Coverage Pointers - Volume XV, No. 20

Dear Coverage Pointers Subscribers:

Do you have a situation? We love situations. They are what make our day.

We were delighted to participate in the PLRB claims conference in Indianapolis. What a great town and what great people and programming. For those who attended our class, thank you. Kipper Burke and I were truly pleased to be there. We welcome more than a dozen new Coverage Pointers subscribers.  For those of you who are joining us for the first time, with this issue, let me explain what is before you. On alternating Fridays you will receive an email which will contain a cover note (that is what you are reading now) and attached will be the publication in Word format.

The issue is in Word format because we want you to use the publication actively. If you see a case summary that is useful to you, we recommend you copy and paste it into your claim file.  Send it along to a friend or colleague. 

We have been publishing for almost 16 years and back issues of the newsletter can be found at our website,  You can also find us in the New York Insurance LinkedIn group and follow me on Twitter: @kohane. 

Contact information is above.

Peiper’s Pontification:

Every other Thursday, the last thing I do is write a quick note outlining the Property and Potpourri column.  Today is no exception, although unlike most issues my efforts have been stymied by some serious computer gremlins.  Not too worry, as our superb editor has graciously swooped in to save me from missing my first deadline since I started writing in for this fine publication in 2007.   As has been written before not snow, nor rain, nor heat, nor gloom of night, and now nor major computer crashes will keep CP from making its appointed rounds. 

As for the actual column, assuming it actually makes it in under the wire, we've got a few interesting cases to report on this week.  The first, which was released by the Court of Appeals this morning (and consequently added to my tale of woe), tackles the issue of experts where causation is at issue.  The Cornell case arises from allegations of serious physical maladies caused by exposure to toxic mold.  The Court offers us a dispostive review of what is required to ensure an expert's opinion is sufficiently supported. 

We also review a couple of interesting indemnity decisions this week as well.  As you know, we try to grab most, if not all, relevant cases addressing both common law and contractual indemnification.  When dealing with liability insurance, no coverage strategy can be complete without understanding the impact of contractual risk transfer/risk sharing.  Just as with coverage decisions, the rules and interpretations of indemnity claims is a constantly shifting target.  This week, the Court again reviews whether a negligence trigger is read into a indemnity clause even though it was not expressed in the actual writing of the provision.  Here's a's not. 

On the training front, we note that Spring is finally here (honest).  With it, comes the Spring Training season.  Dan has already been out on the road, but please take a look at Beth Fitzpatrick's note referencing the upcoming Insurance Coverage Seminar for the New York Bar Association.  If you reside anywhere in NY, you're close to a program and you should consider attending.  The committee really outdid themselves this year as it is perhaps the best, most varied, program they've ever put together.  I'll be speaking in Buffalo, Beth at the Albany and Long Island locations, and we welcome Jen Ehman to the Buffalo forum this year. 

I am also happy to report that I have been asked to participate in our Catastrophe Seminar again this year.  Myself, along with three of the very best First Party attorneys in the business, review important First Party rules and case law for nearly 30 states in one 3 hour panel discussion.  If you are involved in First Party claims, this is a great program to consider.  Stay tuned for more information. 

That's it for now. Opening Day is Monday.  Winter is officially over.  Go Orioles.  

Steven E. Peiper
[email protected]

DRI Insurance Coverage and Claims Institute (ICCI):

I hope to see many of you in Chicago for the DRI Insurance Coverage and Claims Institute, next week.  Always a great program

ICCI will feature two women's events on April 2, a meet and greet from 5:30 to 6 p.m., and a dine-around at Trattoria No. 10.  All ICCI attendees are invited.  Email Rina Carmel at [email protected] to RSVP for the dine-around, as space is limited.
Jen’s Gems:

Greetings.  This week I am reporting on two really interesting cases from the New York trial courts.  As many of you know, the legislature amended Insurance Law §3420 effective January 17, 2009.  But, what is easily overlooked is that in adopting the prejudice requirement, the legislature identified two situations where prejudice is presumed.  If the notice was provided more than two years after the time required under the policy, there is a presumption of prejudice (which can be rebutted).  If the insured's liability has been determined by a court of competent jurisdiction or by binding arbitration prior to notice, then there is an irrebuttable presumption of prejudice. 

In a case of first impression, out the Supreme Court, Kings County, the court was asked whether the irrebuttable presumption of prejudice applies when a default is entered before notice, but subsequently vacated. The court in Hernandez Castillo v. Prince Plaza, LLC, determined that it did not apply.  The court reasoned that while Prince Plaza’s liability “had” been established, it no longer “has been” established because the default judgment was vacated and the matter is currently pending on the active status calendar.

Also, of interest, in Allstate v. Rosko, the court was asked to consider whether an automobile policy remains in effect after the death of the sole named insured, and when ownership to that insured vehicle passes to an heir.  A very interesting situation. 
Until next issue.

Jennifer A. Ehman
[email protected]

Kudos to Diane Bosse – Bar Association of Erie County’s Lawyer of the Year:

Once again we are honored with public and professional recognition of Diane Bosse’s commitment and talents to the legal profession.  Last year she was one of only eight lawyers statewide recognized by the Eighth Judicial District Gender and Racial Fairness Committee for outstanding leadership and for her pioneering work in promoting diversity throughout the profession. This year—an equally distinctive award –she is being recognized by her colleagues with the Erie County Bar Association’s 2014 Lawyer of the Year Award! 

The Board of Directors of the Erie County Bar Association states that the award is a “tribute to her distinguished career marked by humanity, congeniality and unfailing dedication to the legal profession and community.”  The Board specifically notes that she has “exemplified what good lawyering is all about not only in terms of hard work and commitment, but also in civility, collegiality and social responsibility” and as such, she has set the standards for all practitioners to emulate. She will be recognized at a dinner in her honor on June 9th—and we are all so proud of her!

When learning of the award, Diane tells our President, “I am delighted to receive this award as part of the H&F family.  Thank you for giving me a home.  It’s a pleasure – and my privilege – to work with all of you.  I am very appreciative of the opportunity to practice law with wonderful lawyers and superb staff, while still being able to do the other things that have been such a significant part of my professional life.  I’m proud – and very happy – to be here.”  We are too! 

Albany Greetings:

Hello everyone!  I thought I would come out of hibernation, even though winter has not left, to say hi and pull an Ehman.  For those of you who read coverage pointers early on Thursday, today is my son Ethan’s first birthday, and I just wanted to share the excitement!  We are having a party this weekend with his cousins and our families, and I can’t wait until our yard actually does not have any snow in it so we can play outside on the slide and swing we got him for his birthday.  His development over such a short time in amazing.  Thanks to everyone who feeds into my obsession of showing pictures of him.

As to what is happening in Albany, the budget is due next week.  There has not been a lot of discussion on insurance issues in light of the budget negotiations, but I did provide summaries of some Legislation that is out there.  While it does not appear that any of the three pieces of Legislation discussed have steam in both houses, it is always interesting to see what issues remain important to the Assembly and Senate.  In the Senate, the big insurance issue appears to be no-fault fraud sanctions which they passed last year but died in the Senate, and on the Assembly side they seem to remain concerned with the claim handling after a state of emergency or natural disaster. 

That’s all for now, but thanks for indulging me while I wrote about the big happenings at my house.

Cassandra Kazukenus
[email protected]

The “Third” Major League – One Hundred Years Ago:

You must indulge me in baseball stories, always my favorite.  The year 1914, brought competition to the American and National Leagues:

Indianapolis Star
March 28, 1914
Page 13

Howie Camnitz “Hollers” Trust
He Will Try to Show That National League Is Not Legal

Hot Springs, Ark. – Howard Camnitz, former Pittsburgh twirler, who was enjoined from talking to any member of the Pittsburgh National League team, will through his attorneys … file an amended order in which he will again request the management of the Pittsburgh club to be more specific in the complaint for a temporary injunction and will also charge that the agreement entered into between the management of the Pittsburgh team and the other clubs in the National League is in restraint of trade and a violation of the Federal anti-trust law and the anti-trust law of the state of Arkansas.

Editor’s Interim Note:  Camnitz was one of the first players involved in the Federal League. The Federal League of Base Ball Clubs, known simply as the Federal League, was an American professional baseball league that operated as a third major league in competition with the established National and American Leagues from 1914 to until it folder in 1915.

This article was excerpted from one written by Irving Goldfarb.  The full article can be found here

Though his reign as one of the National League's top pitchers was short-lived, Howie Camnitz was the undisputed ace of the Pittsburgh Pirates pitching staff during their World Championship season of 1909. That season Camnitz, a right-handed curveball specialist, tied for the NL lead in winning percentage (25-6, .806) and ranked fourth in ERA (1.62). "I always inspect very closely the box score of the club we are about to meet next," he explained to a reporter who asked him for the secret of his success. "My object is to ascertain what players are doing the hitting. Every student of baseball knows that players hit in streaks. If a pitcher has men on bases, and a batsman facing him who has been having a slump in his hitting, he can take a chance on letting him line it out. On the contrary, if a player comes up who has been clouting the ball, it may be the safest plan to let him walk."

Camnitz started the 1904 season with Pittsburgh, but even with the powerful Pirates behind him he posted a 1-4 record and a 4.22 ERA in 10 games, eight of them in relief, before he was farmed out to Springfield, Illinois… Camnitz returned to the minors and tore up the Three-I League, compiling a 14-5 record and 151 strikeouts in just 19 games. He spent the next two seasons with Toledo of the American Association, topping the 300-inning mark each year and winning 22 games in 1906. Pittsburgh owner Barney Dreyfuss stopped by more than once to check on the progress of Camnitz…

Beginning his second stint with the Pirates on September 28, 1906, the 25-year-old right-hander fired a seven-inning shutout against the Brooklyn Superbas…In 1907 his career took off, providing the Pirates with a huge return for his $1,200 salary…  The following year he was even better, finishing with a 16-9 record, limiting National League hitters to a .210 batting average, and lowering his ERA to a microscopic 1.56, the fourth lowest in the NL…

Yet Camnitz saved his best work for 1909, when he led the Pirates to their first National League pennant since 1903…In early October, however, his dream season was interrupted by illness -- some reports had him suffering with a throat irritation, while others said that he'd fallen off the wagon. Whatever the reason, Camnitz performed dismally in the World Series. Starting Game Two, he was battered for five runs in 2.1 innings, the last run coming when Ty Cobb swiped home against his replacement, Vic Willis. Camnitz's only other appearance came in Game Six, when he allowed one run in an inning of relief.

