Coverage Pointers - Volume XVI, No. 17

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations, preferably ones where we can go to warm places to resolve them.

A special thanks to my friends at the Canadian Defence Lawyers for their warm and generous welcome last week in Toronto.  GREAT lawyers up there with a real thirst for knowledge.

 

Happy Valentine’s Day.  With thanks to the History Channel we give you a few Valentine’s Day facts:

CANDY

1,241: The number of locations producing chocolate and cocoa products in 2004. These establishments employed 43,322 people.  The per capita consumption of candy by Americans in 2005 was 25.7 pounds. Candy consumption has actually declined over the last few years; in 1997, each American gobbled or savored more than 27 pounds of candy a year.

 

FLOWERS

The combined wholesale value of domestically produced cut roses in 2005 for all operations with $100,000 or more in sales was $39 million. Among all types of cut flowers, roses were third in receipts ($39 million) to lilies ($76.9 million) and tulips ($39.1 million). There were 21,667 florists nationwide in 2004. These businesses employed 109,915 people.

 

JEWELRY

There were 28,772 jewelry stores in the United States in 2004. In February 2006, these stores sold $2.6 billion worth of merchandise.

DOGHOUSES

There is one doghouse in your life, if you don’t, at least, get your Valentine a card.

Bringeth on Spring:

Temps in Western New York may dip to -8o Fahrenheit, which is even colder in Celsius!
[I really accomplished something. I had to figure out how to type a degree (o) sign and learned something.  Cntl-Shift + puts the keyboard into superscript mode and then with the letter “o” one creates a degree sign.  No extra charge for that little tidbit.]

Fitz’ Hits – Congrats to Beth Fitzpatrick:

We send special kudos to Beth Fitzpatrick on her election as Secretary of the Torts, Insurance and Compensation Law Section of the New York State Bar Association at its Annual Meeting in New York City,.  That Section had already recognized Beth’s work as Continuing Legal Education Chair in a previous “Chair of the Year” Award.  Beth will move up to chair that Section in two years. 

 

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, 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 will present 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 on to the:

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 (or more of your) 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:

The deep cold in this area continues and as a result, the blizzard’s snow from last time has not yet melted.  The warmth of Valentine’s Day is on the horizon, but not many here on Long Island love the groundhog that promised six more weeks of winter when he saw his shadow.  Fortunately, the cold has not stopped the Second Department from issuing many decisions on Serious Injury. Several of the cases remind us that a detailed medical affirmation, which describes the testing that led the expert’s conclusions, will help establish a prima facie case of summary judgment for defendants.  The more detailed the affirmation, the more testing the doctor performed, the better the medical affirmation can support the conclusion that there is no serious injury. Further, another case reminds us that when there have been prior injuries that led to prior independent medical examinations, reports from those prior examinations can be helpful in demonstrating that the injuries complained of in the current accident are pre-existing.            

Wishing you a Happy Valentine’s Day,

Rob
Robert Hewitt

[email protected]

Lusitania Sails, But Not For the Last Time:

The Evening World
New York, New York 
13 Feb 1915

BRITISH FLAG FLIES ON THE LUSITANIA
AS BIG LINER SAILS

Two Hundred Transfer Passage
to American Line Steamship St. Paul

LATTER ALSO SETS OUT

Some Observers Predict No Danger
Until Ship Starts to Return

LIVERPOOL, Feb. 13, via London (Associated Press).—The Cunard line steamer Lusitania, the vessel which flew the American flag across the Irish Sea on her last trip as a measure of protection against German submarines, sailed from Liverpool for New York at her usual hour to-day under the British Flag.

Whether or not this emblem will still be flying when the Lusitania reaches the Irish Sea was a question to which the keenly interested passengers found it impossible to answer.

The Lusitania carried a large list of passengers, including many Americans.  Prospective American passengers to the number of 200, however, cancelled their bookings on the Lusitania at the last moment and transferred over to the American line steamer St. Paul, which also sailed for New York to-day.  The St. Paul had the largest passenger list since the rush of American refugees last fall.

Most of the passengers were supremely confident that the Lusitania would not be interfered with on her present voyage, although it is expected the Germans will make a real attempt to get her if she returns on scheduled time.

Although Admiralty officials were silent on the subject. there was a general belief that the fleet commander had provided an escort of big and fast destroyers for both the Lusitania and St. Paul.

Editor’s Note: 
The sinking of the RMS Lusitania occurred three months later, on 7 May 1915 during the First World War, as Germany waged submarine warfare against the United Kingdom of Great Britain and Ireland. The ship was identified and torpedoed by the German U-boat U-20 and sank in 18 minutes. The vessel went down 11 miles (18 km) off the Old Head of Kinsale, Ireland, killing 1,198 and leaving 761 survivors. The sinking turned public opinion in many countries against Germany and contributed to the American entry into World War I while becoming an iconic symbol in military recruiting campaigns as to why the war was being fought.

Fitz’ Bitz:

Dear Subscribers:

Punxatawney Phil saw his shadow and the word is that we can expect six more weeks of winter.  Having endured a blizzard that dumped more than 2 feet of snow and a 2 day ice storm, followed by single digit temperatures, I believe Phil.

I will continue to look toward warmer days and remind you of two programs I will be speaking at-both sponsored by the New York State Bar Association.  In March, a Premises Liability seminar will be held in Albany, New York City and Long Island and our Advanced Insurance Program will be held in May. If you would like additional information about either program, please drop me a note.

In a February 8, 2015 press release, the New York Department of Financial Services announced the release of a report on cyber security in the insurance industry and those measures that DFS will take to strengthen cyber hacking defenses.  The Superintendent referenced recent cyber security breaches as a wakeup call for the industry.  The report follows a survey of some 43 entities, with combined assets of approximately $3.2 trillion, noting that although it may be expected that the largest insurers would have the most robust and sophisticated cyber defenses, the Department did not necessarily find that to be the case.  A copy of the report can be accessed via the DFS website.

An interesting finding, as the industry is being asked to afford coverage for cyber breaches.  As I noted in our December issue, 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.

This week, I report on another action involving coverage under a commercial general liability policy for faulty workmanship, this applying Illinois law.  In Catlin Specialty Insurance Company v. Parks Industries, LLC, TM Transportation Inc., and LT Cargo, Inc., Parks Industries, LLC, issued January 21, 2015, the court found there was no “occurrence” and no “property damage” and thus, no obligation for Catlin to afford defense or indemnity. I also report on a decision of the 9th Circuit, where the court found that due to the failure of the policy insureds to provide notice, no duty was owed by Cincinnati Insurance in connection with a $9.7 million claim.

Stay warm,

                                                                                    Til next time,

                                                                                    Beth
                                                                                    Elizabeth A. Fitzpatrick
                                                                                    [email protected]

They Picked on Jersey a Century Ago:

The Brooklyn Daily Eagle
Brooklyn, New York 
13 Feb 1915

WOULDN’T LIVE IN JERSEY

F. H. Mather, Former Brooklynite,
Gets Divorce from Wife

Rutherford, N. J., February 13—Frank H. Mather, organist and choirmaster at the Grace Episcopal Church here, whose wife, Mary Patrick Hunt Mather, left him after he moved from Brooklyn to this borough three years ago, yesterday received word from Advisory Master in Chancery Roe of Jersey City, to the effect that he recommended to Chancellor Walker to award Mather an absolute decree of divorce. 

Mather, in his petition for divorce, declared that his wife refused to move here with him, protesting against living in New Jersey. 

