Coverage Pointers - Volume XV, No. 15

Dear Coverage Pointers Subscribers:

I receive two or three calls a day that start out with: “I have a situation”.  We do love situations.  We are partners with those who call us.  It’s all about working out coverage strategy, about making the right decisions up front.  Do I defend?  Do I send out a partial disclaimer?  Is there a lien?  How do I protect my insured and how do I protect the company?  Call. My direct dial is 716-849-8942.

A reminder:  while I do love the fans of this cover letter, the actual Coverage Pointers issue is always provided as an attachment to this e-mail with back issues available on our website,

Special thanks to my editorial team for ALWAYS making publication deadlines.  This is truly an publication built on love and dedication. Thanks, in alpha order, to  Audrey, Beth, Cassie, Earl, Jen, Margo, Mike, Kathie and Steve for their good work.

Good Reading, Part I:

The New York State Bar Association’s Torts, Insurance & Compensation Law Journal’s Winter 2013 issue was just published.  Beth Fitzpatrick and I contributed an article: Tips for Writing a Good Coverage Letter and Avoiding Common Pitfalls.  If anyone is interested in receiving a copy, let us know and we’ll be glad to share.

Storms and Travel:

My plans on participating in a bed bug class action mediation in Des Moines this past week were upset by Winter Storm Hercules, a blizzard that dumped 14 inches of snow or more on our fair city (with higher amounts elsewhere).  Instead, I waited a day and traveled to West Palm for a wedding, much more pleasant.

Naming winter storms is ridiculous, by the way.  That’s the last time I’ll ever mention the name of a winter storm.  Enough said.

Mike’s Missive on Serious Injury:

A couple interesting decisions came out of the First and Fourth Departments this past week.  Tendonitis, nerve impingement, and a spur, with pain, can be enough for a serious injury if they cause the requisite limitations.  A different plaintiff elects not to undergo Botox treatment, which would be necessary for further physical therapy to be effective, because of the risks.  This was a sufficient explanation for a cessation in treatment.

Training. Training.  Did I say training?

Some very intelligent folks in Rochester, New York and Atlanta, Georgia have asked us to do a no-fault serious injuries seminar for them and we are looking forward to seeing our friends in Atlanta and friends-to-be in Rochester.  It is never too late to make it your resolution to enhance your understanding of serious injuries and improve your handling of threshold claims.  Give us a call or drop an email and we will figure something out.

Michael Scott-Kristansen
[email protected]

Guinness Book of World’s Record Entry:

I just have to share this with you.  My mother, likely one of the most active 92-year old women you’d even encounter, called me on Wednesday, laughing hysterically.  She told me she had terrible pain in her mouth and went to see the dentist.  I didn’t think that as particularly funny.  However, here’s the rest of the story.

The dentist took x-rays and told her that at her tender age, she was sprouting a wisdom tooth!

At my sister’s suggestion, Mom contacted the Guinness Book of World’s Records and was advised with the submission of proof from the dentist, which she is securing, she will be listed in the next edition of the book, under the category, “The Oldest Person to Grow a Wisdom Tooth” smashing the current record set by a South African, who was a mere 80 years old.

Gotta love it.

Good Reading, Part II:

Writing a Reservation of Rights: A North American Compendium: Available This Month:

Writing a reservation of rights letter, especially in a state or province whose law is unfamiliar, can be among the most difficult tasks insurers and coverage counsel face - especially with a policyholders' bar waiting to seize on any lack of compliance with applicable law. The DRI Insurance Law Committee's Writing a Reservation of Rights: A North American Compendium, provides a comprehensive guide to writing reservations of rights in all 50 states, the District of Columbia and Canada, including the timeframes, laws and language insurers need to keep in mind. Order your copy today!

I served as co-Editor-in-Chief of this publication and with Beth Fitzpatrick, authored the New York chapter.  For the cost of an hour’s worth of good legal time, you can purchase a CD or hard copy version of this monumental publication and have, at your fingertips, a resource that you can refer to time and time again.  Click here for ordering information

Peiper’s Persuasions:

Our second issue of 2014 again fails to bring any relevant first party decisions.  Do not be disheartened, though, as we have many an interesting offering this week.  In particular, we would direct you to the Third Department’s decision in Trombley v. Socha.  In that case, the Court addresses whether a broad form, catch all, insurance/indemnity rider creates obligations for the document’s signer years into the future.  It has long been the rule that indemnity agreements, particularly those indemnity agreements permitting an action against an employer, are strictly construed.  As such, when seeking to enforce an indemnity claim against the employer one better have a very specific contract. 

We have seen indemnity clauses stricken for not being “specific enough.”  With this decision, we see a Court taking one step further in striking an otherwise valid clause because there is no evidence that the document was specifically intended to apply to the project giving rise to the lawsuit at issue.   We applaud the decision for its preservation of the mandates of Workers’ Compensation Law 11, and, frankly, for its good common sense.  If you want contractual indemnification, the process is very simple….ASK FOR IT!

The Trombley decision is joined this week by an interesting decision out of the First Department that refused to burden a lessee with an indemnity obligation where the loss at issue did not occur on a part of the premises it controlled.  The Court succinctly held that the lease’s indemnity provision did not trigger an obligation where the injury occurred on a portion of the premises that the lessee had no duty to maintain. 

These two cases provide great examples of how closely indemnity provisions must be reviewed.  Failure to do so may well result in a loss of an opportunity to avoid exposure altogether; or, result in a loss of the opportunity to shift exposure to another party.   As readers of this column surely recognize, the “who, what, where, when and  how” of indemnity agreements gives rise to constant litigation, and results in a constantly evolving precedent.  While we humbly suggest reading Potpourri every two weeks, as a good way to stay current on the trends, reading agreements with a skeptical eye is the only way to ensure you are avoiding assuming an obligation that is otherwise inapplicable. 

I was fortunate enough to recently speak at a CLM local event on this very topic, and as part of that appearance created an outline of the various indemnity cases we’ve reviewed in Potpourri over the past several years.  If you are interested in our outline, or better yet the actual live presentation on indemnity agreements (and their interplay with insurance policies), feel free to drop me a line.

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

P.S. The K2 decision was reargued before the Court of Appeals last week.  Regardless of the outcome, we commend the efforts of everyone who contributed to what has become a monumental effort to turn back an unprecedented change to insurance law in New York.   While no one can be sure of the outcome, for those of us who make our living in this field you can rest assured that everyone involved presented the very best case possible as to why K2 was an unnecessary departure from years of standing precedent.  Keep your fingers crossed.

Steven E. Peiper
[email protected]


Presidential History, Revisited:

From the last issue, I was truly astounded by the number of people who were intrigued, interested, captivated or motivated in or by my discussion of my personal US Presidential Biography project.  For those who missed it, I decided some 19 – 20 months ago to read presidential biographies/autobiographies in order, and in some cases, have read more than one volume on particularly interesting presidents.  I have been asked by a score or more for the reading list, so I included it here.  For those who haven’t read The Presidents Club by Nancy Gibbs and Michael Duffy, it was that book that inspired me to begin this effort. Anyway, here’s the list, requested by several:

  • His Excellency, George Washington (Ellis)
  • John Adams (McCullough)
  • Thomas Jefferson, the Art of Power (Meachem)
  • James Madison: A Biography (Ketcham)
  • The Last Founding Father: James Monroe and a Nation's Call to Greatness (Unger)
  • John Quincy Adams (Unger)
  • Andrew Jackson-- American Lion (Meacham)
  • Martin Van Burn (Widmer)
  • William Henry Harrison (Collins)
  • John Tyler (May)
  • A Country of Vast Designs – James Polk (Merry)
  • Zachary Taylor (John S.D. Eisenhower)
  • Millard Fillmore (Finkelman)
  • The Expatriation of Franklin Pierce (Boulard)
  • James Buchanan (Baker)
  • Team of Rivals (Goodwin) and The Impeachment of Abraham Lincoln (Carter) and Killing Lincoln (O'Reilly)
  • History of the Impeachment of Andrew Johnson (Ross)
  • Ulysses S. Grant in War and Peace (Brands)
  • Fraud of the Century: Rutherford B. Hayes, Samuel Tilden, and the Stolen Election of 1876 (Morris)
  • Destiny of the Republic: A Tale of Madness, Medicine and the Murder of a President -- Garfield (Millard)
  • Chester Alan Arthur (Karabell)
  • Grover Cleveland (Graff)
  • A Compilation of Messages and Papers of the President - Benjamin Harrison
  • The President and the Assassin: McKinley, Terror, and Empire at the Dawn of the American Century (Miller)
  • Theodore Rex (Morris), Theodore Roosevelt (Autobiography) and The Bully Pulpit (Goodwin)
  • Bully Pulpit (Goodwin)
  • The Tea Party President by William Howard Taft and Charles Stanfield Davis
  • Woodrow Wilson (Brands)
  • Warren Harding (John Dean)
  • Calvin Coolidge, Man from Vermont (Fuess)
  • Herbert Hoover (Leuchtenburg)
  • Traitor to His Class -- FDR (Brands)
  • Citizen Soldier -- Harry Truman (Donald)
  • Eisenhower (Soldier and President (Ambrose) and Eisenhower, In War and Peace (Smith)
  • Kennedy (Sorensen)
  • The Path to Power -- LBJ -- Caro, The Passage of Power (Caro)
  • The Conviction of Richard Nixon (Reston), Nixon, the Triumph of a Politician (Ambrose) Nixon, the Education of a Politician (Ambrose)
  • Write It When I'm Gone -- Ford  (DeFrank)
  • Jimmy Carter (Zelizer)
  • Dutch - Reagan (Morris) and Ronald Reagan (Sutherland)
  • George Herbert Walker Bush (Wicker)
  • First in His Class (Bill Clinton) and My Life (Autobiography)
  • Decision Points -- George W. Bush (Autobiography)
  • The Bridge – Barach Obama – Remnick  [Just Started]


Ahh, what next?

