Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations
I’ve lost my patience with this winter. It’s really that simple. The temperature has not risen above 32 F since January. The snow refuses to melt. It’s no longer even the least bit humorous. Cars are being eaten alive by potholes. Sidewalks have vanished into distant memories. And so it goes.
We have a banner issue to present. Two or three high court coverage decisions are included, one on No Fault, one on First Party coverage. Beth Fitzpatrick achieved a great result in the First Department and that’s reported in my column.
We send a special shout out to FAIA’s Smokemaster and Education Czar, Dave Thompson, for a submission included in Audrey’s column.
Hey, speaking of situations, we’d love YOU to help US with a situation.
A Special Request for Claims Professionals:
Would you have an interest in helping our folks in better understanding the insurance business?
We know it’s really important for our lawyers to understand your business and we want to schedule a series of webinars where our lawyers can learn from you. We want to expose our lawyers to the business of insurance. How do YOU evaluate cases? How are reserves set and how can we better assist you in setting reserves and altering them as the case develops? How do you factor in costs and expenses? How does underwriting factor into our handing of your files? Why is budgeting so important? What about timely reporting? What and when do you need it? What issues are you addressing for cyber security and how can we help in our practices?
We are planning to schedule a series of webinars-like our newsletter-at no cost- but intended to better educate us all. If you would be interested in participating and have a topic in mind, please e-mail me. We will do all the work in scheduling and planning the event and no written materials will be required of you, unless you have something you would like to share. We are very excited about this undertaking and are enthusiastic about your involvement, which is integral.
Our plan to begin the program in June, so please send me your notes so we can set our schedule. If CE credit is important to you, let us know and we will try to work that into our programming!
Court of Appeals Steps Into Dispute Over Notice of Claim Requirements in State Law Discrimination Claims:
The New York Court of Appeals issued an important decision relating to a municipal liability matter last week. While it is not a coverage case, we thought it was worth bringing to your attention a decision involving Notice of Claim requirements in state discrimination cases. Our own Kinsey A. O’Brien prepared the article and you can find it here.
DRI Insurance Coverage and Claims Institute:
March 25 – March 27, 2015
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::
PLRB CLAIMS CONFERENCE:
March 29 - April 1, 2015
Anaheim Convention Center
Anaheim Marriott & Hilton Anaheim
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
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
Although the ground on Long Island is covered in snow, I have recently seen some types of birds I have not seen in several months, indicating that Spring may in fact be near. Perhaps we will all thaw out soon, which I think by this point we all desire, except perhaps the many snow men my boys have made. In this column, we have several interesting decisions. The Court of Appeals affirmed a judgment of the Appellate Division, First Department that was reported on here last September. In that decision, plaintiff’s expert affirmations were deemed conclusory as plaintiff’s experts failed to address the findings of defendants’ experts as to full range of motion and lack of causation.
We also this time have a couple of decisions where defendants’ own expert affirmations provided an issue of fact without even getting to plaintiff’s submissions. In one case, defendants submitted four expert reports, two of which found causation and serious injury, which begs the question of why they were submitted in the first place. We also received another reminder that mild trauma that is quickly recovered from will not meet the serious injury threshold.
Hoping to be thawed out soon, until next time,
One Hundred Years Ago: A Kiss is But a Kiss:
Olean, New York
27 Feb 1915
GIRL ENTERS PLEA OF SELF DEFENSE
Young Woman Who Killed
Toronto Millionaire on Trial
MAN HUGGED AND KISSED HER
Carrie Davies, 18 Years Old, Swears That
Dead Man Wanted Her to Wear Dresses
That Belong to His Wife — Girl Claims
She Was Afraid of Her Life
Toronto, Feb. 27.—“I shot at him. I guess he is dead now. I really did it in self defense.”
This statement made by Carrier Davies, 18 years old, to the local police two hours after she shot and killed Charles A. Massey on the evening of Feb. 8 was repeated during the trial of the Davies girl on a charge of murder.
Girl Shows No Emotion
The girl, accused of murdering a prominent and wealthy Torontonian showed no emotion whatever during examination and cross-examination. She testified that on Friday, Feb. 5, after Mrs. Massey left to visit friends at Hartford, Conn., there was a dinner party at the Massey home. The ladies at the party were drinking heavily, she said, and they showed the effect plainly.
That night, after the party left, the girl said Massey caught her about the waist and said he liked little girls. She struggled to get away and he kissed her, she said.
Editor’s Note: It was Canada's trial of the century, a more recent story reported, on cbcnew.ca, excerpted here:
It all began 100 years ago, on Feb. 8, 1915, when Carrie Davies shot Charles Bert Massey to death. That killing on a quiet residential street in Toronto quickly became a sensation. The story appeared in newspapers from New York to London.
At the time, the Masseys were one of the most powerful families in Canada. The name is still famous in Toronto a century later, tied as it is to Massey Ferguson farm equipment, the concert venue Massey Hall and Massey College, which is part of the University of Toronto campus. Carrie Davies was Bert Massey's 18-year-old British maid, and she said she shot him because she was afraid he wanted to sexually assault her. It was her word against his reputation. But when the trial was over, she was found not guilty.
'She got away with it'
To this day, the verdict doesn't sit right with some members of the Massey family. “Charles Bertie made a pass at a maid and she said no, and he said OK, no means no. And next day, premeditated murder, she shot him," says Rosemarie Tovell, Charles Bert Massey’s first cousin, three times removed.
"I was just surprised she got away with it, frankly."
But relatives of Carrie Davies, who died in 1961, take a very different view. "I think she was a really brave woman to carry out what she did. At that time, anyone else would have been probably hung," says granddaughter Marylou Brown.
As February winds down, we in the Long Island office of Hurwitz & Fine, P.C. are packing for our move into larger space and celebrating the continued expansion of the Hurwitz & Fine, P.C. downstate office. While we will remain at our present address of 535 Broad Hollow Road in Melville, we will be moving into Suite A-7 effective Monday, March 2, 2015. Our telephone number will remain the same. We are excited about our continued growth and the opportunities to more effectively and efficiently serve the needs of our clients.
I look forward to seeing many of you at FDCC meetings next week and I am hoping for a much warmer March.
I have no cases to report today but have guest written the summary of New York State Insurance Fund v. Everest, a case I have lived with for many years, which was recently resolved through the First Department affirmance of the trial court’s grant of our motion for summary judgment on behalf of NYSIF. My summary appears in Dan’s column.
Til next time,
Elizabeth A. Fitzpatrick
A Century Ago: Never Too Old to Get Married:
The Evening World
New York, New York
27 Feb 1915
BRIDE 105 YEARS OLD DIES
FIVE DAYS AFTER MARRIAGE.
Mrs. Marcellina Leon Had Won
Fight in Court Against Relatives
Who Opposed Union.
LOS ANGELES, Cal.— Marcellina Leon, said to be 105 years old, after she had shown strength of mind and body sufficient to win her way and obtain the consent of the courts to marry the man who for fifty years had been her sweetheart, is dead at her home to-day after being a bride for only five days.
Relatives opposed her married to Pleasantino Leon, eighty-two years old. She fought them in the courts, obtained the dismissal of her niece as guardian and established her competency to do as she choose, but shortly after her marriage she collapsed.
We are happy to announce a banner issue for first party issues this week. The Court of Appeals’ reversed a curious decision from the Fourth Department which, perhaps inadvertently, had eviscerated the clear intent of the surface water exclusion. In Platek, the Court offers an excellent historical overview of the ensuing loss exceptions in first party coverage. Judge Read concludes with a wonderful explanation of how the ensuing loss exception is meant to work in harmony with coverage exclusions.
In a decision with less notoriety, we also note that the flood exclusion was also upheld in affirming a denial of business income/extra-expense. The First Department looks, again, at the recurring issue of people misrepresenting their occupancy status on a homeowners’ insurance application. What the applicant saves in premiums, he or she almost always loses at the time a claim is made. Rescission in New York is a draconian penalty for policyholders, but is a needed, and more frequently appearing, tool for carriers to protect themselves from an increasingly dishonest risk pool.
Finally, we point you the Third Department’s decision in Broome County v Travelers which provides a fascinating interpretation of a pollution exclusion in a first party policy. We’re not so sure we agree with that decision, and it will be interesting to see if it catches the Court of Appeals’ attention in the coming months.
Oh, and one more thing. Like clockwork, spring brings training. Check back here often for the myriad of opportunities to hear us, or someone like us, provide a little insight on the ups and downs of the past 12 months. We’d be happy to see you somewhere along the way.
That’s it for now.
Steven E. Peiper
Pitchers and Catchers Reported 100 Years Ago as Well, but It Was More Difficult to Get There:
Brooklyn Daily Eagle
Brooklyn, New York
27 February 1915
BROOKLYN FEDS SAIL
Leave for New Orleans on Way
To Browns Wells, Miss.
The Eastern contingent of the Brooklyn Federal League baseball team sailed at 1 p.m. today on the steamship Creole for New Orleans, where train will be taken for Hazelhurst, Miss., when they will continue their journey to the training camp at Brown’s Wells, Miss., a foot and on horseback, through beautiful vista , over corn rows, etc….
Pitcher Tom Seaton was in command of the expedition that sailed today, and he had Mrs. Seaton along as first mate. The other players were Pitchers Joe Finneran, Ed Lafitte, Mill Chappelle and William Upham … and Catcher Art Watson.
Editor’s Note: The Brooklyn Tip-Tops were part of the “third” major league, the Federal League, which started play in 1914 and folded after the 1915 season. Tom Seaton moved from the Philadelphia Phillies where he had a 27-12 record in 1914 to the Tip Tops in 1915, where he was enticed with a fabulous salary (at the time) of $7,000.
Seaton struggled with a 14-17 record in 1915 and then moved to the Chicago Cubs after the demise of the Federal League. He was released after the Black Sox Scandal of 1915, due to rumors “regarding the practices of players Seaton, Casey Smith and others”. In his obituary, found in the April 11, 1940 El Paso Herald-Post, it was noted that Seaton was credited with being one of the first pitchers to use the knuckle ball. At age 52, he died of lung cancer, likely due to his work as a smelter in an arsenic plant in El Paso.