Though he pitched serviceably over the next three seasons, Camnitz's poor performance in the 1909 World Series marked the beginning of his decline towards mediocrity…Camnitz slipped badly during 1910, ending the season at 12-13 with a 3.22 ERA, almost double his ERA from the previous season…[O]ver the next two seasons Camnitz posted back-to-back 20-win seasons, though his ERA and ratio of baserunners per nine innings never came close to the level he had established in 1907-09.

By 1913 Howie was walking too many batters--he issued a career-high 107 free passes that year--and, ominously, his strikeout totals dropped precipitously. On August 20, following a 6-17 start, Camnitz and third-baseman Bobby Byrne were dealt to the Phillies for outfielder Cozy Dolan and cash. After a season in which he combined to lose 20 games for two teams that finished in the first division, Howie violated the terms of the reserve clause in his contract and signed with the Pittsburgh franchise in the newly formed Federal League. During training camp in Hot Springs, Arkansas, in March 1914, Dreyfuss had to obtain a court injunction to prevent Camnitz from attempting to recruit Pirates players in the Hotel Eastman and even outside the gates to Whittington Park. Honus Wagner called Howie a "troublemaker" and told him to stay away from the younger players.

Beth’s Banter:

Dear Subscribers:

As we head into April, I look forward to Spring like temperatures and, of course, the annual trip to Chicago for the DRI Insurance Coverage and Claims Institute..  The program boasts an impressive array of speakers and topics ranging from minimizing bad faith claim exposure to drafting the all-important coverage letter and presents many opportunities for networking as well.  Our own Audrey Seeley serves as Vice Chair of the Committee.

Looking forward to May, I invite you to attend the New York State Bar Association sponsored, Advanced Insurance Coverage Program, which will be held on Long Island on Friday, May 16th, New York City and Syracuse on May 2nd, as well as Buffalo and Albany May 9th.  I am delighted to once again serve as overall statewide Co-chair of the program and Co-chair of the Long Island venue, where I will be addressing the before and after of the K2 Investments decision and moderating the day’s events. Steve Pieper and Jen Ehman are both speaking at the Buffalo venue, so you are in for a real treat!  If you need assistance in registering or further information , please give me a call.
In today’s issue, I bring you a case decided by the Supreme Court of Arkansas, which addresses coverage for claims involving battery, false imprisonment, outrage and conspiracy.  The coverage action comes as seven women, who alleged they were sexually abused as children by former Christian ministry tycoon Tony Alamo were awarded $525 million by an Arkansas judge this week after an Alamo church failed to respond to a lawsuit.  It is the largest judgment in Arkansas history,

I also discuss coverage for claims involving bodily injury (and sadly, all too often, death) sustained by college students at fraternities and the attempts by these organizations to ensure that the risk is shifted from the fraternities themselves to the individual actors’ homeowner’s insurance policies.  The article was brought to my attention by the newest addition to the Hurwitz & Fine ever—expanding Melville office, recent law school graduate, Diane Clark.  I first met Diane when she was a student in my Insurance Law class several years ago and we are delighted to welcome her to the Hurwitz & Fine family.

Til next time,

Elizabeth A. Fitzpatrick
[email protected]
A Century Ago – Nothing Like a Good Samaritan:

Brooklyn Daily Eagle
March 28, 1914

Then Dresses Wounds and Takes Him
Home in His Auto

While crossing the street at Pitkin Avenue and Watkins Street shortly before noon today, Harry Stevisky, a peddler, 75 years old, of 36 Watkins Street, was run down by the automobile of Dr. Abraham Koplowitz of 351 Watkins Street.  The physician stopped his machine immediately and went to the peddler’s aid.  He found Stevisky had a dislocated shoulder and a scalp wound.

Ambulance Surgeon McCarthy was summoned from St. Mary’s Hospital, but he found that Dr. Koplowitz had done what was necessary for Stevisky and the owner of the automobile that had caused the trouble took the injured man home. 

Audrey’s Angle:

The only thing anyone talks about lately is the weather and when will Spring really arrive.  At this time of year I just keep my head down, focus on my coverage cases, and tell myself to get through the vestiges of a unusually harsh winter.  I don’t watch the weather and don’t ask anyone what the current temperature is.  I do know that we are close to the end of winter as I saw a mass of robins on the lawn last week.  The sighting of robins is sign enough for me that the end of winter is truly here.

I hope to see you in Chicago next week for DRI’s Insurance Coverage and Claims Institute (“ICCI”).  This year’s program has already surpassed the all time high attendance record  and as a highly regarded colleague stated what coverage lawyer in the country won’t be there?  If you have not registered to attend and want to there is always time.  You can sign up on line or walk in the day of the conference to register and attend.  If you need information on who to register do not hesitate to email me at [email protected].  I look forward to catching up with you in Chicago and if not then during the next edition of Coverage Pointers.

Audrey A. Seeley

A Century Ago – “Stop Law-breaking, You Saloon Men”:

The Brooklyn Daily Eagle
March 28, 1914


Must Stop Lawbreaking by Saloon
Men, Including Her Husband

SALEM, Ore., March 27. – Gov. West served notice to-day on Mrs. Hilda Larson the Mayor, and members of the Town Council of Troutdale that unless violations of the liquor laws by saloon men in that town ceased immediately he would close the saloons.

The Governor’s action came after the request of the Mayor, Mrs. Larson, that the District Attorney investigate alleged sales of liquor to minors.  This resulted in the arrest of the Mayor’s Husband, John Larson, a saloon keeper, and two others.

Mrs. Larson and her husband asserted that the arrest was spite work on the part of other saloon keepers, Bert Edmunson, one of the other men arrested, appeared before the District Attorney and charged that all the saloon keepers were breaking the law, and that Mrs. Larson’s request for an investigation was a scheme to shut up all saloons except that of her husband.

The Grand Jury failed to find true bills against any saloon keeper, and then Gov. West investigated on his own account.

Hunter’s Hints on Serious Injury:

It may simply be the increased levels of Vitamin D from the glorious sunlight of the longer days, but I’m incredibly excited for spring and, of course, serious injury case law updates!  With April mere days away, I’m preparing to dust of the clubs, oil up the mitt, and finally, once and for all, scrap the salt-crust off my poor car.  Death to winter, viva la spring.

For your enjoyment this week, we have some primo cases from appellate courts all over the Empire State.  As always, I am ready, willing and able to answer any and all serious injury questions from our readers, so please contact me at your leisure.  Be well, hope to hear from you soon.

Daniel T. Hunter
[email protected]

Our complete issue is attached.  Here are the headlines:

Dan D. Kohane
[email protected]

  • Trumps Vehicle & Traffic Law Section 388. Claims against Owner of Car Derivatively Liable under Section 388 Are Protected Cannot be Pursued if Driver is Protected from Suit Because of Workers Comp Exclusivity
    In Pre-Prejudice Case, Late Notice Does Not Require Prejudice.  Where Insured Knew of Accident and Potential for Claim, Notice Was Required
  • Exclusion for Replacement of Roof Applies to Claim Arising out of Replacement of Partial Roof
  • While There Was a Question of Fact in This Case, Court Holds that Employer’s Liability Carrier Can Secure Summary Judgment in Coverage Action by Demonstrating Absence of Serious Injury – Thousands May Flee but Not Before Thinking Hard
  • While the Additional Insured was Dilatory in Providing Proof of its Additional Insured Status, the Proof was Eventually Provided. However, It Was Also Dilatory in Providing Other Information Relating to Exclusionary Conduct, So a Question of Fact Exists as to the Timeliness of the Disclaimer


Liening Tower of Perley
Michael F. Perley
[email protected]

  • Federal Lawsuit Seeks Penalties From Insurers for Failing to Comply with The Medicare Secondary Payer Act


Daniel T. Hunter

[email protected]

  • Plaintiff Successfully Opposes Summary Judgment Motion, but the 90-180 Claim is Dismissed by the Court
  • Order Reversed Thus Granting Defendants' Motion for Summary Judgment Due to the Failure of Plaintiff's Physician's Report to Explain Exacerbation of the Preexisting Injury
  • Defendants' Evidentiary Submissions Fail to Meet Initial Burden
  • Denial of Defendant's Motion for Summary Judgment Upheld as MRI Shows Tears in Plaintiff's Right Knee
  • Three (3) Plaintiffs Injured by Cement Truck Results in Messy Motion Practice and Modification to Order


Margo M. Lagueras

[email protected]


  • Interest and Attorney’s Fees Owed on Claim Paid During Conciliation
  • Peer Review Void of Factual Specification Is Insufficient to Support Denial
  • Medical Necessity for MRIs Not Established Where EIP Responding Well to Conservative Care
  • Peer Review Issued Before the Treatment in Dispute Is Insufficient



  • Resubmission of Claim Does Not Start Pay or Deny Period Anew
  • Use of Denial to Prove Receipt of Claim Improperly Denied by Trial Court
  • Defendant Precluded From Asserting Fraudulent Procurement Defense


Steven E. Peiper

[email protected]

  • Expert Required to Establish Both General, and Specific, Causation when Prosecuting Toxic Mold Claim; Frye Standard Upheld
  • Right to General Supervision of Work Site Does Not Qualify as Negligence to Defeat Contractual Indemnity Claim
  • Indemnity Clause for Loss Arising From Acts or Omissions of Contractors Work Did Not Require Negligence


Elizabeth A. Fitzpatrick
[email protected]

  • Coverage B Not Available
  • Insurance Coverage for Fraternity Related Injuries


Audrey A. Seeley
[email protected]

  • Parties Not Precluded From Litigating Shooter’s Identity and Motive After Default Judgment Entered In Underlying Action As Coverage Dispute Over Assault/Battery Exclusion.


