Dear Coverage Pointers Subscribers:
Do you have a situation? We LOVE situations.
Happy Chanukah, Merry Christmas, Happy New Year.
Let me start out, in our final issue of the year, to thank you on behalf of our firm for the wonderful opportunities of service to our clients. We look forward to many more together.
The year is winding down and it’s been a busy one. The CP team reported on 694 decisions: 120 decisions appeared in my column, 123 in what is now Rob Hewitt’s Hints on Serious Injury, 150 in Margo’s Musing’s, 18 in Audrey’s Angles, 92 in Steve’s Property and Potpourri, 45 in Cassie’s, 22 in Kathie’s (before she retired), 56 from Jen, 1 from Mike Perley and a perfect 26 articles from Earl.
As our next issue comes out after Christmas and Chanukah have concluded, we take the time now to wish you the most peaceful of holiday seasons with a hope for what seems so elusive: peace on Earth and goodwill to humankind. Take a moment to pray or hope or ask for a safer and quieter world, one where we do not fear to turn on the radio, or tune into CNN or look at news on the Web expecting to find the next act of terror or horror.
I guess it wasn’t much better 100 years ago, as I glanced at the Christmas Day, 1914 headlines. The eight columns of the New York Times exemplify the troubles of those times. Four of the columns had World War I stories of battles overseas or “Christmas Cheer in the Trenches”. The first column spoke of a well-reported murder case, one column reported on the Prohibition bill and another on a revolt in Manila.
We have a number of interesting decisions in this issue. To me, the most interesting decision is the Logan Bus case out of the Second Department. In a student v. student assault case on a bus, does the bus company have coverage if sued for negligently training and supervision the driver? We think the court may have gotten this one wrong. It properly ignored an exclusion but failed to discuss coverage in the absence of that exclusion.
Peiper’s Posting:
The last issue of 2014 brings us closure on a fairly wild year in the insurance world of things. From the starting of this past year with the righting of the K2 wrong, through the trilogy of cases that came out just before Thanksgiving, all in all it has been a fairly good year for the insurer side of things. With the winds of change constant, however, we anxiously await the twists and turns that 2015 will bring.
For our last offering this year, however, the First Party Column again is set to disappoint. Perhaps bigger and better things are in our future in the coming months.
The Potpourri offering this week, however, is particularly strong. For those of you not sure how common law indemnity/contribution works, please take a moment to review the cases below. Apparently, the Second Department, who unleashed a bevy of indemnity decisions, felt it necessary to educate the world on this issue, and yours truly thinks it equally important that their message be distributed far and wide. There is nothing earthshaking in these cases, but they do provide a nice explanation of what constitutes a viable indemnity claim.
That's it for now. Happy Holidays, Merry Christmas, and best wishes for a prosperous New Year.
Steve
Steven E. Peiper
[email protected]
A State of Good Faith:
On June 11, 1998, the highest court in the State, the Court of Appeals, handed down a decision in Smith v. General Accident, holding an insurer liable for bad faith. That decision was the last time any appellate court in New York upheld a bad faith verdict against an insurer. We report on this “count” every year. It’s been 16 years, six months and nine days (or, if you prefer, 6036 days) since a New York appellate court found conduct egregious enough to constitute actionable bad faith.
Jen’s Gems:
Greetings! I hope this note finds everyone well.
With the Christmas holiday approaching next week, I am sure that everyone is scrambling to finish that last minute shopping. It seems like this is the first year my two and half year old daughter, Ella, actually understands the concept of Christmas, Santa Clause etc. With that said, what she seems to have figured out most of all is that she gets presents. Not the best understanding of the holiday, but the upside is that now any time she misbehaves I can now use the threat that parents have been using for years “if you do not stop [inserted negative behavior], I am going to tell Santa.” The direct line to Santa appears to strike fear in the hearts of all children. So far, I have to admit it seems to be working pretty well.
In terms of my column this week, I report on an interesting decision out of the Supreme Court of Missouri, Scottsdale Ins. Co. v. Addison Ins. Co., affirming an excess carrier’s ability to pursue a primary carrier for bad faith refusal to settle. While this decision has not yet been released for publication and is still subject to revision or withdrawal, it highlights what we are seeing all over the country, which is excess insurers creating much of the bad faith law.
Well, until next issue…
Happy Holidays!
Jen
Jennifer A. Ehman
[email protected]
Holiday Cheer:
We reprise, by popular demand, the annual publication of our Christmas coverage ditty.
Christmas Coverage
or
A Policy for Saint Nicholas
Dan D. Kohane
With apologies to Clement Moore (or less)
From our late December 2010 edition with thanks to the Christmas Elves:
Tim Sullivan, John Intondi, Mike Perley and Rich Traub
T'was the night before Christmas, and all through the land,
Few coverage advisors were still in demand.
The policies still showed on both desk and on screen.
My eyes only open with thanks to caffeine.
Most company's adjusters had left for the day;
And most coverage lawyers had little to say.
It was surely the moment to turn out the light,
Shut down the computer, put work out of sight.
Then the phone started chirping, it startled my poise,
not the typical ring-tone, but an odd sounding noise.
It jingled like sleigh bells, instead of a "ding,"
I knew I must answer, despite everything.
A Christmas Eve caller? What could be the need?
But the sound of the music, would just not recede.
I was really not looking for Christmas Eve banter,
Imagine my shock when the caller was Santa!
"I need some advice, sir" said a somber Saint Nick,
"My Christmas Eve Policy is three inches thick."
I don't mean to bother, but I'm wrought with confusion
"I don't understand this new 'Gifting Exclusion.'"
"It carves out the nasties, the mean and the haughty.
It favors the good ones and leaves out the naughty.
My coverage appears to have holes like Swiss Cheese,
I'm afraid if I'm sued, I will twist in the breeze."
"A products exclusion? A chimney one too?
Elf employment exception, I'm screwed through and through.
Just what is still covered? I sure am confounded,
With all of these issues, I fear that I'm grounded."
"With a sleigh full of sacks and reindeer at the ready,
I'm starting to feel just a tad too unsteady.
My belly has acid, my knees are a'quiver
With millions and millions of toys to deliver."
"I want you to help me, I fear a disclaimer.
This policy's scary; I need you to tame her.
We must surely save Christmas, for good girls and boys,
And Amazon won't refund "squat" on the toys.
The holiday challenged, I sure knew my mission
We needed to craft a new ISO edition
Santa needed an ally, a comrade, a fighter,
On the opposite side was a Grinch Underwriter.
I am sure you'd imagine how hard it would be
To secure for Saint Nick a late night policy,
Without coverage gaps, so that Santa could fly,
To save Christmas Day, we were destined to try.
The person in charge of the coverage for Nick,
Had left the shop early, was feeling quite sick.
Perhaps it was sadness, or guilt or just gumption,
He thought he'd killed Christmas, a well-placed assumption.
In order to soften his hardening heart.
We had to play coy, we had to be smart.
We needed to dazzle that Grinch with our guile,
To show him the risk was sure worth his while.
Worse yet, betwixt and between stood a broker,
A bloodsucker culled from the mind of Bram Stoker.
Through him we must go, around or about,
He'd bring pressure to bear, he's really got clout.
"It's Santa," we'd say, "who'd sue him for cash?"
"Another broker can get us a better deal in a flash.
We'll go to the market if a deal can't be made;"
The Grinch saw his bonus beginning to fade.
From the cream of the crop, a new team we'd assemble,
To get Santa bound and to weaken his tremble.
We'd send out the e-mail, we'd tweet and we'd twitter
We needed to find the best of the litter.