Jen’s Gems:

As we continue to work our way through winter, I have had the pleasure of dealing with the germs/illnesses associated with having a two year old in my house.  I half-jokingly say that Ella’s daycare is like a Petri dish.  Unfortunately, these thoughts are only confirmed when she comes home from school to inform me who got sick that day.  Sometimes this information is even followed-up with a reenactment of the day’s events, though thankfully without the release of fluids.  So, I continue to keep my fingers crossed that this winter passes without too many more calls home.    

In terms of my column, this week I report on a decision of interest out of the Nevada Supreme Court, Fulbrook v. Allstate Ins. Co.  The case has the typical components of a bad faith  “set up.”  A tragic loss and minimal policy limits.   The decision is especially interesting because the Court upheld certain rulings made by the district court at trial which included permitting the insurer to submit as evidence demand letters sent by the plaintiff’s attorney to other insurers in other cases.  The court held that in order to judge the reasonableness of the carrier’s action, it needed to likewise consider the actions of plaintiff’s counsel.  This decision, assuming it is followed in other jurisdiction, could provide carriers a significant tool in defending these types of actions.  By allowing evidence that the plaintiff’s attorney is merely attempting to “set up” the carrier in order to increase the pool of money available, it can significantly change the trial dynamics.     
Well, until next issue…

Jen
Jennifer A. Ehman
[email protected]

Overpaid Lawyers 100 Years Back?

The Wichita Beacon
Wichita, Kansas
13 Feb 1915

FEE HAD LITTLE CHANCE

A suit for the collection of a $5 debt had been successfully prosecuted by a lawyer in the City Court and judgment rendered.  Judge Grover Pierpont filled out the necessary papers and handed them to the winning lawyer.  “How about the attorney’s fee?” demanded the lawyer in some alarm as he glanced over the papers.  “Oh, I guess you’ll have to take that out of your judgment,” replied Pierpont.  And everyone in the court room laughed. 

Pondering Peiper:

On the penultimate eve of Valentine’s Day, your writer starts this note wondering aloud where our Editor will work in his famous goat flogging story.  Notice I did not say if, but rather where.  I trust, sight unseen that the history of Valentine ’s Day will be touched upon.  In the unlikely event it is not recited this year, take a look back at past Valentine’s Day issues.  You’ll find it.  

Truth, as they say, is much stranger than fiction.

As for the column this week, if you don’t know what Workers’ Compensation Law 29(5) requires…you’re likely not alone.  Fear not, however, because if you take a gander at the two decisions from February 4, 2015 reviewed below, you’ll know all you ever need.  Basically, you need consent, or confirmation, of a settlement with three months of the resolution of the bodily injury case.  Except when you don’t. Unless you aren’t fast enough, then you do.  Got it.

Lastly, we bid adieu to this issue with a bit an offbeat romance story ourselves.  Just in time for Valentine’s Day, we bring you the story of the “creepy” claims professional that apparently freaked out a juror in Onondaga County.  (insert car insurance commercial with 80’s heart throb joke here).

The real horror story had nothing to do with an adjuster monitoring the trial, but rather the judge who overturned a defense verdict upon hearing tale of the woebegone spectator.  While not completely righted, the matter was returned to the Trial Court for further proceedings on the actual impact the “creepiness” had on other, perhaps less self-absorbed, jurors.  Don’t you just love happy endings?

Truth, as they say, is stranger than fiction. 

By the way, it wasn’t really “they.” Rather, Lord Byron apparently coined the phrase in the 1823 poem Don Juan.  That’s it for now.  Stay warm, and buy your Valentine the good chocolate this year!    

Steve
Steven E. Peiper
[email protected]

Editor’s Note:          I thought I would avoid the goat flogging this year.  Now I’m having second thoughts.  Ok, if you want to learn more about the history of Valentine’s Day, we covered it well in our 2008 Valentine’s edition.

Laborers Ask A Lot, A Century Ago.

The Fort Wayne Journal-Gazette
Fort Wayne, Indiana
13 Feb 1915

Ask For Employment Insurance Law

NEW YORK, Feb. 12.—At a largely attended meeting of unemployed held under the auspices of the socialist party in Union square to-day, a resolution was passed demanding a national unemployment insurance law, the immediate commencement of all contemplated state and municipal public works, the passage of a law prohibiting the exportation of foodstuffs and the creation of municipal shops for the unemployed. Congressman-elect Meyer London was the chief speaker.  The meeting was an orderly one. 

Mr. London urged the crowd to continue agitating by writing to their representatives and by marching until they attracted attention.  He said that a system of compulsory insurance against unemployment on a national scale must be made a part of the political and industrial life of the nation.

This Week’s Highlights:

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

  • Insurer’s Agent Received Timely Notice.  Its Failure to Notify the Insurer Cannot Render it Liable for Late Notice Since its Notice Was the Insurer’s Notice
  • Most Claims by Auto Repair Shops Against Insurers Remain Viable

 

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

  • Defendants Established Entitlement To Summary Judgment By Submitting An Orthopedist’s Report Which Found All Sprains To Be Resolved From An Orthopedist Who Performed Multiple, Detailed Tests That Were Spelled Out Clearly In The report
  • Appellate Court Will Reverse Trial Court Where Plaintiff Shows Issue of Fact Even If Defendant’s Expert Opines That the Injuries Were Preexisting
  • Defendants Must Show Through Competent Medical Evidence That the Alleged Injuries Are Not Serious Injuries
  • Defendants Failed To Establish Plaintiff Was Able to Perform Substantially All of the Material Acts Constituting Her Usual and Customary Daily Activities
  • Defendants Orthopedist’s Finding That All of Plaintiffs’ Injuries Were Resolved Was Not Enough to Make a Prima Facie Case for Summary Judgment
  • Defendant Must Address All Claims in the Bill of Particulars
  • Appellate Court Will Reverse Where All Claims in Bill of Particulars Are Not Addressed
  • Defendant Can Establish a Prima Facie Case Through a Medical Affirmation Which Sets Forth the Testing of the Plaintiff in Detail Combined With Use of Independent Medical Examination Reports from Prior Injuries/Accidents Which Establish That Any Injury Was Pre-Existing
  • Defendants Can Win Summary Judgment Motions If Their Medical Reports Are Detailed As To Favorable Testing and Plaintiff’s Opposition Is General and Conclusory
  • All Claims in the Bill of Particulars Must Be Addressed
  • Medical Affirmations Must Be Sworn To Be Admissible and Must Contain the Date of the Examination of Plaintiff by the Doctor for the Court to Find a Prima Facie Case for Summary Judgment Has Been Made By Defendants

 

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

Arbitration

  • Applicant’s “Monitoring” of Conservative Care Not Medically Necessary
  • IME Insufficient on Issue of Aggravation of Pre-Existing Conditions
  • Interest, Attorney’s Fees and Return of Filing Fee Not Payable Where Claim Not Denied or Overdue
  • Denial Struck Down For Lack of Specificity
  • Denial Based on Lack of Curative or Palliative Benefit after Three Years Upheld

 

Litigation

  • Absence of Certificate of Conformity Not Fatal if Not Shown to Be Prejudicial

 

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

  • Unauthorized Dental Procedure = Battery; GBL § 349 Claim Withstand Motion to Dismiss
  • Trial Court’s Unilateral Investigation into Undue Jury Influence Deemed an Abuse of Discretion
  • No Appellate Right for Denial of Motion in Limine; Motion to Amend Answer Should Be Freely Granted
  • Delay Occasioned by Litigation Over Consent of Settlement Permitted Under Workers’ Compensation Law § 29(5)
  • Delay Occasioned by Injured Party’s Own Neglect Precludes Judicial Approval under Workers’ Compensation Law 29(5)

.   

