Coverage Pointers - Volume XVI, No. 10

Dear Coverage Pointers Subscribers:

Confronted with a situation?  Give us a call.  We love to help our clients deal with situations.

A special salute to our veterans, who should be remembered each and every day, not just on November 11.

Welcome to this week’s issue of Coverage Pointers.  It was nice seeing some of you at the Law School for Insurance Professionals programs where Beth and I presented a “Back to Basics” approach to constructing coverage letters and discussing systematic approaches to coverage position letters.  If you are looking for a similar program for your offices and claims staff, do let us know.

Hewitt’s Highlights:

We are delighted to welcome Rob Hewitt as our newest columnist this week...  As we announced, Rob is our latest addition to our growing Long Island office.  We are delighted to serve the NY Metro area with a local presence. Rob has taken on the Serious Injury duties and we debut Hewitt’s Highlights on the Serious Injury Threshold.

Rob graduated from Hofstra University at the top of his class, summa cum laude, Phi Beta Kappa with dual degrees in history and psychology and received his law degree from Hofstra University where he graduated as valedictorian.  Pretty impressive credentials.  He’s practiced with an excellent downstate firm and now has joined our ranks to work with Beth and Aimee in the Long Island office.

Labor Law Pointers:

I have to tell you, I am really impressed by the job that Dave Adams and his team of Labor Law lawyers do in their monthly publication, Labor Law Pointers.  If you follow cases involving Sections 200, 240 (1) and 241(6) of the Labor Law and you don't subscribe this publication, you're missing an important educational tool. That newsletter covers all the important Scaffolding Act and construction accident cases, and provides strategic advice to those who handle that litigation. In his most recent issue, Dave included the reported Labor Law decisions from the newest Judge of the highest court in the state, the Court of Appeals.  Contact Dave at [email protected] so that you can be added to his subscription list.

Tiers (of Joy) On Our Pillow:

US News and World Report list of “Best Law Firms” was announced this week.  According to its website,

The U.S.News – Best Lawyers “Best Law Firms” rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process. To be eligible for a ranking in a particular practice area and metro region, a law firm must have at least one lawyer who is included in Best Lawyers in that particular practice area and metro. For more information on Best Lawyers, please visit

For the 2015 "Best Law Firms" list, the methodology for the initiative remained the same as in the previous four years.

Clients were asked to provide feedback on firm practice groups, addressing expertise, responsiveness, understanding of a business and its needs, cost-effectiveness, civility, and whether they would refer another client to the firm. Clients also had the option to write in the names of law firms they’ve worked with on other matters and within practice areas beyond those they were asked to comment on by the submitting firm. Some clients chose to write a comment about their experience with the law firm. These comments are for reference only and were not used as data points in the formal evaluation process.

We were honored to receive Seven Tier 1 Rankings in the following areas of law:

  • Insurance Law
  • Personal Injury Litigation – Defendants
  • Product Liability Litigation – Defendants
  • Health Care Law
  • Civil Rights Law
  • Tax Law
  • Trusts & Estates Law


We Are More Than a Coverage Firm:

For those who may have been surveyed, thanks for your support of our Insurance and defense practices.  For those who do not know that we are more than a coverage firm, now you do.  In fact, I received a call the other day from a client seeking to identify a firm that handled Employment Practices Liability defense, not realizing that we did that kind of work.  We do. 

I then asked our Managing Partner and the head of our Employment Practices defense team, Ann Evanko, to offer a few words describing her practice. Actually, I may get other lawyers to do so in future issues.  Here is Ann’s greeting and you can see by her welcome that she reads our newsletter:

From Our Employment Team:

            Got a situation? We love situations!

When you open your mail and discover that the Equal Employment Opportunity Commission (“EEOC”) has served you with a charge of discrimination, you’re in a situation, and not a pleasant one! It’s especially challenging if you are facing one of the EEOC’s new systemic discrimination cases. These administrative claims are conditions precedent to a federal lawsuit, so you know it may get worse. They are costly to defend, time-consuming, and, most importantly, disruptive to your day-to-day business operations.

It doesn’t cost the employee or ex-employee any money to file charges against you and they do not need a lawyer. Given the information readily available on the Internet, it is an easy path to take for a disgruntled employee. And we all know that every work force has disgruntled employees! Even if there is no merit to the case, we see individuals filing charges with the EEOC just to shake down a potential settlement.  It’s these kinds of situations that might make you wish you had Employment Practices Liability Insurance (“EPLI”) so all you would need to do is pay the retention and turn over the defense to your carrier. Or, perhaps you wish you would have engaged in a human resources audit that might have revealed some policies and practices not in compliance with the law—before they are discovered during the lawsuit. Or perhaps you wish you would have given your employment lawyer a call before saying those magic words, “you’re fired!”

The Hurwitz & Fine, P.C. Employment Practices team advises employers about best practices so as to avoid or minimize these situations. We also defend employers in litigation as private counsel and as counsel under EPLI policies. Strong, legally compliant policies and practices and consistent application of the rules to all employees will go far in defending claims successfully. We are like WD-40—we can help you and your clients ease through those tough, difficult and sticky situations!

Ann E. Evanko
[email protected]


Pfffft on Falling Back:

The sun sets at 5:00 PM here in WNY today.  I don’t like being without sunshine in the evenings.

Kudos to Beth Fitzpatrick:

Please join me in congratulating our own Beth Fitzpatrick, head of the Long Island office, on being honored by the Long Island Business News as a 2014 recipient of the Leadership in Law Award!

According to LIBN:

Experience counts. Dedication, hard work, skill, tenacity and excellence are expected. Compassion is essential. The Leadership in Law Award recognizes all of these qualities and is dedicated to those individuals whose leadership, both in the legal profession and in the community, has had a positive impact on Long Island. Recipients of this award demonstrate outstanding achievements, involvement in their profession, support of the community and mentoring.

Congratulations Beth on this well-deserved recognition and honor!

Trial Starts in “Horrible Crime” – 100 Years Ago Today:

A woman charged with committing the most horrible crime in this country’s history goes to trial Monday. She – Mrs. Cynthia Buffom – is charged with planning to end the lives of her husband and her children. She, the state’s attorney alleges, poisoned her husband, her little daughter, her little baby, her two sons all for the sake of an illicit love—the love of a middle-aged married woman for a handsome farm laborer.

If what the state’s officials allege is true, Mrs. Buffom is the arch-murderess of the western world—the Lucretia Borgia of modem times. To see and talk to this remarkable woman the reporter came to Little Valley. He found her seated by the window of her cell reading the battered and thumbmarked trash novel, “Beautiful Evelyn’s Mistake.”  He noted” “she is a comely woman, with a clear ivory complexion, soft brown eyes and a maw of slightly wavy brown hair”

Editor’s Note: Buffom was convicted of murdering her husband, daughter and son and she crippled another son with poison. She was the first woman in New York State history to be sentenced to die in the electric chair.  The conviction was overturned on appeal.  A new trial was scheduled in 1915.  Here’s what happened in the retrial:

The Day
(New London, Conn.)
May 21, 1915

Mrs. Buffum Gets 20 Years Or Life
Little Valley Woman Pleads Guilty in Second Degree for Poisoning of Husband

Mrs. Cynthia Buffum, the Little Valley woman who has been on trial in Supreme Court for two weeks on a charge of murdering her husband, Willis Buffum, by giving him repeated doses of a mineral poison pleaded guilty to murder in the second degree. The decision to enter this plea was reached by Mrs. Buffum and her lawyers after a conference that extended into the early hours of this morning.