The other apt choice, as the time slipped on by,
Was to use those fine people, to make him comply.
By plane and by car, by boat and by train.
We beckoned this family to join in refrain.
And gather they did, first a few then a score,
Lawyers and brokers, claims folks and more
More than a choir, it was surely a throng,
Together they gave voice to a beautiful song.
And they reached that man's spirit, his heart and his soul,
And in no time at all, they'd accomplished their goal.
"Give me my pen", the Grinch yelled to his clerk.
I knew then and there that our ploy it had worked.
"Exclusions begone! Limitations not there!
We'll provide him his coverage, no need to beware."
And so it was written, and Santa could jet,
And Christmas was saved, the best Yuletide yet.
On cold winter night, when you're hearing his jingle,
When the children are sleeping and in comes Kris Kringle,
Remember that coverage protected his flight,
Happy Christmas to all, and to all a good night.
Audrey’s Angles
The DRI Insurance Coverage and Practice Symposium two weeks ago was my first as Chair of the Insurance Law Committee and it was wonderful to see so many people attending. We had over 700 people attend, double digit panel counsel meetings, and over 200 claims professionals in attendance. We are now looking forward to the Insurance Coverage and Claims Institute March 25-27 in Chicago. Please mark your calendars as this program also looks fantastic. The Wednesday afternoon session will be devoted to a mediation theme. The Friday duel track theme this year is personal lines and construction defect. If you would like a copy of the brochure or are a claims professional or in-house counsel interested in inquiring whether you can attend this program free of charge, please email me at [email protected].
With the approach of Christmas, things are very quiet on the personal lines front in terms of noteworthy decisions. I wish you a Merry Christmas from the Seeley family and I will speak with you before the New Year.
Audrey
Audrey A. Seeley
[email protected]
Here a Sultan, There a Sultan, A Century Ago:
Dunkirk Evening Observer
Dunkirk, New York
19 Dec 1914
NEWEST SULTAN NOW IN OFFICE
With Elaborate Ceremony at Cairo
Price Hussein Kamel Was Installed
DEPOSED SULTAN TOO
British Government Declared the
Throne Vacant and Filled It.
No Disorder During Ceremony.
Cairo, Egypt, Dec. 19 – With the most elaborate ceremonies Prince Hussein Kamel was formally installed as sultan of Egypt today. A proclamation was read announcing the fall of Abbas Hilmi, the former khedive and amidst an imposing array of splendor, the sultan named by the British government in its decree establishing a protectorate over Egypt, was escorted through the streets by English, native and colonial troops.
Great crowds filled the streets and the occasion was marked by a general holiday, Egyptian and English rings entwined decorated the buildings, while the two banners were displayed over all government buildings.
All local authorities took part in the ceremonies incident to the elevation of the new sultan, to the throne, declared vacant as a result of the former khedive’s alliance with Turkey and Germany. A cannon salute of 101 guns was fired as the sultan and his military escort moved through the streets. The city was tranquil save for the holiday spirit evidenced by the crowds and there was no disorder.
Editor’s Note: According to Wiki, the unverifiable source of all unimportant knowledge, Sultan Hussein Kamel was the Sultan of Egypt from 19 December 1914 to 9 October 1917, during the British protectorate over Egypt. Hussein Kamel was declared Sultan of Egypt on 19 December 1914, after the occupying British forces had deposed his nephew, Khedive Abbas Hilmi II, on 5 November 1914. The newly created Sultanate of Egypt was declared a British protectorate. Upon Hussein Kamel's death, his only son, Prince Kamal al-Din Husayn, declined the succession, and Hussein Kamel's brother Ahmed Fuad ascended the throne as Fuad I and upon Egypt’s independence became King.
Fitz’ Bitz:
Dear Subscribers:
I am still trying to figure out when summer ended and find it impossible to believe that next week is Christmas. This is our last issue of 2014 and it was a year filled with many important coverage decisions, not the least of which was the Court of Appeals’ reversal of K-2. In the coming year, I expect we will see more coverage cases involving coverage for cyber liability, a topic in the forefront in light of the recent hacking of Sony Pictures. Reports estimate that the hack at Sony Pictures could cost the company some $100,000,000 in connection with the investigation, remediation and repair of damages and Target reportedly incurred some $235 million in expenses related to its 2013 data breach. As a result, more and more companies are realizing the importance of having cyber insurance in effect. The insurance is designed to afford coverage for expenses related to data breaches and other cyber-related incidents, which would otherwise not be afforded coverage under a traditional CGL policy. We expect this coverage to become front and center in the next few years. We also expect the industry to be faced with claims resulting from the use of drones, as their use becomes more widespread. We, of course, will be on the forefront, reporting on significant decisions arising from both the old and these and other new issues facing the industry.
For those of you who regularly read my column, you know that I often report on construction defect cases from across the country and in this week’s column, I provide you with an overview of the law regarding coverage for construction defects under a commercial general liability policy. I also report on a decision from the District Court in Montana, which held that no coverage was owed.
I wish you and your families a joyous holiday season and all of the best in 2015.
Til 2015,
Beth
Elizabeth A. Fitzpatrick
[email protected]
One Hundred Years Ago Today – Some Issues Just Don’t Go Away:
New York Tribune
New York, New York
19 Dec 1914
FAVOR TEACHER-MOTHERS
Committee Expected to Recommend
Leaves of Absence.
The Board of Education may solve the problem of prospective mother-teachers by granting them a leave of absence for two years and reappointing them as teachers if they desire to return at the expiration of that time. Meanwhile their places in the schools will be filed by regular appointment.
The special committee of the Board of Education met yesterday to consider the subject, and, it is understood, decided to make such recommendations to the committee on bylaws at a joint meeting set for December 28. The special committee is expected to urge the necessary amendments to the bylaws to carry out their conclusions. They may also recommend that the bar to the promotion of married women teachers be removed.
Cassie’s Capital Connection:
Happy Holidays from York, Pennsylvania! I have to admit I feel a little like Dan and Steve this week because I have been a road warrior. Stops this week include Kingston, the Southern District of New York, mid-town Manhattan, Hopewell Junction, Latham, and last but not least York, Pennsylvania. No surprise, but things are quiet at DFS so I took the time to review its press release regarding assistance for homeowners and businessowners in submitting claims for coverage arising out of the historic snowstorm Western New Yorkers experienced in November. Ever since Storm Sandy, these press releases have taken a variety of tones, and so I am always curious as to what they say. This one is relatively straightforward and explains some of the coverage available as well as a description of some claims which are unlikely to be covered.
I hope you enjoy your Holidays as I certainly intend to. I’m extremely excited to listen to the non-sensical babbling and steady stream of “whoas” of a 1 ½ year old when he opens his presents and most likely plays in a box instead of with the toys.
Cassie
Cassandra Kazukenus
[email protected]
A Century Ago: No Kids, No Ring:
Dunkirk Evening Observer
Dunkirk, New York
19 Dec 1914
LIFTS BAN ON CHILDREN
Supreme Court Rules Man Had
Cause to Refuse Marriage.
New York, Dec. 19.—Any man is entitled, even at the altar, to be relieved of a promise to marry, if he learns his prospective bride is incapable of bearing children or will not bear children.
So rules Supreme Court Justice Benton in dismissing a breach of promise damage suit brought by Miss Bertha Schechtel, daughter of a wealthy manufacturer, against David A. Greenhouse of Hoboken, N.J.
Greenhouse admitted having broken his promise to marry Miss Schechtel and in defense introduced two letters written to him by her to prove that if they married they probably would not have children.
