Coverage Pointers - Volume XV, No. 9

Dear Coverage Pointers Subscribers:

Situations? You have them?  We embrace them.

Welcome to Buffalo in the late fall.  Flurries are expected and that’s the snow variety.  I know, 90+ in Phoenix, 75+ in Florida.  Pox on you.

It has been a busy couple of weeks, with the DRI Annual Meeting in Chicago and seeing so many friends and colleagues. 

There is great stuff in this week’s issue, with two decisions from our highest court, the Court of Appeals.  One is a No Fault case, seriously damaging an insurer’s right to complain about gaps in treatment.  You’ll find that in Mike’s column.  The other decision, reviewed in Steve’s column, discusses vandalism under a first party policy.

K2 Investments:

As you are all aware, the Court of Appeals has granted reconsideration of its earlier decision and briefs are being filed by the parties.  The New York Insurance Association, the National Association of Mutual Insurance Companies, the Property and Casualty and Insurance Association of America and the Federation of Defense & Corporate Counsel have joined forces to seek amicus status on behalf it their respective members.  We are drafting that application on their behalf.

All the Little Birdies Go Tweet, Tweet, Tweet

Follow us on Twitter @kohane and if you had, these Court of Appeals decision would have been in your hand within moments after they were released.

Beth’s Banter:

Dear Subscribers:

It was wonderful to see so many colleagues at the DRI Annual Meeting held in Chicago last week.   Congratulations to all of the fabulous speakers, including the remarkable Dan Buettner, who spoke on the fascinating topic of the blue zones; areas throughout the world where people have achieved the greatest longevity and who have also achieved a quality of life in their elder years.  In our busy, fast-paced and stressful world as attorneys and insurance professionals, his message was one that resonated with the audience.  You can check him out at

In the coverage world, cheers to Century, who prevailed on an Assault and Battery Exclusion in a claim involving a zealous bouncer employed by the Century insured, Dante’s.  The case was decided by the Missouri Court of Appeals on October 22, 2013. 

I also discuss a decision of the District Court of Colorado, also decided on October 22, 2013, captioned Dish Network Corporation v. Arch Specialty Insurance Company, where the court addresses the insurer’s duty to defend, focusing on whether the claims were “advertising” injuries and the import of the term “broadcast” in an insurance policy. 

Til next time,
Elizabeth A. Fitzpatrick
[email protected]

Happy Birthday Annie:

OK, OK, it’s not 100 years, it’s 175 years (but I’m not sure I’ll still be writing this column when I’m 85, 25 years from now) on her 200th birthday.  Yesterday was the 175th birthday of Annie Edson Taylor.  On her 63rd birthday, October 24, 1901, she became the first person to survive a trip over Niagara Falls in a barrel. Apparently, she did so to avoid living in the poorhouse in her later years.  The trip itself took less than twenty minutes. After the journey, Annie Taylor told the press: “If it was with my dying breath, I would caution anyone against attempting the feat… I would sooner walk up to the mouth of a cannon, knowing it was going to blow me to pieces than make another trip over the Falls.”

Her manager, Frank M. Russell, ran off with her barrel, and most of her savings were used towards private detectives hired to find it. The barrel was 4 ½ feet high and 3 feet in diameter with a leather harness and cushions.  It was weighted down with a 200 pound anvil.

On October 25, 1901, The New York Times as did other newspapers of the day, described Mrs. Taylor as being 43, but that was later debunked.

Jen’s Gems:


Six.  That is the number of days until I take a much needed vacation.  Recently, I realized I could use a few days off when I noticed a sharp increase in the number of people commenting, “you look tired;” presumably, not a compliment.  We will be staying in Bonita Springs, Florida, which is between Fort Meyers and Naples.  It is a nice area that my family has been visiting for a number of years now with good restaurants and plenty of shopping (which is really why I am excited).

In terms of my column this week, I am reporting on one trial court case from Supreme Court, Kings County.  The decision addresses the term “servicing” as used within an Auto Business Exclusion.  It is an issue that does not come up that frequently, but when it does it is always nice to know there is case law out there on point.  I would also direct your attention to the Sixth Circuit decision, Philadelphia Indemnity Ins. Co. v. Youth Alive, Inc., in Kathi’s column.  While it seems as if the court goes beyond the bounds of a 12(b)(6) motion in dismissing the insured’s bad-faith counterclaims, it is an interesting decision that is worth a read. 

Have a good weekend.  Until next issue…

Jennifer A. Ehman
[email protected]

One Hundred Years Ago:  A Catcher is Born:

Herbert F. “Herb” Bremer was born on October 25, 1913 in Chicago, Illinois. Bremer, a catcher, began his professional career in the Cardinals' system with Springfield of the Western Association in 1932. He was batting .305 with 20 home runs and 101 RBIs for the Columbus Red Birds in the South Atlantic League when he was called up by the St Louis Cardinals in September 1937, playing 11 games with seven hits in 33 at-bats.
Bremer was back with the Cardinals in 1938 and played 50 games, batting .219. He played just nine games for St Louis in 1939 and spent the majority of the season with Columbus in the American Association, but hit only .210 in 60 games.

In 1940, he joined the New Orleans Pelicans in the Southern Association where he batted .273. His average tailed off again in 1941 as he split the season between New Orleans and Little Rock, but he regained his stride with Little Rock in 1942, batting .266.
He was drafted by the Boston Red Sox in November, with a view to joining Boston’s major league catching staff the following season. But military service was around the corner and Bremer decided to quit baseball for the duration of the war in January 1943.
He was drafted by the Army on July 22, 1943 and was working in the mess at Fort McPherson, Georgia, while playing on the baseball team. In 1944 he was at Fort Benning, Georgia, playing in the Infantry School League. He was one of the league’s leading hitters and was batting .375 by early August.

In early 1945, Bremer was sent overseas to Europe with the 71st Infantry Division. Bremer played for the 71st Infantry Division Red Circlers baseball team after the cessation of hostilities in Europe.

The 71st Red Circlers featured Ewell Blackwell, Bob Ramazzotti, Ancil Moore, Johnny Wyrostek, Garland Lawing, Ewell Blackwell, Russ Kern, Milt Ticco and Bill Ayers. Bremer batted .333 for the season and helped the team win the American League division of the Third Army baseball league. The Red Circlers then clinched a five-game Third Army Championship Series in August 1945 against the National League division winners - the 76th Infantry Division Onaways - to move on to the ETO World Series against the OISE All-Stars from France.

In front of crowds of 50,000 at Soldier's Field in Nurnberg, Germany, the Red Circlers won the first game on September 2, 9-2. The Red Circlers were beaten by Negro League star Leon Day in the second game, and lost 2-1 in game three on September 6. In the decisive fifth game the Red Circlers were again beaten 2-1 on a combined effort by Sam Nahem and Bobby Keane.

Bremer returned to the Red Sox organization in 1946. On March 29, he was given his unconditional release by manager Joe Cronin. He went back to play for Little Rock but had an injury-troubled season, playing 87 games and batting .295 with 27 RBIs.

Herb Bremer passed away on November 28, 1979 in Columbus, Georgia. He was 66 years old.

Peiper’s Pumpkin Pickings:

We’ve got a real treat (or is it trick) for our first party friends this week.  The Court of Appeals, on cert from the Second Circuit, has issued a ruling on what constitutes “vandalism” for purposes of coverage under a property policy. 

While we will force you to actually read the write-up below, it appears to this reviewer that the Court of Appeals was really being outcome determinative.   On one hand, the Court’s holding appears to expand coverage to actions that were directed to property other than the claimed damage.  On the other hand, however, the Court constricts the coverage by adopting a test for the term vandalism that, essentially, requires an act to rise to the level of punitive damages for coverage to be triggered.  The result of the test, it appears, permits coverage for damage where, as here, the “vandals” actually focused their activities on neighboring property.  However, the damage must have been caused by reckless and wanton behavior.  Got that?  We didn’t think so.  Take a look at the opinion, and then check back with us.

