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Coverage Pointers - Volume XV, No. 6

Dear Coverage Pointers Subscribers:

Yes, it’s true.  We know you were wondering.  If you have a situation, we do indeed love situations.

Hurwitz & Fine has offices across the state:

We are still surprised when we learn that folks do not realize that we have offices across New York State, including Melville, Long Island (serving the NY Metro area) and Albany, covering the Capital and Leatherstocking Districts as well as the North Country.  We’re everywhere.

Thanks for all the nice congratulatory notes about our firm’s recognition by other lawyers in Super Lawyers and Best Lawyers in America. Our goal is always to be on the cutting edge and feel blessed by the support of other lawyers and clients.

We hope to see some of you on Monday at the Law School for Insurance Professionals program in Buffalo or at the upcoming programs in NYC and Long Island.  Beth and I will be presenting on crafting the ultimate coverage position letter at those three venues.

And there is more great programming discussed below.

Special kudos to Dave “Labor Law” Adams and Steve “Indemnity Guy” Peiper for the great Labor Law Webinar produced and broadcast on Thursday.

The courts are back in full swing and by the end of the month; the floodgates of appellate decisions will reopen.

Sheldon Hurwitz Center for Alternative Dispute Resolution:

We were pleased to dedicate the Sheldon Hurwitz Center for Alternative Dispute Resolution on Thursday night, with members of his family and almost our entire legal staff in attendance.  What a meaningful tribute to our late co-founder and mentor to so many.

Our Center is now in full operation with three of us handling mediations, Ann Evanko, Harry Mooney and your scribe. Let us know how we can help.

2013 Law School for Insurance Professionals or “So You Want To Write A Great Coverage Letter?”:

The New York State Bar Association, Torts, Insurance & Compensation Law Section has scheduled the 2013 Law School for Insurance Professionals. Our own Beth Fitzpatrick is a state-wide Co-Chair of the program. It will be presented in the following venues:

This Monday, September 16, 2013
Buffalo with Kohane presenting

Friday, October 4, 2013
New York City with Fitzpatrick presenting

Thursday, October 10, 2013
Syracuse and Long Island with Fitzpatrick presenting

Topics Include:

  • Back to the Basics: Tips for Writing a Great Position Letter and Avoiding the Common Pitfall

 

Dan Kohane to speak on this topic in Buffalo; Beth Fitzpatrick to cover this topic in NYC and Long Island.

  • Strategic Use of the Declaratory Judgment Action — Understanding the Direct Action Statute in NY

 

  • The Use of Social Media In Claims Investigations, Discovery and Jury Selection
  • The Role of the Insurance Professional In Bad Faith Litigation

 

  • So Many Liens – So Little Time
  • What’s My Case Worth?

 

Register online now at www.nysba.org/LSFIP13  to guarantee your seat at the program.

FDCC Insurance Industry Institute (I-3):

We’ll be there – you should too!
Click here for brochure and additional information

When?October 2 - 4, 2013
Where? New York Athletic Club

The I-3 Has Earned An International Reputation As The Premier Conference For Senior Level Insurance Executives.

  • An intensive two-day futurist program taught by some of the industry’s leading professionals.
  • A cutting-edge curriculum that emphasizes some of the toughest issues executives may face, and how to be prepared to handle them effectively.
  • A rare opportunity for leaders to meet, greet and network with your high-level peers and explore issues of current and future interest.

Hotel Reservations:
New York Athletic Club
180 Central Park South
New York, NY 10019
(212) 767-7135 or (800) 699-3293, or email [email protected]
Reservation code: Federation of Defense & Corp. Counsel

Peiper’s  Prose:

There is light at the end of the tunnel.  Trust us, courts are back at work and decisions will again soon flow.  For now, however, we’ve only one measly decision to offer. 

First, my regrets for those of you I missed at the Law School for Claims Professionals in Albany this morning.  In my absence, you were treated to Beth Fitzpatrick’s version of the social and media investigations update.  Nonetheless, I wish I could have been there to say hello.

Instead of Albany, I was sequestered in our conference room this morning with David Adams.  For those of you who listened in, we cannot thank you enough for supporting our initial venture into the world of webinars.  A special tip of the cap to David, his executive assistant Julie Broyles and our IT staff who ensured a smooth process.  We can only hope that David and I performed half as well as they did in putting this together.

For those of you who did not tune in, or have no idea what I am talking about, David and I offered a two hour webinar on handling complex Labor Law cases.  David lent his vast experience in handling hundreds of complex Labor Law cases.  I provided some insight on how coverage counsel can be used to resolve cases quickly and efficiently.  Our program was made a large success by the more than 100 Labor Law Pointers/Coverage Pointers subscribers that tuned in.  Again, we cannot thank you enough for your support.  We hope it provided some useful insights on your day to day operations, and that you enjoyed it half as much as we did putting it together. 

This was our first, but by no means will it be our last.  At your pleasure, we’d love to hear from you on what you liked about the program, what you disliked about the program, and what we could do to make it more useful for you. 

Finally, one final thought, please let us know if you’d be interested in a coverage based webinar.  If so, what topics, if any, would be useful?  We love doing this, but want to ensure that our efforts are tailored to areas that hold the interest of our readership.   Your feedback, on more than one occasion in the past, has resulted in changes to the newsletter and how we present it.  

That’s it for now.  Thanks for reading, and thanks again for your continued support of our efforts. 

Steve
Steven E. Peiper
[email protected]

One Hundred Years Ago – A Double Passion Killing:

New York Times
September, 13, 1913
Mr. Godbee Gets Life Sentence for Killing Former Husband’s Wife

MILLEN, Ga., Sept. 13. – Mrs. Edna Perkins Godbee was found guilty today of the murder of Mrs. Florence Godbee, wife of her divorced husband.  The jury recommended mercy.  She shot and killed her former husband and his wife in the Millen Post Office a few weeks ago.

Mrs. Godbee pleaded that she had long been mistreated by her husband before, and since his divorce and that he applied a vile name to her on the fatal morning.  Her defense for killing the Judge’s wife was that after she began shooting she was so excited she did not know what she did.

Judge Hammon sentenced Mrs. Godbee to remain in the penitentiary for the “rest of her natural life.”

The dead woman was from Williamsport, Penn.  The defense is expected to appeal. 

