Dear Coverage Pointers Subscribers:

Do you have a situation?  We’ve had one in Buffalo over the last few days.  We’re received many, many kind emails from CP subscribers and friends from around the country.  For those who live in the southern part of the City of Buffalo and the eastern suburbs, it has really been miserable.  Ten have died.  There have been over five feet of the white stuff in two days and still falling.  Where I live, we’ve had but a flurry (a foot, maybe).  Where Audrey lives, the depths are monumental. 

There is six feet of snow blanketing Ralph Wilson Stadium and that has led to the postponement of the Bills/Jets game.  There would have been no way to remove the snow from the stadium and a driving ban in Orchard Park made it impossible to bring the resources into play to even give that a try.

We have a couple of very interesting decisions in this week’s edition, including one that speaks to the importance (or unimportance) of adding the injured party as a defendant in a declaratory judgment action.  Probably the most provocative opinion is the one dealing with Super Storm Sandy that is reported in Steve Peiper’s column.

Pardon the shortened letter today – our physical office has been closed for two days, but all the lawyers have been working from remote locations.  It’s just as busy and more comfortable in jeans. Our Managing Partner loves neckties, likely because she doesn’t have to wear one each and every day.

We have a couple of “guest” authors today.  Paul Suozzi offers insights on a Court of Appeals decision that came down on November 20 regarding claims against policy officers.  That excellent summary you will find below. Taylor Gabryel, from our No Fault team, provides Margo’s column today.

Spent a little time in Miami, working with a great claim professional and seeing to the successful mediation of a construction defect lawsuit.  Warmer there than here.

Let’s get right to it.

Audrey’s Angles:

Hats off to my CP colleagues this edition who did not let a little 60+ inches of snow in some areas here, which has shut down our office for two days, stand in the way of getting Coverage Pointers out to you.  Also, thank you to many of my colleagues across the country who have sent such kind emails to me over the past few days checking in on me and thinking of the attorneys and staff at our firm.  It is much appreciated as those in our firm that are in that snow band have most likely had times during this storm when they felt isolated.

We have one decision this edition emanating from the Sunshine State on the application of the sexual molestation exclusion under a homeowners policy.

Finally, the DRI Insurance Coverage and Practice Symposium is less than two weeks away.  If you have not registered yet there is always time.  In fact, if you wake up December 3 and decide you want to attend you can walk in, register, have breakfast, and enjoy the program.  At this point, there are over 600 attendees registered and well over 150 claims professionals registered to attend.  Here is the link to register via http://dri.org/Event/20140140

Audrey
Audrey A. Seeley
[email protected]

A Mother’s Work is Never Done – One Hundred Years Ago:
Brooklyn Daily Eagle
November 21, 1914

MOTHERS’ WORK DISCUSSED
Child Welfare Association Takes Two Sides of Subject

“Mothers’ Meetings” was the topic of discussion yesterday afternoon at the conference of Child Welfare Association, which was held at Unity Church House, 9 Irving Place.
Mrs. N. H. Stewart, chairman of the afternoon, and Miss Ruth E. Tappan of the Training School for Teachers, presented the subject, each from different viewpoints. Mrs. Stewart taking the mother’s point of view while Miss Tappan discussed the subject from the teacher’s viewpoint.

In her discussion. Mrs. Stewart told of the first organized Mothers’ Meeting in Brooklyn, held in 1892, the invitations to which were issued in Italian. Mrs. Stewart declared that mothers must progress with the times in order to keep in touch with their children, and that mothers’ meetings were doing a great deal towards helping mothers. Miss Tappan dwelt mainly upon the influence of the kindergarten. She called it the most sympathetic approach to mothers’ work.

According to the speaker, 3000 mothers’ meetings were held last year in New York City. Mrs. Alfred J. Boulton, president of the Child Welfare Association introduced the speakers. After the discussion, refreshments were served.

“Putting” Paul’s Police Pursuit Perspective:

Paul Suozzi ([email protected]) heads our Municipal Law team (when he isn’t on the links) and handles cases involving the defense of villages, towns, cities, counties, school districts and other municipal defendants throughout the state.  When New York’s highest court handed down an opinion on Thursday, November 20, Paul was kind enough to offer his expertise to summarize the Court’s decision.

By the way, Paul lives right in the heart of the snow belt.  His wife Karen Spencer offers you her photo album of shots taken this week, when the sun peaked through the snow clouds.  Click here to get as taste of the beauty of a snowy day in Western NY.

Frezzell v. City of New York
New York Court of Appeals
2014 NY SLIP Op 08055

The Court of Appeals reviews the “reckless disregard” standard in Vehicle and Traffic Law § 1104, in a case pitting the actions of one New York City Police Officer against an injury caused to another Officer while both were in the line of duty.  (New York City Police are not precluded from suing the City for the negligence of co-employees).   The defendant officer responded to the urgent radio call from a fellow officer engaged in a foot pursuit of a man with a gun near a public housing development by activating his lights and siren and driving eastbound on West 104th Street, a westbound one-way street.  Plaintiff also responded to the call and drove west on 104th Street, where the two police cars collided just seconds after the drivers saw each other.

While police officers normally assume the risks inherent in their jobs, General Municipal Law § 205-e allows them to sue tortfeasors where one can show a statutory violation.  Here, the plaintiff sought to show that his fellow officer violated V&T § 1104, which allows drivers of authorized emergency vehicles to pass red lights and stop signs, exceed the speed limit and disregard regulations governing the direction of movement, etc., but does not relieve them of their duty to drive “with due regard for the safety of all persons” and does not “protect the driver from the consequences of his reckless disregard for the safety of others.” V&T § 1104(e).   Supreme Court granted defendants’ motion for summary judgment and the Appellate Division, First Department, affirmed, with two Justices dissenting.

The Court of Appeals does a thorough analysis of facts and concludes that the defendants met their burden of establishing that the officer’s conduct did not amount to a reckless disregard of a highly probable risk of harm “with conscious indifference to the outcome.”  Referencing the standard and citing Saarinen v, Kerr, 84 NY2d 494, 501 (1994), the Court explains that for liability to be predicated upon a violation of Vehicle and Traffic Law § 1104, there must be evidence that:

“[T]he actor has intentionally done an act of an unreasonable character in disregard of a known or obvious risk that was so great as to make it highly probable that harm would follow and has done so with conscious indifference to the outcome” (Cite omitted). This heightened standard is grounded in the Legislature’s recognition that, although the exercise of the privileges granted in section 1104 may increase the risks to pedestrians and other drivers, emergency personnel “should be afforded a qualified privilege to disregard [certain traffic] laws where necessary to carry out their important responsibilities” (Saarinen, 84 NY2d at 502).  This approach avoids “judicial ‘second-guessing’ of many split-second decisions that are made in the field under highly pressured conditions” and mitigates the risk that possible liability could “deter emergency personnel from acting decisively and taking calculated risks in order to save life or property or to apprehend miscreants” (id.).

The Court found that the defendant officer slowed as he turned on West 104th Street, was driving below the speed limit on a clear and dry evening and that he took preventative measures to avoid the collision by braking hard and veering to the side of the street.  The Court concluded that there were no material questions of fact and affirmed the Appellate Division decision.

Peiper’s Playbook:

I write you from Midtown Manhattan tonight.  We are not sure what the big fuss is about in Buffalo as the last check of my front lawn revealed approximately 10 inches of snow, and begot the first snowman of the 2014 winter.  In fact, I had a relatively uneventful drive to the airport this morning for a flight that left "on time" (albeit 4 hours after it was originally scheduled).

In all seriousness, my colleagues living just to South of me (and by that I mean less than 10 miles to the South) are experiencing something of a different nature. The reports you've see are, indeed, true, and though it’s hard to believe they are not exaggerated.  Our hearts and prayers go out to those impacted by the ferocity of the storm, especially those who have lost a family member in the storm's wake.

