any DRI seminar.

Peiper’s Pantomime:

Welcome to Fall, 2017-style.  I don’t care for 80 degree days in late September, and what is more, I don’t think I’m in the minority.  Here’s hoping warm Falls lead to cold, snowy Winters and great skiing. 

Watch this Space. 

This issue, at least in one way, is the issue…before THE issue.  On September 8th, the Appellate Division, Fourth Department heard argument on the latest assault on the attorney/client privilege.  The arguments presented, which readers of this space have lamented for years, were quite forceful.  We are hopeful that the Court will inject some much needed balance back into the analysis. 

Since the Court’s decision in Lalka v ACA which reiterated the long standing rule that attorneys can’t act as “super-adjusters” and retain attorney/client protections, our friends in the policyholder bar have become increasingly bold in their requests for legal work (ie., coverage opinions, litigation assessments and the like).  The rule, at least as it has always been, is that legal advice, no matter what form—or when it is prepared—is exempt from discovery.  Nowhere, from Beau Rivage through Bertolo’s Rest., has a court ever said that an insurance company forfeits its ability to seek legal counsel. 

It’s a simple rule, really.  If it’s legal work, it’s protected.  If it’s not legal work, but investigative work, it’s not protected.  Fingers crossed this is the message we receive from the Fourth Department. 

On to more pleasant thoughts as we conclude this week with a final notice about the upcoming NYSBA Law School for Claims Professionals.  If you’re near NYC or Albany or Syracuse, it is always a fine program and well worth your attendance.  We hope to see you there. 

On a final note, I am pleased to report that I have also been given the opportunity to participate in a cross-border discussion on litigating subrogation claims in Canada and in the US.  Details to follow, but we will be taking a look at the ever present struggles of preserving evidence and retaining, preparing and collaborating with expert witnesses and consultants.  More details to follow. 
That’s it for now.  See you in two weeks.


Steven E. Peiper

[email protected]

Editor’s note:  I will take 80 degree temps every day from now until next summer.

Companies Protecting Employees During WW I:


Elmira, New York

22 Sep 1917



Montour Falls, Sept. 22.—For some time the Shepard Electric Crane and Hoist Company here has paid bonuses to its many employees in addition to the regular wages.  The company, in line with its customary progressiveness, now has announced a plan for the insuring of all its employees of six months’ standing or more.  The insurance plan provides for the payment of the widow or other heirs of deceased employees of their wages or salary for one year after their death.  A medical examination will be required of those entering the company employ and desiring to participate in the insurance benefits.  A reserve fund of $10,000 has been set aside for the company directors for this purpose. 

Editor’s Note: In 1878, William Shepard sold his farm and purchased a foundry at the insistence of his two teenage sons.  They repaired farm equipment, and manufactured tools and toys and farm tools.  They went on to build bridges and larger machinery.  As the materials became heavier, they went on to produce cranes and hoists first hand-operated and eventually steam and air operated  In 1928, the Shepard Electric Crane and Hoist  purchased the Niles Crane Division of Niles, Bemont and Pond and then became Shepard Niles.  That company operated until 1971, when it was purchased by Vulcan, Inc. of Latrobe, PA.

James and Tom Underwood were both affiliated with Vulcan at the time of purchase.  In 1983 Amco-Pittsburgh acquired Vulcan in a hostile takeover and after a bit of financial trouble with the company, the Underwoods turned the company around.  The company remained in business until 2002, when poor economic conditions let to its demise.  Its assets were sold to KCI Konecranes, a Finnish company that is still in the crane business today.

Welliver Construction Company now occupies the Montour, New York, location where Shepard Niles operated for over 120 years

Baseball debut – 100 Years Ago:

Jimmy “Scoops” Cooney played his first major league game 100 years ago today for the Boston Red Sox.  He eventually played for six different teams between 1917 and 1928.  His father and son, both named Jimmy, each played in the Major Leagues.

A native of Cranston, Rhode Island, Cooney reached the Majors and spent part of 1917 with the BoSox  He then played with the Milwaukee Brewers of the American Association setting a personal mark with 12 consecutive hits in 1923.

In a seven-season career, Cooney was a .262 hitter (413-for-1575) with two home runs and 150 RBIs in 448 games, including 64 doubles, 16 triples, and 30 stolen bases.

Cooney died in Warwick, Rhode Island, just 17 days short of his ninety-seventh birthday.

While in Chicago, Cooney entered the record books as the sixth player in the modern era to turn an unassisted triple play. On May 30, 1927, in the fourth inning of a game against Pittsburgh, Cooney caught a line drive hit by Paul Waner, stepped on second base to retire Lloyd Waner, and then tagged Clyde Barnhart coming down from first base.

One day after Cooney’s fielding gem, Johnny Neun also turned an unassisted triple play. Despite their joint fame, Cooney and Neun never actually met, as they were playing in different leagues. (They did face each other in a minor league game in 1929, but didn’t exchange words.) Finally, nearly six decades later, in 1986, Sports Illustrated arranged a conference call between the two.


Dog v. Cat – 100 Years Ago:


Buffalo Enquirer

Buffalo, New York

22 Sep 1917


It is seldom that a cat and dog fight gets into the higher courts.  Reports filed at city hall today, however, show where one such fight caused a case to be carried to the Appellate Division.  This was in the case of Henrietta Gardner against H. C. Bohack Company, which was tried in Supreme Court in Brooklyn and a verdict was soldered by the plaintiff for personal injuries.  The verdict was affirmed by the Appellate Division, Second Department.


Editor’s Note – Victory for the Dog

The defendant kept a market to which he invited customers, who, as he knew, came with their dogs. Such was the habit of the plaintiff. The defendant had a cat with a kitten. The cat, following her propensity, attacked the visiting dogs, and pursued them even when they were in the immediate protection of their owners. In the present case the plaintiff, to guard it from the onset of the cat, had taken up her dog and placed it on a stool beside her, so that she intervened between it and the cat, but the cat carried forward its attack on the dog, and in the course of it the plaintiff was hurt. On a previous occasion a woman had taken up her dog, and yet the cat attempted to reach it and tore the woman’s dress. * In neither case was the propensity of the cat directed against the woman, but she was involved in the attack on the dog. The jury was justified, in view of the previous incident, in finding that the defendant was negligent in exposing the person of his customer to the frenzy of the cat, although the dog alone animated it.


Gardner v H.C. Bohack Co., 179 AD 242, 242–43 [2d Dept 1917].

​Status of the ALI Restatement of Law, Liability Insurance:

Michael Aylward, of Morris Mahoney, published this recent review of the status of the ALI Restatement of the Law, Liability Insurance, on the DRI Insurance Law Committee blog.  Mike has been involved in this project since the early days.  With his permission and with our thanks for his tireless advocacy, we publish it:

Seven years since its inception, the American Law Institute’s Restatement of the Law, Liability Insurance has passed an important milestone and is now only two steps away from final approval.   This Restatement was supposed to have been approved by the ALI at its annual meeting last May but a final vote was put off for a year so that the Reporters could respond to a firestorm of criticism from the insurance defense community in the weeks leading up to the scheduled May 23, 2017 vote.  

On August 4, the ALI Reporters issued a new Preliminary Draft No. 4.   The key changes in this latest (26th!) draft addressed the Sections had been the most controversial in the Reporters’ March 2017 Proposed Final Draft, namely Section 3 (rules for policy interpretation), Section 12 (liability of insurers for acts or omissions of defense counsel); Section 24 (obligation to make reasonable settlement decisions); Section 42 (allocation); Section 47 (known losses) and Section 48 (fee shifting). 

This new draft was the subject of an intense debate between the ALI Reporters and the ALI Advisers and Members Consultative Group at a special session in Philadelphia on September 7.   All that remains now is for the ALI Council to approve it next January and for the full membership to vote at the next Annual Meeting in May 2018.

