Dear Coverage Pointers Subscribers:

Do you have a situation?  We LOVE situations. 

This week’s issue comes from the DRI Insurance Coverage & Practice Symposium in New York City.  Last night, after dinner, we wanted to stroll over to Rockefeller Center to see the “Tree” but could not cross Sixth Avenue due to protesters peacefully exercising their First Amendment rights.

By the way, one of the speakers pointed out that on the website, Urban Dictionary, there is a definition of insurance company

Evil multi-billion dollar corporations that earn a profit from your premiums, and then find any loophole they can so they can refuse to live up to their responsibility in order to save money.  An insurance company is really a legal form of fraud.

The dictionary likes some lawyers a bit better:

Someone who studies or practices law, usually a member of the legal profession as either a solicitor or barrister. Very often the better lawyers are involved in fighting for Human Rights and Civil Liberties in courts and the academic kind often researches to find out what effects laws are having on real people. 

Often insulted by people who don't know how hard work it is and how much the authorities and corporations would trample over their rights if lawyers and the law didn't exist.

"Look at that dead lawyer in Northern Ireland that was shot for supporting the wrong side, thank god there's one less of them!" - a stupid person

Great programming.  Kudos again for the new DRI Insurance Law Chair, our own Audrey Seeley.

We received great feedback on our Special Edition last week and we thank you for those comments.

Peiper’s Pickings:

I too join you from the DRI Coverage Symposium.  It is a great opportunity to learn, meet up with talented lawyers and claims types from around the Country, and meet some of my own colleagues from my own firm as well.  It turns out both Beth and Audrey do exist, and are far more than ghost contributors to our humble little publication.  With busy workloads, Snowmageddon, and the Thanksgiving Holiday, it has been nearly a month since I've seen most of the people in my office.

This is a unique event; an annual rite of passage to the coverage defense bar.  As one attendee told me at lunch, there may be only 300 people in the County that are actually interested in a discussion about the insured contract exception to the contractual liability exclusion, but they are all in the same room, darn it.   Amen to that, Mr. Burke. 

As for our offering this week, please take a moment to review the first party case involving Liberty Mutual.  For those of you interested in CPLR bugaboos, be sure to review the Second Department's discussion regarding the 120 day rule for summary judgment motions in New York.  Trust me, at some point this will come in handy the next time you are assigned to a new judge after the filing of the Note of Issue.

That's it for now.  Thanks for reading.

Steve
Steven E. Peiper
[email protected]

Satisfying Hunger – A Century Ago:

New York Tribune
Saturday, December 5, 1914

$2,000 Price of Meal – Woman Gets Verdict Against Pullman Company

If food served on a Pullman dining car results in the illness of the traveler, can the Pullman Company be held responsible?  A federal jury decided in the affirmative yesterday and brought in a verdict of $2,000 against the company.  The suit had been brought for $5,000.

Mme. Delia M. Valeria, a teacher of vocal music, claimed that braised beef, eaten in August, 1910 between Weehawken and Lake Mohonk, prevented her from following her profession for six months.  She had asked for fresh meat, she testified, and the beef had been taken from a can.

The defense described Mme. Valeri’s meal as a “hygienic sin,” and said that it was overheating on a hot day that had caused her illness.  After the verdict the question of the company’s responsibility was raised, and this phase of the case will be argued on Friday before Judge Hand.

White Collar Crime – One Hundred Years Ago – Part I:

This story just intrigued me – so I followed it for about six years.

New York Tribune
Saturday, December 5, 1914

Sullivan Faces 50 Year Term By Indictments – Three New Bills May Get $1,000,000
Hidden by Bank Wrecker

FURTHER ACTION BY GRAND JURY LIKELY

Sixty Witnesses Quizzed by Cropsey in Larceny Probes

David A. Sullivan, former president of the Union Bank of Brooklyn, for the wrecking of which the institution he was sentenced to Sing Sing, was indicted three times yesterday for further thefts of the bank’s assets.  Two of the indictments charged Sullivan with being a second offender.  If the minimum sentences were imposed Sullivan, if he lives, might spend the next fifty years in prison.

The Kings County Grand Jury, October term, before which District Attorney James C. Cropsey was investigating Sullivan’s business transactions since the latter became an inmate of Sing Sing, handed up the true bills to County Judge Roy yesterday morning. 

A writ of habeas corpus may be issued next week to produce Sullivan in court to plead.  The indictments specify grand larceny.
Editor’s note:  Your editor was intrigued by this one, a case involving hundreds of thousands of dollars of pilfered funds.  What happened to Sullivan?  50 years in Jail?

Stay tuned.