Actually, she less that eight years in jail for the two killings…

The Constitution
Atlanta, GA
Thursday, July 28, 1921

FULL PARDON GRANTED
MRS. EDNA P. GODBEE

Mrs. Edna P. Godbee, who resides at Perkins station, seven miles from Millen, yesterday received the new that she had been given a complete pardon by Governor Thomas W. Hardwick “very quietly, action coming as a surprise,” according to a dispatch received by The Constitution Wednesday night. 

Mrs. Godbee, after being divorced from her husband, killed him and the woman he had subsequently married.  She was convicted of murdering Mrs. Florence Godbee, but the charge of murdering her former husband was not pressed.

In 1920 Governor Hugh M. Dorsey granted her a parole, and she had been at liberty from that time.  For a fascinating story about this case, click here.

Jen’s Gems:

This evening we had our firm’s biannual attorneys meeting.  While it is always nice to spend an evening discussing the status of the firm and our state-wide growth efforts, my favorite part of these nights is getting to see all of our attorneys from across the state and catching up, sharing a drink and a few laughs.  We truly do have a good group here. 

But anyways, this week I am reporting on an interesting trial court case arising out of asbestos claims related to the construction of the World Trade Center towers that is worth reading.  The decision addressed a motion to dismiss a General Obligations Law § 349 claim and a bad faith component.  As many of you know, bad faith continues to be limited in New York, and this case maintains the strict pleading requirements we follow. 

Also, I wanted to send out a quick congratulations to Dave Adams and Steve Peiper as I hear their Labor Law webcast today was quite well received.  Until next week…

Jen
Jennifer A. Ehman
[email protected]

Girl Babies and Boy Babies, a Letter to the Editor a Century Ago (No Response Located):

To the Editor of The New York Times:

It is a well known biological or other fact that women cry much more frequently and easily than men do, but do girl babies cry any oftener or more easily than boy babies?  Please answer and settle a disturbance in our club.

                                                                        H.V.B., Secretary Nupop Club.
            Brooklyn, Sept. 12, 1913

Audrey’s Angle:

The leaves may be changing in Western New York but it does not feel like fall is approaching when the temperature is an unseasonal 89 degrees.  With fall on the horizon many are looking at choosing and scheduling educational programs they will attend before year’s end.  I hope you will add the DRI Insurance Coverage and Practice Symposium to your list.  It is being held in NYC from December 12-13.  Please note that it is at a different hotel this year – the Sheraton Times Square Hotel.  The program will feature speakers from Allstate Insurance Company, AIG, State Farm Insurance Company, Insurance Information Institute, and Resolute Management, Inc.  If you plan on attending it is highly recommended that you book your hotel early as hotels tend to completely fill up that time of year.  If you need a brochure or information on how to register for the program please send me an email at [email protected].

This edition includes a New Jersey case that may be of interest to those who handle personal lines coverage matters regarding resident relative.  I have always been interested in resident relative and use and operation questions as they are highly fact specific.  Although this case indicates the evidence was one sided.  The topic of resident relative is one that requires a bit of investigation upon notice of the accident or claim and asking the right line of questions of the named insured and the driver seeking coverage to ferret out whether there is sufficient basis to conclude the individual was or was not a resident relative.

Enjoy the last bit of summer.

Audrey
Audrey A. Seeley

Bomb’s Away?  A Century Ago:
The New York Times
September 13, 1913

SCARE OVER BABY DOLL

Post Package Sent to Young Father Solemnly Investigated

There was a parcel post package in the mall for Frederick Denight of 940 Courtlandt Avenue, the Bronx, yesterday morning.  Denight was startled when he read on the box:  “from John Johnson, No. 156 West 156th Street.  This package contains a toy.”

“Who’s John Johnson?” exclaimed Denight.  “Not for me.  That’s a bomb.”

Denight took the package with great care to the Morrisania Police Station.  Lieut. Wines, with Detectives Flynn and Myers, agreed to investigate.  They dipped the box in water. 

“It floats,” observed Wines.

“Of course it floats.” said Flynn.

“That shows it isn’t dynamite.”

For fifteen minutes the box was allowed to soak and then the wrapping paper fell off.

A red rubber head bobbed up, and after a while a whole baby doll was visible.  The much frightened Denight was recalled from the Captain’s waiting room.

“Look here, what do you think of this joke?” asked Wines.

“It’s a mystery to me,” said Denight solemnly.

“Are you married?” asked Wines.

“Yes, Sir, but my wife--”

“Any kids?”

“A girl, born only yesterday,” said Denight.

“Well, when you are out of a job,” said the Lieutenant, “come around here and may be I can make a detective out of you.” 

Mike’s Missives:

While the last couple of months have provided a bounty of serious injury related topics to fill the void at the Appellate Division, this week we were overtaken by the silence.  The Appellate Division has slumbered too long.  Searching for anything new related to the serious injury threshold in New York felt like running in a dream: a lot of energy was expended, but nothing was gained.

I do not mean to suggest this year is exceptional.  Last year, only one case was issued by the Appellate Division for the mid-September issue of Coverage Pointers.  In Pakeman v. Karekezia, the First Department rejected a plaintiff’s 90/180-day claim because he continued to work, even though it was light duty.  This case reflected the fairly consistent rule throughout New York that the ability to work, even in a somewhat limited capacity, for 91 of the 180 days immediately after an accident is fatal to a 90/180-day claim.

If last year is any indication, next issue should mark the return to a more normal case load.  Until then, I hope you enjoy the fading days of summer.

Michael
Michael Scott Kristansen
[email protected]

ABA’s 2013 Women in Insurance Networking CLE Workshop
October 15, 2013, Chicago

The second annual Women in Insurance (WIN) Networking CLE Workshop, sponsored by the Insurance Coverage Litigation Committee of the Section of Litigation of the American Bar Association, will take place on October 15, 2013, in Chicago. It features panels on emerging issues, presented by nationally known attorneys, insurers, brokers and risk managers.  The inaugural workshop held last year in Washington, DC, was a great success, with more than 100 participants. This year, we hope to set a new attendance record and increase participation by in-house industry representatives. Contact the program co-chairs about registration discounts for in-house personnel. 

Details on the event as well as registration information are available at this link.