Those of us lucky enough to work out of the Buffalo office continue to suffer through this miserable winter. It is amazing how the snow banks seem to be multiplying in size daily, and how there are now icicles emanating from my gutters which I am pretty sure are taller than my daughter. As a lifelong Buffalonian, I always feel the need to defend my fair city against those people whose knowledge of Buffalo is limited to the amount of snow we get. I normally say things like, “it is not as bad as you hear” or “but, the summers are beautiful.” Well, I am even having a difficult time finding the upside right now. But, I guess we are almost done with February, and then the slow road to spring should start.
The trial courts were pretty quiet the last two weeks. So, I don’t have anything to report from there. But, I do report on a decision out of the Supreme Court of New Jersey. The decision addresses a bad faith claim following a dispute over the carrier’s right to reject an arbitration decision. It is an interesting read especially because certain policyholder groups attempted to use the case as an opportunity to urge the Supreme Court of New Jersey to alter the standard for first-party bad faith claims.
Until next issue…
Jennifer A. Ehman
NEW YORK COURT OF APPEALS HOLDS THAT STATE LAW DISCRIMINATION CLAIMS
AGAINST MUNICIPALITIES DO NOT REQUIRE A PRE-SUIT NOTICE OF CLAIM
Special Guest Columnist
Kinsey A. O’Brien, Esq/
Last week, the Court of Appeals decided Margerum v City of Buffalo, an important case examining the intersection of New York’s municipal and civil rights statutes. The case is about promotion eligibility determinations in the City of Buffalo Fire Department and has a long, complex litigation history. Ultimately, the Court of Appeals held that a Notice of Claim is not required for New York State Human Rights Law claims against municipalities. The Court also held that liability for employment discrimination should not have been determined on summary judgment on the facts of this case.
To understand the context of this decision, we must look back to 1974, when the United States sued the City of Buffalo in federal court alleging that the City’s written civil service exams for entry-level police and firefighters had a discriminatory adverse impact on African Americans, Hispanics, and women. An adverse impact claim alleges that a facially neutral practice or policy negatively affects a protected group at a disproportionately high rate. In such cases, the plaintiff or plaintiffs are required to use statistical evidence to show the adverse impact. Adverse impact claims are distinguished from “disparate treatment” claims, which are more “traditional” discrimination cases where the plaintiff claims he or she was treated differently because of membership in a protected class.
The United States prevailed in the 1974 suit and the court issued a “‘Remedial Decree’ designed to remedy the effects of past discrimination” through hiring ratios and affirmative action-style recruitment. The Decree was largely affirmed by the Second Circuit. Nearly 15 years later, in 1998, a non-profit organization of African American firefighters, Men of Color Helping All (MOCHA), brought a class action against the City of Buffalo. MOCHA claimed that the 1998 civil service exam used by the City to determine promotion eligibility for firefighters had an unlawful adverse impact on African Americans. MOCHA then brought a second class action against the City in 2003, alleging that the 2002 civil service examination had the same discriminatory adverse impact.
In 2005 and 2006, while the MOCHA lawsuits were pending in federal court, City of Buffalo Human Resources Commissioner Leonard Matarese allowed the firefighter promotion eligibility lists to expire before the four-year maximum duration set by law for those lists. This prompted a group of white firefighters, including lead Plaintiff Eugene Margerum, to initiate their own “disparate treatment” class action suit against the City. Specifically, the firefighters alleged that they would have been promoted if the City had extended the eligibility lists to the maximum of four years, as the City had done in the past. They claimed that the City’s decision to let the promotion eligibility lists expire early discriminated against them on the basis of race in violation of the New York State Human Rights Law (NYSHRL). The firefighters also claimed violations of the New York Civil Service Law and the New York State Constitution.
In the Margerum suit, the City moved to dismiss the claims because the firefighters failed to serve a Notice of Claim before filing the suit. In New York, a Notice of Claim is required by General Municipal Law Section 50-i as a precondition to a certain lawsuits. The intent is to require the claimant to alert the municipal defendant of a forthcoming lawsuit and allow the municipality time to investigate the claim.
In response to the City’s motion, the firefighters cross-moved for partial summary judgment on the issue of liability. The court denied the City’s motion to dismiss, finding that a Notice of Claim was not required on a NYSHRL claim, and granted the firefighters’ motion for partial summary judgment. The court also stayed the Margerum suit to allow the two MOCHA lawsuits to be decided. The federal court ultimately dismissed both of the MOCHA lawsuits.
Once the Margerum litigation resumed, the Appellate Division affirmed the denial of the City’s motion to dismiss, agreeing that Section 50-i of the New York General Municipal Law did not require a Notice of Claim in this type of case. The Appellate Division reversed the grant of partial summary judgment to the firefighters, however, finding “they had failed to establish as a matter of law that the City’s actions were not narrowly tailored to meet a compelling interest.”
Just three weeks later, in another turn of events, the United States Supreme Court decided Ricci v DeStefano (557 US 557 ). In Ricci, the Supreme Court held that under Title VII of the Civil Rights Act of 1964 (Title VII), an employer cannot take affirmative action steps “based on mere statistical disparity alone.” Rather, “before an employer can engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional disparate impact, the employer must have a strong basis in evidence to believe it will be subject to disparate impact liability if it fails to take the race-conscious [intentional] discriminatory action.” After the Supreme Court issued Ricci, the Appellate Division – recognizing that the standards for recover under NYSHRL and Title VII are “in nearly all instances identical” – directed the City and the firefighters to re-argue the issues at the New York Supreme Court (trial court).
Back at New York Supreme Court, both parties moved for summary judgment on liability under the standards of Ricci. The court granted the firefighters’ motion and denied the City’s motion, finding that “the City had failed to meet the strong basis in evidence standard set forth in Ricci.” On a second appeal, the Appellate Division affirmed the Supreme Court’s decision. Accordingly, the case was sent back to the Supreme Court (for a third time) to determine damages. After a bench trial, the court entered judgment for the firefighters for $2,610,007 in economic damages and $255,000 in emotional distress damages. The Appellate Division then took up the case again, reducing the damages to $1,621,007. The Appellate Division also granted the parties leave to appeal to the New York Court of Appeals.
The Court of Appeals rejected the City’s argument that a Notice of Claim was required for a NYSHRL claim. The Court noted that General Municipal Law Section 50-e requires a notice of claim for cases “founded upon tort,” and that Section 50-i prohibits commencement of a lawsuit “‘for personal injury, wrongful death or damage to real or personal property alleged to have been sustained by reason of the negligence or wrongful act of such city’ unless a notice of claim has been served in compliance with section 50-e.” Because “[h]uman rights claims are not tort actions under 50-e and are not personal injury, wrongful death, or damage to personal property claims under 50-i,” the Court found that NYSHRL claims do not require a Notice of Claim as a precondition to suit.
However, the Court went on to disagree with the lower courts on the liability issues, holding that liability under the Ricci standards should not have been decided by the Court as a matter of law. The Court stated: “There must be a credibility assessment of the City’s position as to the validity of the [Civil Service] examinations, the prospects in the [MOCHA] federal litigation, and the reasons for its decision to expire the promotion eligibility lists.” However, because of vague and somewhat inconsistent testimony by Commissioner Matarese regarding why he allowed the promotion lists to expire, such an assessment was not feasible without a trial. As the Court put it, “We know that Matarese decided to let the promotion eligibility lists expire in 2005 and 2006. What we do not know is why.” This question, the Court held, is for a jury to decide. Therefore, the Court of Appeals is sending the case back to the Supreme Court – for the fourth time for those of you keeping track – for a trial on liability.
The Court of Appeals decision was not unanimous. While agreeing that a Notice of Claim should not be required, Judge Read issued a concurring opinion “simply to highlight an inconsistency in New York law, which the Legislature might choose to address.” She pointed out that the Court of Appeals and other courts have found that County Law Section 52(1) requires a Notice of Claim for NYSHRL claims brought against counties, despite the fact that Section 52(1) is similar to Section 50-i in the General Municipal Law. “[I]t is hard to believe that the Legislature ever intended to create a situation where an action brought against the County of Erie alleging violations of the Human Rights Law would require a notice of claim… while the same type of action brought against the City of Buffalo would not.”
Judge Rivera also issued a separate opinion, concurring as to the reversal of summary judgment for the firefighters, but dissenting as to the remand, as she believed summary judgment should be entered for the City. Judge Rivera did not address the applicability of the Notice of Claim requirement. Rather, she wrote in objection to the Ricci standards, which she felt should not have been extended to the NYSHRL. Judge Rivera reviewed the history of the NYSHRL, including its status as “the first state statute to ban employment discrimination in the private sector.” She also pointed out the ways the NYSHRL has been amended and interpreted to provide broader protections than Title VII. Thus, while Title VII standards are certainly instructive to NYSHLR claims, Judge Rivera felt the Court should more fully analyze whether Ricci “is best suited to further our State’s law and policy.”
In conducting this analysis, Judge Rivera found that the federal Ricci standards are contrary to the Legislative intent to provide broad protections against discrimination. She noted that the Ricci standards subordinate the interests of groups who are disenfranchised by policies and procedures that have an adverse impact to those of individuals claiming disparate treatment. She also argued that the standard discourages employers from voluntarily changing discriminatory policies and procedures “out of fear that the employer will be unable to establish ‘the strong basis in evidence’ necessary to avoid liability for disparate treatment claims.” According to Judge Rivera, this incentive for inaction is well-illustrated in this case: the City of Buffalo took action to change practices which were held discriminatory in the 1974 case and which were challenged as discriminatory in the MOCHA litigation, but now faces liability against Margerum and his co-Plaintiffs for taking these appropriate steps.
Accordingly, Judge Rivera would have rejected the application of Ricci in favor of the principle that “an employer does not commit statutorily prescribed intentional discrimination when the employer seeks to reduce and eliminate the causes of inequality at the workplace.” Under this principle, the firefighters’ disparate treatment claims lacked merit and the Court should have granted summary judgment to the City.
The takeaway here is that, as a result of the majority’s decision in Margerum, employees and former employees seeking to sue their municipal employers for alleged NYSHRL violations will not need to serve a Notice of Claim and can proceed directly to a lawsuit. Further, because a Notice of Claim is not required, municipal defendants will no longer have the opportunity to conduct a pre-lawsuit examination of the claimant (known as the 50-h exam) in NYSHRL cases.