FITZ’ BITS
Elizabeth A. Fitzpatrick
[email protected]

  • No Occurrence and No Property Damage = No Duty
  • Cincinnati Walks Due to Late Notice

 

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

 

  • Happy Valentine’s Day.

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

  • A1230 Seeks To Require DFS to Issue Regulations Providing For Standardized Definitions for Commonly Used Terms and Phrases in Insurance Policies
  • A2946 Expediting Actions Involving Insurance Claims for Damages Resulting From a State Disaster Emergency
  • Circular Letter No. 1 (2015)    Providing Clarification regarding No-Fault notice/proof of claim

 

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

  • Where Insured Punches Underlying Plaintiff Three Times in the Face, Court Upholds Carrier’s Denial Based on Expected or Intended Acts Exclusion
  • Framed Issued Hearing Ordered to Address Whether Allegedly Stolen Vehicle Was Uninsured

 

Bad Faith

  • Supreme Court of Nevada Affirms District Court’s Admission of Evidence At Trial Relating to the Plaintiff’s Attorney’s Demand Letters to Other Carriers In Other Proceedings; Admits Evidence of a “Set Up”

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

  • Insurer Denied Summary Judgment on Construction Defect Claims

 

That’s all for now.  Do try to stay warm.  We await invitations from our Florida and Arizona clients for extended speaking engagements that will take us there through April.

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]

02/11/15       Purcell v. M.L. Bruenn Co., Inc
Appellate Division, Second Department
Insurer’s Agent Received Timely Notice.  Its Failure to Notify the Insurer Cannot Render it Liable for Late Notice Since its Notice Was the Insurer’s Notice
Purcell was injured in an automobile accident. It is claimed that she gave notice of the accident to the defendants, who, all agree, were agents of Progressive Insurance Company, which had issued the plaintiffs' insurance policy. The agent did not give notice to Progressive.  Progressive denied coverage and the agent was sued for negligence.

Here, the insurance policy provided that notice to an agent of Progressive would satisfy the notice provisions of the policy. Since, under the terms of the policy, notice to the agent satisfied the plaintiffs' duty to provide notice of the accident to Progressive, the agent demonstrated that any failure to communicate notice of the accident to Progressive did not alter the rights under the terms of the policy or otherwise affect their ability to recover in accordance with its terms.
Editor’s Note:  Makes sense to us.  If notice to the agent was timely, then notice to Progressive was timely.  It makes no difference if the agent did or did not transmit it to Progressive because as its agent, it was accepting notice on behalf of Progressive.

02/16/15       Jeffrey’s Auto Body, Inc. v. Allstate Insurance Company
Appellate Division, Fourth Department
Most Claims by Auto Repair Shops Against Insurers Remain Viable
There were four appeals by automobile repair shop operators seeking to recover payment for repairs performed on behalf of various individuals whose cars they repaired.  They alleged causes of action alleging breach of contract, quantum meruit, and the violation of General Business Law § 349, which prohibits deceptive business practices. The insurer defendants sought various kinds of relief.

The only claim the court dismissed was the one sounding in quantum meruit because there were enforceable contracts (insurance policies) in place during the repairs.  All other claims remain in place.

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

Robert E.B. Hewitt III
[email protected]

02/04/15                 Keegan v. Tzemis
Appellate Division, Second Department
Defendants Established Entitlement To Summary Judgment By Submitting An Orthopedist’s Report Which Found All Sprains To Be Resolved From An Orthopedist Who Performed Multiple, Detailed Tests That Were Spelled Out Clearly In The report
The Appellate Court affirmed the granting of defendants’ motion for summary judgment by the trial court. Defendants submitted competent medical evidence establishing that the alleged injuries to the cervical spine and right should of plaintiff were not serious injuries under either the permanent consequential limitation of use or significant limitation of use categories.  Defendants submitted the affirmed report of an orthopedic surgeon who examined the plaintiff. The surgeon found that there was no evidence of an orthopedic disability finding that the post cervical strain and post right shoulder sprain to be resolved. His report was detailed and indicated multiple testing that did not show any abnormality. 

Plaintiffs failed to raise a triable issue of fact through submission of MRI findings which failed to causally relate of the findings to the subject accident. Furthermore, the documentation indicated that the onset of her pain occurred in 2012, three and a half years after the accident. 

02/04/15                Singh v. Surico
Appellate Division, Second Department
Appellate Court Will Reverse Trial Court Where Plaintiff Shows Issue of Fact Even If Defendant’s Expert Opines That the Injuries Were Preexisting
The Appellate Court found that the defendant met his prima facie burden of showing through competent medical evidence that the alleged injuries to the cervical and lumbar regions of the spine of each of the plaintiffs did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories. Affirmed medical reports of two doctors, one of whom conducted an independent medical examination of plaintiff, and one of whom reviewed MRIs of plaintiff soon after the accident, both of whom opined that the injuries to the spine were preexisting.

The Appellate Court, for unstated reasons, found that each plaintiff raised triable issues of fact as to whether they sustained serious injuries to the cervical and lumbar regions of the spine. The trial court was reversed.

02/04/15       Alves v. Haque
Appellate Division, Second Department
Defendants Must Show Through Competent Medical Evidence That the Alleged Injuries Are Not Serious Injuries
The Appellate Division unanimously reversed the grant of summary judgment to defendants. The defendants met their prima facie burden of showing that plaintiff did not suffer a serious injury within the meaning of the Insurance Law through submission of competent medical evidence that the alleged injuries to the cervical and thoracolumbar regions of the plaintiff’s spine did not constitute serious injuries under the permanent consequential limitation of use or significant limitation of use categories. However, the plaintiff raised triable issues of fact as to whether those areas sustained serious injuries. The Appellate Court did not detail how either side met their burden.

02/04/15       Derosa v. Abeshouse
Appellate Division, Second Department
Defendants Failed To Establish Plaintiff Was Able to Perform Substantially All of the Material Acts Constituting Her Usual and Customary Daily Activities
Defendants failed to make their prima facie burden of showing that plaintiff did not sustain a serious injury. They failed to establish that during the 180-day period following the accident, the plaintiff did not have injuries or impairments, which for more than 90 days, prevented her from performing substantially all of the material acts constituting her usual and customary daily activities. The Appellate Court thus found that the trial court properly denied defendants’ motion to dismiss.

02/04/15                 Wang v. Uruchima
Appellate Division, Second Department
Defendants Orthopedist’s Finding That All of Plaintiffs’ Injuries Were Resolved Was Not Enough to Make a Prima Facie Case for Summary Judgment
The trial court granted summary judgment but the Appellate Court reversed. In support of their motion, defendants submitted the medical affirmations of two doctors. An orthopedist examined plaintiff and found normal range of motion in the wrist and right knees. He determined there were a “resolved sprain” of the cervical spine and right shoulder, knee and wrist with no disability for plaintiff Wang and similarly, a resolved sprain with no disability in plaintiff Xu’s cervical spine and left knee. A radiologist found a normal MRI of plaintiff’s right knee and no causal relation between the accident and the small joint effusion in plaintiff Xu’s knee. 

