Coverage Pointers - Volume XVI, No. 16

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.

For our several new subscribers, and we have a few more each and every week, let me welcome you to Hurwitz & Fine’s Coverage Pointers.  As far as we know, we have the oldest continually published electronic coverage newsletter in the nation, now in our 16th year of publication. Our focus is primarily on New York insurance coverage decisions and we report and summarize on every appellate court opinion involving casualty insurance, property insurance, No Fault, life, health and disability insurance as well as related topics. Our columnists are good at what they do and they try to take the complex and make it simple and usable for our several thousand subscribers.  Past issues of our publication can be found on our website, www.hurwitzfine.com and there is a robust search engine on the site which will assist you in finding cases and summaries.

This is not a fancy publication; you won't find bells and whistles, fancy graphics or colorful icons. Instead, you'll find case law, summaries and good and practical advice. We highlight trends when we see them developing and criticize those decisions we think have failed to follow established precedent. Claims professionals, lawyers, trial and appellate judges and their staffs read our newsletter.  We are honored that it has become a staple in the insurance industry and our summaries are republished, with our permission (and sometimes without) in professional publications throughout the country as well as on company intranets.

While we take the law seriously, this publication tries its best to maintain a sense of humor. Throughout the cover letter, which you are now reading, you'll find tidbits of historical trivia, generally from newspapers that were published exactly 100 years before the current issue of Coverage Pointers.  Whenever we travel throughout the country our readers comment on those stories so we continue to offer them as a respite from the world of insurance law. Just before the signature block at the bottom of the cover letter, you will find a bulleted list of the headlines of the cases summarized in the actual issue. The Coverage Pointers publication is attached to the cover letter in Microsoft Word format. Why don’t we use a fancy, high gloss, pdf format?  Simple really. We want you to copy and paste our summaries into your claims or notes files when you see a case similar or related to one you are handling. If you can do that from time to time, we know that this labor of love has been worthwhile.

We will also bring to your attention relevant continuing education programs that are being offered throughout the country and in Canada, and will advise you when our lawyers are coordinating, chairing or speaking at these programs. We are committed to education and are proud of those lawyers in our office (many of them) who donate their time and talents to write and present in a gallimaufry (fn.1) of programs . We can also help you craft a training program for your claims professionals if we can help you in your goal to have an educated and savvy staff.

Each issue asks the question:”Do you have a situation?" and I guess it has become our tagline. Almost all of our calls start out that way: "I have a situation, and need help". While we love situations, we love even more providing direction and guidance to those who need our help. We love what we do, we love the people for whom we do it and we welcome you to our family.

Our friends in Long Island and New York City, let alone those in Boston, Providence and points east had a tough time this week.  We hope all is well.  We, from Buffalo (who had flurries at best) can feel your pain.

Every day is one day closer to Spring.  That is my mantra.  Winter starts earlier in western NY than in most places in the country, so as we reach the end of January, there is a glimmer of springtime in the distance.  If I can reach it without spending the next several weeks in cold country, I’d be happier.  Wait, I can.  It’s time to hit the road for educational programs.  Let’s see?  Toronto?  Well, that’s no warmer.  Chicago?  No help there.  Anaheim?  Getting warmer…

Footnote (1): [A] gallimaufry, [is] a word used several times a generation ago in the court of appeals to signify a hodgepodge, jumble or confused medley. (citations omitted). The word “gallimaufry” since has fallen into disuse, though the concept appears alive and well. 
DeBaliviere Place Ass'n v. Veal, 337 S.W.3d 670, 672 (Mo. 2011)

Editor’s Note: To settle a bet we had to check and found that the word has been used 122 times in judicial decisions in state and federal courts, but only once in the New York State courts.  New York’s highest court, the Court of Appeals used the word “gallimaufry” and “gallimaufrous” as well as “crazyquilt” in its 1976 decision striking down the Sunday Sales (Blue) laws in People v. Abrahams, 40 N.Y.2d 277 (1976),

Educational Opportunities Galore:

Let me remind you of some great upcoming Continuing Education.   I’ll be there presenting at each of these.  Will I get a chance to meet you?  Contact me for registration information on any of these fine programs.

Canadian Defence Lawyers Insurance Coverage Symposium:

February 5, 2015
Toronto Board of Trade
Toronto Ontario
What You Will Learn:

  • The elements of a construction comprehensive risk management programme including sureties, labour and material payment bonds, COC/builders’ risk coverage and property insurance
  • Whether the project property insurer can ever subrogate against project participants when a builders’ risk policy is in place
  • The role of the GL and Wrap-Up carriers
  • Protection offered to construction project professionals under E&O coverage
  • What is a typical data breach scenario and why does it matter?
  • How ‘Coverage A” and ‘Coverage B’ of today’s CGL policies apply to data breach
  • Coverage under typical D&O and E&O policies for data breach
  • Tips for in-house and external counsel to maintain solicitor work product privilege over their files when defending claims and conducting claims investigations
  • When is an act “intentional”?  When is negligence derivative of intentional conduct?

 

I’ll be part of a panel on Liability Insurance Coverage for Intentional Acts:

Actions alleging damage and injury caused by a myriad of forms of intentional conduct are on the rise. Do traditional forms of liability coverage cover intentional conduct? What is the meaning of an intentional acts exclusion? When is negligence derivative of intentional conduct to apply exclusion? To what extent do those who allegedly failed to supervise the intentional conduct find coverage under common liability policies?

Dan D. Kohane - Hurwitz & Fine, P.C., Buffalo, New York
Brian C. Elkin - Lavery de Billy, Ottawa

 

The following month:

DRI Insurance Coverage and Claims Institute –

March 25 – March 27, 2015
Chicago Marriott
Chicago Illinois

The Insurance Coverage and Claims Institute is DRI’s flagship seminar for insurance executives, claims professionals, and outside counsel. Each spring in Chicago, DRI brings together outstanding speakers to provide insight and guidance into complex and cutting-edge issues we face in our insurance defense practices. On Wednesday, we will focus on settlement by presenting a hands-on, live mediation demonstration and a session for coverage attorneys to hone their negotiation skills. On Thursday, we will provide litigation guidance for cases involving multiple occurrences, supplementary payments, cyber liability, consent judgments, and bad faith. We will explore the interplay between underwriting and claims and the enforcement of arbitration agreements. Finally, on Friday, we will present a dual track focusing on issues unique to personal lines and commercial and construction litigation.

On Thursday, March 26, I’ll be presenting as part of this panel:

Ethics: You Have Been Retained to Represent the Carrier Against Allegations of Bad Faith—Now What?

This panel will address the legal and ethical obligations of the lawyer, who is retained by a liability carrier to provide advice and counsel on pending or threatened “bad faith” claims that arise from the carrier’s handling of the underlying claim against its insured.

  • David W. Zizik, Zizik Powers O’Connell Spaulding & Lamontagne PC, Westwood, Massachusetts
  • Kelly R. Dalmass, Harleysville Insurance, Harleysville, Pennsylvania
  • Dan D. Kohane, Hurwitz & Fine PC, Buffalo, New York

 

From Chicago to Anaheim, and then:

 

PLRB CLAIMS CONFERENCE:

March 29 - April 1, 2015
Anaheim Convention Center
Anaheim Marriott & Hilton Anaheim

www.PLRBClaimsConference.org
Anaheim, CA

 

EDUCATE • INNOVATE • INVIGORATE

The PLRB 2015 Claims Conference delivers resources to improve your job performance! You may select from nearly 100 educational classes, more than 60% new topics, and visit nearly 300 different service providers representing all segments of the industry at the Insurance Services Expo.

