Coverage Pointers - Volume XVI, No. 19

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.

Pardon the brevity of this letter.  That I am able to sit at the computer and actually try to make sense out of anything is a testament to good medical care.

OK.  OK.  Next year, when it issuggested, I will roll up my sleeve and take the flu vaccine.  I was diagnosed the B-strain, which the Doc said was the milder of the two strains out there.  If it is, I wouldn’t like to be the person with the A-strain. 

For a guy who has missed about eight days of work in 37 years on account of illness, this was a bummer, particularly because I was taking a rare three days of vacation following the FDCC Winter Meeting.  In West Palm, where the temps were about 80 degrees, I was suffering from the chills.  Anyway, I think I’m on the right side of this thing now.

Kudos to our Cassie Kazukenus who knocked one out of the park in a construction defect appeal.  You’ll see the decision reported in my column.  She is so modest that she doesn’t even mention it in her cover note, below.
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 is 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!
Cassie’s Capital Connections

It has been a while since I wrote a cover note.  The 60 degree weather in New York Wednesday must have given me hope that spring is coming and inspiration to come out of hibernation.

In reality, I just wanted to draw your attention to a bill that was sent to the Governor’s office related to the issuance of certificates of insurance.  It directly relates to a practice that we see all the time – the issuance of a certificate of insurance stating that the insurance policy issued contains certain policy terms and conditions when the policy in fact does not.  Usually, we see it when a certificate of insurance states that specific entities are listed as additional insureds under a policy of insurance when in reality, that entity is not an additional insured under the policy referenced.  The legislation creates a penalty for insurers and insurance producers who do this.  The legislation provides that when the superintendent determines, after notice and hearing, that there was a willful violation, a penalty will be paid to the state in the amount of $1000 for a first violation and $2000 for a second penalty. 

The immediate thought I had was how is this going to be enforced, how will a willful violation be proven and how is this going to come to the attention of DFS?  The legislation gives the superintendent the authority to adopt rules or regulations for the enforcement of this provision.  So I guess only time will tell as to how DFS intends to enforce this provision, and whether the enforcement has any effect on the number of certificates which are issued with terms and conditions that do not comport with the actual policy terms. 

If the bill is signed into law, we will include the language in a future issue.  In the meantime, if anyone wants the bill, we’ll be happy to share a copy with you.

Cassandra A. Kazukenus
[email protected]

One Hundred Years Ago – Lincoln’s Bodyguard Passes:

The Evening World
New York, New York 
13 Mar 1915


Served as Bodyguard for Lincoln,
Who Told Him of Murder Warnings in Dreams.

WASHINGTON, MARCH 13.—Col. H. Crook, disbursing officer of the White House, who was President Lincoln’s bodyguard and who had been intimately acquainted with every President since 1840, died to-day at his home here.  He had been sick with Pneumonia more than a week.

President Wilson expressed deep regret when informed of Col. Crook’s death.  Last January the Colonel celebrated his fiftieth anniversary as an attaché of the White House.

Col. Crook is survived by his mother, Mrs. Mary A. Garton, who is ninety-six years old.

He was taken from the Washington police force in 1865 and appointed as President Lincoln’s bodyguard.  Prior to this he had served in the Union army.  He accompanied Lincoln on many of his walks and drives, and it was his duty to watch over the President during public receptions.

Col. Crook told often of how, on the afternoon before Lincoln’s assassination, the President had come to him in confidence and said that on three successive nights he had had dreams which foretold his murder.  Crook thereupon begged the President not to go to the theatre that evening, as planned.  Lincoln insisted, and, furthermore, would not hear of Crook accompanying him.  He ordered Crook to go home and rest.  As they parted Lincoln failed to say “Good night”—the only time he ever failed to say it, said Crook.

The Colonel also told how he drove Guiteau, President Garfield’s assassin.

Fitz’ Bits:

Dear Subscribers:

I am delighted to be participating, as the Long Island Chairperson and as a Speaker,  at both the Long Island and New York City venues of the New York State Bar Association Premises Seminar being held in five venues across New York State.  The programs feature an excellent panel of speakers and topics ranging from the basics of trip and fall cases to dram shop liability, negligent security cases, liability for sporting activities, discovery and trial tips, including the use of security cameras and social media, as well as insurance considerations.  I was fortunate last week to be with many of you at the FDCC Meeting which featured extraordinary speakers, excellent topics, and wonderful opportunities for networking. 

Today, I bring you a case from the Court of Appeals Texas, seeking coverage for claims, involving allegations of construction defects by their insureds.  The Trial Court had awarded the sum of $500,000 for damages as a result of the alleged poor quality of materials, craftsmanship, and construction, as well as $193,000 of attorney’s fees.  On appeal, the Court found the so-called “business risk’ exclusions precluded coverage for the repair or replacement of defective workmanship and sub-standard goods and services, while construction operations were still on-going, which exclusions were included in the commercial general liability policy considered by the Court. 

Til next time.                                                                         

Elizabeth A. Fitzpatrick
[email protected]

Insurance Fraud Alive and Burning a Century Ago:

The Brooklyn Daily Eagle
Brooklyn, New York
13 Mar 1915


In “Fake” Fire Insurance Trial at
Wilmington, Del.