The appellate court found that defendants motion failed to address plaintiff’s claim set forth in the bill of particulars that  he sustained a serious injury to the lumbar region of his spine under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law without analysis of why. It was unnecessary to determine whether plaintiff’s papers in opposition raised triable issues of fact in light of the defendants not meeting their burden. The trial court’s grant of summary judgment was reversed.

02/04/15                McDonough v. Mulligan
Appellate Division, Second Department
Defendant Must Address All Claims in the Bill of Particulars
The Appellate Court reversed the trial court’s granting of summary judgment to defendants. The Appellate Court found that defendants failed to meet their prima facie burden of showing that plaintiff did not sustain a serious injury. The papers failed to adequately address plaintiff’s claims in her bill of particulars that she sustained serious injuries to the cervical and thoracolumbosacral regions of her spine and to her shoulders, knees, and ankles under the permanent consequential limitation of use and significant limitation of use categories and that she sustained a serious injury under the 90/180 day category.

02/04/15                Mendez v. Mitchell
Appellate Division, Second Department
Appellate Court Will Reverse Where All Claims in Bill of Particulars Are Not Addressed
The Appellate Court reversed the trial court’s granting of summary judgment to defendants. The Appellate Court found that defendants failed to meet their prima facie burden of showing that plaintiff did not sustain a serious injury. The papers failed to adequately address plaintiff’s claims in her bill of particulars that she sustained serious injuries under the 90/180 day category. The case does not set forth much detail.

01/28/15                Yi v. Comfort
Appellate Division, Second Department
Defendant Can Establish a Prima Facie Case Through a Medical Affirmation Which Sets Forth the Testing of the Plaintiff in Detail Combined With Use of Independent Medical Examination Reports from Prior Injuries/Accidents Which Establish That Any Injury Was Pre-Existing
The Appellate Court found that defendants submitted competent medical evidence establishing, prima facie, that the alleged injury to the plaintiff’s right shoulder did not constitute a serious injury under either the permanent consequential limitation of use or significant limitation of use categories Defendants submitted the sworn report of an orthopedist who performed an independent orthopedic examination and a neurologist who performed an independent neurological examination in plaintiff’s prior accident two years before in which she had sustained a prior right shoulder accident. The orthopedic averred that plaintiff had normal range of motion in her cervical spine and right shoulder based upon quantified range of motion testing with a goniometer. He found no objective findings either in range of motion testing or muscle spasm. He found she had recovered fully. He also performed motor and sensory testing and found no deficits.

Plaintiff, however, raised a triable issue of fact as to whether she suffered a serious injury to her right shoulder. Plaintiff submitted her own affidavit, the sworn report of an orthopedic surgeon who examined plaintiff twice; and the sworn report of a radiologist who performed an MRI examination of plaintiff’s right shoulder. In finding an issue of fact for unstated reasons, the Appellate Court reversed the trial court.

01/28/15       Pryce v. Nelson
Appellate Division, Second Department
Defendants Can Win Summary Judgment Motions If Their Medical Reports Are Detailed As To Favorable Testing and Plaintiff’s Opposition Is General and Conclusory
The Appellate Court determined that defendant met the prima facie burden of showing that plaintiff did not sustain a serious injury to the thoracolumbar region of her spine and left shoulder. In support of the motion, defendants relied on the affirmed medical report of the examining orthopedist, as well as the hospital records and medical reports of the plaintiff’s treating medical care providers, and a transcript of the plaintiff’s deposition testimony. The examining orthopedist opined that the condition of the thoracolumbar region of the spine was the result of preexisting degenerative disc disease and a prior motor vehicle accident, and he provided a nonconclusory explanation for that opinion. The slight limitation in the range of motion in the left shoulder was opined to be insignificant. In addition, the defendant demonstrated that during the 180-day period immediately following the accident, the plaintiff did not have any injury or impairment which for more than 90 days prevented her from performing substantially all of the acts that constituted her usual and customary daily activities.

In opposition, plaintiff failed to raise a triable issue of fact. The medical reports and records of plaintiffs treating physicians failed to set forth any quantified range of motion findings or a qualitative assessment of the plaintiff’s left shoulder or an opinion as to the cause of any limitation in the range of motion of the lumbar region of the plaintiff’s spine. Thus the motion was granted.

01/28/15       Sissoko v. Motivate Taxi, Inc.
Appellate Division, Second Department
All Claims in the Bill of Particulars Must Be Addressed
The Appellate Court reversed the trial court’s granting of summary judgment to defendants. The Appellate Court found that defendants failed to meet their prima facie burden of showing that plaintiff did not sustain a serious injury. The papers failed to adequately address plaintiff’s claims in her bill of particulars that she sustained serious injuries under the 90/180 day category.

01/28/15       Baik v. Enriquez
Appellate Division, Second Department
Medical Affirmations Must Be Sworn To Be Admissible and Must Contain the Date of the Examination of Plaintiff by the Doctor for the Court to Find a Prima Facie Case for Summary Judgment Has Been Made By Defendants
The Appellate Court found that the defendants submitted competent medical evidence establishing that the alleged injuries to the cervical and lumbar regions of the plaintiff’s spine and to the plaintiff’s left knee did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories. Defendants’ submitted evidence that plaintiff’s status post left knee arthroscopy was resolved and the same was true with respect to lumbosacral spine strains and bilateral shoulder strains.

In opposition, however the plaintiff raised triable issues of fact as to whether she sustained serious injuries to the cervical and lumbar regions of her spine and to her left knee. She submitted affirmed medical reports of two doctors which the Appellate Court found raised issues of fact for unstated reasons.  Thus the trial court was reversed.

The defendants did not meet their prima facie burden of showing that the plaintiff did not sustain a serious injury under the 90/190-day category of the Insurance law as the defendants’ motion failed to adequately address her claims in the bill of particulars that she sustained a serious injury, because they submitted an unsworn inadmissible report from one doctor, and a report from another doctor that failed to note the date of the exam.

MARGO’S MUSINGS ON NO FAULT

Margo M. Lagueras
[email protected]

Arbitration

02/05/15       Buffalo Neurosurgery Group v Allstate Prop. & Cas. Ins. Co.
Erie County, Arbitrator Douglas Coppola
Applicant’s “Monitoring” of Conservative Care Not Medically Necessary
The EIP was involved in a motor vehicle accident in January 2009 and commenced treating with Applicant in March.  Records indicated that the EIP had pre-existing cervical and lumbar injuries sustained in a 2004 accident and had undergone L4-5 surgery in 2005.  In April 2010, an IME was performed and the examining physician determined that the ongoing office visits were not medically necessary.  In a previous arbitration, Arbitrator Murphy-Louden found the IME persuasive as Applicant was only monitoring the EIP’s conservative care, without providing any treatment with either curative or palliative benefits.  Arbitrator Murphy-Louden further found that Applicant failed to offer any rebuttal to the IME’s conclusions.  Arbitrator Coppola concurred with the prior decision and found it to control the present case. 

02/03/15       RES Physical Medicine & Rehab. Services v Geico Ins. Co.
Erie County, Arbitrator Mona Bargnesi
IME Insufficient on Issue of Aggravation of Pre-Existing Conditions
The 29-year old EIP was involved in two motor vehicle accidents prior to the subject January 2012 accident.  The prior accidents resulted in a concussion and injuries to the right knee and low back.  The subject accident resulted in alleged injuries to the neck, right shoulder, right rib cage and low back, as well as headaches.  Applicant evaluated the EIP in January 2012 after the accident.  In November 2012, Applicant reported that the EIP was progressively getting worse and that his pain level was 9/10.  He diagnosed exacerbation of cervical and lumbar strains, cervical and lumbar radiculopathy, thoracic spine pain and right rib contusion, all causally related to the 2012 accident.  Applicant discontinued Lortab and Diazepam, and stated the EIP on Percocet and Flexeril. 