The following is a summary of the key changes in this latest draft and the controversy that continues to surround them:

--Principles of Policy Interpretation (Section 3)

            Section 3 proposes to replace the “plain meaning” approach that most courts follow with a new “presumption of plain meaning.”   The plain meaning evident from the text of the policy will still be favored but, if a policyholder presents “highly persuasive evidence demonstrating that a reasonable person in this policyholder’s position would give the term a different meaning under the circumstances”, a court may disregard the plain meaning of the text in favor of the plainer meaning revealed by that extrinsic evidence.

            The Reporters have made a concerted effort in this new Preliminary Draft to rationalize their novel approach to contract interpretation and to minimize the extent to which it diverges from the majority view.   They explain that their proposed approach is a compromise between “strict plain meaning” and the “contextual” approach favored by the Restatement of Contracts that construes terms in accordance with the circumstances and context of the contract that because a determination of ambiguity is to be made without regard to extrinsic evidence, this section did not recognize the concept of “ambiguity and context.”  The “presumption” approach is akin to the cases in which courts have found coverage on the basis of “latent ambiguity” but differs from these cases in that the existence of an alternative meaning based on extrinsic evidence will only result in a finding of coverage if the latent meaning is more reasonable than the patent meaning evidence from the policy’s text.

            Notably, the Reporters assert that extrinsic evidence may not be used to “manufacture” an alternative meaning.  Rather, a plausible basis must exist for arguing that an alternative meaning exists before courts should allow discovery of extrinsic evidence to determine the relative reasonableness of the proposed latent meaning.

--Liability of Insurers for Conduct of Defense (Section 12)

             DRI and other defense organizations had criticized the March 2017 Proposed Final Draft of Section 12 as turning the tripartite relationship inside out and going far beyond common law precedents with respect to circumstances in which liability insurers may be held directly or vicariously liable for the negligence of defense counsel.   In response, the Reporters made substantial revisions to the black letter rule and Comments for Section 12.  Even so, the revised text remains problematic.

            As revised, Section 12 imposes vicariously liability if counsel is an employee of the insurer (ie. Staff counsel) and direct liability if the insurer “has undertaken a duty to select defense counsel and the insurer breaches that duty, including by retaining counsel with inadequate professional liability insurance” or where “the insurer has undertaken a duty to supervise defense counsel and the insurer breaches that duty.”  Confusion persists, however, with respect to what constitutes “supervision.”   The Reporters explained at the September 7 meeting that they are focusing on cases where the insurer somehow controls the conduct of defense counsel and that a mere engagement letter of the issuance of Billing Guidelines would not give rise to liability.   But what about Litigation Management Guidelines or consultation between defense counsel and insurance claims personnel concerning strategy?

            There was also widespread criticism at the September 7 meeting of the vague statement that insurers may be liable if defense counsel does not have adequate malpractice coverage.  While insurers nowadays typically require panel counsel to produce a dec page or other proof of E&O coverage, how much coverage is enough?

            Look for further changes to Section 12.

--Conditions Under Which Insurers Must Defend (Section 13)

            Section 13 requires insurers to defend any cases where facts are alleged that, if proven, would be covered or if there are “facts not alleged in the complaint…that a reasonable insurer would regard as a basis for adding an allegation to the action.”

             Insurer advocates at the September 7 meeting argued for an elimination of the “reasonable insurer” language in favor of limiting an insurer’s duty to consider extrinsic facts to those actually known by the insurer.  The Reporters responded that they are worried about insurers that stay “willfully ignorant” by conducting little or no investigation.   It was noted, however, the most states have model “Claims Settlement Practices” statutes that require an investigation.

            Controversy also remains with respect to what it means for an “allegation” to be added to an action.  Are the Reporters referring to new facts concerning existing causes of action or an amendment to the pleadings that adds new theories of liability altogether.   

            The Reporters have clarified Section 13 to make clear that, while “factual uncertainty” gives rise to a duty to defend, “legal uncertainty” that may exist when a jurisdiction does not have settled coverage law does not.  This drew criticism from policyholder advocates at the September 7 meeting, who argued that it would encourage delay and obfuscation by insurers.

--Duty to Make Reasonable Settlement Decisions
(Section 24)

            The Reporters have added language to Comment d. to Section 24 to state that their conception of a “reasonable insurer” includes not only an average ordinary insurer but also “a more aspirational concept that protects against circumstances at which average conduct is objectively unreasonable.”  They have clarified, however, that the duty to make reasonable settlement decisions only extends to excess judgments that are otherwise covered by the policy, language that was lacking in earlier drafts.

            The Reporters continue to equivocate with respect to whether insurers must make an offer of settlement in the absence of a demand from the plaintiff.  Comment f. states that they are adopting a “reasonableness” standard, not a “hard and fast rule” and that whether an insurer owes the duty to make an offer depends on the particular circumstances as where the facts known to the insurer make clear that the policy limits are significantly less than the reasonable settlement value of the underlying case given the severity of the claimant’s damages and the likelihood of liability being found.  They acknowledge, however, that there may be strategic value in not making an offer early on. 

--Allocation in Long-Tail Losses (Section 42)

             Despite policyholder efforts to return Section 42 to an “all sums” approach, the reporters have retained a “pro rata by years” allocation methodology for long tail losses.   Recently, the insureds shifted their emphasis from arguing for “all sums” to arguing instead that equity required that insureds not be required to assume responsibility for “pro rata” shares allocable to years when insurance was “unavailable,” as was largely the case for asbestos losses and, to a lesser extent, pollution claims after 1986.  The Reporters did include a discussion of “unavailability” in a new Comment h. but do not expressly endorse it.

--Known Losses (Section 47)

            The Reporters have amended both the black letter rule and Comments for Section 47 to make clear that conventional CGL insurers do not have a duty to defend claims that are already in suit before their policies are issued.  This is in contrast to the text that was in last Spring’s Proposed Final Draft, which found that the liability of insurers whose obligations were subject to large self-insured retentions might still be uncertain in such circumstances.  In this latest draft, the Reporters declare that “the touchstone from whether the doctrine applies is substantially certain is whether, absent the application of the doctrine, the insurer will be required to pay some amount of money on behalf of an insured under the policy that is about to be issued.”

--Fee Shifting (Sections 48-49)

            Sections 48 and 49 set forth the remedies available to policyholders and, in particular, the circumstances in which policyholders can recover their fees for litigating coverage disputes.  Section 48 states that insurers that substantial prevail in coverage suits commenced by insurers seeking to terminate a defense obligation may recover their fees, whereas Section 49 allows fees if the insurer has declined to defend and the insured obtains a ruling finding a duty to defend.  At the September 7 meeting, insurer advocates protested that Section 48, while consistent with the Mighty Midgets rule in New York, unfairly penalized insurers for bringing DJs to clarify their obligations, especially in states like Illinois where the failure to bring a DJ may estop the insurer from contesting its indemnity obligations.

            As above, we expect that the Reporters will make a few adjustments to this latest drafting, especially as regards Section 12 but that major changes are unlikely before the draft Restatement is submitted to the ALI Council in January.   While there may be efforts to lobby the Council between now and January, there is danger in such efforts as the ALI is sensitive to efforts by outside interests to influence its deliberations.  

            Assuming that the ALI Council approves the revised draft, a second Proposed Final Draft will be presented to the ALI membership next Spring for a final vote in May 2018.  This time around, nearly eight years after this project began in 2010, final approval seems likely. 