For any of you involved in workers’ compensation claims, take a look at the Con Ed case we reference below.  An interesting read, and one that may have a substantial impact on exposure to employers regarding death benefits. 

That’s it for now.  Happy Halloween.

Steven E. Peiper
[email protected]        


A Century Ago:  Things Were Different?  Plenty Different:

New York Times
October 25, 1913


Jury Awards This Sum to Miss McIntyre
in Breach of Promise Suit.


Judge, Charging Jury, Says No Good Reason
for Breaking Engagement Was Given

After deliberating for an hour and twenty minutes, the jury which for four days had been listening to testimony in the $150,000 suit for breach of promise to marry brought Miss Mary I. McIntyre, a former school teacher, 44 years old, against William Hughes, a retired paper box manufacturer, 64 years old, brought in yesterday to Supreme Court Justice Hooker a verdict of $35,000 for the plaintiff.  Justice Hooker in instructing the jurymen told them that their duty was to determine the extent of the damages, the defendant having acknowledged the existence of a contract of marriage, which he broke.

In the defense of their father, three of Mr. Hughes’s four grown daughters took the witness stand yesterday to testify that the engagement to marry had been kept a secret until one month before the date set for the wedding, Oct. 2. 1912, although they had known Miss McIntyre almost a year before, when she came to work for them as a dressmaker.  When they did learn of the engagement, they said, they did not regard it in a serious light.

Audrey’s Insight:

I recently attended the DRI Annual Meeting in Chicago which focused on energizing your career by not only professional development but also personal development.  It was a truly wonderful meeting and I left with a list of books to purchase and place in my pile of “to read” in my library.  The program began with an interesting lecture from Dan Buettner about Blue Zones.  Blue Zones are essentially areas that Mr. Buettner, during his research, found in the world where communities have an unusual longevity.  He spoke of what characteristics those communities possess as well as what habits individuals who have led long lives have.  You need to read his book, Blue Zones, to get the secrets and it set a tone for some for the rest of the program.  For example, there were multiple people at dinner that evening who declined bread and mentioned that it is a secret for leading a longer life.  While eating red meat approximately once a month was another secret, I don’t think I can reduce my intake that drastically!

The Insurance Law Committee and Trucking Committee co-presented a program regarding Insurance Company and attorney relationships which had three high level industry leaders from State Farm, Zurich and Travelers providing insight on maintaining and strengthening an attorney’s relationship with an insurer.  While common sense, it was stressed that communication is a cornerstone to the longevity of a relationship.

I think the one speaker that had the most impact on me was Staff Sargeant Salvatore “Sal” Augustine Guinta.  He is a Medal of Honor recipient and the first living recipient for service in Iraq and Afghanistan.  He served 27 months in Afghanistan and his last deployment was in the Korengal Valley, the most dangerous area of Afghanistan.  Staff Sgt. Guinta wrote a book “Living with Honor” which is one of the many I have on my list to purchase and read.  He had the audience’s full attention while telling his story about being stationed in the Korengal Valley.  He and his brothers faced enemy fire every day.  He spoke of how one of them on a daily basis would stand out to attract enemy fire so that they could just find the enemy.  Staff Sgt. Guinta told his story of how his team on a patrol was ambushed and engaged in fighting so close to the enemy that at times it could be confusing as to who was the enemy and who was the American soldier.  It was during this ambush that he saw the enemy carrying away one of his wounded brothers.  He described how this was common to take the American solider, still alive, to not leave a trace and use the equipment against the Americans. 

Staff Sgt. Guinta saw the enemy carrying away a live, wounded soldier, and without care for his own life, ensured that his brother was not taken away by the enemy.  After the fighting was over he told of the number of lives lost and how his team got up the next day and kept doing their job because they were professionals.  They did not want the enemy to think for a second that it had the upper hand.  His attitude about his actions was simply to say over and over “if not us, who, if not now, when.”  Further, he spoke many times about leading from the front and by example.  You cannot ask someone to do something if you would not do it yourself. 

Despite what he saw and what he experienced, he ended his talk by encouraging everyone in the audience to do one thing every day for another person.  He did not mean heroic life choices such as service to this country either.  It can be the smallest gesture – holding the door for the person behind you while entering a building or letting that one car in during rush hour traffic.  Staff Sgt. Guinta is an inspirational man and I feel so fortunate that he provided his service to our country.  I know he is only one of many and I am glad that he shared his story and his outlook on his service, which is shared by so many soldiers.

I hope to have next edition an interesting case or two for you.  In the meantime, I hope you enjoyed reading what inspired me last week while attending the DRI Annual Meeting.

Audrey A. Seeley
[email protected]


A Century Ago – Young and Petite Was Out, For a Police Officer:

The New York Times
October 25, 1913


And They Must Be More Than 30
to Get on the Chicago Force

CHICAGO, Oct. 24.—Women under 30 years of age need not apply for places on the Chicago police force because a new rule requires that they must be between 30 and 40 years of age, 5 feet to 5 feet 9 inches in height, and must weigh between 115 and 180 pounds.

These specifications for applicants are laid down by the Civil Service Commission, in announcing a coming examination for policewomen.  More than 100 have applied for ten places which pay $900 a year each.


In This Week’s Edition:

Dan D. Kohane
[email protected]

  • Court of Appeals Accepts Review of “Head Scratcher; Will Likely Resolve Split Between Departments on Question of Who Is Entitled to Notice of Disclaimer
  • Policy Excluded Property Damage Known to Exist Prior to Issuance and The Insured Surely Knew Before the Policy Was Effective
  • Whether Disclaimer Was Untimely Was a Question of Fact; What Did the Insurer Know and When Did It Know It
  • Notice of Circumstances Not Timely Provided to Legal Malpractice Carrier and Coverage Lost


Michael P. Scott-Kristansen

[email protected]

  • High Court Eases Plaintiff’s Burden to Explain “Gap in Treatment”

Margo M. Lagueras

[email protected]

  • Peer Review’s Insufficiency Cannot Be Cured With Affirmation and Pre-Accident Medical Records That Did Not Form the Basis of the Denial
  • Denial Upheld Due to Essentially Boilerplate Letter of Medical Necessity
  • Respondent’s Submission of Assignor’s Recorded Statement Is Admissible in Arbitration
  • AR-1 Does Not Substitute a Proper Proof of Claim
  • Denial for Lack of Medical Necessity Must Be Based on a Peer Review, IME Report, or Other Competent Medical Evidence
  • Denial Is Upheld Where Rebuttal Letter Lacks Credibility
  • Peer Review That Does Not Cite to Any Authoritative Work Rejecting Usefulness of Prolotherapy Is Insufficient to Support Denial
  • MRI Report Is Insufficient Rebuttal Evidence
  • Physician’s Wage Loss Claim Is Denied


Steven E. Peiper

[email protected]


  • High Court Creates Clarifies Rule for Vandalism Coverage



  • No Authority to Apportion Death Benefits to Work Related Activities
  • Late Notice of Legal Malpractice Void Coverage


Elizabeth A. Fitzpatrick
[email protected]

Beth’s Banter

  • Dish Was Engaged in Broadcasting; No Coverage Available


Fitz’ Bits

  • Assault and Battery Exclusion Precludes Coverage


Audrey A. Seeley
[email protected]

  • Nothing this week.


Cassandra A. Kazukenus
[email protected]

  • Testimony before the Senate Majority Coalition



Katherine A. Fijal

[email protected]

  • Insurer’s Position on Coverage Reasonable – No Bad Faith


Jennifer A. Ehman
[email protected]

  • “Servicing” as that Term is used within an Auto Business Exclusion includes Washing a Car

Earl K. Cantwell

[email protected]



Enjoy Halloween.  Especially the treats.  Unless you happen to like tricks better.