As for our offerings this week, we finally have a few interesting property decisions.  The first addresses the applicability of the Exterior Finishing and Insulation Systems exclusion, which, as those of you who pay attention already know, has been used with increasing frequency over the past several years. 

The second case we address does an excellent job of describing how the exclusion for rot/decay, where the decay is not hidden, trumps the limited grant of coverage for collapsed caused by hidden decay.  In the case reviewed below, the First Department establishes that a policyholder needs to be diligent in caring for their premises.  Where the homeowner is aware of decay near the area that ultimately fails, the homeowner cannot benefit under collapse coverage where they never actually inspect the areas around where rot/decay was apparent.

Finally, we also note a troubling decision out of the Eastern District of New York.  As readers of this publication already know, the insurance industry did a fabulous job of resolving insurance claims made in connection with our last major disaster in this State, Hurricane Sandy.  Indeed, the massive litigation that most expected, by and large, never actually materialized into anything more than blip on an otherwise busy litigation docket.

There have been, however, a fairly large number of flood insurance claims brought, primarily, in the Eastern District of New York.  It is out of these cases that we get what may be the first black eye for the industry. 

In the simplest of terms, Raimey v Wright National Flood Insurance points out the perils of using a rogue expert.  In that case, Wright received notice of a residence that sustained damage as a result of flood waters.  When the independent adjuster surveyed the residence, the ensuing report noted that the floors seemed uneven, the roof line was likewise uneven, and that the entire house, itself, had been compromised and was unsafe. 

In response, Wright retained an engineering expert who, in turn, also visited and inspected the premises.  The engineer's initial report, penned in December of 2012, acknowledged that the premises sustained significant damage that was caused by flood waters.  As a result, he suggested that the home was likely a total loss because repair would not be an economically viable response. 

However, the report, it appears, was "revised" in January of 2013 by another engineer at the company retained by Wright.  The revised report, which appears to have been the report provided to Wright, noted that the residence had sustained long term damage due to degradation of soil around the foundation. As such, the "revised" report opined that the foundation damage was not resultant from flood waters, and thus outside the scope of coverage.

When, by happenstance, the policy holder learned of the revisions, they brought it to the attention of the Magistrate Judge, Hon. Gary Brown, who was less than pleased.  In a strong admonition, Magistrate Brown ruled that Wright was "stuck" with their retained expert for the remainder of this case, and invited plaintiffs to bring a sanctions motion against defense counsel who did not turn over the draft reports as part of discovery.  

In so holding, the Court rejected the arguments that reports made by origin and cause engineers should be privileged as they are, essentially, experts retained for litigation.  Here, recall, the expert was retained prior to suit, and prior to a coverage determination.  As such, the report was not a privileged document under federal (or state, for that matter) law. 

In addition, the Court also imposed the decision upon Wright event though Wright, through defense counsel, turned over all of the documentation it had been provided by its expert.  Wright argued, reasonably so we might add, that it should not be punished for something its retained expert did, without the involvement or knowledge of anyone from Wright.  Under the circumstances, that argument, though well reasoned, fell upon deaf ears. 

The lasting impact of this case is that the Magistrate Judge also issued a standing Order that ALL reports, drafts, documents, and notes speaking to the existence of coverage must now be turned over in ALL Sandy related cases.  This is the case whether they are in the carrier's possession, or that of a third party. 

The case tells us that we must not only be diligent with our files, but also must keep a keen eye one anyone whom is retained to render advice to the carrier relative to issues of coverage.  Failure to detect, and stop (or at least report) a rogue expert, may very well prove costly moving forward. 

That's it for now.  Thanks to all of you for your well wishes and patience as we dig out, and get back to life as normal. 

Steve
Steven E. Peiper
[email protected]

Not as Fishy as it Sounded – 100 Years Ago:

New York Times
November 21, 1914

CAPT. FISH ACQUITTED
New Yorker Found Not Guilty of Burning Yacht to Get Insurance

Boston, November 20 – Capt. John A. Fish, the New York yachtsmen, was found not guilty today by a jury in the United States District Court of burning his yacht, the Senta II, in Edgartown Harbor on October 25, 1910 to obtain $15,000 insurance. The jury was out 22 hours.

The $15,000 insurance was underwritten by 100 millionaires of New York and other cities and doing business under the name of United States Lloyd’s.  The Civil Suits now pending in New York between Fish and the insurance company will be started at once, according to Capt. fish.

A former conviction of Capt. Fish had been set aside by the Court of Appeals.

Beth’s Bitz:

Dear Subscribers:

It is hard to believe that next week is Thanksgiving and we are in the throes of the holiday season.  The DRI Insurance Coverage Symposium is being held in NYC on December 4th-5th and I look forward to seeing many of you there.

This week, in yet another decision addressing coverage for construction defects, I report on a decision from the District of Hawaii.  The decision was issued in the context of a default motion made by State Farm and ultimately, the court determined that the claims based upon construction defects did not fit within the policy’s coverage for property damage caused by an occurrence and furthermore, the contractual exclusion would have precluded coverage in any event.

I wish all of you and yours a happy, healthy and peaceful Thanksgiving.

Til next time,

Beth
Elizabeth A. Fitzpatrick
[email protected]

Clawing to a Verdict – A Century Ago:

New York Times
November 21, 1914

BITTEN BY VICIOUS LOBSTER
Kitchen Helper Now Gets a Verdict against a Hotel

New Brunswick, NJ, November 20 – Tony Mazzo, a helper in the Hotel Klein here, was ordered to put some live lobsters on the grill. He says he knew it was a perilous job and took every precaution, but despite his care, one of them sprang at him, seized his index finger and shook it as a terrier shakes a rat. Mazzo had his finger dressed and went to the Long Branch hospital for a month and five days.

All this happened last year, and Mazzo testified to it today. As a result, he got a verdict against the Klein brothers, proprietors of the hotel, for $210 and all his medical and hospital expenses.

Hewitt’s Highlights:

Dear Coverage Pointers subscribers:

As the country gets chilled by an early winter, the New York State appellate courts have issued a number of cases dealing with the serious injury threshold.  Included among these cases is a good reminder by the Courts to always make your best arguments in your moving papers, as you the Court will ignore new arguments made for the first time in Reply. We also learn that having a  bridge in your mouth knocked out is not a significant disfigurement under the Insurance Law, if you lost the teeth the bridge replaced prior to the accident.

Have a Happy Thanksgiving.

Until next time,
Rob
Robert Hewitt
[email protected]

Horse Hits Mayor – 100 Years Ago Today:

New York Times
November 21, 1914

HIT MAYOR’S AUTO; FINED $2
Driver, in Court, Says Car Was Going to Fast

William Campbell, 50 years old, a driver of 1532 76th Street, Brooklyn, was fined $2 yesterday for turning a corner of 117 Street and Lenox Avenue on Thursday night so sharply with his team that his wagon struck Mayor Mitchel’s automobile. The Mayor was in the car.

“If the automobile had not been going too fast,” said Campbell to Magistrate Nolan, “the accident would not have happened.”

“The accident was due to you cutting the corner,” said the Magistrate, “and although you may have endangered the Mayor’s life. I believe the Mayor would not want you treated more severely than any other violator of a corporation ordinance, so I will impose a fine of $2.

The pavement was slippery at the time and Patrolman Dylan said Campbell had difficulty turning the corner.

The Mayor’s automobile was going south and the wagon shaft pierced the side of the car. The damage was slight.
Editor’s Note:  At thirty-five years old, John Purroy Mitchel was the youngest person ever to be elected Mayor of New York City, serving from 1914 – 1917.  That distinction earned him the nickname, "Boy Mayor."  He died at the age of 39, in an airplane training exercise for enlistment in World War I.

Jen’s Gems

It has been quite an eventful week in our region with certain parts receiving an entire year’s worth of snow in three days.  While my neighborhood was spared the majority of the snow due to its location north of the city, so many other Western New Yorkers were not as lucky and now face the challenge of digging out over the next few days.  A very difficult task.