Wilmington, Del., March 13—Two Brooklyn witnesses occupied the stand for the greater part of the day yesterday in the continuation of the “fake” fire insurance company trial, which is being conducted in the United States District Court.  They were John Loughlin, a printer, and Thomas C. Peters, manager of a store in a Brooklyn chain-grocery stores system.

Loughlin testified that he had printed several hundred policies on the order of Ronald Frederick Brennen, a defendant in the present trial.  These policies, said Brennen, were for the Home Fire Insurance Company, and some were delivered to the company’s Dover, Del., office, while others went to Frank A. Anthony of New York.

The testimony given by the other Brooklyn witness told of his having been made dummy president of the Mercantile and Marine Company and dummy secretary of the Home Fire Insurance Company.  The court has adjourned until Monday.  

Born Too Young:

The Brooklyn Daily Eagle
Brooklyn, New York
13 Mar 1915


Stubbed Her Foot on a Broken
Board at Rockaway Beach

Miss Mathilda Dulfer, 16 years old, died on Thursday in the Swedish Hospital from blood poisoning, resulting from a splinter of wood in her right foot.  Her funeral was held this afternoon from her late residence, 258 Schenck avenue, and her body was incinerated at the Fresh Pond Crematory.  In accordance with a special request made by Miss Dulfer before her death, her ashes were to be distributed “to the four winds of heaven.”

Miss Dulfer, while promenading on the boardwalk at Rockaway Beach last summer, stubbed her foot against a broken board in the walk, and a large splinter entered the ball of her foot.  The splinter was withdrawn at the time, but is now thought that a portion of it remained, because soon afterward the foot became inflamed and had needed attention ever since.
Editor’s Note:  Antibiotics revolutionized medical care later in the 20th century.  Poor Miss Dulfer was born a few years too early.

Peipers’ Panorma:

A relatively light week, brings with it an equally weak note.  Take a moment to review the intervention case involving the Albany Medical Center below.  While it is not an everyday occurrence, for those of you who, from time to time, bump into the issue it is a nice overview of the factors a court must consider when weighing an application to intervene.  We also review a First Department decision which extends the Court of Appeals’ application of the force of gravity test that was endorsed, most notably, in the Runner decision from a couple of years ago.  We’ll leave David Adams and the Labor Law Pointers staff to explain its significance.  In the meantime, it seems to me, yet again, that the current shape of Labor Law 240 is somewhere far, far away from what the authors envisioned when it was enacted years ago. 

We also extend a thank you to our friends in Syracuse with whom I spent two days walking through contractual risk transfer.  While we do a decent job of reminding you of our training opportunities, I have not been as accessible with first party training.  If you have any questions or want some further discussion on anything first party related, drop me note.  I’d be grateful for the opportunity to put together a program for  your office.

Finally, we bid adieu this week with a shout out to Cassie Kazukenus.  She received, just today, a significant decision from the Second Department (a write up of which you can no doubt read in Dan’s column).  A nice win culminating some really nice legal work by Cassie.  Cheers to her.  That’s it for now. 

Oh yeah, one more thing, the State University of NY is two conference tourney wins away from the Big Dance.  If you happen upon them when filling out your bracket next week, do yourself a favor and pick them as an upset special. Go Bulls. 

That’s really it.  See you in two weeks.

Steven E. Peiper
[email protected]

Highlights of this week’s issue:

Dan D. Kohane
[email protected]

  • Repair And Replacement Of Your Incorrectly Performed Work Is Not Covered Even If Other Structures Benefit From The Repair.
  • No Coverage Because No Policy
  • No SUM Coverage Available
  • Additional Two Week Delay in Disclaimer Not Unreasonable Long Where Disclaimer Based on Independent Contractor Exclusion; Insurer Entitled to Conduct Investigation
  • Anti-Subrogation Principles Bars Action by OCIP Insured Against Others in OCIP
    Material Misrepresentations Will Justify Policy Rescission
  • Uninsured Motorists Arbitrator Empowered to Consider Compliance of Parties to Arbitration Proceeding, Once It Started
  • Livery Vehicle Exclusion Inapplicable for Single Use


Robert E.B. Hewitt III
[email protected]

  • Defendant’s Expert Report Demonstrated That Plaintiff’s Knee Surgery was the Result of Chronic Preexisting Osteoarthritis and Not the Accident Which Plaintiff Was Unable To Rebut
  • Plaintiff Defeats Summary Judgment By Raising Issues of Fact As To Whether The Injuries Constituted Serious Injuries And Were Causally Related to the Accident
  • Plaintiff’s Expert Had A Rational Basis For His Testimony As Plaintiff Appeared In An Early Stage of His Diagnosis Immediately Following the Accident And An MRI Provided Qualitative Evidence of the Injury


Margo M. Lagueras
[email protected]


  • Is “Confidential Stipend” Paid to School District Typist Loss of Earnings?
  • Repayment of APIP Benefits Does Not Get Added Back Onto Policy
  • Virtually Identical MRI Results Show Tests Were Redundant, Not Medically Necessary
  • A Release of Assignment Must Be Signed by Both Parties