Beth’s Banter

Dear CP Friends

I had the great pleasure this week to travel up to Albany and lecture at the Law School for Insurance Professionals program held at the New York State Bar Association.  It was great to see so many colleagues that I have had the great privilege of working with through the years.  I discussed the Ethical Use of Social Media in Claims Investigations and Discovery, but as may be expected, much of the chatter was about the K2 decision and its effect on claims handling, as well as conjecture as to what may happen in light of the grant of reargument by the Court of Appeals just 10 short days ago.

For those of you in Buffalo, you can watch Dan discuss disclaimers and K2 and its impact on September 16th, while I invite the downstate folks to see me do the same in New York City on October 4th and on Long Island on October 10th.   We have assembled an excellent group of panelists, including Judge Silver in NYC and Judge Farneti on Long Island.  Space is filling quickly, so be sure to reserve your spot on line.  If you need assistance, please don’t hesitate to reach out to me.

I have neither Bitz, nor Banter this week, but stay tuned.

Beth
Elizabeth A. Fitzpatrick
[email protected]

 

Oscal Dugey Debut – a Century Ago

Oscar Dugey had his major league debut, one hundred years ago today, with the Boston Braves of the National League.
This article was written by Charlie Weatherby.

Oscar Dugey, a utility player, was called “the luckiest kid in baseball” after playing on two straight pennant winners, in 1914 and 1915. One of the best infielders to come out of the Texas League in the 20th century’s first two decades, the 5-foot 8, 160-pound right-hander hit just .194 in 195 games during his six years with the Boston Braves and Philadelphia Phillies. Used primarily as a pinch-hitter and pinch-runner, Dugey played in only 82 games as an infielder/outfielder. Baseball Magazine called him a “brainy man…. [who is] only a fair fielder, a weak hitter and has a none-too-strong arm.” He was at his best on the base paths, where Baseball Magazine’s William Phelon described him as one “who can run like the devil on a wheel.” Sporting Life said that Dugey “comes up with sensational work when sensational work is needed. [He] can take the hundred to one shots and get away with them. His reckless base running would be the ruin of any other player. … Jake takes the long chances and wins.”

Brainy, quick-witted, and shrewd, Jake Dugey made his mark in the dugout, first as an aide to George Stallings on the 1914 “Miracle Braves,” then with Pat Moran’s Phillies, and later as a coach with Bill Killefer’s Chicago Cubs. The Boston Herald said, “Oscar knows baseball as played in the National League as even Pat Moran or John McGraw. You can say no more.” The Wilkes-Barre Times said Dugey “knows more baseball than lots of veterans nearly twice his age.” Renowned as a bench jockey, Dugey was also “one of the craftiest interpreters of signals in either major league,” according to the Fort Worth Star-Telegram.

Jake Dugey spent his later years living at the Ambassador Hotel in Dallas. A March 1965 Denton Record-Chronicle article mentioned that he had suffered a stroke in 1962 that left him with impaired vision. A retired painter, he died at Parkland Hospital on January 1, 1966, after he fell and fractured his hip, an injury that was exacerbated by pneumonia and chronic lung disease. Dugey is buried at Oakland Cemetery in Dallas.

In This Week’s Edition:

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
              

  • UM Award Sustained

 

MICHAEL’S MINI-MISSIVES ON SERIOUS INJURY UNDER NO-FAULT LAW
Michael P. Scott-Kristansen

[email protected]  

  • No cases were reported since the last issue. 

 

MARGO’S MUSINGS ON NO-FAULT
Margo M. Lagueras

[email protected]

Arbitration:

 

  • Peer Review Which Relies, in Part, on Reports Not Pertaining to the EIP, Is Insufficient to Support Denial for Lumbar Surgery
  • Three-Year-Old IME Does Not Support Denial
  • Reviewing Doctor Must Possess Necessary Expert Credentials in Particular Field
  • Respondent Fails to Prove That Injuries Were the Result of an Assault
  • Injured Person Found Not to Be an EIP
  • Conclusory Peer Review Fails to Support Denial
  • “Law of the Case” Doctrine Results in Upholding of Denial

Litigation:

  • Failure to Respond to EUO Requests Precludes Objections
  • Defendant Successfully Establishes Plaintiff Sued Wrong Party

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

  • Question of Fact on Fraud Defense; Still Enough to Dismiss Bad Faith Claim

 

 
BETH’S BANTER OF COVERAGE “B” AND FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]

  • Nothing this week.

 

AUDREY’S ANGLES ON THE NATIONALLY NOTEWORTHY
Audrey A. Seeley
[email protected]

 

  • Oregon – CERCLA 104(e) Letter and General Notice Letter Constitute a “Suit” That Triggers Defense Obligation Under CGL Policy
  • 21-Year-Old Son, While Domiciled in Florida, Had Residency With Mother in New Jersey, Thus Policy Exclusion Inapplicable.

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

  • Financial Service Law §405

 

Immunity Reporting or Furnishing Information in Suspected Fraud Cases

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal

[email protected]

  • Fifth Circuit Certifies Question to Texas Supreme Court

 

KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]

Bad Faith:

  • Defense Not Ended by Policy Exhaustion; Court Focuses on the Sophistication of the Parties in Dismissing the General Obligations Law Section 349 Claim
  • Under Arkansas Law, the Eighth Circuit Affirmed the District Court’s Post-Verdict Motion for Judgment as a Matter of Law in Relation to Defendant’s Counterclaim of Negligence and Bad Faith

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

KEEP “STRANGERS” TO THE POLICY AT A DISTANCE

 

Hope to see some of you at some of the upcoming presentations.  Hang on to the last days of summer!

Dan

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]
Website:   www.hurwitzfine.com
LinkedIn: www.linkedin.com/in/kohane

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Jennifer A. Ehman
[email protected]

INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
[email protected]

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

Michael P. Scott-Kristansen
Diane F. Bosse

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]

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

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]


 Elizabeth A. Fitzpatrick

Diane F. Bosse

Index to Special Columns

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

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

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

09/11/13       In the Matter of Klein v. GEICO General Insurance Company
Appellate Division, Second Department
UM Award Sustained
This was an application to vacate an uninsured motorist arbitration award.  The claim was that the decision was not rationally based and/or that the arbitrator was biased or had the “appearance of bias”.