  • EDUCATE yourself with the latest information on critical claim issues and challenges, earning continuing education credits in a number of key states

 

  • INNOVATE and bring improvements and new solutions to your claim operations
  • INVIGORATE your career by connecting with a vast network of subject matter experts and industry providers at the Insurance Services Expo

 

The theme for this year's Insurance Services Expo is "Tell Me What's New." This is your opportunity to learn about the new products and technologies available to support your claims management responsibilities. The Expo showcases skilled national and regional providers of property and casualty adjustment restoration and recovery services. It is the largest collection of industry service providers under one roof.

We hope that some of you will be attending the PLRB Claims Conference in Anaheim in March.  I’m proud to be a continuing member of the Conference Planning Committee and will be presenting, with Kipper Burke, Divisional VP and Sr. Claims Counsel at Great American P&C, a presentation entitled:

 

Contractual Indemnity Provisions & Additional Insured Liability Coverage

  • Distinguish between an insurer's obligations to those who qualify as additional insureds and those who benefit from contractual indemnity obligations
  • Evaluate how tenders of defense and indemnity should be made under both policy and trade agreement
  • Describe the protocols to be considered when tenders are received under both insurance policy and contract
  • Identify the relevant factors when sending or receiving tenders

Those who attend will leave with a practical and useful approach to the interrelationship between contractual indemnity and additional insured obligations.  We will be discussing tenders of defense and indemnity under both trade contracts and policies and strategic responses to tenders received.

The sessions are being offered:

03/31/2015          8:00-9:30  - Conv Center 2 Room 205AB
04/01/2015          8:30-10:00 - Conv Center 2 Room 205AB

HEWITT’S HIGHLIGHTS:

Dear Subscribers:

We are recovering post blizzard in the Long Island Area, which has involved a lot of snow and a lot of shoveling, but serious injury cases continue to be issued.  In this edition, we report on several cases, including more cases that remind defendants to address all injuries in the bill of particulars if they want to succeed on summary judgment, and a case which states that plaintiff’s must do more than submit general medical opinions that fail to address evidence that injuries are degenerative if they want to defeat summary judgment.

The most interesting case is one in which the third department had a split decision denying summary judgment to defendants. The decision is unusually detailed and contains a dissent. The majority relied on an expert report generated by plaintiff’s expert four years after treatment to determine the injuries constituted serious, nontransient injuries.  The majority also accepted plaintiff’s explanation as to why she had ceased treatment for several years only to resume treatment later.  In comparing the majority and dissenting opinions, you would not think they were looking at the same report.
Hoping any one affected by the snow has shoveled out by now, and until next time,

Rob
Robert Hewitt
[email protected]

 

We Forget How Far We’ve Come -- Discrimination in Full Swing, 100 Years Ago Today:

 

Times Herald
Olean, New York
30 Jan 1915

“JIM CROW” CAR BILL OUT

Capital Segregation Likely to Cause
Big House Fight
30 Jan 1915

Washington, Jan. 30.—The House committee on the District of Columbia reported favorably a bill providing for “Jim Crow” cars in Washington.

The measure was introduced by Representative Clark of Florida and provides that all transportation companies in the District of Columbia must provide separate accommodations for the whites and Negro races and prescribes penalties and punishments for violations of these provisions. 

There will be bitter opposition to this bill in the House; and it will be defeated if a vote is taken during this Congress. 

Fitz’ Bits:

Dear Subscribers:

I know that many of you who are also located on Long Island are sharing the pain of digging out from the first blizzard of 2015.  We were hardest hit in Suffolk County, with bitterly cold temperatures and snowfall in excess of 20 inches.  Fortunately, New York City was not hit as hard, as had been forecast.  It was a pleasure to join my colleagues at the New York State Bar Association Annual Meeting in New York City this week.

As an escape from the bitterly cold temperatures, I look forward to May for many reasons, including that I will not be shoveling 20 plus inches of snow from my driveway.  Another great reason is our annual advanced insurance coverage program that will be held on May 8th in New York City and Syracuse, May 15th in Buffalo and on Long Island and May 29th in Albany.  I am delighted to again serve as overall Co-Chair of the program and as Chair of the Long Island venue.  Further information about the program will be provided to you during the coming months.

As you know, we are also delighted to construct a special program for your office and to provide the training at a date and location that is convenient to you.  If you are interested in scheduling training, please do not hesitate to reach out to me or any of my coverage team colleagues.

In the continuing saga of construction defect, I bring you a case from Texas.  I also bring you a case from California, McMillin Companies, LLC v. American Safety Indemnity Company.

Til next time,

Beth
Elizabeth A. Fitzpatrick
[email protected]

Lawyers Behind Bars – A Century Ago:

The Brooklyn Daily Eagle
Brooklyn, New York 
30 Jan 1915

JAIL FOR LAWYER KENNY

Despite the fact that Judge Alton B. Parker has interceded in his behalf, Michael F. Kenny, a lawyer, 41 years old, of 202 Westervelt Avenue, Staten Island, was today sentenced to serve ten months on Blackwell’s Island for the theft of an overcoat, by Judge Veeder in the United States District Court.  Kenny was taken into custody about a week ago after he had pawned an overcoat value at $80, the property of Milton Diamond, a lawyer, of 411 St. John’s Place.  The theft occurred in the Federal Building, Washington and Johnson streets.  There were similar thefts charged to Kenny from courtrooms in other parts of the borough and also in Manhattan.  Among these victims was Dr. Goldrick of the Police Department. 

It developed that Kenny committed the theft to prevent his wife and four children from being dispossessed from their home.
Editor’s Note:  Not sure what happened to Attorney Kenny.

Peiper’s Panderings:

We start with a sincere “whew” for our friends in NYC, and a “tell us about it” for those of you from Connecticut to Maine.  Here’s hoping everyone made it through the storm unscathed.  Now that we’ve all had our touch of Old Man Winter, I am pretty much ready for Spring. 

As such, and as a honorary member of Groundhog Day Club (I was born on the occasion), I start this week off with a plea for Phil, Dave and every other rodent about to be pulled from a cage, please, please, please do not see your shadow on Monday.  That said, if the Staten Island version elects to bite Mayor DiBlasio, ala his 2009 trick with Mayor Bloomberg, we can’t say we’d be overly disappointed. 

By the way, the name for that groundhog was/is Chuck.  Come on Staten Island, how about a little creativity?  Chuck the Groundhog is, I would submit, perhaps the most unimaginative name possible.  We like Charlotte for a name, but as some of you will recall she untimely succumbed to suspicious causes after last year’s “dropping” incident. 

On that score, our favorite name for a groundhog hails from Georgia where the fine General Beauregard Lee handles prognostication duties.  General Beau, apparently, has received degrees and other honoraria from numerous institutions of higher learning including the school that sits in Athens, Georgia. 

What does any of this have to do with insurance coverage, you ask?  Absolutely nothing.  I really don’t have anything to say about any law related topic this week.  Sorry to disappointed you, but I just don’t have it.  It’s groundhog season, and well, I guess I’m okay with that.  Besides, Dan has been managing to publish off the wall topics for years. I figured it’s about time I joined him.  

Oh yeah, one more thing, pitchers and catchers report in a mere 22 days.