HEWITT’S HIGHLIGHTS:
Dear Subscribers:
Unlike last time, the Courts were busier and issued a number of serious injury threshold cases that I highlight today. Perhaps they have gotten all of their holiday shopping finished. I still have not. Of interest is a case that reminds defendants that their medical experts must address all claims of serious injury listed in the bill of particulars in their affirmed report if summary judgment is to be won. Another case highlights case law that a defendant will win summary judgment if a plaintiff’s treating medical reports and records indicate that his injuries are pre-existing degenerative injuries, and the plaintiff’s expert failed to address and explain that away in his report. It is not enough for the plaintiff’s expert to ignore those records even if the expert opines that the injuries were caused by the accident.
Wishing all subscribers a happy and healthy holiday season,
Rob
Robert Hewitt
[email protected]
One Hundred Years Ago Today – Assuring an Insurable Christmas:
The Evening World
New York, New York
19 Dec 1914
AND NOW “THE SAFE AND SANE XMAS”
Christmas greens, paper ornaments, inflammable tinsel and cotton “snow”—not to speak of moving picture machines—introduced upon insured premises constitute an additional hazard which fire insurance policies do not contemplate. Local fire underwriters have sent a reminder to this effect to their New York policy holders.
Inasmuch as the standard fire insurance policy stipulates that, unless otherwise specially provided, if the hazard is increased by any means within the control or knowledge of the insured the policy becomes void, it is just that the public should be thus annually warned against exposing itself to serious misunderstanding and loss.
After all, nobody’s Christmas need be spoiled because lighted candles and tissue paper on Christmas trees are dangerous and likely to prove costly. There are plenty of ways to brighten up the tree without using naked lights. Non-inflammable tinsel and fireproof decorations can be had in abundance. Buy only these, use a little extra care and common sense, and you can make Christmas festivities sane without sacrificing the sparkle.
This Week’s Headlines from Attached Issue:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Landlord Entitled to Additional Insured Status Under Tenant’s Policy; However Subtenant’s Insurer Walks Because Landlord Not Added as AI on That Policy
Appellate Court Refuses to Disturb Fact Finding of No Contact in Hit-and-Run Uninsured Motorists Claim - Additional Insured Endorsement Covered Only Vicarious Liability and Not Independent Liability of Purported Additional Insured
Courts Continue to Struggle on Question of Whether Assault Committee by Others is an Accident from Standpoint of Premises (or Vehicle) Owner - Issues of Fact Exist as to Whether Insured Provided Timely Notice of Accident
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]
- Appellate Court Reverses Grant of Summary Judgment to Defendant
- Appellate Court Affirms Grant of Summary Judgment to Defendant
- Plaintiff’s Expert Must Address Evidence In Medical Records That Plaintiff’s Injuries Are Pre-Existing and DegenerativeTo Raise Issue of Fact
- Appellate Court Upholds Denial of Summary Judgment to Defendants
- Appellate Court Upholds Denial of Summary Judgment to Defendant
- Appellate Court Reverses Grant of Summary Judgment to Defendants
- Competing Nonconclusory Medical Opinions Leads to Denial of Summary Judgment
- Plaintiff Submits Extensive Objective Evidence to Create An Issue of Fact
MARGO’S MUSINGS ON NO FAULT
Margo M. Lagueras
[email protected]
Arbitration
- Policy Exhausted and No Payment Owed Under “Priority of Payments” Rule
- IME Conducted Over Two Years Prior to Disputed Treatment Is Insufficient to Support Denial
- IME Stating Hip Strain Was “Resolved by History” Is Factually Insufficient
- Arbitrator Finds No Compelling Reason to Provide Original Documents in Response to Verification Request
- Interest Not Owed on Previously Paid Claim
- Verification Is Pending, Claim Is Dismissed
- Failure to Set Forth “Good Reason” for Repeated Verification Requests Will Not Support Delay in Denying
Litigation
- NF-10 Not Fatally Defective Where Amount in Dispute Is Wrong
- Attorneys’ Conclusory Statement Does Not Demonstrate Merits of Case
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property
- First Party Losses Are Not Insured Under a Third-Party Liability Policy
Potpourri
- Common Law Indemnification Claim Dismissed Where there is No Vicarious Liability Claim; Common Law Contribution Claim Survives Where Third-Party Defendant may have Contributed to the Cause of the Defective Condition
- Speculation, Speculation – Speculation by Plaintiff Doomed the BI Claim, Speculation by Defendant’s Expert Doomed Third-Party Indemnity Claim
- Pedestrian Ramps Do Not Trigger Property Owner’s Duty to Maintain Under NYC Code
- Common Law Indemnification Requires the Existence of Some Duty between Parties
- Without a Claim of Vicarious Liability, Defendant’s Common Law Indemnification Claim Fails
FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]
- No Coverage for Faulty Workmanship
AUDREY’S ALL THINGS PERSONAL
Audrey A. Seeley
[email protected]
- Silent Night from the Courts on Noteworthy Cases this Edition.
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
- DFS Press Release Regarding Governor Cuomo’s Deployment of the DFS Comman Center To Help Western New Yorkers With Storm-Related Insurance Issues
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]
- Court Uphold Non-Cooperation Denial
Bad Faith
- Under Missouri Law, Excess Carrier Permitted to Bring Bad Faith Action against Primary Insurer Irrespective of the Claim Settling within the Limits of Insurance
EARL’S PEARLS
Earl K. Cantwell
[email protected]
- Preserving the Attorney-Client Privilege
That’s it for the year. Best to you and yours and we look forward to spending time with you in 2015.
Dan
Dan D. Kohane
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202
Offfice: 716.849.8942
Cell: 716.445.2258
Fax: 716.855.0874
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]
12/17/14 Frank v. Continental Casualty Company
Appellate Division, Second Department
Landlord Entitled to Additional Insured Status Under Tenant’s Policy; However Subtenant’s Insurer Walks Because Landlord Not Added as AI on That Policy
The issue is whether Continental had to defend or indemnify the Frank in an underlying action involving an August 25, 2008 slip and fall on a public sidewalk. Colon was the underlying plaintiff, and claimed that, as she walked past clothing racks on the sidewalk, she tripped, and her husband thereafter told her that she tripped on a crack in the sidewalk.
Frank, the property owner, leased the premises to White Plains Sportswear (“Sportswear”), which in turn subleased the premises to Pretty Girl, Inc.(“Pretty Girl”). Continental was the CGL carrier for Sportswear and Leading Insurance “Leading” was the insurance carrier for Pretty Girl.
An insurance carrier's duty to defend arises whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of recovery under the policy. If any of the claims against an insured arguably arise from covered events, the insurer is required to defend the entire action.
Continental failed to establish that it had no duty under the subject policy to defend Frank. Its policy contained an endorsement stating that a lessor of premises is an additional insured with respect to liability arising out of the ownership, maintenance, or use of the specific part of the premises leased.
It was established that their potential liability in the underlying action arises out of the ownership, maintenance, or use of the specific part of the premises leased to Continental's insured, Sportswear and sublet to Pretty Girl.
The underlying claim arises out of the maintenance or use of the leased premises, as the sidewalk was necessarily used for access in and out of the leased building. At the time of the accident, the Frank was not listed as an additional insured on the Pretty Girl policy issued by Leading.
12/17/14 Progressive Northwestern Ins. Co. v. Scott
Appellate Division, Second Department
Appellate Court Refuses to Disturb Fact Finding of No Contact in Hit-and-Run Uninsured Motorists Claim
Scott sought uninsured motorist (“UM”) benefits from Progressive for injuries sustained by a hit-and-run vehicle. Progressive brought an application to stay arbitration on the ground that there was no physical contact between Scott’s motorcycle and the hit-and-run car.