The Second Department found that there was a rational basis to sustain the award.
Editor’s Note:  Very difficult to overturn an arbitrator’s award.

 

MICHAEL’S MINI-MISSIVES ON SERIOUS INJURY UNDER NO-FAULT LAW
Michael P. Scott-Kristansen
[email protected] 

No cases were reported since the last issue. 

 

MARGO’S MUSINGS ON NO-FAULT
Margo M. Lagueras
[email protected]

Arbitration

09/04/13       Cameron B. Huckell, MD v. Peerless Insurance Co.
Erie County, Arbitrator Michelle Murphy-Louden
Peer Review Which Relies, in Part, on Reports Not Pertaining to the EIP, Is Insufficient to Support Denial for Lumbar Surgery
At issue was the reimbursement for lumbar surgery that was denied based on a peer review by Dr. Salvatore Corso.  The Arbitrator found the peer review unpersuasive for several reasons.  First, it was not based on all the medical records as Respondent did not forward a lumbar MRI report or the operative report for Dr. Corso’s review.  In addition, Dr. Corso failed to comment on the medical records that clearly showed that the EIP’s complaints of severe, constant lower back pain continued despite extensive conservative treatment.  Finally, Dr. Corso’s opinion was based, in part, on his review of two progress reports that were entirely irrelevant because they did not pertain to the EIP and should not have been sent to Dr. Corso.  As such, the denial was not upheld.

09/04/13       Vascular Intervention Associates v. Nationwide Mut. Fire Ins. Co.
Erie County, Arbitrator Michelle Murphy-Louden
Three-Year-Old IME Does Not Support Denial
Applicant sought reimbursement for a cervical discogram and post-discogram CT scan.  Respondent denied based on an IME performed nearly three years before the disputed services.  The Arbitrator found that the medical records showed that the EIP’s condition had changed significantly in the three years since the IME and that the treating doctor’s examination reports were more persuasive than the IME.  Therefore, the performance of the disputed services was found to be justified and reimbursement was awarded in full.

09/04/13       RS Medical v. Praetorian Insurance Co.
Erie County, Arbitrator Douglas S. Coppola
Reviewing Doctor Must Possess Necessary Expert Credentials in Particular Field
Respondent retained an internist and gastroenterologist to review the DME prescribed by a chiropractor.  The Arbitrator noted that chiropractic is separate and distinct from the practice of internal medicine, so the reviewer’s standards were not controlling.  The Respondent failed to establish that its reviewer was familiar with the generally accepted standards of care or that he had the requisite skill, training, education, knowledge or experience to render his opinion reliable.  As the reviewer did not show how the ordering of the particular equipment departed from generally accepted standards, Respondent’s denial was not upheld.

09/03/13       Applicant v. Geico Ins. Co.
Erie County, Arbitrator Veronica K. O’Connor
Respondent Fails to Prove That Injuries Were the Result of an Assault
Applicant, one of three pedestrians hit by a speeding car in a parking garage, sought lost wages and Respondent denied the claim based on its investigation, which resulted in a determination that the injuries were caused by an assault and not a motor vehicle accident.  In support, Respondent relied on the Second Department 2008 decision in State Farm Mut. Auto. Ins. Co. v Langan.  The Langan decision went up to the Court of Appeals.  The Court of Appeals affirmed and held that whether an occurrence is an accident or an intentional assault must be determined from the insured’s perspective.  The Arbitrator specifically held that, while Respondent chose to rely on the Langan decision as the basis for its denial, it clearly failed to review the entire opinion which actually did not support the denial.  However, because Applicant was only entitled to a monthly wage loss benefit of $2,000, she could only be awarded $4,000 for the period in dispute rather than the almost $20,000 she claimed.

09/03/13       Applicant v. A. Central Insurance Co.
Erie County, Veronica K. O’Connor
Injured Person Found Not to Be an EIP
Respondent denied reimbursement for office visits and x-rays claiming that its investigation, including several EUOs, revealed that the injured person was not an EIP under Regulation 68.  During his EUO, Applicant admitted that he did not know how he was injured.  The ER records indicated that the injuries resulted from a fall while walking and not from a motor vehicle accident.  The insured testified that he had lent his vehicle to his nephew, who told him that when he pulled into a parking lot he found Applicant on the ground bleeding and clearly intoxicated, so he took Applicant to the hospital.  The insured further testified that he inspected his vehicle and did not find any damage that would indicate any contact between his vehicle and Applicant.  The Arbitrator, after reviewing the evidence, upheld the denial.

09/03/13       RES Physical Medicine & Rehab. Services v. Geico Ins. Co.
Erie County, Arbitrator Kent L. Benziger
Conclusory Peer Review Fails to Support Denial
At issue was the medical necessity of cervical intraligamentous prolotherapy injections with ultrasound guidance.  Respondent denied based on a peer review which was rebutted by the treating provider.  The rebuttal included authoritative sources supporting the need for the injections as well as a list of hospitals utilizing the procedure.  In contrast, the peer review did not offer a thorough discussion as to the scientific basis for his determination that the injections were not medically necessary, but rather simply stated, in conclusory manner, that the injections are not recommended for acute, subacute or chronic lower back pain.  The Arbitrator found that neither the guideline cited by the peer review, nor the peer review itself, offered any substantial discussion or analysis as to why the procedure was not recommended and, as such, Respondent failed to disprove Applicant’s contentions.

08/28/13       RS Medical v. Geico Insurance Co.
Erie County, Arbitrator Michelle Murphy-Louden
“Law of the Case” Doctrine Results in Upholding of Denial
The durable medical equipment (DME) at issue was dispensed in October 2010 for injuries allegedly sustained in a motor vehicle accident in April 2010.  In July 2010, the EIP underwent an orthopedic IME as well as a chiropractic IME.  The Arbitrator stated that the chiropractic IME was not sufficient to deny the DME, which was prescribed by a physician.  Moreover, the chiropractor, despite opining that the EIP was not in need of DME, specifically stated that her opinion was based solely on a chiropractic perspective.  However, the orthopedic IME, which determined that the EIP was not in need of any further orthopedic treatment, was sufficient and had already been found sufficient by three other arbitrators for other treatment in related cases.  Finding that Applicant failed to present any new evidence that would require this Arbitrator to ignore the “law of the case” doctrine, this Arbitrator abided by the prior opinions of her colleagues and denied the claim.