Steve
Steven E. Peiper
[email protected]

 

A Mooving Story from a Century Ago:

Times Herald
Olean, New York
30 Jan 1915

Overworked Wife is Set Free.

Trenton, Jan 20.—The Court of Errors and Appeals has affirmed the divorce granted Mrs. William Moore of Passaic County, by the Court of Chancery.  It was testified that there were 36 cows on the Moore farm and that Mrs. Moore had to wash all the cans, chop all the wood and do all the heavy work on the place.

 

Highlights of This Week’s Issue, Attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

  • The Insurer’s Disclaimer Letter Was Clear Enough; Whether the Insured’s Notice Was or Was Not Timely is a Question of Fact
  • Declaratory Judgment Obtained by Default Against Insured Does Not Collaterally Estop Underlying Plaintiff from Relitigating Coverage Issues
  • Sufficient Proof of Written Contract Requiring Additional Insured Status and That Work Arose out of Named Insured’s Activities to Justify a Defense Obligation
  • Time to File Application to Stay Arbitration of UM or UIM Claim is 20 Days from Receipt of Arbitration Demand

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

  • Plaintiff Cannot Rely On a General Opinion By His Expert That the Accident Caused the Injury When the Expert Failed To Address Evidence of Degeneration
  • Defendants Must Address All Claims of Injuries Made in Bill of Particulars
  • Defendants Showed Through Competent Medical Evidence Their Entitlement to Summary Judgment
  • Defendants Failed To Address All Claims In the Bill of Particulars
  • Majority Relies On A Report Generated By Plaintiff’s Expert Four Years After Treatment To Determine that the Injuries Were Not Transient and Were Serious And Found Plaintiff Had Explained Adequately Why She Had Ceased Treatment For Years Only To Resume Later

 

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

Arbitration

  • Arbitrator Hold Respondent Should Have Obtained Another IME For Denial of Post Cut-Off Claims
  • Peer Review Deemed Conclusory and Insufficient to Uphold Denial
  • Peer Review Finding MUA Not Medically Necessary Is Upheld

 

Litigation

  • Benefits Denied Where Plaintiff’s Knee “Buckled” Causing Her to Fall While Exiting Vehicle

 

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

  • Waiver of Subrogation Clause Bars Suit
  • Warranty Requiring Fully Operational Fire Alarm Is a Condition Precedent to Coverage
  • Failure to Provide Full Ten Day Cancellation Notice Window to New Mortgagee Precludes Denial on Late Payment

 

FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]

  • “Your Work” Exclusion Saves the Day in Texas
  • Denial of Motion for Summary Judgment on Defense Obligations Does Not Necessarily Mean Insurer Need Defend

 

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

  • Not this week.

 

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

Bills in the Hopper:

  • S207/A1313 Zone of Danger for Intentional and Negligent Infliction of Emotional Distress Claims
  • A244/S1605 Proposed Amendment to General Obligations Law §15-108

 

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

  • Question of Fact Found As to Whether Damaged Tower Crane
  • Was Intended to Become a Permanent Part of the Insured Project

 

Bad Faith:

  • Where Trial Court Improperly Excluded Evidence of a Prior Favorable Decision on Coverage and the Carrier’s Payment of the Underlying Claims, New Mexico Court of Appeals Vacates Bad Faith Damages and Remands Case for New Trial

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

  • CGL Policy Does Not Cover “Non-Conforming” Construction Work

 

That’s all for now.  We love your feedback.  See you in a couple of weeks.

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

1300 Liberty Building
Buffalo, NY 14202     

Office:                        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]

01/29/14       24 Fifth Owners, Inc. v. Sirius America Insurance Company
Appellate Division, First Department
The Insurer’s Disclaimer Letter Was Clear Enough; Whether the Insured’s Notice Was or Was Not Timely is a Question of Fact
The insured’s claim that Sirius's disclaimer letter did not specify that the late notice defense was based on the time that had elapsed between 24 Fifth Owners, Inc.'s receipt of the underlying complaint and the tender to Sirius, even considered for the first time on appeal as a purely legal argument is unavailing, as the letter, which also referenced the policy condition relied upon, sufficiently apprised plaintiffs that notice was considered untimely relative to either event - the date of occurrence or of receipt of the lawsuit

The question of the whether the notice was or was not timely is a question of fact.

01/28/14       West Street Properties, LLC v. American States Ins. Co.
Appellate Division, Second Department
Declaratory Judgment Obtained by Default Against Insured Does Not Collaterally Estop Underlying Plaintiff from Relitigating Coverage Issues
This was a direct action to recover the amount of an unsatisfied judgment against the insurers.

The plaintiff sought to recover on a judgment it obtained in an underlying action entitled West Street Properties, LLC v A & A Industries, LLC, commenced in the Supreme Court, Westchester County, under Index No. 09/14364, based on an oil spill on real property owned by the plaintiff. American States and Scottsdale had issued commercial liability policies to the defendants in the underlying action.

American States had won a declaratory judgment action determining that they had no obligation to defend or indemnify the insureds but that determination was not binding on the injured party. Why?  The DJ was obtained by a default judgment.

Further, American States defendants failed to demonstrate, prima facie, that it properly disclaimed coverage of the underlying defendants' claim pursuant to the subject policy. The noncooperation of an insured party in the defense of an action is a ground upon which an insurer may deny coverage, and may be asserted by the insurer as a defense in an action on a judgment by an injured party.  In order to establish a proper disclaimer based on its insured's alleged noncooperation, an insurer is required to demonstrate that "it acted diligently in seeking to bring about its insured's cooperation, that its efforts were reasonably calculated to obtain its insured's cooperation, and that the attitude of its insured, after the cooperation of its insured was sought, was one of wilful [sic] and avowed obstruction'". Here, the submissions of the American States defendants were insufficient to sustain their prima facie burden.
Editor’s Note: We understand and most of us here (Jen Ehman dissenting), that agree.  But see, the Court of Appeals decision in D’Arata, 76 NY2d 659 which seems to suggest otherwise.

 

01/21/15       Pinon v. 99 Lynn Avenue, LLC
Appellate Division, Second Department
Sufficient Proof of Written Contract Requiring Additional Insured Status and That Work Arose out of Named Insured’s Activities to Justify a Defense Obligation
In 2004, 99 Lynn Avenue, LLC, and 105 Lynn Avenue, LLC (collectively, the “Lynn LLCs”), the owners of properties located at 99 Lynn Avenue and 105 Lynn Avenue in Hampton Bays, contracted with Vickers a general contractor, for the construction of custom homes on each of their respective properties. Vickers subcontracted with PMC to perform the masonry work.  Pinon, an employee of PMC, was injured when, during his lunch break from his work for PMC on the projects, he dove off a bulkhead located on one of the subject properties into a bay.

Pinon sued Vickers, the Lynn LLC’s and PMC for injuries.  Vickers commenced a third-party action against Merchants Mutual Insurance Company (“Merchants”) seeking defense, indemnification, and reimbursement of past defense costs in connection with the main action as an additional insured under a commercial liability insurance policy that Merchants issued to PMC. The Lynn LLCs then sued Merchants and Lexington, their homeowners carrier.

The policy issued by Merchants to PMC stated that it provided additional insurance coverage for "[a]ny person or organization [PMC was] required by a written contract, agreement or permit to name as an insured" with respect to liability for injuries arising out of PMC's work for the additional insured "at the location designated in the contract."