In October 2012, an IME was performed by Dr. Grammar who noted very limited and painful range of motion, upper extremity weakness, and decreased sensation, among other test results.  While he stated that the EIP suffered from pre-existing cervical and lumbar conditions, he conceded that the strains were causally related to the 2012 accident.  He did not compare MRIs from April 2012 to prior studies to demonstrate that the bulges and herniations seen were the result of the prior accidents.  Therefore, given the IME’s positive orthopedic findings, reported significant range of motion loss, and the fact that Dr. Grammar related the sprains to the 2012 accident; the Arbitrator determined that the IME did not support the denial and awarded reimbursement.

02/02/15       Erie County Medical Center v A. Central Ins. Co.
Erie County, Arbitrator Michelle Murphy-Louden
Interest, Attorney’s Fees and Return of Filing Fee Not Payable Where Claim Not Denied or Overdue
Respondent received Applicant’s claim and timely requested verification in the form of the EIP’s properly completed NF-2 and the Assignment of Benefits.  When verification was not received, Respondent timely made a second request.  Applicant then filed the subject arbitration.  For reasons not explained, Respondent first remitted payment exhausting the PIP coverage, and shortly thereafter remitted an additional payment exhausting the OBEL coverage under the policy.  During the hearing, Applicant argued that Respondent’s verification requests were improper as against the hospital and that it was entitled to interest on the PIP and OBL amounts from the date of filing of the AR-1 to the date of payment.  Applicant further argued that it was entitled of attorney’s fees and reimbursement of the filing fee.

The Arbitrator, citing the provisions of the No-Fault Regulations, disagreed.  First, while the request for the EIP’s completed NF-2 might not have been appropriate, the request for the Assignment of Benefits was not.  Given that Applicant failed to show that it had responded to the verification requests, its claim was not overdue when the arbitration was filed.  Therefore, the claim was not arbitrable when filed. 

As for the demand for interest, attorney’s fees and reimbursement of the filing fee, the Regulations only mandate the payment of interest when benefits are denied or overdue.  An applicant is only entitled to attorney’s fees for those services necessarily performed in connection with securing payment of a valid claim that was denied or overdue.  In addition, and given that the claim was not arbitrable when filed, Applicant was not entitled to reimbursement of the filing fee.  As such, Applicant’s claim was denied in its entirety.

02/01/15       Catholic Health Systems v ACA Ins. Co.
Erie County, Arbitrator Gillian Brown
Denial Struck Down For Lack of Specificity
The claim submitted was for surgery and related services. Reimbursement was denied by Respondent whose NF-10 stated “Benefits for this medical specialty have been terminated based on the results of an Independent Medical Exam.”  The Arbitrator reiterated that while a denial form based on a defense of lack of medical justification does not require that the medical rationale be set forth, it does require specificity as to the grounds for the denial.  Here, at least two IMEs were performed, but the denial did not specify which IME was the basis for such denial.  As a result, the Arbitrator struck down the denial, finding it defective on its face.

02/01/15       Medical Care of WNY at Buffalo v NFTA-Metro System, Inc.
Erie County, Arbitrator Gillian Brown
Denial Based on Lack of Curative or Palliative Benefit after Three Years Upheld
In January 2012 the EIP was a passenger on a city bus when she was apparently thrown off her seat due to a sudden movement by the bus.  Applicant’s claim was for physical therapy treatments performed five times per week from January to May, 2014.  Two IMEs were performed by Dr. Luzi who found that the EIP was not benefiting in any way from the extremely aggressive treatment and that there was also evidence of malingering as she was not doing any exercises on her own.  It was also noted that the EIP had almost identical complaints going back to 1995 and that her physical conditions remained virtually unchanged. 

The Arbitrator found that Applicant failed to rebut Dr. Luzi’s reports and that, in fact, Applicant’s reports and records tended to support the IME conclusions.  The Arbitrator determined that where the EIP’s condition remained unchanged after three years of treatment, it could not be said that such treatment was providing even a palliative effect, supporting that the physical therapy services were of no use, either palliatively or curatively.

Litigation

01/15/15       Healing Art Acupuncture, P.C. v Amica Mut. Ins. Co.
Appellate Division, Second Department
Absence of Certificate of Conformity Not Fatal if Not Shown to Be Prejudicial
Defendant denied plaintiff’s claims on the grounds that they exceeded the amount permitted under the fee schedule and demonstrated that it had fully paid the services in accordance with the fee schedule for acupuncture performed by chiropractors.  In support, defendant submitted an affidavit executed by a fee schedule adjuster for defendant’s vendor.  That affidavit was notarized outside New York State and did not conform to the requirements set forth in CPLR 2309(c) and Real Property Law 299-a regarding the submission of a certificate of conformity. 

On appeal, the court affirmed the lower court holding that the absence of the certificate of conformity is not a fatal defect where a substantial right of a party is not prejudiced.  Here, plaintiff did not show any prejudice, nor did plaintiff’s papers show that defendant did not properly reimburse according to the fee schedule for acupuncture services performed by chiropractors. 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

02/06/15       Angus v Forba Holdings, LLC
Appellate Division, Fourth Department
Unauthorized Dental Procedure = Battery; GBL § 349 Claim Withstand Motion to Dismiss
Plaintiff commenced this action asserting, inter alia, dental malpractice, battery and violations of General Business Law § 349.  It was alleged that the defendant’s dental clinic was engaged in a scheme to perform unnecessary procedures on patients.  It is further alleged that the procedures were performed without informed consent or fraudulently obtained consent.

Defendant moved to dismiss the Cause of Action for battery on the basis that it was duplicative of plaintiff’s claim for dental malpractice.  The Court disagreed, however, and ruled that performing a procedure without consent qualifies as a battery.  In instant case, the Court noted that defendant was unable to establish that they “did not intentionally engage in offensive bodily contact without plaintiff’s consent.”   We think that means defendant did not meet its burden.

Defendant’s motion to dismiss the GBL § 349 claims was also denied because the Court did not believe that the incidents complained of were confined to one patient, and not directed to the general public.  In affirming the Trial Court’s denial, the Court noted the existence of triable issues as to whether defendants “engaged in a scheme to place profits before patient care...” 

02/06/15       Varano v Forba Holdings, LLC
Appellate Division, Fourth Department
Trial Court’s Unilateral Investigation into Undue Jury Influence Deemed an Abuse of Discretion
In this action, Forba obtained a defense verdict after the conclusion of a trial in Onondaga County.  At the conclusion of that proceeding, one of the jurors reported that members of the jury had been “stalked” throughout the course of the trial.  The alleged “stalker”, who was characterized as acting “creepy”, was later ascertained to have been a claims professional that was monitoring the case. 

This report triggered the Trial Court to conduct its own in camera questioning of the juror, at the conclusion of which the Court determined that undue influence may have been exerted over the jury.  Thereafter, the Trial Court granted plaintiff’s motion to set aside the defense verdict and Order a new trial. 