In terms of my column this week, the trial court decisions were fairly limited.  However, I do report on an interesting decision out of New York County.  In that case, following a fire loss, the insurer discovered that the insured property was not a one or two family home as indicated on the insurance application, but instead contained three separate living units.  What is interesting, in my opinion, about the decision is that the carrier initially denied coverage based on the “Concealment and Fraud” provision, but eventually prevailed on summary judgment based on the definition of “residence premises” which was limited to one or two family dwellings.  One wonders whether there was difficulty establishing that the basement dwelling was present when the application was completed.  An interesting read.

Also, I hope many of you are considering attending DRI’s upcoming Insurance Coverage and Practice Symposium in New York City on December 4th and 5th.  The program should be a great event with many relevant topics discussed by practitioners and industry representatives from around the county. 

We hope everyone stays warm and safe.  Until next issue…

Jen 
Jennifer A. Ehman
[email protected]

Highlights from Today’s Issue, Attached:

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

  • Underlying Complaint Broad Enough to Implicate a Duty to Defend for Additional Insured
  • Police Report Admissible to Prove Involvement of So-Called Uninsured Car
  • Underlying Plaintiff That Was Not a Party in Declaratory Judgment Action is Still Bound by Its Results
  • Dissatisfied SUM Claimant Unsuccessful In Setting Aside Award
  • City Entitled to a Defense in a Construction Site Accident Claim; Extrinsic Evidence Cannot be Used to Limit Defense Obligations; Indemnity Questions Remain for Another Day
  • Fourth Department Grants Review of Troubling “Notice” Case – It is On Its Way to the Court of Appeals
  • Cancelation of Auto Policy Based on Lack of Insurable Interest was Invalidated Where Insured Was Still Vehicle Owner
  • Suspended and Disbarred Attorney Had No Claim for Fees and/or Breach of Duty When Suing for His Share of Contingent Fees, Under Facts of The Case

 

HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]

  • Appellate Court Again Confirms The Importance of Not Waiting To Reply Papers To Address Important Issues As It Will Not Be Properly Before the Court
  • Appellate Court Finds Issue of Fact As To Serious Injury When Parties Submitted Competing Medical Expert Reports 
  • Appellate Court Finds Issue Of Fact As To Whether The Accident Aggravated a Prior Injury Resulting In Significant Limitation of Us
  • Appellate Court Affirms Grant of Summary Judgment To Defendants On Grounds That Plaintiff Did Not Sustain Serious Injury
  • In These Cases The Defendants Failed To Meet Prima Facie Burden; Thus Plaintiff Did Not Have To Demonstrate Issue of Fact
    • Appellate Court Upholds Jury Verdict Which Found Plaintiff Did Not Sustain Serious Injuries
    • In Light of Conflicting  Expert Medical Opinions Submitted By the Parties, Summary Judgment Was Properly Denied For Both Parties
    • Appellate Court Reverses Grant of Summary Judgment to Defendant Due To Failure by Defendant To Adequately Address All Injuries In the Bill of Particulars
    • Plaintiffs Were Able to Raise Issues of Fact After Defendants Made Prima Facie Case By Submission of Medical Evidence

 

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

Taylor F. Gabryel
[email protected]
[Guest Columnist]

  • Unless A Party Has Demonstrated “Exceptional Circumstances”, Arbitrators Do Not Have The Power To Direct That Parties Engage In Discovery.

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]

  • Exterior Insulation and Finish System Exclusion Found Clear and Unambiguous; Coverage for Collapse of a Façade Precluded as a Result
  • Where Decay/Rot is Not Hidden from View, Collapse Coverage is Not Triggered

 

FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]

  • Faulty Workmanship Not An Occurrence

AUDREY’S ALL THINGS PERSONAL
Audrey A. Seeley
[email protected]

  • Sexual Molestation Exclusion Unambiguous and Bars Coverage for Sexual Battery/Negligent Supervision Claim.

 

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

  • Medical Treatment Guidelines Constitutional

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

  • Three-Family Dwelling Did Not Constitute “Residence Premises” Under Terms of Homeowners Policy

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

  • Insurance Company Wins Late Notice of Claim Argument

 

Send shovels and plows and all good wishes to those stranded in Western New York.  Thanks for your support, kindness and well-wishes.

Dan
Dan D. Kohane
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202    
Office:                        716.849.8942
Fax:                            716.855.0874
Cell:                            716.445.2258
E-Mail:                        [email protected]
H&F Website:           www.hurwitzfine.com
LinkedIn:                   www.linkedin.com/in/kohane

 

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


NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Jennifer A. Ehman
[email protected]

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

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

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

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

Elizabeth A. Fitzpatrick
Cassandra Kazukenus

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

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Taylor F. Gabryel

APPELLATE TEAM
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

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

11/20/14       City of New York v. New York Marine and General Ins. Co.
Appellate Division, First Department
Underlying Complaint Broad Enough to Implicate a Duty to Defend for Additional Insured
The underlying complaint alleged that the plaintiff therein tripped and fell on a tree stump. It was further alleged that the negligence of defendant Britt Realty Development Corp. contributed to the accident by permitting construction debris on the sidewalk, or otherwise creating an obstruction.

Since these allegations are potentially covered by the Marine policy issued to Britt, in which the City was named as an additional insured "only with respect to operations performed by or on behalf of [Britt] for which the [City] has issued a permit," Marine is obligated to defend the City in the underlying action.

11/20/14       GEICO v. Boohit
Appellate Division, First Department
Police Report Admissible to Prove Involvement of So-Called Uninsured Car
Boohit, GEICO’s insured, applied for uninsured motorists benefits.  GEICO, believing that the tortfeasor was identified in the police report and insured, sought to permanently stay arbitration.

GEICO established by admissible proof that a vehicle owned by Brodie, the tortfeasor, was insured by Nationwide.  No objection was made to the admission of a police report containing the license plate number of the vehicle. Accordingly, the evidence is presumed to have been unobjectionable and any error is considered waived. In any event, the contents of the police report were admissible under the present sense exception to the hearsay rule, as they were sufficiently corroborated by Brodie's and Boohit's testimony.

11/19/14       River View at Patchogue, LLC v. Hudson Insurance Company Appellate Division, Second Department
Underlying Plaintiff That Was Not a Party in Declaratory Judgment Action is Still Bound by Its Results
VTEQE, Ltd., entered into an agreement with the River View to perform certain environmental remediation work on real property owned by River View. Hudson Insurance Company (“Hudson”, had issued a policy of commercial liability insurance to VTEQE, Ltd., VTEQE, Inc., and their principals (collectively the “VTEQE group”). It developed did that River View was under investigation in connection with improper remediation practices. That investigation ultimately led to the criminal prosecution and conviction of the VTEQE group. River View hired another company to complete the work and then sued thethe VTEQE group to recover damages.

Hudson commenced a declaratory judgment action against the VTEQE group, seeking a judgment declaring that it was not obligated to defend or indemnify it in the River View action due to a breach of the notice requirements under the policy. On February 1, 2010, Hudson won that action in state Supreme Court with the court declaring that it had no obligation to defend or indemnify the VTEQE group in the River View action because it was not afforded timely notice of the claim, as required by the subject policy. River View ultimately procured a judgment by settlement in the River View action, without Hudson's knowledge or participation.

River View, as a judgment creditor of VTEQE group,, then commenced a direct action against Hudson to compel Hudson to pay the judgment pursuant to the policy it issued to the VTEQE group. Hudson moved for summary judgment dismissing the complaint on various grounds including the argument that the successful prosecution of the Declaratory Judgment Action resolved the coverage issues in its favor.