Mrs. Buffum was sentenced to not less than 20 years nor more than life. On a previous trial Mrs. Buffum was sentenced to death, but a re-trial was granted on the ground that new evidence had been discovered.

She died in 1946 and is buried with her children in Little Valley, according to sources.


Audrey’s Angles:

I hope that you and your family had a great Halloween.  My son enjoyed walking to a house with one of his big cousins who showed him how to trick or treat.  Thereafter, he sat back and watched his cousins run from house to house probably wondering what was going on.  The concept of ringing a stranger’s door bell and asking for candy was a bit contrary to what we have been teaching him.

I also want to congratulate my partner, Beth Fitzpatrick, who is being honored next week by the Long Island Business News as a 2014 recipient of the Leadership in Law Award!  Congratulations Beth on a well-deserved distinction.  I am so honored to practice law with you!! 

As my colleagues generously advertised last edition, I was recently appointed as the DRI Insurance Law Committee Chair.  DRI is a phenomenal professional organization for attorneys and claims professionals.  If you are interested in getting involved in DRI and specifically in the Insurance Law Committee please contact me at [email protected].  Our committee has many opportunities for publication, organizational involvement, and networking.

In addition, if you have not registered for the DRI Insurance Law Committee’s Insurance Coverage and Practice Symposium, December 4-5, in New York City please do so as soon as you can.  There are already several hundred claims professionals and attorneys registered and we have no registration limit.  If you are a claims professional or in-house attorney you may be able to attend this program for free.  This is the premier insurance coverage program.  We are fortunate that New York Court of Appeals Judge Smith will be the keynote speaker.  Those who handle New York matters know that in the past year an unprecedented number of insurance coverage decisions have been handed by New York’s highest court.  Judge Smith’s address is one not to miss.  Other cutting edge topics include current trends in bad faith litigation, putting a human face on the insurer at trial, the future of the privacy offense, and a Friday morning mini-theme on the duty to settle.  Join us for unsurpassed networking opportunities, including receptions on Wednesday and Thursday nights, dine-arounds at some of New York City’s best restaurants, and women’s networking functions.  You can register for the program at via

Until next edition,

Audrey A. Seeley
[email protected]

100th Anniversary of New Republic:

On this day in 1914, while World War I rages in Europe, the first issue of a new weekly magazine, The New Republic, is published in the United States.

The New Republic’s editorial board was presided over by the journalist Herbert Croly, author of the influential 1909 book The Promise of American Life. Impressed by Croly’s arguments for greater economic planning, increased spending on education and the need for a society based on the "brotherhood of mankind"—ideas that were said to have influenced both Theodore Roosevelt and Woodrow Wilson—the heiress Dorothy Payne Whitney and her husband, the banker and diplomat Williard Straight, approached Croly and asked him to join them in launching a new liberal journal that would provide an intelligent, opinionated examination of politics, foreign affairs and culture. After recruiting his friend and fellow journalist Walter Lippmann, Croly saw the first issue of the new magazine hit the stands on November 7, 1914.

Though its first issue sold only 875 copies, after a year the circulation of The New Republic reached 15,000. Strong supporters of Theodore Roosevelt and his newly formed Progressive Party, the magazine’s editors were wary of the administration of Woodrow Wilson, although they did support Wilson’s proclaimed neutrality at the beginning of World War I. In May 1915, however, a German submarine sank the British passenger ship Lusitania, killing 1,201 passengers and crew members, including 128 Americans. The New Republic began to switch its anti-war position, eventually throwing all its support behind President Wilson’s decision to take the nation to war in April 1917. Walter Lippmann especially grew close to the administration during wartime, working as an assistant to Newton Baker, the president’s secretary of war, and with Colonel Edward House, Wilson’s closest adviser.

Steve’s Stewardship:

While a review this Edition would suggest things around the State are picking up, unfortunately the first party side of insurance law remains relatively quiet.  Here’s hoping we’ll have something interesting to report in the next couple of weeks.  

For those of you interested in civil litigation, however, the column doesn’t disappoint. We’d encourage you to take a look at the Metro-North case reviewed in this week’s Potpourri.  It is a great example of vicarious liability, and the interplay with statutory protections.  In that case, because the claim against Metro North was untimely so too  would have been the claim against their employee.  The reason being that you can’t backdoor a negligence claim where, as in that case, the controversy is already barred.

That case also reminds us of a different point.  While we presume Metro North, and their employee, will ultimately be successful, when preparing a motion the movant CAN NOT leave anything to interpretation.  In that case, the employee did not present enough evidence to establish, in fact, he was actually so employed and in the course of his employment at the time of the incident.  Perhaps there is more at issue, but it may be a simple fact that the movant did not demonstrate a fact that would seem self-evident. This is yet another reminder that on a dispostive motion, a Court cannot take anything for granted.  If there is a fact you have to prove, you need to prove it…hopefully through admissible evidence. 

Three Cheers for Melville!

We close by offering our congratulations to Beth Fitzpatrick on yet another well-deserved honor.  She is a remarkable attorney, and we are all very grateful to have her as a partner, colleague and mentor.  We also welcome Rob Hewitt to the Coverage Pointers staff this week.  The Serious Injury column has been a bit of a revolving door the past 18 months, we hope this is the beginning of a long run for Rob because, frankly, we’re running out of catchy titles.  Finally, a congratulations and get to work to Diane Clarke who just found out that she passed the NYS Bar Exam. 
That’s it for this week. 

Steven E. Peiper
[email protected]


The Original Wolf of Wall Street’s Lawyer, a Century Ago:


The Evening World
New York, New York
7 Nov 1914


“Wolf of Wall Street’s” Arrest
Reveals Action of Grand Jury, July 30, 1913


Judge Fixes Bail for Lamar at
$30,000 After Prosecutor
Scores Prisoner

The indictment of Lawyer Edward Lauterbach of this city for conspiracy, with David Lamar, often called “the Wolf of Wall Street,” to defraud J. P. Morgan & Co., was made public this afternoon in the United States District Court, presided over by Judge Frank V. Rudkin.  The indictment was found by the United States Grand Jury on July 31, 1913, but it has been kept sealed until now awaiting the arrest of Lamar in this jurisdiction.  Mr. Lauterbach will plead to it in the United States Court Monday morning.

When the “Wolf” was first arrested soon after the original indictment he said that he was simply trying to do a friendly act for Lauterbach.