Cassandra A. Kazukenus
[email protected]

  • A5570 Amendment To CPLR In An Effort To Expedite Insurance Claims Resulting From A State Disaster Emergency
  • A07902 Steering In Automobile Claims
  • S0435A Creation Of A Task Force On Disasters


Katherine A. Fijal

[email protected]

  • Certified Question Answered by New York Court of Appeals


Jennifer A. Ehman
[email protected]

  • Mother’s Death Does Not Eliminate Coverage for Daughter’s Later Automobile Accident in Mother’s Vehicle; Death Does Not Mean Ownership Was Transferred
  • Irrebuttable Presumption of Prejudice Does Not Apply Where Default is Withdrawn After Notice


Bad Faith

  • Court Finds No Contractual or Statutory Bad Faith Under Pennsylvania Law


Earl K. Cantwell

[email protected]



That’s it – watch out for April Fool’s pranksters, especially in the courts.

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

Diane F. Bosse
Joel R. Appelbaum

Steven E. Peiper, Team Leader
[email protected]

Elizabeth A. Fitzpatrick
Cassandra Kazukenus

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
Liening Tower of Perley
Hunter’s Hints 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]

03/27/14       Isabella v. Koubek
New York Court of Appeals Determines that Workers Compensation Trumps Vehicle & Traffic Law Section 388. Claims against Owner of Car Derivatively Liable under Section 388 Are Protected Cannot be Pursued if Driver is Protected from Suit Because of Workers Comp Exclusivity
Kathie Fijal reported on the Second Circuit case, certifying this case to the New York State Court of Appeals, in Vol. XV, No. 5 of this newsletter.

This case arises out of an automobile accident in New York. On November 27, 2007, Roberta Oldenborg, wife of third-party defendant vehicle owner, Michael Koubek, was driving Koubek’s car back from a business meeting when she collided with a car driven by Doris Hallock and owned by Peter Hallock. Oldenborg’s co-worker, Matthew Isabella, was a passenger in the vehicle and was injured in the accident. Because the injury occurred in the course of his employment, Isabella was prevented by New York’s Workers’ Compensation Law from suing Oldenborg, and he eventually obtained workers’ compensation benefits.

Isabella later filed a suit against the Hallocks in federal court. In turn, the Hallocks filed a third-party complaint against Koubek. Koubek argued that his wife’s statutory immunity under Section 29(6) of the New York Workers’ Compensation Law protected him from liability, and he moved for summary judgment.
Based on the case Champ v. Estate of Hales, 10 Misc.3d 988 (Sup. Ct. 2005) the district court denied Koubek’s motion. In Champ, the court held that a defendant in Hallock’s position could sue the owner of a car under New York V & T Law §388 even though the negligent driver of that car enjoyed statutory immunity based on Workers’ Compensation Law §29(6).

The issue presented on appeal was whether a defendant may pursue a third-party contribution claim under New York V & T Law §388 against the owner of a vehicle, where the vehicle driver’s negligence was a substantial factor in causing the plaintiff’s injuries, but the driver is protected by the exclusive remedy provisions of New York Workers’ Compensation Law § 29(6).

The state Court of Appeals has now answered that question, and we suggest, correctly so.

The Court held that the exclusivity of the Workers Compensation Law applies equally to a party derivatively liable.  Since Isabella is precluded from suing co-employee Oldenborg he is similarly precluded from suing the owner of the car that Oldenborg was driving, Hallock.  If that suit were allowed, the exclusivity rule would be overturned, merely by the coincidence that the owner of the co-employee’s car was someone else.

That rule applies equally to direct claims by Isabella against Hallock as well as contribution claims by others against Hallock.

03/27/14       Hermitage Insurance Company v. Athena Mngt. Corp.
Appellate Division, First Department
In Pre-Prejudice Case, Late Notice Does Not Require Prejudice.  Where Insured Knew of Accident and Potential for Claim, Notice Was Required
Athena defaulted in the underlying lawsuit.  It argued that it was unable to afford an attorney but that is not a reasonable excuse for its default. The record shows that Athena failed for over two years to take any steps to protect its interests even though it knew it had to answer the complaint. Accordingly, having defaulted, Athena "is deemed to have admitted] all allegations in the complaint, including the basic allegations of liability.

The argument that Hermitage failed to show that it was prejudiced by Athena's three-month delay in notifying it of the accident, was unavailing. The notice provision in the subject policy operates as a condition precedent to coverage, and late notice of an occurrence, absent a valid excuse, vitiates coverage as a matter of law, regardless of any prejudice.

The test is not whether the insured will be ultimately liable, but whether the insured should reasonably have anticipated a claim, whether meritorious or not. Athena's owner admitted her immediate knowledge of the incident involving a burn to a child, and that the media had been at the building. While Athena's owner stated that she had her superintendent investigate, and that the cause of the accident was allegedly a faulty thermostat that had been broken by the tenants, the owner could have easily questioned Wilshire about the particular facts of the occurrence, which would have informed her that the thermostat was not the exclusive cause of the accident. The owner could have also questioned Wilshire about whether he intended to make a claim, but she failed to do so.
Editor’s Note:  A shout-out to Suzanne M. Saia, from the Law Offices of Steven G. Fauth, LLC, for her good work on this appeal.

03/26/14       Utica First Insurance Company v. Mumpus Restorations, Inc.,
Appellate Division, Second Department
Exclusion for Replacement of Roof Applies to Claim Arising out of Replacement of Partial Roof
The underlying claimant contended that his accident does not fall within the provision of the insurance policy issued by the plaintiff that excludes coverage for damages "arising out of any Roofing Operations, which involve any replacement roof or recovering of existing roof," because the work out of which his injuries allegedly arose involved the replacement of only a portion of the subject building's roof. Alternatively, he contends that the exclusion is ambiguous and should therefore be construed in his favor.

While exclusions from coverage must be in clear and unmistakable language the plain meaning of a policy's language may not be disregarded to find an ambiguity where none exists.  This was roofing work so coverage is excluded.

03/19/14       American Home Assurance Co. v. D.P. Consulting Corp.
Appellate Division, Second Department
While There Was a Question of Fact in This Case, Court Holds that Employer’s Liability Carrier Can Secure Summary Judgment in Coverage Action by Demonstrating Absence of Serious Injury – Thousands May Flee but Not Before Thinking Hard
This is the most thought-provoking case of this issue.

In March 2008, Canteros sued AvalonBay to recover damages for personal injuries allegedly sustained by Canteros when he fell from a roof at premises owned by AvalonBay. AvalonBay then commenced a third-party action against Canteros's employer, D.P. Consulting Corp. (“DP”), seeking common-law indemnification and contribution. DP's Workers Compensation/ Employer’s Liability (WC/EL) insurer was American.

In March 2011, American commenced a declaratory judgment action seeking a declaration that it has no duty to defend and indemnify DP in the underlying action under the employers' liability policy it issued to D.P. American contended that, absent a "grave injury" within the meaning of Workers' Compensation Law § 11, there was no basis for coverage under the insurance policy issued to D.P., and that Canteros did not sustain a grave injury.

American demonstrated its prima facie entitlement to judgment as a matter of law declaring that it is not obligated to defend and indemnify DP in connection with AvalonBay's third-party claims for common-law indemnification and contribution by making an initial showing that there is no possible factual or legal basis on which American might eventually be obligated to indemnify D.P. under any provision of its policy but DP then raised a triable issue of fact in this regard. Specifically, it raised a triable issue of fact as to whether Canteros sustained a "grave injury" within the meaning of Workers' Compensation Law § 11.
Editor’s Note:  Interesting case and certainly a good one for Employer’s Liability carriers.  We always thought that the duty to defend was based on the allegations in the complaint, even if groundless, false or fraudulent.  This court appears to be mixing up defense obligations (based on pleadings) with indemnity obligations (based on fact).  But, what do we know?

Would that approach allow an auto carrier to bring a DJ action to be resolved from its defense obligation because the plaintiff has not sustained a serious injury? 

Surely, if there was a conflict between the interests of the defense counsel and the carrier, a Declaratory Judgment Action might be appropriate.  Here is an example – actually two similar scenarios – that slightly modifying the facts as described in this case:

  • Assume Canteros sued AvalonBay to recover damages for personal injuries allegedly sustained by Canteros when he fell from a roof at premises owned by AvalonBay. AvalonBay then commenced a third-party action against Canteros's employer, D.P. seeking common-law indemnification and contribution. DP's WC/EL insurer was American.  

    Assume for the purpose of this example that there is also a claim for contractual liability against D.P. and that (a) D.P. does not have contractual liability coverage for the third party claim or (b) D.P. has contractual liability under a CGL policy with limits of $1,000,000.


Under NY law, employer’s liability coverage provided under the WC/EL policy is unlimited.  Certainly, it is in the insured’s best interest to have unlimited coverage available for the third party claim, whatever the truth might be.

If there is not applicable contractual liability coverage or the value of the case exceeds $1,000,000, a motion by defense counsel to dismiss the common law claim (which requires proof of a “grave injury”) might be considered to be outside of the insured’s best interests and the defense counsel could be placed in an unethical quandary if that motion were made.  Successful prosecution of that motion could leave the insured without coverage (or with insufficient coverage) to pay a judgment that is rendered against the employer on the third party claim.

In that situation, it would be appropriate for the WC/EL insurer to commence a DJ action, or perhaps to intervene, to resolve the question of grave injury.

In the scenario described in the court’s opinion, there is no conflict of interest facing defense counsel because if the court determines that there is no “grave injury” in the underlying tort lawsuit, the third-party action against the employer is dismissed without any exposure to the employer.

Editor’s Note: In speaking with counsel, we there was a contractual liability claim out there with the contractual liability carrier having denied coverage based on late notice.  However, at no time was there a request made by American to have the defense counsel move to dismiss the grave injury claim.  The settled, by the way, shortly before the decision was rendered.

For an interactive discussion about this case and other recent cases, join and visit the New York Insurance group on LinkedIn.

03/18/14       Zurich American Ins. Co. v. Lonero Transit, Inc.
Appellate Division, First Department

While the Additional Insured was Dilatory in Providing Proof of Its Additional Insured Status, the Proof was Eventually Provided. However, It Was Also Dilatory in Providing Other Information Relating to Exclusionary Conduct, So a Question of Fact Exists as to the Timeliness of the Disclaimer
The City of New York defendants engaged in dilatory conduct with respect to plaintiff's request for proof of their additional insured status under the policy issued to defendant Lonero Transit. By producing their full contract with Lonero, they eliminated any issue of fact whether they are insured under the policy. The contract requires Lonero to name the City defendants as additional insureds under the policy. Plaintiff does not challenge the sufficiency of this proof.