However, as Judge Read pointed out, there are caveats to this, including that county employees are still required to serve a Notice of Claim under County Law Section 52. A similar requirement exists under Education Law Section 3813 for claims against schools and school districts “for any cause whatever... relating to district property or property of schools… or involving the rights or interests of any district or any such school.” This statute requires, as a pre-condition to suit, “that a written verified claim” be served on the district or school within three months after the claim arises. Federal courts and state appellate courts have extended this requirement to NYSHRL claims, at least where the plaintiff seeks damages (see, e.g., Barbato v Bowden, 63 AD3d 1580, 1581 [4th Dept 2009]; Hoger v Thomann, 189 AD2d 1048, 1049 ; Falchenberg v New York City Dep't of Educ., 375 F Supp 2d 344, 349 [SDNY 2005]). Thus, school district employees must still serve a Notice of Claim before suing for employment discrimination and other NYSHRL claims.
One final caveat: municipal and other employers should keep in mind that federal claims under Title VII require the plaintiff to file a pre-suit charge with the United States Equal Employment Opportunity Commission (EEOC). In New York, filing a discrimination charge with the New York State Division of Human Rights would satisfy this prerequisite, as charges with this state fair employment practices agency are automatically cross-filed with the EEOC.
Margerum is an important case, as it alters the way NYSHLR claims against municipalities are sued and changes the procedural devices and defenses available to municipal defendants on NYSHLR claims. For those interested in reading the decision in greater detail, the citation is: Margerum v City of Buffalo, — NY3d —, 2015 NY Slip Op 01378 .
This Week’s Highlights:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
- If Occurrence Falls Outside of Retro Period in Claims Made Policy, No Obligation to Deny Coverage Timely Under Statute
- The Insurer is Bound by The Words of Its Policy
- Subrogated Carrier’s Claim Released When Its Insured Releases All Claims
- Framed-Issue Hearing Necessary in Claim for Uninsured Motorists Benefits Where There is Conflicting Proof of Physical Contact
- Federal Judge Rejects Recoupment of Defense Fees
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
- Court of Appeals Affirms Summary Judgment Where Defendants’ Expert Reports Indicating Full Range of Motion and Degenerative Conditions Were not Rebutted by Plaintiff’s Conclusory Expert Reports
- Plaintiff Defeated Summary Judgment By Submitting Expert Affidavit Finding Range of Motion Deficits Which Conflicted With Defendants’ Expert Affidavit
- Competing Expert Affidavits As to Causation and Scope of Injury Will Lead to Denial of Summary Judgment
- Plaintiff’s Own Expert Report Failed to Address Her Radiologist’s Finding That Injuries Were Degenerative and Thus Not Caused By The Accident
- Issue of Fact Raised by the Dispute Between the Parties Experts As To Whether Tears In Plaintiff’s Knee and Shoulder Were Due to the Accident Or Arthritis
- Defendants Will Be Denied Summary Judgment When Their Own Submissions Establish Issues of Fact as to Serious Injury
- Defendants Submitted Four Expert Reports Which Disagreed With Each Other With Respect to Causation and Serious Injury Thus Causing an Issue of Fact in Defendants’ Own Submissions
- Mild Injuries Caused by an Accident Will Not Constitute the Necessary Serious Limitation of Use or Function Required Under the Insurance Law
MARGO’S MUSINGS ON NO FAULT
Margo M. Lagueras
- Peer Review Insufficient to Support MUA Denial
- Denial of Reimbursement for Facet Blocks Upheld Given Response to Conservative Care
- Applicant’s Assignor Not EIP for Purposes of APIP or Medical Payments
- Medical Records Providing No Objective Findings Fail to Rebut Peer Review
- No-Fault Insurer Not Required to Pay Facility Fee for Office-Based Surgery in Facility Accredited Under Public Health Law 230-d
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
Court of Appeals
- Ensuing Loss Exception for Explosion Does Not Erode the Protections of the Subsurface Water Exclusion
- Silica Dust Falls Within Pollution Exclusion in a First Party Policy
- Flood Exclusion Bars Coverage for Business Interruption and Extra-Expense Claims
- Lie on Insurance Application = Material Misrepresentation = Voiding of Coverage
- Court Dismisses Common Law Indemnity and Contribution Claims against Plaintiff’s Employer and Finds No Grave Injury, Where Plaintiff Maintained Ability to Use His Right Hand to Perform Tasks of Daily Living
- Contractual Indemnity Claims Cannot Be Resolved Due to Uncertainty Regarding Where Plaintiff Fell
Elizabeth A. Fitzpatrick
- See her summary in Kohane’s Coverage Corner
AUDREY’S ALL THINGS PERSONAL
Audrey A. Seeley
- Defense Not Owed In Counterclaims for Lanham Act Violation, Sherman Act Violation, and Deceptive Trade Practices Under Coverage B Portion of General Liability Policy
- Yet Another Reason to Always Write “UM Equal to BI Limits Stacked”
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
- S1471 – Cancellation of Auto Policies
- Circular Letter No. 2 (2015) - Guidelines and Procedures for the Implementation of the Provisions of the Terrorism Risk Insurance Program Act of 2015.
KEEPING THE FAITH WITH JEN’S GEMS
Jennifer A. Ehman
- Highest Court in New Jersey Declines to Alter the Test for First-Party Bad Faith Claims; Instead, Holds that Unpublished Decision Relied Upon by Insurer Established Fair Reason to Believe It was Making Legitimate Legal and Business Decision
Earl K. Cantwell
- Insurance Claim Properly Removed to Federal Court
That’s all for now. Please think warm thoughts for those of us in cold country.
Dan D. Kohane
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202
E-Mail: [email protected]
H&F Website: www.hurwitzfine.com
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York
Dan D. Kohane
Audrey A. Seeley
Jennifer A. Ehman
INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
Michael F. Perley
Elizabeth A. Fitzpatrick
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Jennifer A. Ehman
Taylor F. Gabryel
Diane F. Bosse
Joel R. Appelbaum
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
Elizabeth A. Fitzpatrick
Audrey A. Seeley, Team Leader
Margo M. Lagueras
Jennifer A. Ehman
Taylor F. Gabryel
Jody E. Briandi, Team Leader
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
Audrey’s All Things Personal
Cassie’s Capital Connection
Keeping the Faith with Jen’s Gems
KOHANE’S COVERAGE CORNER
Dan D. Kohane
02/26/15 American International Spec.Lines Ins. Co. v. Kagor Realty Appellate Division, First Department
If Occurrence Falls Outside of Retro Period in Claims Made Policy, No Obligation to Deny Coverage Timely Under Statute
The purpose of the subject policy's "retroactive date" was to provide coverage to claims made during the policy period that were based on events that took place after a particular date. Thus, the insured in this case was required to prove that a pollution incident commenced after the retroactive date.
Here, the record amply demonstrates that the lead paint pollution conditions that were alleged to have caused the infant plaintiff's bodily injuries commenced prior to the June 9, 1996 retroactive date. Since there was no coverage for that claim in the coverage grant, the failure to disclaim timely is of no consequence.
Editor’s Note: Kudos to our friends at the Traub Lieberman firm and Dawn Warren, the handling attorney. This case reminds us that the obligations to disclaim timely under 3420(d)(2) only apply to disclaimers (for bodily injury and wrongful death claims) where the basis for denial is an exclusion or breach of policy condition.
02/24/15 New York State Ins. Fund v. Everest Nat. Ins. Co.,
Appellate Division, First Department
The Insurer is Bound by The Words of Its Policy
This coverage dispute involved the amount required of the Everest commercial excess liability policy issued to nonparty, El Sol Contracting and Construction Corp. The explicit language of the commercial excess liability policy issued by Everest to El Sol unambiguously provided that Everest’s obligation was to pay the lesser of the $2 million coverage limit called for under the trade contract between El Sol and nonparty, Triborough Bridge and Tunnel Authority or the $10 million limit of the Everest policy. Everest contended that it was entitled to offset the $1 million. paid by the primary insurer, since the trade contract required minimum insurance coverage limits of only $2 million. The court agreed however, with our argument that, the extent of insurance is governed not by the terms of the underlying trade contracts among the insureds but by the policy terms. While Everest may have intended such offset, its policy did not provide for an offset. The court further agreed that if the disputed policy language were ambiguous, it would be construed against Everest, the drafter of the policy, since Everest offered no extrinsic evidence that supported its interpretation (see generally Matter of Mostow v State Farm Ins. Co., 88 N.Y.2d 321 ; QBE Ins. Corp. v. Public Serv. Mut. Ins. Co., 102 AD3d 442 [1st Dept 2013] ).
Editor’s Note: Congrats to our Beth Fitzpatrick on this win at the First Department. She is also the guest editor of this summary.
02/19/05 Daimler Chrysler Ins. Co. v. New York Central Mutual Fire Ins. Appellate Division, First Department.
Subrogated Carrier’s Claim Released When Its Insured Releases All Claims
Guest Columnist: Summary by Richard Corde, Boggeman George & Corde, P.C., the successful lawyer on the appeal
A NYCM insured leased a Jeep which was titled to Chrysler Financial. The finance agreement required that the insured purchase insurance and name Chrysler an additional insured. The insured only requested that Chrysler be named as a loss payee. The lease predated the changes to VTL 388 which now absolves a vendor with a security interest from being an “owner”.
The insured was involved in an accident. The insured and Chrysler were named in the suit as owner and operator. NYCM only appeared for their named insured and plaintiff retained separate attorneys for the defense of Chrysler. Chrysler asserted common law indemnity cross claims in the underlying action. The underlying case was settled by NYCM without any contribution by plaintiff for Chrysler. A stipulation of discontinuance was signed by all parties to the underlying action. Chrysler’s insurer than sued NYCM claiming an entitlement to reimbursement of all of their attorney’s fees in defending the underlying claim as they were additional insureds under the NYCM policy even though the Dec Sheet listed them only as a loss payee. They argued that the definition of an insured included them by reference as it included “any person or organization but only with respect to legal responsibility for acts or omissions of you “.