Lamar’s indictment came after President Wilson’s assertion that a secret lobby was at work against the efforts of his Administration.  In the investigation Lamar admitted he had telephoned to various persons and, impersonating members of Congress, advised them to employ Edward Lauterbach, the New York lawyer, to prevent a Government inquiry into the Union Pacific Railroad and the Steel Corporation.  Lamar said his only object was to “do a friendly service” to Lauterbach and get him back in the good graces of “big business.” 

The Appellate Division eventually censured the lawyer:

This is a case quite out of the ordinary. The respondent is a well-known lawyer, now 70 years of age or over, who has for half a century occupied a conspicuous position as a lawyer and politician. The charges against him grow out of his efforts to rehabilitate himself in the good graces of the banking firm of J. P. Morgan & Co., with whom he says he had had in the past friendly and profitable relations, which relations, however, had been broken off in consequence, as he believed, and as is doubtless the fact, of his known intimacy with a person named Lamar, whose practices had made him a subject of suspicion and dislike to the firm of J. P. Morgan & Co., as well as to other bankers. The charge against the respondent is that he used unprofessional and improper methods in his efforts to regain his lost standing with the Morgan firm and to enjoy the benefits which would result from a renewal of friendly relations with them.

In re Lauterbach, 169 A.D. 534 (App. Div. 1915)


Highlights of This Week’s Issue, Attached:

Dan D. Kohane
[email protected]

  • Remember the New York Rule – A Reservation of Rights on Late Notice is No Substitute for a Disclaimer
  • If there is No Contractual Requirement for Uninsured Motorists Arbitration, Moving to Stay Arbitration Demand is not Subject to the “20 Day” Rule and Insurer Cannot Be Compelled to Arbitrate
  • Claim Against E&O Carrier and Defense Firm for Utilizing “United Front” Defense Dismissed Without Proof of Damages
  • Twenty Day Time Period to Move to Stay Underinsured Motorists Arbitration Does Not Apply When Claimant Not Insured
  • Insured has No Claims Against Reinsurer for Claim Handling


Robert E.B. Hewitt III
[email protected]

  • Appellate Court Affirms Finding That Plaintiff Raised Issues of Fact as To Significant Limitation of Use and Permanent Consequential Limitation Categories
  • Appellate Court Reverses Lower Court and Finds That A Baby Born Early But Alive As a Result of an Accident Does Not Constitute “Loss of Fetus”
  • Plaintiff Failed to Distinguish His Pre-Existing Injuries from Prior Accidents from the Ones Claimed To Have Been Caused By the Current Accident
  • Defendants’ Medical Evidence Demonstrated a Prima Facie Case That Plaintiff Did Not Sustain a Serious Injury, Which Plaintiff Failed to Rebut


Margo M. Lagueras
[email protected]


  • Treatment Notes Documenting Assignor’s Condition as “Status Quo” Support Opinion That Further Treatment Will Not Provide Improvement
  • Positive Test Result Does Not Necessarily Mean Test Was Medically Necessary
  • “Chronic Pain” Which Does Not Prevent EIP from Working Does Not Support Claim for Wage Loss
  • Unchanged Pain Levels Support That Post-IME Treatment Not Medically Necessary



  • “Evidentiary Facts” Must Support Summary Judgment Motion
  • Is EUO a Condition Precedent to Coverage or Part of Verification Procedures?


Steven E. Peiper
[email protected]

  • Question of Fact Regarding Whether an Employee’s Use of a Boat For a Total of Nine Days Over the Period of Four Years Qualified Him as a “Seaman” Under the Jones Act
  • Question of Fact over Supervision, Direction and Control Results in Question of Fact on Special Employment Status
  • One Year Suit Limitation Bars Suit Against Metro-North; Suit Limitation Will Also Preclude Claim Against Employee if he can Establish the Loss Occurred While Acting Within the Scope of his Employment with Metro North
  • Post-Installation Modification Destroys Products Liability Argument


Elizabeth A. Fitzpatrick
[email protected]

  • Working too hard this week.


Audrey A. Seeley
[email protected]

  • No reported decisions.

Cassandra A. Kazukenus
[email protected]

  • Proposed Amendment to Regulation 10 – Public Adjusters


Jennifer A. Ehman
[email protected] 


On vacation this week.
Earl K. Cantwell

[email protected]

  • Confusion Reigns Regarding Coverage for Construction Defects


OK, that’s all for this week.  Write with questions, call for training, send us love notes, whatever works!
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: 
Twitter:                       @kohane


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
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Taylor F. Gabryel
Diane F. Bosse
Joel R. Appelbaum

Steven E. Peiper, Team Leader
[email protected]

Elizabeth A. Fitzpatrick
Cassandra Kazukenus

Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Taylor F. Gabryel

Jody E. Briandi, Team Leader
[email protected]

 Elizabeth A. Fitzpatrick
Diane F. Bosse

Index to Special Columns

Kohane’s Coverage Corner
Hewitt’s Highlights on Serious Injury
Margo’s Musings on No Fault
Peiper on Property and Potpourri
Fitz’ Bits
Audrey’s All Things Personal
Cassie’s Capital Connection
Keeping the Faith with Jen’s Gems
Earl’s Pearls

Dan D. Kohane
[email protected]

11/06/14       Vermont Mutual Insurance Co. v. Mowery Construction, Inc.
Appellate Division, Third Department
Remember the New York Rule – A Reservation of Rights on Late Notice is No Substitute for a Disclaimer
In 2005, Ciuffo was hurt while working on a construction project operated by Mowery. Mowery’s owner and president, became aware of the incident on the date that it occurred, he did not report it to Vermont Mutual Ins. Co. (“VMIC”) until Ciuffo sued Mowery more than two years later.

VMIC conducted an investigation into the untimely notice issue and, thereafter, sent Mowery a reservation of rights letter stating that it would provide a defense in the negligence action, but was reserving its right to disclaim coverage and discontinue its defense if it determined that Mowery did not have a good faith belief that VMIC was not obligated to notify plaintiff of the accident. Less than a month later, plaintiff commenced this declaratory judgment action seeking among other things, a declaration that it was not required to defend or indemnify defendant due to Mowery's untimely notice of claim.

The insurer argued that its disclaimer was timely, inasmuch as its investigation of Mowery's contention of defendant's nonliability provided a reasonable basis for the delayed notice to its insured. An insurer's decision to disclaim liability insurance coverage must be given to the insured, in writing, as soon as is reasonably practicable, "failing which the disclaimer or denial will be ineffective".

While the timeliness of an insurer's notice of disclaimer generally raises an issue of fact for a jury to decide, where, as here, the basis for a disclaimer "was or should have been readily apparent before the onset of the delay," the delay will be found to be unreasonable as a matter of  law. Reasonableness of delay is measured from the time when the insurer learns of sufficient facts upon which to base the disclaimer

VMIC has retained an investigator name Quillinan to conduct its late notice investigation.  He interviewed Mowery’s owner and provided plaintiff with a written report, dated January 15, 2008, which confirmed that, although Mowery knew that Ciuffo had been injured on the date that the accident occurred, he did not believe that plaintiff needed to be notified of the incident because Ciuffo was a subcontractor and not defendant's employee.