River View was not a party in the Declaratory Judgment Action and claimed that it was not bound by the decision.  Hudson argued that while they were not a party, they were unified in interest.  The court round that when a plaintiff maintains a direct action against an insurer pursuant to Insurance Law § 3420, it "stands in the shoes" of the insured and can have no greater rights than the Hudson further demonstrated that the issue considered and decided on the merits in the declaratory judgment action was identical to the issue presented in the instant action, i.e., whether Hudson was obligated to defend or indemnify the VTEQE group in the River View action. Thus, Hudson established its prima facie entitlement to judgment as a matter of law.
Editor’s Note:  Interesting decision.  Very interesting.  Imagine if the insured’s attorney in the Declaratory Judgment Action did not actively or competently handle the DJ.  Would the claimant lose its right to make its own arguments?  We generally include the underlying plaintiff as a defendant in DJ actions so that there is no question about that party being bound.

11/19/14       Government Employees Insurance Company v. Schussheim
Appellate Division Second Department
Dissatisfied SUM Claimant Unsuccessful In Setting Aside Award
A pro se insured did not like the result of an underinsured motorist proceeding. She brought a legal action to overturn it. The court found that the she failed to establish by clear and convincing evidence that the arbitrator was biased against her and in favor of her adversary, or that they were improper ex parte communications or that she was not permitted to present her case.

11/18/14       Greenwich Insurance Company v. City of New York
Appellate Division, First Department
City Entitled to a Defense in a Construction Site Accident Claim; Extrinsic Evidence Cannot be Used to Limit Defense Obligations; Indemnity Questions Remain for Another Day
There were a series of car accidents allegedly resulting from negligence in connection with the construction of work on an exit ramp from the Queensboro Bridge. Triumph was the contractor for City on a project entitled "Queens Plaza Streetscape Improvement Project." Triumph obtained a commercial general liability policy from plaintiff that extends coverage to the City as additional insureds, for injury arising out of the acts or omissions of Triumph or those acting on its behalf.

Greenwich commenced a declaratory judgment action seeking to be relieved of its duty to defend. Claimed that the injuries were caused by the City’s negligence in its placement of  “Jersey Barriers’” and the City’s failure to post warning signs. Greenwich claimed that Triumph no control over any of these things.

The court found that the underlying complaints pleaded claims within the scope of coverage and therefore Greenwich owed the City a defense.  The issue of indemnity cannot be resolved at this time.

11/14/14       Spoleta Construction, LLC v. Aspen Insurance UK Limited
Appellate Division, Fourth Department
Fourth Department Grants Review of Troubling “Notice” Case – It is On Its Way to the Court of Appeals

Here’s our previous review:

07/11/14
Appellate Division, Fourth Department
Split Court Wrestles Over Sufficiency of Additional Insured’s Notice

Shane VanDerwall was hurt on October 20 2008 while working on a construction project. Spoleta was the general contractor, VanDerwall worked for a subcontractor, Hub-Langie, a paving company (“Hub”). Under the trade contract, Hub agreed to defend and indemnify Spoleta for all claims arising out of Hub’s work and to name plaintiff on its general liability policy.

Hub secured a policy from Aspen which provided blanket AI coverage for
"any person or organization . . . when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy."

Here’s the timetable:

  • Late December 2009, Spoleta learned of the accident for the first time in late December 2009 in a letter from VanDerwall's attorney.
  • January 27, 2010, Spoleta’s liability carrier sent a letter to Hub notifying it of VanDerwall's "claim," noting Hub’s contractual agreement to defend and indemnify Spoleta, and requesting that Hub put its own insurance carrier on notice to allow the carrier to conduct its own investigation. There is no claim of additional insured status.
  • February 9, 2010, Hub sent Aspen a "General Liability Notice of Occurrence/Claim form regarding VanDerwall's alleged injury, with the January 2010 letter attached.
  • February 22, 2010, Aspen had requested and received a copy of the contract between Hub and Spoleta containing the defense, indemnification and additional insured requirements.
  • April 15, 2010 VanDerwall commenced the underlying action;
  • May 27, 2010, Spoleta’s counsel demanded that Aspen defend and indemnify it in the underlying action;
  • June 2, 2010 Aspen disclaims on late notice.

The lower court found the notice to Aspen untimely and granted Aspen judgment. 

Initially, the court concluded that the December 2009 letter was a notice of an "occurrence . . . which may result in a claim" and not a "claim" under the policy. The court finds that the December 2009 letter "neither makes any demand for payment nor advises that legal action will be forthcoming. Rather, the letter advised plaintiff that VanDerwall had retained an attorney in connection with personal injuries he had sustained during the course of his work on the construction project, requested that Spoleta forward the letter to its insurance carrier, and warned Spoleta that failure to notify its carrier could result in a denial of coverage and "personal responsibility for any obligations that may arise" from VanDerwall's accident.

The court concluded that the January 2010 letter and form that Hub sent to Aspen was sufficient to constitute notice of an occurrence.

The majority then concludes that the May 2010 letter constituted notice of a "claim" or "suit" based upon VanDerwall's April 15, 2010 commencement of the underlying action. The majority therefore agree with Spoleta that the lower court erred in dismissing the complaint against Aspen inasmuch as the documentary evidence does not conclusively establish a defense to Spoleta’s claim as a matter of law.  In other words, the original letter constituted notice of an occurrence on behalf of the name insured and additional insured.

Editor’s Interim Note:  There is a long line of cases requiring each insured to give its own notice, unless the parties are united in interest. How notice by one insured can be notice by another does not comport with existing case law, we submit.  And of course, if there was notice by both with the earlier letter, wouldn’t the insurer then have an obligation to deny coverage to both?

A strong two-judge dissent disagreed.

"As an additional insured under the policy issued by defendant, plaintiff had, in the absence of an express duty, an implied duty, independent of the named insured's obligation, to provide defendant with timely notice of the occurrence for which it seeks coverage". Where, as here, a contract of primary insurance requires notice "as soon as practicable" after an occurrence, "the absence of timely notice of an occurrence is a failure to comply with a condition precedent which, as a matter of law, vitiates the contract"
The dissent agreed that the December 2009 letter to plaintiff from the attorney of for  VanDerwall was, under the terms of the policy in question, "notice of an occurrence . . . which may result in a claim," and not notice of a claim.

The dissent did not agree with the majority that the January 27, 2010 letter from plaintiff's liability carrier to Hub, which was subsequently sent to Aspen by Hub constituted notice of an occurrence by the AI under the terms of the policy.

The dissent argued that the January 27, 2010 letter did not notify Aspen of an occurrence that may result in a claim under the policy. Instead, the letter merely stated that plaintiff was seeking defense and indemnification from Hub pursuant to the indemnification provision of the subcontract. The letter does not indicate that plaintiff is seeking coverage directly from Aspen as an additional insured on the policy nor does it ask Hub to provide notice of any kind to Aspen on Spoleta’s behalf.

Upon receipt of the January 27, 2010 letter, Aspen disclaimed coverage to Hub because of Hub’s failure to comply with the notice provisions of the policy, and then notified Spoleta’s liability carrier of such disclaimer. In the letter to plaintiff's liability carrier notifying it of the disclaimer to Hub, defendant stated that it had received the January 27, 2010 letter "making a claim of contractual indemnity" against Hub, and advised that plaintiff had not provided a copy of the contract containing the "claimed indemnity provision." Plaintiff's liability carrier did not respond to that letter

It was not until May 27, 2010 — more than four months after Spoleta was informed of VanDerwall's injury, and a month after Spoleta had been sued by VanDerwall — that plaintiff, through its attorney, notified Aspen that it was seeking coverage directly from Aspen as an additional insured. Defendant promptly disclaimed coverage because of plaintiff's failure to comply with the notice provisions of the policy, among other reasons.

Inasmuch as Spoleta clearly did not intend for the January 27, 2010 letter to serve as notice of an occurrence under the policy, and in fact did not even then realize that it was an additional insured under the Hub, the January 27, 2010 letter cannot serve as sufficient notice of an occurrence that might result in a claim for coverage under the policy by plaintiff.  The disclaimer was therefore proper.