  • Denial Which Was Due on Saturday Was Timely Issued on Monday


Steven E. Peiper
[email protected]

  • Runaway Reel of Wire Triggers LL 240 Protection; Question of Fact on LL 200 Precludes Dispostive Finding on Contractual Indemnification Claim
  • Intervention Refused Where Parties are United In Interest, and Additional Parties Would Unnecessarily Delay and Complicate Litigation


Elizabeth A. Fitzpatrick
[email protected]

  • No Coverage for Faulty Workmanship


Cassandra A. Kazukenus
[email protected]

  • A4616/S3681 Issuance of Certificate of Insurance Delivered To Governor
  • Supplement to Circular Letter No. 22 (2005) – Filing of Actuarial Opinion Summaries
  • A1923/S675 – Proposed New General Obligations Law Provision


Jennifer A. Ehman
[email protected] 

  • Testimony that Insured Borrowed the Vehicle One or Twice Insufficient to Establish it was Available for Her Regular Use


Earl K. Cantwell

[email protected]

  • Insurance Company Obtains Discovery Protective Order


That’s it for now.  Get your flu vaccine if it isn’t too late!
Dan D. Kohane
Hurwitz & Fine, P.C
1300 Liberty Building
Buffalo, NY 14202    

Office:      716.849.8942
Mobile:     716.445.2258
Fax:          716.855.0874
E-Mail:     [email protected]


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

Dan D. Kohane
[email protected]

Audrey A. Seeley
[email protected]

Jennifer A. Ehman
[email protected]

Dan D. Kohane, Team Leader
[email protected]

Michael F. Perley
Elizabeth A. Fitzpatrick
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Taylor F. Gabryel
Diane F. Bosse
Joel R. Appelbaum

Steven E. Peiper, Team Leader
[email protected]

Elizabeth A. Fitzpatrick
Cassandra Kazukenus

Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

Taylor F. Gabryel

Jody E. Briandi, Team Leader
[email protected]

 Elizabeth A. Fitzpatrick
Diane F. Bosse

Index to Special Columns

Kohane’s Coverage Corner
Hewitt’s Highlights on Serious Injury
Margo’s Musings on No Fault
Peiper on Property and Potpourri
Fitz’ Bits
Audrey’s All Things Personal
Cassie’s Capital Connection
Keeping the Faith with Jen’s Gems
Earl’s Pearls

Dan D. Kohane
[email protected]

03/11/14       ERIE Ins. Co. v. Radtke
Appellate Division, Second Department
Repair And Replacement Of Your Incorrectly Performed Work Is Not Covered Even If Other Structures Benefit From The Repair.
A homeowner commenced a lawsuit against a general contractor and a subcontractor at the site, Nick Radtke, Inc. (“Radtke”) seeking to recover the costs the homeowner was going to incur in repairing and replacing the retaining walls that Nick Radtke installed.  Erie, as the insurer for Radtke, provided a defense to its insured in the underlying action because it was alleged that other structures on the property sustained damages as a result of the partial and imminent failure of the retaining walls.  Erie commenced a declaratory judgment action seeking a declaration that it had no duty to defend of indemnify in the underlying action because there was no “occurrence” and the “your work” exclusions applied to preclude coverage.  The homeowner commenced a third-party action against the general contractor’s insurer which had disclaimed coverage for the same reasons.

The homeowner, in his verified interrogatory responses, stated that his damages consisted of “the costs incurred in demolishing the old wall, planning the new wall and constructing the new wall which have totaled, to date, approximately, $348,700…”  On motion, the homeowner submitted an engineer’s report which contained evidence of cracking and settling of the pool house and other structures, and he argued that the repair and replacement of the retaining walls would constitute repairs to those other structures.  He argued that because the repair to the retaining wall repaired damages to other structures not worked on by Radtke, the exclusions do not apply.  The trial court didn’t buy it stating the homeowner’s “attempt to otherwise cast his claim is belied by his answers to the interrogatives.” 

The trial court did not address the “occurrence” arguments, but held that the “claim seeks relief for conduct that falls solely and exclusively under the work product exclusions...,” and held that Erie did not have a duty to defend and indemnify Radtke in the underlying action.  The Second Department affirmed explaining that the “your work” exclusions “applies to work that had to be restored, repaired, or replaced because it was incorrectly performed.”
Editor’s Note:  Special Atta-Lawyer Kudos to our own Cassandra Kazukenus for her victory on this one (and she even wrote the summary here).

03/12/15       Bayswater Development LLC, v. Admiral Insurance Company, Appellate Division, First Department
Florida, Not New York Law Governed Chinese Dry Wall Coverage Litigation; Pollution Exclusion Applies to Deny Coverage
This was a Declaratory Judgment action seeking a declaration that Admiral and American Empire were obligated to defend Bayswater in connection with Chinese Drywall litigation pending in Florida and New York. The court found that Florida has a more significant relationship to this matter than New York, and the motion court's conclusion that Florida is the state "with the most significant contacts with the matter in dispute," such that Florida law controls, was correct

Courts in Florida have consistently held that pollution exclusions, such as those contained in the Admiral and American Empire policies, preclude coverage for damage caused by "Chinese Drywall".