Litigation

08/26/13       Canarsie Chiropractic, P.C. v. State Farm Mut. Suto. Ins. Co.
Appellate Term, Second Department
Failure to Respond to EUO Requests Precludes Objections
Defendant moved to dismiss the complaint on the ground that plaintiff failed to comply with request for EUO.  Plaintiff argued that defendant failed to prove it timely mailed the EUO scheduling letters and denials and that the EUO requests were not justified.  The Civil Court granted defendant’s motion and plaintiff appealed.  On appeal, the Appellate Term affirmed finding that the affidavits defendant submitted established that the EUO letters and denials were timely mailed.  Because plaintiff did not respond to the EUO requests in any way, it could not now object to the requests, making discovery as to the reasonableness of the requests unnecessary to oppose the motion.

08/21/13       Great Health Care Chiropractic, P.C. v. Omni Indem. Co.
Appellate Term, Second Department
Defendant Successfully Establishes Plaintiff Sued Wrong Party
Defendant moved to dismiss the complaint on the ground that it had not issued a policy covering the accident and that therefore, plaintiff had sued the wrong party.  In support, defendant proffered affidavits from its litigation manager and the claims litigation manager of American Independent Insurance Company (AIIC).  The affidavits established defendant’s lack of coverage defense as the AIIC claims litigation manager attested that his company issued the policy that would cover the loss.  The Civil Court was reversed and defendant’s motion to dismiss the complaint was granted.

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

09/11/13       Drysdale v Allstate Prop.
Appellate Division, Second Department
Question of Fact on Fraud Defense; Still Enough to Dismiss Bad Faith Claim
Plaintiff’s automobile was insured by Allstate.  On March 7, 2007, plaintiff reported her car stolen.  It turns out, plaintiff’s car was, in fact, found on fire in a different part of Brooklyn.  When it was determined that the fire had been intentionally set, Allstate denied and disclaimed coverage on the basis that plaintiff had participated in the loss of her vehicle.

During litigation, both parties moved for summary judgment.  Plaintiff established the existence of the insurance policy, that the car qualified for coverage under the policy, and that all conditions precedent to coverage had been met. 

Defendant pointed out that Ms. Drysdale had been charged with arson, but not convicted due to a violation of the right to speedy trial.  This, along with other evidence, established a question of fact as to the cause of loss and thereby resulted in both motions being denied on a question of fact.

However, the simple fact that Allstate had established a question of fact relative to the cause of loss indicated that Allstate had a reasonable basis to issue a denial.  Accordingly, under such circumstances, Allstate’s actions were not undertaken in Bad Faith.

BETH’S BANTER OF COVERAGE “B” AND FITZ’ BITS

Elizabeth A. Fitzpatrick
[email protected]

No bantering this week.

 

AUDREY’S ANGLES ON THE NATIONALLY NOTEWORTHY

Audrey A. Seeley
[email protected]

08/30/13       Anderson Brothers, Inc. v. St. Paul Fire and Marine Ins. Co.,
U.S. Court of Appeals, Ninth Circuit
Oregon – CERCLA 104(e) Letter and General Notice Letter Constitute a “Suit” That Triggers Defense Obligation Under CGL Policy.
Anderson, who was insured by St. Paul Fire and Marine Insurance Company (“St. Paul”) under two CGL policies, owned and leased property within the boundaries of a Portland Federal Superfund Site (“the Property”).  In January 2008, Anderson received a letter from the US Environmental Protection Agency (“EPA”), known as a CERLCA section 104(e) letter.  The 104(e) letter advised Anderson that the EPA sought its cooperation in the EPA’s investigation of the release of hazardous substances at the Property.  The letter was an information request and advised that while voluntary cooperation was sought, there was a legal requirement to comply with the information requested.  Anderson’s failure to comply could result in an enforcement action and civil penalties.  Anderson tendered the letter to St. Paul for a defense and was refused.

In November 2009, Anderson received a general notice letter from the EPA advising Anderson that it was identified as a potentially responsible party (“PRP”) and all PRPs may be required to take clean up action.  Anderson tendered the letter to St. Paul for a defense and was refused.

This declaratory judgment action was commenced and the Ninth Circuit held that under the CGL policy, the 104(e) letter and general notice letter were a “suit” triggering St. Paul’s defense obligation.  The Court, recognizing that the issue presented concerned state contract law, provided a background of CERCLA, which revealed that the aforementioned letters cannot be ignored without serious negative consequences.  Thus, many courts have held that a general notice letter identifying a party as a PRP is the functional equivalent of a suit.

In Oregon, two cases render the term “suit,” with regard to environmental cases, ambiguous in a CGL Policy.  As required, the Court resolved the ambiguity in the insured’s favor.  The Court went on to point out and apply the definition of “suit” adopted by the Oregon legislature in 1999 under the Oregon Environmental Cleanup Assistance Act (“OECAA”).  This statute actually instructs courts to apply the suit definition when interpreting CGL policies wherein EPA administrative action cases are implicated.

The Court then went through the four prong definition of “suit” under OECAA and concluded that the section 104(e) letter and general notice letter fell within that definition. 

It is noted that the Court rejected St. Paul’s argument that applying OECAA’s suit definition violated the US Constitution Contracts Clause and Oregon Constitution.  The Court reasoned that under Oregon common law, the term “suit” was deemed ambiguous with regard to environmental claims.  Thus, the Court must apply Oregon contract principles and construe the definition in favor of the insured.  The Court continued on to indicate that OECAA’s definition codifies the common law and does not run afoul of the Contracts Clause or Oregon Constitution.

08/29/13       Giangerelli v. Gari
Superior Court, Appellate Division, New Jersey (Unpublished Opinion)
21-Year-Old Son, While Domiciled in Florida, Had Residency With Mother in New Jersey, Thus Policy Exclusion Inapplicable.
The central issue in this coverage dispute between IFA Insurance Company (“IFA”) and New Jersey Manufacturers Insurance Company (“NJM”) is whether an exclusion’s exception, which considered whether a 21-year-old driver was a resident relative of his mother’s household, applied.  Justin Gari, who was 21 years old, was involved in a July 6, 2008, two car motor vehicle accident while driving a car owned by his mother, Joanne Macolino.  Officer Giangerelli was allegedly injured during that accident and commenced a bodily injury action against Gari and Macolino.  Giangerelli had UM and UIM coverage with NJM and sought coverage under same.  Macolino had a personal auto policy with IFA.