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

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



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

Dan D. Kohane
[email protected]

Audrey A. Seeley
[email protected]

Jennifer A. Ehman
[email protected]

Dan D. Kohane, Team Leader
[email protected]

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

Michael P. Scott-Kristansen
Diane F. Bosse

Steven E. Peiper, Team Leader
[email protected]

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

Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Jody E. Briandi, Team Leader
[email protected]

 Elizabeth A. Fitzpatrick

Diane F. Bosse

Index to Special Columns

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

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

Dan D. Kohane
[email protected]

10/22/12       Sierra v 4401 Sunset Park, LLC
Court of Appeals
Court of Appeals Accepts Review of “Head Scratcher; Will Likely Resolve Split Between Departments on Question of Who Is Entitled to Notice of Disclaimer

We reported on the Second Department decision in a previous issue of CP.
12/19/12       Sierra v 4401 Sunset Park, LLC
Appellate Division, Second Department
A Head Scratcher’s Paradise: When a Tender Is Made by an Insurer on Behalf of Its Insured to an AI Carrier, the Insured Is Entitled to Receive Notice of Disclaimer, or Is It?

Scottsdale issued a certificate of insurance to the 4401 Sunset Park, LLC (“4401”), and Sierra Realty, in accordance with a construction agreement. On August 18, 2008, Juan Sierra, allegedly was injured while working in the subject building.

On January 6, 2009, 4401 and Sierra Realty’s own insurer, Greater New York Insurance Company (“GNY”), tendered to Scottsdale. On February 2, 2009, Scottsdale disclaimed coverage and rejecting the tender, on the grounds that the GNY letter constituted late notice of the accident and did not comply with terms of the Scottsdale policy. Scottsdale did not send this letter to 4401 or Sierra Realty.

Sierra Realty and 4401 moved for summary judgment declaring that Scottsdale was obligated to defend and indemnify them because they did not get notice of the disclaimer.

Where a primary insurer, like GNY, tenders a claim for defense and indemnification to an insurer, in this case Scottsdale which issued a certificate of insurance indicating that they are additional insureds, that insurer must comply with the disclaimer requirements of Insurance Law § 3420(d)(2) by providing written notice of disclaimer of coverage to the additional insureds. The fact that the tendering insurer provided untimely notice of the accident "does not excuse the insurer's unreasonable delay in disclaiming coverage". The failure of Scottsdale to provide written notice of disclaimer to 4401 and Sierra Realty rendered the disclaimer of coverage ineffective against them.

NY was not the real party in interest, such that the notice of disclaimer to GNY would be rendered effective as against 4401 and Sierra Realty.
Editor’s Note: Without explanation, the Court suggested that this case was different than Cincinnati Insurance Companies v Sirius America Insurance Company which we reported on in our May 16, 2008 edition, a decision out of the Fourth Department:

Notice of Disclaimer to Liability Carrier for Additional Insured Constitutes Notice to Additional Insured
The rule of reason has prevailed in the Fourth Department on an interesting issue of statutory compliance with the disclaimer requirements.
Section 3420(d) requires a liability carrier in a matter involving bodily injury or wrongful death to send out notices of disclaimer to the injured party and any other claimant to be effective. The term “any other claimant” is generally recognized as including co-defendants in lawsuits. In this case, the carrier did not send out the notice of disclaimer to the injured party and instead of sending it out to the co-defendants, sent it out to the liability carrier for the co-defendants. In this case, the co-defendants were also insureds under the policy, entitling them to notice.

The Fourth Department held that (a) the co-defendants had no standing to complain about a failure on the part of the carrier, Sirius, to send the letter out to the injured party (underlying plaintiff) and (b) that by sending the notice to the co-defendants liability carrier, Sirius complied with the statute. The court cited to a 1999 First Department case, Excelsior Ins. Co. v Antretter Contr. Corp., 262 AD2d 124, 127-128), which held: .

While defendant is correct that an insurer is not always equivalent to an attorney as an agent for receipt of notice, because the latter is an agent for all purposes while the former may have conflicts of interest with the insured, this is not such a case. Failure to serve a formal notice on the nominal party in interest does not render ineffective the denial of coverage where, under the circumstances, the party who received the notice was expected to forward it to the nominal party and had undertaken to protect the nominal party's rights

Was it different? If so, how?

In this case, Scottsdale, the subcontractor carrier that provided additional insured coverage, receives a tender from the general contractor and owner’s carrier. Scottsdale denies coverage by sending notification to the carrier that tendered, rather than to its’ putative AI insureds, and the court found the notice insufficient.

In the Cincinnati case, Cincinnati was the insurer for Falter Construction and the City of Buffalo, who claimed AI status under a policy issued by Sirius. Sirius sent its disclaimer notice to Cincinnati but not to Falter or the City. The Court held that Falter and the City had no standing to assert the statutory violation by Sirius.

“With respect to Falter and the City, although they are entitled to notice of disclaimer pursuant to Insurance Law § 3420 (d) based upon their status as insureds, the notice of disclaimer was not rendered invalid under Insurance Law § 3420 (d) based on the failure of Sirius to send it to them inasmuch as Sirius complied with the statute by sending the notice of disclaimer to plaintiff Cincinnati Insurance Companies, the insurance carrier for Falter and the City.”

10/17/13       S.T.A. Parking Corp. v. Lancer Insurance Company
Appellate Division, First Department
Policy Excluded Property Damage Known to Exist Prior to Issuance and The Insured Surely Knew Before the Policy Was Effective
The insurance policy states that there is coverage for property damage only if "[p]rior to the policy period" the insured does not know that such damage occurred. Here, S.T.A. knew about the property damage to neighboring buildings allegedly caused by construction work performed on its garage at 434 East 77th Street before the inception of the policy.  In fact, on the date of the application for insurance, correspondence was sent to the S.T.A. from counsel to the owner complaining about damage and asking that report be made to S.T.A.’s carrier.  Two months earlier, a Department of Buildings inspector reported that there was a crack in the building that had been caused by the work being done on S.T.A.'s premises and two weeks after that notice, there was a basement flood blamed on S.T.A.

10/15/13       Quality Building Contractor, Inc. v. Delos Insurance Company
Appellate Division, First Department
Whether Disclaimer Was Untimely Was a Question of Fact; What Did the Insurer Know and When Did It Know It
The court below properly found that Sirius's disclaimer of coverage based on a late notice of claim was ineffective.  However, Sirius had another ground for disclaimer, that being an exclusion endorsement in the subject insurance policy.
Since it was not clear when the grounds for disclaimer based on THAT endorsement were “readily apparent” to Sirius, there is a question of fact as to whether Sirius unreasonably delayed in its disclaimer by its investigation in the endorsement’s applicability.
Editor’s Note:  The so-called “30-Day Rule” to disclaim is measured from when the insurer, that has undertaken an active and timely investigation, has received evidence that an exclusion in the policy applies.  Documentation of the file is so very important.

10/15/13       Property & Casualty Ins. Co. v. Levitsky
Appellate Division, First Department
Notice of Circumstances Not Timely Provided to Legal Malpractice Carrier and Coverage Lost
The insurance policy at issue contains three notice provisions: one requiring notice of "any" circumstances which "may" give rise to a claim; a second, separate notice provision if a claim does result; and a third provision related to notice allowing an insured to "lock in" coverage for a circumstance that occurs during the policy period, even if the resulting claim doesn't occur until after the policy period has ended.

The notice of circumstance clause and the notice of claim clause, which are each independent conditions precedent to coverage, are unambiguous.   Here, the defendants failed to comply with the notice of circumstance clause in a timely fashion because they became aware of circumstances which may give rise to a claim in October 2006 or 2007 either when the defendant in the underlying action answered the complaint, denying ownership of the premises, or six days later, when the statute of limitations expired and defendants had failed to join the owner of the premises on which their client was injured.

Despite these circumstances, defendants did not notify plaintiff as to the potential claim until August 2008, after their client's case was dismissed.

Michael P. Scott-Kristansen
[email protected]

10/15/13       Ramkumar v. Grand Style Transportation Enterprises Inc.
New York Court of Appeals
High Court Eases Plaintiff’s Burden to Explain “Gap in Treatment”
In Pommells v. Perez, a 2005 decision by the Court of Appeals, the Court held that a plaintiff must demonstrate some reasonable explanation for gaps in treatment, when justifying the existence of a “serious injury”.  The question that has troubled some courts was the quantum and quality of that explanation.