We argued that Chrysler had an obligation to raise that claim either in a timely DJ action or as a cross claim in the underlying action. By signing the Stipulation of Discontinuance their insured waived the claim for attorney’s fees
The Court agreed with New York Central and found that the Daimler-Chrysler claim were both released and time barred because it stands in the shoes of its insured.
Editor’s Note: Atta-lawyer, Rich.
02/18/15 Merchants Preferred Ins. Co. v. Waldo
Appellate Division, Second Department
Framed-Issue Hearing Necessary in Claim for Uninsured Motorists Benefits Where There is Conflicting Proof of Physical Contact
Waldo sought uninsured motorist benefits for physical injuries she allegedly sustained in a motor vehicle accident with an unknown "hit-and-run" driver. After Merchants disclaimed coverage, the Waldo demanded arbitration of her claim. The petitioner thereafter commenced this proceeding to temporarily or permanently stay arbitration of the appellant's claim.
Merchants claimed that Waldo failed, as required by the policy, to (1) report the accident within 24 hours or as soon as reasonably possible to a police, peace, or judicial officer, or to the Commissioner of Motor Vehicles, and (2) file a sworn statement with the petitioner setting forth the facts supporting her claim. The petition further alleged that there was no physical contact with the hit-and-run vehicle.
On certain issues (notification of the authorities) Merchants did not provide proper proof in its application since, as to those issues, it only provided the unsupported assertions of its attorney. However, the Merchants did submit evidentiary facts to establish a preliminary issue as to whether there was physical contact between the Waldo's vehicle and a hit-and-run vehicle.
Waldo did provide some proof that her vehicle came into contact with the hit-and-run vehicle. She submitted an affidavit in which she swore that another vehicle struck her vehicle when it changed lanes, and that the other vehicle skimmed her front bumper.
Accordingly, the court should have scheduled a framed-issue hearing to determine the factual issues.
01/23/15 General Star Indemnity v. Driven Sports, Inc.
United States District Court, Eastern District of New York
Federal Judge Rejects Recoupment of Defense Fees
In this case, General Star agreed to provide a litigation defense in three underlying actions, subject to a complete reservation of its rights, including the right to recoup any amounts paid in the defense of the actions, if it were determined that the Policy did not require coverage. When originally negotiating the provision of coverage, plaintiff had proposed that defendant sign a “non-waiver and defense funding agreement,” which “provided that defense expenses would erode the Policy's limit of liability and that Driven Sports would agree to repay any defense expenses in the event that it is finally determined that such amounts are not covered under the Policy. The insureds rejected plaintiff's offer, and thus plaintiff's reservation of the right to seek recoupment remained unilateral.
The court eventually determined that there was no obligation of the insurer to defend those lawsuits and then considered the application by General Star to recoup costs from the insured. The court recognized that there was some authority, four separate cases that permitted recoupment when the right to recoup was reserved.
The relevant New York law under consideration is unjust enrichment, because plaintiff's argument for recoupment is not based in the text of the Policy itself. It is undisputed that no provision of the Policy explicitly grants plaintiff the right to seek recoupment. Instead, plaintiff argues that defendant would be unjustly enriched by legal representation to this point in the underlying cases, where it has been held that the claims in those cases are excluded from the Policy.
The Court rejected that argument and concluded that the policy does not provide for recoupment but does require the insured to defend lawsuits that allege claims within coverage. It held that to allow the insurer to claim back legal fees it was obligated to pay because of its broad duty to defend would amount to rewriting the contract of insurance.
To hold otherwise would risk eroding the well-established doctrine under New York law of imposing an “exceedingly broad” duty to defend on insurers. … Thus, the insured would lose the benefit of his bargain with the insurer, which the insured struck believing that the insurer was obligated to defend him, at least initially, even in the most borderline cases. A judicial alteration of that contractual balance, without any Policy language justifying such an outcome—and, in fact, with Policy language promising that the insurer will pay all expenses—is contrary to the “reasonable expectations of the average insured.
The court found that allowing recoupment in this case would effectively make the duty to defend coextensive with the duty to indemnify, despite the fact that New York courts have repeatedly held that the duty to defend is broader. “The duty to defend arises whenever the allegations in a complaint against the insured fall within the scope of the risks undertaken by the insurer, regardless of how false or groundless those allegations might be. Under these circumstances, the Court found that the New York Court of Appeals would find recoupment to be an inappropriate remedy.
Editor’s Note: If you want a copy of the decision, please let us know.
Robert E.B. Hewitt III
02/12/15 Alvarez v. NYLL Mgt. Ltd
New York Court of Appeals
Court of Appeals Affirms Summary Judgment Where Defendants’ Expert Reports Indicating Full Range of Motion and Degenerative Conditions Were not Rebutted by Plaintiff’s Conclusory Expert Reports
In a rare decision by the Court of Appeals, the Court unanimously affirmed the Appellate Division’s granting of summary judgment, finding that the plaintiff failed to raise a triable issue of fact as to whether or not she suffered a serious injury within the meaning of the Insurance Law. The Appellate Division’s decision, which was a 3-2 decision with an automatic right to appeal, was addressed in my predecessor’s column in September 2014. To reiterate:
Defendants made a motion for summary judgment to dismiss plaintiff’s lawsuit based on plaintiff’s failure to establish a serious injury within the meaning of the Insurance Law, which was granted by the trial court. In response to the appeal of the trial court’s decision, the Appellate Division, First Department found that defendants made a prima facie showing that plaintiff did not sustain permanent or serious significant injuries to her right shoulder, right knee, and neck as a result of the subject matter motor vehicle accident. Defendants submitted expert reports of an orthopedic surgeon and radiologist. The orthopedic found full range of motion in plaintiff’s right shoulder, right knee and neck, and concluded that plaintiff’s conditions were degenerative in nature. Plaintiff’s medical reports included a physician’s examination finding full range of motion of plaintiff’s right knee, and the exact same range of motion in both of plaintiff’s shoulders following the accident. Further, plaintiff’s emergency room records included her acknowledgment of a history of arthritis.
Plaintiff failed to raise a triable issue of fact with respect to her injuries in opposition to defendants’ proof. Plaintiff’s orthopedic surgeon’s opinion that her shoulder, knee, and spine conditions were caused by the accident and not degeneration were deemed conclusory by the Appellate Division, and thus were insufficient to raise an issue of fact as to causation. Further, this surgeon failed to address or contest the detailed findings of preexisting degenerative conditions by defendant’s experts, which were acknowledged in the reports of plaintiff’s own radiologists. Plaintiff’s surgeon also failed to address plaintiff’s history of arthritis, or the earlier conflicting findings by plaintiff’s other treating physicians of normal knee range of motion and the same range of motion in both shoulders following the subject matter motor vehicle accident. Since plaintiff failed to raise a triable issue of fact, the Appellate Division, First Department affirmed the trial court’s granting of defendants’ motion for summary judgment to dismiss plaintiff’s complaint.
The Appellate Division also stated that the trial court properly dismissed plaintiff’s 90/180 day claim as plaintiff failed to allege in her bill of particulars that she was incapacitated for at least 90 of the first 180 days following the accident.
The dissent in the Appellate Division Decision would have found an issue of fact based upon plaintiff’s need for arthroscopic surgery on her right shoulder tear two weeks after the accident, and surgery on her right knee two months after the accident. Plaintiff had testified she never sustained injury to her right shoulder and right knee or other parts of her body before the accident. The surgeon found significant limitations of motion and an MRI showed impingement from the accident. The treating surgeon also noted plaintiff’s continued difficulty in performing daily activities after the accident. The physician who examined plaintiff 10 days after the accident observed that she had decreased range of motion. Thus the dissent would have found an issue of fact.
02/24/15 Diaz v. Dela Cruz
Appellate Division, First Department
Plaintiff Defeated Summary Judgment By Submitting Expert Affidavit Finding Range of Motion Deficits Which Conflicted With Defendants’ Expert Affidavit
The Appellate Court unanimously affirmed the lower court’s denial of summary judgment. Defendants successfully met their prima facie burden to show a lack of serious injury to the cervical or lumbar spine by submitting an affirmed report of an orthopedist who found full range of motion. Plaintiff, however, raised an issue of fact. Plaintiff submitted the affirmed report of a radiologist who interpreted plaintiff’s cervical and lumbar spine MRIs and found herniated discs at several levels. Plaintiff also submitted an affidavit from his treating chiropractor which contradict plaintiff’s expert and stated plaintiff had range of motion deficits in the cervical and lumbar spines, unrelated to age or prior trauma, as evidenced by his ability to work as a taxi driver prior to the accident.
Defendants also met their prima facie burden of showing lack of a 90/180 day injury by relying on plaintiff’s allegations in his bill of particulars and report to an examining chiropractor that he missed less than 90 days from work. However, plaintiff raised an issue of fact by submitting an affidavit stating he was disabled from work more than three months and from his chiropractor’s affidavit stating he had been disabled from work more than three months due to his medical injury. Therefore, the conflict was an issue of fact.
02/19/15 Steele v. Santana
Appellate Division, First Department
Competing Expert Affidavits As to Causation and Scope of Injury Will Lead to Denial of Summary Judgment
The Appellate Court unanimously reversed the grant of summary judgment by the trial court. Plaintiff claimed injuries to her right shoulder and was incapacitated from work for three months as a result of the accident in which she was knocked from a bicycle by defendants’ motor vehicle. Defendants’ made a prima facie showing that plaintiff did not sustain permanent consequential or significant limitation injuries to her right shoulder by submitting the affirmed reports of an orthopedic surgeon and radiologist. The orthopedic surgeon conducted an examination and found full range of motion in plaintiff’s right shoulder and the radiologist concluded that plaintiff’s injuries were degenerative. However, plaintiff was able to raise an issue of fact. She submitted an affirmation from her orthopedic surgeon which averred that he reviewed the MRI of her shoulder, which showed a tear to her tendon, and that during surgery he visualized tear in plaintiff’s rotator cuff which he attributed to the accident. Therefore, summary judgment should have been denied.