Fitz’ Bits:

Dear Subscribers:

Greetings from New York City where I am attending the DRI Insurance Coverage Symposium, as I know are many of our readers.  It is always a highlight of the year featuring excellent speakers, timely topics and the opportunity to catch up with colleagues from across the country.  Thus far, we have heard an interesting and entertaining presentation by Judge Smith, who will be retiring from the New York Court of Appeals at the end of December and who will certainly be missed.  Congrats again to our own Audrey Seeley, chair of the DRI Insurance Committee.

This week I report on another construction defect action, this one applying Utah law, where the court held that the insurer was obligated to defend its insured in litigation by homeowners, but not in connection with pre-litigation claims under “Chapter 40”.  Chapter 40 is a Nevada statute governing homeowner construction defect claims which requires a claimant, as a condition to pursuing a construction defect claim through litigation, to provide written notice to the contractor identifying the alleged defects and the nature and extent of the damage and thereafter, allowing the contractor a reasonable opportunity to inspect the home and repair any damage found.

Til next time

Beth
Elizabeth A. Fitzpatrick
[email protected]

White Collar Crime – One Hundred Years Ago – Part II:

Fast forward, a couple of months later

The New York Times
Thursday, February 18, 1915

SULLIVAN PAROLED, WILL BE REARRESTED

Ex-Banker, Leaving Sing Sing Today

Must Answer New Charges in Brooklyn

DEPOSITORS MAKE PROTEST

Denounce Liberation of Wrecker, Whose Freedom While Convict Caused Warden’s Removal

David A. Sullivan, former head of the Union Bank of Brooklyn, who has been serving a sentence in Sing Sing for grand larceny committed in connection with his management of the affairs of the bank, and whose automobile rides and trips to New York while a prisoner led to the removal last Fall of Warden Thomas J. McCormick, procured a parole yesterday from the State Parole Board.

The minimum term of two years of Sullivan’s indeterminate sentence, expired early this month, and the board met at the prison in Ossining yesterday especially to act on the banker’s application.  All three members of the board were present – John B. Riley, Superintendent of Prisons; Henry J. McCann and William Townsend.  They directed that Sullivan be released this morning.
Editor’s note:  Sentenced to two years in jail in January 1913, he started his sentence the following month and served two years. He was out by February 1915. Did he serve “hard time”?  Feggetabout it.  Sullivan, apparently, bought the warden a car (as he was entering jail) and the warden used him as a chauffeur, allowing Sullivan to drive around town and do his thing.  The warden was fired when the truth was revealed but Sullivan was released nonetheless, to face older charges.  Did he? 

Stay tuned.

Hewitt’s Highlights:

Dear Subscribers:

The Appellate Courts are apparently catching up with their holiday shopping, as we have only two serious injury cases this week.  One decision reminds defendants that they must address all medical claims in a plaintiff’s bill of particulars to succeed on summary judgment or the appellate courts will not hesitate to reverse. The other decision is a standard grant of summary judgment to defendants upon their submitting competent medical evidence that plaintiff’s injuries do not meet the threshold, which plaintiff failed to rebut.

I hope your holiday shopping is done though mine has not begun.

Until next time,

Rob
Robert Hewitt
[email protected]

White Collar Crime – One Hundred Years Ago – Part III:

The New York Times
Monday, March 15, 1915

Sullivan in Sanitarium – Former Head of Union Bank Has Nervous Breakdown, Report Says

David A. Sullivan, former President of the Union Bank of Brooklyn, who was sentenced to two years in Sing Sing Prison for his part in the wrecking of that institution, and who was recently released on parole, is said to be in a private sanitarium out of town, suffering from a nervous breakdown.  When Sullivan was released from Sing Sing he said that he was a very sick man and he had the appearance of being in ill-health.  He was rearrested at that time on new indictments found against him in Brooklyn.  He is now out on bail awaiting trial.

Upon his release from prison, Sullivan promised to aid the stockholders of the defunct bank to recover some of their money, and a week ago he made an offer of assistance to Joseph G. Deane, counsel for the bank.  Trial?  More jail time?  Stay tuned.

Jen’s Gems:

Greetings!

This week I am writing from New York City where the Insurance Law Committee of DRI is putting on its annual Insurance Coverage & Practice Symposium.  The seminar always attracts a great group of insurance professionals and attorneys.  Of special interest, this year’s key note speaker was Judge Robert S. Smith of the New York Court of Appeals.  Judge Smith discussed some of the coverage opinions he has authored during his tenure on the bench including the infamous K2 (I) and K2 (II) decision.  Always interesting to hear a judge’s view of these influential decisions.

Until next issue…

Jen
Jennifer A. Ehman
[email protected]

White Collar Crime – One Hundred Years Ago – Part IV:

The Brooklyn Daily Eagle
Friday, February 27, 1920

QUASH INDICTMENTS AGAINST SULLIVAN
 Wrecker of Mechanics and Traders Bank Will Not Have to Face Old Charges.