In reversing, the Appellate Division began by noting that the decision to vacate a jury decision and grant a new trial usually rests with the discretion of the Trial Court.  Here, however, the actions of the Trial Court in conducting its own investigation were seen as an abuse of said discretion.  The Fourth Department was particularly critical of the Trial Court’s decision to only interview one witness (the reporting juror).  The Court was also critical that the Trial Court’s investigation was done without notice to defense counsel, and without providing defense counsel an opportunity to participate.  Finally, the Court noted that the Trial Court’s ruling to preclude defense counsel from interviewing other jurors prejudiced any ability for defendants to proffer a defense to the motion for new trial.

Accordingly, the Court vacated the Order for a new trial, and further remanded the matter back to the Trial Court for an evidentiary hearing on the extent of the influence of purported wayward insurance professional.

02/06/15       Thome v Benchmark Main Tr. Assoc., LLC
Appellate Division, Fourth Department
No Appellate Right for Denial of Motion in Limine; Motion to Amend Answer Should Be Freely Granted
The instant case has its origins in a Labor Law case that Christa and IPL settled prior to trial.  At that time, however, both parties kept their indemnity claims against third-party defendant Fisher active.  Fisher, in turn, made a series of motions to the Trial Court, of which we review below.

Fisher Motion 1 – Fisher made a motion in limine for partial summary judgment to dismiss an indemnity/contribution claim commenced by IPL.  That motion was denied by the Trial Court, and Fisher sought appellate review.  In refusing to review the motion in limine, the Appellate Division noted that such an Order is “at best, an advisory opinion which neither appealable as of right nor by permission.”

Fisher Motion 2 – After the settlement, Fisher moved to amend its Answer to assert an Affirmative Defense that the Christa/IPL settlement was not reasonable.  The Trial Court denied the application, but the Fourth Department reversed.

In reaching this conclusion, the Court noted that where a position is not advanced in the pleadings a party is instructed by the CPLR to plead the Affirmative Defense to avoid undue surprise and prejudice to the other parties.  Because the settlement was surely not reached at the time of the initial Complaint, it follows that it could not have been included therein. As such, defendant Fisher was obligated to assert the Affirmative Defense. 

The Court also noted that Christa’s argument that the proposed Amendment was futile did not change the outcome where, as here, the company failed to present any evidence that the settlement was appropriate and reasonable. 

02/04/15       Fidelity & Guar. Ins. Co. v DiGiacomo
Appellate Division, Second Department
Delay Occasioned by Litigation Over Consent of Settlement Permitted Under Workers’ Compensation Law § 29(5)
Defendant sustained bodily injury while in the course of his employment.  Accordingly, he was paid more than $189,000 in workers’ compensation benefits.  At the same time, defendant also prosecuted a bodily injury action which resulted in a settlement of $2,050,000.  The bodily injury matter was resolved on May 5, 2009, and on the same day Mr. DiGiacomo’s counsel requested the TPA for the workers’ compensation carrier to advise of the current lien.  Plaintiff’s TPA did not respond until October of 2009 when it demanded $123,442.47

In May of 2010, plaintiff’s commenced an action seeking to recover the lien.  At the same time, defendant’s counsel moved for an Order compelling the TPA to consent to the reasonableness of the settlement.  That motion was granted without opposition.  In 2011, plaintiff overturned the Order granting the TPA’s consent. 

At that point, plaintiff again commenced a lawsuit seeking recovery of the lien initially claimed in October of 2009.  Defendant’s counsel immediately moved for judicial approval of the settlement.  In support of its position, defendant argued that judicial approval was not needed because the settlement was more than the lien.  If, however, approval was needed, the application was timely under Workers’ Compensation Law 29(5) which requires approval by the carrier or the Court be obtained within three months.  While the application was well beyond three months, defendant argued that the delay should be forgiven where, as here, there was no prejudice to the workers’ compensation carrier, the delay was occasioned due to the workers’ compensation carriers’ own actions, and that the approval was previously approved by the carriers’ TPA in 2011. 

In issuing its decision, the Appellate Division noted that approval via Section 29(5) is needed in all cases because, particularly where benefits are still accruing, the benefits may eventually exceed the amount of the settlement.  That said, the Court noted that a late approval can be granted where the movant can establish (1) the settlement was reasonable, (2) the delay was not caused by injured party’s fault or neglect and (3) there was no prejudice to the compensation carrier.  In this case, defendant DiGiacomo established all three requirements, and, as such, the Trial Court was within its discretion to confirm the settlement.

It is also noted that while confirming the settlement, the Court also ruled that plaintiff was entitled to payment, in full, of the lien it initially asserted in October of 2009. 

02/04/15       Lobban v Brown
Appellate Division, Second Department
Delay Occasioned by Injured Party’s Own Neglect Precludes Judicial Approval under Workers’ Compensation Law 29(5)
Plaintiff was injured in the course of his employment, and as a result filed a claim for workers’ compensation benefits.  Thereafter, plaintiff also filed a bodily injury action, and later resolved it for $48,100.  At the time of the settlement, the workers’ compensation carrier did not consent to the agreement.  Unfortunately for the injured party, his counsel did not seek judicial confirmation of the settlement until after the three month window established under Workers’ Compensation Law § 29(5) expired.

Plaintiff, in turn, attempted to excuse the delay.  However, where, as here, the delay was occasioned by the plaintiff’s own neglect, the Trial Court’s decision to deny judicial approval was appropriate.   

FITZ’ BITS

Elizabeth A. Fitzpatrick
[email protected]

01/21/15       Catlin Specialty Insurance Company v. Parks Industries, LLC, et al., 14-cv-727
United States District Court, N.D. Illinois, Eastern Division
No Occurrence and No Property Damage = No Duty
The Northern District of Illinois denied the motion for summary judgment by Parks Industries in this action involving allegedly defective auxiliary power units (APU) developed and manufactured by Parks Industries.  The underlying complaint alleged that Parks sold defective APUs and the plaintiff sought recovery in excess of $75,000 for the purchase price of the APUs, installation and uninstallation costs, repair costs, total gross income lost for the use of certain semi-trucks which the APUs were to be installed on payments to drivers, as well as fuel charges.

Catlin issued two commercial general liability policies to Parks which provided coverage for sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage caused by an occurrence that took place during the policy period.  Catlin asserted Exclusion K --  “Damage to Your Product” and Exclusion M -- “Damage to Impaired Property or Property Not Physically Injured.”  Property damage was defined as physical injury to tangible property, including all resulting loss of use of that property, as well as loss of use of tangible property that is not physically injured.  Occurrence was defined as an accident, including continuous or repeated exposure to the same general harmful conditions.  The court found that the damages sought were for economic loss, which under Illinois law, was not covered under standard CGL policies.  The court also found that the APU failures were not an occurrence defined as an accident.  Noting, “the mere failure of a product to perform as warranted is not beyond the realm of expectation and is foreseeable by the parties.  The court thus denied the insured’s motion for summary judgment.

02/10/15       Blixseth v. Richardson and Cincinnati Insurance Company
Ninth Circuit Court of Appeals
Cincinnati Walks Due to Late Notice
Cincinnati Insurance was spared payment of more than $9,000,000 based upon the failure of the policy insureds to provide Cincinnati with written notice of any claim made against any of the policy insureds for a wrongful act.  Notice was provided by Yellowstone Club World and its bankruptcy trustee, but not by a policy insured.  As a result, opined the court in a brief decision, Cincinnati does not have a duty to defend.

Citing, LaBonte v. Mutual Fire & Lighting Insurance Co. of Richland County, the court noted “when the language of a policy is clear and explicit, the policy should be enforced as written.”  The court further noted that well-settled Montana Law provides that absent waiver, failure to comply with a notice requirement bars recovery under the policy. While, as we know, under amendments to New York Insurance Law 3420 effective in 2009, the insurer must now demonstrate prejudice to disclaim for late notice, notice remains an integral policy condition that insureds must heed.