K2 Investment Argument:

For those who haven’t seen the K2 Investments argument, on reconsideration, I would recommend it.  A link to the argument is here.  Just click on the webcast link on the January 7 date.

Audrey’s Angle:

The weather is always an adventure in Buffalo.  Last week, we went from sub-zero temperatures and a blizzard shutting down the City to 55 degrees and a thaw with flooding. 

This edition we have a case from the Iowa Court of Appeals upholding a two-year contractual statute of limitations on actions against an underinsured motorist insurer by a third party beneficiary for your review. 

Finally, as the DRI Insurance Law Committee’s Vice Chair, I am compelled to ensure that you are aware of yet another seminar planned by the Insurance Law Committee.  The Insurance Coverage and Claims Institute will be held from April 2 through 4 at the Swissotel in Chicago.  Aside from in-house speakers from Zurich North America, American Modern Insurance Group, State Farm Insurance Companies, Travelers, and OneBeacon Insurance Group, this seminar also features a dual track on Friday.  The dual track this year is litigating a coverage claim for those looking for practical advice on issues such as selecting the appropriate company representative in a bad faith case, ensuring a complete record to preserve Appellate issues, and properly using your counsel to investigate claims.  The second track is claims made and other specialty coverages which will address pollution coverages, coverage for intentional conduct, and coverage for employment disputes.  If you are interested in attending and need more information regarding this seminar, please do not hesitate to email me at [email protected].

Audrey A. Seeley
[email protected]


Beth Bitz’ – Voices from Long Island:

Dear Subscribers:

Well, we survived our first blizzard of 2014, as well as the first full week of work post holidays.  I’m not sure which was more challenging! 

In today’s column, I discuss a case from South Carolina, where the court found damages for advertising injury were alleged, so as to trigger the insurer’s duty to defend. 

There were no construction defect decisions since I last wrote and both litigants and the courts seem to have figured out the rules regarding discovery of social media, so what’s a columnist to do?  Well, as I returned to teaching Insurance Law at Touro College on Long Island this week, I thought I’d share with you a post I found, discussing a claim by a law school professor that his screaming, ranting and otherwise berating his students should be protected under the ADA statute.

I hope your 2014 is off to a great start and remind you that we frequently provide training programs on topics of interest and would be happy to do so for your organization, particularly if you are located in a climate warmer than Long island in January!

Til next time,

Elizabeth A. Fitzpatrick
[email protected]


Coverage Litigation, the Fear of Success and the Alternatives:

Sometimes, the last thing a carrier wants to do is fight with another insurer over the interpretation of policy language and succeed.  Why?  The precedent might be used against that insurer in many cases to come in the future.  There are alternatives that leave no footprints.


H&F Offers Insurance Coverage Mediation at the Sheldon Hurwitz Center for Alternative Dispute Resolution (or Elsewhere):

Resolving the Complex without the Substantial Costs of Litigation or the Risk of Adverse Precedent

There are times, more often recently than not, when insurers wish to resolve complex insurance coverage disputes without the expense and costs of trial and without risking potentially adverse judicial precedent. We have encouraged the mediation and/or arbitration of complex insurance coverage claims and our office can assist insurers and insureds in bringing reasoned resolution to coverage disputes.

Hurwitz & Fine, P.C. offers both mediation services on complex coverage disputes through attorney Dan D. Kohane.  Why spend the money and the time to litigate these questions when resolution by mediation or arbitration can bring closure to hotly contested matters in relatively short order for substantially reduced costs.

Mediation or Neutral Evaluation Services can be provided at the Sheldon Hurwitz Center for Alternative Dispute Resolution or at any other location agreeable to the parties.

Dan, a founding Board Member of the American College of Coverage and Extracontractual Counsel, has been handling complex insurance coverage matters for over 30 years. For over 25 years, he has served as an Adjunct Professor of Insurance Law at the Buffalo Law School and is frequently retained as an expert witness in insurance coverage matters throughout the United States and Canada. He is well-schooled as a mediator and lectures regionally, nationally and internationally on insurance coverage issues. He also served as President of the Federation of Defense & Corporate Counsel, an international organization of over 1300 merit-selected lawyers and regional and national insurance claims professionals and is the past chair of the FDCC's Insurance Coverage Section.

Dan is also an experienced trial lawyer, handling insurance coverage and extra-contractual matters of behalf of insurers and policyholders. He brings years of experience, scholarship, practicality and common sense to the table.

For information, contact Dan Kohane at [email protected] or 716.849.8942.


Trains Win, Foreman Loses – The “Open Run” Defense Created One Hundred Years Ago:

New York Times
January 17, 1914


Her Husband Saved Railroad
Laborer’s Life at Cost of His Own


Erie Wins In Court of Appeals,
which Says Imperiled Man
Had Fair Warning

Mrs. Mary O’Brien, whose husband, John O’Brien, foreman of a truck gang on the Erie Railroad, was killed on June 27, 1908, while saving the life of one of the members of his gang, had her verdict of $12,000 against the railroad company set aside yesterday by the Court of Appeals.  O’Brien’s action is analyzed in the opinion of the court which granted the railroad’s appeal and demand for a new trial.  The Court said:

Plaintiff’s intestate was an employee of the defendant in the capacity of foreman over a body of men, including one Vitalli, who were engaged in the work of repairing the tracks and roadbed of the defendant company near a station known as Turners (Harriman) situate between Paterson, N.J., and Port Jervis, N.Y.

About 10 o’clock in the morning of June 27, 1908, an express train bound west on track 1 approached the spot where the accident occurred at a rate of 50 miles an hour.  East of Turners Station there is a curve in the tracks.  A locomotive traveling westerly over the curve in question would be visible from where the accident occurred for several hundred feet.

The evidence of Vitalli discloses that at the point where he was at work a train coming from the east could be seen for a distance of about twenty-five rails, each about 30 feet in length.  Vitalli was at work on track 1, his back toward the east, the direction from which the train was approaching.  While thus employed he heard plaintiff’s intestate (O’Brien) call out several times, ‘Look out, look out!” but did not think O’Brien, the foreman was calling to him.  Thereupon the intestate came near to him and exclaimed:

‘What are going to do, going to be killed, or do you want to die?’ and pushed him (Vitalli) off of track 1 and on to track 2, the east-bound track.  As intestate was stepping off track 1 he was struck by the locomotive, and as a result thereof was killed.

The Court established the “Open Run” rule:

An engineer is not bound to stop his train the moment he sees some living object upon the track. He has the right, in broad daylight, when his train is perfectly visible and its approach must be heard and known, at least in the first instance, to assume that the object, whatever it is, will leave the track in time to escape injury. Reasonable care in the management of trains which must make their time between stations, and have the right of way, does not require more.

Assuming that the engineer in charge of the train saw Vitalli on the track, he would have the right  to assume that Vitalli would leave the track in time to escape injury. The engineer was bound to exercise only reasonable care in the management of the train. As it was not due to stop at Turners Station, negligence cannot be attributed to the act of the defendant in running through a country district at the rate of speed stated, nor to a failure on the part of the engineer to have his train under control in approaching the curve in expectation of finding a person upon the track west of the curve. Such a rule would materially interfere with the running of trains and impose upon defendant a rule of conduct heretofore disapproved by this court.

Editor’s Note:  The case is reported: O'Brien v. Erie R. Co., 210 N. Y. 96.

Jen’s Gems:

Greetings.  While many of you probably expected me to discuss Buffalo’s blizzard last week (the first one since 1993), there is a more important “blizzard” to discuss:  the blizzard of speculation surrounding oral reargument before the New York Court of Appeals on the K2 decision.  If you have not heard yet, it took place last Tuesday before a hot bench primarily led by the author of the decision Justice Smith.  You know you truly work with a group of coverage enthusiasts, when you need to hold the office viewing party in the main conference room.  Counsel for American Guarantee was clearly determined to stay on message (Servidone), but Justice Smith seemed set on discussing public policy, and whether the “right” rule is the old rule or new rule as he called them.  We will now have to wait and see whether any change will be made to the decision.