Vickers demonstrated the existence of a written contract expressly requiring PMC to name Vickers and the Lynn LLCs as additional insureds under the commercial liability policy it obtained from Merchants. It was also demonstrated that the allegations of the complaint in the underlying action suggested a reasonable possibility of coverage in that Pinon's injuries arose out of PMC's operations on the Lynn projects, as defined in the subject policy and so must defend them.

01/20/15       Travelers Property Cas. v. Archibald
Appellate Division, First Department
Time to File Application to Stay Arbitration of UM or UIM Claim is 20 Days from Receipt of Arbitration Demand
An application to stay uninsured and underinsured arbitration must be made within 20 days of the arbitration demand.  However, the 20 days does not start to run until the notice to arbitrate is received by the insurer.

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

Robert E.B. Hewitt III
[email protected]

01/26/15       Angeles v. Versace Inc.
Appellate Division, First Department
Plaintiff Cannot Rely On a General Opinion By His Expert That the Accident Caused the Injury When the Expert Failed To Address Evidence of Degeneration
The Appellate Division unanimously affirmed the grant of defendants’ motion for partial summary judgment for failure to establish a serious injury.   Defendants made a prima facie showing that plaintiff did not sustain an injury involving a “significant” or “permanent consequential” limitation of use of his lumbar spine through submission of medical evidence that the injuries were pre-existing and degenerative.

In response, plaintiff’s expert generally opined that the accident caused the injury. However, plaintiff’s expert failed to address defendants’ evidence of degeneration in the x-ray reports of the lumbar spine, which were found in the plaintiff’s expert’s own records. Therefore, no issue of fact was raised. Without any evidence of causation, plaintiff could also not establish his 90/180-day injury claim. Given the lack of serious injury, the issue of liability was deemed academic.

01/21/15       Eremina v. Dobrynin and Baik v. Enriquez
Appellate Division, Second Department
Defendants Must Address All Claims of Injuries Made in Bill of Particulars
The Appellate Court affirmed the denial of each defendant’s respective summary judgment motions. The Court found that the defendants did not address all of the plaintiff’s claims of injuries in each of their bill of particulars, particularly that they sustained a serious injury to the lumbar region of their spine under either the permanent consequential or significant limitation categories. Therefore, they failed to meet their prima facie burden that plaintiffs failed to sustain a serious injury.

01/21/15       Hwang v. Vasconez-Vallejo
Appellate Division, Second Department
Defendants Showed Through Competent Medical Evidence Their Entitlement to Summary Judgment
The Appellate Court found that the defendant met their prima facie burden by showing through competent medical evidence that the alleged injuries to the cervical and lumbar regions of the plaintiff’s spine, left knee, and left shoulder, did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories. In opposition, plaintiff failed to raise triable issues of fact. Therefore, the grant of summary judgment by the trial court was affirmed.

01/21/15       Hussein v. Empire Paratransit Corp.
Appellate Division, Second Department
Defendants Failed To Address All Claims In the Bill of Particulars
The Appellate Court reversed the grant of summary judgment to defendants by the trial court.  Defendants did not establish a prima facie case of summary judgment as to plaintiff as the motion failed to address the claims in plaintiff’s bill of particulars that he sustained a serious injury to both wrists under either the permanent consequential limitation of use or significant limitation of use categories and serious injuries to the cervical and lumbar regions of the spine under the significant limitation of use category and the 90/180-day category of the Insurance Law.

01/15/15       Flanders v. National Grange Mutual Insurance Company
Appellate Division, Third Department
Majority Relies On A Report Generated By Plaintiff’s Expert Four Years After Treatment To Determine that the Injuries Were Not Transient and Were Serious And Found Plaintiff Had Explained Adequately Why She Had Ceased Treatment For Years Only To Resume Later
The Appellate Court affirms the Broome County trial court’s denial of summary judgment in a split decision which leads to a more detailed decision. The facts of the case are as follows. In August 2006, plaintiff was rear-ended while driving her car. After settling an action against the driver of the car that hit her, plaintiff and her husband, derivatively, commenced this action against defendant seeking supplementary underinsured motorist coverage, alleging that, as a result of the accident, she suffered a serious injury as defined in Insurance Law § 5102 (d). In their motion for summary judgment, defendants asserted that, based on a report completed following an August 2011 independent medical examination, plaintiff did not suffer a serious injury under the claimed permanent consequential limitation of use, significant limitation of use or 90/180-day categories. The trial court denied the motion, finding that plaintiffs had raised issues of fact relative to the category of significant limitation of use. 

In affirming the trial court’s denial of the motion, the majority of the Appellate Court noted that defendants primarily relied on two reports by a neurosurgeon. The first report, issued in July 2011, was based solely upon review of plaintiff's medical records, and the second was issued thereafter in August 2011 following a physical examination of plaintiff. The neurosurgeon opined that plaintiff had no objective neurological impairments, that she suffered from preexisting lumbar and cervical spondylolisthesis and that while there was some evidence of preexisting migraine headaches warranting treatment by a neurologist, the records did not demonstrate that she suffered a head injury in the accident that could have caused post-concussion syndrome or her limited memory problems.  The Majority noted that, while the submission held some weaknesses, that the trial court properly held that the evidence proffered by defendant's expert was sufficient to demonstrate a prima facie case for summary judgment in defendant's favor, with issues of weight and credibility reserved for the factfinder. The burden shifted to plaintiffs to raise an issue of fact with competent proof based upon objective medical findings and tests to support any alleged serious injuries and connect them to the accident.

The Majority found Plaintiff's submitted no expert medical proof to refute the opinions expressed by defendant's medical expert relative to her orthopedic injuries. Plaintiffs submitted extensive arguments as to alleged weaknesses and inconsistencies in defendant's expert proof, but the Appellate Court found that plaintiffs' unsupported assertions and criticisms of the quality of defendant's submissions do not constitute the requisite competent medical proof. The Appellate Court found that its review was limited to the issues posed and the quantum of evidence proffered by plaintiffs' neuropsychological expert. The neurologist had conducted a neuropsychological evaluation in 2007 of potential post-concussion syndrome. The neurologist concluded that plaintiff suffered from mild to moderate cerebral dysfunction .characteristic of post concussive syndrome. The neurologist also submitted an affidavit in opposition to defendants’ motion that incorporated by reference a December 2011 report in which he discussed his neuropsychological evaluation and his review of the report completed by defendant's expert.

In these documents, the neurologist stated the specific battery of tests he had conducted of plaintiff and that based upon his clinical review and testing, his professional opinion was that plaintiff demonstrated psychometrically documented deficits in cognitive function that included decreased attention/concentration, mild impairment of concept recognition and development, decreased fine motor coordination and reduced memory function in specifically identified areas. These deficits, according to the neurologist placed plaintiff in the impaired range in a variety of areas involving cognitive function and were sufficiently severe to constitute serious injury within the meaning of Insurance Law § 5102 (d). Based upon his clinical experience, he opined that plaintiff's deficits as revealed by the objective testing were consistent with her subjective complaints of significant life impairment in a variety of areas related to cognitive function.

The neurologist further opined, based upon his clinical experience, that plaintiff's impairment was causally related to the impact of her head against the headrest during the accident and the significant chronic muscular-skeletal pain that she experienced thereafter, and that the condition was not transient, as it was the testing was performed eleven months after the accident. Absent evidence that plaintiff had suffered from cognitive impairments prior to the accident, and in view of his report that she had not, the Majority found it was both reasonable and legally acceptable for the neurologist to attribute the cause of the decrease in her cognitive function to the motor vehicle.