03/11/15       Dichira v. Nawid
Appellate Division Second Department
No Coverage Because No Policy
The plaintiff sued Nawid to recover damages for personal injuries allegedly sustained on April 16, 2008, when the plaintiff tripped and fell on the sidewalk in front of Nawid's property. Nawid then sued Tower Insurance Company (“Tower”) and Countryside.  Nawid claimed he had obtained liability insurance coverage for the property from Tower when he purchased the property in 2006. He alleged that after purchasing the property he made timely payments into an escrow account with Countrywide that was to be used, among other things, to pay insurance premiums, and that Countrywide had negligently failed to pay the insurance premiums.

Tower established that it never issued an insurance policy for the subject property, and that its affiliate, Castlepoint Insurance Company, issued an insurance policy to Nawid for the subject property which only became effective on June 13, 2008, two months after the accident. "

Countrywide established its prima facie entitlement to judgment as a matter of law by demonstrating that the insurance premiums that were to be paid from the escrow account related to a policy of hazard insurance, not the policy of liability insurance that Nawid claimed to have procured.
Editor’s Note: Attaboy Max.

03/11/15       Matter of GEICO v Terrelonge
No SUM Coverage Available
Appellate Division, Second Department
On May 5, 2008, Terrelonge, driving a vehicle owned by her, collided with a vehicle driven and owned by Lesly Simonis. Terrelonge was insured with GEICO, with $100,000/$300,000 bodily injury limits and $25,000 per person and $50,000 per occurrence in SUM (underinsured motorist benefits.

Simonis was insured by Safety Insurance. His policy had a bodily insurance policy limit of $25,000 per person. Safety Insurance Company tendered its entire policy limit of $25,000 in settlement of her bodily injury claim.

On July 12, 2013, the appellant served, by certified mail, return receipt requested, a notice of intention to arbitrate her SUM claim against GEICO. The return receipt indicates that the notice of intention to arbitrate was received by GEICO on July 15, 2013. GEICO commenced the instant proceeding to permanently stay arbitration by purchasing an index number and filing a notice of petition and petition on August 1, 2013. GEICO claimed that the appellant was not entitled to SUM benefits because the difference between the SUM policy limit for one person—$25,000—and the amount offered by Safety Insurance Company—also $25,000—was zero. In opposition, the appellant claimed that the proceeding to permanently stay arbitration was not timely commenced within the 20-day statute of limitations set forth in CPLR 7503(c). The appellant also claimed that she was entitled to underinsurance benefits because Simonis was insured for the statutory minimum bodily injury insurance of $25,000 per person, while she was insured for $100,000 per person. In the order appealed from, the petition to permanently stay arbitration was granted.

The twenty day period of time to file a petition to stay arbitration beings to run only upon receipt of the notice of intention to arbitrate.  Here it was timely commenced.
Benefits were not available because the offer of the limits clearly reduced the available coverage to zero.

03/10/15       Tower Insurance Company v. United Founders Ltd.,
Additional Two Week Delay in Disclaimer Not Unreasonable Long Where Disclaimer Based on Independent Contractor Exclusion; Insurer Entitled to Conduct Investigation
It is undisputed that the work out of which the claim arose was performed by an independent contractor. United's contention that Tower cannot rely on the "Independent Contractor Exclusion" in its policy, as its disclaimer was untimely, is unavailing. This from the brief submitted by Attorney Suzanne M. Saia from the Law Offices of Steven G. Fauth LLC, who successfully handled the appeal:

Here, Tower did not have sufficient information when it first received notice of the matter that the exclusion applied. Tower’s first notice consisted of the underlying complaint, which fails to allege Singh was injured in the course of employment with an independent contractor hired by United, as required to trigger the exclusion. While the complaint alleges United was the general contractor (R36), thus suggesting the exclusion’s applicability, it also alleges in the alternative that United was merely “a contractor” thus leaving its status in doubt. In any event, Tower had the right to obtain “concrete evidence” through an investigation to confirm the relevant facts before disclaiming.

Tower rapidly did so, dispatching within days of first receiving notice an investigator who interviewed United’s principal and forwarded his report to Tower just a week after being assigned. A mere 16 days later, Tower disclaimed coverage. As demonstrated by the cases cited above in which this Court and others have found longer delays between receiving all necessary facts and dispatching the disclaimer letter reasonable as a matter of law, the lower court here correctly concluded Tower’s disclaimer was timely.
Editor’s Note:  Thanks and congratulations to Attorney Suzanne M. Saia who can be contacted here.

03/05/15       Parache v. DD 11th Avenue LLC
Appellate Division, First Department
Anti-Subrogation Principles Bars Action by OCIP Insured Against Others in OCIP
The record establishes that Mastercraft and SMEG were members of J E Levine Builder Inc.'s Contractor Controlled Insurance Program. Accordingly, the antisubrogation rule bars the cross claims and third-party claims brought by J E Levine Builders against Mastercraft and SMEG.