Here, plaintiff was asked in his deposition why he ceased physical therapy and he replied that "they cut me off like five months." The Appellate Division held that a "bare assertion that insurance coverage for medically required treatment was exhausted is unavailing without any documentary evidence of such or, at least, an indication as to whether an injured claimant can afford to pay for the treatment out of his or her own funds".

The Court of Appeals that in Pommels, the Court did not require any particular proof regarding that explanation, although it recognized that there is "abuse of the No-Fault Law in failing to separate 'serious injury' cases, which may proceed to court, from the mountains of other auto accident claims, which may not",

Then the Court held that the Appellate Division's requirement that plaintiff either offer documentary evidence to support his sworn statement that his no-fault benefits were cut off, or indicate that he could not afford to pay for his own treatment, is an unwarranted expansion of Pommells. Plaintiff testimony was enough to establish that he was cut off by the no fault carrier and that he did not have medical insurance at the time of the accident. While it would have been preferable for plaintiff to submit an affidavit in opposition to summary judgment explaining why the no-fault insurer terminated his benefits and that he did not have medical insurance to pay for further treatment, plaintiff has come forward with the bare minimum required to raise an issue regarding "some reasonable explanation" for the cessation of physical therapy. Summary judgment should not have been granted.

A stinging, two judge dissent by Judges Smith and Read found that the majority lowers the barrier the courts have erected to try to weed out baseless no fault claims.

Margo M. Lagueras

[email protected]

10/17/13       Applicant v. Geico Insurance Co.
Erie County, Arbitrator Michelle Murphy-Louden
Peer Review’s Insufficiency Cannot Be Cured With Affirmation and Pre-Accident Medical Records That Did Not Form the Basis of the Denial
Approximately 9 months after the accident, Respondent requested a peer review of a lumbar myelogram performed on the 53 year old Applicant.  The peer reviewer opined that Applicant had a 50-year history of lower back pain and that there was no discussion of her clinical status prior to the low-speed impact.  He further noted that Applicant was neurologically intact and that there was no discussing as to surgery.  The Arbitrator found this opinion to be cursory and noted that Respondent should have provided the peer reviewer with Applicant’s pre-accident medical records to include in his report.

At the hearing, Respondent submitted the Reply Affirmation of the IME doctor which related to a Motion for Summary Judgment filed by Respondent in Applicant’s personal injury lawsuit.  The Arbitrator declined to consider the Affirmation, which was a summary and discussion of Applicant’s pre-accident medical records intended to show lack of causal relationship, and noted that Respondent could not now attempt to cure the insufficiency of the peer review with the opinion of another physician which did not form the basis of its denial.

10/17/13       Academic Buffalonians in Physical Medicine v. Allstate Property and Casualty Insurance Co.
Erie County, Arbitrator Douglas S. Coppola
Denial Upheld Due to Essentially Boilerplate Letter of Medical Necessity
The 18 year old EIP was involved in a motor vehicle accident on April 17, 2012.  At the ER, he complained of mild lumbar tenderness but there were no neurological deficits and he was discharged.  He then went to Zenith Medical where an examination revealed normal, but painful, lumbar range of motion but again, no sensory or reflex deficits.  Nevertheless, he was immediately referred for a lumbar MRI, and then EMG/NCV testing.  The letter of medical necessity for the testing noted subjective complaints of low back pain and stiffness.  The objective findings were of “diminished lumbar range of motion with pain.”  The referring doctor did not, however, fill in the neurological exam section and merely stated the findings showed “radiculopathy” and that the testing was needed to establish a final diagnosis and develop an effective treatment plan.  Notably, the testing did not reveal any lumbar radiculopathy.

Respondent requested a peer review of the EMG bill.  The reviewing doctor, an internist, issued a detailed report denying the testing that was performed so soon after the accident.  He noted that there had been no comprehensive motor strength examination, no clinical neurological examination and no neurological deficits in the ER evaluation.  He stated that electrodiagnostic testing is meant to compliment the findings of a clinical neurological examination, not replace it.  He also noted that no medical plan as to how the study would help in the evaluation and management of the EIP had been outlined prior to the testing and that it was contrary to accepted standards to perform such testing unless it would enhance the patient’s care.  Applicant did not rebut the peer reviewer’s report.

In upholding the denial, the Arbitrator pointedly noted that the recommendations made as a result of the study, such as using a warm pad, taking B vitamins and doing physical therapy, did not require electrodiagnostic studies.

10/17/13       Frank S. Tang v. Allstate Insurance Co.
Erie County, Arbitrator Kent L. Benziger
Respondent’s Submission of Assignor’s Recorded Statement Is Admissible in Arbitration
At issue was billing, pursuant to CPT 97814, for additional 15 minute acupuncture treatments which require the re-insertion of acupuncture needles after the initial treatment period.  With its submission, Respondent included the transcript of the Assignor’s recorded statement upon which it based the denials. 

The Arbitrator, while noting that the statement might not meet the evidentiary standard for admissibility in a court, noted that in arbitration it was permissible as the arbitrator is the judge of the relevancy and materiality of the evidence offered.  The Arbitrator concluded that Respondent, through the recorded statement, sustained its burden as the Assignor’s statements indicated that Applicant, following the initial insertion of the needles, did not come back into the room until the session was completed.  Therefore, Applicant did not re-insert the needles for the “additional 15 minutes of personal one-on-one contact with the patient” as required for reimbursement under CTP 97814.  The Arbitrator specifically stated that even though the treatment took place prior to April 1, 2013, he would not award reimbursement for services not proven rendered.  He further commented on the fact that Applicant did not rebut the denial with any affidavit of compliance with CPT 97814.

10/16/13       Applicant v. Geico Insurance Co.
Erie County, Arbitrator Douglas S. Coppola
AR-1 Does Not Substitute a Proper Proof of Claim
In this wage loss claim, Respondent asserted that it did not receive any requests or proof from the claimant for wages for any time period until the AR-1 was received and it was, as a result, deprived of its right to request verification of the claim.  The Arbitrator agreed noting that the AR-1 is only appropriate to be filed when a claim is overdue.  Until that time, a claim is not arbitrable.  In addition, in this case, the documents submitted established that not only had the treating chiropractor released Applicant to return to work, full duty, but that Applicant had, in fact, returned to work the month prior to the beginning of the period in dispute.  For this additional reason, the claim was moot.

10/16/13       Elite Medical Supply of NY, LLC v Kemper Independence Ins. Co.
Erie County, Arbitrator Michelle Murphy-Louden
Denial for Lack of Medical Necessity Must Be Based on a Peer Review, IME Report, or Other Competent Medical Evidence
At issue was Respondent’s denial of reimbursement for a lumbosacral orthosis and a multi-mode stimulator.  The denial was based on the EIP’s failure to appear for IMEs and the lack of medical necessity.  With respect to the IME defense, the Arbitrator found that Respondent failed to establish the EIP’s non-compliance with policy conditions because it did not submit evidence from anyone with personal knowledge of the EIP’s non-appearance.  With respect to the defense of lack of medical necessity, Respondent’s denial stated that “Our review of the medical records submitted, our investigation, and accepted medical practices reveals that the services alleged t have been rendered were not medically necessary.  Therefore, your claim is denied for lack of medical necessity.”  However, the denial did not indicated that it was based on any peer review, IME or other competent medical evidence, and Respondent did not submit any such documentation.  Therefore, Respondent failed to properly support its denial.

10/16/13       Elite Medical Supply of NY, LLC v Geico Insurance Co.
Erie County, Arbitrator Michelle Murphy-Louden
Denial Is Upheld Where Rebuttal Letter Lacks Credibility
An expander LSO brace was prescribed two months after the initial chiropractic evaluation.  Reimbursement was denied based on the opinion of a peer reviewer who found that there was no specific reason stated on the letter of medical necessity as to why the DME was prescribed.  The prescribing chiropractor then wrote a rebuttal letter in which he stated that after a thorough examination, the EIP was diagnosed with lumbar pain, instability and sciatica, that an in-office trial had proved effective, and that the brace was necessary to facilitate healing and reduce pain.