On motion of District Attorney Lewis, three indictments found in 1912 against David A. Sullivan, who wrecked the Mechanics and Traders Bank, out of which grew the Union Bank, which also failed, were dismissed today by Justice Aspinall in the Criminal Branch of the Supreme Court.  Two of the three indictments charge grand larceny and one forgery, for alleged alterations of bank records to cover transactions in which worthless securities were put in the place of money belonging to the depositors.

A statement by District Attorney Lewis submitted to Justice Aspinall, declares that on Jan. 20, 1913, when Justice Frederick E. Crane, then sitting in the Supreme Court, sentenced Sullivan to Sing Sing for not less than two years, he took into consideration, the District Attorney believes, all the crimes set forth in the various indictments.  Sullivan served two years, and while he was in jail a scandal was caused by his “joy rides” on periods of freedom, when he was supposed to be in a cell.  When Sullivan came out of jail he was broken in health and spirit.  He is now living quietly in some unknown place and his name has not been heard here since then.
Editor’s note:  Ahh, justice.  I wonder if the warden returned the car.

Betting on a Long Life – A Century Ago:

New York Tribune
Saturday, December 5, 1914

SETS AGE MARK AT 120

Prof. Starr and Count Okuma Make Longevity Wager

Los Angeles, Dec. 4. -  Professor Frederick Starr, of the University of Chicago, who is in Los Angeles for his first vacation in thirty years, says he intends to live to be 120 years old, five years less than the age set by Count Okuma, Premier of Japan, who has told Professor Starr he intended to live 125 years.

Professor Starr said he had a wager with the Count.  If Professor Starr lives to be 120 the Count must give him a present, and if, on the other hand, Professor Starr is living when the premier arrives at 125 the present is to come from the professor.

Asked for his recipe for longevity, the noted explorer said it was a smile and good nature.  “Never get angry,” he said, “that kills the germ of life.  Be cheerful, smile even if you don’t feel like it and you will live longer.”

Editor’s note:  Professor Starr lived to age 75 and Count Okuma to 83.  I guess nobody won the bet.

Labor Law Pointers:

If you don’t subscribe to our sister publication, Labor Law Pointers, published monthly, you missed Wednesday’s issue.  Here was the introduction and (1) click here to read the issue and write to Dave Adams at [email protected] to subscribe:

Labor Law Pointers

Volume IV, No. 2
Wednesday, December 3, 2014

Brought to you by Hurwitz & Fine, P.C.
Editor: David R. Adams
[email protected]

Hurwitz & Fine, P.C.’s monthly electronic newsletter, Labor Law Pointers, offers a review and concise analysis of current and significant New York State Labor Law cases in four distinct areas of law including New York Labor Law Section 240(1), 241(6), 200 and indemnity. We approach these cases by analyzing and addressing all potential defenses to the Labor Law claim, and conducting a comprehensive and complete review of all contracts and policies to assess whether it is appropriate and possible to shift potential risk to other parties or entities based on contracts, additional insured status or common law indemnification. Labor Law Pointers is published the first Wednesday of each month. If you know of others who may wish to subscribe to this free publication, please feel free to forward it. If you wish to subscribe or unsubscribe, please send an e-mail to [email protected]  or call the Editor/Labor Law Team Leader David R. Adams directly at 716-849-8900.

From the Editor:

As I have been on trial Chris Potenza has offered up the following note on two cases he reported on relating to cave-in fatalities and the applicability of Labor Law 200 which identify and distinguish the two available types of 200 cases, defect on the property or the means and method of the work being performed in lieu of my usual rambling comments.  Thanks Chris.

There are two interesting, and seemingly competing decisions on Labor Law § 200/ common-law negligence from the Third Department on cases with similar fact patterns.  Both cases involve a fatality during excavation work at a residential construction project in which the unsecured trench walls buried the plaintiff.   In Peck v Szwarcberg, the Third Department granted summary judgment to the defendant property owner as there was no evidence that defendant exercised any supervisory control over decedent's work in the trench installing the drain pipes, or any aspect of the construction project.  Conversely, in Mayer v Conrad, the Third Department denied summary judgment to the defendant property owner in which the plaintiff died while working in a trench smoothing concrete when the trench collapsed onto him.  The Court in Mayer reasoned that the embankment was “transformed ... into a premises condition” inasmuch as it remained in that condition for several weeks prior to decedent's accident and neither decedent nor any other co-workers were working on the embankment at the time of the accident.  