IFA commenced a declaratory judgment action against Gari, seeking a declaration that there was no insurance coverage for Gari in the Giangerelli action pursuant to the policy’s exclusion for using a motor vehicle without a reasonable belief that Gari was entitled to do so.  IFA further argued that the exclusion’s exception for family members did not apply as Gari was not a resident relative of his mother’s household.   NJM sought to intervene.  It is noted that Macolino was dismissed from the bodily injury action via stipulation.  The bodily injury action and declaratory judgment action were consolidated.  Later, the bodily injury action was dismissed without prejudice for private arbitration and the declaratory judgment action proceeded to trial.

At trial, the following testimony was elicited regarding Gari’s residency with Macolino.  Macolino divorced Gari’s father with Gari was four or five years old and received custody of Gari.  When Gari was 10 or 11 years old he went to Florida to live with his father.  Gari would visit Macolino every summer and every holiday.  Gari had his own bedroom in her apartment and occasionally received mail at her address.

In 2004, Gari became involved in the juvenile justice system and could not travel to New Jersey.  It is sadly noted that in 2011, Gari was fatally injured in a motor vehicle accident.  Macolino could not recall whether Gari visited her in 2006 or 2007.

Gari, a week before the accident, stayed with Macolino.  He brought clothes and books and Macolino made arrangements to transfer Gari to a New Jersey school.  Gari discussed with Macolino about his likelihood of permanently relocating to New Jersey.  However, after the 2008 accident, he returned to Florida to live with his father.

On the date of the accident, Macolino did not provide Gari with permission to use her car.  Yet, Macolino admitted she usually let Gari drive her car.  The investigating police officer at the accident scene testified that he spoke to Gari on the date of the accident.  Gari appeared under the influence of drugs or alcohol and was highly agitated.  Gari advised that he lived and worked in Florida and did not have his mother’s permission to use her car.

The trial court dismissed the declaratory judgment action on a directed verdict and found that Gari was a resident of Macolino’s household, thus the exclusion did not apply.  On appeal, the directed verdict was upheld with a discussion regarding New Jersey residency.

In New Jersey, for insurance purposes, a person can have multiple residences.  Further, children of divorce frequently are a resident of each parent’s home.  Here, Gari was unmarried, living with his parents and attending school.  The fact that Gari was 21 years old at the time of the accident did not negate his ability to have a residency with Marcolino.  The facts were that Gari had a bedroom at Marcolino’s apartment, had regularly visited her for lengthy periods of time over the years, received mail at Marcolino’s address, and seriously considered changing his domicile to her home to attend school.  It was evident that his domicile remained in Florida but he had a residence with Marcolino in New Jersey.  The court held that a reasonable jury could not have found to the contrary; thus, the trial judge did not improperly substitute his judgment for that of a jury.

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

Financial Service Law §405
Immunity reporting or furnishing information in suspected fraud cases

Previously, Insurance Law §406 provided immunity to insurance companies for reporting and furnishing information pertaining to an insured or claimants suspected or involved in fraudulent activities.  In 2011, this provision of the Insurance Law was repealed, and we were recently asked whether insurance companies still have immunity in this situation. 

The provision was repealed in 2011 when the Banking and Insurance Department was combined into the Department of Financial Services.  With the joining of the two departments, the State explained that “in order to more thoroughly uncover, investigate and eliminate the myriad financial frauds that may be perpetrated in, and may involve the people of, New York state, the legislature finds that it is appropriate that the responsibilities of the insurance frauds bureau and the criminal investigations bureau that were administered by the department of insurance and the department of banking, respectively, prior to the enactment of this article, be consolidated into a new financial frauds and consumer protection unit under the supervision of the superintendent.”  As a result, Financial Services Law §405 was enacted. 

Financial Services Law §405 provides immunity, in the absence of fraud or bad faith, no insurance company will be subject to civil liability:

  1. for providing information relating to suspected violations of the banking or insurance law furnished to law enforcement officials;
  2. for providing information relating to suspected violations of the banking or insurance law as required under the state laws (i.e. ISO); and
  3. for providing information furnished in reports to the financial frauds and consumer protection unit or any state agency investigating fraud or misconduct.

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
[email protected]

08/29/13       In Re:  Deepwater Horizon
United States Court of Appeals Fifth Circuit –Texas Law Applied
Fifth Circuit Certifies Question to Texas Supreme Court
Transocean Holdings, Inc. [“Transocean”] owned the Deepwater Horizon, a semi-submersible, mobile offshore drilling unit.  In April 2010, the Deepwater Horizon sank into the Gulf of Mexico after burning for two days following an onboard explosion [“Incident”].  At the time of the Incident, the Deepwater Horizon was engaged in exploratory drilling activities at Mocondo Well under a Drilling Contract between BP American Production Company’s [“BP”] predecessor and Transocean’s predecessor. The Contact required Transocean to maintain certain minimum insurance coverages for the benefit of BP.  The extent to which these policies covered BP’s pollution-related liabilities arising from the Deepwater Horizon incident was the subject of this appeal.

Transocean held insurance policies with a primary liability insurer, Ranger Insurance, Ltd. [“Ranger”], as well as several excess liability insurers led by London market syndicates [“Excess Insurers”]. 

The policy terms that are important to this case are “Insured” and “Insured Contract”.  The policies defined Insured as included in the Named Insured, other parties, and (c) any person or entity to whom the “Insured” is obligated  by any oral or written “Insured Contract” (including contracts which are in agreement but have not been formally concluded in writing) entered into before any relevant “occurrence.”

As defined in the polices “Insured Contract”, means any written or oral contract or agreement entered into by the “insured” (including contract which are in agreement but have not been formally concluded in writing) and pertaining to business which the “Insured” assumed the tort liability of another to pay for “bodily injury”, “property damage”, “personal injury” or “advertising injury” to a “Third-party” or organization.