Beyond that excitement, I also wanted to highlight a really interesting decision out of Supreme Court, New York County, Old Republic Ins. Co. v. United Natl. Ins. Co.   The case addresses the dilemma faced when you have a document or piece of evidence that is privileged, but it supports your case.   Do you waive the privilege and use the document or assert the privilege and potentially weaken your case?    That is a decision I would submit is best made before suit is filed. 

Lastly, since I have received such positive feedback (if only from a few loyal supporters) on my Ella updates, I figured I would drop in one quick adorable thing she did this week.  I know you are probably saying to yourself, “I am sure she did more than just one.”  True, but I only have so much room in this note.  She said “I love you” for the first time.

Until next issue…

Jennifer A. Ehman
[email protected]

A Century Ago – Volcano Erupts in Japan – How Many Killed?

Wellsville (NY) Reporter
January 17, 1914



Tokyo, Jan. 17 – Indications are that the loss of life from the eruption of Sakura Jima may be much larger than supposed, is given in a report received today from officials of the interior department.  Nine thousand of Sakura’s estimated population, nineteen thousand, has been accounted for up to last evening.  Others it is expected will be found but the loss of life evidently was extremely heavy.

Bishop Walter Andrews of the English church in Hokkaido in the famine stricken district writes the suffering everywhere is intense.  Farmers’ families are eating soups of chopped straw, leaves and rotten potatoes and meat taken from cats, dogs and fish.  The more fortunate have a thin gruel made of rice or wheat.

Editor’s Note:  The story of 10,000 deaths from a volcanic eruption intrigued your Editor.  There aren’t too many volcanoes that have lead to that many deaths.  However, further research revealed the actual death toll was between 28 and 35.  I guess the others eventually showed up.


Highlights of This Week’s Issue:

Dan D. Kohane
[email protected]

  • Assault and Battery Exclusions, Even Unsigned, Mean What They Say and Say What They Mean


Michael P. Scott-Kristansen

[email protected]

  • Plaintiff’s Rejection of Riskier Treatment May Be a Reasonable Explanation for Cessation in Treatment
  • Tendinitis, Nerve Impingement, Pain, and a Spur, Which Cause a Significant Loss of Use for a Significant Period, Can Meet the Threshold
  • Basic Case Where Defendant Meets His Burden and Plaintiff Does Not
  • Motion to Dismiss Complaint Denied Where Defendant Fails to Address Plaintiff’s 90/180-Day Claim
  • Defendant’s Motion for Summary Judgment Denied Because All Parties Met Their Burden on Seriousness and Causation
  • Motion to Dismiss Complaint Denied Where Defendant Fails to Address Plaintiff’s Knee Injury
  • Significant Limitations in Reports of Defendant’s Physicians Prevents Summary Judgment


Margo M. Lagueras

[email protected]


  • Respondent’s Failure to Peer Review MRIs at Issue Results in Award for Applicant
  • Defense of Lack of Causal Relationship Must Be Based on More Than Just Pre-Existing Conditions
  • Denial Based on Peer Review Upheld Following Policy Exhaustion



  • Overruling Its Prior Decision in Art of Healing, the Court Hold Medical Provider Is Not Required to Lay Foundation for Admissibility of Claim Forms as Part of Prima Facie Case


Steven E. Peiper

[email protected]


  • Broadly Worded Release from an Unrelated Contractual Matter Precludes Indemnity Claim in a Subsequent Medical Malpractice Action
  • Broad Indemnity Rider Executed Years Before the Loss and Contract at Issue did not Support Owner’s Claims for Contractual Indemnification
  • Destruction or Loss of the Alleged Cause of Injury Gives Rise to Preclusion Sanction
  • Lease Did Not Apply to Situs of Accident, Contractual Indemnity Clause Inapplicable


Elizabeth A. Fitzpatrick
[email protected]

Beth’s Banter on Coverage “B”:

  • Insurer Must Defend Insured Under Advertising and Personal Injury Portion of CGL Policy


Fitz’ Bits:

  • Anger Protected Under ADA?


Audrey A. Seeley
[email protected]

  • Two Year Statute of Limitations for UIM Claim Applied to Third Party Beneficiary (Iowa)


Cassandra A. Kazukenus
[email protected]

  • DFS Issues Its 2014 Regulatory Agenda


Katherine A. Fijal

[email protected]

Coverage Limited to Amount Stated in Sublimit Endorsement


Jennifer A. Ehman
[email protected] 

  • Where Insured Was a Newly Formed Business and Relied on Advice of Broker, Court Finds a Question of Fact as to Whether the Insured’s Late Notice should be Excused due to its Good Faith Belief in Non-Liability
  • Court Upholds Carrier’s Assertion of Privilege as to Certain Attorney-Client Documents, but Warns that if the Documents are not Disclosed, Carrier Cannot Rely on them to Prove its Case


Earl K. Cantwell

[email protected]



That’s all for now.   All the best.

Dan D. Kohane
Hurwitz & Fine, P.C.

1300 Liberty Building
Buffalo, NY 14202    
Phone: 716.849.8942
Fax:      716.855.0874
E-Mail:  [email protected]
H&F Website:



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

Dan D. Kohane
[email protected]

Audrey A. Seeley
[email protected]

Jennifer A. Ehman
[email protected]

Dan D. Kohane, Team Leader
[email protected]

Michael F. Perley
Elizabeth A. Fitzpatrick
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Michael P. Scott-Kristansen
Diane F. Bosse

Steven E. Peiper, Team Leader
[email protected]

Elizabeth A. Fitzpatrick
Cassandra Kazukenus
Michael P. Scott-Kristansen

Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Jody E. Briandi, Team Leader
[email protected]

 Elizabeth A. Fitzpatrick

Diane F. Bosse

Index to Special Columns

Kohane’s Coverage Corner
Michael’s Mini-Missives on Serious Injury
Margo’s Musings on No Fault

Steve on Sandy, Peiper on Property and Potpourri
Beth’s Banter on Coverage B and Fitz’ Bits
Audrey’s Angles on the Nationally Noteworthy
Cassie’s Capital Connection
Fijal’s Federal Focus
Keeping the Faith with Jen’s Gems
Earl’s Pearls

Dan D. Kohane
[email protected]

01/09/14       Martinez v. OEL Realty Corp
Appellate Division, First Department
Assault and Battery Exclusions, Even Unsigned, Mean What They Say and Say What They Mean
The policy contained an “Assault and Battery” exclusion and the allegations alleged assault and battery. Because the complaint's negligence allegations could not survive except for the assault, those claims are deemed to have arisen from the assault and are thus subject to the assault and battery exclusion under the 1996 Creative Housing decision.

The declarations page advised of the "Assault and Battery Exclusion." The fact that it was not countersigned makes no difference.   


Michael P. Scott-Kristansen
[email protected]

01/03/14       Clark v. Aquino
Appellate Division, Fourth Department
Plaintiff’s Rejection of Riskier Treatment May Be a Reasonable Explanation for Cessation in Treatment
The lower court granted the defendant’s motion for summary judgment.  The Appellate Division, however, held that the lower court erred.  The plaintiff alleged the most common permanent serious injuries: consequential limitation of use, significant limitation of use, and 90/180-day.

The defendant’s evidence on causation was insufficient because she failed to show that the injuries were preexisting and not an exacerbation.  The defendant’s own expert acknowledged that the plaintiff suffered a strain and that she was free of pain before the accident.

The defendant’s argument based on the plaintiff’s cessation of treatment also failed because the plaintiff provided a reasonable explanation for the cessation.  The plaintiff ceased physical therapy upon being discharged and instructed to continue exercises at home.  Further physical therapy would also have been merely palliative absent Botox injections, the risks of which, the plaintiff apparently rejected.  The plaintiff also ceased chiropractic treatment because she was discharged as the treatment only provided temporary relief.

The defendant failed to meet its burden on permanency for the permanent consequential limitation of use category of injuries because the evidence demonstrated that the plaintiff’s injuries were lengthy in duration and not expected to improve.

The defendant failed to meet its burden on the significant limitation of use category of injuries because she failed to address the plaintiff’s allegation of cervical dystonia.  The defendant’s expert also assigned a numeric percentage to the significant loss of range of motion in the plaintiff’s neck and recited the tests he or she used, which created a question of fact.  The medical records submitted by the defendant also noted lost range of motion from muscle spasms.  Lastly, the parties’ experts disagreed regarding whether the plaintiff suffered disc herniations.

01/07/14       Trezza v. Metropolitan Transp. Authority
Appellate Division, First Department
Tendinitis, Nerve Impingement, Pain, and a Spur, Which Cause a Significant Loss of Use for a Significant Period, Can Meet the Threshold
The jury found in favor of the plaintiff and the awarded $500k for past pain and suffering, $1.5 million for future pain and suffering, and $500k for future medical expenses.  Defendants appealed in part on the contention that the plaintiff failed to establish a serious injury at trial.  The Court agreed that the plaintiff failed to meet her burden on her shoulder injury with respect to the permanent consequential limitation of use category.  The plaintiff failed on permanent consequential limitation of use because she did not submit any objective evidence of permanent limitations based upon a recent examination.