Physical contact is a condition precedent to an arbitration based upon a hit-and-run accident involving an unidentified vehicle and the burden of proving that contact is on the insured.
After a framed issue hearing, the court below had found no contact between the motorcycle and the unidentified vehicle. The Appellate Division would not disturb the factual finding below.
12/17/14 Wilson Central School District v. Utica Mutual Ins. Co.
Appellate Division, Second Department
Additional Insured Endorsement Covered Only Vicarious Liability and Not Independent Liability of Purported Additional Insured
The Wilson Central School District (“Wilson”) sought a defense and indemnity from Utica Mutual Insurance Company (“Utica”). Utica insured School Bus Service, Inc. (“Bus Service”) and provided coverage to Wilson under an additional insured endorsement. That endorsement provided that Wilson is an additional insured, but only "[t]o the extent that such additional insured is held liable for your acts or omissions arising out of and in the course of ongoing operations performed by you or your subcontractors for such additional insured; or . . . [w]ith respect to property owned or used by, or rented or leased to, you."
The language of the endorsement covers only the District's vicarious liability for the acts of the Bus Service. The underlying complaints seek to hold the District liable only for its own independent acts and omissions. The defendant School Bus Service, Inc., the insured, is not even referred to in the underlying complaints. Hence, the District is not an additional insured under the policy.
12/10/14 Logan Bus Co., Inc.v. Discover Prop. & Cas. Ins. Co.
Appellate Division, Second Department
Courts Continue to Struggle on Question of Whether Assault Committee by Others is an Accident from Standpoint of Premises (or Vehicle) Owner
Logan Bus Company, Inc. (“Logan”), commenced this action to compel Discover to defend and indemnify it in an underlying action entitled Serrano v Lutheran Social Services (the “underlying action”). The complaint in the underlying action alleged that the Serrano, a student riding to school on a bus owned and operated by Logan, was the victim of a sexual assault perpetrated by another student as a result of inadequate supervision by an employee of Logan. The auto policy contained an “Abuse or Molestation Liability" endorsement.
In support of its motion, Logan submitted, the subject insurance policy. The clear and unambiguous terms of the "abuse or molestation" endorsement limited coverage to acts perpetrated by "employees" or "volunteer workers."
Since Logan alleged that the subject incident was perpetrated by a student, the endorsement was inapplicable and the court found no duty to defend.
Editor’s Note: Interesting, the court did not discuss (perhaps nobody argued) whether the negligent supervision claim was covered under the policy even without consideration of the endorsement. In Agoado Realty Corp. v. United Int'l Ins. Co., 95 N.Y.2d 141 (2000) the Court of Appeals held that in the absence of a clear assault and battery exclusion, a claim against a realty company for an assault committed by others in the building was an accident from the standpoint of the insured property owner. Was the assault in this case an accident from the standpoint of the bus company?
12/10/14 Integrated Construction Services, Inc. v. Scottsdale Ins. Co.
Appellate Division, Second Department
Issues of Fact Exist as to Whether Insured Provided Timely Notice of Accident
Integrated sought defense and indemnity under ad CGL policy issued by Scottsdale. Scottsdale denied coverage on the basis of late reporting of the accident.
Here, there were triable issues of fact as to whether Integrated had a good faith belief in nonliability, and whether that belief was reasonable, a permissible excuse for later notice. To the extent that the delay was not attributable to the asserted good-faith belief in nonliability, there were issues of fact as to whether Integrated provided notice "within a reasonable time under all the circumstances".
As the court did not discuss the issue of prejudice, this may be yet another of the last remaining pre-prejudice late notice cases in the courts. On the other hand, if the notice were timely, the issue of prejudice would never be reached by the court.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]
12/17/14 Belmont v. German
Appellate Division, Second Department
Appellate Court Reverses Grant of Summary Judgment to Defendant
Defendants established a prima facie entitlement to summary judgment as a matter of law by demonstrating that the Plaintiff did not sustain a serious injury by submitting competent medical evidence that the alleged injuries to the cervical region of the spine did not constitute serious injury under the permanent consequential limitation of use or significant limitation of use categories, as well as not being caused by the accident.
However, the Appeals Court reversed the grant of summary judgment because the Plaintiff raised (the decision does not set forth how) an issue of fact as to whether the accident was the cause of serious injuries to her cervical spine.
12/17/14 Hernandez v. Erskine
Appellate Division, Second Department
Appellate Court Affirms Grant of Summary Judgment to Defendant
Defendants submitted competent medical evidence showing Plaintiff did not sustain a serious injury under either the permanent consequential limitation of use or significant limitation of use categories. Plaintiff failed to raise a triable issue of fact in opposition. The case sets forth no details.
12/11/14 Rivera v. Fernandez & Ulloa Auto Group
Appellate Division, First Department
Plaintiff’s Expert Must Address Evidence In Medical Records That Plaintiff’s Injuries Are Pre-Existing and DegenerativeTo Raise Issue of Fact
The decision affirming summary judgment was not unanimous. Defendants submitted competent medical evidence showing Plaintiff did not suffer either the permanent consequential limitation of use or significant limitation of use of his left knee. Defendants’ expert radiologist and orthopedist opined that Plaintiff had a chronic condition and suffered no injury causally related to the accident. The orthopedist found that Plaintiff’s left knee showed no signs of abnormality and had the same range of motion as the uninjured right knee. Plaintiff’s own medical records including an MRI which mentioned degenerative injuries but no definitive MRI evidence for a tear. Plaintiff’s treating orthopedist did not contest this note.
Plaintiff failed to raise a triable issue of fact in opposition because his orthopedist’s opinion that he suffered an knee injury secondary to the car accident failed to address or contest the opinion of defendants’ medical experts that the condition was chronic and failed to address the finding of degenerative changes in the MRI report in Plaintiff’s own medical records. The appellate division cited case law that a Plaintiff cannot raise an issue of fact concerning the existence of a serious injury where the Plaintiff’s own experts fail to address indications from the Plaintiff’s own medical records or in the Plaintiff’s own expert evidence that the physical deficits in question result from a pre-existing degenerative condition rather than the subject accident.
12/10/14 Bracco v. Zuhir
Appellate Division, Second Department
Appellate Court Upholds Denial of Summary Judgment to Defendants
Defendants established a prima facie entitlement to summary judgment as a matter of law by demonstrating that the Plaintiff did not sustain a serious injury as a result of the accident. (It is not mentioned how). However, in opposition, Plaintiff raised a triable issue of fact whether she suffered a medically determined injury or impairment of a nonpermanent nature which prevented her from performing substantially all of her customary and usual daily activities during 90 of the first 180 days.
12/10/14 Ford v. Thomas
Appellate Division, Second Department
Appellate Court Upholds Denial of Summary Judgment to Defendant
Defendants met their prima facie burden of demonstrating that the Plaintiff did not sustain a serious injury through submitting competent medical evidence that the alleged injuries to the cervical and lumbar regions of the spine did not constitute serious injury under the permanent consequential limitation of use or significant limitation of use categories.
However, the Appeals Court affirmed the denial of summary judgment because the plaintiff raised an issue of fact as to whether he sustained serious injuries to the cervical and lumbar regions.
12/10/14 Fort v. Williams
Appellate Division, Second Department
Appellate Court Reverses Grant of Summary Judgment to Defendants
Defendants failed to meet their burden because the papers submitted failed to adequately address Plaintiff’s claim set forth in the bill of particulars that he sustained a serious injury under the 90/180 day category of the Insurance Law. Since the Defendant did not sustain a prima facie burden, it was unnecessary to examine Plaintiff’s papers to see if he raised an issue of fact.