There are two main distinctions in these cases however.  In Peck, the decedent plaintiff was performing the excavation work when the unsecured walls collapsed on him.  In Mayer, the decedent plaintiff was performing ancillary work in the already established, yet unsecured, excavation trench, and the unsecured walls of this trench were an open and visible hazard on the property for weeks.   Further, the property owner in Peck was in no way involved in the construction project aside from hiring the contractor, while in Mayer, the defendant property owner was “in the construction business”, visited the site daily, met with the contractor regularly, and even owned the excavator that the contractor used on this project.  These facts bolstered the argument that the property owner defendant knew or should have known that the seven- to nine-foot-high unsecured embankment that had been on the property for weeks posed a danger to the workers at the work site. 

Headlines in this week’s issue attached:

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

  • Insurer’s Claim to Recover Defense Costs from Second Company It Defends Fails
  • Exclusion in Out-Of-State Uninsured Motorists Endorsement Invalid and Therefore Unenforceable in New York
  • Questions of Fact Exist on Timeliness of Disclaimer
  • Hearing to Be Scheduled to Determine Whether Carrier’s Action Waived Late Notice Defense

 

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

  • Appellate Court Upholds Granting Summary Judgment to Defendants as Plaintiff Did Not Sustain Serious Injury
  • Appellate Court Reverses Trial Court’s Grant of Summary Judgment to Defendants as Defendants Failed to Adequately Address Bill of Particulars

 

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

  • On hiatus this week.

 

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

Property

  • The Term Theft, as Used in an Auto Policy, is not Confined to its Limited Meaning as Established in the Penal Law, but Rather can be Interpreted More Broadly

 

Potpourri

  • Indemnity Clauses in Commercial Leases are Strictly Construed
  • Preliminary Conference Order Controls Deadline for Summary Judgment Motions

 

FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]

  • Insurer Obligated to Defend Construction Defect Claims

 

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

  • Tied up at the DRI Conference.

 

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

  • Governor Cuomo Signs A9346A into Law Amending the Appraisal Process under Fire Insurance Policies
  • Superstorm Sandy Mediation Emergency Regulation Extended

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

  • Claim against Agent Dismissed Where It Procured Specifically Requested Coverage and No Special Relationship Existed

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

  • CGL Policy Does Not Cover Construction Defects

 

That’s all for this week.  See you on the 19th.

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

1300 Liberty Building
Buffalo, NY 14202    

Office:      716.849.8942
Mobile:     716.445.2258
Fax:          716.855.0874
E-Mail:     [email protected]
Website:   www.hurwitzfine.com
LinkedIn: www.linkedin.com/in/kohane

 

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


NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Jennifer A. Ehman
[email protected]

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

Michael F. Perley
Elizabeth A. Fitzpatrick
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]

12/04/14       OneBeacon America Ins. Co. vs. Whitman Packaging Corp.
Appellate Division, First Department
Insurer’s Claim to Recover Defense Costs from Second Company It Defends Fails
OneBeacon sought to recover from Whitman payments in made to insured, Estee Lauder, its corporate parents, for payments made defending both companies in a NYS Department of Environmental clean-up action. OneBeacon claimed Whitman was unjustly enriched but failed to establish that claim or that Whitman had increased the costs of defense.   Claims of equitable subrogation also fall.

12/03/14       GEICO v. Johnson
Appellate Division, Second Department
Exclusion in Out-Of-State Uninsured Motorists Endorsement Invalid and Therefore Unenforceable in New York
Johnson was involved in a motor vehicle accident where his car collided with another that failed to stop at a stop sign. Johnson was driving his sister’s car, registered and insured by State Farm in Ohio, The policy contained an endorsement for uninsured motorist coverage, which provided for liability limits of $100,000 per person and $300,000 per accident, but excluded from the definition of an insured any person who is insured for uninsured motor vehicle coverage under another vehicle policy.

State Farm disclaimed coverage on the ground that Johnson had UM coverage available through GEICO and therefore, State Farm argued, he was not insured under the GEICO policy.

When he demanded arbitration under the GEICO policy, an application to permanently stay arbitration was filed, with GEICO arguing that the exclusion in the State Farm policy violated NY law.

Here, the exclusion contained in the uninsured motorist coverage endorsement of State Farm's personal automobile liability policy is not permitted by law. "Insurance Law § 3420(f)(1) requires that every automobile insurance policy contain an uninsured motor vehicle endorsement. Neither that statute, nor any regulations applicable to it. mentions any exclusions".  The State Farm policy had to meet NY minimum requirements.

12/03/14       American Country Ins. Co. v. Jacob Hanukov Bus Serv. Corp. Appellate Division, Second Department
Questions of Fact Exist on Timeliness of Disclaimer
While the lower court found that there were questions of fact on the timeliness of the insured’s notice, it should have also found that there were questions of fact on the timeliness of the insurer’s disclaimer.  Sorry, no other facts to offer you on this one!