Michael Aylward
Senior Partner
Morrison Mahoney LLP
Boston MA
(617) 439-7500



Jen’s Gems:


Tonight I will be attending my first PTA meeting (or Home School Association meeting as they call it in the cCatholic schools).  The school came up with a great plan for forcing parents (who otherwise would not want to go) to attend the meeting.  The notice for the meeting says that kids don’t have to wear their uniforms on Friday if their parent attends the meeting.  Apparently, there will be a sign-in sheet.  So, I either go or Ella has to be one of the only kids wearing a uniform tomorrow, which means that I will then have to hear complaints about why she had to wear her uniform and no one else did.  When you think about, it is a genius strategy for boosting attendance at the meeting. 

Now, speaking of things you should want to attend…DRI’s 2017 Annual Meeting this year will be in Chicago, Illinois, October 4-8 at the Sheraton Grand Chicago Hotel.  For the political junkies, this year’s speakers and special guests, include:

  • Eric H. Holder, Jr., Former U.S. Attorney General

  • Jeffrey R. Toobin, Senior Legal Analyst, CNN Worldwide, Staff Writer at the New Yorker

  • John O. Brennan, Former Director of the CIA

  • Richard W. Painter, S. Walter Richey Professor of Corporate Law, University of Minnesota Law School & Former Ethics Attorney to George W. Bush

  • Clarence Page, Chicago Tribune, and Sonja R. West, Associate Professor of Law, University of Georgia School of Law will speak on a panel moderated by Katie S. Phang, Berger Singerman LLP, Legal Contributor for NBC News/MSNBC. 

The Annual Meeting is also a great time to site-see and explore Chicago.  It is a vibrant city with numerous Michelin-Star restaurants, over 200 theaters, world-class museums, parks, hot dogs, deep dish pizza, Wrigley Field and the 2016 World Series Champions—Chicago Cubs.  There’s definitely something for the entire family.  And, the $200 discount for registration has been extended through the meeting.  So, there is still time to register at the lower price.   

And, registration is now open for DRI’s Insurance Coverage & Practice Symposium, December 7-8, 2017, in New York City.  This is always a great program!  See Dan’s note, above, for registration links.

Until next issue…


Jennifer A. Ehman


Tessa’s Tutelage:

Dear Readers:

I think the end of summer usually prompts me to take a look at my to-do list and roll up my sleeves.  Before you even ask, I do not particularly like pumpkin spice lattes, so it isn’t that. Maybe it is the shortening days that push me to check more things off my to-do list so I can get home to Netflix and pajamas.  I am starting to believe that the Courts are in the same mind set.  There are a bevy of no-fault decisions coming out … and some of them are so short it is almost difficult to summarize them.  Many of the cases we are seeing revolve around the obligations of insurance companies and assignees pursuant to the No-Fault framework.  No-Fault regulations require a pretty step-by-step approach and insurance companies and providers alike sometimes stumble when checking their respective to-do lists. This week we have plaintiff’s failing to show for examinations under oath, failing to rebut evidence that it received timely notice of a denial, or submitted timely notice of the claim.

The one case that piqued my interest was Acupuncture Approach, P.C. v Tri State Consumer Ins. Co, because it mentioned billing codes.  As you know, No-Fault billing code decisions are not as frequent as IME no-shows and timely mailing cases.  In this case, defendant denied coverage, in part, because the billing for service was not a service within the provider’s specialty (e.g. your chiropractor tries her hand at the latest acupuncture craze).  The decision indicates that defendant did not provide sufficient evidence to establish its arguments.  Unfortunately, the Court did not opine about what type of evidence a defendant should present. 

I hope that you all are feeling just as productive as the courts are right now. 

My best,


Tessa R. Scott


Women Employed During War Time:

Buffalo Enquirer

Buffalo, New York

22 Sep 1917



            Chicago, Sept. 22—The American Express Co. is replacing drafted men with their women relatives.  The first lot went to work today.


Ewell’s Universe:

Dear Subscribers:

The leaves are not changing. The leaves are not falling. And yet I am told it is fall. Apparently, this past week, a national coffee chain based out of Seattle released its Pumpkin Spice Latte. So, now that is “officially fall,” my girlfriend and I went to a local pumpkin patch for the day. Of course, we stopped at the above coffee chain for her to get a pumpkin spice latte to set the mood for picking out pumpkins, eating pumpkin donuts and apple cider, and wandering through corn mazes.

We started with the corn maze, which was an adventure maze with hidden clues to a riddle. Apparently, we took a wrong turn somewhere because we missed all of the clues and finished the maze in six minutes. So we turned around and proceeded to solve the riddle in reverse. After the corn maze, I tried deep-fried Oreos for the first time. There was also a tractor ride through the pumpkin fields, but our tickets blew away in the strong wind. So we missed out. It was a great time and I now have a pumpkin to carve. If you have any suggestions, let me know.

Turning to our cases, we again have an uninsured/underinsured motorist (“UIM”) issue. Last week, Alabama’s Supreme Court considered whether the bankruptcy discharge of an UIM defendant prevents an injured plaintiff from being able to recover UIM benefits under the plaintiff’s own insurance policy. The answer? No, nothing. The Court adopted the majority view that, although the UIM motorist’s liability was dischargeable in bankruptcy, the discharge injunction does not prohibit a plaintiff from proceeding with litigation establishing the legal liability of the debtor as a prerequisite to collecting UIM proceeds. Stated another way, an UIM debtor can be sued to establish his or her liability for the accident to reach UIM benefits. However, no proceeds can be collected from the insured personally by operation of the bankruptcy discharge.

For our New York readers, the Second Circuit Court of Appeals considered this issue long ago. Green v. Welsh, 956 F.2d 30 (2d Cir. 1992). In that case, the Second Circuit held that the discharge injunction permits an injured plaintiff to sue an uninsured/underinsured motorist following the bankruptcy discharge, but only to prove liability as a prerequisite to recovery from the liability insurer. This is the clear-cut majority view, with only a few jurisdictions, such as Utah, breaking from tradition. Wilcox v. Anchor Wate Co., 164 P.3d 353 (2007).

I hope you are enjoying fall as much as I am.


John R. Ewell



Huge Verdict for 1917:

Bennington Banner

Bennington, Vermont

22 Sep 1917


Biggest Verdict of the King in Windham County Court


Brattleboro, Sept. 20.—After being out an hour and a quarter the jury in Windham Count court late this afternoon in the case of Affra Ryder of this town against the Vermont Last Block company of Brattleboro rendered a verdict of the plaintiff to recover damages of $10,501.55 for injuries received in the Last Block company’s factory February 4, 1914.  A block jumped out of a chute and struck Ryder on the head, fracturing his skull.

Contributory negligence was alleged but the County court last year awarded a verdict of nearly $7000.  The case went to the Supreme court which held that liability was established but that error was made in the judge’s charge and sent the case back to be tried on the question of damages alone.

The verdict today is the largest for personal injuries ever rendered in the Windham County court.  Ryder’s counsel argued for future damages, their medical expert testifying that Ryder never would recover.  The Last Block company is in bankruptcy, but carries liability insurance. 


Hewitt’s Highlights: 

Dear Subscribers:

The summer season is over and yet the summer lull is still affecting the appellate divisions with respect to serious injury cases. Only one case was issued this time. It was an appeal from a jury verdict. As usually occurs, the jury verdict was upheld as the jury was entitled in this case to choose between two experts with differing opinions.

I hope everyone was safe with the hurricanes, and we hope Puerto Rico recovers as quickly as possible.  

Until next time,

Robert Hewitt


Voting Rights – a Major Political Issue:

The Brooklyn Daily Eagle

Brooklyn, New York

22 Sep 1917



Washington, September 22—Mrs. Robert Lansing, wife of the Secretary of State, has accepted the secretary-ship of the National Association Opposed to Woman Suffrage, which recently moved its headquarters from New York to Washington.  