AUDREY’S ALL THINGS PERSONAL

Audrey A. Seeley
[email protected]

 

Happy Valentine’s Day.

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

A1230           Seeks To Require DFS to Issue Regulations Providing For Standardized Definitions for Commonly Used Terms and Phrases in Insurance Policies
This proposed bill was reported out of the Assembly’s Insurance committee.  However, there is no similar/same bill currently before the Senate.

This bill would amend Insurance Law §§ 3425 and 3426 to add a new subsection to each requiring the Superintendent of DFS to issue regulations providing for standardized definitions of commonly used terms and phrases in policies that provide coverage for personal lines insurance as well as commercial lines policies which provide coverage for damage to real and personal property within six months after passage of the proposed bill.  It would allow insurers to use alternative definitions, but only if the alternative definition is equally favorable to the policyholder.

A2946           Expediting Actions Involving Insurance Claims for Damages Resulting From a State Disaster Emergency
This bill also has no same/similar bill before the Senate.  The bill has been reported from the Codes committee at this time.

This proposed bill would amend the CPLR by adding three new rules – 3410, 3411 and 3412.  CPLR 3410 would make mandatory preliminary conference within 30 days after an RJI is filed in any action involving an insurance claim for damages to property in a county where a state disaster emergency has been declared by the Governor relating to any claim for damages arising from such.  All parties would be required to appear in person or by counsel with full authority to dispose of the case.  Upon filing of the RJI, the court would promptly send a notice to parties advising them of the time and place of the conference, the purpose of the conference and the requirements of this rule.  Further, no adjournments of the preliminary conference in excess of 10 days would be granted, and adjournments would only be granted upon good cause.

This proposed bill would also require that discovery be completed within 60 days from the date of the preliminary conference, and penalties could be assessed against any party for refusal to comply with discovery within the timeframe.  The timeframe could be extended for good cause by the court.

CPLR 3411 would require a mandatory settlement conference within 14 days after a note of issue has been filed. 

CPLR 3412 would require all pre-trial motions to be made within 30 days after the note of issue is filed.

Circular Letter No. 1 (2015)        Providing Clarification regarding No-Fault notice/proof of claim
DFS issued this Circular Letter in light of the holdings in Sound Shore Med Ctr. v. New York Cent. Mut. Fire Ins. Co., 106 A.D.3d 157 (2nd Dept 2013) and Mount Sinai Hospital v. New York Cent. Mut. Fire Ins. Co., 120 A.D.3d 561 (2nd Dept 2014) which held that the UB-04 form utilized by Hospitals is not the functional equivalent of a NF-5 form which would trigger a no-fault insurer’s duty to pay or deny the claim within 30 days.

This Circular Letter explains that “an insurer is deemed to receive notice of a claim once it receives a completed NF-2 form from an eligible injured person or the corresponding completed hospital facility form, NYS form NF-5.” It is at that time the 30 days to pay or deny the claim commences unless verification has been requested within the prescribed timeframes.  DFS explains that the regulation requires an insurer to accept proof of claim submitted on a form other than those listed previously “if that form contains substantially the same information as the prescribed form.”  Further, an insurer may request the prescribed form be submitted if the form utilized does not contain substantially the same information.

DFS explains that when an insurer receives a UB-04 form from a hospital facility that is not accompanied by the NF-5, the insurer should provide the hospital with an opportunity to submit a completed NF-5 as soon as possible, and in those instances where the eligible injured person has previously submitted an NF-2 to the insurer, the insurer need NOT request an NF-5.  The insurer may seek additional verification as necessary however.  Thus, an NF-5 or NF-2 does need to be completed, but the insurer needs to notify the hospital that an NF-5 is needed and provide the hospital with an opportunity to submit the same.

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
[email protected] 

02/03/15       Tower Ins. Co. of New York v. Ramlakhan
Supreme Court, New York County
Where Insured Punches Underlying Plaintiff Three Times in the Face, Court Upholds Carrier’s Denial Based on Expected or Intended Acts Exclusion
On June 17, 2012, the underlying plaintiff was assaulted by Kumar Ramlakhan while a visitor at the insured premises.  The underlying plaintiff alleges that he was punched three times by Kumar before blacking out.   After the incident, Kumar was charged with assault in the third degree, and eventually pled guilty to disorderly conduct. 

A complaint was then brought against Kumar and his parents based on theories of negligence. Tower, the homeowners’ insurer, denied coverage based on, among other things, an exclusion for bodily injury which is expected or intended by one or more insureds.

In this action and in opposition to Tower’s motion for summary judgment, defendants argued that the gravamen of the underlying claim against them was grounded in theories of negligence in the ownership, operation and control of their premises and in the negligent provision of alcohol to under aged persons.  They also argued that Kumar became so drunk and intoxicated over the course of the evening that he was not even aware or conscious of what he was doing to injure the plaintiff. 

The court held that notwithstanding the allegations of negligence, such allegations arose out of Kumar striking the underlying plaintiff, and nothing in the record suggested that this incident was anything other than an intentional act.  The claims for negligence would not exist but for the striking of the victim in the face. 

Lastly, the fact that Kumar resolved the assault by way of a disorderly conduct violation was of no moment.  The facts of importance are those stemming from the physical altercation between Kumar and the plaintiff, not the plea. 

01/23/15       Matter of National Liab. & Fire v. Elkadri
Supreme Court, New York County
Frame Issued Hearing Ordered to Address Whether Allegedly Stolen Vehicle Was Uninsured
Petitioner moved to permanently stay the uninsured motorist arbitration initiated by respondent or, in the alterative, a temporary stay of arbitration pending a preliminary hearing to determine whether respondent was involved in an accident with an uninsured motor vehicle. 

Respondent was involved in a motor vehicle accident that occurred on November 10, 2010.  During the accident, respondent allegedly sustained injury when the vehicle he was a passenger in was struck by a vehicle owned by proposed additional respondent, Avis Rent A Car Systems LLC.  Avis disclaimed coverage for the accident based on the statement of Franklin Rivers that he was operating the vehicle on that day and had left the car running with the keys in the ignition and his brother sleeping in the backseat while he ran to cash a check and it was at this time the car was stolen and shortly thereafter caused the subject accident.

The Court ordered a temporary stay pending a framed issue hearing on the ground of whether the Avis vehicle was being driven by a permissive user at the time of the subject accident, and to overcome the alternative presumption. 

Further, if the presumption of permissive use was rebutted, the judge would then need to address whether Avis is otherwise responsible to cover the loss based on a violation of VTL § 1201(a), which provides that no person driving or in charge of a motor vehicle shall permit it to stand unattended without first stopping the engine, locking the engine and removing the keys.  Under New York law when a violation is established, the victim of the theft can be held liable for those that suffer injury as a result thereof.   Additionally, the judge will also need to determine whether Avis may still disclaim based on the Graves Amendment, which bars vicarious liability actions against professional lessors or renters of vehicles. 