12/9/14 Vargas v. Marte
Appellate Division, First Department
Competing Nonconclusory Medical Opinions Leads to Denial of Summary Judgment
Defendants made a prima facie showing that the Plaintiff did not sustain a permanent consequential or significant limitation in his left knee as a result of the accident. Defendants submitted reports of their orthopedist, who found normal ranges of motion in Plaintiff’s left knee, and of their radiologist, who found that Plaintiff’s left knee symptoms were preexisting degenerative symptoms consistent with injuries he sustained four years earlier.
However, Plaintiff raised an issue of fact with his medical expert’s finding of range of motion deficits, in addition to the nonconclusory opinions rendered in the affirm4eed reports of his surgeon and orthopedic expert. Particularly, Plaintiff’s surgeon, although recognizing a prior left knee injury and age related degeneration, opinion after reviewing Plaintiff’s MRIs from before and after the accident, coupled with the lack of pain in the knee before the accident and the acute pain after the accident, showed that the left knee meniscal tears were causally related to the accident.
Further, Defendants met their initial burden on the 90/180 day category of serious injury by showing lack of causation but failed to establish prima facie that Plaintiff worked for more than 90 out of the 180 days following the accident. Plaintiff raised an issue of fact as to causation and also presented evidence he was terminated from employment 45 days after his accident due to his injuries.
12/9/14 Sanchez v. Draper
Appellate Division, First Department
Plaintiff Submits Extensive Objective Evidence to Create An Issue of Fact
Defendants established prima facie entitlement to judgment as a matter of law when they showed Plaintiff’s injuries were not significant or permanent by submitting affirmed reports of an orthopedist and neurologist who found full range of motion and no signs of nerve damage Defendants also submitted a radiologist report that the MRI of the 55 year old Plaintiffs cervical spine showed diffuse degenerative changes that preexisted the accident and no herniation.
However, Plaintiff raise an issue of fact by submitting the affirmed narrative report of his treating neurologist, who set forth Plaintiff’s history of progressively worsening symptoms, including limitations in range of motion expressed as a percentage of normal and described the qualitative impairments. The report was supported by objective medical evidence, including the affirmed MRI reports finding herniated discs in the cervical spine and bulging discs in the lumbar spine, observations of muscle spasm and an abnormal EMG and nerve conduction test. Defendants did not contest causation of the lumbar injury and their orthopedist conceded the possibility of a cause and effect relationship between the history and the claimed injuries. Therefore, summary judgment was defeated.
Plaintiff submitted certified medical records of the physical therapy and chiropractic treatment he started receiving in the days after the accident, thus supporting a finding of a causal connection between the accident and his injuries.
Margo M. Lagueras
[email protected]
Arbitration
12/10/14 Erie County Medical Center v Progressive Ins. Co.
Erie County, Arbitrator Michelle Murphy-Louden
Policy Exhausted and No Payment Owed Under “Priority of Payments” Rule
Applicant provided emergency room and in-patient services to the EIP following an accident on May 15, 2013. On June 4, 2013, Respondent received Applicant’s claim and issued payment on June 30, 2013, in the amount allowed under the applicable DRG schedule. On August 7, 2013, Respondent issued a payment which exhausted the policy limits, and on August 9, 2013, issued a Denial of Claim to the EIP for all further benefits dues to policy exhaustion. Thereafter, in November 2013, Respondent received a letter from Applicant’s billing clerk stating that her calculation of the applicable DRG amount was different and requesting the amount not paid. A bill for the additional amount was attached and Respondent timely denied that claim for additional reimbursement.
The Arbitrator determined that Respondent’s denial of the additional bill was proper. When Respondent received the billing in June, it had not exhausted the policy and it paid Applicant’s claim in the order in which Applicant rendered services. The Arbitrator found no evidence to support Applicant’s claim that Respondent improperly paid subsequent claims while Applicant was attempting to secure the additional payment as Applicant did not seek the additional payment until November, more than five months after the original payment and more than three months after the policy exhausted.
However, Applicant also argued that the unpaid amount corresponded to the improperly downcoded service and a claim for EMG/NCV studies that were denied based upon a peer review. The Arbitrator agreed that the downcoding was improper but a timely denied claim does not hold a place on the priority of payments line, making any determination of medical necessity moot given the policy exhaustion. To hold otherwise would mean payment of other bills would be held up, potentially for years, while awaiting completion of litigation over a disputed bill. Similarly, claims not requiring verification must continue to be paid even while prior claims are pending verification. The insurer is not required to ‘hold the place’ or set aside amounts. Here, Applicant waited more than eight months to commence arbitration. This was four months after the exhaustion date so, if there is any fault, it is Applicant’s.
[The “priority of payments” rule requires that when claims aggregate to more than $50,000, payments are to be made in the order in which each service was rendered or each expense was incurred, provided the claims are made before policy exhaustion. Thus, if a number of claims are received at the same time, payments are made in the order of the rendition of services. However, if the insurer pays the $50,000 before receiving claims for services rendered prior in time to those paid, the insurer is not liable for those late claims].
12/09/14 Jerry J. Tracy, Physician PLLC v Allstate Ins. Co.
Erie County, Arbitrator Mona Bargnesi
IME Conducted Over Two Years Prior to Disputed Treatment Is Insufficient to Support Denial
The 37 year-old EIP was allegedly injured in a motor vehicle accident in March 2011. Her injuries included a cervical disc protrusion as well as lumbar protrusions and degenerative disc disease. In July 2011, an IME was performed and the examining physician determined that there was no need for further physical therapy or orthopedic treatment. In November 2013, the EIP first consulted with Applicant and at issue were office visits and trigger point injections administered from November 2013 to April 2014.
The Arbitrator found that Applicant demonstrated that his continued treatment and trigger point injections provided significant quantifiable benefit both through his notes showing improving range of motion and through the EIP’s subjective comments. The Arbitrator also noted that the 2011 IME did not contemplate the possibility of an exacerbation or recurrence of symptoms such that further care might be required. As such, Applicant was entitled to reimbursement.
12/09/14 Graham R. Huckell, MD v Geico Ins. Co.
Erie County, Arbitrator Mona Bargnesi
IME Stating Hip Strain Was “Resolved by History” Is Factually Insufficient
The 56 year-old EIP allegedly injured his head, back, neck, shoulders and bilateral hips in an accident in September 2013. Physical therapy was immediately started and it was noted that the range of motion of the bilateral hips was “severely limited”. An MRI performed in October revealed a right hip strain. An IME was conducted in January 2014, at which time the EIP complained of the same lumbar and right hip pain. The IME physician opined that the right hip was “resolved by history” and that there was no need for further orthopedic treatment, including physical therapy, surgery or injections. In February 2014, the EIP consulted with Applicant who administered a right hip trochanter bursa injection.
The Arbitrator found the IME lacked an insufficient factual basis or medical rationale to support that further treatment to the right hip was not medically necessary. The examining physician simply stated that the hip injury was “resolved by history”, without providing any explanation of what history he was referring to or how he arrived at such a conclusion. Furthermore, given the EIP’s complaints during the examination, it was unclear how his condition could be considered “resolved”, nor was it explained why the injections would not be an appropriate alternative treatment. Given the insufficiency of the IME report, Applicant was awarded reimbursement.
12/09/14 Upstate MUA Chiropractic, PLLC v St. Paul Travelers Ins. Co.