The Arbitrator found the peer review persuasive and the rebuttal lacking in credibility.  First, the rebuttal letter was a template previously seen repeatedly by the Arbitrator in which the only specific information was the EIP’s name, age and date of the accident.  In addition, the rebuttal not only failed to refer to or discuss the peer review, but there was no mention in the treatment notes that there had been an in-house trial of the brace, or that the EIP had been diagnosed with lumbar pain, instability and sciatica.  In fact, the diagnoses in the prescribing chiropractor’s treatment notes were thoracic pain and sciatica only.

The Arbitrator also rejected Applicant’s argument that the peer review was defective because the reviewer did not discuss the expander feature of the LSO.  The Arbitrator stated that the expander LSO “is first and foremost a device designed to restrict motion.”  The chiropractor did not explain why he felt it necessary to restrict lumbar motion while simultaneously providing treatment designed to improve lumbar mobility.  Logically, had the chiropractor felt lumbar traction would be beneficial, it would have been performed in-office.  Instead, the treatment notes only indicated that manipulation, heat and muscle stimulation were performed in the office so clearly the expander feature of the LSO was not as relevant as Applicant claimed.
See also: Elite Medical Services P.C. v. A. Central Insurance Co.

10/16/13       RES Physical Medicine & Rehab. Servs. v. Geico Insurance Co.
Erie County, Arbitrator Douglas S. Coppola
Peer Review That Does Not Cite to Any Authoritative Work Rejecting Usefulness of Prolotherapy Is Insufficient to Support Denial
The 34 year old EIP received prolotherapy [intraligamentous injection treatment] for her complaints of lumbar pain, buttock pain and radicular pain into the right lower extremity.  Respondent arranged a peer review with Dr. Florio, who denied the medical necessity of the injection for the injuries sustained in the accident, stating that the “medical literature” did not support the use of prolotherapy in the cervical region.  Dr. Florio did not, however, cite to any authoritative work rejecting its usefulness, and the authority he did cite to merely state that it was not recommended for cervical injuries, but not that it was not medically necessary to treat cervical injuries or that it was clinically unwarranted.  In addition, Dr. Florio did not discuss any of the pertinent physical findings in the treating doctor’s notes, or that the records revealed a slow but steady improvement with the injection therapy. 

The treating doctor testified that prolotherapy, for both cervical and lumbar issues, is well respected and practiced by several pain management specialists in Western New York so it is within the appropriate standard of care in Western New York.  The Arbitrator found that the peer review was not persuasive and that the treatment was not only was the palliative, but also curative.

10/15/13       Western New York MRI, LLP v. Geico Insurance Co.
Erie County, Arbitrator Michelle Murphy-Louden
MRI Report Is Insufficient Rebuttal Evidence
The issue here was the denial of reimbursement for a cervical MRI performed 11 days after the accident “to evaluate the health and integrity of the vertebrae and adjacent anatomical structure…to rule out a space occupying lesion of the spinal canal or foramen to determine if a surgical consultation is required.”  Respondent denied reimbursement based on a peer review which noted that there were no clinical findings to suggest herniated intervertebral disc syndrome or progressive neurologic deficits.  The Arbitrator found the peer review to be persuasive and noted that Applicant’s sole submission in support of its claim was the MRI report itself which was insufficient rebuttal evidence.

10/11/13       Applicant v. Met Life Auto & Home Insurance Co.
Erie County, Arbitrator Kent L. Benziger
Physician’s Wage Loss Claim Is Denied
Applicant, a physician, was rear-ended in a motor vehicle accident in October 2009.  His past medical history was significant for low back pain in 1999 and 2006, for which he had physical therapy and steroid injections.  In January 2009, he again developed low back pain going down his right leg.  His claim included earnings lost as a result of being unable to, or having to reduce time, from treating patients in his office and in the hospital, as well as being a site supervisor and being on call (referred to as ‘over the cap’ for which he claimed he was paid $500.00 per day). 

Following the accident, Applicant complained of mid lower lumbar pain with radiation to the right hip, right buttocks and right leg with right foot numbness.  A lumbar MRI revealed degenerative changes, three mild broad-based disc bulges and narrowing of the neural foramen.  A lower extremity EMG/NCV revealed a right peroneal neuropathy consistent with a left L5 radiculopathy and right chronic L5 radiculopathy and right S1 nerve root irritation.  Applicant treated extensively through 2009 and 2010 with various specialists, including treatment to his knees and right elbow for pre-existing osteoarthrosis and degenerative changes.  Physical therapy records noted that Applicant reported pain in his left shoulder when he felt something pop, as well as pain in his left knee and lower back, while playing golf.  He was advised to work only four hours daily at this office and he testified that he discontinued hospital admissions and follow-ups.

In November 2010, Applicant was examined by Dr. Hughes, a neurologist.  He complained of low back pain and tingling and numbness down the outside of his left leg to his toes.  He told Dr. Hughes that he worked six to six and a half hours a day in the office and hospital prior to the accident but only four hours in his office after.  He also gave up his hospital work except for teaching.  Following examination, Dr. Hughes diagnosed an acute cervical and lumbosacral strain and exacerbation of pre-existing right L5 radiculopathy.  In an addendum, Dr. Hughes stated Applicant was capable of working in his pre-accident capacity.

Significantly, Applicant also brought a SUM arbitration in which that arbitrator determined that Applicant had been adequately compensated.  Arbitrator Benziger, while noting that whether to give res judicata effect was in his discretion, found that the SUM arbitrator’s rationale, Dr. Hughes’ examination, and a detailed review of all the records, as well as the fact that Applicant was admittedly playing golf during the entire period in dispute, supported the termination of benefits.  He also determined that the claim of underpayment prior to the denial was not persuasive as Applicant failed to provide Respondent with requested verification to support his contention as to the reduction in the number of patients he would treat in his office or the hospital. 
Note: This office represented the Respondent - Applicant’s love of golf did not benefit his position.

Steven E. Peiper

[email protected]


10/17/13       Georgitsi Realty, LLC v. Penn-Star Ins. Co.
Court of Appeals
High Court Creates Clarifies Rule for Vandalism Coverage
The Court of Appeals was posed the following two questions by the Second Circuit:
“For purposes of construing a property insurance policy covering acts of vandalism, may malicious damage be found to result from an act not directed specifically at the covered property?”
“If so, what state of mind is required?”

The insured, Georgitsi Realty, LLC (Georgitis), owned an apartment building that was covered under a “named perils” policy of property insurance issued by Penn-Star Ins. Co. (Penn-Star).  The coverage applied to “direct physical loss or damage…caused by or resulting from” any of 14 kinds of events, including vandalism. 

The owner of the adjacent lot decided to construct a new building that would include an underground parking garage.  The excavation for this garage caused cracks in the wall and foundation of the apartment.  As the apartment building began to settle, Georgitisi feared the building would collapse.  The New York Department of Buildings issued a series of violations and “stop work” orders, and Georgitisi obtained a temporary restraining order.  All of this was ignored and excavation continued.  Georgitsi submitted a claim to Penn-Star as a result of the damage.   

The District Court granted summary judgment for Penn-Starr holding that the alleged conduct of the adjacent owner and its contractors was not “vandalism” within the meaning of the policy.  The Second Circuit certified the case.
In response to the first question, the Court of Appeals answered “yes.” It relied largely on the Sixth Circuit decision, Louisville & Jefferson Co. Metropolitan Sewer Dist. v. Travelers Ins. Co., in which a sewage treatment plant sustained damage when the owner of a recycling company began “storing” toxic waste in a public sewer.  The plant owner was allowed to recover the damage to the plant under a policy insuring against vandalism and malicious mischief. 