The Court, however, held that the plaintiff met her burden on the issue of significant limitation of use to her right shoulder.  The plaintiff’s evidence established that she suffered from limited use of her right shoulder for a significant period due to tendinitis, ongoing nerve impingement, and pain.  The plaintiff’s MRI results were corroborative and she underwent an arthroscopic surgery on her right shoulder that demonstrated an anterior spur. 

01/08/14       Liriano v. Ruperto
Appellate Division, Second Department
Basic Case Where Defendant Meets His Burden and Plaintiff Does Not
The plaintiff was sitting at a red light when she was rear-ended by the defendant’s vehicle.  The plaintiff sued the defendant for her injuries alleging serious injuries to her lumbar, cervical, and thoracic spine as well as her left knee.  The defendant met his burden of demonstrating that those injuries did not rise to the level of a permanent consequential limitation of use or significant limitation of use.  The plaintiff, in turn, failed to rebut the defendant’s case (she failed to meet her burden).  The Court held, therefore, that the defendant’s motion should have been granted.
Editor’s Note:        Don’t forget that serious injury threshold is only an issue in cases arising out of the use or operation of a motor vehicle.  For all you experts out there it may seem obvious, but everyone has to begin somewhere.

01/08/14       Christie v. Harrison         
Appellate Division, Second Department
Motion to Dismiss Complaint Denied Where Defendant Fails to Address Plaintiff’s 90/180-Day Claim
This one hardly needs explaining, and frankly, it happens far too often.  The defendant sought to dismiss the plaintiff’s complaint by motion for summary judgment.  The plaintiff’s bill of particulars stated that the plaintiff sustained a 90/180-day injury.  The defendant’s motion, however, did not address the plaintiff’s 90/180-day claim.  As a result, the motion for summary judgment, in as much as it sought to dismiss the plaintiff’s complaint, was denied.
Editor’s Note:        You may wonder, and you would not be alone I am sure, why some cases result in partial summary judgment and other motions are outright denied where one serious injury survives.  The issue is the relief sought.  If a summary judgment motion seeks to dismiss the complaint, then the defendant must prevail on every single serious injury because the plaintiff is still entitled to recover for all of his or her injuries if he or she proves she sustained at least one serious injury.

01/08/14       Jean v. Cerebral Palsy Transport, Inc.
Appellate Division, Second Department
Defendant’s Motion for Summary Judgment Denied Because All Parties Met Their Burden on Seriousness and Causation
The lower court granted the defendants’ motion for summary judgment.  The lower court was correct in holding that the defendants met their burden.  The plaintiffs, however, also met their burden, creating a question of fact, so the defendants’ motion should have been denied.

The defendants met their burden of demonstrating that the injuries to the plaintiff’s cervical spine and right shoulder did not constitute a permanent consequential or significant limitation of use.  The defendants also established that the plaintiff’s injuries were not caused by the accident.  The plaintiff, however, submitted evidence demonstrating the opposite.

01/08/14       Yunayeva v. Digiugno Steel, Inc.
Appellate Division, Second Department
Motion to Dismiss Complaint Denied Where Defendant Fails to Address Plaintiff’s Knee Injury
The defendants failed to meet their burden on their motion for summary judgment, which sought the dismissal of the plaintiff’s complaint.  The Court denied the defendant’s motion because the defendant failed to address every claim of serious injury made by the plaintiff in her bill of particulars.  The plaintiff alleged she sustained a serious injury to her right knee, but the defendant’s motion papers did not address her right knee.

01/08/14       Chang v. Cardone
Appellate Division, Second Department
Significant Limitations in Reports of Defendant’s Physicians Prevents Summary Judgment
The Court overturned an order in favor of the defendant, who had moved for summary judgment on the basis that the plaintiff did not sustain a serious injury.  The Court held that the defendant failed to meet his burden.

The medical reports of the defendant’s expert physicians contained evidence of significant range-of-motion limitations in his lumbar spine.  The defendant’s evidence also failed to demonstrate that the plaintiff’s injuries were not caused by the accident.


Margo M. Lagueras
[email protected]


01/03/14       Western New York MRI v. A. Central Insurance Co.
Erie County, Arbitrator Douglas S. Coppola
Respondent’s Failure to Peer Review MRIs at Issue Results in Award for Applicant
The cervical and lumbar MRIs at issue were performed in July, about two months after the accident, revealing positive findings at several levels.  However, chiropractic IME, also in July, reported a normal examination and opined that further chiropractic care and diagnostic testing were not medically necessary.  In August, cervical DMX x-rays were also performed and revealed instability.  Based on the IME, the DMX x-rays were denied despite the positive findings.  The EIP continued treating with an orthopedic specialist and, in September, an orthopedic peer review was performed.  Based upon the peer review, the July MRIs were denied.  The Arbitrator found neither that neither the IME nor the peer review discussed the positive findings nor that the EIP reported benefit from the chiropractic treatment to her treating doctors.  Upon the positive findings of the DMX studies, which were recommended following the MRIs, Respondent did not request any further commentary from either the IME or peer review doctors.  Respondent’s choice to not follow up resulted in the award for the Applicant.

01/02/14       Buffalo Spine Surgery v. ACA Insurance Co.
Erie County, Arbitrator Michelle Murphy-Louden
Defense of Lack of Causal Relationship Must Be Based on More Than Just Pre-Existing Conditions
Applicant sought reimbursement for a cervical surgery and x-rays performed during the summer of 2012.  Respondent denied based on a peer review which concluded there was no causal relationship between the surgery and the 2009 accident.  The EIP had been involved in a prior accident in 2005 and had cervical surgery in 2006.  He remained symptomatic through 2007 and 2008 and was referred to pain management.  In 2009 he was involved in the accident at issue and consulted with Applicant complaining, in part, of worsening neck and arm pain.  Applicant opined that the EIP had sustained new injuries.  Then, the EIP apparently was incarcerated at some point in 2010 and was released in 2012 just prior to the surgery at issue.  Notably, a cervical MRI performed just before the surgery was read as unremarkable.  The purpose of the surgery was to remove failed hardware and perform a subtotal discectomy, anterior foraminotomy and fusion at C4-5, with instrumentation at C4-6.

The peer reviewer noted that the EIP had undergone cervical surgery prior to the 2009 accident and that an MRI performed just after the accident showed a central protrusion at C2-3 that was due to an old herniation (seen on a 2005 MRI) and not new trauma.  The imaging studies just prior to the surgery at issue revealed pre-existing degenerative changes (DDD) throughout the entire spine.  He concluded that the subject surgery was not causally related to the 2009 accident but was rather due to pre-existing DDD.  Based on this opinion, Respondent denied Applicant’s claims.

The Arbitrator noted that she rendered a previous decision in October 2013 in which she had found the peer review to be insufficient to uphold the denial because the peer review failed to address whether the present conditions could be the result of an exacerbation of prior conditions.  Because Respondent failed to establish that the EIP’s conditions were not aggravated by the 2009 accident, she found in that applicant’s favor. 

At the first hearing in this matter, Respondent first stated that it intended to appeal the prior award.  A continuance was granted pending the outcome of the appeal, but Respondent did not appeal, and then failed to appear at the second hearing.  Instead, Respondent submitted an addendum by the peer reviewer stating that the 2009 accident did not aggravate the pre-existing conditions.  The Arbitrator stated that “[t]his eleventh hour attempt by Respondent to avoid liability for Applicant’s claim is nothing short of disgraceful.  Respondent’s remedy was to appeal my prior Award in the Buffalo Synapse matter, not attempt to remedy the deficiencies in Dr. Berman’s peer review herein by submitting post-hearing a cursory Addendum by Dr. Berman which Respondent never requested nor received permission to submit.”  The Arbitrator further stated that the false allegation by Respondent that it was going to appeal the prior award unjustifiably prolonged the award in this matter.  She held that the previous award operated as collateral estoppel in this matter.

01/02/14       Elite Med. Supply of NY, LLC v. National Liab. & Fire Ins. Co.
Erie County, Arbitrator Kent L. Benziger
Denial Based on Peer Review Upheld Following Policy Exhaustion
Applicant commenced arbitration in March claiming reimbursement for a lumbar orthosis, a multi-mode stimulator and a cervical traction unit denied by Respondent based on a peer review that determined the items were not medically necessary.  In June, Respondent issued another denial stating that policy limits were exhausted.  During the arbitration, Respondent supported its position through the submission of an affidavit and payout sheet.  The Arbitrator stated that it makes no difference that the policy was exhausted after the initial denial based on a peer review and prior to a decision in the arbitration.  The peer review found that the DME was not medically necessary and the Court of Appeals has held that the priority of payment rule is not applicable to claims that have been denied or have not been verified because that would vitiate the prompt payment rule (see Nyack v General Motor Acceptance Corp., 8 NY3d 294 [2007]).  As a finding of fact, the Arbitrator found that the policy was exhausted and no reimbursement owed. 