Erie County, Arbitrator Douglas Coppola
Arbitrator Finds No Compelling Reason to Provide Original Documents in Response to Verification Request
Respondent issued verification requests to Applicants which were cc’d to other medical providers (supposedly a merged request for the four billers of the MUA treatment). Applicants responded and Respondent advised that other verification requests were still outstanding. Applicant then sent a second verification response while Respondent supposedly was contacting other providers with requests for records. Respondent claimed that it did not have to pay or deny until verification to its outstanding requests was received. Respondent did not, however, dispute that it received partial verification responses from Applicant.
The Arbitrator first noted that the verification requests were unclear as no correspondence to any non-party was contained in the ADR electronic records. In addition, it appeared that most of the reiterated requests were demands for “original” documents from the facilities and billers. While Respondent claimed that electronic copies of records were not accepted, they never advised why original records were necessary to process the claims. Notably, original documents are not necessary under the “Electronic Signatures Act” (15 USC 7001). The Arbitrator awarded in Applicant’s favor determining that there was no compelling reason to provide “original documents” and that Respondent could not “string out unduly burdensome demands and string out its obligation to pay or deny within 30 days by issuance of burdensome demands which were timely responded to by Applicant herein.”
12/09/14 Mount St. Mary’s Hospital of Niagara Falls v Progressive Ins. Co.
Erie County, Arbitrator Michelle Murphy-Louden
Interest Not Owed on Previously Paid Claim
Applicant’s claim for services rendered from September 1, 2013 to September 2, 2013, was received by Respondent on December 12, 2013, and denied as not causally related on December 30, 2013. Then, on February 3, 2014, Respondent issued payment in a lesser amount pursuant to the fee schedule. At the hearing, Applicant conceded that the amount paid was in accordance to the fee schedule but argued that interest was owed because it claims the payment was untimely.
The Arbitrator disagreed because Respondent initially timely denied the claim. As such, when Respondent, for unexplained reasons, paid the claim, it was not “overdue” within the meaning of the Insurance Law and the No-Fault Regulation (Ins. Law 5106(a) and 11 NYCRR 65-3.8(a)). Interest is only owed on “overdue” benefits (11 NYCRR 65-3.9(a)). Given that payment occurred before and was not precipitated by the filing of the arbitration, Applicant was not entitled to interest pursuant to 11 NYCRR 65-3.9(c).
12/05/14 Mount St. Mary’s Hospital of Niagara Falls v Geico Ins. Co.
Erie County, Arbitrator Gillian Brown
Verification Is Pending, Claim Is Dismissed
Respondent sent two verification requests seeking a “completed and signed no-fault application” and “detailed session notes for procedure code 74177” but no response was received (no denials were issued as the disputed dates of service were prior to the 120 day rule). Applicant argued that Respondent should have requested an NF-5 rather than an NF-2 and that, because it did not, its delay was not appropriate and it should be required to pay the claim.
The Arbitrator disagreed, reasoning that that would be an elevation of form over substance. The carrier did not owe reimbursement merely because it did not request the correct form and the claim was denied as premature.
12/05/14 Jerry J. Tracy, Physician PLLC v Geico Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Failure to Set Forth “Good Reason” for Repeated Verification Requests Will Not Support Delay in Denying
Applicant sought reimbursement for chiropractic manipulation under anesthesia (MUA) performed in March 2014. Respondent did not deny the claim but rather delayed reimbursement pending verification. Specifically, Respondent asked if MRIs of the lumbar spine and hips had been performed prior to the MUA, to which Applicant responded that no MRI reports were reviewed or required. In May, Respondent sent two more requests reiterating verbatim the question concerning the MRIs and stating that it still required the previously requested information.
The Arbitrator reasoned that Applicant had already responded that no MRIs were taken or reviewed and that, in any event, Respondent did not request more detail or why it needed to know why MRIs were not required. Given that Respondent did not set forth a “good reason” for its repeated requests, and did not pay or deny the claim within 30 days, Applicant was entitled to reimbursement.
Litigation
12/10/14 NYU-Hospital for Joint Diseases v Allstate Ins. Co.
Appellate Division, Second Department
NF-10 Not Fatally Defective Where Amount in Dispute Is Wrong
Plaintiff timely mailed a copy of the NF-5 and defendant Timely denied. Plaintiff then sought summary judgment asserting that the NF-10 was “defective” because it “contain[ed] the wrong amount of the bill and the wrong amount in dispute.” The trial court granted plaintiff’s motion but, on appeal, was reversed as the mistake was nonprejudicial and the denial was otherwise timely and proper. Therefore, the trial court should have denied plaintiff’s motion, regardless of the sufficiency of defendant’s opposing papers.
12/05/14 Restoration Sports & Spine v Geico Ins. Co.
Appellate Term, Second Department
Attorneys’ Conclusory Statement Does Not Demonstrate Merits of Case
On appeal, the trial court is reversed and defendant’s motion to dismiss is granted where defendant served a 90-day notice pursuant to CPLR 3216(b)(3) and plaintiff did not file of notice of trial, or move to vacate the 90-day notice, or move to extend the 90 days. Plaintiff’s opposition consisted only of the attorney’s conclusory statement that the bills had been submitted and not paid within 30 days. The court held that to avoid dismissal pursuant to CPLR 3216, the plaintiff must demonstrate both a justifiable excuse for its delay as well as a meritorious defense, things the attorney’s statement failed to do. The court further noted that the action had not been commenced with a verified complaint.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property
12/04/14 Vineyard Sky, LLC v Ian Banks, Inc.
Appellate Division, First Department
First Party Losses Are Not Insured Under a Third-Party Liability Policy
Plaintiff is the owner of a property that sustained water damage after a series of heavy rains. The instant claim was commenced against plaintiff’s roofing contractor, PCF, and PCF’s liability insurer, Endurance. Endurance moved to dismiss the plaintiff’s various claims against it.
Of the claims asserted, Endurance maintained that plaintiff was not entitled to coverage as an additional insured under PCF’s policy. This is because plaintiff, itself, sustained the loss, and even though it was an insured under Endurance’s third-party liability policy, plaintiff could not recover first party losses thereunder. Further, plaintiff had not obtained a verdict against PCF, and as such it could not maintain a direct action against Endurance because it was not a judgment creditor.
Finally, a settlement with defendant Ian Banks, who served as the construction manager for the project, did not confer standing to plaintiffs. Settlement with Ian Banks was not sanctioned, nor otherwise approved, by Endurance.
Potpourri
12/17/14 Torres v 63 Perry Realty, LLC
Appellate Division, Second Department
Common Law Indemnification Claim Dismissed Where there is No Vicarious Liability Claim; Common Law Contribution Claim Survives Where Third-Party Defendant may have Contributed to the Cause of the Defective Condition
Plaintiff sustained injury after he slipped on a marble landing at defendant’s premises. The marble landing was installed at the premises by third-party defendant Suli approximately 22 months prior to the incident. As part of the third-party action, 63 Perry sought common law and contractual indemnification from Suli, as well as alleging a breach of Suli’s obligation to procure insurance.
Suli moved to dismiss the common law indemnification claim by arguing that plaintiff only had direct claims of negligence against 63 Perry. Because 63 Perry could not be vicariously liable to plaintiff, it followed that 63 Perry would never have a viable claim for common law indemnification.
Moreover, the contractual indemnity claim, as well as the failure to procure coverage claim, were both dismissed where, as here, 63 Perry could not produce an agreement containing triggering language. Rather, it only produced a 2005 purchase order which did not contain an insurance procurement clause, or sufficient indemnity language.