Quillinan's report further indicated that Mowery's attorney had "pressed" him to confirm whether plaintiff would be providing defendant with a defense in Ciuffo's personal injury action, and specifically requested that plaintiff "review the facts presented" and make a prompt decision. The court found that Quillinan's report provided plaintiff with sufficient information upon which a disclaimer would be soundly based.

Instead, VMIC retained an attorney to further investigate the circumstances of Mowery's untimely notice of claim.

This was wholly unnecessary as defendant's claim was not factually complicated, nor did plaintiff encounter any obstacles in conducting its investigation such that further inquiries were required.  Even after receiving the attorney's summary, which ostensibly equipped it with sufficient facts to issue a written disclaimer, plaintiff instead sent defendant a reservation of rights letter, which does not serve as "a substitute for the required notice of disclaimer"

11/05/14       Progressive Specialty Ins. Co. v. Louis
Appellate Division, Second Department
If there is No Contractual Requirement for Uninsured Motorists Arbitration, Moving to Stay Arbitration Demand is not Subject to the “20 Day” Rule and Insurer Cannot Be Compelled to Arbitrate
Progressive commenced this proceeding to permanently stay arbitration of a claim for uninsured motorist benefits made by Louis, who allegedly was injured in a motor vehicle accident while driving a vehicle insured by Progressive. Louis cross-moved to dismiss the petition on the ground that it was untimely, not brought within 20 days of the arbitration demand.

True, Progressive did not apply for a permanent stay of arbitration within the 20-day time. However, since the basis for the permanent stay was that the parties had never agreed to arbitrate, an exception to this time limitation applies, and the proceeding need not be commenced within 20 days of the arbitration demand.

Moreover, the lower court properly granted the petition for a permanent stay on the basis that the subject policy did not mandate arbitration of the subject uninsured motorist.

10/30/14       Kaufman v. MLMIC
Appellate Division, Third Department
Claim Against E&O Carrier and Defense Firm for Utilizing “United Front” Defense Dismissed Without Proof of Damages
Two practicing OB/GYN doctors and their employer, a nursing home, were sued by the Nortons for medical malpractice. Dr. Nguyen and the hospital were insured by defendant Medical Liability Mutual Insurance Company (MLMIC) and the insurer assigned defense of the case to defendant Carter, Conboy.  The Norton action went to verdict and the jury found in favor of the Nortons an apportioned 35% of the liability to Dr. Kaufman and the remaining 65% to Dr. Nguyen.

Dr. Kaufman then sued the insurer and the defense firm alleging that the use of a "united front" defense resulted in a conflict of interest to the detriment of plaintiff, and constituted legal malpractice under the circumstances.

Plaintiff must prove in a legal malpractice action include that her attorney was negligent, she would have succeeded on the merits "but for" her attorney's negligence and she sustained actual and ascertainable to submit sufficient proof to raise a triable issue as to all those elements.

The undisputed proof established that Dr. Kaufman plaintiff did not have to pay any part of the verdict, which was covered in full by the insurer and hospital. Plaintiff's contention that she sustained non-pecuniary damages, such as a taint on her reputation resulting from media and other coverage of the Norton verdict, is unavailing since "the established rule limit[s] recovery in legal malpractice actions to pecuniary damages".  She established no other proof that she was hurt by the verdict or its aftermath,

Without damages, the legal malpractice claim is dismissed as well.

10/29/14       Allstate Insurance Company v. Marke
Appellate Division, Second Department
Twenty Day Time Period to Move to Stay Underinsured Motorists Arbitration Does Not Apply When Claimant Not Insured
Marke, a pedestrian, was hit by a car insured by Farmers on October 27. 2011.  That car was driven by Abowath and had a $100,000/$300,000 policy. Abowath, the driver was insured by Allstate with a $25,000 per person and $50,000 per accident. The Allstate policy contained a supplemental uninsured/underinsured motorist (SUM) endorsement.  Marke brought claims against both insurance carriers, and recovered $100,000 from Farmers Insurance Company.

She then filed a notice of intention to arbitrate her claim against Allstate. The respondent served Allstate with a notice of intention to arbitrate her claim, dated November 30, 2012, which was delivered on December 3, 2012. In a demand for arbitration filed with the American Arbitration Association, the respondent specified that her claim was for SUM benefits.

Allstate commenced this proceeding to permanently stay arbitration of the claim by filing a petition dated March 4, 2013   more than 20 days after the demand was filed.  Marke claimed the petition was untimely.

Here, there was no agreement to arbitrate because she was not an insured within the meaning of the SUM endorsement.  The SUM endorsement defines an insured an including an occupant of a vehicle operated by the named insured.   (See 11 NYCRR 60-2.3[f]). She was not.  She was a pedestrian.  Since she was not an insured, there was no agreement to and the 20-day period of limitations set forth in CPLR 7503(c) did not apply.

10/28/14       OneBeacon America Ins. Co. v. Colgate-Palmolive Company
Appellate Division, First Department
Insured has No Claims Against Reinsurer for Claim Handling
The underlying dispute between Colgate and OneBeacon arose over OneBeacon's right, under the more than 50 primary and excess liability policies it issued to Colgate (the Policies), to control Colgate's defense against more than 20 lawsuits alleging personal injury caused by exposure to Colgate's talc products, which allegedly contained asbestos (the Talc Cases.) OneBeacon alleges that Colgate has not allowed it to control the defense of these cases, rejected the defense counsel and strategy that OneBeacon selected, and insisted on selecting its own independent counsel.

During an extended period ending in 1983, the Colgate secured the Policies were either purchased directly from OneBeacon or from two of its predecessors. In 2001, OneBeacon and National Indemnity (“NICO”) entered into a Reinsurance Agreement and a Services Agreement. Under the Reinsurance Agreement, in exchange for a $1.25 billion premium, NICO agreed to provide OneBeacon with $2.5 billion of reinsurance coverage for the carrier's liability under the Policies. The coverage encompassed OneBeacon's liability for Colgate's "asbestos related losses."

The Reinsurance Agreement further provided that, in accordance with the Services Agreement, OneBeacon appointed NICO "to perform all administrative services" connected with the Policies, including the settlement or payment of the reinsured claims. Finally, the Reinsurance Agreement stated that it was an indemnity insurance agreement solely between OneBeacon and NICO, and that no one other than those two parties had any rights under the contract.
Colgate alleges that, by entering into the Reinsurance Agreement, OneBeacon either assigned its rights and obligations under the Policies to NICO, or NICO assumed those rights and obligations. According to Colgate, NICO thereby became contractually obligated to it as the insured and NICO breached its contractual obligations by refusing to acknowledge Colgate's choice of counsel and refusing to pay the legal fees.

The Reinsurance Agreement, which is a contract only between NICO and OneBeacon, is separate and distinct from the underlying. Colgate lacks standing to state a claim against NICO for breach of the underlying Policies because NICO is not a party to those contracts.