In regard to the degree or severity of impairment, the majority noted that the neurologist’s report documents impairments in a variety of areas and describes only one of them as mild. The majority held that multiple mild cognitive impairments may be sufficient to demonstrate the existence of serious injury in the significant limitation of use category when they result in a combined impact that limits one's ability to perform daily life function.

The Majority noted that the neurologist’s December 2011 report summarizes the results of the multiple psychometric tests administered during the neuropsychological evaluation and specifically documents the results of each test in quantitative terms and further determines the degree of plaintiff's impairment in each tested area of function by comparing her performance to average norms, and thus meet the established legal standard for expert testimony substantiating a serious injury claim.  The Majority also noted that defendant's expert conducted no psychometric testing of his own, nor did he opine that the cognitive impairments that plaintiff’s expert identified predated the accident; instead, he did no more than summarily dismiss plaintiff’s expert’s opinions based upon his own conclusions that plaintiff had preexisting headaches and orthopedic issues, as well as his apparent skepticism as to the mechanism of her injury.

Thus, the majority found that plaintiffs met their burden in opposition to defendant's motion by providing the requisite objectively measured quantum of evidence necessary to satisfy the significant limitation of use category of serious injury. The majority found that plaintiff had successfully explained away the periods of time during which plaintiff did not engage in cognitive therapy treatment, as she explained that she had discontinued the therapy while she engaged in grief counseling following the death of her mother and had used memory aids and organizational skills to function, but had resumed treatment several years later, when she experienced an episode of severe memory loss. The majority found that while these circumstances may affect the weight a jury chooses to give to this aspect of the proof, they cannot serve to disqualify plaintiffs, as a matter of law, from demonstrating that plaintiff suffered from a chronic injury and resulting significant limitation of use.

The dissent agreed with the majority that defendant met its burden on the motion for summary judgment and that plaintiffs did not submit the requisite competent medical proof with regard to the orthopedic injuries of plaintiff. However, they disagreed that plaintiff had raised a material question of fact with respect to plaintiff’s alleged cognitive injuries. The dissent found that plaintiffs presented no objective evidence of a head and, while plaintiff explained why she stopped cognitive therapy, she does not provide a reasonable explanation for failing to resume such therapy for more than four years. The dissent found plaintiff’s neurologist’s affidavit to be conclusory and that while plaintiff's psychologist identified certain cognitive deficits discovered during the neuropsychological testing conducted, characterized one such deficit as mild, but otherwise failed to provide any quantitative or qualitative comparison of plaintiff's condition to normal function. The dissent found his opinion that the nature of plaintiff’s condition was not transient to be deficient as the report was generated more than four years after he tested plaintiff. The dissent would have dismissed the complaint.

MARGO’S MUSINGS ON NO FAULT

Margo M. Lagueras
[email protected]

Arbitration:

01/15/15          Robert DeTamble LMT v Geico Ins. Co.
Erie County, Arbitrator Douglas Coppola
Arbitrator Hold Respondent Should Have Obtained Another IME For Denial of Post Cut-Off Claims
The 67 year-old EIP was involved in an accident in October 2009, and began treating with chiropractic for neck pain radiating into the bilateral shoulders, radiculopathy and low back pain radiating into both lower extremities with associated numbness and tingling in her feet.  MRIs showed positive findings in both the cervical and lumbar spine.  The EIP then also commenced massage therapy with Applicant in April 2012.  An orthopedic IME had been performed in May 2011, and a chiropractic IME, upon which the denials for the massage therapy were based, was performed in August 2011.

The Arbitrator found that the chiropractic IME was conclusory because, while finding pathology per the MRI reports, and that the EIP showed continued restrictions of motion, the examining chiropractor nevertheless concluded that the massage therapy was not necessary from a chiropractic standpoint. 

The Arbitrator, citing Amato v State Farm (30 Misc 3d 238 [Dist Ct, Nassau County 2010]), stated that “a timely submitted claim for medical services rendered after the issuance of an IME cut-off is presumed to be medically necessary.”  Based upon Amato, the Arbitrator held that Respondent should have obtained another IME regarding the medical necessity for the massage therapy given that the IME was performed months before the treatment at issue.  Given that Respondent failed to do so, the Arbitrator, under the cited ruling in Amato, held that Respondent failed to establish that the massage therapy was not medically necessary.
Note:  We note that the cited Amato case was reversed by Amato v State Farm Insurance Co. (40 Misc 3d 129 [App Term, 9th and 10th Jud Dist 2013]) and the case was remitted to the District Court for entry of judgment in favor of defendant dismissing the complaint.  The Appellate Term found that, without credible evidence, it would be speculative to find that an assignor’s condition had worsened after an IME cut-off and, therefore, held that it is the plaintiff’s burden to demonstrate that the treatment rendered after an IME or peer review cut-off is medically necessary. 

01/14/15          Peter D. DeRose, DDS, MBA v Allstate Ins. Co.
Erie County, Arbitrator Gillian Brown
Peer Review Deemed Conclusory and Insufficient to Uphold Denial
The EIP was struck head-on in December 2013, and sustained a concussion and whiplash.  She was then evaluated by Applicant with complaints of pain in her teeth and jaw, grinding of her teeth, clicking of the jaw, pain when chewing and very painful headaches.  Applicant ordered and reviewed MRI studies and prescribed an orthotic to stabilize the joint and calm the muscles and bite equilibration.  Respondent denied reimbursement based on a peer review performed by Dr. Madison, DDS, in February 2014.

The Arbitrator found the peer review insufficient to support the denial as it did not contain an appropriate rationale for lack of medical necessity concluding only that there seemed to be a question as to whether there was a TMJ injury.  The report did not state a generally accepted standard of care, relate the symptoms to that standard of care, or state how the treatment differed from the standard of care.  There was no reference to studies or authoritative publications as required for peer reviews.  In contrast, the Arbitrator found that Dr. De Rose testified credibly at the hearing, stating that he submitted a detailed report after reviewing the peer review but never received a response from Respondent.  He further testified that he did not see a second peer review by Dr. Madison until the day of the hearing and that one month after receiving the orthotic, the EIP’s condition had greatly improved.  As such, the Arbitrator found that Applicant adequately rebutted both peer reviews and reimbursement was awarded.

01/12/15          Upstate MUA Chiropractic, PLLC v State Farm Mut. Auto. Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Peer Review Finding MUA Not Medically Necessary Is Upheld
The EIP was involved in an accident in June 2012.  She was involved in a subsequent accident in October 2012.  At issue was chiropractic manipulation under anesthesia performed to the spine, hip and right shoulder of the 62 year-old EIP on February 7, 8 and 9, 2014.  Reimbursement was denied based upon the peer review of Ariel Goldin DC, LAc, dated March 27, 2014.

The Arbitrator noted the conflicting reports of Dr. Tracy and Dr. Ess.  While Dr. Tracy opined the EIP’s pain had become chronic and recommended MUA because the EIP reported to him that chiropractic treatment had provided only moderate temporary improvement and injections had not been beneficial, Dr. Ess reported increased function and decreasing symptoms with chiropractic treatment.  Notably, x-rays performed in June 2012 showed normal vertebral alignment and osteopenia in the thoracic and lumbar spine.  Furthermore, during the pre-operative examination, normal range of motion in the neck was documented.  Moreover, the shoulders and hips/pelvis were documented not as sources of pain but rather as having radiating pain to those regions.  In fact, the shoulders received no conservative care prior to the MUA, and yet MUA was performed on all those regions.