03/05/15       128 Hester LLC, v. New York Marine and Gen. Ins. Co.
Appellate Division, First Department
Material Misrepresentations Will Justify Policy Rescission
A material misrepresentation made at the time an insurance policy is being procured may lead to a policy being rescinded and/or avoided. Even innocent misrepresentations are sufficient to allow an insurer to "avoid the contract of insurance or defeat recovery thereunder.  An insurer must demonstrate with written underwriting guidelines that if it had known the true nature of the risk it would not have issued the policy.

Here the insured knew of significant collapse potential problems which it should have provided in the application when asked for that information.

03/04/15       New York City Transit Authority v. Powell
Appellate Division, Second Department

Uninsured Motorists Arbitrator Empowered to Consider Compliance of Parties to Arbitration Proceeding, Once It Started
The lower court held that the injured parties had abandoned the demand to arbitrate their claims for uninsured motorist benefits. While more than three years elapsed between the service of the original demand and the filing of the demand with the American Arbitration Association, there is evidence in the record which is inconsistent with a finding of an intent to abandon.  The demand was filed within the six year limitations period.  The court found that the arbitrator could rule on the issue of abandonment.
Editor’s Note:  it is the rare legal issue that can be considered by the uninsured motorist arbitrator.  Most procedural issues are for the court to decide, not the arbitrator.  The Court of Appeals has held that while the arbitrator is not empowered to decide whether there is a valid arbitration agreement or whether condition precedents were satisfied, the arbitrator can decide whether the parties have properly conducted themselves in the arbitration proceeding (County of Rockland v. Primiano Construction, 51 NY2d 1).

03/04/15       New York Central Mutual Fire Ins. Co. v. Byfield
Appellate Division Second Department
Livery Vehicle Exclusion Inapplicable for Single Use
On March 17, 2013, a two-car accident occurred involving a Nissan insured y NY Central and a mini-van insured by GEICO. Three occupants of the Nissan sought uninsured motorist benefits under the policy issued by NY Central because GEICO and denied coverage with respect to the mini-van.

GEICO denied coverage because the minivan was being used by a “livery vehicle, which is an allowable exclusion under DFS regulations.  NY Central brought an application to stay the uninsured motorists (“UM”) arbitration claiming that GEICO’s disclaimer was inappropriate.

The facts adduced at the hearing warranted the conclusion that, while GEICO's insured might have been employing his mini-van to transport a passenger "for hire" at the time of the accident, his use of the vehicle for such purpose entailed a "single isolated use" that was "not tantamount to its employment as a public or livery conveyance’”. 

For a vehicle’s use to fall within the “livery exclusion,” there must be a demonstration that the vehicle is used that way for the general public.  Since GEICO did not establish that, it has coverage and therefore, the court permanently stayed the UM arbitration.


Robert E.B. Hewitt III
[email protected]

03/10/15       Campbell v. Fischetti
Appellate Division, First Department
Defendant’s Expert Report Demonstrated That Plaintiff’s Knee Surgery was the Result of Chronic Preexisting Osteoarthritis and Not the Accident Which Plaintiff Was Unable to Rebut
The Appellate Court unanimously affirmed the lower court’s grant of summary judgment for defendants. Plaintiff was a pedestrian struck by defendant’s vehicle. Defendant established a prima facie case of a lack of serious injury by submitting the affirmed report of an orthopedist who determined that plaintiff’s knee replacement surgery was not needed because of the accident but due to her preexisting osteoarthritis. Defendant also relied on plaintiff’s testimony that she was diagnosed with arthritis in her left knee in the early 1990s and that she walked with a cane before the accident. An X-ray taken the day of the accident also revealed only a mild contusion and that plaintiff had chronic degenerative changes with severe medial joint space narrowing.

In opposition, plaintiff failed to raise an issue of fact. Her orthopedic surgeon had diagnosed her with left knee osteoarthritis before and after surgery and provided no objective basis other than the history provided by plaintiff that the knee surgery nine months after the accident was related to the accident. Plaintiff failed to provide evidence of any injuries that were different from her preexisting arthritic condition. Regarding the 90/180 day claim, plaintiff admitted at her deposition that, although she was allegedly restricted for four to six months following the accident, that she was not really confined, and none of her medical records indicated that she was unable to perform her usual and customary activities.

03/04/15                 Campbell v. Morgan, Celestin v. Shawy
Appellate Division, Second Department
Plaintiff Defeats Summary Judgment by Raising Issues of Fact as To Whether the Injuries Constituted Serious Injuries and Were Causally Related to the Accident
In both Campbell and Celestin, the Appellate Division found issues of fact. In Campbell, it affirmed the lower court’s denial of defendants’ motion for summary judgment, after a motion to reargue, based on plaintiff demonstrating an issue of fact.  In Celestin it reversed the lower court’s granting to defendants summary judgment. In both cases, defendants met their prima facie burden of showing a lack of serious injury. Defendant’s submitted unreported competent evidence that the alleged injuries to the cervical and lumbar spines did not constitute serious injuries under either the permanent consequential limitation of us or significant limitation of use categories and that the alleged injuries to the spine were not caused by the subject accident. In opposition, however, plaintiff raised issues of fact. The Appellate Court does not detail how those issues of fact were demonstrated in either case.