Given the absence of a contract between NICO and Colgate, the claim that NICO breached the implied covenant of good faith and fair dealing also fails. Colgate argues that it adequately pleaded a separate implied covenant claim because it alleges that NICO refuses to communicate with its chosen counsel, to appoint local counsel, or to agree to confidentiality provisions in connection with disclosures about counsel's work. However, these allegations merely constitute a description of how NICO refuses to acknowledge Colgate's choice of independent counsel, which refusal is the subject of Colgate's breach of contract counterclaim against OneBeacon.


Robert E.B. Hewitt III
[email protected]

11/5/14         Master v. Boiakhtchion
Appellate Division, Second Department
Appellate Court Affirms Finding That Plaintiff Raised Issues of Fact As To Significant Limitation of Use and Permanent Consequential Limitation Categories
Defendants brought a motion for summary judgment to dismiss plaintiffs’ complaint on the grounds that neither plaintiff sustained a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. Defendants submitted medical reports from their examining orthopedist that the plaintiff husband had a full range of motion in the cervical and lumbar regions of his spine, and the plaintiff wife had a full range of motion in the cervical region of her spine and right knee, based on objective range of motion tests, wherein the numerical findings were compared to what is normal. Defendants also submitted the deposition testimony of each of the plaintiffs, which showed that they both returned to work full time immediately after the accident.

However, the appellate court agreed with the lower court that plaintiffs each demonstrated a triable issue of fact by submitting the affirmed medical reports of their examining osteopath, and the affirmations and medical reports of their radiologist, as to whether the husband sustained a serious injury to the cervical and lumbar regions of his spine, and whether the wife sustained a serious injury to the cervical region of her spine and right knee, under the significant limitation of use and/or permanent consequential limitation of use categories of Insurance Law § 5102(d).  The plaintiffs' examining osteopath conducted recent examinations of the plaintiffs, during which she observed range-of-motion limitations, reviewed their magnetic resonance imaging reports and other medical reports, and considered the history of the accident presented by the plaintiffs, and concluded that the injuries were permanent and causally related to the subject accident. The appellate court refused to examine unnamed additional evidence submitted by Defendants for the first time on Reply.

11/5/14         Leach v. Ocean Black Car Corp.  
Appellate Division, Second Department
Appellate Court Reverses Lower Court and Finds That A Baby Born Early But Alive As a Result of An Accident Does Not Constitute ‘Loss of Fetus’
In this unusual case, plaintiff, who was pregnant, alleged that she suffered a placental abruption during a motor vehicle accident causing her infant son, also a plaintiff, to be born prematurely and by unplanned caesarean section.  

Defendants moved for summary judgment to dismiss so much of the complaint as alleged that the plaintiff mother, individually, sustained a serious injury under the "loss of a fetus" category of Insurance Law § 5102(d) as a result of the subject accident, and the plaintiffs cross-moved for summary judgment on that portion of the complaint. Upon a renewal motion, the lower court adhered to a prior determination denying defendant’s motion and granting plaintiff’s cross-motion on that issue, finding that the phrase "loss of a fetus" encompassed any termination of a pregnancy caused by an accident, regardless of whether the fetus was born alive.

The appellate court reversed on that issue finding that, contrary to the lower court’s determination, the plain meaning of the term "loss of a fetus" does not include the premature birth of a living child, but rather, is only applicable where, as a result of an automobile accident, a viable pregnancy terminates with loss of the fetus.  The appellate court found that this determination was consistent with the legislative history as that category of damages was added in 1984 after an appellate court found that the version of Insurance Law § 5102(d) in effect at that time did not permit a woman, who was nine months pregnant at the time of her accident, to recover damages resulting from her delivery of a stillborn baby.

The appellate court found that the policy considerations underlying the 1984 amendment are not implicated when a child is born alive, even if the child is caused to be born earlier.

10/30/14       Dudley v. Imbesi
Appellate Division, Third Department
Plaintiff Failed to Distinguish His Pre-Existing Injuries from Prior Accidents from the Ones Claimed To Have Been Caused By the Current Accident
Defendants were able to make a prima facie showing that plaintiff pedestrian’s extensive physical and psychological injuries were pre-existing by submitting his deposition testimony and his substantial medical and social security disability records. It was documented that the pre-existing injuries from prior accidents led to the same symptoms and complaints that plaintiff was now attributing to the accident.   Specifically, Defendants established that plaintiff was involved in a prior motor vehicle accident and was subsequently found to be permanently disabled due to "severe impairments secondary to low back and cervical pain" and continued to complain of pain in his neck, back, legs and arms over the course of the ensuing years, as well as certain cognitive difficulties and psychological disorders. Plaintiff’s complaints following a second prior motor vehicle accident were also nearly identical to those following the accident at issue in the present case.

The Appellate Division found that in light of the proof that plaintiff's injuries were related to preexisting conditions, plaintiff was required to come forward with objective medical evidence distinguishing his preexisting conditions from the injuries claimed to have been caused by the present accident.   Plaintiff’s medical report, however, only concluded that plaintiff’s preexisting neck and lower back pain were exacerbated by the new accident, but failed to objectively differentiate Plaintiff’s condition prior to the current accident to his condition subsequent to the accident.  With respect to his alleged psychological injuries, plaintiff proffered the report of a psychologist which the appellate court rejected as having no probative value as it was unsworn, and in any event, did not causally connect his psychological condition to the current accident. Therefore, the appellate court found that the case was properly dismissed. 

10/29/14       Li v. 3511 System, Inc.
Appellate Division, Second Department
Defendants’ Medical Evidence Demonstrated a Prima Facie Case That Plaintiff Did Not Sustain a Serious Injury Which Plaintiff Failed to Rebut
The appellate court affirmed the granting of defendants’ motion for summary judgment as defendants demonstrated a prima facie Case that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident by submitting competent medical evidence establishing, prima facie, that the alleged injuries to the plaintiff's left knee and right elbow did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) The defendants further submitted unnamed evidence demonstrating, prima facie, that the plaintiff did not sustain a serious injury under the 90/180-day category. Plaintiff failed to raise a triable issue of fact in opposition.


Margo M. Lagueras
[email protected]


10/21/14       Daniel Cox DC PC v Geico Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Treatment Notes Documenting Assignor’s Condition as “Status Quo” Support Opinion That Further Treatment Will Not Provide Improvement
The EIP, a 28 year-old female, began chiropractic treatment two days after the December 2010 accident with complaints of head, neck, back, shoulder, arm and leg pain.  A lumbar MRI performed two weeks later revealed a moderate herniation at L5-S1 and a minimal bulge at L4-5.  Two months later, in February 2011, a cervical MRI revealed a tiny herniation a C5-6.  In May 2012, Applicant noted cervical spine pain with radiation and tingling into the bilateral arms and nausea.  His assessment was “status quo”.  In June 2012, Applicant noted shooting pains on the right arm, radiation into the arms and legs and stiffness and spasms in the lower back.  Again, Applicant’s assessment was “status quo”.  In August 2012, the EPs’ subjective complaints included cervical spine pain, tingling in both arms, trouble sleeping, driving, and with her activities of daily living.  Applicant’s objective assessment was “status quo”.