12/18/13       Viviane Etienne Med. Care, PC v. Country-Wide Ins. Co.
Appellate Division, Second Department
Overruling Its Prior Decision in Art of Healing, the Court Hold Medical Provider Is Not Required to Lay Foundation for Admissibility of Claim Forms as Part of Prima Facie Case
Art of Healing Medicine, PC v Travelers Home and Marine Insurance Co. (55 AD3d 644) was decided by the Second Department in 2008.  Now, in Viviane Etienne, where the insurer did not timely or properly deny the claim, the Second Department holds that “[t]o the extent that Art of Healing imposes a ‘business record’ requirement obligating the plaintiff to establish the truth or the merits of the plaintiff’s claim, we overrule Art of Healing.”

In Art of Healing, the Appellate Court affirmed both the trial court and the Appellate Term in holding that the plaintiff failed to establish its prima facie burden when it relied on an affidavit from a biller who did not possess personal knowledge of the plaintiff’s business practices and procedures so as to establish that the claim forms attached to the plaintiff’s motion were admissible under the business records exception to the hearsay rule.  In essence then, Art of Healing, added a requirement to a plaintiff’s prima facie burden – that a plaintiff demonstrate the admissibility of its billing records under the business records hearsay exception.  However, the courts have consistently held that a plaintiff makes a prima facie showing, as a matter of law, simply by submitting evidentiary proof that the prescribed statutory billing forms were mailed and received by the carrier, and that payment is overdue.

The Court notes that “proof of the fact and amount of the loss sustained”, required to trigger the 30-day pay or deny rule, refers to the contents, not the merits, of the billing forms.  Therefore, a plaintiff is not required to show, as part of its prima facie case, that the contents of the forms are accurate, or that the services were actually rendered or necessary.  And, an insurer that fails to proffer a timely and proper denial is precluded from objecting to a purported deficiency in a claim, such as whether the services were in fact rendered, causally related or medically necessary. 

Here, plaintiff’s submissions in support of its motion included an affidavit from the president of the company providing billing services to plaintiff describing how plaintiff provided the necessary documents from which the billing was generated, the methods employed by his own company in generating the billing, and his mailing procedure.  Defendant argued that all of plaintiff’s exhibits were hearsay and that the affidavit was a template with only generalized details but no specifics as to the handling of the claims in dispute. 

The Court disagreed with defendant’s contention that plaintiff failed to establish that the bills were mailed and received, finding that plaintiff’s submissions were sufficient to give rise to a presumption of receipt.  As such, plaintiff satisfied its prima facie burden and defendant failed to raise a triable issue of fact in opposition.  Because defendant failed to request additional verification, object to the adequacy of the claim forms, or otherwise deny the claim, it forfeited the right to challenge the admissibility of the claim forms under the business records exception to the hearsay rule.  In responding to the dissent, the majority observed that in Art of Healing it had departed from its own precedent and that it needed to restore consistency – specifically, that a plaintiff’s prima facie burden is satisfied by “proof of billing.”
Note:  A forceful two-judge dissent stated, among other things, that a defendant’s ability to assert a defense does not alter a plaintiff’s affirmative burden of proof in the first instance.  We predict this one is headed to the Court of Appeals.

Steven E. Peiper
[email protected]


01/15/14       Rivera v Wyckoff Hgts. Med. Ctr.
Appellate Division, Second Department
Broadly Worded Release from an Unrelated Contractual Matter Precludes Indemnity Claim in a Subsequent Medical Malpractice Action
This matter has its roots in an agreement reached between Montefiore Medical and Wyckoff Medical wherein Montefiore agreed to provide staffing for Wyckoff’s OB/GYN practice.  In 1997, Wyckoff appears to have defaulted on the agreement.  This resulted in Montefiore commencing an action against Wyckoff seeking to recover all outstanding fees from under the aforementioned agreement.  That matter was eventually resolved with Wyckoff paying $400,000 Montefiore, and also agreeing to Release Montefiore from any and all future claims it might possess against it. 

In 2004, Wyckoff was named as a defendant in the instant medical malpractice lawsuit.  Wyckoff responded by commencing a suit against, among others, Montefiore.  Montefiore, in turn, moved to dismiss on the basis of the Release language.  Wyckoff opposed the motion by arguing that the Release in question was not intended to apply the instant claim. 

The trial court agreed that the Release was not applicable to this matter, and accordingly denied Montefiore’s motion to dismiss.  In reversing, the Appellate Division noted that the Release should not be “set aside” unless there is evidence of “duress, fraud, illegality or mutual mistake.”  Further, where the document is unambiguous on its face the Court must refrain from interpreting it in a manner that creates an obligation that the signatories to the document “neglected to specifically include.” 

Because the Release broadly extinguished any pending, and future claims, arising out of the agreement, the Court was compelled to apply the terms as they were written.  As such, the Release acted to preclude Wyckoff’s indemnity claims asserted in the matter bar.  In so holding, the Court noted the fact that the Release pre-dated the medical malpractice action did not alter its decision.  Likewise, Wyckoff’s arguments that it did not intend the Release to have such an expansive meaning did not impact the applicability of the document in the instant matter.

01/09/14       Trombley v Socha
Appellate Division, Third Department
Broad Indemnity Rider Executed Years Before the Loss and Contract at Issue did not Support Owner’s Claims for Contractual Indemnification
Plaintiff was in the course of his employment with defendant Sullivan where he was framing an apartment building owned by defendant Socha.  During this time, he fell from a height and sustained injury.  The incident happened in 2006, and Sullivan was working under a contract with Socha.  Socha settled the bodily injury action, and proceeded against Sullivan in an action for contractual indemnification. 

The indemnity issue eventually proceeded to a bench trial where the Court ruled that Socha had not established its entitlement to recovery.  The instant appeal ensued.

Previously, in 2004, Sullivan had executed an insurance/indemnification rider.  At that time, Sullivan had been retained to construct a pole barn for Socha.  The rider provided that Sullivan defend and indemnify Socha for claims arising out of future projects entered into between the two parties. 

Testimony revealed that at the time the Rider was executed, Sullivan had not even heard of, yet alone agreed to perform, the construction a Socha’s apartment building.  However, Socha’s principal testified that he believed he advised Sullivan that rider in question would be effective for all future projects per his ordinary course of dealing with other contractors retained by Socha.  Socha’s representative acknowledged, however, that there was no specific discussion about future work that Sullivan would perform for Socha at the time the rider was executed.  Moreover, the rider at issue was not appended to the contract that Sullivan signed relative to the apartment framing project where plaintiff was injured. 

Sullivan, on the other hand, admitted that he executed the Rider in 2004.  At that time, Sullivan maintains that Socha only advised the rider was required by its insurance carrier.  Further, Sullivan advised that at the time the rider was executed there had been no discussion beyond the pole barn project. 

In affirming the trial court’s decision, the Appellate Division noted that Workers’ Compensation Law § 11 precludes claims against the employer unless said employer “expressly agreed to contribution to or indemnification of the…person asserting the cause of action.”  Accordingly, courts have been instructed to strictly construe indemnity agreements to avoid creating a duty where one had not been intended. 

To determine if an indemnity provision is enforceable, the Appellate Division advised that plaintiff must satisfy both prongs of a two part inquiry.  The first addresses whether the parties entered into an agreement that is applicable to the site or job where the incident occurred.  If so, the party seeking indemnity must also establish the provision at issue is valid under Workers’ Compensation § 11. 

In this case, the Court found that Socha had not established that the rider (as executed in 2004) governed a subsequent contract that was executed years later.  Accordingly, the clause at issue was inapplicable to injuries sustained by Mr. Trombley.  As such, Socha’s attempts to shift its exposure to Trombley’s employer, Sullivan, failed. 

01/09/14       Malouf v Equinox Holdings, Inc.
Appellate Division, First Department
Destruction or Loss of the Alleged Cause of Injury Gives Rise to Preclusion Sanction
Plaintiff sustained injury on September 17, 2008 when she fell off of a treadmill at Equinox’s premises.  The instant lawsuit was subsequently commenced in May of 2009, and thereafter Equinox filed a third-party action against the manufacturer of the treadmill.  Although not certain, it appears that Equinox replaced the treadmill in question at some point in 2010.  Importantly, the defendant did not preserve the evidence even though it knew litigation was ongoing, and also knew that the claim was premised upon the use of that item. 

In light of the disappearance of the treadmill, plaintiff made an application seeking to preclude Equinox from arguing at trial that the treadmill was operating properly at the time of the injury and that it was free from defects.  Third-Party Defendant joined in the request seeking to strike the third-party Complaint due to the loss of the treadmill.