02/25/15                Kahvejian v. Pardo
Appellate Division, Second Department
Plaintiff’s Expert Had A Rational Basis For His Testimony As Plaintiff Appeared In An Early Stage of His Diagnosis Immediately Following the Accident And An MRI Provided Qualitative Evidence of the Injury
The Appellate Court affirmed the verdict of a jury that the plaintiff sustained a serious injury as a result of the subject automobile accident.  Plaintiff had testified his knees hit the dashboard of the car. He did not receive medical treatment at the scene of the accident because he did not want to leave unattended the jewelry he had with him from the jewelry store he owned. Two weeks later, when the pain in his knees and left hip did not subside, he saw a physician who examined him and found tenderness in the shoulder blade and lower back, both knees, and left hip, consistent with pressure from the seat belt across his lap and left hip. X-rays did not reveal any fractures.  The initial diagnosis was bursitis of the left hip. After an MRI, he diagnosed him with avascular necrosis of the left hip, meaning a loss of blood supply causing the death of a portion of the bone. He was given crutches. After a follow-up visit, he did not come back for treatment for two years. When he returned, the physician tested the range of motion in his left hip, which was limited.

The physician testified at this point the injury was considered permanent and the only alternative to living with the limitation would be a hip replacement. The physician also testified that there was reason to believe the accident caused the avascular necrosis to a reasonable degree of medical certainty but that he could not say with 100% certainty. He noted that plaintiff was very active before the accident and presented himself at an early stage of the diagnosis. If he had presented himself at stage three or four of the diagnosis then it would not likely have been the accident because it takes time to get to those stages. Therefore, it had to have been sustained relatively recently to the time the MRI was taken. In his medical opinion, when plaintiff’s knees hit the dashboard, this shoved the ball of his hip into the socket and damaged the joint.

The defense physician expert, who confirmed a loss of range of motion, testified that it would be impossible for anyone to be 100% certain that the injury was caused by the accident based on a review of MRI films. Moreover, he opined plaintiff had osteoarthritis which takes a long time to development. Another defense witness, a radiologist, diagnosed it as osteoarthritis based upon review of the MRI films.

The Appellate Division noted that while a contemporaneous medical report as to injuries is important proof of causation, there is no requirement per the Court of Appeals to prove quantitative measurements of range of motion contemporaneous to the accident. The Appellate Division found that the contemporaneous MRI scan was a qualitative assessment of his condition which satisfied the standard. The fact that he did not lose complete use of the hip did not mean he did not sustain a serious injury since a permanent consequential limitation of use is sufficient to establish a serious injury. The Appellate Division also found the testimony that “there was a reasonable degree of medical probability” that the accident caused the injury was equivalent to the usual “reasonable degree of medical certainty.”  It satisfied the standard that it be reasonably apparent that the doctor intended to signify a probability supported by a rational basis. The Appellate Division noted that plaintiff’s expert explained the foundation for his opinion, and that he had a rational basis for his opinion, as he explained plaintiff initially appeared at an early stage of the condition immediately after the accident. Therefore, there was a rational basis that a jury could have found that plaintiff sustained a serious injury as a result of the accident and the verdict was based on a fair interpretation of the evidence.



Margo M. Lagueras
[email protected]


02/22/15       Applicant v State Farm Mutual Auto Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Is “Confidential Stipend” Paid to School District Typist Loss of Earnings?
Applicant was employed as a Senior Clerk Typist for a local school district and, in addition to her salary and medical and dental benefits, she also received an annual “confidential stipend”.  She was involved in a motor vehicle accident and sought, in addition to wage loss, reimbursement of her health care premiums as well as her yearly stipend. 

The Arbitrator, relying in part on a decision by Arbitrator Veronica O’Connor as well a response on this issue from the Insurance Department, determined that the cost of health insurance premiums are not a reimbursable expense under No-Fault.  With regard to the annual stipend, however, it issue is whether or not that stipend constitutes a loss of earnings according to the No-Fault regulations.  While determining that the stipend does constitute a loss of earnings, the Arbitrator agreed with respondent that the award should be limited to the period during which applicant was not working and not the entire yearly amount.  As such, the yearly stipend was reduced to the appropriate amount for the 8 and a half months applicant was disabled.

02/21/15       Applicant v Geico Ins. Co.
Erie County, Arbitrator Gillian Brown
Repayment of APIP Benefits Does Not Get Added Back Onto Policy
Applicant had a total of $175,000 in no-fault benefits and the issue was whether those benefits were exhausted.  In her post-hearing submission, Applicant submitted calculations to the effect that approximately $28,000 remained available, while Respondent submitted evidence of exhaustion.  The total paid out as medical expenses, wage loss and other expenses was $134,538.33 before any offsets.  The wage loss offsets totaled $20,790.00.  Applicant was awarded Social Security Disability in the amount of $979.90 per month, plus $16,446.00 is past benefits.  The lump-sum for past benefits was also an offset, leaving $3,225,67 available and which Respondent proved was exhausted.