A chiropractic IME had been performed in July 2011, at which time the assignor complained of constant, intense migraine headaches, constant neck pain and intense back pain with spasms into her arms and legs.  She reported “minimal relief” with treatment and stated that she felt her pain had worsened.  The examining chiropractor opined that she had reached end results with chiropractic.  An orthopedic IME was also performed in July 2011, at which time the assignor similarly complained of worsening pain and poor range of motion.  The examining doctor opined that continuing conservative care, including physical therapy, would not provide further improvement.

The Arbitrator, while noting that there is no authority for denying no-fault benefits based upon “maximum medical improvement” where the applicant establishes that treatment continues to be necessary, here the treatment notes did not support Applicant’s burden to show that continued chiropractic care was providing curative or significant quantifiable palliative benefits.  Applicant’s notes continuously documented the assignor’s condition as “status quo” and her subjective complaints also did not show any improvement and, in fact, she complained that she felt her condition was worsening.  The Arbitrator therefore upheld Respondent’s denial.

10/21/14       WNY Rehabilitation & Pain Management v Geico Ins. Co.
Erie County, Arbitrator Gillian Brown
Positive Test Result Does Not Necessarily Mean Test Was Medically Necessary
The EIP was involved in an accident in October 2011.  It was reported that she had previously had a prior cervical spine injury and a diagnosis of carpal tunnel syndrome.  At issue was whether EMG testing was medically necessary to determine whether the conditions in her wrist were caused by carpal tunnel syndrome.  A peer review was ordered and the reviewing doctor stated that “ordering electrodiagnostic studies to prove the obvious does not aid in the diagnostic impression.”  Base on the peer review, Respondent denied the claim.

During the hearing, Applicant’s counsel argued that the EIP was suffering from radiculopathy and that the EMG was useful to distinguish between radiculopathy and carpal tunnel.  The Arbitrator noted that the peer reviewer had conceded that point but that the question was whether, given the prior diagnosis and overwhelming evidence that the EIP was, in fact, suffering from carpal tunnel, the testing was medically necessary.  The Arbitrator found the peer review to be persuasive and the fact that the test did yield positive results did not necessarily mean that the test was medically necessary.  The courts have not “enunciate[d] a standard or bright line rule that any tests which yields a positive result is presumptively valid” but rather there must be an “appropriate rationale for lack of medical necessity.”

10/16/14       Applicant v A. Central Ins. Co.
Erie County, Arbitrator Mona Bargnesi
“Chronic Pain” Which Does Not Prevent EIP from Working Does Not Support Claim for Wage Loss
The 30 year-old EIP was involved in an accident in August 2012.  Her symptoms included decreased range of motion of the cervical, thoracic and lumbar spine as well as spasms and trigger point tenderness.  She was told to continue working full time as long as tolerated.  An IMR was performed in March 2013, at which time it was noted that the EIP was working full time as a customer service debt specialist.  The examining physician noted complaints of radiation into the mid back and neck with pain to her jaw and headaches, diffuse spasms in the trapezial muscles and tingling to the tops of her shoulders and neck.  He also noted decreased range of motion and recommended she continue with her prescription medications and follow up with her treating physician every 4-6 weeks.  He commented that the EIP was working and not disabled. 

The Arbitrator stated that in order to recover lost wages, the EIP had to prove that she was disabled during the period claimed as the burden of proof is solely on the person seeking those benefits.  At the time of the hearing, the EIP testified that she stopped working in May 2013 and that a disability note was faxed to Respondent.  In June 2013, she returned to work because she needed the money and she would stand up and stretch to deal with the pain.  Although it had been reported that her pain increased with computer use, it appeared that her job mainly consisted of making telephone calls.  The Arbitrator noted that the disability note excused her from work due to “chronic pain”, a condition that was already ongoing and had not prevented her from working up to May 2013.  Nothing new was presented to warrant a change in the EIP’s work status and she did, in fact, testify that she returned to work one month later, would stand up and stretch as needed, and did not claim she was unable to perform her work duties.  The wage loss claim was accordingly denied.

10/16/14       Applicant v Country-Wide Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Unchanged Pain Levels Support That Post-IME Treatment Not Medically Necessary
Following an April 7, 2012 motor vehicle accident, the 20 year old EIP sought treatment on April 25, 2012 for C5-6 and L5-S1 radiculopathies, C5-7 and L5-S1 disc bulges and a T2-3 herniation.  She received physical therapy, massage therapy and epidural injections.  EMG studies performed in May revealed evidence of C5-6 radiculopathy.  In September and December 2012, she received epidural injections and her pain level was reported 8/10.  In October the EIP complained of worsening neck pain, and during a November examination her range of motion was noted to be the same as on the previous examination.  Examinations in January and February 2013 reported almost identical findings with pain levels remaining at 8/10.

In July 2012, an orthopedic IME had found normal ranges of motion and all testing was normal.  The examining doctor diagnosed resolved cervical, thoracic and lumbar sprains/strains and opined that there was no objective evidence of disability.  A neurological IME was performed in September 2012.  Again, testing was negative and it was noted that there were no objective clinical deficits to support the subjective complaints. 

The EIP testified during the hearing that she paid her treatment bills herself, that she continued to take pain medication, including valium, and that the epidural injections provided only one to two weeks of relief.  The Arbitrator found that the EIP’s own testimony demonstrated that the treatment was not providing any curative or significant palliative benefits.  Her treating doctor’s notes reflected that her range of motion did not improve and that her pain levels remained constant at 8/10.  The Arbitrator determined that post-IME treatment was not medically necessary.  As such, she awarded reimbursement for treatment up to August 2, 2012, but denied all bills after August 5, 2012.


11/03/14       NJ/NY Pain Management v Allstate Ins. Co.
Appellate Term, First Department
“Evidentiary Facts” Must Support Summary Judgment Motion
Defendant’s motion for summary judgment was denied, and plaintiff’s cross motion was granted, where defendant failed to raise a triable issue of fact because, although it established timely denial of the claim, it failed to submit the IME report, or any other evidentiary proof, upon which its denial was based.

10/05/14       Prestige Medical PC v Travelers Home & Marine Ins. Co.
Civil Court, Kings County
Is EUO a Condition Precedent to Coverage or Part of Verification Procedures?
The issue examined by the Civil Court was whether an insurer can issue a denial beyond the 30 day period based upon a failure to appear for an EUO if the insurer has failed to comply with the verification procedures.  In other words, is appearance for an EUO a condition precedent to coverage such that a denial can be issued beyond the 30 day pay or deny period, or is it simply part of the verification procedures which would require timely issuance of a denial.

Here, plaintiff’s assignor appeared for his EUO on February 14, 2012, following which, on March 13, 2012, defendant noticed plaintiff for an EUO on April 3, 2012.  When plaintiff failed to appear, defendant sent a follow up request on April 3, 2012, rescheduling the EUO for April 23, 2012.  Plaintiff again failed to appear so defendant issued a denial on May 9, 2012, based upon plaintiff’s no-show, and then moved for summary judgment.  Plaintiff cross moved on the grounds that defendant did not sent out the scheduling letter within 15 days after holding the EUO of plaintiff’s assignor (see 11 NYCRR 65-3.5(b)).