The Court of Appeals agreed with the logic in the Sixth Circuit decision.  It found no reason why the term “vandalism” should be limited to acts directed specifically at the covered property.  Vandalism, as the term is ordinarily understood, need not imply a specific intent to accomplish any particular result; vandals may act simply out of love of excitement, or an unfocused desire to do harm. 
The Court noted that while the “vandalism,” which derives from the sack of Rome by the Vandals, more readily brings to mind people who smash and loot than business owners who seek their profit in disregard of injury they do to the property of others, the Court found no principle distinction between the two. 
With regard to the second question, the court elected the actual malice standard.  Conduct is malicious for these purposes when it reflects such a conscious and deliberate disregard of the interest of others that it may be called willful or wanton.  This standard is meant to distinguish between acts that may fairly be called vandalism and ordinary tortious conduct.  The Court was clear that vandalism should not be converted into something approaching general coverage for property damage. 

In a dissenting opinion by Justice Abdus-Salaam, she agreed that vandalism does not have to be directed at the covered property, but expressed concern that the necessary “malicious” statement of mind omits a critical component:  intent to damage property.  A perpetrator who acts maliciously but without the intent to damage property does not commit an act of vandalism, as that term is traditionally understood.  Thus, the insurer would have to prove that the damage was caused by a malicious act intended to damage property, even if not the insured’s specific property.  Such an evidentiary requirement would better confine vandalism coverage to the bounds contracted for by the parties to the insurance contract, and prevent coverage from extending to willful and malicious acts not properly categorized as vandalism because property damage was not the actor’s primary intent. 


10/15/13       Hroncich v Con Edison
Court of Appeals
No Authority to Apportion Death Benefits to Work Related Activities
Plaintiff’s husband was forced to retire from his job at Con Edison in 1993 when it was discovered he had developed asbestosis. The ailment was allegedly caused as a result of continued exposure to asbestos throughout his career as a plumber and mechanic for Con Ed.  Later that year, the Workers Compensation Board ruled that plaintiff’s decedent was permanently partially disabled, and ruled that he had sustained a 37% loss of earning capacity. 

Several years later, in 1999, plaintiff was diagnosed with thyroid cancer.  The cancer, which had nothing to do with asbestos condition, eventually progressed to decedent’s lungs.  By 2007, he was admitted to the hospital in respiratory distress, and succumbed to his ailments approximately one month later.  

Plaintiff the instituted a claim for Workers Compensation benefits against Con Ed.  Essentially, it was alleged that decedent’s death was hastened by the fact that his lungs were compromised and more susceptible to failure due to the asbestos exposure.  Con Ed opposed the claim on the basis that decedent’s lungs were not compromised by the asbestosis condition, and that the report of physicians testifying on behalf of plaintiff was unduly speculative. 

The WCLJ eventually ruled that the death was causally related to the previous asbestos condition.  In addition, the WCLJ refused to apportion the award between work-related (and therefore covered) and non-work related (and therefore not covered).

The instant appeal addresses the question of whether the Court must apportion awards based upon the percentage that is related to work activities.  In reaching its conclusion, the Court also reiterated the previous rule that established death benefits were available in situations where the condition “contributes to the death” of the covered employee.

In refusing to permit apportionment, the Court ruled that there was nothing in the Workers’ Compensation Law that would support such a ruling. In so holding, the Court specifically noted that Sections 10, 15(7) & 16 do not specifically require apportionment.  Absent specific instructions from the legislature, the Court was unwilling to impose it upon claimants. 

10/15/13       Property & Casualty Ins. Co. of Hartford v Levitsky
Appellate Division, First Department
Late Notice of Legal Malpractice Void Coverage
Defendant’s law firm apparently failed to name the owner of a premises in a Labor Law § 240(1) they had commenced on behalf of a client/injured party. From the opinion, it appears that the mistake should have been apparent when the named defendants in the action commenced by Mr. Levitsky denied ownership of the premises in question.  The Court also suggested that defendant’s firm had notice of the true owner of the property prior to suit, and simply failed to name the correct party.

In any event, the policy in question provided notice requirements which were triggered:
(1)  upon notice of any circumstances which may give rise to a claim;
(2)  upon notice of any actual claim; and,
(3)  when the insured wished to lock in claims that occurred within the
policy period, but where the claim did not arise until policy expired.

In the instant matter, the Court ruled that plaintiff’s had notice of a potential claim when the named defendants denied ownership in the premises and the statute of limitations expired six (6) days later.  Even if those events did not trigger a duty to notify the carrier, the depositions of the defendants wherein ownership of the premises was explained undoubtedly triggered the defendant’s duty to notify.  Unfortunately, they did not provide notice until approximately nine (9) months later.  Having no excuse for the delay, coverage was lost as a result.

Elizabeth A. Fitzpatrick
[email protected]

Beth’s Banter

10/22/13       Dish Network Corp.v. Arch Specialty
United States District Court, District of Colorado
Dish Was Engaged in Broadcasting; No Coverage Available
In Dish, the court grappled with the meaning of “advertising injury” on remand from the Tenth Circuit Court of Appeals’ reversal of the court’s earlier opinion, granting summary judgment in favor of the defendant insurers.  The Tenth Circuit held that the complaint may arguably fall within the policies at issue because it potentially alleged advertising injury arising from Dish’s misappropriation of advertising ideas, which Dish committed in the course of advertising its goods, products or services.  

The crux of the court’s analysis on remand was the meaning of the term “broadcast” in an insurance policy, as the various defendant insurers invoked business exclusions in their policies to negate coverage for all advertising injuries suffered by insureds involved in the business of “broadcasting.”   The court found the business in which Dish was engaged fell squarely within the meaning of “broadcasting,” such that coverage for defending the lawsuit was unavailable under the policies issued. 

As in New York, Colorado courts follow the “four corners rule” or “complaint rule,” under which the courts compare the allegations of the underlying complaint with the applicable policy terms to determine whether the insurer must pro-offer a defense.  The policies included exclusions for “advertising injury” arising out of an offense committed by an insured whose business is advertising, broadcasting, publishing or telecasting.  The court referred to the annual report for Dish, its articles of incorporation, as well as its website, all of which referred to its operations, in part, as to broadcast.   The insurers asserted that because Dish was a direct satellite broadcaster, it was primarily in the business of broadcasting and, therefore, not covered for advertising injuries.   Evidently, Dish’s argument was that the satellite television programming it provides should not be considered “broadcasting” because it is a subscription service not available to the indiscriminate public or the public, generally. 

The Court rejected Dish’s contention, finding that the plain meaning of broadcasting includes the business of providing satellite television programming, in which Dish was primarily engaged.  The court also found that no insurer acted in bad faith. 

Fitz’ Bits:

10/22/2013     Kotini v. Century Surety Company
Missouri Cout of Appeals
Assault and Battery Exclusion Precludes Coverage
In Kotini, a coverage dispute arose out of an incident that occurred, in which Kotini was injured when Williams, acting as a bouncer for Dante’s, forcibly removed Kotini from Dante’s premises.  Century had refused to defend or indemnify Dante’s or Williams, contending that the claims fell within the policy’s Exclusion for Bodily Damage Resulting from an Assault or Battery.  Kotini, Dante’s and Williams had, thereafter, entered into a settlement agreement in which Kotini agreed to limit any further recovery against Dante’s and Williams to the assets of any insurer.  The action was in the nature of a New York direct action, described here as an equitable garnishment action against Century seeking to collect the underlying judgment.

The facts relevant to the incident, itself, as testified by a witness, Amanda Walker, was that a drunken patron at Dante’s had grabbed her breast and that Kotini, her boyfriend at the time, threw his arms up at the man, telling him to watch what he was doing.  She indicated that Williams, the Dante’s bouncer, grabbed Kotini from behind, lifted him from the ground and walked him to the Dante’s doorway. During this time, Kotini was yelling, wiggling and kicking Williams, trying to break free. She then indicated that, while Kotini was being held in the air, Williams kneed him in the back and then dropped him to the ground, causing a skull fracture.  It was further asserted that Williams then lifted Kotini’s head and shoulders off the ground and dropped Kotini a second time.