In deciding the motion, the Court granted plaintiff’s request for preclusion where it was established that the condition of the treadmill in question could not be tested due to Equinox’s failure to preserve it.  In addition, where Equinox’s entire third-party action was premised upon the condition of the treadmill the Court found that the extreme sanction of striking the third-party Complaint was appropriate. 

01/07/14       Vivas v VNO Bruckner Plaza, LLC
Appellate Division, First Department
Lease Did Not Apply to Situs of Accident, Contractual Indemnity Clause Inapplicable
Plaintiff commenced the instant action after falling on a sidewalk at a premises owned by VNO.  At that time, Payless shoes leased commercial space adjacent to the sidewalk.  Importantly, however, the lease agreement between Payless and VNO provided that Payless was only acquiring the right to inhabit space “in the building.”  Further, the lease provided that VNO retained “exclusive control and management” of the space. 

Accordingly, because Payless had no duty to maintain the sidewalk at issue, it followed that it had no contractual obligation to indemnify VNO for a loss that occurred on it. 

Elizabeth A. Fitzpatrick
[email protected]

Beth’s Banter on Coverage “B”:

01/06/14       The Episcopal Church in South Carolina v. Church Insurance Company of Vermont & The Church Insurance Company
(United States District Court, South Carolina) 2014 WL 37225
Insurer Must Defend Insured Under Advertising and Personal Injury Portion of CGL Policy
The underlying action from which the coverage action derived involved a doctrinal dispute between the Diocese, TEC, and plaintiff, TEC-SC.  Evidently, although the Diocese disassociated from the Episcopal Church also known as the Protestant Episcopal Church, the Diocese continued to use the same intellectual, real, and personal property it used prior to the split.  The Diocese filed the underlying action seeking a declaration from the state court that the Diocese’s existence and continued use of the disputed property were proper.   They also sought an Order enjoining the Episcopal Church from their continued use of the same property.

The Episcopal Church was insured by a policy issued by Church Insurance Company of Vermont, which included coverage for advertising injury liability, defined in pertinent part as “injury other than bodily injury, property damage or personal injury, arising out of one or more of the following offenses: … b. Misappropriation of advertising ideas or style of doing business or c. infringement of copyright, title, slogan, trademark or trade name.”  Damages were defined as compensation in the form of money for a person who claims to have suffered an injury.

After the underlying action was commenced, the Episcopal Church requested that Church Insurance Company of Vermont defend and indemnify it in the underlying action.  Church Insurance Company denied coverage on numerous grounds, including that the claims were not covered by the policy or were subject to exclusion.  The action against the insurer sounded in breach of contract, bad faith and sought a declaratory judgment that Church Insurance Company had a duty to defend and indemnify the Episcopal Church in the underlying action.

After discussing basic canons of contract interpretation, including the principle that a contract, where unambiguous, clear and explicit, must be construed according to the terms the parties have used and that an insurer’s obligation under a policy is defined by the terms of the policy itself, and cannot be enlarged by judicial construction, the court also noted that a policy clause excluding coverage must be liberally construed in favor of coverage, while exclusions are construed most strongly against the insurer, who also bears the burden of establishing the exclusion’s applicability.

In light of the foregoing, the court found that since the second cause of action sought reasonable attorneys’ fees and since damages were defined within the policy as compensation in the form of money for a person who claims to have suffered an injury, attorneys’ fees constituted monetary compensation and were alleged in connection with a claim of trademark infringement.  Noting that the policy provided that damages due to  advertising injury would be afforded coverage, the court found that the underlying action did, in fact, allege an advertising injury as defined in the policy. The court further found that the Intentional and False Acts Exclusion of the policy did not preclude coverage, as the governing statute allowing for an award of attorneys’ fees did not limit same to situations where the court found the other party committed the wrongful acts with knowledge or in bad faith, but included the catchall phrase “or otherwise according to the circumstances of the case.” 

Applying the principals of contract interpretation as set forth above, the court noted that they could not say that the allegations in the underlying complaint clearly fell within one of the policy exclusions.  They, thus, found that Church Insurance Company of Vermont had a duty to defend plaintiff because the underlying complaint alleged both an advertising injury, as defined by the policy, and attorneys’ fees, which fell within the policy’s definition of damages.  The court denied summary judgment on the bad faith claim, finding that the elements were established, but sufficient evidence to demonstrate that Church Insurance Company of Vermont’s refusal to defend was an unreasonable action or made in bad faith, was not presented. 




Having nothing to do with insurance coverage, other than the nexus between my serving as an adjunct professor of insurance law and being intrigued by the headline, “Professor sues John Marshall Law under ADA,” I bring you a claim by a longtime professor at the John Marshall Law School in Chicago, who sued law school administrators, claiming they violated the Americans with Disabilities Act when they failed to accommodate his depression and Asperger’s Syndrome.

Evidently, the longtime professor, who had been teaching at the school since 1985, was suspended from teaching and barred from campus following an alleged incident in which he lost his temper in class and chastised two students for being unprepared.  Although there was no record of exactly what the professor said to his students, the Dean wrote of the professor, “Your recent conduct has been so disrespectful, intimidating and insubordinate that your relationship with the law school appears to be irreparably damaged.”  Joel Cornwell brought suit in the Northern District of Illinois on December 31, 2013 alleging violation of Title I of the Americans with Disabilities Act.  The claims involved the Professor’s alleged conduct toward maintenance staff, as well
“3 separate student complaints about your conduct in your E & T [Estates & Trusts] class last Friday.” As it turned out, the complaints concerned Professor Cornwell’s criticism of two students who were unprepared for an assignment and were thus chastised for their unpreparedness.

Ah, the good old days.



Audrey A. Seeley
[email protected]

01/10/14       Osmic v. Nationwide Agra Business Ins. Co.
Supreme Court, Iowa
Two Year Statute of Limitations for UIM Claim Applied to Third Party Beneficiary
On May 23, 2009, Esad Osmic and his children were passengers in a Ford Explorer owned and operated by Osmic’s brother, Selin.  While Selin was driving down the highway, Ms. Rochelle Heasley entered the highway by cutting across two lanes of traffic, which forced Selin to take evasive action to avoid an accident.  As a result, Selin lost control of the Explorer and it rolled over into the grass embankment near the highway.  Selin, Osmic, and Osmic’s two children were ejected from the vehicle. 

Heasley was insured by Progressive Insurance Company with limits of $50,000 per claim and $100,000 per occurrence.  Selin was insured by Nationwide Agra Business Insurance Company (“Nationwide”) which provided underinsured motorist coverage.

Osmic began treatment for right shoulder pain in October, 2009, and eventually underwent arthroscopy in November, 2012.  Approximately 13 months post-accident, Osmic’s counsel sent a letter of representation to Nationwide and, thereafter, constant communication between Osmic’s counsel and Nationwide occurred for the next 8 months.  Progressive advised Nationwide on September 13, 2010, that it settled Selin’s claim for $65,000, which left only $35,000 of insurance coverage for the accident.

On March 7, 2011, Osmic’s counsel sent a demand to Progressive on behalf of Osmic and his two children.  The letter sought over $175,000 for Osmic and $13,000 for each child.  At that point, there was approximately 10 weeks remaining before the two year statute of limitations to commence a personal injury action against Heasley.  In response, Progressive advised Osmic’s counsel of the $35,000 remaining on the policy and offering same. 

Osmic’s counsel only then initiated contact with Nationwide regarding underinsured motorist coverage.  Nationwide requested a copy of Osmic’s counsel’s demand letter to Progressive as well as copies of medical records.  Osmic’s counsel provided same on March 28, 2011, together with a demand for a copy of the policy’s declaration page to confirm the underinsured limits.  On April 1, 2011, Osmic’s counsel sent Nationwide additional medical records and reiterated his request for the policy’s declaration page.

On April 12, 2011, Nationwide responded consenting to the settlement with Progressive and declining to provide a copy of the declaration page at that point without consent of the insured to provide the information.  Nationwide further indicated that upon its review of this matter, the offer from Progressive with regard to each child was sufficient to adequately indemnify them for their injuries.  Osmic’s injuries were being reviewed. 

On May 27, 2011, Nationwide advised Osmic’s counsel that pursuant to the underinsured motorist portion of the policy, any claim against Nationwide was barred as it must have been filed within two years after the date of the accident. 

Osmic commenced suit against Nationwide as well as his own insurer on June 23, 2011, seeking recovery under Nationwide’s underinsured motorist coverage.  Nationwide subsequently moved for summary judgment on the basis that Osmic failed to timely file his claim within two years from the date of accident as required under the contract. 

After Nationwide’s summary judgment motion being denied and affirmed at the Appellate level, the Supreme Court granted application for further review.  The Court began its review with the policy’s language.  A review of the policy’s insuring grant revealed that Osmic was an insured for purposes of the underinsured motorist coverage.  Next, the Court reviewed whether the two year contractual limit on filing suit against the underinsured motorist insurer was reasonable and enforceable.  Generally, under Iowa code since an underinsured motorist claim is contractual, it is presumptively subject to a ten year statute of limitations.  However, under common law, an insurance contract can modify that ten year statute of limitations for bringing a suit.  That statutory deadline would be enforceable if it was reasonable.  The Court went on to further indicate that in the past, it had upheld a two year contractual limit for underinsured and uninsured motorist claims and found that limitation to be reasonable.