The court noted that the Second Department follows the First Department’s decision in Unitrin Advantage Insurance Co. v Bayshore Physical Therapy (82 AD3d 559 [1st Dept 2011]), which holds that the failure to appear for an EUO is a violation of a condition precedent to coverage which entitles the carrier to deny coverage retroactively to the date of loss and, therefore, the 30 day period does not apply to the denial.  However, the court also noted that the Appellate Term, Second Department, still appears to hold that the failure to appear for an EUO is a precludable defense, which would require timely denial.

Therefore, the court held that the carrier must first comply with the time frames in the verification procedures before it can deny beyond the 30 day period.  Specifically, and as set forth in the regulations, the insurer must request verification within 15 days of receipt of the claim in order to toll the 30 day period to pay or deny the claim.  If the requested verification has not been provided within 30 days after the original request, the insurer must send a follow up request within 10 days (see 11 NYCRR 65-3.6(b)).  In the case of a verification request in the form of an EUO, it must be scheduled “as expeditiously as possible” and the insurer’s 30 days begin to count from the date the EUO is conducted (see 11 NYCRR 65-3.8(a)(1)).

In this case, the court found that the insurer did not send the letter requesting the EUO of plaintiff until 28 days after conducting the EUO of plaintiff’s assignor.  When plaintiff failed to appear, that same day defendant issued the follow up letter.  After plaintiff failed to appear the second time, defendant issued a denial on May 9, 2012.  11 NYCRR 65-3.8(j) provides that any deviation from the verification time lines reduces the carrier’s 30 days to ultimately deny the claim.  Given that defendant requested plaintiff’s EUO 28 days after the assignor’s EUO (rather than within 15 days), the time within which to issue the denial was reduced by 13 days, leaving 17 days from April 23, 2012.  The court granted defendant’s motion for summary judgment finding that defendant issued a timely denial on May 9, 2012, one day before the expiration of the May 10, 2012 deadline.

Steven E. Peiper

[email protected]

10/30/14       Marston v Gen. Elec. Co.
Appellate Division, Third Department
Question of Fact Regarding Whether an Employee’s Use of a Boat For a Total of Nine Days Over the Period of Four Years Qualified Him as a “Seaman” Under the Jones Act
Plaintiff was employed by URS when, in the course of his work as a surveyor, he drowned after his boat was swept over a dam.  The work was being performed in connection with GE’s dredging project on the Hudson River.  Plaintiff’s Estate commenced this claim under the Jones Act against URS.  Co-Defendants Parsons and Saratoga also asserted cross-claims for common law and contractual indemnification against URS.

The trial court denied URS’ motion to dismiss, and the Appellate Division affirmed.  URS argued that the Estate’s claims under the Jones Act are unsupported where, as here, the decedent did not, and could not, qualify as a seaman under the statute.  While there is no set definition for the term, the Court noted that to qualify one must demonstrate a substantial connection to a vessel in terms of both duration and nature.

However, failure to assert decedent’s status as a “seaman” in the Complaint is not, standing alone, fatal to the Cause of Action.  Moreover, although URS’ position that decedent was only on a vessel a limited amount of times, the Court noted that his status could have changed by the date of incident causing his death. 

As the term “seaman” requires a fact specific analysis, the Appellate Division noted that URS had not met its burden at this stage of the litigation.  Insofar as the cross claims were dependent upon the outcome of decedent’s “seaman status,” any motion to dismiss them was likewise premature at this time due to the pending question of fact. 

10/29/14       Nolan v Irwin Contracting, Inc.
Appellate Division, Second Department
Question of Fact over Supervision, Direction and Control Results in Question of Fact on Special Employment Status
Plaintiff was employed as a carpentry supervisor by Vision when he sustained injury during the course of his employment.  Thereafter, he commenced the above-captioned suit against defendant who served as the general contractor at the jobsite.  Defendant also directly retained Vision through written contract. 
Although plaintiff received workers’ compensation benefits through Vision, Irwin still argued that the bodily injury action was inappropriate because plaintiff was engaged as its special employee at the time of the incident.  In the alternative, Irwin argued that the injuries plaintiff sustained were inherent risks to the job and his injuries were caused by his own conduct. 

The trial court agreed with Irwin, and dismissed the action on the basis of special employment status.  In reversing, the Second Department started by acknowledging that where workers’ compensation benefits are paid to an employee, subsequent negligence arguments against “special employers” are, in fact, barred.   Here, however, Irwin failed to establish the relationship.

In determining whether a special employment circumstance exists, the Court instructs that one should consider the right to control the work, method of payment, whether it furnished equipment and whether the company retained the right to discharge the plaintiff.  Of these factors, the Court also points out that the right of supervision, direction and control is “significant and weighty.”

In remanding the matter to the trial court, the Appellate Division also advised that Irwin failed to meet its burden that the incident in question did not arise out of a known defective condition. 

10/29/14       Griffin v Perrotti
Appellate Division, Second Department
One Year Suit Limitation Bars Suit Against Metro-North; Suit Limitation Will Also Preclude Claim Against Employee if he can Establish the Loss Occurred While Acting Within the Scope of his Employment with Metro North
Plaintiff commenced the above action nearly two years after he was struck by a vehicle owned by Metro-North.  At the time of the incident, the vehicle was being operated by a Metro-North employee. 

Metro-North moved to dismiss the claim on the basis that it was time barred pursuant to the Public Authorities Law.  In relevant part, at the time that this matter was commenced Section 1276 of the Public Authorities Law required that any action against the Metropolitan Transportation Authority (of which Metro-North is a part) be commenced within one year of the date of loss.  As such, the claims against Metro-North were time barred.

In addition, the Public Authorities Law also provides, in relevant part, that if the incident arose out of a vehicle, then the driver of said vehicle is entitled to indemnification from Metro-North.  This is the case, of course, so long as the vehicle was being operated within the scope of the driver’s employment with Metro-North.  Under such circumstances, Metro-North (who would owe indemnity) becomes the “real party in interest” to the lawsuit.  Where the claim against Metro-North is time-barred, so too, it follows, is the claim against Metro-North’s employee/indemnitee.   

Unfortunately, where, as here, the employee fails to establish the incident fell within his actions as an employee of Metro-North, a question of fact exists to preclude summary judgment.

10/23/14       NY Municipal Ins. Recip. v. International Truck & Engine Corp.
Appellate Division, Third Department
Post-Installation Modification Destroys Products Liability Argument
Plaintiff commenced this action after one of its dump trucks caught fire at a County garage.  The fire was caused by hydraulic cables being improperly bundled with the truck’s battery cables.  When the battery cables frayed after normal use and wear, the resulting spark ignited the hydraulic fluid which, in turn, started the conflagration. 