Wilewicz’ Wide-World of Coverage:

Dear Readers,

Hopefully this missive finds you all well and in one piece. I, on the other hand, am intact but bandaged. A couple of days ago I managed to stand up, have my knee buckle, and I landed rather oddly on my right ankle and left knee. A very odd feeling, given that I rarely fall down and/or hurt myself. Suffice it to say, I have not been able to walk since and have crutched around my three story house very slowly. No fractures, but will likely need to go for MRIs next week to check for tendon or ligament damage. Figures that I would end up house-bound just when summer has decided to stick around for a while longer. It’s been a long week. Let’s get right into this week’s coverage of coverage.

Just one decision from our high federal court this week. In Intelligent Digital Systems v. Beazley Insurance, the Second Circuit took up the issue of whether an insured v. insured exclusion applied. There, a Board member of an entity sued that company in relation to a promissory note. He had previously sold his own tech company to them in exchange for that note and the opportunity to serve on the Board of the purchasing company. They then sought coverage under their directors and officers policy in relation to the suit. However, as a Board member was also an “insured” under that policy, the insured v. insured exclusion applied. The policy did not cover such essentially domestic disputes, as that was not its purpose. As such, no coverage for them.

Until next time,


Agnes A. Wilewicz


Even Then, the Red Cross Served:

Press and Sun-Bulletin

Binghamton, New York

22 Sep 1917



2,500 Sweaters for Soldiers and

200 Pairs of Mittens for

Sailors to Be Made


In order to supply the soldiers and sailors of Broome County with the garments they need for as much comfort as it is possible for them to have while in war service, the Red Cross Society needs indefatigable work on the part of its present knitters and needleworkers, and a host of new workers in addition to those already giving their services. 

With 2,500 sleeveless sweaters to knit for the soldiers who will have gone out from this county, when the draft army has departed, there is knitting for everybody who will knit for some time to come.

Mrs. David Murray and her associates in the Navy League have joined forces with the Red Cross Society, and the Red Cross will supply yarn when the knitters do not feel that they can provide themselves with it for the garments they are able to knit.  When knitters wish to purchase the yarn, it may be obtained at cost price through the Red Cross Society.


Barnas on Bad Faith:

Hello again:

We seem to have run into a stretch of unseasonably warm weather here in Buffalo.  Yes, that does happen.  However, count me among those who are not interested in temperatures in the mid-80s in late September.  Fall is my favorite season, in large part due to the weather.  Fall weather is truly elite.  Give me a nice, crisp 60 degree fall day over mid 80s any day of the week, especially Sundays.  As much as nobody wants to sit outside in a football game when the temperature is below freezing, it’s almost as bad sitting on the sunny side of the stadium when it’s 85 like it will be this Sunday for the Bills Broncos game.  I personally prefer to enjoy my Oktoberfest while wearing a hoodie and jeans rather than while baking in the hot sun.                        

You will find the Gussman case in my column this week.  There, the Plaintiff alleged that Geico breached the insurance contract and handled her underinsured motorist claim in bad faith.  Plaintiff demanded the $75,000 available under her UIM coverage from Geico and commenced an action in federal court when it allegedly failed to pay.  Geico moved to dismiss, arguing that the bad faith claim failed to state a cause of action.  Likewise, Geico argued that Plaintiff’s breach of contract claim was insufficient to invoke federal diversity jurisdiction since it did not satisfy the monetary threshold, i.e., more than $75,000.  The motion as denied, as the court concluded that the bad faith claim stated a cause of action.  Plaintiff’s claim also satisfied the monetary threshold as the potential recovery on the bad faith claim could be combined with the contract claim.

Thanks for reading.

Signing off,


Brian D. Barnas

[email protected]



Auto Racing – A Century Ago:

The Evening World

New York, New York

22 Sep 1917



Nineteen Machines in 100-Mile Event for

Harkness Trophy at Sheepshead Bay




Sept. 22.—Tom Milton dashed in the lead in an annual race for the $10,000 Harkness trophy in the auto race here this afternoon. Chevrolet soon forged in front, however, with De Palma second and Mulford third. 

Nineteen starters got away in the 100-mile event.  Gil Anderson and Ewan withdrawing on account of engine trouble.

Thirty thousand persons sat in a chill grandstand to watch the events.  The start was made at 3:06.

Editor’s Note: The Harkness Trophy Race was an American auto racing event, first run in 1915 at the Sheepshead Bay Speedway at Sheepshead Bay, New York. The winner's trophy was named for Harry Harkness, one of the principal investors who purchased the Sheepshead Bay Race Track horse racing facility, and converted it to a wooden board automobile race track.

The purchase was completed in April 1915, and the first race named for Harkness was held on November 2 of that year.

The Chevrolet in the story was Louis-Joseph "Louis" Chevrolet (December 25, 1878 – June 6, 1941) was a  Swiss-American Swiss-American race car driver, co-founder of the Chevrolet Motor Car Company in 1911, and a founder in 1916 of the Frontenac Motor Corporation, which made racing parts for Ford's Model T

The race ceased to exist after four years. The Sheepshead Bay Speedway Corporation ran into financial difficulties, following the January, 1919, death of Harry Harkness. The property was sold for residential real estate development.


Off the Mark:

Dear Readers,

Fall is here and the change in seasons has already affected my household.  My six year old had his first cold of the season.  While it was a chore to get him to take his medicine, he did provide us with some laughs.  He asked my wife to “call CVS and tell them their medicine tastes disgusting.”  The way he asked so seriously, still makes me smile.

This edition discusses a construction defect case decided last week by the Southern District of California.  In Pulte Home Corporation v. American Safety Indemnity Company, the plaintiff moved for partial summary judgment seeking a declaration that the defendant insurance carrier owed it a duty to defend in the underlying construction defect action. 

The US District Court for the Southern District of California, applying Georgia law, held that the defendant insurance carrier had no duty to defend the plaintiff, a purported additional insured, in the underlying action as the allegations in the underlying complaint did not implicate damages not excluded by the j(5) and j(6) business risk exclusions.  The Court concluded that the insurance policies at issue unambiguously excluded coverage for the construction defects referenced in the underlying complaint.  Notably, the underlying complaint did not allege or imply that the claimed defects had caused damage to persons or property unrelated to the defective work itself.  Accordingly, the Court denied the plaintiff’s motion for partial summary judgment.

Until next time …



Brian F. Mark
[email protected]


Help Wanted – Buffalo Style
Buffalo Enquirer

Buffalo, New York

22 Sep 1917




WANTED – Twenty attractive young women to enter unique contest for The Buffalo Enquirer “Liberty Girl;” winner to receive $50 and to be sent to Spartanburg, South Carolina, with money and useful articles to be distributed among soldiers in Buffalo regiments.  Send photograph, entry and permission to publish to MANAGER BUFFALO ENQUIRER GROTESQUE PARADE, NO. 252 MAIN ST.


Headlines from this week’s issue:


Dan D. Kohane

[email protected]

  • Insurer Sanctioned for Failing to Provide Witness Who Wasn’t Employed by the Company

Robert E.B. Hewitt III

  • Plaintiff Raised an Issue of Fact Fulfilling Its Burden Once Defendant Demonstrated a Prima Facie Entitlement to Summary Judgment


Tessa R. Scott


  • Plaintiff Failed To Rebut Defendant’s Evidence That It Had Not Received Timely Notice of the Claim

  • Defendant Provided Adequate Evidence to Establish That the Denial of Claims Forms Had Been Properly Mailed

  • Defendant’s Evidence Established that the Injured Party Failed to Appear for an Examination under Oath

  • Defendant Failed to Establish that the Service Billed for was Outside the Provider’s Specialty


Steven E. Peiper

[email protected]


  • Lack of Prior Damage Exclusion Results in Coverage for Loss of Equipment that Started Breaking Down Before the Policy’s Inception



  • Absent a Duty to the General Public, Counter-Claim against Parent for Negligent Supervision was Denied

  • Zurich’s Attempts to “Intervene” in Workers’ Compensation Hearings Denied due to Lack of Standing


Agnes A. Wilewicz

[email protected]

  • Second Circuit Finds that Insured v. Insured Exclusion Unambiguously Bars Coverage Under D&O Policy, Where Insured Company Sought Coverage for Claim Brought by Insured Director (NY Law)


Jennifer A. Ehman

  • Found Not to be a “Customer” as that Term was Used in the Policy



Brian D. Barnas

[email protected]

  • Insured could Combine Bad Faith Claim with Breach of Contract Claim to Exceed Diversity Jurisdiction Amount in Controversy Requirement


John R. Ewell

  • Alabama Supreme Court Holds that UIM Motorist’s Bankruptcy Discharge Does Not Preclude Recovery of UIM Benefits



Howard B. Altman

  • Happy New Year.