Applicant argued that the repayment she made to Respondent in the amount of $44,000 had to be added back to the policy limit, thus leaving an available balance.  The Arbitrator disagreed as Respondent has the right of subrogation to any proceeds paid under the APIP policy.  Applicant repaid $44,000 out of the approximate $427,000 settlement she received.  The Arbitrator correctly determined that that money cannot be added back onto the policy without “running afoul” of the non-duplication clause in the APIP policy which provides that “the eligible injured person shall not recover duplicate benefits for the same elements of loss covered” by the policy.  The policy was exhausted and Applicant’s claim appropriately denied.

02/21/15       Western New York MRI, LLP v Geico Ins. Co.
Erie County, Arbitrator Mona Bargnesi
Virtually Identical MRI Results Show Tests Were Redundant, Not Medically Necessary
The 46 year-old EIP was allegedly injured in a motor vehicle accident in May 2013.  An MRI of his right should was performed in June 2013.  It revealed no rotator cuff tear, no fracture, no labral tear, degenerative changes at the AC joint and mild tendinitis/sprain of the supraspinatus and infraspinatus tendons.  A cervical MRI revealed degenerative changes.  The EIP received chiropractic care, a subacromial injection and underwent a computerized physical performance evaluation, cervical and lumbar range of motion evaluation and a cervical MRI, among other things.  In October 2013, he began physical therapy and, in November, reported that it was very helpful.  Range of motion testing of the cervical and lumbar spine reflected notable improvements over that done a month earlier.  The disputed lumbar MRI, cervical motion x-rays (DMX) and right shoulder MRI were ordered and performed in November 2013. 

A peer review was performed by Dr. Bazos who determined that the lumbar MRI and DMX were not medically necessary.  A separate peer review was performed by Dr. Westerband with regard to the right shoulder MRI.  He found there was no medical necessity for repeating the June MRI. 

The Arbitrator determined that Dr. Bazos’ peer review was not persuasive with regard to the lumbar MRI.  With respect to the DMX, the Arbitrator agreed in principle with Dr. Bazo but found that the peer review lacked a medical rationale to support his assertion that further study was not warranted.  Therefore, reimbursement for the lumbar MRI and the DMX was awarded.  However, the Arbitrator determined that Dr. Westerband’s conclusion with respect to the shoulder MRI was persuasive.  No reason was given by the provider for ordering the study and no mention was made of the prior study or its findings.  Both the June and November MRIs were essentially identical and, contrary to Applicant’s counsel’s usual argument, positive results do not necessarily mean the test was necessary.  The Arbitrator noted that if she were to follow Applicant’s usual argument, the results of the November MRI would tend to show that the test was redundant, and therefore not medically necessary.

02/19/15       Applicant v A. Central Insurance Company
Erie County, Arbitrator Gillian Brown
A Release of Assignment Must Be Signed by Both Parties
At issue was whether Applicant, who had signed an Assignment of Benefits (AOB), had standing to pursue reimbursement for chiropractic care.  At the first hearing, Applicant was granted a continuance because she claimed there was a Release but that it had not been uploaded to the ADR Center.  At the second hearing, Applicant presented a document captioned “Release of Assignment of Benefits” which, although specifically in the name of the provider, was signed only by Applicant. 

To be valid, an AOB must be signed.  Logically, where an AOB is signed by both parties, a Release of such Assignment must also be signed by both parties.  In this case, the Arbitrator additionally found that the purported Release was factually incorrect as it stated that the provider had not received compensation for its services where it was evident that Applicant had paid for services out of her personal injury settlement.  However, given that there was a valid AOB in existence, and the Release was not a valid document, the Arbitrator could not award reimbursement even if the IME upon which the denials were based had been determined to be insufficient (a issue not reached).


02/25/15       VS Care Acupuncture v State Farm Mut. Auto. Ins. Co.
Appellate Term, First Department
Denial Which Was Due on Saturday Was Timely Issued on Monday
The first issue here was whether defendant’s denial of the claim was timely where the last day of the 30 calendar days to pay or deny fell on a Saturday but the denial was not issued until Monday.  The court held that it was timely.

The second issue involved CPT codes (97039 moxibustion and 97026 infrared treatment) billed by a licensed acupuncturist.  The position taken by defendant’s certified medical coder was that, although the codes were within the scope of practice of an acupuncturist, they could not be considered for reimbursement because the codes were in the workers’ compensation medical fee schedule.  The court disagreed with this reasoning.  It found that, because the superintendent of insurance has not adopted a fee schedule for acupuncture performed by a licensed acupuncturist, an insurer may consider “charges permissible for similar procedures under the schedules already adopted” in order to determine appropriate reimbursement.


Steven E. Peiper

[email protected]

03/12/15       Aramburu v Midtown WB, LLC
Appellate Division, First Department
Runaway Reel of Wire Triggers LL 240 Protection; Question of Fact on LL 200 Precludes Dispostive Finding on Contractual Indemnification Claim
Plaintiff was injured when, during the course of his employment, he slipped and fell on a ramp.  At that moment, the reel of wire that he had been maneuvering down the ramp broke loose, and ran over top of him.  Because the wire was rolling downhill, the incident resulted from the failure to provide an adequate safety device to protect plaintiff from an incident which arose out of a significant elevation differential.  First it was runaway spools pulling people into door frames (see Runner), now the same logic has been extended to being struck by an item that was propelled, on some level, by gravity.