The Arbitrator found Dr. Goldin’s peer review to be thorough and well-reasoned.  Dr. Goldin pointed out the many inconsistencies between Dr. Tracy’s and Dr. Ess’ reports and the fact that they did not address the existence of the EIP’s osteopenia and its potential contraindications in relation to MUA, or in the absence of subluxations as shown on the x-rays.

The Arbitrator further commented on the collateral estoppel effect of her prior awards which, although involving a distinct applicant, involved MUA performed on the same dates, the same applicant’s counsel, and the same peer review.  In those cases, counsel had a full opportunity to challenge the peer review.  However, the peer review was not rebutted and the decisions were not appealed.  Here, Dr. Tracy submitted a rebuttal affidavit which was uploaded to the ADR Center the day before the hearing.  As excuse for the late submission, Applicant argued that Dr. Tracy had been scheduled to testify but was unable to attend and therefore prepared the affidavit.  The Arbitrator agreed with Respondent that Dr. Tracy’s failure to appear deprived Respondent of the opportunity to cross-examine him and the late submission of the affidavit did not permit review or response by Respondent.  As such, the Arbitrator determined that Respondent had been prejudiced and declined to consider Dr. Tracy’s affidavit, upholding Respondent’s denial.
Note:  See also related claim Jerry J. Tracy, Physician, PLLC v State Farm Mutual Automobile Insurance Co., AAA Case No. 17-14-9049-1142.

Litigation:

01/21/15          Gonzalez v American Commerce Ins. Co.
Appellate Division, Second Department
Benefits Denied Where Plaintiff’s Knee “Buckled” Causing Her to Fall While Exiting Vehicle
Plaintiff fell and injured her knee while getting out of her husband’s vehicle in front of their house.  Her claim for no-fault benefits was denied on the ground that the injury did not arise out of the use or operation of a motor vehicle.  Plaintiff sued and moved for summary judgment. Defendant’s cross motion to dismiss the complaint was granted and, on appeal, affirmed.  Plaintiff’s injury was not the result of the use or operation of the vehicle itself but rather plaintiff herself testified during her examination under oath, a signed statement, and on her application for no-fault benefits, that her knee “gave way” as she exited the vehicle, causing her to fall.  The court therefore determined that her injuries were not the result of the use or operation of the vehicle and no-fault benefits were not available.

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

01/27/15          Allstate Indemnity Co v Virfra Holdings, LLC
Appellate Division, First Department
Waiver of Subrogation Clause Bars Suit
Allstate commenced the instant subrogation action seeking to recover a loss it paid to its own insured.  However, the action was barred by operation of the waiver of subrogation clause contained within the relevant insurance policies and the condominium association bylaws. Allstate’s claim was dismissed accordingly.

01/21/15          Triple Diamond Café, Inc. v Interested Underwriters at Lloyds
Appellate Division, Second Department
Warranty Requiring Fully Operational Fire Alarm Is a Condition Precedent to Coverage
Plaintiff’s bar and lounge, The Rare Olive, was broken into and set ablaze in April of 2010.  Shortly thereafter, plaintiff’s submitted a claim to Lloyds for coverage of the loss.  Lloyds’ denied the claim on the basis that the policy contained an explicit warranty in the Declarations which required that the business have, inter alia, a fully operation alarm system at all times.  Here, upon the investigation, it was revealed that the alarm system, although present, was not activated at the time of the loss. 

Plaintiff commenced the instant claim arguing that the requirement found on the Declarations Page of the policy was not a “warranty.”  In addition, the plaintiff argued that “fully operational” did not mean “actually set.”  Finally, the plaintiff argued that, at a minimum, the term “fully operational” was ambiguous.

With respect to plaintiff’s first argument, the Court noted that the requirement labeled “warranty” was in fact a warranty under Insurance Law 3106.  As such, a violation of it constituted a violation of a condition precedent to coverage.  A violation of a condition precedent, in turn, provided the basis for coverage being lost. 

In addition, the court ruled that the term “fully operational” clearly meant that the alarm had to have been set and ready to respond to a potential loss.  There was no ambiguity in the term, and the court rejected any attempt to present extrinsic evidence used to create an ambiguity where none was present on the face of the policy. 

01/21/15          Shants, Inc. v Capital One, N.A.
Appellate Division, Second Department
Failure to Provide Full Ten Day Cancellation Notice Window to New Mortgagee Precludes Denial on Late Payment
Plaintiff purchased a building, and retained MRW as its broker to procure insurance coverage on the premises.  MRW obtained a policy of insurance through Tower.  The policy provided coverage to both Shants, Inc., as well as GreenPoint as the mortgagee of the premises.  GreenPoint, as mortgagee, paid the premiums of the policy out of its escrow account.   

GreenPoint’s interest in the mortgage was subsequently purchased by Capital One.  However, because the change was never provided to Tower it appears that Tower continued to send premium notices to GreenPoint.  As a result, on August 24, 2010, Tower eventually sent a notice of cancelation to GreenPoint, plaintiff, and plaintiff’s broker MRW. 

Within a week of receipt of the notice of cancellation, on August 31, 2010, MRW advised Tower that Capital One had purchased the note and was now the appropriate mortgagee.  Tower, it appears, processed a request to amend the policy to name Capital One as mortgagee, and on September 9, 2010, appended a retroactive endorsement to the policy which made Capital One effective mortgagee as of the inception of the new policy. 

Five days later, on September 14, 2010, Tower issued a cancellation notice to plaintiff for failure to pay premiums.  Eight days after that, on September 22, 2010, Capital One submitted payment for the outstanding premium.  Tower chose not to reinstate the policy, but instead allegedly returned the unearned premium to Capital One.  For its part, Capital One claims to never have received the check.  It is noted that all parties agree Capital One never cashed the check that Tower allegedly issued.

In March of 2011, fire destroyed the building.  Plaintiff submitted a claim, and Tower immediately denied it due to its cancellation.  In response, plaintiff commenced legal action against Capital One, Tower and MRW. 
On appeal, the Second Department noted that pursuant to the terms of the Tower policy it was required to provide Capital One, as mortgagee, at least ten days notice prior to cancellation.  The ten day time line ran from the first notice of cancellation Tower issued. 

Here, Tower issued a Notice of Cancellation to GreenPoint in August of 2010.  Therefore, the cancellation was issued well beyond the ten day requirement.  However, the cancellation was issued only five days after Tower was notified that Capital One was the appropriate mortgagee.  Tower never issued a cancellation notice to Capital One prior to cancelling the policy on September 14, 2010.  The Court ruled that per the terms of the Tower policy, Tower was required to provide notice – and a separate ten day waiting period – Capital One.  Where that did not happen, Tower failed to comply with its own cancellation requirement, and therefore its denial/cancellation was rendered ineffective as against Capital One.

Moreover, with respect to plaintiff, because the cancellation to Capital One was ineffective, and because Capital One was the entity that actually paid the mortgage, the policy was still effective for plaintiff as well.

Finally, as coverage was confirmed for Capital One and plaintiff, it followed that MRW’s claims for indemnification against Tower were rendered moot.   