However, due to the City defendants' dilatory conduct, further discovery is needed as to plaintiff's second reason for disclaiming coverage, the policy's "Abuse or Molestation" exclusion. The record demonstrates that Lonero was placed on notice of this ground for disclaiming on or about July 27, 2011. However, it does not demonstrate whether the City defendants received notice of this second ground for disclaiming. The City claims the disclaimer was late but it is not clear from the record when the insurer had the information necessary to deny coverage.


Liening Tower of Perley

Michael F. Perley
[email protected]


U.S. ex rel Hayes v. Allstate, et al
(1:12-cv-01015-WMS(USDC WDNY)

In 2012, J. Michael Hayes, Esq., an experienced plaintiff’s attorney in the City of Buffalo, filed a complaint under seal seeking intervention by the United States government to prosecute his complaint alleging that 68 insurance companies have violated the Federal False Claims Act (31 U.S.C. §§ 3729-3732) due to the manner in which they settled personal injury lawsuits while ignoring their responsibility to “reasonably consider” the interest of Medicare in the settlement.  The 224-paragraph complaint essentially alleges that these insurance companies “conspire[d] to defraud the government by getting a false or fraudulent claim allowed or paid” in violation of 31 U.S.C. § 3729(a).  Hayes bases these allegations on the requirements under the Medicare Secondary Payer Act (42 U.S.C. 1395y(b)) that requires “primary payers” to reasonably consider the interest of Medicare.  Obviously, Hayes defines insurance companies and self-insured entities as the “primary payer.” 

In support of his claim, Hayes relies on the requirements of the Medicare Secondary Payer Act and further alleges that the defendant insurance companies or self-insured entities acted with “deliberate ignorance” or “deliberate disregard” of the Secondary Payer Act.

If Hayes’ claim is proven, each insurance carrier or self-insured faces a minimum civil penalty of $5,500 and a maximum penalty of $11,000 for each claim in which they violated the Act plus three times the amount of damages sustained by the government due to this failure.

It remains to be seen whether this suit will survive a motion to dismiss. Essentially, what Hayes advises he plans to do is to compel each insurance company to identify and provide closing documents in cases it settled over the last six years (the statute of limitations of the Federal False Claims Act) and to properly account to him, on behalf of the government, with regard to how it complied with the Medicare Secondary Payer Act and why it should not be considered in violation of the Federal False Claims Act.

I had the opportunity to talk to Mr. Hayes concerning this lawsuit and to ask him how he identified those insureds and self-insureds who were proper defendants.  His answer to me was simple; in his practice he identified insurance carriers and self-insureds that did not consider compliance with the Medicare Secondary Payer Act important and preferred to shift responsibility entirely to the plaintiffs and their attorneys.

As the case presently stands, Mr. Hayes is drafting an amended complaint so this case will not heat up until that complaint is filed and served.  Surely compliance with the Medicare Secondary Payer Act is an important part of settling any claim or lawsuits.  I have long considered the possibility that the United States would become interested in enforcing the Medicare Secondary Payer Act against insurance companies based on what I characterize as the “Willy Sutton Paradigm,” namely, that insurance companies are “where the money is.”  Evidence that this may happen was brought to light early on in U.S. v. Stricker (524 Fed.Appx. 500).  The government lost its lawsuit to enforce Medicare’s interest, not because the statute failed to entitle them to do so, but because the suit was untimely.  Mr. Hayes has tailored his complaint, perhaps with Stricker in mind.

Although, as I indicated above, this case will not heat up for some time, I am more than happy to discuss its implications, or any direct involvement that our readers have, in this lawsuit. 

We will follow developments closely and keep you updated.


Daniel T. Hunter
[email protected]

03/19/14       Suarez v. Salas
Appellate Division, First Department
Plaintiff Successfully Opposes Summary Judgment Motion, but the 90-180 Claim is Dismissed by the Court
Defendants brought a motion for summary judgment claiming Plaintiff did not sustain a serious injury within the meaning of Insurance Law §5102(d), and met their prima facie burden of demonstrating Plaintiff's lack of a serious injury by submitting affirmed reports of medical experts who found no deficits in Plaintiff's lumbar or cervical spine range of motion.  The Court noted that the Defendants' examining physicians were not required to review Plaintiff's medical records since they detailed the specific medical tests performed in their affirmed reports and found full ranges of motion.

In opposition, Plaintiff raised triable issues of material fact by submitted an affirmed report of physicians which found bulging and/or herniated discs with continuing range of motion defects.  Even though Plaintiff defeated Defendants' motion for summary judgment, the Court dismissed Plaintiff's 90-180 day serious injury claim since Plaintiff failed to submit any confident evidence that the injuries prevented them from performing substantially all of their daily activities during the applicable time period.

03/19/14         Inzalaco v. Consalvo
Appellate Division, Second Department
Order Reversed Thus Granting Defendants' Motion for Summary Judgment Due to the Failure of Plaintiff's Physician's Report to Explain Exacerbation of the Preexisting Injury
The Appellate Division, Second Department reversed the trial court and, in doing so dismissed Plaintiff's Complaint.  Defendants initially brought a motion for summary judgment claiming Plaintiff's lack of a serious injury.  They submitted an affirmed report from an orthopedic surgeon as well as Plaintiff's own medical records which demonstrated a preexisting degenerative condition in Plaintiff's right knee with the suggestion of knee replacement surgery having been made approximately sixteen (16) months prior to the motor vehicle accident.

The lower court accepted Plaintiff's medical affirmations of two (2) treating orthopedists as sufficient evidence to rebut Defendants' summary judgment motion.  However, the Second Department reversed the trial court since those physicians failed to explain in a specific and non-conclusory manner exactly how the subject matter motor vehicle accident exacerbated Plaintiff's preexisting condition, necessitating immediate surgery.  Since Plaintiff's medical reports were not specific enough in their explanation, the Second Department found that the Plaintiff failed to raise a triable issue of fact as to causation.  Accordingly, Defendants were found to be entitled to summary judgment and Plaintiff's Complaint was dismissed.

Practice Tip:  As this case demonstrates, when a preexisting injury exists, it is essential that medical reports specifically discuss and explain how the preexisting injury was made worse as a result of the motor vehicle accident, especially when surgery is involved.

03/21/14          Thomas v. Huh
Appellate Division, Fourth Department
Defendants' Evidentiary Submissions Fail to Meet Initial Burden
Defendants made a motion for summary judgment claiming Plaintiff did not sustain a serious injury with respect to two (2) categories of Insurance Law §5102(d):  Permanent consequential limitation of use and significant limitation of use.  In support of their motion, Defendants submitted reports of imaging studies of Plaintiff's spine and one (1) report of a physician who conducted an independent medical examination of Plaintiff.  The Court found the opinion of that physician that Plaintiff's condition was the result of degenerative changes predating the accident, fails to account for evidence that Plaintiff had no complaints of pain prior to the motor vehicle accident. 

Further, the Court found that this physician's opinion that Plaintiff's limitations in ranges of motion were magnified or self-imposed, had no factual basis and were pure opinion.  Since the Defendants failed to meet their initial burden, the Court did not consider the sufficiency of Plaintiff's opposition papers and their determination to affirm the trial court in denying Defendants' motion for summary judgment.

03/25/14          McSweeny v. Sang H. Cho
Appellate Division, First Department
Denial of Defendant's Motion for Summary Judgment Upheld as MRI Shows Tears in Plaintiff's Right Knee
Defendant moved for summary judgment against Plaintiff, a police officer, struck while directing traffic.  Plaintiff claimed serious injury to his right knee under the no-fault categories of permanent consequential limitation of a use of a body organ or member and significant limitation of the use of a body function or system.

In support of their motion for summary judgment, Defendant present a medical report stating Plaintiff had no limitations in range of motion, did not suffer a traumatic injury to his right knee, and instead presented with a preexisting degenerative condition.  However, Plaintiff submitted medical evidence demonstrating that an MRI six (6) months after the motor vehicle accident showed medial and lateral meniscus tears in Plaintiff's right knee.  Further, an orthopedic surgeon causally related the injuries to the motor vehicle accident.  He also opined that Plaintiff's injuries were permanent, recommended arthroscopic surgery to repair the tears, and diagnosed Plaintiff with limited range of motion.  As such, the First Department upheld the lower court's decision denying Defendant's motion for summary judgment.

03/25/14         Wyndham v. New York City Transit Authority
Appellate Division, First Department
Three (3) Plaintiffs Injured by Cement Truck Results in Messy Motion Practice and Modification to Order
Plaintiffs, Robin, Cheryl and Chandler, claim to have been injured when the vehicle they were riding in was struck by a New York City Transit Authority cement truck.  Defendant moved the lower court to dismiss all Plaintiffs' causes of action, and submitted in support of their motion reports of an orthopedist and neurologist who examined each Plaintiff three and one-half (3 1/2) years following the accident and found full range of motion, negative test results and resolved sprains in all body parts claimed to have been injured in the subject matter accident.  They also submitted a report by a radiologist opining that Plaintiff Chandler's claimed injuries were preexisting and degenerative.

Plaintiff Robin raised a triable issue of fact regarding her "permanent consequential" and "significant limitation" serious injury claims by submitting reports from her radiologist which show bulging and herniated discs, reports of radiculopathy, and reports of limited range of motion from the time of the accident.  However, since Plaintiff Robin failed to put forth any evidence that the accident caused her sustain a medically determined injury or impairment of a non-permanent nature which prevented her from performing substantially all of her customary daily activities of the 90 of 180 days immediately following the accident, the First Department dismissed her 90-180 claim.

Plaintiff Chandler presented no admissible medical evidence to substantiate any of his claims, and therefore, his claims were found to be properly dismissed.

Plaintiff Cheryl raised triable issues of fact pertaining to her permanent consequential or significant limitation of use claim by submitting an MRI showing bulging and herniated discs.  Although this report was not affirmed, the First Department notes that it can be considered an opposition to a summary judgment motion since it is not the sole evidence offered to rebut Defendant's motion.

The Court also denied Plaintiffs' motion for re-argument noting that the new evidence proffered would not change the prior determinations of the lower court and that Plaintiffs fail to provide a reasonable justification as to the failure to present those facts on the prior motion.