Editors Second Note:      I would agree that the earlier notice was NOT notice of an occurrence or a request for coverage.  It was a request for contractual indemnification.  We do not believe that the carrier had an obligation to determine, without a request to do so, that Spoleta was or could be an additional insured unless a request for that status was included.

11/12/14       Progressive Specialty Ins. Co. v. Alexis
Appellate Division, Second Department
Cancelation of Auto Policy Based on Lack of Insurable Interest was Invalidated Where Insured Was Still Vehicle Owner
This case involved an application to stay a claim for uninsured motorist (“UM” ) benefits

Stephen Alexis and Gwen Alexis sustained injuries when the vehicle that Stephen was operating (“Alexis vehicle) was involved in a collision with a vehicle owned by Ko (“Ko car”). At the time of the accident, the Alexis vehicle was insured by Progressive and the Ko car was insured by New York Central Mutual Insurance Company (“NYCM”). Stephen and Gwen sought to arbitrate a UM claim under the Progressive policy. Progressive then commenced a proceeding to stay the arbitration on the ground that the Ko car was insured by NYCM at the time of the accident.

NYCM contended that it had cancelled the Ko policy prior to the subject accident. There was a framed issue hearing and the court found that that NYCM had failed to establish the policy was validly canceled. me of the accident. After the hearing, the Supreme Court determined that New York Central failed to establish that it had validly cancelled the policy prior to the accident.

Apparently NYCM contended that it canceled the policy because Ko did not have an insurable interest in the vehicle. However, the court found that Ko was still the vehicle owner, therefore had an interest and accordingly the cancellation on that ground was invalid.

11/12/14       Siskin v. Cassar
Appellate Division, Second Department
Suspended and Disbarred Attorney Had No Claim for Fees and/or Breach of Duty When Suing for His Share of Contingent Fees, Under Facts of The Case
Siskin commenced this action against Christopher J. Cassar, Christopher J. Cassar, P.C., Christopher J. Cassar, Esq., Christopher J. Cassar, Attorney-at-Law, Christopher J. Cassar, Inc., Christopher J. Cassar, Co., and Christopher J. Cassar, LLC (“Cassar:”), Pogue and William Pogue (“Pogue”), Harleysville Insurance Company (“Harleysville”), and the American Arbitration Association and Paticoff (“AAA“). Siskin wanted to recover a contingency fee related to the settlement of an arbitration of the Pogue’s underinsured motorist claim against Harleysville. He argued that Pogue hired him to prosecute a claim for personal injuries sustained by Pogue in an automobile accident, that he filed a demand for arbitration against the Harleysville, that the arbitration was settled with the defendant Cassar, who was listed as Pogue attorney, and that the Harleysville issued a check to Cassar and Pogue. At the time of the settlement, the Siskin was suspended from the practice of law. Subsequently, he was disbarred.

The court found that the disbarred attorney was owed a duty by none of the defendants and that there was no evidence that any of them wrong and most of them owned no duty to him.

HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW

Robert E.B. Hewitt III
[email protected]

 

11/18/14       Anderson v Pena
Appellate Division, First Department
Appellate Court Again Confirms The Importance of Not Waiting To Reply Papers To Address Important Issues As It Will Not Be Properly Before the Court
The Appellate Court partially modified the lower court’s decision to the extent the lower court granted summary judgment as to Plaintiff’s claims of “significant” and “permanent consequential” limitations in use of her cervical spine. 

Defendant established a prima facie showing that Plaintiff did not sustain a serious injury to her cervical spine by submitting an orthopedic expert’s report finding, after an examination, a full range of motion in Plaintiff’s spine.  The Court specifically found that the orthopedist did not have to review Plaintiff’s MRI films or reports when making this finding. However, Plaintiff raised triable issues of fact through her expert report which included an affirmation that she sustained objective medical injuries and deficits of range of motion causally related to the accident. On Reply, Defendants argued that Plaintiff failed to present any explanation for the two-year gap in her treatment, which amounted to a cessation of treatment. The Court did not consider this argument as it was improperly raised in Reply for the first time.

The Court did affirm the dismissal of Plaintiff’s claim of a 90/180-day injury. Defendants relied on Plaintiff’s affidavit stating that she missed about two months of work and her expert physician’s affirmed report stating she returned to ‘limited duty’ work two weeks after the accident and remained working thereafter. Therefore, she could not demonstrate that she suffered a medically determined injury or impairment of a non-permanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for not less that ninety days during the one hundred eighty days immediately following the occurrence of the injury or impairment. Plaintiff failed to raise an issue of fact in response to Defendants’ prima facie showing. 

11/13/14       Fludd v. Pena
Appellate Division, First Department
Appellate Court Finds Issue of Fact As To Serious Injury When Parties Submitted Competing Medical Expert Reports  

Although Defendants established a prima facie case for summary judgment as their medical expert submitted a report that Plaintiff had full normal range of motion and exhibited no functional disability at the time of examination as to her claims of injuries to her cervical or lumbar spine, Plaintiff raised an issue of fact as to her lumbar spine. Her rating orthopedist confirmed she exhibited limitations in range of motion in her lumbar spine when she was examined shortly after the accident and again when she was examined after Defendants moved for summary judgment,. He also opined that bulging discs on the MRI were causally related to the accident. Even though Plaintiff failed to attach the MRI report to the medical expert’s affirmation, the affirmation by the orthopedist who reviewed the MRI constituted admissible objective medical evidence.

Summary Judgment was properly granted to Defendants on the 90/180 day category claim as Plaintiff testified she returned to work on limited duty eight weeks after the accident.  Plaintiff also failed to submit any objective evidence of injury to her cervical spine and the post-accident treatment records of her doctor do not refer to any such injury. She also failed to raise an issue of fact as to her left shoulder claim.

11/13/14       Sutliff v. Qadar
Appellate Division, First Department
Appellate Court Finds Issue Of Fact As To Whether The Accident Aggravated a Prior Injury Resulting In Significant Limitation of Us

Defendant’s made a prima facie showing of a lack of permanent or significant limitation of use of the left shoulder by submitting an orthopedist report finding full range of motion in the shoulder and negative clinical test results and their radiologist’s MRI report finding a normal shoulder, Plaintiff failed to raise an issue of fact as to the existence of a permanent consequential limitation of use of the left shoulder. The treating physician found only a minor limitation prior and Plaintiff had ceased treatment for over a year with no explanation

Plaintiff raised a triable issue of fact as to whether the subject accident aggravated his prior left shoulder injury, resulting in significant limitation in use by submitting the affirmed report of Plaintiff’s treating physician who found substantial limitations and positive clinical results a month after the accident, and Plaintiff underwent shoulder surgery a year later. The treating physician noted that the prior injury had improved with therapy prior to the accident and that the subject accident caused significant injuries to the shoulder. This along with the fact Plaintiff took a full year to return to work after the accident raised an issue of fact as to whether the accident caused an aggravation or exacerbation of the prior injury and as to the existence of a 90/180-day injury. Plaintiff also submitted an MRI report and an operative report that provided objective proof of a pre-existing partial tear that may have been aggravated by the accident, and of new symptoms following the accident. Though unaffirmed, because the Defendant’s expert considered the Plaintiff’s expert reports in reaching his conclusions, and they were presented by Defendant’s expert, they could be considered by the Court. Plaintiff also submitted a medical report that reflected he was not medically cleared to return to work until six months after the accident and four months after his shoulder surgery

11/12/14       Flores v. Luna
Appellate Division, Second Department
Appellate Court Affirms Grant of Summary Judgment To Defendants On Grounds That Plaintiff Did Not Sustain Serious Injury

The Defendants met their prima facie burden of showing that the Plaintiff did not sustain a serious injury by submitting competent medical evidence establishing, prima facie, that alleged injuries to the cervical, thoracic, and lumbar regions of the plaintiff’s spine, as well as his chest, left shoulder, left wrist, left knee, and left ankle, and left foot, did not constitute serious injuries under the permanent consequential limitation of use or signification limitation of use categories, or the 90/180-day category of Insurance Law §5102(d). Further, the evidence submitted by Defendants indicated that the injuries to the left shoulder, cervical, and lumbar regions of the spine were not caused by the accident in any event. Plaintiff did not raise an issue of fact. The decision does not set forth any real facts or details as to how the prima facie burden was established.