Defendant Viking installed the hydraulic cables when it “upfit” the truck with a plow and dump bed.  At the time of installation, Viking installed brackets which effectively kept the hydraulic cables from coming into contact with the battery cables.  Viking was able to produce evidence which established that someone had performed a post-installation modification of the system which ran both lines together as a way of lessening slack on the lines.  As it was not Viking, the Court agreed that the product had been altered after it left Viking’s control.  Under such circumstances, it followed that no claim for products liability could be maintained against Viking.  In opposition, plaintiffs failed to raise a credible issue of fact.


Elizabeth A. Fitzpatrick
[email protected]

Working too hard this week.


Audrey A. Seeley
[email protected]

No reported decisions.

Cassandra A. Kazukenus
[email protected]

Proposed Amendment to Regulation 10 – Public Adjusters

DFS is considering amending the regulations in place pertaining to public adjusters.  The proposed regulation would seek to prohibit an individual from acting as a public adjuster between the hours of 6 pm and 8 am either directly or indirectly, “including through a contractor or any other individual or entity.” 

In large part the new proposed provisions of the Public Adjusters regulation pertains to compensation agreements for public adjusters.  The proposed regulation would seek to prohibit an adjuster from receiving any compensation, directly or indirectly, for a referral of the insured to another individual/entity for services, work or repairs relating to the insured’s claim wherein the public adjuster represents the insured.  It would also prohibit a public adjuster from referring an insured to an individual who is related to the public adjuster by blood or affinity to the second degree of consanguinity or to an entity owned or controlled by such an individual for services, work or repairs. However, the public adjuster may receive compensation in that situation when the compensation is prominently and clearly disclosed to the insured in the written compensation agreement.

Likewise, the proposed regulation seeks to prohibit a public adjuster from referring the insured to an individual or entity with whom the public adjuster or their spouse has a financial or ownership interest in an individual or entity that performs services, work or repairs unless the financial or ownership interest is prominently and clearly disclosed to the insured in the written compensation agreement.  The written compensation agreement must be a separate document from any agreement or contract entered into to perform services, work or repairs, and it must itemize all fees in writing and shall not be used as a means to circumvent that the public adjuster may charge pursuant to this regulation.

Should a public adjuster make any of the above referrals after the written compensation agreement is signed by the insured, then the public adjuster may not receive any compensation unless the public adjuster obtains an acknowledged disclosure statement containing the necessary information. 

Additionally, the new provisions would prohibit the public adjuster from requiring an insured to use any individual or entity for services, work or repairs.  If there are services rendered by an outside expert retained or employed by the public adjuster, the public adjuster shall include the fees in the compensation agreement. 

The new provisions also limit the maximum compensation a public adjuster may recover.  The proposed provisions would create an exception to the rule that a public adjuster may not charge a fee of 12.5 percent of the record.  The exception would allow a public adjuster to charge a fee of up to 20% on a supplemental claim if the aggregate fee charged is less than or equal to 12.5% of the full claim payment.  The fee is computed based upon the actual cash value of the recovery until such time as the insured makes the required repairs or places the property and any monies paid to the insured after the insured has retained the services of the public adjuster.   Moreover, any monies received by the public adjuster for the referrals are deemed compensation from the insured and shall not exceed the maximum charge allowed in combination with any other compensation. 

When a claim is paid on a loss wherein a public adjuster has been hired, the insurer must follow the wishes and intent of the insured as to who will be named on the insurer’s check and pursuant to a signed direction to pay letter.  When there is no signed direction to pay letter, the insurer must issue two checks – one to the insured and public adjuster and the second is to the insured or any loss payee/mortgagee or both for the remaining balance of what is owed.


Jennifer A. Ehman
[email protected] 


On vacation this week.

Earl K. Cantwell
[email protected]

12/03/13       Indalex, Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa .
Confusion Reigns Regarding Coverage for Construction Defects
Many court decisions have been issued over the last few years on the general subject of whether there is coverage available under commercial general liability, policies for claims stemming from construction defects.  The decisions, even within states, are not always consistent.  Many states have elected to adopt legislation amending their civil procedure or insurance statutes to address the issue.  A recent case from Pennsylvania highlights the issues and represents the problem.

Historically, the courts in Pennsylvania had taken a restricted view of coverage under CGL policies for construction defect claims.  The most common analysis was that a defective construction claim was not an “occurrence” because it is not “sudden or accidental” for purposes of a defined “occurrence”.  Indalex appears to be a typical claim.  Indalex manufactured windows and doors but faced lawsuits from consumers and contractors that its products were defective resulting in water leakage that caused physical damage such as mold and cracked walls, and alleged personal injuries. The lawsuits included claims of negligence, strict liability, breach of warranty, and breach of contract.  Based on Pennsylvania precedent, the trial court concluded that there was no coverage for these claims, again largely on grounds that there was no covered “occurrence”.  However, this result was reversed on appeal by the Pennsylvania Superior Court. 

The appellate court in tortured fashion went through the guiding Pennsylvania precedents and managed to (arguably) distinguish them from the pleadings and claims in the Indalex case.  These included decisions by the Pennsylvania Supreme Court and other decisions by the Superior Court.   The Court held that coverage under a CGL policy was triggered because the underlying complaints alleged defective products resulting in loss to property other than the construction products themselves, and personal injury, and that this met the definition of a “covered” occurrence.  Behind the analysis there appears to be a view that “tort-like” claims were sufficiently pleaded to bring the allegations within traditional CGL accidental /occurrence definitions.

Consequently, whether and under what circumstances there is coverage in Pennsylvania under CGL policies for construction defect claims is in a state of flux and uncertainty.

By way of background, regardless of how the courts have ruled on this issue, which has confounded them throughout the country, the analysis and outcome generally turn on four or five key policy definitions and issues, including the following:

  1. Can a construction defect be defined as an accidental, sudden “occurrence” within the normal meaning and legal interpretation of the phrase?
  2. Does the analysis turn on whether the act causing the damage must be unintentional, or is it sufficient to allege that the resulting damage was unintentional?   In other words, is there coverage even if an intentional, purposeful act such as installing something defectively on a construction site is still covered if it results in an “unexpected” or unintended loss?
  3. There are often policy exclusions barring coverage with respect to claims arising out of “your work” of contractors and subcontractors; do such exclusions bar coverage for construction defect allegations?
  4. There are also frequently exclusions, or at least legal interpretations of policies, that preclude coverage if the damage is only incurred to the installed construction materials themselves, i.e. concrete, doors, windows, columns, roofs, etc.  There are factual and legal questions whether there is or must be damage to other property or parts of the structure not part of the construction, or at least not part of the construction defect.
  5. There are also frequently policy exclusions for claims or liabilities incurred by a contractor or subcontractor by virtue of contract, and the question arises whether such claims as breach of contract and breach of warranty (which are often part of construction defect claims) are barred by such exclusions.

As stated, the decisions in this arena have been confusing, inconsistent, and even reversed or magnified from time to time within states.  More than a few states have tried to resolve the issue by legislation due to the ongoing litigation, judicial confusion, and numerous insurance issues that attend such claims.  When analyzing a claim, care must be taken to review the particular state’s decisions on this subject, update them, and even look to see whether there has been any relevant legislation or regulation.

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