12/02/14       Long Island Lighting Co. v. American Re-Insurance Company
Appellate Division, First Department
Hearing to Be Scheduled to Determine Whether Carrier’s Action Waived Late Notice Defense
The insurers issued excess comprehensive general liability policies to Long Island Lighting Company ("LILCO"). The policies require LILCO to provide notice to the insurer when an "occurrence" is "reasonably likely" to give rise to liability under the policy.

On October 28, 1994, the insurers were notified of potential liability concerning LILCO’s Bay Shore, Long Island plant. Defendants issued reservation of rights letters specifically reserving the defense of late notice, but did not disclaim on any grounds. The letters requested supplemental information from LILCO.

On September 12, 1997, LILCO brought this action seeking a declaratory judgment action against the insurers for liabilities associated with the investigation and government-mandated cleanup of sites including Bay Shore. Then the insurers denied coverage for late notice.

On appeal, the Court of Appeals reversed and remanded the matter to this Court for a determination as to whether defendant insurers waived the defense of late notice under the common law.   We reported on that decision, sub nom, KeySpan Gas in a previous issue of CP:
06/10/14       KeySpan Gas East Corporation v. Munich Re America
New York State Court of Appeals
Duty to Disclaim Promptly Only Applies Where There is a NY Policy, a NY Accident and a Bodily Injury or Wrongful Death Claim
In October and November 1994, LILCO notified defendants by letter about "environmental concern[s]" at retired MGP sites on Long Island. LILCO stated that, although no regulatory agencies had commenced a lawsuit or formal investigation, LILCO expected agency action would be "forthcoming" and that the extent of its potential liability "if any" could not yet be determined. LILCO also notified defendants that a neighboring property owner had brought a property damage claim against the company for environmental contamination and asked defendants to "acknowledge [their] duty to indemnify [LILCO] for any damages that it may incur within [the] policy limits."
The carriers sent out reservation of rights letters on several coverage defenses.  LILCO provided information indicating that it knew of a potential claim for several years.
LILCO thereafter commenced this declaratory judgment action in September 1997. In their answers, defendants asserted late notice as an affirmative defense warranting denial of coverage.
The Appellate Division held that LILCO failed, as a matter of law, to provide timely notice under the policies of environmental contamination at both the Bay Shore and Hempstead MGP sites but refused to grant the insurers summary judgment because “issues of fact remain as to whether defendants waived their right to disclaim coverage based on late notice" by "failing to timely issue a disclaimer".
The insurers reminded the Court that Insurance Law § 3420 (d) (2) provides:
"If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant."
By its plain terms, section 3420 (d) (2) applies only in a particular context: insurance cases involving death and bodily injury claims arising out of a New York accident and brought under a New York liability policy.  If one of those factors is not present, the insurer will not be barred from disclaiming coverage "simply as a result of the passage of time," and its delay in giving notice of disclaimer should be considered under common-law waiver and/or estoppel principles.
Editor’s Note:  This case has generated a lot of trade press but was really an easy call.  The statute is clear and the high Court got it right.   All the Court had to do was read the Kohane/Fitzpatrick chapter on New York disclaimers in the DRI ROR Compendium, available here.  There was an excellent on-line discussion of this case in LinkedIn’s New York Insurance Group which we founded and manage.  We encourage you to join the nearly 1200 folks who are already members.
The First Department, on remand, holds triable issues of fact exist concerning whether defendant insurers, under the common law, waived the defense of late notice.

The evidence supports an inference that defendants knew of facts supporting a late notice defense long before disclaiming coverage in their answers. A reasonable jury could infer from a variety of actions that defendants intended to abandon their late notice defense. The ruling is not predicated upon a failure to disclaim coverage "as soon as reasonably possible" after learning of LILCO's untimely notice, but on facts in the record indicating that defendants were aware of a potential late notice defense, yet manifested an intent not to assert one.
Editor’s Note: There will need to be trial on this issue now.  The legal fees march on. 

 

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

Robert E.B. Hewitt III
[email protected]

12/03/14       Syllas v. Cassells
Appellate Division, Second Department
Appellate Court Upholds Granting Summary Judgment to Defendants as Plaintiff Did Not Sustain Serious Injury
The decision does not set forth many details. The Appellate Division determined that the Defendants met their prima facie burden of showing that plaintiff did not sustain a serious injury under Insurance Law §5102(d) as a result of the accident. The Court noted that Defendants submitted competent medical evidence establishing prima facie that the alleged injuries to the cervical and lumbar regions of the spine and left knee did not constitute serious injuries under the permanent consequential limitation of use, significant limitation of use categories, or 90/180-day category.   Plaintiff failed to raise a triable issue of fact in opposition.