FITZ’ BITS

Elizabeth A. Fitzpatrick
[email protected]

01/13/15          Feaster v. Mid-Continent Cas. Co., 2015 WL 164041
United States District Court, Southern District of Texas
“Your Work” Exclusion Saves the Day in Texas
In the continuing debate over coverage for faulty workmanship or construction defect claims, the Texas court in Feaster v. Mid-Continent Casualty Company reconsidered its previous order and determined that summary judgment was properly granted and should be reinstated in favor of Mid-Continent.

On January 25, 2006, the Feasters purchased a new home built by King Wood in 2005.  King Wood was afforded Commercial General Liability insurance through policies issued by Mid-Continent, with the initial policy incepting on April 25, 2004 and by renewals annually under virtually identical terms in 2005, 2006, 2007 and 2008.  The 2008 policy expired on April 24, 2009.

Several years after the Feasters purchased the home, they began to encounter structural and cosmetic damages.  The initial evidence of damage surfaced in the spring of 2008 when cracking in the flooring was noted.  Between 2009 and 2010, the damage worsened as cracks and other defects formed in the sheetrock, brick mortar and woodwork.  In February 2011, the Feasters filed a lawsuit naming King Wood among other defendants.  The suit was forwarded by King Wood to Mid-Continent seeking defense and indemnity.  Mid-Continent denied the request, citing exclusions j and l, “your work” and “your property” exclusions.

Based upon the denial of the tender by Mid-Continent, no answer was interposed by King Wood and default judgment was thereafter entered against them.  The court awarded the Feaster $305,130.  After the Feasters attempted to collect on the judgment, they obtained King Wood’s interest in the Mid-Continent policies.  The plaintiffs then sued Mid-Continent, alleging unfair and defective settlement practices, breach of contract and breach of the duty of good faith.

The Feasters acknowledged that the damages occurred after they took possession of the property, but contended that the “your work” exclusion was unconscionable and, thus, unenforceable because it reduces the Mid-Continent policies to phantom policies not covering anything.

01/22/15          McMillin Companies, LLC v. Amer. Safety Indemnity Company, 2015 WL 270034
United States District Court, Fourth District, Div. 1, California
Denial of Motion for Summary Judgment on Defense Obligations Does Not Necessarily Mean Insurer Need Defend
The court reversed the lower court, remanding the action for further proceedings.  They found that the denial of summary judgment did not necessarily establish that American Safety had an obligation to defend, holding that the denial of American Safety’s motion for summary judgment in which the court denied the motion, finding that American Safety failed to carry its burden of disproving coverage under a blanket additional insured endorsement did not necessarily establish that a duty to defend existed.

The pertinent facts underlying the coverage dispute are as follows.  McMillin was the general contractor at a series of residential construction projects.  They were sued by some 117 homeowners in an action alleging construction defects.  They tendered their defense to their subcontractors’ insurers, including American Safety, contending that they were entitled to coverage by virtue of their status as an additional insured.  American Safety denied the tender.

McMillin thereafter sued American Safety and other insurers, alleging breach of contract and bad faith based upon their failure to defend them.  All of the other insurers settled, with the exception of American Safety.  American Safety moved for summary judgment but the trial court denied the motion, finding that American Safety failed to meet its burden, demonstrating that there was no possible obligation to afford defense.

At trial, McMillin argued that the denial of American Safety’s summary judgment motion established that they were obligated to defend, citing Horace Mann Insurance Co. v. Barbara B., a 1993 California decision, which held that where coverage depends on an unresolved factual dispute, the very existence of that dispute would establish the possibility of coverage and, thus, a duty to defend.

The court here distinguished Horace Mann, noting that the trial court had ruled only that American Safety had not met its initial burden of proof.  American Safety had sought summary judgment on the grounds that the underlying action did not involve liability from ongoing operations of the named insured, liability from the named insured’s sole negligence and, furthermore, that in any event, exclusions j(5) and j(6) barred coverage.

The court also addressed American Safety’s contention that since other insurers had provided McMillin a defense, even if there had been a breach of their duty to defend, McMillan sustained no damages.  The court found that the settlement proceeds from the other insurers could reduce the amount American Safety ultimately owed McMillin.  The case was remanded for further trial.

AUDREY’S ALL THINGS PERSONAL

Audrey A. Seeley
[email protected]
Not this week.

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

S207/A1313 Zone of Danger for Intentional and Negligent Infliction of Emotional Distress Claims

This proposed legislation would add a new subdivision to CPLR §215 which would codify a cause of action for intentional and negligent infliction of emotional distress.  The new subdivision would allow a cause of action “by an immediate family member within the zone of danger for intentional or negligent infliction of emotional distress.” Included as “immediate family members” would be a spouse, parent, child, sibling or grandparent. 

A244/S1605 Proposed Amendment to General Obligations Law §15-108

This proposed Legislation would repeal the current General Obligations Law §15-108 and add an entirely new General Obligations Law §150-108.  The proposed new provision seeks to clarify the effect of settlement in a tort action.  It states that a settlement with one of the two or more persons claimed to be liable in tort for the same injury “does NOT discharge any other tortfeasor from liability unless its terms expressly so provide.”  However, the non-settling tortfeasor may choose to reduce their liability to the plaintiff by the “stated settlement amount, the consideration actually paid, or the settling tortfeasor’s equitable share of the damages as determined” under Article 14 of the CPLR. 

If there is a settlement with more than one tortfeasor, the remaining tortfeasors may choose to reduce their liability to the plaintiff “by the total of all stated settlement amounts, the total consideration actually paid for all of the settlements, or the total of the settling tortfeasors’ equitable shares of the damages” as determined under Article 14 of the CPLR. 

The non-settling tortfeasor must make the decision in open court or in a writing and prior to the opening statement of the trial. 

Where the remaining tortfeasor has elected to receive a credit equivalent to the amount the plaintiff received in settlement, the credit “shall be ratably apportioned between the past damages of the plaintiff and the future damages.”  This will be done by determining the ratio between the plaintiff’s past damages and the plaintiff’s total damages and then apportioning that same percentage of the settlement towards payment of the plaintiff’s past damages.  For purposes of the apportionment of the settlement credit between past and future damages, the ratio will be premised upon the amounts of damages awarded by the jury/judge after adjustment has already been made for all other setoffs, credits and reductions. 

Where the remaining tortfeasor elects to receive an equitable share credit, each of the plaintiff’s awards for past damages and for future damages as remain after all other set-offs, credits and reductions will be reduced by the settlor’s equitable share of the total culpability.

This provision also states that “a settlement between the plaintiff or claimant and a tortfeasor relieves such tortfeasor from liability to any other person for contribution or indemnification.”  Further, the settling tortfeasor may not seek contribution or indemnification from another person except where in consideration of the settlement; the plaintiff has released from liability the person to whom the tortfeasor would seek contribution/indemnification from.
However, this section will not affect or impair “any claim for indemnification if, prior to the accident…the party seeking indemnification and the party from whom indemnification is sought had entered into a written contract in which the latter had expressly agreed to indemnify the former for the type of loss suffered.” 

 

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
[email protected] 

01/15/15          Lend Lease (US) Constr. LMB Inc. v Zurich Am. Ins. Co.
Supreme Court, New York County
Question of Fact Found As to Whether Damaged Tower Crane
Was Intended to Become a Permanent Part of the Insured Project
Plaintiffs brought this action seeking coverage under a builder’s risk policy for damages to a building under construction due to Super Storm Sandy.  The damages sustained in the storm related to the dislodgment and partial destruction of the crane tower that had been built in connection with the project, and other damages and delays to the project. 