Brian F. Mark
[email protected]

  • US District Court, Applying Georgia Law, Denies Insured’s Motion for Summary Judgment Finding that the Insurer had no Duty to Defend



Earl K. Cantwell

  • Beware of Contract Formation by Email



As the summer comes to an end, we will soon have a larger number of coverage decision about which we can report.

In the meantime, prayers for those under stress, Happy New Year to all who celebrate and we’ll see you in two weeks.  We’ll try signing it this way:






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


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

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

Brian D. Barnas


Jennifer A. Ehman, Team Leader

Patricia A. Fay


Jody E. Briandi, Team Leader
[email protected]


Diane F. Bosse

Topical Index

Kohane’s Coverage Corner

Hewitt’s Highlights on Serious Injury

Tessa’s Tutelage
Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Jen’s Gems

Barnas on Bad Faith
Ewell’s Universe

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

Earl’s Pearls


Dan D. Kohane
[email protected]


09/20/17       Desiderio v. GEICO General Insurance Company

Appellate Division, Second Department

Insurer Sanctioned for Failing to Provide Witness Who Wasn’t Employed by the Company

GEICO was sanctioned for failing to produce a witness who was noticed for deposition in a SUM proceeding.  A pro-se plaintiff, himself an attorney, he sought extra-contractual damages.  GEICO’s conduct was found to be frivolous under Court of Appeals rules. Its answer was conditionally stricken, unless the witness was produced by a specified date.  Close to $6,000 in sanctions were awarded.

The witness was a claims supervisor.  The claim representative in a SUM claim had been deposed.  GEICO has moved for a protective order.  Six months later, the court ordered that the supervisor be produced.  By the time the order came down, the supervisor had left the company.  GEICO offered to produce an alternative witness.  GEICO then produced the former employee but plaintiff refused to appear for his deposition.

Plaintiff then tells the court that he doesn’t want the witness but wants the Answer stricken.  Court issues an order requiring to produce the witness or the Answer would be stricken and assessed the sanctions.  GEICO complied by producing the former employee, even though it shouldn’t have been required to produce him

Editor’s Note:  Discovery was stayed while the protective order motion was pending.  Once it was resolved, the supervisory, who was an employee when the notice was first sent, was no longer an employee of GEICO.  Not being an employee of GEICO, the carrier was no longer under any obligation to produce him.  He became a non-party witness.  Moreover, the plaintiff decided to proceed without taking the witnesses testimony even though he was produced.  Sanctioning an insurer for seeking a protective order is unfortunate and, we suggest, unduly and unreasonably harsh.


Robert E.B. Hewitt III


09/20/17       Eastman v. Nash

Appellate Division, Second Department

Plaintiff Raised an Issue of Fact Fulfilling Its Burden Once Defendant Demonstrated a Prima Facie Entitlement to Summary Judgment

The facts are as follows: the plaintiff allegedly was injured when a vehicle in which she was a passenger, an ambulette, collided with a vehicle. At a trial on the issue of damages, the plaintiff presented the testimony of a neurologist, who testified that he measured the range of motion of the plaintiff's lumbar spine, and found deficits of up to 50%. The plaintiff's neurologist also reviewed an MRI film of the plaintiff's lumbar spine taken after the accident, and concluded that it showed no major preexisting conditions. He concluded that the accident caused a disc herniation at L4/5.The defendants presented the testimony of a diagnostic radiologist, who reviewed the same MRI film, and concluded that the plaintiff's disc herniation at L4/5 was caused by degeneration that had been occurring for several years before the accident. The defendants also presented the testimony of a neurologist, who examined the plaintiff after the accident, and concluded that "[s]he was somewhat short of full movement of the lumbar spine, the lower back."

The jury found that the plaintiff sustained a serious injury under both the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d), and that the plaintiff sustained damages in the sums of $150,000 for past pain and suffering and $50,000 for future pain and suffering, covering a period of one year. The Appellate Division found that the Supreme Court properly denied that branch of Nash's motion which was pursuant to CPLR 4404(a) for judgment as a matter of law.

A motion for judgment as a matter of law pursuant to CPLR 4401 or 4404 may be granted only when the trial court determines that, upon the evidence presented, there is no valid line of reasoning and permissible inferences which could possibly lead rational persons to the conclusion reached by the jury upon the evidence presented at trial, and no rational process by which the jury could find in favor of the nonmoving party.  In considering such a motion, the trial court must afford the party opposing the motion every inference which may properly be drawn from the facts presented, and the facts must be considered in a light most favorable to the non-movant. Here, based on the evidence adduced at trial, the Appellate Division found there was a valid line of reasoning and permissible inferences from which the jury could have concluded that the plaintiff sustained a serious injury to the lumbar region of her spine under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). Moreover, the verdict was not contrary to the weight of the evidence. A jury verdict should not be set aside as contrary to the weight of the evidence unless the jury could not have reached its verdict on any fair interpretation of the evidence  Where, as here, conflicting expert testimony is presented, the jury is entitled to accept one expert's opinion and reject that of another expert. Here, regarding whether the accident caused the injury to the lumbar region of the plaintiff's spine, it was a fair interpretation of the evidence for the jury to credit the testimony of the plaintiff's neurologist over that of the defendants' diagnostic radiologist.



Tessa R. Scott


09/08/17       Compas Med., P.C. v American Tr. Ins. Co

Appellate Term, Second Department

Plaintiff Failed To Rebut Defendant’s Evidence That It Had Not Received Timely Notice of the Claim

Plaintiff appealed 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.

Defendant's cross motion for summary judgment was based upon the defense, among others, that defendant had not received timely notice of the accident. Plaintiff’s sole argument was that the Civil Court incorrectly granted defendant's cross motion for summary judgment.  However, the proof submitted by defendant established that it had not received timely notice of the accident, was not rebutted by plaintiff.


09/08/17       Laga v Country Wide Ins. Co

Appellate Term, Second Department

Defendant Provided Adequate Evidence to Establish That the Denial of Claims Forms Had Been Properly Mailed

The Second Department determined that contrary to plaintiff's argument, the proof submitted by defendant in support of its cross motion was sufficient to give rise to a presumption that the denial of claim forms at issue had been properly mailed. Plaintiff's remaining argument with respect to defendant's cross motion was not properly before this court, as it is being raised for the first time on appeal, and we decline to consider it.


09/08/17       Charles Deng Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co

Appellate Term, Second Department

Defendant’s Evidence Established that the Injured Party Failed to Appear for an Examination under Oath

Again Plaintiff only argued one thing, and it failed. The proof submitted by defendant in support of its motion was sufficient to demonstrate that plaintiff's assignor had failed to appear for examinations under oath


09/19/17       Acupuncture Approach, P.C. v Tri State Consumer Ins. Co

Appellate Term, First Department

Defendant Failed to Establish that the Service Billed for was Outside the Provider’s Specialty

Plaintiff appealed from an order of the Civil Court of the City of New York, which granted defendant's motion for summary judgment dismissing the complaint.