12/03/14       Huang v. Marcus
Appellate Division, Second Department
Appellate Court Reverses Trial Court’s Grant of Summary Judgment to Defendants as Defendants Failed to Adequately Address Bill of Particulars
Although Defendants were granted summary judgment by the trial court, the Appellate Court reversed, finding the Defendants failed to meet their burden of showing neither plaintiff sustained a serious injury as a result of the accident. Defendants failed to adequately address plaintiffs’ claims in their bill of particulars that they both sustained serious injuries under the 90/180-day category. Since they did not meet their burden, it was unnecessary to determine whether plaintiff’s opposition papers raised a triable issue of fact. Unfortunately, the Appellate Court did not set forth any factual details or address what specifically was deficient in the motion papers.

MARGO’S MUSINGS ON NO FAULT

Margo M. Lagueras
[email protected]

On hiatus this week.

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

Property

11/21/14       Wirth v Liberty Mutual Ins. Co.
Appellate Division, Fourth Department
The Term Theft, as Used in an Auto Policy, is not Confined to its Limited Meaning as Established in the Penal Law, but Rather can be Interpreted More Broadly
Plaintiff's son was tragically killed in an accident involving the insured's truck and livestock trailer.  Although the insured claimed the vehicles were stolen at the time of the incident, Liberty nonetheless disclaimed on the basis that there was no collision coverage on either the truck or the trailer.

Rather than arguing for collision coverage that did not exist, the insured's instead argued that coverage was triggered under a separate section of the policy which provided coverage for damage to autos "other than collision."  Among the triggers of that coverage was loss occasioned by theft or larceny.  Liberty argued that "theft" or "larceny" should be read to comport with the Penal Law definition, and as such posited that for the coverage to be triggered the insured needed to establish that their son misappropriated the vehicles with "criminal intent".  The disagreed, and affirmed the trial court's ruling that the loss could have occurred from theft. 

Finally, although coverage for the damage was confirmed, the Court noted that the policy's death benefit did not include coverage for funeral expenses.  Moreover, the insured’s lacked standing to recover a death benefit anyway. 

Potpourri

11/26/2014   Alayev v Juster Associates, LLC
Appellate Division, Second Department
Indemnity Clauses in Commercial Leases are Strictly Construed
Defendant Juster filed an application for summary judgment therein alleging that plaintiff could not establish the reason why she fell outside of a building owned by Juster.  In opposition, plaintiff submitted deposition testimony establishing that she alleged she fell on a raised piece of sidewalk in front of Juster's building.  Moreover, plaintiff was able to establish that Juster was also not entitled to summary judgment where, as here, there remained a question of fact as to whether Juster had constructive notice of the defective condition upon which plaintiff fell.

Juster's claim for contractual indemnification against its tenant also failed.  In denying the motion, the court noted that indemnity clauses are to be strictly construed, and in the instant case Juster could not point to a provision in the lease which unequivocally established such an agreement.  The court went on to state that Juster could not be indemnified for its own negligence because such a clause would be in violation of the General Obligations Law. 

Peiper's Point....we respectfully disagree with that last point.  As those of you follow this stuff know, a party to a commercial lease may be indemnified for their own negligence.  The GOL only prohibits a party from exempting itself from liability, it may, however, contract to have a tenant pay all indemnity costs. 

11/20/14       Freire Crespo
Appellate Division, First Department
Preliminary Conference Order Controls Deadline for Summary Judgment Motions
In this interesting decision from the Second Department, the Court again held that summary judgment motions made beyond the 120 time limit created by CPLR 3212(a) could be dismissed unless good cause for the delay was shown at the time of the motion.  Here, one moving party proffered the explanation that a long standing illness to counsel precluded them from timely submitting the summary judgment application.  The Court concluded that such a reason was acceptable.  However, where another movant offered no reason or excuses for its untimely submission the Trial Court was within its discretion to ignore the motion.

The more interesting issue in this case involved a dispute over the proper time period for Summary Judgment.  The CPLR clearly provides a 120 time limit after the Note of Issue is filed.  Notably, the Preliminary Conference Order also required motions to be submitted within the traditional 120 day deadline.  Here, however, the matter was transferred to another judge who maintained court rules requiring motions with sixty days of the filing of the Note of Issue.  Under such circumstances, the timeline established in the Preliminary Conference Order controls.  The Court suggests that if the PC Order was issued after the transfer to the new judge, the new judge's rules would likely apply.

 

FITZ’ BITS

Elizabeth A. Fitzpatrick
[email protected]

11/26/14       Cincinnati Insurance Co. v. AMSCO Windows, 2014 WL 6679589
United States Court of Appeals, Tenth Circuit
Insurer Obligated to Defend Construction Defect Claims
The coverage action derived from actions by various Nevada homeowners alleging construction defects in connection with windows manufactured by AMSCO, sold by window dealer J&L Windows Inc., and installed in new homes constructed in Nevada.