Finally, the Appellate Division noted that 63 Perry’s claim for contribution survived. The court noted that traditionally a breach of contract will not impose tort liability for damages to a non-contracting party. However, an exception to that general rule is created where the party from whom contribution is sought “launches an instrument of harm or creates or exacerbates a hazardous condition.” In the instant case, 63 Perry’s expert opined that the marble slab upon which plaintiff fell was defectively installed, thus leading to the condition giving rise to the claim. Based upon that opinion, the Court found a question of fact relative to Suli’s potential negligence.
12/17/14 Baldwin v Windcrest Riverhead, LLC
Appellate Division, Second Department
Speculation, Speculation – Speculation by Plaintiff Doomed the BI Claim, Speculation by Defendant’s Expert Doomed Third-Party Indemnity Claim
In this case, the movant successfully argued that defendant’s claims for common law indemnification should be dismissed after they were able to establish that plaintiff only speculated that the ice/water upon which she fell entered the premises due to defective soffits which were installed by the third-party defendant.
In opposing the motion, Windcrest submitted an expert who opined that the ice/water may have entered through the soffits. Here, however, given the speculation of the expert report, it was deemed too tenuous to create a question of fact.
12/17/14 Stanziale v City of New York
Appellate Division, Second Department.
Pedestrian Ramps Do Not Trigger Property Owner’s Duty to Maintain Under NYC Code
Plaintiff slipped and fell while ascending a pedestrian ramp adjacent to a premises owned by Bauer. The premises was leased to Empire Beauty School. Plaintiff commenced the current lawsuit against Empire, Bauer and the City of New York.
Bauer moved for summary judgment dismissing the Complaint against it, as well as all cross-claims. While the NYC code shifts responsibilities for sidewalks to the owner of the abutting premises, the code does not apply to similarly situated pedestrian ramps. Accordingly, the code did not apply, and there was no basis for a claim against Bauer.
12/10/14 Ponce v Miao Ling Liu
Appellate Division, Second Department
Common Law Indemnification Requires the Existence of Some Duty between Parties
A claim for Common Law Indemnification requires the claimant to establish a duty from indemnitor to indemnitee. The proposed indemnitor’s duty to the injured party will not create a separate duty between defendants. Here, defendant/third-party plaintiff failed to establish that nexus, and its claim was dismissed as a result.
12/09/14 TOV Mfg., Inc. v Jaco Import Corp.
Appellate Division, First Department
Without a Claim of Vicarious Liability, Defendant’s Common Law Indemnification Claim Fails
It appears that TOV sued Jacobovits after it was determined that Jacobovits sold TOV a less than quality gemstone. Jacobovits, in turn, commenced a claim for common law indemnification against United Gemological Laboratory (“UGL”) who served as the appraiser of the stones.
UGL moved to dismiss Jacobovits’ claim for common law indemnity because the only claims against Jacobovits were premised upon its own negligence. In affirming, the Court noted “[a] party sued solely for its own alleged wrongdoing, rather than on a theory of vicarious liability, cannot assert a claim for common law indemnification.”
In addition, the Court dismissed Jacobovits’ claim against UGL under General Business Law 239-c which permits civil actions against appraisers. However, such actions were limited in appraisals of items, in part, made of precious stones. Here, it was the stone in question that caused the claim, and not an object made of stones. As such, the Court found that the section did not apply.
Elizabeth A. Fitzpatrick
[email protected]
The battle over coverage for construction defects, i.e., claims that a contractor or subcontractor engaged in faulty workmanship, thereby causing damages, has been litigated across the country with widely divergent results depending on the jurisdiction. The initial issue which must be addressed is whether such defects constitute an “occurrence,” defined under CGL policies as an accident, which would thus bring the claim within the embrace of the insuring agreement, subject to the applicability of policy exclusions. The industry has taken the position that a CGL policy was not intended to serve as a surety for work performed by an insured and, thus, the CGL policy does not respond. Policyholders contend to the contrary and many jurisdictions have found that defective workmanship may constitute an “occurrence” and that policy exclusions for “your work” do not apply to that portion of the work performed by a subcontractor or to property that is damaged, that does not constitute part of the work of the contractor itself.
Litigation over these issues has resulted in four states passing legislation that takes this issue away from the courts and provides that faulty workmanship does constitute an “occurrence” under a CGL policy. Thus far, Arkansas, Colorado, South Carolina and Hawaii have passed such legislation, and New Jersey has introduced a similar bill. New York remains in the camp which holds that faulty workmanship is not an “occurrence,” although it is, of course critical, as always to read the particular policy at issue, since policy language varies and can significantly alter the analysis and outcome.
12/10/14 RQR Development LLC v. Atlantic Casualty Insurance Company, 2014 WL 6997935
United States District Court, District of Montana
No Coverage for Faulty Workmanship
The issue in this coverage action was whether Atlantic Casualty (Atlantic) breached its duty to defend its insured, Mike Henning d/b/a Granite Mountain Excavating (Granite), in an underlying action brought by RQR Development against Granite and several others for alleged delays and construction and engineering deficiencies, which resulted in RQR Development’s hiring of another excavator to remedy Granite’s work. It was alleged that RQR incurred significant expenses in repairing Granite’s deficient work and their action against Granite sounded in breach of contract, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, negligence, deceit and constructive fraud.
Granite had been issued a commercial general liability policy by Atlantic which was in full force and effect at the relevant times. Upon receipt of RQR’s complaint, it tendered the complaint to Atlantic for defense and indemnity. Atlantic responded, contending that there was no coverage for the allegations of the complaint and they declined to defend Granite. Ultimately, a judgment against Granite in the amount of $326,114 with 10% interest from December 5, 2013 was issued. Granite then assigned its rights under the policy to RQR Development and this lawsuit resulted.
The court initially analyzed the duty to defend and ultimately concluded that Atlantic had demonstrated that RQR Development’s claims did not constitute an “occurrence,” as defined by the policy and that the unambiguous exclusions to the policy were applicable. As they found no coverage for any of RQR Development’s claims, they determined that Atlantic had no duty to defend.
In finding there was no occurrence, the court opined that the damages allegedly occurred as a result of Granite’s failure to comply with the standard of care reasonably to be anticipated from the average excavator, not as a result of an accident. Although it is not clear why the court found it necessary to turn to policy exclusions, as the court found the claims did not constitute an “occurrence,” the court examined the “your work” exclusions j(5) and j(6) and found that the underlying complaint alleged damages to RQR Development’s property resulting from Granite’s negligence, acts and omissions while rendering, excavating and performing other services on its property and thus, the claim, as pled, came within the “your work” exclusions. The court also noted that the Montana Supreme Court has previously found no coverage for repair or replacement of the insured’s own faulty work and “agreed with the majority of jurisdictions which hold that this standard language found in a majority of comprehensive general liability coverage policies is unambiguous and all inclusive.” Atlantic’s motion for summary judgment was thus granted.
Audrey A. Seeley
[email protected]
Silent Night from the Courts on Noteworthy Cases this Edition.
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
DFS Press Release Regarding Governor Cuomo’s Deployment of the DFS Comman Center To Help Western New Yorkers With Storm-Related Insurance Issues
I’m sure it is no surprise to many of you, but Governor Cuomo deployed the DFS command center to Western New York last week to help property owners with insurance questions related to snow and water damage claims caused by the November snow storm. (On a side note, I saw the DFS command center when I was in Buffalo last week so I can confirm they were there).