The First Department disagreed.  It found that there were triable issues of fact are raised as to whether defendant-insurer properly denied plaintiff's no-fault claim billed under CPT code 97039. Defendant's submissions failed to establish that the service is not reimbursable because it is a "physical medicine modality" and "outside the provider's specialty."



Steven E. Peiper

[email protected]


09/19/17       National Union Fire Ins. Co. of Pittsburgh, PA v TransCanada

Appellate Division, First Department

Lack of Prior Damage Exclusion Results in Coverage for Loss of Equipment that Started Breaking Down Before the Policy’s Inception

TransCanada Energy operates a power plant known as TC Ravenswood.  On September 12, 2008, a turbine generator which was designated as “Unit 30” had to be taken off line due to excessive vibrations. 

Essentially, a crack had formed in one of the rotors of the turbine prior to the inception of the policy.  Nevertheless, the turbine was operational until the crack worsened, thus worsening vibrations, until it ultimately triggered an alarm and trip system.  When the alarm was triggered, the unit stopped operating.  As there was no language in the policy that excluded losses which occurred prior to the policy period, it followed that coverage under the policy was confirmed. 

In addition, it appears that National Union challenged TransCanada’s business interruption claim.  The court agreed that business interruption claims that extend beyond the time to restore or replace the loss were not covered.  However, in the current instance, because the “business interruption” was TransCanada’s loss of opportunity to earn “future capacity revenues” the Court ruled that the traditional rule did not apply.

National Union argued that nevertheless coverage should still be precluded due an exclusion which reads “[a]ny increase in loss due to retroactive or future changes in the Capacity Payments or Bonus Payments that were in effect at the time of loss."  The term Capacity Payments is defined, apparently, as “those payments that become payable to the insured ‘in return for attaining or exceeding certain production levels’."  Because TransCanada only sells “actual production capacity,” the exclusion was rendered ambiguous and construed against National Union.


09/20/17       Siragusa m/n/g I.S., an infant v Conair Corp.

Appellate Division, Second Department

Absent a Duty to the General Public, Counter-Claim against Parent for Negligent Supervision was Denied

Plaintiff’s infant daughter allegedly injured her hand on the blades of a hand held blender.  The child, and the blender, was left unattended by the child’s mother.  As such, Conair sought leave to amend its Answer to assert a counter-claim against the mother. 

In affirming the trial court’s denial, the Court noted that the proposed amendment was without merit because Conair could not establish a duty.  Here, Conair essentially argued that plaintiff negligently supervised her daughter.  However, there is no cause of action against a parent for negligent supervision of their own child.  Thus, in order to assert a cognizable theory for indemnity/contribution, Conair needed to establish that plaintiff owed a duty to the general public at large.  Having failed to meet that burden, its application to amend was properly denied.  


09/14/17       In re: Cortes v Eagle Systems, Inc.

Appellate Division, Third Department

Zurich’s Attempts to “Intervene” in Workers’ Compensation Hearings Denied due to Lack of Standing

Mr. Cortes was injured in a motor vehicle action while allegedly in the course of his employment.  Thereafter, an application for workers’ compensation benefits was made which resulted in a hearing being scheduled before a Workers’ Compensation Law Judge.  During the process, it was determined that XL Specialty was the workers’ compensation carrier for plaintiff’s employer at the time of the incident, and as such XL Specialty was notified of the claim and hearings. 

XL Specialty did not appear at the hearings, but Zurich American Insurance did where it attempted to argue that Mr. Cortes was an independent contractor, and thus not entitled to benefits.  Notably, Zurich did not issue a workers’ compensation policy, but did issue a “contingency liability policy” to the employer.  When the Law Judge ruled in favor of Mr. Cortes, Zurich appealed to the Workers’ Compensation Board.  That action was dismissed due to lack of standing.

Zurich again appeals, this time to the Appellate Division, Third Department.  Again, Zurich’s application was denied where it could not establish legal standing to challenge the Law Judge’s decision.  While it may have liability to the employer, it owes no obligations to the claimant.  As such, it is not in a position to raise defenses to Mr. Cortes’ claims.



Agnes A. Wilewicz

[email protected]

09/19/17       Intelligent Digital Systems, LLC v. Beazley Insurance Company

United States Court of Appeals, Second Circuit

Second Circuit Finds that Insured v. Insured Exclusion Unambiguously Bars Coverage Under D&O Policy, Where Insured Company Sought Coverage for Claim Brought by Insured Director (NY Law)

Jay Russ is a New York attorney who founded IDS, a tech company in the recording industry. He was the sole officer of IDS. In January 2008, IDS agreed to sell its assets to VMS, a company in the video technology business. VMS agreed to pay IDS $1.5 million over time and issued a promissory note to that effect, and agreed to have Russ added to its Board of Directors and hire him as a consultant. In December 2008, Russ resigned from the Board and indicated that he might sue VMS for payments under the promissory note. Litigation ensued, and VMS sought coverage under its policy with Beazley Insurance.

Beazley provided coverage to VMS under a directors and officers liability insurance policy. This provided that the “Insurer shall pay on behalf of the Directors and Officers all Loss which is not indemnified by the Company resulting from any Claim first made against the Directors and Officers during the Policy Period for a Wrongful Act”. This policy also contained an “insured v. insured exclusion”, which excluded coverage for “any Claim ... by, on behalf of, or at the direction of any of the Insureds, except and to the extent such Claim ... is employment-related and brought by or on behalf of any of the Directors and Officers”. The policy further defined “Insureds” as “the Directors and Officers of the Company”. Pursuant to these terms, the carrier disclaimed coverage on the basis of the insured v. insured exclusion. Alternatively, the insurer argued that Russ’s coverage claim was equitably estopped from proceeding.

In analyzing the applicability of the insured v. insured exclusion, the Second Circuit cited general principles of New York coverage law. Noting that the exclusion was not ambiguous, it stated that “on its face, [the exclusion] exempts from coverage “any” claim brought by, on behalf of, or at the direction of an insured director, unless the claim is employment-related”. It was not limited to claims brought by an insured in his “capacity” as a director, but more broadly applied to all claims between insureds. The insured’s other argument that Russ was not a “director” also failed, in large part because the jury at the trial court determined that he was, in conjunction with the fact that he was formally elected, subsequently attended board meetings, and was paid for his work. Since he was thus clearly a director and insured, the claim was barred by the insured v. insured exclusion. Having so ruled, the court denied to address the issue of equitable estoppel.



Jennifer A. Ehman


08/17/17       Allstate Ins. Co. v. Bunn

Supreme Court, New York County

Hon. Lucy Billings

Court Finds Coverage Under Dealers’ Policy for Motor Vehicle Accident; Driver Found Not to be a “Customer” as that Term Was Used in the Policy

On December 16, 2012, Maryellis Bunn allegedly sustained injury while standing on a sidewalk at 8th Street and 6th Avenue in New York County.  The vehicle that struck her was a 2011 Nissan Maxima operated by Aldair Lemos (“Lemos”).  The day before the accident Lemos and his mother, Lucemi Love (“Love”), visited Port Motors Lincoln-Mercury.  It was undisputed that Love deposited $9,500 toward the 24,000 purchase price for the vehicle, but advised that she would not enter any financial agreement that required payment of more than $450.00 per month.  The salesman promised to secure favorable financing for her by December 17, 2012.  Love signed an agreement indicating that if favorable financing was not obtained that the deposit would be refunded. 

The salesman then handed Lemos the keys to the vehicle, still bearing the dealer’s plates, gave Lemos permission to drive the vehicle until the 17th, and showed him the card signifying the dealer’s insurance coverage for the vehicle. 