Margo M. Lagueras
[email protected]


03/13/14       RES Physical Medicine & Rehab. Services v Allstate Ins. Co.
Erie County, Arbitrator Kent L. Benziger
Interest and Attorney’s Fees Owed on Claim Paid During Conciliation
On April 17, 2013, Applicant billed for an office evaluation and drug screening performed on March 20, 2013.  Respondent requested verification to which Applicant responded on May 28, 2013.  Respondent again requested all medications and prescriptions issued to the EIP, as well as sign in sheets and items enumerated in specific paragraphs in its initial verification request.  On July 8, 2013, Respondent sent an EUO Notice and, on September 24, 2013, the EUO of Dr. Strut was taken.  On December 6, 2013 Respondent issued full payment on all the claims, and on the 18th, AAA advised that the matter had not been resolved during the conciliation period.  Subsequently, a telephonic hearing was scheduled.

As the principal in dispute was paid, the only issue was that of interest and attorney’s fees.  The Arbitrator reasoned that interest was owed from July 3, 2013, 30 days after Applicant provided the final relevant requested information, and December 6th, when Respondent paid the claim.  The Arbitrator noted that, in this instance, the verification requests were unduly burdensome.  In addition, the EUO Notice was not timely requested and therefore did not toll the 30-day deadline to pay or deny the claim.  Since no denial was issued before the late payment of the claim, interest began to accrue when payment was due.  As for attorney’s fees, pursuant to the regulations [11 NYCRR 65-4.6], Applicant was entitled to $60.00 as payment was never denied prior to payment, which was made during conciliation.

03/13/14       Elite Medical Supply of NY, LLC v Geico Insurance Co.
Erie County, Arbitrator Douglas S. Coppola
Peer Review Void of Factual Specification Is Insufficient to Support Denial
Applicant claimed reimbursement for a cervical traction unit and multi-mode stimulator which were supplied to the EIP some six weeks after the accident.  The Arbitrator noted that this was the third claim arising out of the same accident and involving the same EIP, and that, in addition to chiropractic care, the EIP was also attending pain management.  A peer review was performed which denied the reasonableness and necessity of both items of DME.  However, the peer reviewer did not discuss the specific facts of the EIP’s care.  He also cited to policy guidelines of private insurance carriers which are not binding in this case, or cited to studies that seemed to be contrary to the specific circumstances of the EIP in this matter.  In addition, the peer reviewer did not state that the prescription of the equipment deviated from accepted standards of care, nor did he address the palliative benefits received from the treating chiropractor.  As such, the Arbitrator determined that the Applicant’s submission sufficiently rebutted the Respondent’s peer review and established the medical necessity of the prescribed items.
See also:  AAA Case No.  412013147155.

03/13/14       Kenton Open MRI, PC v Geico Insurance Co.
Erie County, Arbitrator Douglas S. Coppola
Medical Necessity for MRIs Not Established Where EIP Responding Well to Conservative Care
The seriously overweight 39-year old EIP was injured in July 2012 in a front-end impact.  He immediately commenced chiropractic care and, a week later, pain management.  He was initially diagnosed with cervical and lumbar sprains/strains.   About three weeks after chiropractic treatment began a left shoulder MRI was performed.  Respondent requested a peer review and the peer reviewer stated that a chiropractor in NYS may not order imaging studies of an extremity which would not be treated from a chiropractic standpoint without a valid medical reason.  The chiropractor’s SOAP notes did not reflect any treatment to the left shoulder prior to ordering the MRI so the reviewer considered it to be a departure from the accepted chiropractic standards.  The Arbitrator agreed.

The peer reviewer similarly reviewed a lumbar MRI performed August 27, 2012, and noted that the EIP was responding well to chiropractic treatment and showing improvement.  Absent some red flag or consideration of surgery, neither of which were present in this case, the reviewer stated that a routine investigation with MRI was not justified.  There was no indication that the chiropractic care was not sufficient to manage the EIP’s care so it should have been continued for a longer period of time before considering MRIs.  Again, and in the absence of any rebuttals, the Arbitrator agreed and denied the claim in its entirety.

03/10/14       Applicant v Liberty Mutual Fire Insurance Co.
Erie County, Arbitrator Ken L. Benziger
Peer Review Issued Before the Treatment in Dispute Is Insufficient
In this case, the peer review was issued prior to the treatment in dispute and therefore could not comment on the EIP’s condition at the time of that treatment or state that the treatment departed from generally accepted standards.  The Arbitrator pointedly stated that he would hope this would not signal a trend where carriers attempt to use old peer reviews to discuss new treatment.


02/28/14       Westchester Medical Center v A. Central Insurance Co.
Appellate Term, Second Department
Resubmission of Claim Does Not Start Pay or Deny Period Anew
Defendant established that it first received plaintiff’s claim on May 9, 2011.  Defendant timely requested verification on May 29th and again on June 29th.  Plaintiff did not respond.  Instead, plaintiff resubmitted its claim on July 18, 2011, and asserted that the 30-day period to pay or deny began to run as of that date.  On appeal, the court reversed the trial court finding that plaintiff failed to rebut defendant’s showing that the two claims were identical.  Contrary to plaintiff’s assertion, the 30-day pay or deny period does not run anew with the resubmission of the claim and defendant’s cross-motion to dismiss on the grounds that the claim was premature should have been granted.

02/28/14       Eagle Surgical Supply, Inc. v Allstate Insurance Co.
Appellate Term, Second Department
Use of Denial to Prove Receipt of Claim Improperly Denied by Trial Court
Plaintiff attempted to introduce the NF-10 to establish that defendant had received its claim form but the trial court refused to admit it and dismissed the complaint.  On appeal, the court reversed holding that the trial court should have admitted the NF-10 as plaintiff was not trying to use it at its own business record, but rather as an admission by defendant that the claim form had been received.  Because plaintiff proved that defendant had not paid the claim, judgment should have been granted to plaintiff.

02/28/14       Great Health Care Chiropractic, PC v Hanover Insurance Co.
Appellate Term, Second Department
Defendant Precluded From Asserting Fraudulent Procurement Defense
Defendant moved for summary judgment asserting that plaintiff misrepresented the vehicle’s garaging state and thus fraudulently procured the policy of insurance.  However, defendant failed to establish that it had timely denied plaintiff’s claim.  As a result, on appeal the court reversed the trial court holding that defendant was precluded from asserting that defense because it did not establish timely denial of the claim.


Steven E. Peiper
[email protected]

03/27/14       Cornell v 360 W. 51st St. Realty, LLC
Court of Appeals
Expert Required to Establish Both General, and Specific, Causation when Prosecuting Toxic Mold Claim; Frye Standard Upheld
Plaintiff resided in defendants’ apartment building from 1997 through October of 2003.  Plaintiff’s alleges that she noticed mold forming in and about the premises in the summer of 2003, and defendants failed to adequately remedy those situations.  Then, in October of 2003, defendant began demolition/construction in the basement of the building.  This process, it is alleged, resulted in the release of additional mycotoxins, dust and other debris which caused serious injuries to plaintiff. 

Defendants eventually moved for summary judgment on the basis that plaintiff could not establish general causation that the dust, mold and debris resulted in the alleged damages.  Moreover, plaintiff could not point to specific sources of contaminants which caused specific injuries.  Thus, in addition to general causation, plaintiff could not meet the burden of establishing specific causation as well. 

Defendant’s motion was supported by the expert affidavit and opinion of Dr. S. Michael Phillips.  Dr. Phillips opined that the relevant literature on the topic, which was generally accepted within the relevant scientific community, supported the finding that plaintiff’s injuries were not “caused” by the conditions alleged.

Counsel to plaintiff responded by introducing their own expert, Dr. Eckhardt Johanning.  Dr. Johanning had been treating plaintiff’s condition since shortly after her symptoms developed.  Dr. Johanning attacked the sufficiency and credibility of Dr. Phillips, as well as the studies upon which Dr. Phillips opinion was based.  Dr. Johanning opined, not surprisingly, that plaintiff’s claimed injuries were directly attributable to defendant’s actions. 

The trial court, relying upon an earlier opinion from the Appellate Division which analyzed the exact same theories, the exact same evidence, and the exact same experts as the instant case, found that plaintiff had not met its burden of establishing causation.  As such, plaintiff’s claims against defendants were dismissed on summary judgment.

On appeal, the Appellate Division reversed.  In so ruling the Court noted that its previous decision was not dispositive on the issue, and that in the instant case plaintiffs expert produced enough scientific evidence to create question of fact on both the general and specific causation requirements.  Dr. Johanning’s reference to “some material” which pointed to causation between mold and the types of maladies claimed by plaintiff created a question of fact sufficient to preclude defendant’s motion for summary judgment.  Further, Dr. Johanning’s reliance upon differential diagnosis (the process of establish the cause of an injury by ruling other possibilities) was sufficient to support, at least a question of fact, on the specific causation question. 

In dissent, Justice Catterson argued that plaintiff’s expert never satisfied the long standing “Frye Test” which required that plaintiff’s theory be generally accepted by the relevant scientific community.  The Appellate Division granted certiorari to defendants, and the instant decision is a direct result of defendants’ petition.

In reversing the Appellate Division, the Court noted that Dr. Phillips was competent to render an expert medical opinion on the impacts and effects of exposure to mold.  In addition, the peer reviewed, generally accepted materials upon which Dr. Phillips was based remained the accepted standard on indoor mold exposure.

Having established the sufficiency of Dr. Phillips’ opinion, the burden then shifted to plaintiff’s expert to establish, at a minimum, a question of fact on both the issues of general and specific causation.  The Court rejected Dr. Johanning’s challenges to both the credibility of Dr. Phillips, as well as the reference materials upon which Dr. Phillips relied.  The Court also rejected Dr. Johanning’s argument that the fact that Public Health officials had established exposure to mold was a public health concern.  Regardless of whether the public health apparatus had acknowledged the possibility that mold was dangerous to one’s health, the Court noted that it was insufficient to establish legal causation. 

Finally, materials relied upon by Dr. Johanning spoke to the likely association between mold and health risks.  It did not, however, demonstrate a causal connection between them.  In reaching this conclusion, the Court of Appeal noted that Dr. Johanning’s reference to “some support” for general causation did not meet the Frye Test requirement that the opinion be “generally accepted by the relevant scientific community.”  As such, the Court ruled that plaintiff had failed to meet its burden of creating a question of fact on the issue of whether plaintiff could establish general causation between the existence of mold and bodily injury. 