11/12/14  Felicciardi v. Lankap Cab Corp., Silan v. Sylvester, and Flowers v. Bhola
Appellate Division, Second Department
In These Cases The Defendants Failed To Meet Prima Facie Burden; Thus Plaintiff Did Not Have To Demonstrate Issue of Fact
 
None of these cases set forth any facts in detail and rely on the exact same reasoning. In Felicciardi and Flowers, the Second Department held  that Defendants failed to adequately address the plaintiff’s claim, set forth in the bill of particulars, that the Plaintiffs’ sustained a serious injury under the 90/180 day category. In Silan, Defendants failed to adequately address the plaintiff’s claim, set forth in the bill of particulars, that the Plaintiffs’ sustained a serious injury under the permanent consequential limitation of use or significant limitation of use categories. Since the Defendants did not meet their prima facie burden, it was unnecessary to determine whether Plaintiffs’ opposition papers demonstrated an issue of fact.

11/12/14       Knight v. M&M Sanitation Corp.
Appellate Division, Second Department
Appellate Court Upholds Jury Verdict Which Found Plaintiff Did Not Sustain Serious Injuries

Defendant sanitation company’s truck backed up into the stationary vehicle in which the Plaintiff was sitting. Plaintiff was sipping soda from a can at the moment of impact and claimed that the impact was heavy, causing his mouth and teeth to hit the can. He testified that the force from the impact loosed his existing front upper dental bridge, which he received 12 years earlier because of several missing front teeth. The jury returned a verdict in favor of Defendants that Plaintiff did not sustain a serious injury under either the significant limitation of use or permanent consequential limitation of use categories.

On appeal, the Plaintiff contended that the lower court erred in denying his request to charge the jury with respect to the significant disfigurement category. The Court held that to constitute a significant disfigurement within the meaning of the insurance law, a reasonable person viewing the injury would have to regard it as unattractive, objectionable, or the object of pity and the disfigurement must also be causally related to the subject accident. The Appellate Court rejected the contention that the loss of the bridge was a disfigurement. Rather, the loss of the teeth was the disfigurement and that loss predated the accident by 12 years.

As for the Plaintiff’s argument that the lower court erred in not charging the jury under the fracture category of the Insurance Law, the Court noted that the lower court correctly denied this request for a charge as the Complaint did not allege a tooth or jawbone fracture and the bill of particulars did not sufficiently particularize the Plaintiff’s allegation of fracture as a result of the accident. Rather, it alleged the loosening of the Plaintiff’s “existing dental structures in his mouth leading to teeth loss” and need for multiple surgical tooth extractions.

Plaintiff also failed to present medical evidence at trial to support a charge that he sustained a tooth or jawbone fracture.  Although his dental surgeon testified that four weeks after the accident, a fractured tooth had been removed, there was no evidence in the records and no testimony that the tooth was fractured as a result of the collision. It was also undisputed that Plaintiff did not seek any treatment or make any complaints about his teeth or mouth when he visited a hospital nine days after the accident or other hospitals in the next few weeks. He only told his dental surgeon of the accident four months after it occurred. Therefore, there was not sufficient evidence he had suffered a jawbone or tooth fracture.

The Appellate Court also determined that the lower court did not err in denying Plaintiff’s request for a missing document charge with respect to pictures taken at the scene of the accident with a disposable camera, as he failed to establish that any photographs existed or that he moved to compel their production during discovery.

11/12/14       Wilcoxen v. Palladino
Appellate Division,  Second Department
In Light of Conflicting  Expert Medical Opinions Submitted By the Parties, Summary Judgment Was Properly Denied For Both Parties

Plaintiff’s motion for summary judgment set forth a prima facie case of serious injury  to his right leg under the permanent consequential limitation of use and significant limitation of use categories, and that the injury was causally related to the accident. However, Defendants raised an issue of fact by submitting an expert medical report to rebut Plaintiff’s expert medical report.

The Court also held the Defendants’ motion for summary judgment was properly denied due to the conflicting expert medical opinions submitted by the parties.

 

11/12/14       Clark v. First Student, Inc.
Appellate Division,  Second Department
Appellate Court Reverses Grant of Summary Judgment to Defendant Due To Failure by Defendant To Adequately Address All Injuries In the Bill of Particulars
Although the lower court had granted Defendants’ motion for summary judgment on the grounds that Plaintiff did not sustain a serious injury, the Appellate Court reversed. The Appellate Court found that the motion papers failed to adequately address the claims in the Bill of Particulars that Plaintiff sustained serious injuries to the cervical and lumbar regions of the spine and to his right shoulder under the permanent consequential limitation of use and significant limitation of use categories,  as well as a serious injury under the 90/180 day category. Yet again the Court found that since the  Defendants did not meet their prima facie burden, it was unnecessary to determine whether Plaintiff’s opposition papers demonstrated an issue of fact.   The case is not particularly detailed.

11/12/14       Trunzo v. Yanotti and Ogle v. Higgins
Appellate Division, Second Department
Plaintiffs Were Able to Raise Issues of Fact After Defendants Made Prima Facie Case By Submission of Medical Evidence

In both cases, Defendants met their prima facie burden of showing there was no serious injury by submitting medical evidence. In the Trunzo case, the medical evidence established that  the alleged injuries to the cervical and thoracolumbar regions of the plaintiff’s spine did not constitute serious injuries under the permanent consequential limitation of use or significant limitation of use categories. In the Ogle case, the medical evidence established that the alleged injury to the lumbar spine did not constitute serious injuries under the permanent consequential limitation of use or significant limitation of use categories. However, in both cases, Plaintiffs raised triable issues of fact in opposition as to whether they sustained serious injuries and therefore the Appellate Court reversed the lower court’s grant of summary judgment. The Court does not mention in either case how Plaintiff raised these issues of fact.

 

MARGO’S MUSINGS ON NO FAULT

Margo M. Lagueras
[email protected]

Taylor F. Gabryel
[email protected]
[Guest Columnist]

 

11/10/14       RS Medical v. A. Central Insurance Company
Erie County, Arbitrator Mona Bargnesi
Unless A Party Has Demonstrated “Exceptional Circumstances”, Arbitrators Do Not Have The Power To Direct That Parties Engage In Discovery.
In its AR-1, Applicant’s attorney included a demand for “All Medical Records provided to, relied on, and/or reviewed by Peer Review or IME doctor on which any denials involving our client is based.”  In support of its argument, Applicant’s counsel cited 11 NYCRR 65-3.8(4), which states:

If the specific reason for a denial of a no-fault claim, or any element thereof, is a medical examination or peer review report requested by the insurer, the insurer shall release a copy of that report to the applicant for benefits, the applicant’s attorney, or the applicant’s treating physician, upon the written request of any of these parties.

In addition, the Applicant argued that assignees are entitled to the medical records reviewed by the examiner in order to determine the accuracy of the report.

In response, the Respondent argued that the language of 11 NYCRR 65-3.8(4) only requires an insurer to release a copy of that report and not the documents upon which the peer reviewer relied.  In this matter, a copy of the report was provided to both the Applicant and AAA.