At the time of the accident, the dealership had a policy in place with Merchants, which covered all motor vehicles owned by the dealer.  That policy specified that

“Who Is An Insured”: includes:

a.      The following are “insureds” for covered “auto.”

         (1)      You for any covered “auto.”

          (2)      Anyone else while using with your permission a covered “auto” you own…except:


                   (d)      Your customers.

Merchants disclaimed coverage to Love and Lemos on the basis that “at the time of the accident you had taken possession of the vehicle involved in the accident,” and “are not considered and Insured under the policy…”

The court noted that under the terms of the policy Lemos would be entitled to coverage if he was using the vehicle with the dealership’s permission and was not its customer.  In the court’s view, Merchants waived any grounds based upon lack of permission as that was not stated as a basis for denying coverage.  Not sure we agree with that.  But, even if that basis was not waived, the court found no evidence to support any claimed lack of permission citing testimony that the salesman handed the keys to Lemos.

Moreover, the court found that Lemos was a not a customer as that term was used in the policy.  In its view, Love and only she was a prospective purchaser of the dealer’s vehicle.  It also found that Love did not own the vehicle at the time of the accident.  While Merchants relied on the proposition that the title to a motor vehicle passes when the parties to the sale intend the title to pass, the court found no evidence that either the dealership or Love intended that the title to the vehicle pass before December 17, 2012 (when she was supposed to return).  Accordingly, the court granted the injured plaintiff’s motion for summary judgment and held that the disclaimer of coverage issued by Merchants to Lemos was invalid, and that Merchants was obligated to defend and indemnity him relative to the underlying action. 



Brian D. Barnas

[email protected]


09/12/17       Gussman v. Government Employees Insurance Company

United States District Court, District of New Jersey

Insured could Combine Bad Faith Claim with Breach of Contract Claim to Exceed Diversity Jurisdiction Amount in Controversy Requirement

On May 20, 2014, Plaintiff asserts she was stopped at the exit of a shopping center and was hit in the rear by another motorist Robert Snyder.  As a result of the accident, Plaintiff alleges she sustained serious bodily injuries.  The vehicle driven by Robert Snyder on the date of the collision had $25,000 in coverage.  This amount did not fully compensate Plaintiff’s injuries.  On the date of the accident Plaintiff had a Geico auto policy with UIM limits of $100,000 per person and $300,000 per accident.

Plaintiff on June 1, 2016, requested that Geico consent to a settlement between her and the underinsured driver Robert Snyder.  Additionally, she filed a claim for UIM benefits.  On June 22, 2016, Defendant consented to the requested.  Later, on June 24, 2016, Plaintiff forwarded documentation supporting her injuries to Geico’s adjuster, and on August 2, 2016, Geico was given permission by Plaintiff to review the first party file.  However, Plaintiff asserted that Geico ignored or acted with reckless indifference to the proof she submitted.

Plaintiff brought a claim against Geico for the remaining $75,000 limit on her underinsured motorist policy bad faith.  Geico moved to dismiss arguing that Plaintiff’s recovery for her breach of contract claim was limited to $75,000, thus she could not satisfy the amount in controversy necessary for diversity jurisdiction.  Geico also argued that Plaintiff’s bad faith claim failed to state a cause of action upon which relief could be granted.  However, the Court found that Plaintiff’s complaint contained numerous allegations of bad faith conduct that sufficiently alleged a reckless disregard for Plaintiff’s rights.  Plaintiff’s allegations included claims that Geico engaged in delay tactics, misused the investigation of Plaintiff’s first party underinsured, and failed to reasonably evaluate the medical records in the record.

The Court also denied the motion because Plaintiff’s bad faith claim, if successful, included the potential for consequential damages and punitive damages.  When coupled with the potential recovery on the bad faith claim, Plaintiff’s damages on the breach of contract claim vaulted the statutory jurisdictional threshold of a claim in excess of $75, 000.  As a result, the amount in controversy exceeded the jurisdictional requirement, and Geico’s motion was denied.


John R. Ewell

09/15/17       Easterling v. Progressive Specialty Insurance Company

Alabama Supreme Court

Alabama Supreme Court Holds that UIM Motorist’s Bankruptcy Discharge Does Not Preclude Recovery of UIM Benefits

In 2014, Hershel and his wife, Charlotte Easterling (the “Easterlings”), were injured when their vehicle was rear-ended by a vehicle driven by Ashley Marie McCartney (“McCartney”). In 2015, the Easterlings sued McCartney alleging that McCartney behaved negligently at the time of the accident. The Easterlings' complaint also named Progressive, their insurer, as a defendant and included a count seeking to recover UIM benefits from Progressive.

Following the filing of the underlying action, Charlotte passed away. Subsequently, an estate was opened and Hershel was appointed personal representative of Charlotte's estate. Before trial, McCartney filed a "Suggestion of Bankruptcy" informing the trial court of her initiation of bankruptcy proceedings and asserting, as a result, that, because the underlying action was allegedly "founded on a claim that a bankruptcy discharge would release," the instant case "should be ceased." In response, Progressive filed a motion and supporting brief requesting summary judgment in its favor on Hershel's UIM claim. Specifically, Progressive argued that, under Alabama law, a plaintiff may seek to recover UIM benefits from his insurer only if the plaintiff is "legally entitled to recover damages" from the tortfeasor, citing Alabama’s UIM Statute.

Progressive contended that, because McCartney's bankruptcy filing "foreclose[d] [McCartney's] legal obligation to pay debts" -- including any judgment recovered against her by Hershel -- Hershel was not legally entitled to recover from McCartney in excess of McCartney's own liability-insurance policy limits and, thus, Hershel's claim for UIM benefits accordingly failed as a matter of law. In support of its position, Progressive sought to have applied the rationale of various Alabama Supreme Court cases which interpreted the phrase "legally entitled to recover" to prevent the recovery of UIM benefits. Hershel opposed.

The trial court granted Progressive's motion based on the holding that, because of McCartney's bankruptcy filing, "[Hershel could] no longer obtain a judgment that ... McCartney would be responsible for that would invoke the UM/UIM carrier to pay." Hershel appealed to the Alabama Supreme Court.

On appeal, Herschel argued that a bankruptcy discharge protects only the filing debtor and "will not act to enjoin a creditor from taking action against another who also might be liable to the creditor," including, in particular, an insurer that may be secondarily liable. Progressive, on the other hand, argued that the trial court's ruling was correct in that it represents a "logical extension" of the Alabama Supreme Court's interpretation of the phrase "legally entitled to recover" contained in the UIM Statute. Progressive maintained that the automatic stay and ultimate discharge of a tortfeasor's personal liability for damages via bankruptcy proceedings effectively "forecloses the ... legal obligation to pay debts."

The Alabama Supreme Court reviewed Alabama’s case law, and concluded that the phrase "legally entitled to recover" refers to “the insured's ability to prove the merits of the underlying tort claim against the UIM tortfeasor.” The Court, however, distinguished this case, explaining that there is a clear distinction between a plaintiff's "legal entitle[ment] to recover" based on a showing of a tortfeasor's nominal liability and the plaintiff's ability to legally collect the demonstrated damages from the tortfeasor/debtor.” Accordingly, the Court held that nothing prevents Hershel from establishing that he is legally entitled to recover from McCartney on the merits of his claims. Instead, Hershel is merely barred, by operation of McCartney's bankruptcy discharge, from actually collecting demonstrated damages from her.

The Court rejected the insurer’s argument stating that McCartney’s bankruptcy discharge does not render Hershel unable to satisfy the prerequisites of the UIM Statue by proving the merits of his claim. The Court explained that “any injunction against proceeding directly against the debtor… in no way extends to Hershel’s own insurer.” Therefore, the Alabama Supreme Court reversed the grant of summary judgment to the insurer and remanded the case to the trial court to proceed forward.