02/17/15 Figueroa v. Ortiz
Appellate Division, First Department
Plaintiff’s Own Expert Report Failed to Address Her Radiologist’s Finding That Injuries Were Degenerative and Thus Not Caused By The Accident
The Appellate Division unanimously affirmed the grant of summary judgment to defendants. The defendants met their prima facie burden of showing that plaintiff did not suffer a serious injury causally related to the accident. They submitted an affirmed report of an orthopedic surgeon, who found normal range of motion in all parts, and a radiologist, who opined that the conditions shown in the MRI taken of plaintiff’s cervical spine were degenerative and preexisted the accident.
Plaintiff failed to raise an issue of fact. Her doctor did measure limited range of motion of all parts, but plaintiff offered no objective medical evidence of injury to her right hip, and her doctor’s narrative report acknowledged that the reports of MRIs performed on her lumbar spine, thoracic spine, and right shoulder were all normal. Her radiologist’s affirmed report of the MRI performed on her cervical spine confirmed the presence of desiccation in the affected discs, and her doctor failed to address those findings or explain why the degenerative findings were not the cause of the claimed injuries.
The Appellate Court also found that dismissal of plaintiff’s 90/180-day claim was appropriate in light of plaintiff’s testimony that she was able to leave home two months after the accident, and where her doctor cleared her to return to work less than 90 days after the accident even though she chose not to return to work.
02/17/15 Chaston v. Doucoure
Appellate Division, First Department
Issue of Fact Raised by the Dispute Between the Parties Experts As To Whether Tears In Plaintiff’s Knee and Shoulder Were Due to the Accident Or Arthritis
The Appellate Division unanimously reversed the grant of summary judgment to defendants on the issue of permanent consequential or significant limitation of use of plaintiff’s right shoulder and right knee. Defendants made a prima facie showing that plaintiff did not plaintiff did not sustain permanent or significant injuries to his right shoulder, right knee, and lumbar and cervical spines by submitting the expert reports if an orthopedic surgeon and radiologist who concluded that plaintiff’s injuries were degenerative in nature and not causally related to the accident. Defendant’s radiologist opined that there was mild or moderate arthritis and the orthopedist opined that the tears found by plaintiff’s surgeon were related to the arthritis because there was no bone edema shown in the knee MRI.
In opposition, plaintiff’s surgeon opined based upon the history of the accident, his examination, and review of MRI reports that the tears in the right shoulder and right knee resulted from the accident. Plaintiff’s MRI reports, presented by defendant’s expert in his report, found a partial thickness tear in the shoulder with effusion. The dispute between the parties’ experts as to whether the tears were related to arthritis or to the trauma of the accident raised an issue of fact.
02/13/15 Gawron v. Town of Cheektowaga
Appellate Division, Fourth Department
Defendants Will Be Denied Summary Judgment When Their Own Submissions Establish Issues of Fact as to Serious Injury
The Fourth Department found that defendants failed to establish a prima facie case of entitlement to summary judgment in all respects. It found the trial court properly found that defendants failed to make a prima facie showing that plaintiff’s alleged injuries did not satisfy the serious injury threshold under the three categories alleges by plaintiff/ Defendants own submissions raise triable issues of fact as to whether the limitations are significant or consequential within the meaning of the statute. They also raised issues of fact as to whether or not plaintiffs’ injuries were preexisting and unrelated to the accident. Defendants also failed to meet their burden of establishing that plaintiff did not sustain a serious injury under the third category alleged by plaintiff, i.e. the 90/180-day category.
02/06/15 Tate v. Brown
Appellate Division, Fourth Department
Defendants Submitted Four Expert Reports Which Disagreed With Each Other With Respect to Causation and Serious Injury Thus Causing an Issue of Fact in Defendants’ Own Submissions
The Appellate Court reversed the trial court’s granting of summary judgment to defendants. Plaintiff was a passenger in a vehicle allegedly struck by a truck. Plaintiff alleged a significant limitation of use of a body function or system. First, the Appellate Court found that the defendants failed to submit evidence in admissible form. Defendants submitted the reports of four physicians who examined plaintiff on behalf of defendant. In one of those reports, the physician noted that MRIs taken of plaintiff show that he has herniated and bulging discs and has range of motion limitations with respect to his cervical and lumbar spine, which were quantified and determined to be not insignificant. Defendants’ own physician expert found the injuries sustained to be causally related. In the second report submitted by defendants, the orthopedic surgeon also found herniated and bulging discs and concluded that plaintiff had range of motion limitations in his cervical spine. He too found a causal relationship between the accident and the injuries. The two other reports submitted found that plaintiff did not sustain a serious injury in the accident and that the injuries were preexisting. However, the conflict in the four reports submitted by defendants precluded a grant of summary judgment.
The Court also found an issue of fact as to liability in the accident, as although plaintiff’s vehicle was rear ended, there was conflicting testimony as to whether the vehicle suddenly stopped sufficient to deny plaintiff’s request for summary judgment.
02/06/15 Jones v. Leffel
Appellate Division, Fourth Department
Mild Injuries Caused by an Accident Will Not Constitute the Necessary Serious Limitation of Use or Function Required Under the Insurance Law
The Appellate Court affirmed the trial court’s granting of summary judgment to defendants. The Appellate Court noted that the New York Court of Appeals has held that whether a limitation of use or function is significant or consequential relates to medical significant and involves a comparative determination of the degree or qualitative nature of an injury based on the normal function, purpose, and use of the body part. Defendant submitted the affirmed report of a neurologist who examined plaintiff on defendant’s behalf and reviewed the medical records. The neurologist found a soft tissue injury from which plaintiff could be expected to make a full recovery and no objective evidence of a cervical disc herniation or other acute injury. The mild injury was thus not a serious injury under the insurance law. Plaintiff failed to establish limitations or restrictions of use resulting from the injuries despite muscle spasms.
Margo M. Lagueras
02/17/15 Jerry J. Tracy, Physician PLLC v Progressive Ins. Co.
Erie County, Arbitrator Douglas Coppola
Peer Review Insufficient to Support MUA Denial
The 35 year-old EIP was rear-ended in May 2011. She was taken by ambulance with complaints of neck and low back pain and apparent disorientation. In 2006, she had a low back injury for which she received lumbar facet injections and an RF rhizotomy which did not help. At the time of this accident, she was on SS Disability and not working. In March 2012, cervical and lumbar MRIs revealed positive findings mostly confirming degenerative changes and possible spasms. She was receiving conservative care, including chiropractic, which Applicant recommended she continue. In December 2013, Applicant recommended manipulation under anesthesia (MUA) because she had “intractable” low back pain and was not responding to chiropractic care and medical co-management. The MUA was performed on three consecutive days in January 2014.
A peer review was performed by Jeffrey Perry, DO. He opined that there was no justification for performing MUA. The Arbitrator determined that the reviewer did not take into account, or did not explain, or misstated, the conservative care records and positive MRI findings, or the apparent fact that the EIP’s pain was not alleviated with the fact injections. The Arbitrator stated that “It is clear the Dr. Perry has a philosophical vent against the MUA concept.” As such, he found the peer review insufficient and awarded the disputed benefits.
There was also a dispute as to the correct fee schedule. Applicant asserted that the amount billed was correct and the Arbitrator agreed stating “I believe this is a more appropriate fee schedule to be awarded in these cases.” As for the facility and anesthesia charges, the Arbitrator stated that given that there is no fee schedule, he would award the full amount requested.
02/13/15 WNY Medical Management, LLC v Liberty Mutual Fire Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Denial of Reimbursement for Facet Blocks Upheld Given Response to Conservative Care
The 37 year-old EIP was injured in June 2011 while a pedestrian. He stated that the passenger side mirror struck his elbow and the door of the minivan hit his right leg, but he did not fall or lose consciousness. He alleged injuries to his neck, right knee, hip and shoulder but the initial hospital evaluation noted an absence of back pain, normal range of motion and normal x-rays of the back. Later in June he consulted with various providers and physical therapy, then stating that he had been knocked down. He then started complaining that he sprained his right knee, and had sustained lacerations and pain on his right side, primarily from his neck into his left arm and occasionally into the left leg. In March 2012, a cervical discectomy and fusion was performed. In April 2013, he was seen by Dr. Bansal for complaints of weakness in his right leg, muscle spasm in the back but no radicular symptoms. Among other things, Dr. Bansal noted normal range of motion and negative straight leg raise and other tests, but myofascial pain and tenderness over the L5-S1 facet joints. He recommended facet joint injections but also noted that physical therapy had produced improvement and reduced pain and spasms. The facet block injections were performed in September 2013.
A peer review was performed in September 2013 by Dr. Grammar who opined that the injections were not medically necessary. Dr. Grammar noted that the EIP had a pre-existing condition for which he was receiving WC benefits which he did not reveal. In addition, Dr. Bansal made no reference to any imaging studies which would have been essential to determine the level to place the blocks.
The Arbitrator agreed that the peer review was sufficient to support the denial. The EIP did not complain of any back pain in the ER and the x-rays revealed only mild degenerative changes at L1. Other medical providers never mentioned any back pain but rather only neck and arm pain. The fact that the EIP changed his version of the events to say he was knocked down, contradicting his original story, also raised a question of credibility. In addition, Dr. Bansal stated that physical therapy was beneficial and did not explain why facet blocks were necessary given that his notes indicated that conservative care was providing relief. As such, the Arbitrator determined that the Applicant “failed to rebut the evidence which overwhelmingly indicates that there was no medical necessity for the disputed facet blocks.”
02/13/15 Erie County Medical Center v A. Central Ins. Co.
Erie County, Arbitrator Michelle Murphy-Louden
Applicant’s Assignor Not EIP for Purposes of APIP or Medical Payments
On February 4, 2013, Applicant’s Assignor was struck while walking along a road in a snowstorm. Applicant sought reimbursement for emergency room and surgical related services provided on February 4, 2013 and surgical related services provided on May 31, 2013. According to Respondent’s PIP and OBEL worksheets, the full $75,000 in coverage was exhausted and a policy exhaustion denial was issued on October 25, 2013.