Since the two year contractual limitation was reasonable, the question became whether there was a barrier to Osmic in providing or commencing the action within two years from date of accident.  The Court held that there was no barrier as Osmic’s counsel contacted Nationwide nearly a year before the two year statute of limitations ran.  Therefore, Osmic could have commenced a suit for underinsured motorist benefits during that time frame.  Also, this was not a case where Osmic did not appreciate the extent of his injuries since at least six months prior to the two year statute of limitations expiring; Osmic knew the extent of his injuries. 

The Court further rejected Osmic’s argument that since he was not the policy holder or named insured, he could not be bound by all of the terms of Selin’s contract with Nationwide.  The Court recognized that a contract can benefit and provide rights to third parties.  However, a third party beneficiary’s rights are controlled by the terms of the contract.  That third party beneficiary is afforded no greater rights than the named insured.  Thus, the two year statute of limitations on bringing an action against the insurer for underinsured motorist benefits applied to Osmic. 

Finally, the Court held that Nationwide had no affirmative obligation to disclose the two year statute of limitations deadline for filing suit to Osmic’s counsel.  The Court, relying upon prior case law, stated that an insurer does not have a duty to warn its policy holder that a time frame to file suit against it is running out.  Accordingly, the Court vacated the Court of Appeals decision, reversed the District Court’s judgment, and remanded it with direction to enter summary judgment in Nationwide’s favor. 


Cassandra A. Kazukenus
[email protected]

DFS Issues Its 2014 Regulatory Agenda

In its 2014 Regulatory Agenda, DFS publishes a list of regulations which will be the subject of review and possible amendments during the upcoming year.  The department has indicated intent to adopt a new part to Insurance Regulation 195.  The intended amendment would serve to implement the Superintendent's authority under Insurance Law § 316 to require an insurer or other person or entity making a filing or submission with the Superintendent to do so by electronic means.  However, there would be an exception if the insurer or other person or entity applies for, and the Superintendent grants, an exemption from the electronic filing requirement.

DFS also intends to make changes to (UM/UIM) 11 NYCRR §§60-2.3 and 60-2.4 to replace references in the regulation to “AAA/American Arbitration Association” with “designated organization.”  DFS also intends to amend the rules related to the manner in which the organization designated by the Superintendent to administer the SUM arbitration program assesses the cost of the program to the insurance industry.  DFS further intends to clarify the intent and application of the coverage available under the UM/UIM endorsement through various editorial revisions to the regulation.  There was no further detail regarding the intended revisions.

DFS also plans to amend 11 NYCRR 65-4 (Regulation 68-D) to modify certain provisions which concern attorney’s fees awarded to healthcare providers seeking reimbursement of overdue no-fault insurance claims.  Again no further information was provided. 

Lastly, DFS also intends to amend Insurance Regulation 96 in order to remove references to Property Insurance Loss Register (PILR), and replace those references with “Central Reporting Organization.”

Katherine A. Fijal
[email protected]

01/07/14       Two Farms, Inc. v. Greenwich Ins. Co.
United States District Court, Southern District New York– New York Law
Coverage Limited to Amount Stated in Sublimit Endorsement
In April, 2008, Two Farms, Inc. [“Two Farms”] purchased a Pollution and Remediation Legal Liability Policy from Greenwich Insurance Company [“Greenwich”].  The policy provides coverage for pollution conditions and remediation expenses for such conditions “on, at, under, or emanating from the location(s)” specified in the policy’s Pollution Legal Liability Schedule and Remediation Legal Liability Schedule. As relevant here, the policy contained the Underground Storage Tank [“UST”] Exclusion, which excludes coverage for claims “based upon or arising out of the existence of any underground storage tank(s) and associated piping.”  The UST Exclusion also contains an exception, which provides, in relevant part, that the Exclusion “does not apply to the underground storage tank(s) or associated piping listed in the Underground Storage Tanks and Associated Piping Schedule, if any”.  The policy also contained a Dedicated Sublimit Endorsement which applies annual sub-limits of liability to “all Underground Storage Tanks and associated piping scheduled to the policy.”  The UST Sublimit caps the coverage amount for each loss or remediation expense at $1,000,000 and caps the total coverage for such expenses at $5,000,000.

In December, 2009, Two Farms discovered that thousands of gallons of gasoline had been discharged into the area surrounding its Pulaski Highways Facility [“Pulaski”] – Pulaski was listed on the Underground Tanks and Associated Piping Schedule. The discharge at Pulaski was caused at least in part by a defective O-Ring.  The O-Ring was a component of the submersible turbine pump, a device that draws gasoline out of a UST.  The O-Ring was located in a containment sump that sits on top of the UST.  Essentially, the defective O-Ring permitted gasoline to leak into the containment sump. Gas then leaked from the containment sump into the ground because of the loose electrical conduit coupling connection.

Two Farms filed a claim with Greenwich for losses and expenses that result from the discharge at Pulaski. The losses were alleged to exceed $5,000,000.  To settle the claim, Greenwich paid Two Farms $1,000,000.  Greenwich took the position that the because of the UST sublimit, it was not required to pay in excess of $1,000,000. Two Farms took the position that the UST Sublimit was inapplicable to the losses sustained at Pulaski, and filed this declaratory judgment action seeking damages of at least $4,000,000.  For the following reasons, the district court agreed with Greenwich.

The issue addressed by the court was the amount of coverage available to Two Farms for the losses it incurred as a result of the discharge at Pulaski. The central argument was whether or not the UST Sublimit Endorsement was ambiguous.  Greenwich argued that the broad language of the UST Exclusion was applicable to the discharge, and that coverage could be restored under an exception to the UST Exclusion only if the term “underground storage tanks and associated piping” is construed to include the equipment that malfunctioned.  Greenwich admitted that the terms “underground storage tanks and associated piping” should be construed to restore coverage, it maintained that the terms must have the same meaning when used in the UST Sublimit and that the UST Sublimit unambiguously limits Greenwich’s indemnification obligation to $1,000,000.

Two Farms argued that the UST Sublimit should be interpreted independently of the UST Exclusion and its exception and that the UST Sublimit is an ambiguous liability limiting provision that must be construed against Greenwich. 

Greenwich argued that the terms “underground storage tanks and associated piping” as used in the UST Sublimit must be construed in the same way that that it is used in the exception to the UST Exclusion.  Greenwich pointed out that the term should be construed broadly because that broad construction is the only basis for Two Farms to bring itself within the exception to the exclusion and obtain any coverage at all.

Two Farms argued that the UST Sublimit should be interpreted independently of the exception and that Greenwich bears the burden of demonstrating that the UST Sublimit is applicable. Two Farms took the position that the term “underground storage tanks and associated piping” can refer either to underground storage tanks and associated piping alone, or to underground storage tanks, associated piping, and other equipment that comprises the UST system, i.e., the term is ambiguous.

The court concluded that the term “underground storage tanks and associated piping” must be interpreted broadly in order to effectuate the parties’ intent that Two Farms receive coverage for losses incurred because of the discharge; namely, losses that result from defects in the UST system.   Further stating that interpretation of the term is appropriately applied across provisions of a policy because “a word used by the parties in one sense will be given the same meaning throughout the contract in the absence of countervailing reasons” – no countervailing reasons were found in this case.

The court noted that the Two Farm’s construction of the policy would require that the term “underground storage tanks and associated piping” have different meanings in the exception and the UST Sublimit even though the term is the same and the provisions refer to the same schedule.  The court found this reading to be unreasonable because it strains the policy language beyond its reasonable and ordinary meaning and distorts the meaning of the terms that the parties negotiated.

The court noted that Two Farms supplied no reason for construing the term differently in the exception and the UST Sublimit.  Noting further that the structure of the policy made clear that the terms should be construed in the same way.  The exception allows coverage for damages from “underground storage tanks and associated piping,” which would otherwise be excluded, but the coverage that was added back by the exception was limited by the UST Sublimit which used the exact same term.

Accordingly, the court held that because the losses that Two Farms incurred as a result of the discharge were caused by defects in components of the UST system at Pulaski, and because the UST Sublimit plainly limits Greenwich’s liability to $1,000,000, Greenwich is not liable for any damages beyond the $1,000,000 it had already paid Two Farms.



Jennifer A. Ehman
                                            [email protected] 

01/02/14       Universal v. Travelers Insurance Company
Supreme Court, Westchester County
Where Insured Was a Newly Formed Business and Relied on Advice of Broker, Court Finds a Question of Fact as to Whether the Insured’s Late Notice should be Excused due to its Good Faith Belief in Non-Liability
On June 24, 2002, Local 3 Union employee Thomas McCormack was allegedly injured when he fell off a ladder at the project.  He was in the employment of Universal, an electrical sub-contractor, at the time.  Universal had a subcontract with an indemnification provision with general contractor J.A. Jones.