Defendants denied coverage on the grounds that the tower crane was not Covered Property within the meaning of the builder’s risk policy, and the policy excluded coverage for “contractor’s tools, machinery, plant and equipment.”  Specifically, the exclusion provided that the policy does not insure against loss or damage to “[c]ontractor’s tools, machinery and equipment including spare parts and accessories, whether owned, loaned, borrowed, hired or leased, and property of a similar nature not destined to become a permanent part of the INSURED PROJECT, unless specifically endorsed to the Policy.”

In support of plaintiffs’ motions for summary judgment, an affidavit was submit by the developer’s Senior Vice President stating that the tower crane was designed and construed to be integrated into the building structure during the construction process, with several components remaining a permanent part of the building.  In opposition, defendants contended that the tower crane was not intended to become a permanent part of the insured project.  They cited to the Construction Management contract which provided that the tower crane was to be removed, and the contractor shall come back and fill in temporary openings with frame concrete. 

The court ultimately denied both plaintiffs’ motions for summary judgment and defendants’ cross-motion finding a question of fact as to whether the tower crane was intended to become a permanent part of the project, which was relevant to the applicability of the contractor’s machinery and equipment exclusion. 

Bad Faith

1/21/15            Progressive Casualty Ins. Co. v. Vigil
Court of Appeals of New Mexico
Where Trial Court Improperly Excluded Evidence of a Prior Favorable Decision on Coverage and the Carrier’s Payment of the Underlying Claims, New Mexico Court of Appeals Vacates Bad Faith Damages and Remands Case for New Trial
Defendants, Colleen and Martin Vigil, were insured under a Progressive automobile insurance policy.  In late September 2002, Colleen contacted Progressive to add a car to the policy.  Believing the policy premium was due on October 3, 2002, Colleen called Progressive to pay the premium over the phone.  During this call, she was told that the premium was not due until October 15, 2002.  She nevertheless paid it anyways.  She later received another notice from Progressive stating that her policy would renew on November 3.  Colleen testified that she found this confusing and called the automated system which informed her that the next premium was due November 15. 

On November 4, her son, Martin, was involved in a car accident in which one passenger was killed and another seriously injured.  After the accident, Colleen called Progressive to check on her coverage, and was advised that she was covered until November 15.  She paid the premium and reported the loss.  About two weeks later, Progressive determined that the Vigils did not have coverage on the date of the loss because it lapsed on November 3. 

Thereafter, Progressive filed this action for declaratory judgment, and the Vigils counterclaimed for bad faith.  While the action was pending, Progressive settled the underlying personal injury and wrongful death claims, paying the policy limits, subject to a reservation of rights.  After the payment, Progressive amended its complaint to seek reimbursement of the amounts paid to settle the claim in the event the factfinder determined there was no coverage. 

After two years of discovery, Progressive was granted partial summary judgment on the coverage issue, and after an additional three years, a jury determined that Progressive was entitled to reimbursement.  In 2009, this court reversed because the issue of whether the Vigils had coverage involved disputed material facts.  The court also noted that the claim for reimbursement would be moot if coverage was found.  The matter was then remanded to the trial court for further proceedings and a new trial. 

While on appeal, the case was reassigned to a different judge, and after the matter was remanded, the Vigils moved for summary judgment on the reimbursement issue.  The court granted the motion finding, as a matter of law, that Progressive did not have a right to seek reimbursement for the payments it made to settle the third-party claims even if there was no coverage. 

Prior to the re-trial on coverage and the bad faith claims, the Vigils moved to exclude from evidence the fact that the trial court had previously concluded there was no coverage.  They also moved to exclude evidence concerning Progressive’s payment of the third-party claims.  Both requests were granted.  The court found that information concerning the trial court’s prior ruling was irrelevant and that information regarding the payment went to the reimbursement issue which had already been decided.  After trial, a jury found coverage and awarded the Vigils amounts in excess of $12 million dollars related to the bad faith claims. 

Progressive appealed arguing that the trial court erred in prohibiting it from admitting any evidence about the prior judge’s ruling and the payment of the third-party claims.  The Court of Appeals affirmed the finding of coverage, but found that these rulings were improper.  The court concluded that the exclusion of the evidence of the previous judge’s ruling that there was no coverage was an abuse of discretion.  It noted that whether Progressive acted reasonably was a fact in consequence in determining the bad faith.  And, the fact that the previous judge concluded there was no coverage tended to make the fact that Progressive acted reasonably more probable, a position supported by other jurisdictions.  Moreover, the exclusion of this evidence prejudiced Progressive as it concealed an important part of the picture from the jury’s view.  

With regard the evidence concerning the payment of the claim, the court likewise found the exclusion of this evidence in error.  The fact that Progressive paid amounts to the claimants was relevant because it tended to make it less probable that Progressive acted in bad faith over the course of the coverage dispute.  In making these payments, Progressive both compensated the third-party claimants and prevented the Vigils from having to defend themselves. 

Accordingly, the court vacated the awards and remanded the action for a new trial. 

 

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

9/18/14            Westfield Insurance Company v. Carpenter Reclamation, Inc.0
Western District of West Virginia
CGL Policy Does Not Cover “Non-Conforming” Construction Work
Carpenter Reclamation did site work for a school district, and in performing excavation work blasted deeper than required by project specifications.  Carpenter had to replace and level the site with fill, and the school district alleged Carpenter did not comply with the contract because it installed Class B fill instead of specified Class A fill.  Carpenter sought coverage from Westfield Insurance for the school district’s claim under its CGL policy.  Westfield denied coverage on several grounds, including that the school district’s claim was for breach of contract and not a claim for “property damage”.  The insurance company also argued that there was no accidental “occurrence” causing the loss based upon the policy definitions. 

Since the federal court was sitting in West Virginia, it reviewed the most current West Virginia law which was the case of Cherrington v. Erie Insurance Property and Casualty Company, 231 W.Va. 470 (2013) which held in 2013 that defective workmanship may give rise to a covered occurrence under a CGL policy provided it causes bodily injury or property damage.  The Cherrington decision was an important recent case in which the Supreme Court of West Virginia had reversed itself with respect to the potential applicability of CGL coverage for construction defect claims.

Nonetheless, the Federal Court held for the insurance company noting that the possibility of overblasting was an expected or foreseen event, and the school district’s claim did not allege a covered “occurrence”.  In addition, the complaint did not really allege property damage since the Court found illogical the idea that excessively blasted or damaged bedrock could really constitute “property damage” since Carpenter’s contract was to blast and remove it in the first place.

The first interesting part of this case is that the Federal Court sitting in diversity had to determine how the law of West Virginia would apply, and in so doing take into account the very recent West Virginia case which changed the state’s legal view with respect to the possibility of CGL coverage for construction defects, provided that bodily injury or secondary property damage was alleged. 

This case is typical of those across the country struggling to decide with whether construction defect claims can be covered by CGL coverage, and focuses on four of the key insurance provisions usually at issue: the “accidental occurrence” definition; the “your work” exclusion; the exclusion for claims incurred as a result of breach of contract or contractual obligations; and the definition of covered property damage.

In this case, the contractor still could not satisfy the “property damage” requirement since the gist of the school district’s claim was the excessively blasted and removed bedrock which the Court ruled did not really fit the meaning of secondarily or unintentionally caused property damage.

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