The issue then became whether the Assignor was entitled to the APIP and Medical Payments benefits which were denied. The Arbitrator determined that, under the facts of the case, the Assignor was not an EIP as defined by 11 NYCRR 65-1.3 because he was not Respondent’s named insured or relative, nor was he occupying the insured vehicle, or another vehicle driven by the named insured or relative, at the time of the accident. Therefore, the Assignor was not entitled to APIP benefits under Respondent’s policy. Furthermore, as Medical Payments coverage is only available to the named insured or relative specified on the Declarations Page, the Assignor was not entitled to those benefits either. Given that Respondent issued the PIP and OBEL exhaustion denial prior to the commencement by Applicant of the arbitration, Respondent had no further obligation under the policy and the claim was denied.
02/13/15 WJW Medical Products, Inc v National Liability & Fire Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Medical Records Providing No Objective Findings Fail to Rebut Peer Review
Applicant sought reimbursement for a Motion X mechanical lumbar support (LSO) dispensed in April 2014, to a 35 year-old EIP injured in February 2014. Dr. Winch prescribed the LSO “to support spine, prevent further injuries and promote [illegible]/ function”. A peer review was performed on April 30, 2014 by Bonnie Corey, DC, who, after reviewing records and citing to numerous articles, concluded that there was no medical necessity for the LSO as the medical records did not indicate any lumbar or ligamentous instability, or severe muscle weakness.
The Arbitrator found the peer review was factually and medically sufficient and was not refuted. Applicant argued that the medical records themselves constituted an adequate rebuttal but the Arbitrator pointed out that just as Dr. Corey noted, Dr. Winch stated that he performed orthopedic, neurologic and chiropractic tests but never stated which tests or any results. Furthermore, Dr. Winch’s diagnoses were not supported by any objective findings such as MRIs or orthopedic tests and his letter of medical necessity was a boilerplate. Therefore, there was nothing in the medical records to rebut Dr. Corey’s opinion and the denial was upheld.
02/18/15 GEICO Insurance Co. v Avanguard Medical Group, PLLC
Appellate Division, Second Department
No-Fault Insurer Not Required to Pay Facility Fee for Office-Based Surgery in Facility Accredited Under Public Health Law 230-d
In a case of first impression, the Second Department reverses the trial court and holds that facilities accredited under Public Health Law 230-d, which is not contained in Public Health Law Article 28, are not entitled to reimbursement for a facility fee as payable first-party benefits under Insurance Law 5102.
A facility fee is a charge for the cost of providing technicians, medical assistants, equipment as in for x-rays and ultrasounds etc. It is not a fee for a particular medical procedure, but rather a blanket charge added to the billing for all procedures. Defendant sought reimbursement for “office-based surgery”. It was not disputed that Defendant is accredited under Public Health Law 230-d as a setting for office-based surgery and that the medical practice of the anesthesiologist performing the surgeries, and who is an owner of Avanguard, is similarly accredited.
The court, after analyzing Insurance Law 5108, 5102, Regulation 83, the No-Fault Regulations, Public Health Law Article 28 and Section 230-d, disagreed with Defendant’s position that it was entitled to reimbursement because facility fees are included within the definition of “basic economic loss” in Section 5102. The court noted that “basic economic loss” expressly incorporates the limitations imposed by Section 5108, and there is no provision in the Workers’ Compensation schedules expressly providing for payment of facility fees for office-based surgery performed in a facility accredited under Public Health Law 230-d. Although a provider may be entitled to reimbursement in situations when there is no fee schedule, here the existing fee schedule and “PAS” codes exist but only apply to Article 28 ambulatory surgical centers.
The court also noted that Section 230-d imposes a substantially more modest level of oversight and regulation than Article 28. The court therefore determined that it would be improper for it to determine that a facility, such as Defendant, is entitled to a benefit of Article 28 when it is not subject to the regulatory burdens. As such, the trial court was reversed and Plaintiff’s motion declaring that it is not required to reimburse Defendant for facility fees as payable first-party benefits under Insurance Law 5102 was granted.
Court of Appeals
02/19/15 Platek v Town of Hamburg
Court of Appeals
Ensuing Loss Exception for Explosion Does Not Erode the Protections of the Subsurface Water Exclusion
We initially reported on this decision in our August 3, 2012 issue of Coverage Pointers. At that time, we stated:
07/06/12 Platek v Town of Hamburg
Appellate Division, Fourth Department
Exception for “Explosion” Creates Water Damage Coverage; Two Justice Dissent Says “No Way”
Plaintiff’s commenced the instant action against Allstate after they sustained water damage at their home. The water infiltrated the home after a water main ruptured near the premises. Upon receipt of the claim, Allstate immediately disclaimed under the “water damage” exclusion which removes coverage for property damage caused by “water on or below the surface which…flows, seeps or leaks through the residence premises."
Plaintiff challenged Allstate’s denial by arguing the exception for physical loss caused by fire, explosion or theft caused by water infiltration preserved coverage. Essentially, plaintiff argued that the water damage, as a whole, was removed from coverage, but the exception restored coverage for water damage that arose from an explosion. Put to the current facts, plaintiff argued that because there was an “explosion” of the water main, the water damage exclusion did not apply.
To reach this conclusion, the Court was also asked to determine that a water main could, in fact, explode. The Court relied upon the dictionary definition of “explosion” which described the act as “to burst violently as a result of pressure from within.”
In opposition, Allstate argued that the “explosion” exception was an “ensuing loss” provision. In essence, Allstate argued that any loss, regardless of how, that was related to flood waters was categorically excluded. However, if there was an additional event (i.e., fire, explosions, theft), and additional property damage that was occasioned as a result of the additional event, coverage would apply to cover the additional property damage.
The Court held that the both interpretations of the water exclusion, and the subsequent exception, were plausible. Under such a situation, the Court ruled that an ambiguity existed in the policy and confirmed that Allstate could not rely upon the water exclusion in this case.
In a well-reasoned dissent, Justices Peradotto and Martoche argued that the Court had strained the intent and plain meaning of the water damage exclusion to create an illogical result. As aptly noted by the dissent, to adopt the Court’s view would be an acceptance that fire could cause a flood…or that theft could cause a flood. Either way, the policy is cover water damage and eviscerating the intent of the exclusion.
The Court’s adoption of plaintiff’s argument put the cart before the horse.
The policy does not cover, in the dissent’s view, water damage under any circumstance. The policy will cover, however, damage that arises from “fire, explosion or theft” after the flood occurs. Thus, if someone breaks in and steals items from a flooded house, the theft would be covered.
As noted above, this is a 3-2 split. We will be monitoring to see if this matter ends up at the Court of Appeals.
Peiper’s Point - We are not so sure the general public would think a water main rupture was an “explosion,” just sayin’.
It took a while, but the Court of Appeals has finally righted one of the more confusing decisions to come out of the Appellate Division in recent years. In writing for a majority of the Court, Judge Read began by referencing three important cannons of construction in insurance law. The first is that coverage is driven by the actual language of the policy. The second principle is that the carrier has the burden of establishing its coverage defense when such defense is based upon the application of an exclusion. Finally, the third rule is that if a carrier is able to establish the applicability of an exclusion, the burden shifts to the insured establish that an exception to the exclusion is triggered to save coverage.
In the instant case, the loss was undoubtedly precipitated by water that was on or below the surface which flows, seeps or leaks through any part of a residence premises. As such, on its face, the water damage exclusion applied to bar coverage.
The Court then went into a lengthy discussion about what an ensuing loss exception is, and why it was added to first party policies. Essentially, it is posited that ensuing loss exceptions arose out of the great San Francisco fire of 1906. Because the fires may have started due to the great 1906 earthquake, some insurers denied coverage on the basis that the fires were really caused by the earthquake (and thus excluded). The ensuing loss provision reinvigorates coverage lost by an exclusion when the event leads to certain enumerated losses. For instance, damage from fire or explosion which is caused by subsurface water are covered.
An ensuing loss provision does not, however, swallow the exclusion. The homeowners in the instant case argued that the exception for explosion actually created coverage for water damage. When, in fact, the exception created coverage for explosions caused by water damage. In so holding, the Court noted that the fact that Allstate did not label the exception as “ensuing loss” was irrelevant to the policy language’s otherwise understood meaning. In short, the water damage exclusion clearly evinced intent by the parties to the contract to remove coverage for damage caused by flood waters. To read the exception as proposed by plaintiffs would contravene the clear purposes of the exclusion.
Judge Pigott crafted an interesting, and notable, concurring opinion in this case. While he agreed that the explosion exception to the water damage exclusion (ie., the ensuing loss exception) did not apply, he noted that the only proof in the Record was that the loss was caused by an explosion (of the water pipe). As such, had it been argued, Judge Pigott opined that coverage under the original grant of the policy may have very well provided protection for this loss. In other words, the water was immaterial. The loss was caused by an explosion, and explosions are covered by the policy.
Peiper’s Point – Huzzah to Justices Peradotto and Martoche whom dissented at the Appellate Division. Although it took nearly three years, their well-reasoned dissent was ultimately exonerated; and rightly so.
02/26/15 Broome County v Travelers Indem. Co.
Appellate Division, Third Department
Silica Dust Falls Within Pollution Exclusion in a First Party Policy
Travelers issued a first party property policy to plaintiff which covered, among other things, a certain office building in Binghamton. During the course of the construction of a parking garage under the building, silica dust was permitted to enter the building’s elevator shift and disperse throughout structure. Travelers denied coverage on the basis of the pollution exclusion, and the faulty workmanship exclusion. Plaintiff cross-moved, and the Trial Court denied both motions on a question of fact.
On appeal, the Third Department held that the pollution exclusion applied to bar coverage. The Court noted that the exclusion applied to preclude coverage for the “discharge, dispersal, seepage, migration, release or escape of pollutants.” The Court apparently had little problem determining that silica dust was, in fact, a pollutant as that term was defined in the policy. In so holding, the Court distinguished a pollution exclusion in a first party policy from the same exclusion when employed in a third party policy. To the Third Department, the terms “discharge, dispersal seepage, migration release or escape of pollutants” had to include the “short migratory event” which left silica dust throughout the premises. To hold otherwise, in the Court’s eyes, would have rendered the exclusion meaningless.
The Court also affirmed Travelers denial on the faulty workmanship exclusion. Here, the Record revealed that the dust was permitted to escape due to inadequate protective barriers to contain it. Thus, the flawed process of the contractors resulted, directly, in the loss at issue. In reaching this conclusion, the Court rejected plaintiff’s arguments that the exclusion was ambiguous. The Court also rejected plaintiff’s argument that the silica dust loss was an ensuing loss, and thus excepted from the faulty work product exclusion.