In proceeding with its coverage analysis, the court noted that there was no dispute that Kotini had obtained a judgment in his favor against Century’s insured, that the policy was on effect when the incident occurred, and that the policy generally covered claims for bodily injury.  The question was whether Kotini’s injury fell within the Assault and Battery Exclusion in the policy.  Similar to the New York Court of Appeals Decision in K2 Investments, of which we have written on several prior occasions, Kotini argued that Century had breached its duty to defend, thereby leaving Dante’s and Williams free to make a reasonable settlement with Kotini and precluding Century from litigating the issue of coverage in the garnishment action.   The court, however, found that Kotini never raised that issue in the trial court and had, thus, waived the issue for appellate review. 

The policy included a broad Assault and Battery Exclusion, providing that the coverage did not apply to bodily injury arising out of, or resulting from, an actual, threatened or alleged assault or battery, the failure of any insured or anyone else for whom any insured is or could be held legally liable to prevent or suppress the assault and battery, as well as the negligent employment, investigation, supervision or training of any person for whom the insured was legally responsible.  Relying on the Webster’s Dictionary definition for assault and battery and considering the terms in their ordinary meaning, the court held that the Assault and Battery Exclusion was not ambiguous and encompassed any conduct within the meaning of its terms. 

Kotini argued that the trial court did not find an assault actually took place, but instead found that there was no evidence of Williams’ intent and that the bouncer used unreasonable force.  Kotini pointed to the Expected or Intended Injury Exclusion and claimed that the exception to the exclusion, which provided that the exclusion did not apply to bodily injury resulting from the use of reasonable force to protect persons or property, conflicted with the Assault and Battery Exclusion.   His contention was that the Expected or Intended Injury Provision granted coverage for intentional injuries caused by force to protect persons or property, provided the force was reasonable, and contended that whatever was excluded under the Assault and Battery exclusion can “come back into coverage” if the action was  reasonable.  The court rejected this contention, finding that the conduct of the bouncer constituted an assault and battery and was, thus, excluded through application of the above exclusionary language.



Audrey A. Seeley
[email protected]

Nothing this week.


Cassandra A. Kazukenus
[email protected]

Testimony before the Senate Majority Coalition

On October 8, 2013, NYIA had the opportunity to testify before the Senate Majority Coalition regarding several existing regulations that NYIA and its members “have identified as imposing unnecessary, burdensome and/or excessive costs on property/casualty insurance companies.”  The regulations identified by NYIA were Regulation 30 (11 NYCRR §§105-109), 11 NYCRR §79.6, 15 NYCRR §82.8(c)(1), and Regulation 79 (11 NYCRR Part 67).  Additionally, NYIA testified regarding the burdensome and expensive nature of the financial examinations performed by the Department of Financial Services, and the excessive use of emergency regulations.

NYIA’s testimony regarding the excessive costs and burdensome nature of the DFS’ financial examination process focused on the fact that these exams should be dedicated to financial matters like solvency rather than matters appropriately reviewed during a market conduct examination.  NYIA testified that the financial exams have included requests for reviews of “an insurer’s Board minutes, insurance policies purchased by the company, expense classifications, employee benefits, privacy compliance, disaster preparedness plans, fraud plan compliance and other non-financial items.”  As pointed out by NYIA, these issues should be a part of a market conduct exam rather than a financial exam which should be limited to an insurer’s solvency.  By including these items in the review, the exam process has become burdensome and expensive.

NYIA’s testimony regarding the excessive use of emergency regulations primarily focused on one example.  While NYIA agreed that emergency regulations have a place, it testified that emergency regulations should not “become a means of circumventing the public comment period required for non-emergency regulations.”  In support of its position, NYIA pointed to the adoption the emergency regulation creating the mediation program for policyholders impacted by Storm Sandy as an example of why the use of the emergency regulation mechanism was not necessary.  In that instance, the entity responsible for administering the mediation program was not ready until beyond the 45 day comment period that would have been required if the ordinary regulation adoption process had been used.  Thus, there was no need for an emergency regulation in that matter especially in light of the need for DFS to answer numerous clarifying questions by insurers.

NYIA also suggested changes to 15 NYCRR §82.8(c)(1) which stipulates “that a customer may not be charged for storage by a motor vehicle repair shop unless a written notice is given.”  Because insurers have found that this notice is rarely provided and insurers have no practical means to contest the charges when they are not legitimate, NYIA suggested making a willful violation by repair shops a willful violation of the regulation subjecting it to penalties.

In addition to NYIA’s testimony at the hearing, members and representatives of the building trades testified regarding the need for changes to the Scaffold Act (Labor Law §240).  Generally, they testified that comparative negligence needs to be allowed under the act.  Additionally, there was mention of the possibility of requiring insurance after a project is finished.  Specifically, “the building trades have requested that DFS mandate a 10 year completed operations minimum requirement for owner-provided, or contractor-provided, insurance programs.” 

A special thank you to Marc Craw at NYIA for providing me a copy of a transcript of his testimony, and a brief summary of the proceedings.

Katherine A. Fijal
[email protected]

10/11/13       Philadelphia Indemnity Ins. Co. v. Youth Alive, Inc.
United States Court of Appeals, Sixth Circuit
Insurer’s Position on Coverage Reasonable – No Bad Faith
Youth Alive is a nonprofit corporation providing mentoring and other services to at-risk youth in Louisville, Kentucky.  In 2008, Youth Alive transported several youths to an event in Louisville using three vans owned by Youth Alive. When the event concluded, four of the youths attempted to board a Youth Alive van for the ride home but were apparently unable to do so because it was full.  Thereafter, a Youth Alive employee requested that a 16 year old Youth Alive participant who had driven himself to the event, drive the four children to their homes – he agreed.  The 16 year old, however, did not possess a valid driver’s license; and, the car that he was driving was not his and had been stolen during a carjacking.

Shortly after the 16 year old drove away a police officer saw him driving erratically and ran a check on the license plate and discovered that the vehicle had been stolen, and gave chase.  The 16 year old lost control of the vehicle and collided with a tree.  The 16 year old survived the crash but his four passengers were killed.

After the accident, the estates of the four children brought lawsuits against Youth Alive in Kentucky state court, alleging that Youth Alive was negligent in permitting the children to be driven home by the 16 year old. Youth Alive notified Philadelphia Indemnity [“PI”] of the suit and requested defense and indemnification under two policies – and CGL policy and a commercial excess liability policy.  PI provided a defense under a reservation of rights. Youth Alive counterclaimed asserting that PI’s coverage position had no reasonable basis in law or fact and (1) breached its common law duty of good faith and fair dealing and (2) violated the Kentucky Unfair Claims Settlement Practices Act, Ky.Rev.Stat. §304.12-230, by misrepresenting pertinent coverages and failing to affirm liability on claims within a reasonable time.

Thereafter, PI filed suit in the United States District Court for the Western District of Kentucky, seeking a judicial determination that neither policy provided coverage for the claims arising from the accident. PI cited to Automobile Exclusion (g) which excluded coverage for any bodily injury arising from the use of any automobile “owned or operated by or rented or loaned to any insured.”  PI argued that Exclusion (g) applied because the CGL policies defined “insured” to include “volunteer workers” and “club members” performing activities on Youth Alive’s behalf.   PI also argued that its excess policy also contained an automobile liability exclusion that excluded by its plain terms “any liability” arising out of the use of any automobile, whether or not operated by an insured.

In the meantime, the state court case was settled, with PI paying $1.8 million.  The district court later dismissed Youth Alive’s statutory and bad faith counterclaims, reasoning that as a matter of law, PI’s coverage position had not been taken in bad faith.

The sole issue on appeal was whether Youth Alive sufficiently alleged that PI acted in bad faith in seeking a declaratory judgment that neither of its two pertinent insurance policies provided coverage to Youth Alive. The district court held that Youth Alive failed to sufficiently allege bad faith claims against PI, and for the following reasons the United States Court of Appeals for the Sixth Circuit [“Court”] agreed.