Bad Faith

01/30/15       Fulbrook v. Allstate Ins. Co.
Supreme Court of Nevada
Supreme Court of Nevada Affirms District Court’s Admission of Evidence At Trial Relating to the Plaintiff’s Attorney’s Demand Letters to Other Carriers In Other Proceedings; Admits Evidence of a “Set Up”
Pamela Fulbrook’s daughter was killed when she fell from the roof of a car driven by Michelle Bennington.  Michelle’s parents owned the car and insured it through Allstate.  After the accident, Fulbrook’s attorney sent a letter to Allstate seeking to settle the claim against the Benningtons.  The demand letter stated that Fulbrook would settle her claim if, within two weeks from the date of the letter, Allstate paid the full value of the Benningtons’ policy and provided proof of no other insurance.  Allstate did not accept the offer prior to the expiration of the deadline provided.

Fulbrook then filed a wrongful death lawsuit, and entered into an agreement with the Benningtons whereby they stipulated to liability.  Damages were set at $2,500,000, and the judgment was then entered. 

Several months before the judgment was entered, however, Allstate filed this action seeking a declaration that its obligation to the Benningtons for Fulbrook’s claim was limited to the $15,000 policy limit and finding that Allstate acted reasonably.  Fulbrook and the Benningtons counterclaimed for compensatory and punitive damages. 

Before trial, Allstate made a motion to have Fulbrook’s counsel disqualified on the grounds that he was a percipient witness.  While declining to disqualify, the court did order that he be excluded from the courtroom during the testimony of witnesses that would directly relate to his expected testimony. 

During trial, evidence was presented concerning Allstate’s conduct and Fulbrook’s counsel’s conduct and motive with regard to the claim.  The jury eventually returned a verdict in favor of Allstate determining that it did not breach the duty of good faith and faith dealing.  Fulbrook appealed challenging a number of rulings. 

The first objection related to the district court’s admission of evidence of Fulbrook’s attorney’s motives, which included settlement offer letters sent to insurers in other matters.  In reviewing this admission, the Supreme Court held that the evidence was relevant to the issue of the insurer’s conduct because the attorney’s conduct can influence the insurer’s conduct.  Further, the attorney’s conduct was relevant as it provided a context for evaluating Allstate’s actions.  Specifically, the demand letters from other matters helped reveal whether the demand letter sent here was reasonable.

The next objection related to jury instructions given which directed the jury to consider whether the insurer had knowledge of the unreasonableness of its conduct.  The court held that because knowledge as a component was consistent with Nevada law defining bad faith, it was an appropriate instruction.   

Further, the court considered whether Fulbrook’s attorney was properly excluded from the trial.  Fulbrook argued that exclusion was only appropriate for necessary witnesses.  The Supreme Court disagreed finding that because Allstate requested the attorney be excluded, the district court had a duty to exclude unless he met an articulated exception.  Since there was no demonstration in the record that an exception applied, there was no abuse of discretion.

Lastly, Fulbrook and the Benningtons argued that the district court erred in not granting attorneys’ fees and costs based on its award of the policy limit.  The court held that because Allstate brought this action to limit recovery to the policy limit and to determine that it did not act in bad faith, it received the benefits it sought.  On the contrary, where Fulbrook and the Benningtons counterclaimed for compensatory and punitive damages, which were not awarded, they did not prevail in the litigation, and should not have been awarded fees. 

Of note, Judge J. Pickering did concur in part, and dissent in part.  While ultimately agreeing with the outcome, she argued that the district court inappropriately admitted the letters Fulbrook’s attorney sent in other proceeding.  She opined that it was one thing to say that an insured’s demand letter imposed such unreasonable conditions that the insurer did not act in bad faith in not immediately meeting the demand.  But, it was another proposition, in her opinion, to submit, as evidence of an insured’s subjective intent to “set up” his insurer, letters the insured’s attorney send on behalf of other insureds to “set up” other insurers in other unrelated cases.    

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

11/24/14Centex Homes v. Lexington Insurance Company
Central District of California
Insurer Denied Summary Judgment on Construction Defect Claims
Gateway Concrete subcontracted with Centex to install concrete foundations in a housing development in California.  The subcontract required Gateway to purchase insurance naming Centex as an additional insured.  Gateway subsequently obtained its CGL insurance policy from Lexington.  In November 2009, several home owners filed a lawsuit against Centex seeking recovery for property damage to their homes.  Centex ultimately settled the underlying lawsuit with the homeowners, as well as a related claim with Gateway.

In February 2009, Centex tendered the defense and indemnification of the homeowners’ lawsuit to Lexington as an additional insured under the Gateway CGL policies.  Centex eventually filed a declaratory judgment action in California state court which Lexington Insurance removed to federal court.  The case comes up for decision on Lexington Insurance’s motion for partial summary judgment on coverage issues.

The Court began its analysis reciting some basic principles of insurance coverage analysis.  First, the duty to defend depends in large part on a comparison between the allegations of the complaint and the terms of the policy.  With respect to competing claims and arguments, the insured need only show that the underlying claim may fall within the policy coverage, whereas the insurer must prove that it cannot.  Generally, doubt concerning the potential for coverage and the existence of the duty to defend is resolved in favor of the insured.
Lexington first argued that there was no coverage under the policies because Gateway failed to satisfy a Self-Insured Retention (“SIR”) requirement.  The SIR Endorsement established a retained limit of $25,000 per occurrence, and Lexington argued it had no duty to defend unless and until that limit was exhausted.  The Court actually agreed with the insurance company on this point. 
The second argument was whether the policies precluded additional insureds from satisfying the SIR.  Lexington argued that only the primary insured Gateway could satisfy the SIR.  However, the Court ruled, that unless a policy expressly provides otherwise, a retained limit may be satisfied by a co-defendant’s payment or by other insurance obtained by the insured.  The argument then focused on whether Gateway (or anyone else) had satisfied the SIR requirement because they actually made settlement payments and Lexington Insurance argued that the policy precluded a settlement in excess of the retained limit without prior consent.  The Court ruled, however, that there remained an issue of fact whether Gateway could enter into a settlement with Centex without Lexington’s prior approval.

Lexington also argued that Centex did not qualify as an additional insured because the underlying liability arose from Gateway’s completed operations, whereas the additional insured endorsement referred to liability arising out of ongoing operations.  However, the Court found enough factual and legal distinction to argue that claims in the underlying action could conceivably be within the policy coverage and the additional insured endorsement therefore did not preclude coverage.  Likewise, the Court ruled that certain exclusions with respect to property damage arising from ongoing operations did not necessarily preclude coverage.

The Court also denied summary judgment on Centex’s bad faith claim against Lexington.

The lessons of this case are several:

  1. Lexington Insurance removed this case to federal court from state court and, generally speaking that is a recommended strategy on behalf of insurance companies.
  2. The case emphasizes that the duty to defend generally depends on a comparison of the allegations of the complaint to the terms of the policy.
  3. The case also drives home the point that in coverage litigation the insured may only need to show the underlying claim may fall within policy coverage, whereas the insurer may have a generally higher burden to prove that the claim does not or cannot arise from covered circumstances.
  4. Lexington Insurance made the proper approach to this case by arguing against coverage on several inter-related points concerning coverage definitions, the additional insured endorsement, and policy exclusions. 
  5. It is interesting that the argument was that Gateway allegedly satisfied the $25,000 SIR limit with one payment in that amount.  Notice is taken of prior cases from California where in similar circumstances a deductible or SIR limit was applied to each home or building as a separate “occurrence”, so that the deductible or SIR requirement is the dollar limit times the number of homes or units involved  in the dispute.  This argument was apparently not made by Lexington Insurance in this case.
The Court’s explanation of the “factual question” regarding settlement without carrier approval is questionable.  This is a clear and frequently included policy provision.

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