Howard B. Altman

[email protected]

Happy New Year.


Brian F. Mark
[email protected]


09/13/17       Pulte Home Corporation v. American Safety Indemnity Company
U.S. District Court for the Southern District of California
US District Court, Applying Georgia Law, Denies Insured’s Motion for Summary Judgment Finding that the Insurer had no Duty to Defend

This declaratory-judgment action arises out of an underlying construction defect action commenced by several homeowners against the plaintiff herein, Pulte Home Corporation (“Pulte”), a residential real estate developer.  Pulte served as the general contractor for a real estate development project called “The Reserve at the Woods.”  Pulte subcontracted with Concrete Concepts, Inc. (“CCI”) to lay concrete foundations for the project’s residences.  Pulte’s agreement with CCI required CCI to obtain general liability insurance (“GCL”) listing Pulte as an additional insured.  CCI obtained two policies from the defendant, American Safety Indemnity Company (“ASIC”).  Said policies contained standard business risk exclusions limiting the scope of coverage for property damage caused by CCI’s concrete work.

Several individuals, who purchased homes in “The Reserve at the Woods,” commenced suit against Pulte alleging construction defects at the project.  Pulte sought additional insured coverage from ASIC.  ASIC denied coverage and Pulte eventually settled the underlying lawsuit.

Pulte then commenced this declaratory judgment action seeking a declaration that ASIC owed Pulte a duty to defend.  Based on the choice of law provisions contained in the ASIC policies, the Court applied Georgia law.  Pulte filed a motion for partial summary judgment arguing that under Georgia law, ASIC was required to defend Pulte in the underlying action.

Under Georgia law, the duty to defend is quite broad.  To determine whether an insurer has a duty to defend, Courts must compare the policy language with the allegations of the complaint asserted against the insured.  If the facts alleged in the complaint even arguably bring the occurrence within the policy’s coverage, the insurer has a duty to defend the action.  The duty to defend will not arise if the facts alleged in the complaint unambiguously exclude coverage under the policy.

The ASIC policies provide that ASIC has the duty to defend the insured against any suit seeking damages for property damage.  The policies also contains standard business risk exclusions that provide that there is no coverage for property damage to “(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the property damage arises out of those operations; or (6) That particular part of any property that must be restored, repaired or replaced because your work was incorrectly performed on it.”

Pulte points to two paragraphs in the underlying complaint that allegedly triggered ASIC’s duty to defend.  Both paragraphs allege defective conditions that include concrete hardscape issues, including efflorescence and cracking.  Pulte argued that the references to concrete efflorescence and cracking put ASIC on notice that property damage caused by CCI’s concrete work would be at issue in the underlying action, triggering ASIC’s duty to defend.

Applying Georgia law, the Court concluded that the facts alleged in the underlying complaint were insufficient to trigger ASIC’s duty to defend.  The Court reasoned that the complaint contained only two vague references to property damage stemming from defects even arguably within the scope of CCI’s concrete work.  The Court noted that the complaint did not allege or imply that the claimed concrete defects had caused damage to persons or property unrelated to the concrete itself.  The Court found this to be critical as ASIC only agreed to insure the risk that CCI’s defective or faulty workmanship would cause injury to people or damage to property outside of CCI’s scope of work. 

The policies’ j(5) and j(6) business risk exclusions exempt from coverage property damage that arises out of CCI’s subcontracting operations on Pulte’s behalf, and any costs associated with any property that must be restored, repaired or replaced because of CCI’s defective work.  Efflorescence and cracking are typical construction defects, and any property damage associated with same would arise out of CCI’s operations.  Additionally, any costs associated with repairing or replacing the damaged foundations is clearly excluded from coverage.  As the complaint did not even arguably implicate damages not covered by the j(5) and j(6) exclusions, ASIC had no duty to defend Pulte in the underlying action.  The Court, relying on Georgia case law, held that when an insurance policy contains business risk exclusions, as in the ASIC policy, there is no coverage unless there is a claim for damages to non-defective property not covered by the general contractor’s or the subcontractor’s scope of work. 

The Court reiterated the fact that nothing in the underlying complaint hinted at property damage beyond that arising out of or necessary to remediate CCI’s defective work, and held that permitting coverage on these facts would effectively cause ASIC to guarantee CCI’s work, and therefore the business-risk exclusions apply and the claim is denied.  The Court concluded that the ASIC insurance policies unambiguously excluded coverage for the construction defects referenced in the underlying complaint.  Accordingly, the Court denied Pulte’s motion for partial summary judgment.



Earl K. Cantwell
[email protected]


06/26/17       Pacific Commercial Services, LLC v. LVI Environmental

2017 U.S. Dist. LEXIS 98614 (D. Hawaii)  

Beware of Contract Formation by Email

LVI hired Pacific Commercial as a waste removal subcontractor on a project at a Honolulu power plant.  Pacific Commercial began work in early 2012 and eventually was paid over $500,000 for work on the project.  However, in January 2013, LVI began to use other companies for waste transportation and disposal services, and Pacific Commercial sued for breach of contract. 

LVI argued that it could not have breached a subcontract because the parties did not have a valid agreement because, inter alia, Pacific Commercial had never signed the subcontract.  The Court, however, ruled that a basic legal issue was that LVI began having other contractors perform waste handling and disposal without “terminating” Pacific Commercial’s subcontract.   That was due, in part, to LVI’s position that it had no actual subcontract with Pacific Commercial, a position the Court rejected.  The Court ruled that parties may make a contract without signing where assent is otherwise indicated.  In this case, the “subcontract” was found to be formed by a series of emails exchanged between the parties in March and April 2012. 

LVI had emailed Pacific Commercial a “subcontract/purchase order” form.  Pacific Commercial had replied suggesting several modifications, and LVI in turn responded that “We accept what you propose below.  Please revise it and send it to me for signature.”  LVI apparently then sent a revised subcontract to Pacific Commercial, which was apparently never signed and exchanged. 

The Court ruled that this email exchange showed a proposal for a contract, revisions to the contract, a “meeting of the minds” on essential terms, and acceptance of a contract.  The Court also indicated that Pacific Commercial indicated assent to the subcontract by beginning performance under the contract, which in fact continued for a year and over $500,000 in invoices and payments. 

LVI attempted to argue that this subcontract was not “final”, and that the parties had been engaged in ongoing negotiations during 2012, but the Court was not convinced finding clear mutual assent to the formation of a contract in the April 2012 email exchanges.  The Court concluded that the parties entered into a valid contract under which LVI was bound to use Pacific Commercial exclusively for waste removal services on the project, unless it invoked the subcontract’s termination provision, which it never did.  LVI admitted that it did not provide any notice of termination, but rather simply began diverting the work to other firms, and as a result was found to have breached the “subcontract”. 

This case represents a relatively new but increasing phenomenon of courts having to decide whether contracts were formed, terminated, or breached by emails, texts, and other electronic communications.  Another important factor is whether or not, as happened here, the parties entered into some partial or actual performance of a contract originating in email communications.  In this case, the “contract” existed for a period of about one year and over $500,000 in payments, which certainly helped the Court conclude that the parties had entered into a contractual arrangement of some substance and continuity.  Although there was an e-mail proposal and proposed revisions submitted by e-mail, there was also an explicit e-mail agreement to the modifications (“We accept what you propose below.”). 

This case represents a warning to businesses, including the insurance industry, to be careful and beware of creating contracts, binders, extensions, endorsements, etc., prematurely and incompletely based upon email or text communications.  Absent a signed contract, “mutual assent” may nonetheless be established through e-mails, documents, performance, invoices, and payments.

© Hurwitz & Fine, P. C. 2017
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