Moreover, even if general causation could have been demonstrated by plaintiff, the Court also held that plaintiff’s expert failed to establish specific causation.  While an expert is not required to provide a “precise quantification”, the Court noted that Dr. Johanning failed to even establish that a specific mycotoxin result in a specific injury to plaintiff.  The Court specifically rejected Dr. Johanning’s argument that differential diagnosis was sufficient to establish, at a minimum, a question of fact on causation.      

In a short dissent, Judge Pigott noted that the standard enunciated in Frye was to ensure that “junk science” did not reach the jury.  Here, however, he notes that both sides apparently agree that mold can cause a variety of ailments including respiratory and skin irritation.  As such, because there is an acknowledged association between mold and injury, Judge Pigott would be in favor of letting the question of whether those associations rise to causation fall within the province of the jury. 

03/19/14       Gonzalez v Majestic Fine Custom Homes
Appellate Division, Second Department
Right to General Supervision of Work Site Does Not Qualify as Negligence to Defeat Contractual Indemnity Claim
Plaintiff sustained injury when he fell from a set of stilts while performing spackling work at home being constructed by defendant Majestic.  As part of the project, Majestic retained Draghi to perform framing work.  They also retained Italiano to perform drywall installation.  Italiano, in turn, subcontracted taping and spackling to plaintiff’s employer, Nico.

Plaintiff commenced the instant lawsuit under Labor Law 241(6) against Draghi, Italiano Majestic.  Draghi eventually moved for summary judgment arguing that they were not an owner, general contractor, or agent of a general contractor, and as such were not an appropriate defendant.  At the same time, Draghi also moved for summary judgment seeking contractual indemnification from Italiano. 

Draghi’s motion for summary judgment against plaintiff was granted where they were able to establish that they did not hire any subcontractors and did not have any obligation to control the various aspects of the project. 

Somehow Draghi possessed a contractual indemnity claim against Italiano (even though Draghi would not have been party to a contract with Italiano).  In any event, the claim for contractual indemnification was granted despite the fact that the clause at issue was allegedly in violation of General Obligations Law 5-322.1.  However, where, as here, there was no negligence attributable to Draghi the indemnity clause was enforceable as written.  In so holding, the Appellate Division noted that Draghi’s actions to undertake “general duties to oversee work” was not sufficient support a claim for  negligence against it.

Peiper’s Point – Generally, to support a claim for negligence the party opposing an indemnity claim must establish that the movant exercised supervision, direction or control over the actual work being performed by the injured party.  The right, per the contract, to control the work is insufficient to support a negligence theory.


03/11/14       Guzman v 170 West End Avenue Associates
Appellate Division, First Department
Indemnity Clause for Loss Arising From Acts or Omissions of Contractors Work Did Not Require Negligence
This case arises out of a Labor Law 240(1) claim where plaintiff fell from a height and sustained injury.  It was not a major surprise that summary judgment was awarded by the trial court, and affirmed by the Appellate Division.  What is interesting, however, is the discussion over the indemnity claim against, who we presume was, the plaintiff’s employer, Kay. 

The defendants in this case moved for contractual indemnification against Kay pursuant to a clause that provided indemnity to “the Owner Parties for any liability or claims for the result of any event or occurrence which arises in connection with the Work.  The trial court ruled that the “Owner Parties” were entitled to indemnification upon demonstrating that Kay was negligent.  In modifying the trial court’s Order, however, the Appellate Davison noted that the clause at issue has no requirement that Kay be negligent. Rather, the plain wording of the indemnity provision only requires that it arise out of an event or occurrence in connection with the Work.  Here, the loss obviously arose out of the Work, and thus the indemnity provision was triggered without a showing of negligence.

In so holding, the Appellate Division noted the fact that “Owner Parties” were not negligent.  As such, the fact that the provision at issue did not contain savings’ language did not impact its enforceability as it was not in violation of General Obligations Law 5-321.  The Court also rejected Kay’s argument that it only owed indemnity to the “owner.”   The Court noted that the agreement specifically provided for indemnity running to “Owner Parties”  which included the managing agent of the premises.

Peiper’s Point – While we agree with the decision, we have some reservations about issues discussed in the dicta of the opinion.  For one, we not sure savings language is required in an indemnity agreement governed by 5-321.  As we’ve reported several times over the years, a party to a commercial lease may be indemnified for its own negligence if other parameters are established during the motion practice.  As such, savings language would appear, at least to us, to be superfluous.  In addition, we are troubled by the Court’s broad interpretation of the term “Owner Parties.”  Indemnity provisions, regardless of contract or lease, should be strictly construed.  This case could be read to support an argument that an indemnity provision should be read to include parties who are otherwise unknown at the time of the contracting.  That, in our humble opinion, would be expanding the scope of the agreement beyond its appropriate scope.  Here,   however, the lease   agreement in question appears to have contemplated a broader reading.  Thus, supporting the indemnity claim of the MGA. 

Elizabeth A. Fitzpatrick
[email protected]

03/13/14       Kolbek v. Truck Insurance Exchange.
Arkansas Supreme Court 2014 WL 1096168
Coverage B Not Available
In Kolbek, the coverage dispute arose from claims of alleged abuse by several young women by employees of the insured’s employees.   Truck Insurance Exchange (TIE) issued an apartment owner’s policy to Jeanne Estates Apartments (JEA).  JEA became involved in underlying lawsuits, which involved several of the appellants.  TIE thereafter commenced a declaratory judgment action asking for a declaratory judgment that they owed no coverage for any of the alleged misconduct alleged in the underlying claims. 

In analyzing the right to coverage, the Court initially reviewed general principles of contract interpretation, including that the Court will liberally construe any ambiguities in the policy in favor of the insured and that in determining a liability insurer’s duty to defend, the pleadings against the insured determine such duty.  With respect to one of the claims, the Court simply found that the claim occurred prior to the inception of coverage and thus, there was no issue of material fact that no coverage was available for those claims.

With respect to the claims by several of the other parties, the Court noted that the plaintiffs in the case asserted that they were teenage members of a religious organization related to the insured and suffered inter alia, beatings.  Their complaint asserted causes of action for battery, false imprisonment, outrage and conspiracy and asserted that the damage they sustained was in the form of physical pain and suffering, emotional distress and scarring/disfigurement, which was caused by the defendants intentionally and with malice.  The Court initially noted that claims were made against individuals who did not qualify as insureds under the policy and further opined that all allegations were comprised of intentional tortious acts.  The Court noted that the policy specifically excluded coverage for “bodily injury” and “property damage” expected or intended from the standpoint of the insured.

The final case involved seven young women who initiated a lawsuit against a number of persons and entities associated with Tony Alamo, including the insured alleging negligent hiring, negligent supervision and contending that the insured was vicariously liable, as the employer of Tony Alamo for his acts in the course and scope of his employment and that the insured was negligent in allegedly maintaining property that housed the plaintiffs.  The Court noted that the Truck Insurance Exchange policy issued applied only to bodily injury, property damage, personal injury, advertising injury and medical expenses arising out of the ownership, maintenance or use of the premises. The Court found that none of the allegations were connected to the ownership, maintenance or use of JEA’s premises nor were they connected to the necessary or incidental operations of JEA, noting that while the Court has not interpreted “arising out of” language in the liability policy of an apartment complex, they had done so in other types of liability policies.”  The Court found that even if they were to find a causal connection between the allegations and the business operations of JEA, such that the insurance policy provided coverage, several exclusions to the policy applied to a majority of the allegations in the complaint.  They thus affirmed the Circuit Court’s grant of summary judgment to the insurer.

According to news reports, Alamo, 79, has been serving a 175-year prison sentence in Tucson after being convicted in 2009 on 10 counts of sex trafficking minors. Lawyers are looking for the court to sell several properties associated with Alamo’s operations to collect on the $525,000,000 judgment.

02/19/14       The Dark Power of Fraternities 

The Atlantic, Caitlin Flanagan
Insurance Coverage for Fraternity Related Injuries
A fascinating article entitled The Dark Power of Fraternities published in The Atlantic in February of 2014 by Caitlin Flanagan provides an in depth look at fraternities through the ages and across the country. I, of course, was keenly interested in the insurance coverage issues raised in claims by injured students against the fraternities and ultimately, the national organizations behind them.  Interestingly, while the common understanding may be that hazing is the largest source of injury at fraternities, a 2010 analysis by Willis, cited in Flanagan’s article, reveals that assault and battery account for approximately 23% of all claims, sexual assault 15%, slip and falls 10%, followed closely by falls from heights at 9% with auto accidents and hazing rounding out the claims at 7% each.

The article discusses the use of self-insurance as a means of combating prohibitive insurance premiums combined with reluctance on the part of the industry to insure fraternities.  According to Flanagan, in 1992, four fraternities created what was initially called the Fraternity Risk Management Trust, which today boasts some 32 different fraternities as members.  Concomitant with the use of self-insurance was the development of a risk management policy by the national organizations, which was accomplished by the creation of the Fraternal Information and Programming Group (FIPG) which, in the middle 1980s, developed a comprehensive risk management policy.

The manual uses, as its foundation, an alcohol policy as, not surprisingly, the majority of all fraternity insurance claims involve liquor.  The key on the part of the fraternity, thus, is to establish that the individuals involved in the actions causing the bodily injury or death were not acting within in accordance with the guidelines.  A violation of the guidelines will often result in the unavailability of coverage to the wrongdoer by the fraternities’ own insurer and perhaps redress to the fraternity members parent’s homeowner’s insurer.



Audrey A. Seeley
[email protected]

03/26/14       Khan v. Landmark American Ins. Co.
Court of Appeals, Georgia
Parties Not Precluded From Litigating Shooter’s Identity and Motive After Default Judgment Entered In Underlying Action As Coverage Dispute Over Assault/Battery Exclusion.
On November 4, 2006, Mr. Khan was shot in the parking lot of Flashers nightclub.  Khan commenced a bodily injury action against Flashers alleging, inter alia, that a Flashers employee, during the course of his employment, was directed to shoot Khan.

Flashers sought a defense from its insurer, Landmark American Insurance Company (“Landmark”) in the bodily injury action.  Landmark denied Flashers a defense on the ground that the policy excluded bodily injury claims arising from an assault and battery.  The exception to the exclusion as is well known is if the assault or battery is committed while trying to protect persons and/or property.