02/26/15 Five Towns Nissan, LLC v Universal Underwriters Ins. Co.
Appellate Division, First Department
Flood Exclusion Bars Coverage for Business Interruption and Extra-Expense Claims
Plaintiff sustained a water damage loss, and also sustained loss that allegedly fell within its coverage for business income and extra-expense. In support of its argument for coverage, plaintiff argued that BI/Extra-Expense coverage was applicable because the “Covered Cause of Loss – Special Form” only applied to claims of physical damage. As such, there was no exclusion for flooding that was applicable to BI/Extra-Expense.
The Court rejected this argument by noting that the BI/Extra-Expense grant of coverage specifically conditioned coverage upon a review of the “Covered Cause of Loss –Special Form” which incorporated the flood exclusion. Where it was clear the loss was caused by flood, the Court affirmed the carrier’s denial in whole.
02/25/15 Morales v Castlepoint Ins. Co.
Appellate Division, Second Department
Lie on Insurance Application = Material Misrepresentation = Voiding of Coverage
Plaintiff applied for homeowners’ coverage on a premises located in Brooklyn. Several years later after a fire occurred at the premises, it was discovered that plaintiff, in fact, never resided at the location. Because Castlepoint was able to establish that it would not have issued the policy for a non-owner occupied dwelling, it was able to establish that plaintiff’s application contained a material misrepresentation. Castlepoint, accordingly, was justified in its decision to rescind the subject policy.
In rejecting plaintiff’s opposition, the Court noted that it was disinterested in hearing that the application had been submitted without apparent or actual authority. Here, the policy was renewed, with the same terms, for multiple years without objection. The result of which meant that plaintiff’s conduct in not correcting the mistake resulted in the ratification of the initial application.
02/19/15 Barclay v. Techno-Design, Inc.
Appellate Division, Third Department
Court Dismisses Common Law Indemnity and Contribution Claims against Plaintiff’s Employer and Finds No Grave Injury, Where Plaintiff Maintained Ability to Use His Right Hand to Perform Tasks of Daily Living
While plaintiff was employed by Codino’s Foods, Inc., he submits that the owner directed him to adjust nozzles inside a food processing machine. Plaintiff then reached inside the machine while it was operating and the sleeve of his uniform got caught in the gears, pulling his arm into the machine and causing serious injuries to his right hand and arm.
Plaintiff brought this lawsuit against the manufacturer, Techno-Design, Inc. The manufacturer then commenced a third-party action against Codino seeking common law indemnification and contribution. Condino moved for summary judgment dismissing the third-party action on the grounds that plaintiff did not sustain a grave injury under Workers Compensation Law § 11, and the manufacturer cross-moved. The trial court granted Codino’s motion in part dismissing the claim that plaintiff suffered a grave injury as a result of the loss of several fingers, but denied that part of the motion relating to the claimed total loss of use of plaintiff’s hand. The manufacturer’s cross-motion was denied in its entirely. For reference, Workers Compensation Law § 11 includes, as a grave injury, “permanent and total loss of use or amputation of an arm, leg, hand or foot…[or the] loss of multiple fingers.”
The evidence established that while an examining physician averred that plaintiff had lost 90% use of his upper right extremity and 60% use of the fingers on his right hand due to the loss of functionality of his middle, ring and small fingers, he was still able to pinch his index and middle fingers to his thumb. Also, he testified that he could use his right hand to lift a pen, grasp keys, move the gear shift and operate his vehicle, tie his shoes, button his shirt, use a fork and spoon, dial a telephone and write to some degree. Thus, given the plain meaning of the statute, plaintiff’s limited ability to use his right hand did not create an issue of fact as to whether he sustained a total loss of use of such hand. Moreover, the permanent immobility or purported “functional amputation” of three of plaintiff’s fingers did not fall within the category of “loss of multiple fingers.”
02/17/15 Souare v. Port Authority of N.Y. & N.J.
Appellate Division, First Department
Contractual Indemnity Claims Cannot Be Resolved Due to Uncertainty Regarding Where Plaintiff Fell
Plaintiff fell at a bus terminal. At time of the incident, the Port Authority and Greyhound had in place a Space and Services Agreement, which provided that the Port Authority would provide general maintenance for the terminal. There was also a Bus Carrier License Agreement in place which obligated Greyhound to indemnity the Port Authority for all third party claims arising out of its use of the space defined as the areas where passengers loaded, and to “take precautions at the gates and platforms adjacent to the Space reasonably necessary to assure the safety of its passengers and other persons.”
The First Department upheld the trial court’s decision denying both the Port Authority’s and Greyhound’s motions as to contractual indemnity on the ground that it was unable to determine which entity controlled the location where plaintiff fell.
It also upheld the trial court’s finding that Greyhound failed to provide evidence that it complied with its contractual requirements to procure insurance covering the Port Authority for all liability arising out of Greyhound’s use of the space under the Bus Carrier License Agreement. But, as it was still uncertain where the plaintiff fell, the motion was premature as it had yet to be determined whether the failure to procure caused the Port Authority any losses.
Elizabeth A. Fitzpatrick
See her summary in Kohane’s Coverage Corner
Audrey A. Seeley
02/17/15 Uretek (USA), Inc. v. Continental Cas. Co.
United States Dist. Crt., S.D. Texas
Defense Not Owed In Counterclaims for Lanham Act Violation, Sherman Act Violation, and Deceptive Trade Practices Under Coverage B Portion of General Liability Policy
Uretek sought insurance coverage under a general liability policy issued by Continental Casualty Company (“Continental”) for a counterclaims Applied Polymerics, Inc. asserted against it in a patent infringement action Uretek commenced. The counterclaims against Uretek alleged false representation under the Lanham Act, monopolization or attempted monopolization under the Sherman Act, and unfair and deceptive trade practices under state law. Applied Polymerics alleged that Uretek knowingly misrepresented to competitors and customers that certain road repair and maintenance contracts were covered under the disputed patent and that the misrepresentations were intended to and did have the anti-competitive effect. Continental denied Uretek a defense to the counterclaims and the declaratory judgment action ensued.
The court held the general liability policy’s coverage b was not triggered as the counterclaims did not fall within an enumerated category of the definition of “personal and advertising injury.” Uretek argued that the counterclaims fell within categories d – oral or written publication that disparages an organizations goods, products or services, f – use of another’s advertising idea in your advertisement, and g – infringing upon another copyright, trade dress or slogan in your advertisement.
Uretek unsuccessfully argued that the counterclaim’s allegation that it mislead competitors as to the patent’s scope was disparagement of services under category d. The court reasoned that the allegations in the complaint never stated or implied that Uretek invoked the name or service of any competitor in communications with its customers. If Applied Polymerics alleged that Uretek told customers that Applied Polymerics infringed the patent in question then the allegation would fall within category d.
Uretek also unsuccessfully argued that the Lanham Act violation per se falls within categories f and g. This is because any claim asserted under the Lanham Act addresses those two categories. The court held that the argument failed as it required to court to impermissibly look to the legal theories alleged as opposed to the facts alleged in the counterclaims. The counterclaim contained no allegation that Uretek used Applied Polymerics’ advertising idea in its advertisement or that Uretek infringed on Applied Polymerics’ copyright, trade dress or slogan in Uretek’s advertisement. Accordingly, Continental was not obligated under the general liability policy to defend Uretek in the counterclaims asserted against it by Applied Polymerics.
02/19/15 Chase v. Horace Man Insurance Company
Florida Supreme Court
Yet Another Reason to Always Write “UM Equal to BI Limits Stacked!”
Here is a summary of a recent Florida Supreme Court Case on UM coverage that our friend David Thompson, CPCU, AAI, API, CRIS, who is an Education Instructor at the Florida Association of Insurance Agents, permitted us to reprint:
About a week ago an agent emailed me saying that the named insured (Bill) on a personal auto policy had passed away. The company did a name change and listed the wife (Mary) as the sole named insured. Bill had selected UM limits that were less than the BI limits years back (bad move!), and he had signed the UM form. Part of what I advised the agent was to get a new UM form signed if Mary still wanted the lower limits. Of course, the agent should recommend that Mary increase the UM limits to equal the BI limits and stack it. Simply sending a new UM form with instructions only of, “Please sign this and return it” would be a “cha-ching” for a plaintiff attorney!
It’s nice when I make a recommendation and the Florida Supreme Court backs me up! Just yesterday, the court issued a decision that is right up the alley here. The short version of the 20-page decision is that a PAP issued by Horace Man Insurance Company named Richard Chase as the sole named insured. The policy also listed his daughter, Allison, as a driver. BI limits were 100/300 and UM limits were 25/50. In 2004 the insurer changed the named insured on the policy, removing Richard and listing Allison as the sole named insured. The policy number and all coverages were unchanged; Richard’s auto was removed and a new auto purchased by Allison was added. No new UM form was obtained. In 2007, while occupying Allison’s vehicle, Richard was killed and Allison was seriously injured by at at-fault party. Allison claimed that she and Richard’s estate were entitled to UM limits of $100,000 each. The insurer denied and offered limits of 25/50. The Supreme Court ruled that a new UM form should have been obtained with Allison’s signature, thus the higher UM limits were available.
What is the take away here? Well, I simply HAVE to say it again:
- Always write UM limits equal to the BI limits stacked, and also write UM on the umbrella.
- If the UM limits are not equal to BI limits stacked (bad move), and the named insured changes, obtain a new UM form if the lesser coverage is still desired.
- Never, ever, simply send a customer a UM form with instructions of, “Please sign this and return it to us.” Explain to the customer that they are giving up valuable coverage and the agency recommendation is that maximum UM limits should be purchased.
It’s Friday and I started the morning out early by reading a UM court case. I smell Sonny’s BBQ for lunch. What a way to start a weekend…UM and BBQ!
David Thompson, CPCU, AAI, API, CRIS.
Thank you Dave! If you have any questions for Dave he can be reached at [email protected].