Under Kentucky law, a plaintiff must adequately alleged three elements to maintain a bad-faith claim:  (1) that the insurer was obligated to pay the claim under the terms of the policy; (2) that the insurer lacked a reasonable basis in law or fact for denying the claim; and (3) that the insurer either knew there was no reasonable basis for denying the claim or acted with reckless disregard for whether such a basis existed.  The standard applies to both common-law and statutory bad-faith claims.

In support of its claim that PI’s position was unreasonable, Youth Alive relied in part on its executives’ and board members’ opinions regarding who they believe qualified as a “volunteer” for purposes of the organization’s operations.  The Court noted, however, that coverage under an insurance policy depends upon the terms of the policy, not either party’s unilateral definition of similar language in extrinsic materials.  The policy provided its own definition of “volunteer”, and it was the Court’s opinion that PI’s reading of the policy language, if not a persuasive interpretation, was a plausible one.  It was not unreasonable for PI to argue that the 16 year old, in accepting Youth Alive’s directive to transport the children on its behalf, fell within the terms of the policy despite his brief term of service. The Court held that PI’s interpretation was reasonable, and that there was no Kentucky precedent to the contrary. 

The Court also determined that PI’s argument that the 16 year old driver was an insured by virtue of being a “club member” was similarly a matter subject to genuine debate.  PI’s argument that the 16 year old’s admittance to and participation in Youth Alive activities made him a “member” of the group was, even if ultimately incorrect, not entirely lacking in any reasonable basis. 

The Court also held that Youth Alive was incorrect in arguing that PI had not reasonable basis to contest coverage under the excess policy.  The Court noted that the plain language of the excess policy supports PI’s position. 

Finally, the Court also disagreed with Youth Alive’s position that PI proceeded in bad faith by unreasonably delaying settlement and erecting needless adversarial hoops as preconditions to Youth Alive’s indemnification.  The only dilatory tactic alleged by Youth Alive is that Philadelphia Indemnity refused to settle the estate’s claims against Youth Alive pending the outcome of its declaratory judgment action in the district court. The Court noted that when coverage is reasonably in dispute, the preferred course of conduct for an insurance company is what occurred:  (1) a defense of PI’s insured in the personal injury action under a reservation of rights’ and (2) a separate declaratory action adjudicating the issue of coverage.

The Court concluded that it was reasonable for PI not to commit itself to a settlement before coverage was determined.  PI investigated the claim, provided a defense and eventually settled the case on Youth Alive’s behalf. Accordingly, the Court held that Youth Alive’s bad faith claim must fail as a matter of law.

Jennifer A. Ehman
                                            [email protected]    

09/26/13       Yoon v. GEICO Gen. Ins. Co.
Supreme Court, Kings County
“Servicing” as that Term is used within an Auto Business Exclusion includes Washing a Car
Plaintiff, Jae Yoon, was the principal and owner of company that leased a car wash, Nereuss Corp.  On the date of the loss, Yoon was driving a vehicle owned by a customer onto a car wash conveyor/track when it impacted the rear of the unoccupied vehicle in front of him.  This caused that vehicle to move forward on the car wash conveyor and in turn impact with the rear of the next vehicle. This in turn caused that vehicle to move off the car wash track and strike Demond Moore. Moore suffered multiple injuries including but not limited to the amputation of his left leg below the knee.

Yoon commenced the instant declaratory action against Geico General Insurance Company and Moore seeking to have Geico defend and indemnify him in the underlying action pursuant to two insurance policies:  a Family Automobile Policy (“Auto Policy) and a Personal Umbrella Policy (“Umbrella Policy”).
Geico disclaimed coverage under the policies, based on the applicability of the automobile business exclusion in the primary policy, and the business pursuits exclusion contained in the umbrella policy.  Of note, the Umbrella Policy provided that its "coverage is no broader than the primary insurance except for our liability limit."

With regard to the automobile business exclusion, it removed coverage for those using the automobile while that person is working in or engaged in any auto business.  The Auto Policy defines the term "Auto Business" as "the business of selling, repairing, servicing, storing, transporting or parking of autos."   For purposes of this particular policy, the operative term was "servicing," which was not defined in the policy.

It was undisputed that the Nereuss facility was in the business of washing and vacuuming vehicles.  During his deposition, Yoon testified that he was the president of the Nereuss car wash which would vacuum the vehicles first if requested by the customer, before washing the exterior of the vehicle.  It is further undisputed that the accident occurred as a result of Yoon driving a vehicle, a non-owned auto, onto the car wash conveyor/track, which ultimately led to Moore's injuries.  In the court's view, the term "servicing," as used in the automobile policy exclusion provision herein, reasonably could be construed to the include services performed by Nereuss, such as cleaning, waxing, and vacuuming. Indeed, providing upkeep of the exterior of a vehicle by washing it clearly falls within the ambit of necessary maintenance for the vehicle.

Thus, applying the plain and ordinary meaning of Geico's automobile exclusion, especially the term "servicing," the court held that the auto business exclusion applied to the case at bar and, therefore, precluded coverage under the Geico policies at issue.     

Earl K. Cantwell

[email protected]


If a tree falls in a forest but there is no one to hear, does it make a sound? If a notice of claim is sent to an insured that never receives and opens the letter, is it still a timely claim?  A California Appeals Court recently dealt with such questions in the case of Evanston Insurance Co. v. 155 Hamilton Development, LLC, 2013 WL 3201679 (Cal. Ct. App., 2nd District, June 25, 2013).  A developer alleged structural problems in a condominium project that Structural Engineering Consultants (“SEC”) engineered.  SEC notified its carrier, Evanston, about the claim in May 2008, but the insurer denied coverage asserting that the letter dated April 29, 2008, was not timely.  Evanston had canceled the insurance policy for non-payment of premium on March 21, 2008. 

SEC filed a declaratory judgment action seeking to force Evanston to provide defense in the underlying suit by the developer.  Evanston in turn brought counterclaims against SEC and the developer to establish that coverage did not exist.

According to the opinions, SEC began experiencing financial difficulties in 2007.  By February 2008, the company only had one employee, the owner/proprietor.  The owner testified he left the company mail”unopened for several months”. The developer’s attorney said he started notifying SEC about the claim starting March 10, 2008.

The March 10 letter to the insured was sent first class mail to an old address for the company, but there was a mail forwarding order in effect, so that complication was not an issue.  The address on the letters was the one listed for the professional corporation with the California Secretary of State.  SEC’s owner said the only letter he saw was the one dated April 29, 2008.  Evanston contended that SEC did not “receive” the March 10, 2008 letter because it was not opened and the insured was never aware of it. 

The Trial Court ruled against the insurance company and in favor of coverage citing a California evidentiary code rule which establishes a “rebuttable presumption” that letters sent by first class mail to an address of record are deemed “received” by the addressee.  Evanston appealed arguing that the insured had not met its burden to prove that the claim was timely received.

The Trial Court ruling was affirmed on appeal.  The appeals court also noted and applied the “mailbox rule” in the California procedural code as a fair standard which promoted uniformity and enabled parties to determine whether and when a mailed item is “deemed” received.  The appellate court also cited evidence from Evantston’s claims department that, if the first letter to the insured had arrived before the policy was canceled, it would nonetheless be considered received and have been covered under the policy and claims handling guidelines.

This case is a reminder that claims departments and insurance claims
professionals should closely monitor incoming mail and, for example, arrange for substitute opening and review in the event of a vacation, illness, etc.

This case is also a reminder that underwriting departments and procedures should encourage insureds to have proper mail receipt and notification procedures in place so that it is possible to determine when a piece of mail is received, how quickly it is opened and reviewed and by whom.  Insureds should also be encouraged to update public records, websites and the like with new or relocated business addresses.  In this way, claims notification and handling can be processed more efficiently and with minimal dispute, and legal claims can be promptly handled without delay or risk of going into default.

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