Universal knew about the accident the day it happened and promptly notified the Local 3 Electrical Union which provided workers compensation coverage through the Electrical Employers Self Insurance Safety Plan (“EESISP”).  Universal also claimed to have notified its broker on or about the day of the accident and asked it what to do. They alleged that the broker told them to abide by what the union said.  Travelers, (USF&G), Universal’s general liability carrier, were not notified.

McCormack went back to work almost immediately and continued working for Universal for the next two years without mentioning the accident or the possibility of suit.

Universal testified that at the time of the McCormick accident it had only been in business a few years.  In that time, there were only 3 other personal injury incidents, all involved employees, all were handled by EESIP and none ever turned into litigation of any kind involving Universal.

On June 17, 2005, slightly less than three years after the accident, the action entitled Thomas McCormack v. J.A. Jones Construction Group, LLC, LWC Construction Group, Inc., George Breslaw & Sons, Inc., 388 West Broadway LLC, Chelsfield Management Services, Inc., and Chelsfield 388 West Broadway, Inc. was filed in the New York Supreme Court for Kings County.

On July 9, 2008, six (6) years after the accident, J.A. Jones filed the Third-Party action against Universal seeking common-law and contractual indemnification.

On or about July 15, 2008, Travelers was notified of the accident / impleader action.

By letter dated July 24, 2008, Travelers denied coverage to Universal based on, among other things, late notice measured from the time of the accident and notice to the Local 3 Union / EESISP. 

Universal argued that the determination of its “Reasonable Belief in Non-Liability” had to be based on its actual business experience; that Universal had beliefs as to accidents involving its Union employees for the few years it was in business before the subject accident and that such accidents involving union employees would be covered by workers commendation insurance and never result in litigation.

Universal confronted the underlying rationale for decisions holding that as a matter of law notice is late where an employer notifies the workers compensation carrier and not the primary general liability carrier stating: “The only way for this court to rule in favor of Travelers and grant it summary judgment is if the court were to superimpose another belief onto Universal.  It would be wrong to simply say that “This is New York and we are a litigious society.  A subcontractor should know that even a minor accident will, due to a greedy plaintiffs’ bar and unethical claimants, always results in some kind of litigation; fair or not, justified to not.  Stripped of the veneer of respectful legal-ease, that is the exact position taken by carriers and some courts in these situations.” 

Citing the standard that “Reasonability” is based on the actual circumstances and experiences of the insured seeking to invoke the excuse and not on some arbitrary superimposed societal standard, Universal cited the holding that “An insured's good-faith belief that the injured party would not seek to hold it liable, when reasonable under the circumstances, may excuse a delay in notifying an insurer of an occurrence or potential claim.”  Donovan v. Empire Ins. Group, 49 AD3d 589 (2nd Dept., 2008); White v City of New York 81 N.Y.2d 955 (NY 1993), Argentina v. Otsego Mutual, 655 N.E. 2d 166 (NY, 1995). 

Universal argued further that the question of whether the insured had a good-faith belief in non-liability, and whether that belief was reasonable, presents a question of fact and not one of law, despite a mountain of cases to the contrary. Klersy Bldg. Corp. v. Harleysville Worchester Ins. Co., 36 A.D.3d 1117 (3rd Dept., 2007); G.L.G. Contracting Corp. v. Aetna Cas. & Sur. Co., 215 A.D.2d 821 (3rd Dept., 1995) Cohoes Rod & Gun Club, Inc. v. Firemen's Ins. Co. of Newark, N.J., 134 A.D.2d 782 (3d Dept. 1987) Sabre v. Rutland Plywood Corp., 93 A.D.2d 903 (3rd Dept., 1983).

In a pleasant surprise for the plaintiff, Justice Bellatoni of the Supreme Court, Westchester County ruled that: “Regarding the timing of the notice provided to USFG, it is well settled that a "[f]ailure or delay in giving notice may be excused if the insured ... had a good faith and reasonable belief of his or her non-liability" (see Chiarello v. Rio, 101 A.D.3d 793, 795 [2nd Dep't 2012]). Obviously, the question whether an insured's good faith belief in non-liability is reasonable is one that is ordinarily left for trial. This question is only appropriately decided on a motion for summary judgment when "the evidence, when construed in favor of the insured, establishes that the belief was inherently unreasonable or formed in bad faith (see Chiarello, 101 A.D.3d at 795). Given the submissions of the parties, the Court cannot find, at this juncture, that plaintiff’s belief was inherently unreasonable or formed in bad faith.”

Curiously, perhaps troubling for carriers in the future, the court also found that the “subject policy does not unambiguously require plaintiff to provide notice, whether orally or in writing, of an occurrence or an offense which may result or which has resulted in a claim or suit.  Rather the policy requires plaintiff to "see to it" that USFG is notified.”

Take Away:  We would like to thank Howard S. Kronberg, Esq., Keidel, Weldon & Cunningham, LLP, for this contribution. 

12/30/13       Old Republic Ins. Co. v United Natl. Ins. Co.
Supreme Court, New York County
Court Upholds Carrier’s Assertion of Privilege as to Certain Attorney-Client Documents, but Warns that if the Documents are not Disclosed, Carrier Cannot Rely on them to Prove Case
This decision arises out of a motion to compel production of attorney communications.  The communications were relevant to Old Republic’s decision to fund the settlement in the underlying action, which was allegedly due to oral assurances that United National would contribution up to its $5 million policy limit to the settlement on behalf of STS  (a mutual insured) before Old Republic would be obligated to contribute any money.  These assurances formed the basis of Old Republic’s breach of contract and equitable estoppel claims in this action. 

United National requested the communications allegedly to fully understand the scope of the parties’ alleged oral agreement and to see if and how Old Republic changed its position regarding the settlement based on United National’s representations.  As this was the central issue of this case, it argued that it would make these documents while otherwise privileged not so. 

In considering the question, the court reminded the parties that simply because a privileged communication contains information relevant to issues the parties are litigating does not, without more, place the contends of the privileged communication “at issue.”  Citing to the 1994 Southern District of New York decision in Ackwright Mut. Ins. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., even where a party’s state of knowledge is particularly at issue, such as in this case, waiver of a privilege should not be implied because the relevant question is not what legal advice was given or what information was conveyed to counsel, but what facts the party knew and when.  Accordingly, the court found that United National was not entitled to the privileged document unless Old Republic sought to use them. 

The court aptly cautioned Old Republic however that its decision not to utilize the subject communications somewhat periled its case, which rested entirely on its contention that the parties–highly sophisticated insurance companies—orally agreed as to the parameters of the funding to settle an extremely contentious litigation.  The refusal to produce attorney communications prior to United National’s promise may result in Old Republic being unable to meet its burden in the case.  Ergo, it cannot prove it changed its position. 

Take Away:  This is great decision because it highlights a struggle at times faced in the discovery process.  While, by nature, we are programmed to be ultra-protective of privilege (often rightly so), in certain situations, the refusal to produce privileged documents can doom a case.  In these situations, the best strategy is to evaluate this issue prior to filing suit.  At that point, determine whether the benefit of relying on these documents outweighs the harm in disclosing them. 

Earl K. Cantwell

[email protected]


Nationwide Mutual Fire Insurance Co. v. Advanced Cooling & Heating, Inc., 2013 WL 5807880 (Florida Appeals, October 30, 2013).

Advanced Cooling & Heating (“Advanced”) was hired to fix a problem with an air conditioning unit and install a compressor.  The customer stopped payment because the air conditioner still was not cooling properly.  Advanced sued the customer for payment in small claims court, and the customer sued a counterclaim alleging the company failed to properly inspect the air conditioner resulting, inter alia, in an un-needed repair.  Advanced requested that Nationwide defend the counterclaim but the insurance company declined, arguing that the counterclaim was not covered under a CGL policy.

Advanced sued Nationwide seeking a Judgment that the insurer had a duty to defend the counterclaim, and the trial court ruled in favor of Advanced.  Nationwide appealed, and on appeal the ruling was reversed in favor of Nationwide.

The policy covered “bodily injury” and “property damage”, but here the customer’s counterclaim did not contain allegations of personal injury or property damage.  The appellate court said that a complaint seeking recovery for the cost of repair and removal of defective work does not present a property damage claim.  Rather, the claim is purely economic and does not fall within the meaning of property damage under a CGL policy.  The ruling was therefore reversed, and summary judgment of no coverage was entered in favor of Nationwide.

This appears to be a case where defective work or repair was itself in issue, and there was no other injury or damage to any part of the property to arguably constitute, in whole or in part, “property damage” to existing property.  This case also demonstrates how claims and damages of a purely economic nature such as repair costs, business interruption losses, lost profits, and other expenses may not fit the policy definition and meaning of “property damage”

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