Pursuant to the terms of the Drilling Contract, Transocean was required to maintain insurance covering the operations to be performed under the Contact.  The Drilling Contract required that Transocean carry all insurance at its own expense and that the policies “shall be endorsed to provide that there will be no recourse against BP for payment of premium.”  Further, it required that BP . . . shall be named as additional insured in each of Transocean’s policies, except Workers’ Compensation for liabilities assumed by Transocean under the terms of the Contract.

In rendering its decision on BP’s judgment on the pleadings, the district court analyzed two Texas cases cited by BP in support of its motion, Evanston Ins. Co. v. ATOFINA Petrochems, Inc., 256 S.W.3d 660 (Tex. 2008), and Aubris Resources LP v. St. Paul Fire & Marine Ins. Co.,  566 F.3d 483 (5th Cir. 2009).  BP argued that (1) it was an “additional insured” under the insurance policies at issue and (2) the insurance policies alone – and not the indemnities detailed in the Drilling Contract – govern the scope of BP’s coverage rights as an “additional insured”.

The district court found these two cases distinguishable and denied BP’s motion.  BP timely appealed and a unanimous panel of the Fifth Circuit Court of Appeals [“Court”] initially reversed the district court’s judgment.  The Insurers and Transocean petitioned for a rehearing and the Court withdrew its ruling to certify the following questions to the Texas Supreme Court:

1.       Whether Evanston Ins. Co. v. ATOFINA Petrochems, Inc. compels a finding that BP is covered for damages at issue, because the language of the umbrella policies alone determines the extend of BP’s coverage as an additional insured if, and so long as, the additional insured and indemnity provisions of the Drilling Contract are “separate and independent”?

2.       Whether the doctrine of contra preferentem applies to the interpretation of the insurance coverage provision of the Drilling Contract under the ATOFINA case, given the facts of this case.

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
                                            [email protected]    

Bad Faith

08/15/13       American Home Assur. Co. v Port Auth. of NY & NJ
Supreme Court, New York County
Defense Not Ended by Policy Exhaustion; Court Focuses on the Sophistication of the Parties in Dismissing the General Obligations Law Section 349 Claim
Plaintiff, American Home Assurance Company (“American Home”), issued a policy of insurance to the Port Authority in 1966. 

It then commenced this action seeking a judicial determination as to its obligations in relation to thousands of underlying asbestos claims arising out of the construction of the World Trade Center towers (‘WTC”).  Specifically, it submitted that the pending WTC asbestos claims are not covered by the policy, and that it has no duty to defend or indemnify the Port Authority, Alcoa [the contractor retained to install an aluminum curtain wall on the exterior of the WTC towers], M & D [its sub-contractor], and/or Tishman.  American Home also sought a declaration that it is entitled to recoupment from Alcoa, M & D and Tishman of any uncovered defense and indemnity payments already made. 

In response, the Port Authority interposed counterclaims alleging, among other things, that American Home breached the policy and violated section 349 of the General Business Law. 

The first issue was the Port Authority’s motion for partial summary judgment, which sought a determination that American Home is required to pay defense costs in full for asbestos personal injury lawsuits.  Apparently, American Home has begun limiting the scope of its defense obligations on cases where it was claimed that injury occurred at both WTC sites and non-WTC sites to only those portions of defense costs allocated to the defense of the WTC claims.

In considering the motion, the court separated the issue into two questions: (1) whether American Home is required to pay defense costs in full under the Policy; and (2) if American Home is obligated to pay defense costs, whether the Port Authority’s potential exhaustion of the policy terminates that obligation.

With regard to the first inquiry, the court held that the duty to defend extends to the entire action.  If various grounds are alleged, some within and some outside the coverage of the policy, the insurer is bound to undertake the defense of the whole action on behalf of its insured.  American Home tried to make a creative argument that its policy’s use of the term “reasonable” defense costs was intended to exclude claims related to non-WTC sites.  The court did not agree. 

On the second question, the court found no provision in the American Home policy terminating defense costs upon exhaustion of the liability limit.  The court noted that the insurer could have done so if intended (i.e., a provision that disclaimed the duty to defend “when we have used up the applicable limit of insurance in the payment of judgments or settlements”).  The court declined to presume that such a limit existed. 

The next issue considered by the court was American Home’s cross-motion to dismiss the Port Authority’s counterclaims.  Specifically, it sought dismissal of the Port Authority’s counterclaim which asserted that “American Home engaged in deceptive acts and practices in violation of Section 349 and the General Business Law.”  The Port Authority alleged that American Home violated Section 349 by "failing to effectuate a prompt, fair, and equitable settlement of claims such as the Port Authority's even where liability is reasonably clear.”  The court reiterated established case law holding that, as a threshold matter, in order to satisfy GBL section 349, plaintiff’s claim must be predicted on a deceptive act or practice that is consumer oriented. 

The court held that the transaction at issue is different in type and kind from “modest transactions” covered by the statute.  In relying on the 1995 Court of Appeals decision in New York University v Continental Ins. Co., it noted that a private contract dispute over policy coverage and the processing of a claim which is unique to these parties is not conduct which affects the consuming public at large.  Thus, the claim was dismissed. 

American Home likewise sought dismissal of a paragraph in the Port Authority’s counterclaim, which alleged that AIG (or American Home) breached the covenant of good faith and fair dealing inherent in the policy.  In agreeing with American Home, it noted that the claim for breach of the implied covenant stems from the same facts as the breach of contract claim, asserting, at bottom, that American Home breached the policy by not paying claims in a timely manner.  Accordingly, the breach of the implied covenant of good faith and fair dealing claim was duplicative of the breach of contract claim, and in turn dismissed. 

09/06/13       Hortica –Florists Mutual Ins. Co. v Pittman Nursery Corp.
United States Court of Appeals Eighth Circuit
Under Arkansas Law, the Eighth Circuit Affirmed the District Court’s Post-Verdict Motion for Judgment as a Matter of Law in Relation to Defendant’s Counterclaim of Negligence and Bad Faith
This decision was presented to the Eighth Circuit following the district court’s grant of a post-verdict motion for judgment as a matter of law (“JMAL”).  In an interesting set of facts, the underlying claims arose out of a struggle for control of a family business.  Pittman Nursery Corp. (“PNC”) sells trees, shrubs and plants to large and small retailers nationwide.  PNC is part of a larger horticulture business owned by a mother and her three adult children.  Beginning in 2007, a family feud pitted one daughter against her mother and other siblings and the PNC’s former president.  This resulted in five lawsuits.