The claims arose under “Chapter 40,” a Nevada statute governing homeowner construction defect claims, which requires homeowners to provide written notice to the contractor of the alleged defects and allowing the contractor a reasonable opportunity to inspect and repair any damages found prior to commencing suit.  At the conclusion of the pre-litigation process, any unresolved claims may proceed to Nevada state court and it was in this context that the coverage issues ripened.

From January 1, 2002 to January 1, 2007, AMSCO maintained general insurance issued by Cincinnati under a series of renewable commercial general liability policies which obligated Cincinnati to pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies.  The standard Commercial General Liability insuring grant continued by advising that the insurance applied to bodily injury and property damage only if the bodily injury or property damage is caused by an “occurrence” that takes place in the coverage territory.

After AMSCO tendered its defense to Cincinnati, Cincinnati refused to defend and instead sought a declaration that it had no duty to neither defend nor indemnify AMSCO.  Following motion practice, the District Court ruled that Cincinnati’s duty to defend extended to the homeowner claims and active litigation because where defective workmanship causes damage to property other than the work product itself . . . such damage results from an accidental occurrence within the meaning of Commercial General Liability language.  However, they found that the duty to defend did not extend to the Chapter 40 pre-litigation proceedings which they opined are not “suits.”

On appeal, and after noting that the parties agreed that Utah law governed the policy interpretation, the court agreed with the District Court that the homeowner claims alleged an “occurrence” as defined in the policies, but that the Chapter 40 proceedings did not constitute suits.  Thus, they found that Cincinnati had a duty to defend AMSCO against the homeowner claims in active litigation.  In doing so, the court rejected Cincinnati’s argument that in claims involving manufacturing defects, there are no circumstances where any resultant damage to surrounding areas could ever be deemed an “occurrence” under the policy.  Cincinnati’s position was that such damage was not an accident, but rather the natural and probable result of faulty workmanship.

The court instead found that under Utah law, the test for determining whether an event is an occurrence under a liability policy was not whether the result was foreseeable, but rather whether it was intended or expected.  Finding that the result, to wit, damage to the surrounding structure as a result of a defective window, was not intended or expected from the perspective of the insured, the court affirmed the District Court’s holding that Cincinnati had a duty to defend ANSCO against the claims in active litigation.

AUDREY’S ALL THINGS PERSONAL

Audrey A. Seeley
[email protected]

Tied up at the DRI Conference.

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

Governor Cuomo Signs A9346A into Law Amending the Appraisal Process under Fire Insurance Policies.
On November 21, 2014, Governor Cuomo signed the above referenced Legislation into law, and the measures took place immediately.  Prior to the enactment of A9346A, the courts had taken a limited view of the issues that are subject to appraisal which did not include the extent of loss or damage.  The amendment to Insurance Law §3408(c) was amended to clarify that an appraisal must determine the actual cash value, the replacement cost, the extent of the loss or damage and the amount of the loss or damage in accordance with policy.  Further, an appraisal will NOT determine whether the policy actually provides coverage for any portion of the claimed loss or damage.  

Superstorm Sandy Mediation Emergency Regulation Extended
DFS recently extended their previously issued emergency regulation which established a mediation process for unresolved Sandy claims.  It was originally implemented on February 25, 2013, and the regulation has been extended to apply until February 4, 2014.  As a brief reminder, this regulation created a mediation program for the negotiation of insurance claims which occurred between October 26, 2012 through November 15, 2012 in New York City, Long Island, Westchester, Rockland and Orange counties.

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
[email protected] 

11/18/14       Three Monkeys Rest. Inc. v Cortland Ins. Agency, Inc.
Supreme Court, New York County
Claim against Agent Dismissed Where It Procured Specifically Requested Coverage and No Special Relationship Existed
Plaintiff’s insurer denied coverage following a fire that destroyed its restaurant.  Based on defendants’ alleged failure to procure appropriate coverage, plaintiff brought this action. 

Plaintiff’s principal, Itai Afek, owned Three Monkeys Restaurant.  When it opened the restaurant, Afek installed a grill and deep fryer.  However, he did not install a fire suppression system based upon the advice of an unidentified fire department inspector.

In November 2009, Afek sent his insurance agent an e-mail requesting, in relevant part, $50,000 for insurance for fire.  Two quotes were received each indicating that the policy was contingent upon the restaurant having a functional fire suppression system.  When the agent e-mailed the quote to Afek, he advised of the requirement and asked whether the restaurant’s cooking area had such a system.  Afek responded that it had a hood, but no safety system.  No further correspondence was had concerning the system, and no explicit request was made to obtain a policy that did not obtain such a system.