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
S1471 – Cancellation of Auto Policies
This bill was reported out of the Senate Insurance committee this week to the Senate floor with no companion Assembly bill. It would allow an insurer, within the first 60 days, to rescind or retroactively cancel a policy to the inception of a newly issued auto insurance policy. This will be allowed when the initial premium payment is not honored by a financial institution due to the nonexistence or the unauthorized use of a bank account, or if the if the initial premium payment is denied by a credit card company because of its unauthorized use. This would not apply to insurance policies issued to insureds that transport passengers for hire.
If someone is injured during the first 60 days the policy is in force and that person would ordinarily be covered under the policy had it not been cancelled, the individual will be entitled to recover under his or her own policy, subject to the terms and conditions of that policy. If that injured person is uninsured, they will be entitled to recover under the MVAIC if they did not participate in the fraudulent activity, including, but not limited to an accident staged to defraud an insurer. The MVAIC will not be entitled to subrogation rights against the cancelling insurer.
This bill also seeks to amend Insurance Law §3420 by requiring an insurer to disclaim liability or deny coverage because of rescission or cancellation of the policy.
Additionally, the bill seeks to amend Insurance Law §5103 which mandates first party coverage under an auto policy. The bill would amend the definition of named insured to preclude from coverage a vehicle whose coverage is rescinded or cancelled pursuant to the above.
Circular Letter No. 2 (2015) - Guidelines and Procedures for the Implementation of the Provisions of the Terrorism Risk Insurance Program Act of 2015.
TRIA has been extended again for six years with the enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2015. In an effort to aid insurers regarding their obligations under both New York and Federal law, DFS has issued circular letters upon the extension of the program in each of the previous years, and this circular letter seeks to incorporate the prior letters and amend to the extent expressly done in this letter.
There were several provisions of TRIA which were amended or extended under the recently passed act. These changes include:
- Fixing the insurer deductible at 20% of an insurer’s direct earned premium for the preceding calendar year and the federal share of compensation at 85% of insured losses that exceed insurer deductibles until January 1, 2016 when the federal share will decrease by 1% per calendar year until it equals 80%
- The Secretary of the Treasury must certify acts of terrorism in consultation with the Secretary of Homeland Security and the Attorney General.
- The program trigger was amended to apply to certified acts with insured losses exceeding $100 million for calendar year 2015, $120 million for 2016, $140 million for 2017, $160 million for 2018, $180 million for 2019 and $200 million for 2020 and each thereafter.
- The mandatory recoupment of the federal share through policyholder surcharges increased from 133% to 140%
- Now requires insurers participating in the Program to submit to the Secretary of the Treasury for a Congressional report to be submitted on June 30, 2016 and every other June 30 thereafter, information regarding insurance coverage for terrorism losses in order to evaluate the effectiveness of the Program. The information to provided includes:
- Lines of insurance with exposure to terrorism losses,
- Premiums earned on coverage,
- Geographical location of exposures,
- Pricing of coverage,
- The take-up rate for coverage, and
- The amount of private reinsurance for acts of terrorism purchased
Jennifer A. Ehman
02/18/15 Badiali v. New Jersey Mfrs. Ins. Group
Supreme Court of New Jersey
Highest Court in New Jersey Declines to Alter the Test for First-Party Bad Faith Claims; Instead, Holds that Unpublished Decision Relied Upon by Insurer Established Fair Reason to Believe It was Making Legitimate Legal and Business Decision
Plaintiff was rear-ended by an uninsured motorist. At the time of the incident, he was insured for UM coverage under his personal auto policy with defendant, and also under his employer’s insurance with Harleysville. Plaintiff filed a UM claim with both carriers, which proceeded to arbitration and resulted in an award of $29,148.62. While Harleysville paid its half of the award, defendant rejected the award and demanded a trial de novo. Defendant asserted that the language of its personal auto policy allowed either party to dispute an award in which the total amount exceeded $15,000 (plaintiff took the position that since defendant’s share was less than $15,000, the language did not apply).
Thus, in response, plaintiff filed suit to enforce the award. The awarded was ultimately affirmed irrespective of the fact that the total arbitration award was in excess of the $15,000 threshold. Defendant then paid the award.
Thereafter, plaintiff commenced a second action against defendant asserting claims for breach of contract, bad faith and consumer fraud. Regarding bad faith, plaintiff argued that defendant expended more than $28,000 to avoid paying its portion of the award. Plaintiff further asserted that defendant caused him to incur substantial expense, years of delay, and undue aggravation as a result of its handling of the UM claim, which entitled him to treble and punitive damages, as well as attorney’s fees and cost.
Defendant moved for summary judgment essentially arguing that it did not act in bad faith because it relied on a 2004 unpublished decision in which the Appellate Division, under essentially the same circumstances, held that the insurer was entitled to reject the award and demand trial de novo. Although defendant conceded that the decision lacked any precedential authority, it asserted that its mere existence proved that defendant’s conduct was reasonable, fair and honest, and that it had “fairly debatable” reasons to reject the award. The trial court agreed, and the Appellate Division affirmed.
On appeal to the highest court in New Jersey, plaintiff argued that defendant failed to establish that it actually relied on the unpublished decision at the time it rejected the award, and that defendant’s decision was contrary to other published legal authority which was binding on plaintiff. It also argued that the decision was premature as discovery was not complete, and that plaintiff was entitled to attorney’s fees.
Of interest, the court granted leave to appear as amici curiae to the New Jersey Association for Justice and to United Policyholders. It appears they sought to use this case in an effort to convince the court to depart from the “fairly debatable” approach so as to allow for a determination of bad faith where an insurer acts intentionally or recklessly in a manner contrary to its role as a fiduciary.
In considering this case, the Supreme Court declined to alter the statutory test for bad faith in New Jersey related to first-party claims as, it opined, the issue before it did not require such action. Instead, the court narrowed the issue to a mere consideration of whether the existence of the unpublished decision served as a reasonable basis to support the position taken by defendant in the instant matter.
It ultimately found that, in this context, the existence of the unpublished decision established that defendant had, at the very least, fair reason to believe that it was making a legitimate legal and business decision by rejecting the award. Thus, it held that the existence of the unpublished decision precluded a finding of bad faith. The court then went on to note that even without the unpublished decision, the language of the policy itself provided a rational reason to seek trial de novo.
The court highlighted the policy language which stated that “[a] decision agreed to by two of the arbitrators will be binding unless the award exceeds the minimum limit for liability specified by the Financial Responsibility Law of New Jersey [$15,000]. If the arbitration award exceeds that limit, either party may demand the right to a trial by jury on all issues.” It also rejected the case law plaintiffs submitted was binding finding that the decision was involved a UIM claim, which was different than a UM claim. Thus, even though defendant only needed to contribute $14,574.31, the total award was still in excess of $15,000.
The court also rejected the claim that the motion was premature and that costs were owed.
11/7/2014 Graves v. Standard Insurance Co.
Western District of Kentucky
Insurance Claim Properly Removed to Federal Court
Many times in this column, I have made reference to the fact that, as a general proposition, insurance companies dealing with claims of coverage, bad faith, complicated losses, and policy definitions, generally fare better in the United States District Courts than in the general state courts of common jurisdiction.
Therefore, it is important to review and assess an initiated litigation and determine whether or not the case can be removed to federal court, most frequently on the basis of diversity of citizenship jurisdiction which has a monetary threshold of $75,000.00. At times, it is less than clear what the monetary amount is in dispute if there is no coverage or coverage, or certain exclusions or limitations apply, etc., and whether the $75,000.00 threshold is met or exceeded. This was the case in Graves v. Standard Insurance Co. 2014 WL 5803071 (W.D. Kentucky, November 7, 2014) wherein an insurance company almost waited too long to remove a disability benefits dispute to federal court. However, the federal court ruled that removal had not been required earlier because the insurance company did not have the information or realize until five months into the case that it met the $75,000.00 statutory jurisdictional threshold.
The claimant became disabled for neck and back pain resulting from cervical fusion surgery. Standard Insurance initially approved the claim and paid benefits for about two years. Thereafter, the company altered its definition of disability to a more stringent standard and discontinued paying monthly disability income. The claimant sued Standard Insurance, which is located in Portland, Oregon, in the Kentucky state courts. However, because the alleged amount of the benefit payments owed to the claimant was apparently less than $7,000.00 when suit was filed, the insurance company did not immediately remove the complaint to federal court. Some months later, the claimant eventually valued her claim at roughly $883,000.00, and it was at that point Standard Insurance removed the case. The claimant filed a motion seeking a remand to the Kentucky state courts arguing that the insurance company waited too long to seek removal.
The federal court agreed with the insurance company that removal was not required earlier because it was “not clear” within the first months of the litigation that the jurisdictional threshold was met. Apparently, based on the initial pleadings, the value of the stated claim was for lost benefits totaling less than $7,000.00. Because the Court ruled that Standard Insurance did not have to remove at an earlier time, it also rejected the argument that Standard Insurance “waived” its right to remove the case because it had defended itself in the state court proceedings for a period of time.
The lessons of this case are several and significant, particularly from the point of view of procedural removal:
First, removal must be accomplished within a very short time following initiation of suit, i.e., 30 days from the date of service, and this time is set by statute and cannot be modified or extended by stipulation or consent. Therefore, suit papers must be promptly reviewed for many reasons, including whether or not there is a basis to remove the case, usually focused on diversity of citizenship.
The second lesson is it may be very hard to determine at the inception of a lawsuit whether the $75,000.00 threshold amount will be met. In any event, insurance companies are advised to move quickly to remove a case to federal court once information comes in by pleadings, discovery, bills of particulars, answers to interrogatories, etc. that the plaintiff is in fact claiming a sum in excess of $75,000.00.
Third, if you are unable to make a clear determination as to the amount of damages, or are unclear whether and to what extent the claimant may be seeking extensive future damages, it may be advisable to insert the affirmative defense of lack of subject matter jurisdiction which at a later time can evolve into an argument for removal to federal court. This would help you argue that, from the inception of the state court case, there was a possibility that the state court should not have jurisdiction over the matter.
Lastly, again, the federal courts are usually more conducive and “friendly” to insurance companies, particularly concerning technical arguments, disputes over expert witnesses, bad faith claims, and disputes with respect to the interpretation of policy language.