Arbitrator Bargnesi, citing DeSapio v. Kohlmeyer (35 N.Y.2d 402, 406, 362 N.Y.S.2d 843, 847 [1974]), noted that the availability of disclosure devices is significantly different between judicial and arbitration proceedings as it is contemplated that disclosure devices will be used sparingly in arbitration.  Further, Arbitrators do not have the power to direct that parties engage in disclosure proceedings, and only under exceptional circumstances will a court order disclosure in arbitration (See Kahn v. New York Times Co., 122 A.D.2d 655, 663, 503 N.Y.S.2d 561, 566 [1st Dept. 1986]). 

In her decision, Arbitrator Bargnesi noted that the Applicant submitted a pre-printed, boilerplate document demand which indicated that the documents were needed “to verify, question, or contest the statements used as foundation in the expert opinion.”  With respect to the Applicant’s discovery request, Arbitrator Bargnesi opined that the Applicant had not shown “exceptional circumstances” for the same.  As such, Arbitrator Bargnesi held that the Respondent was not obligated to provide the requested documents to the Applicant.

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

11/18/14       FSLM Assocs., LLC v Arch Ins. Group
Appellate Division, First Department
Exterior Insulation and Finish System Exclusion Found Clear and Unambiguous; Coverage for Collapse of a Façade Precluded as a Result
Plaintiff brought the instant action after its claim for coverage was denied by Arch Insurance Company.  While the facts are somewhat minimal, it appears that an incident involving the exterior façade of a building on W. 116th Street resulted in the façade’s collapse.  Upon receipt of the claim, Arch referenced an exclusion for loss arising out of an “Exterior Insulation or Finish System” to deny coverage.

On appeal, the Appellate Division agreed that the loss appears to have been occasioned out of a masonry leveling product that was applied prior to the exterior façade being installed.  When, presumably, the leveler failed, the façade itself collapsed.  Because the damage clearly was related to the installation of the exterior finish system, the exclusion applied and coverage was barred.  In so holding, the Court noted that the language of the EFIS exclusion (which has grown in its popularity on CGL policies over the past 5 years) was clear and unambiguous.

11/13/14       6 Montague, LLC v New Hampshire Ins. Co.
Appellate Division, First Department
Where Decay/Rot is Not Hidden from View, Collapse Coverage is Not Triggered
The Appellate Division, First Department reversed the trial court, and in so doing affirmed New Hampshire’s denial based upon decay and rot.  Plaintiff sustained a loss due to a fractured beam which had become compromised due to the extensive rot. Plaintiff argued that the rot/decay was hidden from view, and therefore the policies coverage for collapse should apply to provide coverage.

It is noted that the beam, itself, could not be visually inspected prior to the loss because it was encased in fascia.  In finding for the carrier, the Court also noted that the rot at issue was plainly visible in the areas around the beam in question.  Thus, under the circumstances of this case, where decay/rot should have been observed prior to the loss, the decay/rot exclusion applies to bar all coverage.  This is the case, notwithstanding the exception for hidden decay found within the collapse coverage of the policy.

FITZ’ BITS

Elizabeth A. Fitzpatrick
[email protected]

10/14/14       State Farm Fire & Casualty Co. v. R.K. Wooten,
2014 WL 5149201
United States District Court of Hawaii
Faulty Workmanship Not An Occurrence

The action involved claims by Maui Park Plaza (“MPP”) against Betsill Brothers Construction and design professionals and subcontractors involved in the construction of the MPP complex in Maui.  R.K. Wooten (“RKW”) was identified as a defendant in the litigation who was engaged in metal framing and drywall installation.  MPP alleged various construction defects in the project, including leakage, structural issues and building code violations, and allegations were asserted against all of the defendants for breach of contract, breach of warranty and negligence.  MPP sought special, general, compensatory and/or consequential damages, as well as attorney’s fees and costs.

RKW tendered its defense to State Farm and State Farm provided a defense subject to a reservation of rights.

The State Farm comprehensive business liability coverage forms included an insuring agreement, whereby State Farm agreed to pay those sums that the insured became legally obligated to pay as damages because of property damage caused by an occurrence in the coverage territory.  Exclusions were included for damages assumed in a contract or agreement with an exception for an insured contract.  Occurrence was defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions resulting in bodily injury or property damage.  Property damage was defined as physical injury to or destruction of tangible property and loss of use of tangible property not physically injured or destroyed.  The policy also included the “your work” exclusion.

The decision was issued in the context of a motion seeking a default by State Farm and the court initially addressed the likely prejudice to State Farm if the motion were not granted by virtue of State Farm having to continue to defend RKW in the underlying action and potentially pay an award.

The court next reviewed Hawaii law regarding insurance policy interpretation, noting that the duty to defend is limited to situations where the pleadings have alleged claims for relief which fall within the terms for coverage of the insurance contract.  “Where pleadings fail to allege any basis for recovery within the coverage clause, the insurer has no obligation to defend.”

Applying this framework, the court determined that the underlying actions claims were not covered by the terms of the policies.  They found that the claims by MPP based upon construction defects did not fall within the scope of coverage for property damage caused by an occurrence and further that well-settled Hawaii law provides that claims arising from an insured’s obligations arising under contract – whether phrased in terms of a breach of contract or negligence – are not claims for property damage caused by an occurrence.  As a result, the court granted State Farm’s motion for the default, finding that State Farm had no duty to defend or indemnify R.K. Wooten d/b/a RKW Drywall Interiors in connection with the Maui Park action.

 

AUDREY’S ALL THINGS PERSONAL

Audrey A. Seeley
[email protected]

11/14/14       Dueno v. Modern USA Ins. Co.
District Crt. Appeal (5th Dist.), Florida
Sexual Molestation Exclusion Unambiguous and Bars Coverage for Sexual Battery/Negligent Supervision Claim.
A minor, A.C., was allegedly sexually battered by another minor, J.Y., while in the care of the Modern USA Insurance Company’s (“Modern”), insureds, Ms. Irizarry and Mr. Yambo.  J.Y. was Ms. Irizarry and Mr. Yambo’s son.  A.C.’s aunt commenced an action against Ms. Irizarry and Mr. Yambo alleging negligent supervision of A.C. resulting in J.Y. allegedly sexually battering A.C. 

Modern, who issued a homeowner’s insurance policy to Ms. Irizarry and Mr. Yambo, commenced the instant declaratory judgment action seeking a declaration that the homeowner’s policy afforded no coverage to Ms. Irizarry and Mr. Yambo.  Modern relied upon its sexual molestation exclusion which provided:

SECTION II–EXCLUSIONS
1. Coverage E—Personal Liability and Coverage F—Medical Payments to Others [do not apply to “bodily injury” or “property damage”]:
....
k. Arising out of actual or alleged sexual molestation or harassment, corporal punishment, or physical or mental abuse;....

Modern was granted summary judgment and the trial court’s decision was affirmed on appeal.  The Court held that Modern’s sexual molestation exclusion was unambiguous and this case was materially indistinguishable, both factually and the policy language, from the Valero case. 

The Court rejected Appellant’s argument that the Premier case applied as in that case an intentional act exclusion was deemed ambiguous and could not be relied upon to exclude coverage for a negligent supervision claim.  The Court quickly pointed out that in Premier, the exclusion was deemed ambiguous because that exclusion applied to any insured yet conflicted with the policy’s severability clause which applied the insurance separately to each insured.  Here, Modern’s sexual molestation exclusion applies to any act of sexual molestation irrespective of whether the person causing the injury is an insured.  Thus, the exclusion is more broadly worded, as was the exclusion in Valero, and not ambiguous.

The Court further rejected the argument that the exclusions use of the phrase “arising out of” alone created an ambiguity as that issue has already been decided by prior courts as not creating an ambiguity.  The Appellant’s argument that the exclusion only applied to sexual molestation and not sexual battery was rejected.  The Court held that plain meaning of the sexual molestation included unwanted sexual touching thus encompassing a claim for sexual battery.

Finally, the Court soundly rejected Appellant’s argument that Valero was an anomaly and not in line with the decisions from other jurisdictions.  [Note: A shout out to Rebecca Haller, at Meckler, Bulger, Tilson, Marick & Pearson, LLP, a fellow DRI Insurance Law Committee member, whose DRI For the Defense Article, was the focus of the Court’s discussion on this point.]