The press release further goes on to discuss which claims may or may not be covered. The press release explains that most homeowners’ policies “insure losses to a home damaged by wind, wind-driven rain, trees or other falling objects, or the collapse of a structure due to the weight of snow or ice.” The press release does further state that damage to the inside of a home caused by melting snow is not usually covered unless it entered through an opening in the structure caused by wind. Likewise, the repair of frozen pipes is not covered if the damage is due to negligence such as failing to maintain an adequate temperature in one’s home.
Among other items, the press release also explains that most businesses have bought business interruption/continuation coverage which applies to provide coverage for lost earnings when a business is forced to shut down operations for an extended time due to a covered loss. Typically, the coverage includes expenses such as payroll and utility bills.
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
[email protected]
11/21/14 Global Liberty Ins. Co. v. Tavaras
Supreme Court, Suffolk County
Court Uphold Non-Cooperation Denial
Aneury Tavaras (“Tavaras”) was operating a motor vehicle owned by Ricardo Gomez (“Gomez”) when he allegedly executed an illegal U-turn and struck another vehicle owned and operated by Victor Casado. Casado and a passenger in the Tavaras vehicle brought suit. The clam was tendered to Gomez’s automobile insurer, Global Liberty. Global Liberty assigned counsel to represent Tavaras and Gomez.
After Taveras and Gomez failed to appear at previously ordered depositions, the court in the underlying action issued an order, mandating their appearance or the non-appearing party would be precluded without further motion. When Taveras and Gomez failed to appear and comply with the order, the injured parties moved for summary judgment as to liability against them on the basis of their preclusion from being able to testify at trial. The motions were granted.
Global Liberty then brought this action seeking a declaration that coverage was not owed because Taveras and Gomez breached the policy provisions requiring cooperation with the investigation and defense of those claims, which is a condition precedent to insurance coverage. In support of their motions, the injured plaintiffs asserted that the efforts made by Global Liberty and its counsel to secure cooperation were limited. The court disagreed finding that Global, and the law firm it retained to represented Tavaras and Gomez, made diligent efforts by means of correspondence, numerous telephone calls and the hiring of an investigator to secure cooperation. The court further found that these efforts were reasonably calculated to bring about the cooperation.
Lastly, it noted that Gomez, the named insured, willfully obstructed defense of the underlying action citing conversations with his counsel in which he demanded assistance in securing money for him from the underwriting department in relation to another action, and when the assistance demanded was deemed insufficient Gomez advised his counsel that he would not help Global Liberty in any way. The willful obstruction was also evidenced by the failure of Gomez and Tavaras to appear at the court ordered depositions.
The underlying plaintiffs’ motion for summary judgment was denied, and the court elected to search the record and grant summary judgment in favor of Global Liberty.
Bad Faith
12/09/14 Scottsdale Ins. Co. v. Addison Ins. Co.
Supreme Court of Missouri
Under Missouri Law, Excess Carrier Permitted to Bring Bad Faith Action against Primary Insurer Irrespective of the Claim Settling within the Limits of Insurance
In August 2007, a Wells Trucking employee was involved in an automobile accident that resulted in the death of another motorist. An accident reconstruction report attributed the accident to the employee’s speed and failure to drive in the proper lane and decedent’s failure to yield the right of way. Wells Trucking had a primary policy with United Fire that had limits of $1,000,000, and an excess policy issued by Scottsdale with limits of $2,000,000.
The decedent’s family filed a wrongful death action against Wells Trucking. Eventually the case went to mediation where it settled for a total of $2,000,000. United Fire and Scottsdale each paid $1,000,000. Wells Trucking then assigned to Scottsdale its rights to pursue a bad faith failure to settle claim against United Fire. The assignment resulted in this action. Scottsdale asserted that the decedent’s family provided numerous opportunities to settle the claim for United Fire’s policy limit, but United Fire declined to do so even knowing the exposure to Wells Trucking and that a probable judgment would be well in excess of a $1,000,000.
United Fire moved for summary judgment. Due to a procedural issue, the trial court declined to consider Scottsdale’s opposition deeming it untimely. The motion was then granted as all allegations were deemed admitted.
On appeal, the court held that even though Wells Trucking and Scottsdale failed to respond timely, United Fire still bore the burden of showing that it was entitled to summary judgment. Under Missouri law, a bad faith refusal to settle an action will lie when the liability insurer reserves the exclusive right to contest or settle any claim, prohibits the insured from voluntarily assuming any liability or settling any claims without consent, and is guilty of fraud or bad faith in refusing to settle a claim within the policy limits. In United Fire’s motion, it submitted that no bad faith claim could lie in this action because it tendered it limits and Wells Trucking did not suffer an excess verdict.
The court disagreed finding that that insurer’s duty is to protect the insured’s financial interests, which are impacted by an insurer’s breach of duty whether the breach results in an excess judgment or settlement. Requiring an excess judgment would force the insured to go to trial after its insurer wrongfully refuses to settle instead of permitting the insured to protect itself from further liability by settling. Further, an insurer’s obligation to act in good faith when settling a claim is part of what the insured pays for with its premium.
Next, United Fire argued that Scottsdale could not assert the bad faith claim on any of the theories alleged: assignment, conventional subrogation, equitable subrogation or by raising its own claim based on a direct duty of good faith owed by primary insurer to an excess insurer.
The court addressed each theory finding that an action for the breach of the duty of good faith, while a tort, arises from a contract of insurance, which is not purely personal in nature. Therefore, it is an assignable tort. Likewise, with regard to conventional subrogation, the court found that there was nothing in the nature of the relationship between primary insurer, the insured, and the excess carrier that precluded its application. The same result was found for equitable subrogation. The only theory the court did not endorse was a direct duty.
Thus, the trial court’s order was reserved and the case remanded.
EARL’S PEARLS
Earl K. Cantwell
[email protected]
08/07/14 Collazo v. Balboa Insurance Co.
Western District, Washington
Preserving the Attorney-Client Privilege
Claims handling, particularly contested claims, often implicates counsel for the insurance company in several ways, and care should be taken to log, protect, and preserve grounds for asserting the attorney-client and other legal privileges. The importance of such practices was emphasized in the recent case of Collazo v. Balboa Insurance Co., 2014 WL 3893784 (W.D. Wash. August 7, 2014). In this case, the Western District of Washington did not allow the insured-claimant to “pierce the privilege”.
The claimant had a fire damage claim and sued Balboa for failing to make adequate payments, asserting a claim for bad faith, etc. Collazo sought to compel Balboa to produce unredacted copies of claims handling records which the insurance company contended were protected by the attorney-client privilege and the work-product doctrine. The Court ruled that in Washington there is an initial assumption that no attorney-client privilege exists in first-party actions alleging bad faith claims handling and processing. However, that presumption can be rebutted by the insurer demonstrating in camera that the attorney-client privilege was indeed involved, and that the attorney was providing counsel and legal advice to the insurer. Upon reviewing these documents in chambers, the Court concluded that they were not related to claims investigation, evaluation, or processing but consisted of statements and advice that were attorney work product and/or protected by the attorney-privilege. The Court made an incidental finding that the material in dispute was also irrelevant to the merits of Collazo’s substantive legal claims.
The Court concluded that the insurance company had rebutted the “presumption” against privilege and denied the insured-claimant’s motion to compel.
This case represents the importance of preserving the attorney-client privilege, such as by separating and differentiating attorney correspondence and advice from routine claims correspondence and handling. The discussions and input of counsel should be clearly delineated, and counsel’s input and response, and attorney notes and comments, should not be commingled with general claims handling notes and materials.
Where possible, attorney communication and correspondence should be segregated into a separate disputed claims file or litigation file wherein communications and correspondence can be clearly marked as attorney-client privilege and/or communications and material prepared for litigation, or in preparation for contesting a disputed claim.