Thereafter, the two quotes where sent to Afek.  Each quote stated “PROTECTIVE SAFE GUARD IS ATTACHED (P-9 WET ANSUL SYSTEM).”  Afek ultimately chose the less expensive of the quotes.  Thus, a policy was issued which required a safety system.  Afek only read the application and the first page of the policy.

Approximately a year and a half later, after one renewal, a fire took place at the restaurant due to hot oil being discharged from the fryer.  The insurer disclaimed.

To establish defendants’ prima facie entitlement to summary judgment, they needed to establish that they satisfied plaintiff’s specific request for coverage and they did not have a special relationship with plaintiff.  Per this decision, Afek admitted that the policy satisfied the specific request for coverage made in the November e-mail.  The agent made clear that the insurer required the fire suppression system, and never told the plaintiff that one was not needed.  Thus, in procuring the policy, defendants satisfied their duty to plaintiff.

Likewise, no special relationship existed between defendants and plaintiff.  When the quotes were provided, Afek sought the advice of his accountant only, and there was no indication that defendants were compensated to provide additional insurance advice.  Afek also never inquired or discussed with defendants any issues involving a fire suppression system.

In turn, summary judgment was granted in favor of defendants.  

 

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

CGL POLICY DOES NOT COVER CONSTRUCTION DEFECTS

The state courts, federal courts, trial courts, and appeals courts across the country continue to struggle with whether a contractor’s commercial general liability (CGL) policy can cover subsequent construction defect claims essentially arising from alleged defective workmanship. An interesting and illustrative case is Reggie Construction Ltd. v. Westfield Insurance Co., 2014 WL 4291584 (Ohio Ct. App. September 2, 2014).

Reggie Construction built a home for the Whites who eventually filed suit against the contractor alleging mold in the home made them ill.  Westfield Insurance refused to defend Reggie in the lawsuit and the construction company sued for breach of contract.  In an interesting twist, the Whites withdrew their Complaint but re-filed a few months later alleging that the contractor allowed the house to sit open and flood causing “general water damage to the property” without reference to mold or mold illnesses.  Meanwhile, Westfield Insurance moved for a declaratory judgment and the Trial Court issued an initial declaratory ruling that Westfield had no duty to defend the construction company against allegations of fraud, misrepresentation, and rescission.  However, it left open whether there was possible coverage for claims of breach of contract, breach of warranty, and negligence. 

Westfield filed a motion for summary judgment on the remaining claims contending it was not obligated to defend or indemnify Reggie for claims not caused by an accidental occurrence as defined in the policy.  In another interesting twist, Reggie Construction accepted a judgment of $735,000.00 in favor of the homeowners because Westfield would not defend it and the company claimed it could not afford a defense.  However, the construction company did oppose Westfield’s motion for summary judgment.

The contractor argued that the homeowners alleged damage from water infiltration was a “consequence” of faulty workmanship, and this “consequential damage” constituted an accidental occurrence covered by the policy. The Trial Court granted Westfield Insurance’s motion for summary judgment, and the Appellate Court affirmed. 
The Appellate Court emphasized the policy definition of an occurrence as an “event proceeding from an unexpected happening or unknown cause”.  Potential damage from water and moisture are commonly known in the construction industry, and the Court said the construction company would have expected or known that faulty work could cause such problems and damage.  In short, the predictable consequences of poor workmanship which the contractor could have controlled during the building process were not a sudden or accidental occurrence.

This case, with some unusual twists, represents one current opinion in an ongoing string of litigation across the country as to whether and what extent a contractor’s CGL policy is available to defend and indemnify the contractor from subsequent construction defect claims.  This case represents one part of the analysis which stresses that under normal definitions construction defects are not insured “accidental occurrences” because, even if unexpected and unintended results may occur, they were brought about by intentional, purposeful acts during construction.  In short, unintended consequences of intentional acts are not sudden and accidental occurrences.  This position is taken by many courts in rejecting CGL coverage for construction defect claims.

It is useful to note that in this case the home was a new build so it would have been difficult for the contractor to argue that the water, moisture, mold, etc. damaged existing building components and to argue that damage to existing building components not part of the ongoing construction may be accidental.  Some courts have accepted this distinction if the construction defect harms or impairs existing building components and may provide coverage for damage to those components, but not for the actual defective construction itself.

In examining such cases, courts have also examined common policy provisions excluding coverage for “your work” of contractors, and also excluding coverage for breach of warranty or other liabilities assumed or incurred because of contract, particularly with respect to breach of contract and warranty claims.  This continues to be an evolving and changing legal issue nationwide.