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

11/20/14       In re Kigin v. State of NY Workers’ Compensation Board
New York State Court of Appeasls
Medical Treatment Guidelines Constitutional
In this matter, the primary issue before the Court of Appeals was whether the Workers’ Compensation Board exceeded its statutory authority when it promulgated parts of the Medical Treatment Guidelines. 
A brief background on the Legislative history is helpful in this matter.  In 2007, Workers’ Compensation Law §13-a was amended.  In relevant part, the statute directed the Workers’ Compensation Board (“Board”) to maintain a list of pre-authorized procedures that a claimant may undergo without the employer’s prior approval.  This was authorized by the Legislature to “remove impediments to prompt diagnostic and treatment measures and to better reflect current medical service costs.”  Thereafter, the Board adopted the Medical Treatment Guidelines which were incorporated by reference in the regulations.
The Guidelines include a list of pre-authorized medical procedures as well as limitations on the scope and duration of these procedures.  Additionally, there is a variance procedure under which a provider may seek an authorization for medical care not pre-authorized or in excess of the scope and/or duration of the pre-authorized treatment.  To be granted a variance, the treating provider must demonstrate that the treatment is appropriate for the claimant and medically necessary.
With that in mind, we have Maureen Kigin’s claim for workers’ compensation benefits.  Ms. Kigin’s treating physician initially prescribed acupuncture three times a week for six weeks, and she was granted an authorization from the carrier for such.  Upon conclusion of the six weeks, Ms. Kigin was reevaluated, and her physician recommended she receive additional acupuncture three times a week for six more months.  This time the Guidelines were in place, and a variance was required because the duration of the acupuncture treatments exceeded the duration set forth in the Guidelines.
Upon request for the variance, the carrier obtained an IME of the claimant who determined that further acupuncture treatments were not medically necessary because the objective findings did not support Ms. Kigin’s subjective complaints.  The variance was denied based upon the IME’s determination that the treatment was not medically necessary.
A review of the carrier’s denial of the variance request was sought wherein both Ms. Kigin’s treating physician and the IME doctor testified.  The Workers’ Compensation Law Judge determined that the “claimant’s medical provider failed to show that the additional acupuncture treatments were medically necessary.”  This decision was appealed and affirmed by the Workers’ Compensation Board panel and again appealed and affirmed by the Appellate Division.
On appeal, the claimant asserted that (1) the Board lacked the authority to promulgate the regulations and incorporated Guidelines, (2) the variance procedure improperly shifts the burden of proof to claimants physician to prove the medical necessity of a proposed treatment, and (3) the Guidelines violated claimant’s due process right to a meaningful hearing. 
With regard to the assertion that the Board exceeded its statutory authority, the court explained that it will uphold regulations that have a “rational basis and are not unreasonable, arbitrary, capricious or contrary to the statute under which they were promulgated.”  In this matter, the court found that the Board acted properly and lawfully as the Guidelines were clearly authorized under the Law, and the court found that the variance procedure was not a pre-denial as asserted by the claimant because the Board had to consider what is NOT best practice or what may NOT be medically necessary in order to establish those procedures which are pre-authorized.  The court found that this was achieved through the Guidelines and the variance process.
Ms. Kigin also asserted that the Guidelines shifted the burden of proof from the employer to the carrier.  The court found that there was no such burden of proof requirement under the Workers’ Compensation Law.  The court further clarified that §21(5) of the Workers’ Compensation Law creates a presumption in favor of the claimant in certain circumstances rather than a burden of proof.  The court explained that §21(5) simply creates a presumption by stating that “the contents of medical and surgical reports introduced in evidence by claimants for compensation shall constitute prima facie evidence of fact as to the matter contained therein.”  As such, the court held that the claimants may still rely upon the presumption which establishes the facts contained in the medical report, and the claimant still must first establish medical necessity.

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
[email protected] 

10/08/14       Almonte v. Castlepoint Ins. Co.
Supreme Court, New York County
Three-Family Dwelling Did Not Constitute “Residence Premises” Under Terms of Homeowners Policy
On February 12, 2011, a fire occurred at a property owned by Juan Ramon Almonte and insured by Castlepoint under a homeowners’ policy.  When Castlepoint investigated the loss, it determined that the property was not a two-family owner occupied dwelling as represented on the application, but, instead, it had three family homes.  Accordingly, it advised Almonte that it was reserving its right to disclaim coverage based on the concealment or fraud provision in its policy indicating that it would not have issued the policy had it known the truth. 

Castlepoint eventually denied coverage, not on the concealment or fraud provision, but instead advising that since there were three separate living spaces within the house, the house did not constitute a residence premises under the policy which was defined as a one or two family home. 

Almonte then brought this action seeking actual, compensatory, consequential and punitive and/or exemplary damages and a declaration that the loss was insured.  Castlepoint eventually moved for summary judgment.  Based on the motion papers, the court found that Castlepoint made a sufficient prima facie showing that coverage was limited to one and two family residences.  It also submitted sufficient evidence that the insured premises was a three-family residence.  Specifically, it included an affidavit and photographs from an adjuster who conducted an inspection of the property and observed separate living units/apartments on the first and second floors, as well as one in the basement, and that each of the three living units contained its own kitchen, bathroom and living area.   

In opposition, plaintiffs failed to raise a triable issue of fact as to whether the basement apartment constituted a third and separate dwelling unit.  They submitted no affidavit or other evidentiary proof, and relied solely on an attorney’s affirmation and a memorandum of law.  The court rejected plaintiffs’ argument that the premises was a two family dwelling since it only had one entrance, with staircases leading from the first floor to the second floor and basement, and there were no separate entrances to the second floor and basement. 

Lastly, the court rejected the argument that the Castlepoint policy limiting coverage to one and two family owner occupied dwellings violated Insurance Law §3404. 

Summary judgment was granted to Castlepoint, and plaintiffs’ cross-motion was denied. 

 

EARL’S PEARLS
Earl K. Cantwell
[email protected]

7/24/14     Alterra Excess & Surplus Ins. Co. v. Gotama Building  Engineers
Central District of California
Insurance Company Wins Late Notice of Claim Argument
Adherence to the notice of claim provisions in virtually every insurance policy is essential as an initial step to seeking and obtaining coverage on a claim.  A recent California case applied this principle in favor of an insurance company in 2014 WL 3866093 (C.D. Cal.

Gotama consulted on an architectural project for DLR Group for plumbing and mechanical-engineering work on a home for the elderly in the Los Angeles area.  The facility notified DLR in April 2013 that it had to correct deficiencies in those components, and DLR sent Gotama a letter April 24, 2013 notifying it of the problem.  The facility eventually sued DLR Group, and DLR then cross claimed against Gotama for indemnity and contribution for breach of contract.  Gotama filed a coverage claim with Alterra Insurance in January 2014, and Alterra responded with a declaratory judgment action in federal court.

The Court held that Gotama was not entitled to defense coverage or indemnification because it waited too long to notify Alterra of the claim.  The policy required Gotama to inform the insurance company about any claims no later than 60 days after the coverage expired on June 1, 2013.  The carrier was not placed on notice by Gotama until January 2014, some 7 months later.
Gotama argued that DLR Group’s April 24, 2013 letter did not fit the definition of a “claim” triggering the 60-day limitations time, but the Court rejected that argument.  The letter warned Gotama that it might have to bear the cost of repairing the design deficiencies of the structure, and specifically stated that Gotama should notify its insurance carriers.

This case once again demonstrates that a good late notice of claim argument is relatively easily susceptible of proof, and is also case determinative, a true “show stopper”.  Regardless of the insured’s opinion about a potential claim, a claim letter, notice, or suit falling within the definition of a “claim” should be timely reported to assure coverage litigation.