  • Muniz - Members of PNC’s Mexican migrant work force alleged that the former president required each worker to pay him $1,000 before he agreed to sign the paperwork which allowed the worker to renew his work visa for the following year.  They claimed violations of the Fair Labor Standards Act and set forth racketeering claims.  Most of the Pittman family supported the former president.  One did not, and fired him;
  • Aydani - The former president then sued PNC alleging wrongful termination and other claims;
  • Hunter - The former president’s step-son also employed by PNC was fired too, and he too filed suit; and
  • Two other suits then resulted between entities controlled by the Pittman family and PNC. 

 

Plaintiff issued a Hortica Greenhouse Grower Business Package to PNC, which included a commercial general liability policy, business excess policy, employment practices liability endorsement, and an employee dishonestly policy. 

PNC tendered its defense in all five lawsuits to plaintiff.  Plaintiff assigned Cross, Gunter, Witherspoon & Galchus to defend all the suits.   

Plaintiff then commenced this action seeking to clarify its coverage obligations.  PNC counterclaimed for negligence, bad-faith, breach of fiduciary duty, and breach of contract.  The district court ruled that plaintiff was obligated to defend and indemnify PNC under the CGL policy in Muniz and under the EPL in Hunter and Aydani.  Thus, only PNC’s counterclaims remained.  These claims eventually went to trial and the jury found plaintiff negligent in its handling of PNC’s insurance claims and awarded PNC $50,000.  It also concluded that plaintiff acted in bad faith and awarded PNC $1.3 million in damages.  Plaintiff moved for judgment as a matter of law, which was granted.  The district court concluded that the jury’s verdict was simply not supported by the evidence.

The Eighth Circuit considered, inter alia, the bad faith and negligence claims.  JAML is appropriate when all evidence points one way and is susceptible to no reasonable inferences that would sustain the position of the non-moving party. 

Under Arkansas law, which applied here, a claim for bad faith exists when an insurance company affirmatively engages in dishonest, malicious or oppressive conduct in order to avoid a judgment obligation to its insured.  Further, although an insurer’s actions, or inactions as the case may be, may not amount to a claim for bad faith, Arkansas recognizes a separate claim for defective performance (negligence). 

To support of its bad faith and negligence arguments, PNC pointed to six instances in which plaintiff allegedly exploited the inherent conflict between the insured and its counsel by manipulating the defense plaintiff provided to PNC to escape its obligations under the policies.

  • PNC argued that plaintiff assigned Cross Gunter to represent PNC despite PNC’s absolute right to choose its own counsel.  The court held that even assuming Arkansas law provided PNC this right, PNC presented no evidence that plaintiff chose Cross Gunter out of malice or dishonestly nor did PNC explain how its inability to choose proximately caused it harm. 
  • PNC then claimed that plaintiff instructed Cross Gunter to “steer” its defense away from the $2 million, non-eroding CGL policy and toward the $100,000 eroding EPL policy.  In the court’s review of the documents submitted by PNC, it found no “smoking gun.”  The document did not provide strong support for this claim.
  • Next, PNC asserted that plaintiff agreed with Cross Gunter not to disclose the CGL policy to counsel for the Muniz plaintiffs despite PNC’s desire for an early settlement.  PNC could not explain how the gap between the decision not to voluntarily disclose the policy was made, and its eventual disclosure as an attachment to the DJ action, was significant.
  • PNC asserted that Cross Gunther refused to consent to an amendment of the complaint in the Muniz class action to add a claim of negligent supervision.  Consent was denied because the amendment would not provide any additional insurance coverage, and instated would add an additional claim for liability against only PNC.  The court found this tactic by defense counsel to be reasonable.
  • PNC next alleged that Cross Gunther took the written position that there was no coverage for PNC under the CGL policy.  The court could not find such an opinion in writing. 
  • Lastly, PNC argued that plaintiff refused reasonable settlement negations until its duty to defend was settled.  The court held that in Arkansas an insurer is not required to capitulate simply because a policyholder prefers it.  Moreover, the court noted that the Muniz plaintiffs’ settlement offer was initially $1.95 million.   When only twenty-five plaintiffs came forward with evidence of extortion, the case was settled for $600,000, significantly less than the demand.

 

Ultimately, the court concluded that PNC may be able to show only that is was denied the right to choose its own independent counsel.  On that matter, however, PNC provided no persuasive evidence indicating affirmative misconduct by plaintiff, which would be necessary to establish bad faith, or proximate cause and damages, which would be necessary to establish negligence.  The rest of the alleged misconduct was simply not supported. 

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

KEEP “STRANGERS” TO THE POLICY AT A DISTANCE

In reviewing claims and assessing a loss, it is important to keep in mind who is and is not a named insured under the policy.  This point was recently emphasized in the state of West Virginia in the case of Triad Insulation, Inc. v. Nationwide Mutual Fire Insurance Co., 2013 WL 3184656 (W. Va. June 24, 2013).  A small business owner’s wife owned a building in Huntington, West Virginia which the company also used as its main business location.  The roof suffered structural damage in January 2010 due to snow and ice buildup.  The business owners and the company eventually alleged that Nationwide mishandled adjustment of the loss and refused to authorize necessary repairs which resulted in total loss and demolition of the building.  They argued that the building and its contents could have been remediated but for Nationwide’s alleged delay and improper claims handling.

The complaint included a claim on behalf of the business owner for loss of his own “personal property” stored in the building.  Nationwide moved to dismiss that claim because he was not an insured under the policy.  The Trial Court agreed, finding that his cause of action constituted a prohibited third-party suit for bad faith claims handling.  This decision was affirmed on appeal.

On appeal, the company owner argued that his claim was not a third-party bad faith action because he was not in an adversary position to the building owner (his wife) or his company.  However, the West Virginia Supreme Court of Appeals upheld the lower court ruling finding that third parties to an insurance contract have no common law or other cause of action for breach of good faith and fair dealing implied within or rising out of an insurance contract.

This case is a reminder to closely scrutinize losses and claims to determine who is an actual named insured who may be entitled to recover under a policy.  This applies not only to direct first party claims, but also precludes claims by third parties or others who are “strangers” to the policy and not part of any direct or even implied contractual dealings be

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