Flashers defaulted in the action after Landmark denied it a defense resulting in a $2.3 million damages award.  After Flashers settled the matter with Kahn, it assigned to Kahn its claims against Landmark.  Kahn subsequently commenced the instant action against Landmark asserting, among other things, breach of contract of Landmarks’ defense obligation.

On appeal, Kahn argued that his partial summary judgment motion was improperly denied as Landmark was precluded from contesting liability as well as the shooters motive since a default judgment was entered.  The Court disagreed.

The Court reasoned that when Landmark refused to defend Flashers in the bodily injury action it did not waive its right to contest coverage under the policy for the underlying bodily injury action.  Since the assault and battery exclusion was in dispute Landmark had to prove the shooters intent for the exclusion to apply just as Kahn would have to prove the shooters intent to demonstrate the exception to the exclusion applied.  Yet, Kahn was correct that the default judgment established the shooter was a Flasher’s employee, which could not be relitigated here.  However, Flashers was not precluded from litigating the issue of the shooter’s identity as well as the shooter’s intent as those issues were not alleged in the underlying bodily injury action’s complaint.

Further, Kahn establishes that the shooter’s intent was to protect persons or property.  This is because Flashers’ owner claimed there was an unwritten policy with his management team that no employee could use force unless necessary to protect persons or property.  Then Flashers manager speculated that he could not see a reason why an employee would use force other than to protect persons or property.  The Court found that the unwritten policy and the manager’s speculation did not establish that the shooter did so to protect persons or property.  Accordingly, Kahn’s partial summary judgment motion was properly denied.

Cassandra A. Kazukenus
[email protected]

A5570 Amendment to CPLR in an Effort to Expedite Insurance Claims Resulting From a State Disaster Emergency

This Legislation was introduced and passed in the Assembly last year, but it died in the Senate.  This Legislation has once again made it back to the Assembly calendar, and it bill seeks to add three sections to the CPLR – 3410, 3411 and 3412.

Proposed §3410 would require a preliminary conference within thirty (30) days after a request for judicial intervention (RJI) is filed in actions involving a claim for damages occurring to property in a county where a state disaster emergency was declared, and the claim arises from the cause of the state emergency.  Additionally, the new provision would bar any adjournments greater than ten (10) days, and the adjournment will only be granted for good cause.  Further, this provision would require discovery to be completed within sixty (60) days from the date of the preliminary conference, and penalties may be assessed against any party for refusal to comply with discovery within the sixty days.  The court may, however, extend the time for discovery in the interest of justice or upon good cause.

Proposed §3411 would mandate settlement conference in actions these actions within fourteen (14) days of filing the note of issue.

Proposed §3412 would require all pre-trial motions to be made within thirty (30) days after the filing of the note of issue except CPLR §3212(a) motions.

Further, these cases will be considered a preferred case on the trial calendar pursuant to CPLR §3403(a).

A07902 Steering In Automobile Claims

This Legislation was recently advanced from the Assembly Insurance Committee to the Assembly calendar, and the sister Legislation in the Senate remains in the Insurance Committee at this time.  This proposed Legislation would amend Insurance Law §2610-a(c) which currently requires an insurer to inform an insured that any rental company may be used.  The section would be amended to require the insurer to provide the insured with a list containing the name and contact information of at least three rental car companies within 30 miles of the area where the insured will use the rental vehicle.  If there are not three rental companies in that radius, the insurer must provide the same information for as many as possible within 30 miles of the insured’s location.

The Legislation will also add a new subsection (e) which would bar an insurer from receiving any compensation, rebate, discount, or anything of value from a rental company in consideration for direct referral of a claimant.   This type of anti-steering legislation is found in many states. 

S0435A Creation of a Task Force on Disasters

This Legislation passed the Assembly last year, and is on the Assembly calendar once again.  This Legislation was recently committed to the Insurance Committee in the Senate.

This Legislation seeks to create a task force to examine how insurers who write policies providing coverage for loss of or damage to real and personal property in New York respond to disasters.  The task force would also review the ways state and local agencies and the Department of Homeland Security can assist in insurer’s response as well as whether insured and communities have adequate insurance.

The task force would be comprised of 18 members with the Superintendent of DFS or his designee and the Commissioner of the Department of Homeland Security and Emergency Services and his/her designee comprising two of the members.  Four additional members will be appointed by the Governor with eight additional members appointed by the Governor based upon the recommendations of the Assembly speaker and the temporary president of the Senate (4 from each house).  The last four will be appointed by the Governor upon the recommendations of the minority leaders of the Senate and Assembly (two from each house). 

The appointees must include five insurer representatives who write this type of insurance, and one of the five must write for the National Flood Insurance Program.  Five of the appointees must be local officials who respond to disasters and emergencies such as police and fire officials, and these appointments must reflect the geographic diversity of the State, including areas of the state prone to flooding such as the Hudson Valley, Long Island and New York City.  Two of the appointments must represent independent and public adjuster organization; two must be from non-profits which have experience with disaster relief and two must be from consumer advocacy groups. 

The following issues are to be considered by the task force:

  1. Steps insurers currently take to respond to disaster related claims in a timely fashion;
  2. Challenges insurers currently experience in responding to disasters;
  3. Steps insurers currently take to adequately assess damage so that homeowners and municipalities can remove debris and make repairs quickly;
  4. Additional steps insurers and state and local agencies can take to better respond to the needs of communities and policyholders affected by a disaster;
  5. Ways insurers and state and local agencies can proactively reach out to policyholders and communities following a disaster;
  6. Ways insurers can assist homeowners and business affected by a disaster whose premiums are due;
  7. Steps insurers can take if their employees are affected by a disaster in order to still respond to claims in a timely fashion;
  8. Whether or not NY residents have enough insurance coverage and if not, what are the barriers preventing the same;
  9. Identifying measures to encourage homeowners and businesses to purchase flood insurance as needed;
  10. Steps insurers take to prevent policyholder disputes and to resolve those disputes that do occur;
  11. Legislative action that may be taken to address these issues.


Katherine A. Fijal

[email protected]

03/12/14       Georgitsi Realty, LLC v. Penn-Star Insurance Co.
United States Court of Appeals Second Circuit –New York Law
Certified Question Answered by New York Court of Appeals
In the January 18, 2013 edition of Coverage Pointers we reported on this case advising that the Second Circuit Court of Appeals [“Court”] certified two questions to the New York Court of Appeals.  On January 15, 2013, the New York Court of Appeals accepted the question for review; and on March 12, 2014, the Court rendered its decision.

For your convenience we will reprint our January 18th article, followed by the Court of Appeals response.

The question presented to the Court of Appeals was:  “[F]or purposes of construing a property insurance policy covering acts of vandalism, may malicious damage be found to result from an act no directed specifically to the covered property?  If so, what state of mind is required?”

By way of background, Georgitsi owns an apartment building (the “Building”), located on Eighth Avenue in Brooklyn, New York.  Georgitsi was insured by Penn Star under a broad form policy which included coverage for a variety of perils, including fire, windstorm, smoke, riots and vandalism.  The policy defined “vandalism” as the “willful and malicious damage to, or destruction of, the described property”.

Beginning in 2007 the Building sustained significant damage as a result of construction and excavation work performed on the property adjacent to the Building owned by Armory Plaza, Inc. [“Adjacent Parcel”].  The excavation work was performed as part of a plan to construct an underground parking garage.  Georgitsi had previously notified Armory Plaza and the excavators, engineers, and architect working on the Adjacent Parcel about the damage to the Building. 

Georgitsi had also notified the New York City Department of Buildings, which issued numerous “stop work” orders and summonses to the Excavators. Georgitsi also obtained a temporary restraining order from the Kings County Supreme Court enjoining the excavators from continuing their construction work on the Adjacent Parcel.  The excavators nonetheless continued the construction work and ultimately admitted to many violations of the stop work orders, paying $36,500 in fines to the city.

In December, 2007 Georgitsi notified Penn Star of its claim under the policy.  Penn Star denied coverage on the ground that excavation damage did not constitute vandalism under the Policy.  Georgitsi filed suit against Penn Star in state court, which Penn Star later had removed to the United States District Court for the Eastern District of New York. 

That Magistrate Judge, in his report and recommendation to the district court, found that the excavators had not committed vandalism within the meaning of the Policy because their actions were directed only to the Adjacent Parcel, not the Building, and that proof of recklessness would not satisfy the malice requirement of the Policy as a matter of law.  The district court adopted the recommended ruling of the Magistrate Judge.

Because the U.S. Court of Appeals for the Second Circuit concluded that the appeal turned on the unsettled and important question of New York law of whether “malicious damage” within the meaning of an insurance policy covering vandalism may be found to result from an act not directed at the policyholder’s property but causing damage thereto and undertaken with knowing disregard for the policyholder’s rights, it certified the above question to the New York Court of Appeals.

As to question of whether for purposes of construing a property insurance policy covering acts of vandalism, malicious damage be found to result from an act not specifically directed at the covered property, the Court of Appeals answered the question in the affirmative stating that “malicious damage within the coverage of such a policy may result from acts not directed specifically at the covered property.”

As to the second question of what state of mind is required the Court of Appeals stated that “to obtain coverage under such a policy the insured must show malice, defined as such a conscious and deliberate disregard of the interests of others that the conduct in question may be called willful or wanton.”

Accordingly, the Court vacated the judgment of the district court and remanded the matter to the district court for further proceedings.


Jennifer A. Ehman
                                             [email protected] 

03/24/14       Allstate Ins. Co. v Rosko
Supreme Court, Richmond County
Mother’s Death Does Not Eliminate Coverage for Daughter’s Later Automobile Accident in Mother’s Vehicle; Death Does Not Mean Ownership Was Transferred
This decision arises out of a personal injury action commenced by the Roskos to recover damages for injuries sustained by Mr. Rosko when he was struck by a motor vehicle while standing on a sidewalk.  Allegedly, two vehicles were racing side-by-side at a high rate of speed when the vehicle driven by defendant Hollis Driscoll apparently ran off the road and struck plaintiff on the sidewalk.
At the time of the incident, Allstate issued an automobile liability insurance policy to Mary Henderson (the owner of the vehicle being driven by Ms. Driscoll). 

However, Ms. Henderson died a few months prior and, according to her Last Will and Testament, Ms. Driscoll and her brother, were named as co-executors and equal heirs to the estate.  Ms. Driscoll also owned a separate vehicle, also insured by Allstate.

Allstate took the position that title to the vehicle which struck plaintiff passed to Ms. Driscoll upon the date of her mother’s death such that the portion of the policy of liability insurance on Ms. Driscoll’s own vehicle, which provides her with coverage during the operation of a non-owned vehicle, was unavailable to provide "excess" coverage for the claims made by the Roskos.  Remember, personal automobile policies typically exclude coverage for vehicles owned by the insured that are not scheduled.

The court began by reciting the case law in this area.  Title to a motor vehicle passes when the parties intend it to pass.  Generally, ownership is vested in the registered owner of the vehicle or the one holding the documents of title, but these presumptions are not absolute, and may be rebutted by evidence which demonstrates that another individual owned the vehicle at the time in question.
In this case, the court rejected Allstate’s argument that the transfer of ownership of the subject vehicle occurred at the time of her mother’s death.  It held that this was not established nor the statutory presumption rebutted.  To the contrary, the underlying plaintiffs established to the satisfaction of the court that such transfer did not occur until the certificate of title naming Ms. Driscoll as the owner was executed.

The mere fact that Ms. Driscoll was both an heir to her mother’s estate and was operating the decedent’s motor vehicle at the time of the subject accident was insufficient, standing alone, to establish any intention on the part of the heirs that legal ownership of the vehicle be vested in Ms. Driscoll at the time of her mother’s death or any other time prior to the happening of the accident.  In fact, the proof submitted by the parties indicated that Ms. Driscoll’s brother was intended to share equally in the estate, and that the assets thereof were still in the process of being distributed when the accident occurred.  Thus, the decedent’s policy was primary, and Ms. Driscoll’s policy was deemed to be excess insurance.

03/03/14       Hernandez Castillo v Prince Plaza, LLC
Supreme Court, Kings County
Irrebuttable Presumption of Prejudice Does Not Apply Where Default is Withdrawn After Notice
This decision appears to be one of first impression in New York.  The question presented to the court was whether the irrebuttable presumption of prejudice set forth in Insurance Law §3420(c)(2)(B) applies where a default judgment entered against an insured prior to notice is vacated after notice.

On August 16, 2011, plaintiffs commenced the underlying action by serving a summons and verified complaint on Prince Plaza via the office of the Secretary of State. On January 9, 2012, a default judgment was entered against Prince Plaza.  

Prince Plaza claims that it first received notice of the accident and lawsuit on or about February 24, 2012 when it received a copy of the default judgment with notice of entry from plaintiffs.  On or about February 28, 2012, Prince Plaza filed a claim for coverage with Century, its insurer.  In response, Century disclaimed coverage to Prince Plaza based on, inter alia, late notice.  Thereafter, in a stipulation so-ordered on June 11, 2012, the default judgment against Prince Plaza was vacated on consent of the parties and the matter was restored to the active status calendar.

By way of background on Insurance Law §3420(d), prior to 2009, liability insurers in New York were not required to show any prejudice as a result of late notice in order to disclaim coverage.  Recognizing the hardship oftentimes placed on insureds and injured parties under the no-prejudice rule and to bring New York into the mainstream, the legislature amended the statute and adopted a notice-prejudice standard for policies issued or delivered in New York on or after January 19, 2009.

While getting rid of the no-prejudice rule, the legislature did include section (c)(2)(b), which provides:  “[n]otwithstanding subparagraph (A) of this paragraph, an irrebuttable presumption of prejudice shall apply if, prior to notice, the insured’s liability has been determined by a court of competent jurisdiction or by binding arbitration; or if the insured has resolved the claim or suit by settlement or other compromise.”

In finding this presumption did not apply here, the court held that while Prince Plaza’s liability “had” been established, it no longer “has been” established because the default judgment was vacated and the matter is currently pending on the active status calendar. Therefore, based on the plain language of the statute, the irrebuttable presumption of prejudice does not apply.

The court felt that this interpretation of the statute was consistent with the express legislative intent of preventing insurers from denying coverage for claims based on a technicality. Here, the default judgment was vacated on consent of the parties approximately three months after Century received notice. In the court’s opinion, there was no evidence that Century expended any time or resources to have the judgment vacated.  Nor did Century allege that it was, in fact, prejudiced in any way.  Under these circumstances, it was the Court's view that applying an irrebuttable presumption that Century has been prejudiced would allow Century to disclaim coverage over an inconsequential technicality.

This was precisely what the legislature intended to prevent.

In the alternative, Century argued that Insurance Law §3420(c)(2)(A) creates a presumption of prejudice in this case because Prince Plaza failed to provide notice of the occurrence or claim within two years of the accident.
Century asserted that the failure to maintain a correct address with the office of the Secretary of State is, in itself, insufficient to excuse late notice to an insurer.  In decline to adopt Century’s view, the court relying on an uncontroverted affidavit that if Prince Plaza had updated its address with the office of the Secretary of State, it still would not have known about the accident until shortly after August 26, 2011, when the summons and complaint were served upon the Secretary of State.  As such, it would not have been practicable for Prince Plaza to have provided notice to Century prior to that time.  Thus, notice was provided to Century within two years of the time required under the policy, and the presumption did not apply. 

The court then reasoned as Century did not allege prejudice because of the delay, and in turn did not prove it, the motion was denied.

Bad Faith

03/20/14       Rowe v Nationwide Ins. Co.
United States District Court, Western District Pennsylvania
Court Finds No Contractual or Statutory Bad Faith Under Pennsylvania Law
Christopher Rowe was sitting in his vehicle when he was struck from behind by a car driven by Opal Gayle.  At the time of the accident, Rowe’s vehicle was covered by an automobile policy issued by Nationwide with UIM coverage and collision. 

After Gayle’s carrier tendered its $15,000 policy limit, Rowe submitted a UIM claim demanding an amount in excess of $300,000.  Nationwide offered $5,000 to settle the case.  Rowe declined the offer and commenced an action against Nationwide.  Nationwide then removed the action to federal court.  The complaint contained causes of action for both breach of contract and contractual and statutory bad faith.  While the UIM claim was resolved at mediation for $50,000 shortly after suit was filed, the settlement did not resolve the bad faith claims, which are at issue here.

As to the common law claim, under Pennsylvania law, a duty of good faith and fair dealing is implicit in an insurance contract.  To prove a contractual bad faith claim, a plaintiff must show that the insurer’s conduct was unreasonable or negligent.  When a party sues for damages stemming from an insurer’s bad faith handling of a claim, the damages sought may be different from damages compensated by payment pursuant to the policy.

In considering Rowe’s argument, based on contractual bad faith, the court held that Nationwide’s settlement offers were based on its honest, considered judgment after a careful and through investigation.  Rowe’s disagreement with Nationwide over the value of his claims is simply not a basis for a contractual bad faith claim. 

Next, the court examined the statutory bad faith claim considering the property damage and UIM portion separately.  Rowe challenged Nationwide’s handling of his property damage claim on numerous grounds.  The court dismissed each of these allegations in turn submitting that Nationwide’s value was reasonable as it was based on the CCC Valuescope Market Report.  Also, Nationwide only indicated it would abandon the vehicle after Nationwide finished its evaluation, tendered an offer on the car and repeatedly communicated with Rowe about the status.  Moreover, while both the court and Nationwide agreed that the additional damages should not have happened, in the court’s opinion, this did not establish bad faith in handling the claim. 

Likewise with regard to the UIM claim, the court found no bad faith on Nationwide’s part.  Nationwide’s initial scheduling of an IME in Pittsburgh even though Rowe had travel restrictions was not done in bad faith.  The evidence showed that Nationwide attempted to reschedule the IME after those restrictions were lifted, and even offered to have a different doctor, closer to Rowe, perform the review.  The court further found no delay in Nationwide’s handling of the claim or that its offers were unreasonable.  A number of factors, out of Nationwide’s control contributed to prolong resolution of the claim, including the time taken to tender the underlying policy limit, obtain the UIM package and collect all records.  Accordingly, in light of this analysis, the court disclaimed the bad faith causes of action. 


Earl K. Cantwell

[email protected]


11/05/13       Carneal v. Travelers Casualty Insurance of America
2013 WL 5939879 (W.D. KY
Adjuster’s Expert Testimony Limited 
In this case, a United States District Judge excluded projected expert witness testimony on behalf of a claimant seeking recovery on a water damage claim on the policy and for bad faith.  The claimant sustained water damage to its building, filed a claim with Travelers, and the insurance company concluded that the damage was caused by faulty installation of a rubber membrane roof.  Therefore, the claim was denied under a policy exclusion for faulty or defective construction.  The claimants sued alleging negligence by the Travelers and also violation of Kentucky statutes.  The plaintiffs indicated they were going to call an experienced claim adjuster as a witness to testify with respect to the claims handling, whether Travelers acted in bad faith, and the bases for denying the claim.  A motion to exclude this testimony was granted by the District Court.

The Court first determined that the adjuster was not qualified to testify on whether the roof was defectively installed.

Second, as to policy exclusions, the court said any opinions rendered would only be interpretation of the policy language and legal conclusions with respect thereto. 

Third, with respect to the alleged statutory violations, the projected testimony would be no more than legal conclusions or recitations about the statutory provisions and added nothing to the facts of the case.

The projected expert witness testimony would not address the facts of the case and would not assist the trier of fact.  To the extent it consisted of argument about statutory and policy provisions, those were deemed matters of law for the court to consider and not a proper subject for expert witness testimony.

There are four lessons to be learned from this case:

  • Expert testimony must relate to the facts of the case and be focused upon assisting the jury or other trier of fact.  If the expert witness is not qualified to comment on the actual facts in issue, such as whether the roof was defectively constructed in this case, it is not probative and irrelevant.
  • Expert testimony purporting to define or interpret policy language and definitions, exclusions, endorsements, etc. may be argued to constitute questions of law which are for the court to interpret and determine.
  • Likewise, expert witness testimony regarding alleged statutory or regulatory violations may be no more than argumentative legal conclusions which again are improper and invade the province of the court.
  • Once again, in a contested coverage or claim denial situation, the federal courts are usually a more neutral forum for carriers with better prospects of success on motions to dismiss, motions for summary judgment, motions such as this to strike expert witness testimony or limit proof at trial, and in obtaining favorable trial rulings.


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