At the time of plaintiff’s motion, a contractor, Rockrose, moved to dismiss plaintiff’s Labor Law 200 claim.  However, where it was undisputed that Rockrose was responsible for maintaining the ramp, and where Rockrose acknowledged that the ramp had been icy in the past, a question of fact arose as to whether Rockrose knew, or should have known, that the ramp was icy when plaintiff slipped.  Where a question of fact as to Rockrose’s negligence existed, dismissal of the Labor Law 200 claim was clearly not warranted.

It follows, then that inasmuch as Rockrose’s negligence remained in doubt they were not entitled to an award of contractual indemnification.  The court noted that the loss fell within the breadth of the indemnity agreement at issue, but Rockrose obviously cannot recover for any percentage of negligence attributable to it. 

03/05/15       Mavente v Albany Medical Ctr.
Appellate Division, Third Department
Intervention Refused Where Parties are United in Interest, and Additional Parties Would Unnecessarily Delay and Complicate Litigation
Plaintiff commenced the instant medical malpractice action against the Albany Medical Center.  However, prior to the action, he had been receiving benefits through his employer’s self-insured benefits fund.  As part of that agreement, plaintiff agreed that he would repay, from dollar one, all monies received from the Fund if he successfully prosecuted the instant claim.  In addition, plaintiff also executed a subrogation agreement with the Fund, and agreed to cooperate with the Fund’s enforcement of claims.  Failure to cooperate with the Fund would result in the loss of benefits.

Not satisfied with the agreement, the Fund also sought leave to intervene as a matter of right in the instant litigation.  In denying that application, the Court initially conceded that the Fund would be bound by any adverse determination levied against plaintiff.  However, upon further questioning, all parties acknowledged that plaintiff had an incentive to maximize his recovery (and thereby pay off monies advanced by the Fund). All parties also agreed that plaintiff’s counsel was qualified, and would provide effective counsel.  Under such circumstances, the Court appropriately elected to deny the Fund’s motion for leave for intervention.

Moreover, the Appellate Division also upheld the Trial Court’s denial of the Fund’s request for intervention by permission.  In this case, having the Fund as a party would result in duplicative discovery and motion practice.  In addition, the Court noted that having the Fund in the action would unnecessarily complicate settlement negotiations.  Accordingly, it was not an abuse of the court’s discretion in denying the application.


Elizabeth A. Fitzpatrick
[email protected]

01/21/15       Dallas National Insurance Company v. Calitex Corp., Elshir Enterprises L.P. and Thomas, LP, et al., 14-cv-727
The Court of Appeals Texas, filed March 3, 2015 2015WL968308
No Coverage for Faulty Workmanship
In Dallas National Insurance Company v. Calitex, the claims for insurance coverage derived from a project involving a 12-unit townhome complex in Dallas.  Turnkey, the DNIC insured, entered into a contract with Calitex for construction of the complex.  The project was to be completed no later than October 26, 2007 and construction of the townhomes began in November 2006.

In February 2008, Calitex filed a lawsuit against Turnkey, a sub-contractor of Turnkey, Integrated Builders, Inc. and David Hurst, Turnkey’s “owner.”  The lawsuit alleged that the stone exterior was not properly treated, leaked or entire areas were left uncovered with stone and windows, once installed, leaked.  Furthermore, there were allegations that the project had not reached substantial completion and was not ready for use and/or occupancy.  The damages alleged were a devaluation of the units of approximately $600,000.

Calitex asserted causes of action for breach of contract, breach of warranty and negligence.  They also sought attorney fees.  Following receipt of the suit, DNIC concluded that it had no obligation to defend or indemnify Turnkey as a result of the allegations.  A jury trial ensued in which the jury found liability against Turnkey and Integrated and awarded Caltex $500,000 in damages and $193,500 in attorney’s fees against Turnkey and $500,000 in damages against Integrated.

In examining the coverage issues set forth, the Court review the definition of an “occurrence, “ “property damage” and the typical exclusions relied upon by insurer’s in claims involving construction defects, to wit, exclusion ( j) damage to property, which excludes property damage to that particular part of real property on which you are any contractors or sub-contractors working directly or indirectly on your behalf are performing operations if the property damage arises out of those operations. 

Reviewing the file testimony and applying the applicable law, the Court concluded that at least some of the damage in the underlying lawsuit constituted damage to a particular part of real property on which Turnkey or its sub-contractors were performing operations and arose out of those operations.  They then found that since Calitex had the burden to segregate covered damage from non-covered damage in order to recover, DNIC was entitled to summary judgment, since at least some of the damages awarded against Turnkey in the underlying suit were excluded by a policy exclusion.  The Court thus reversed the Trial Court deciding in favor of DNIC.



Audrey A. Seeley
[email protected]

No column this week.

Cassandra A. Kazukenus
[email protected]

A4616/S3681       Issuance of Certificate of Insurance Delivered To Governor
On March 6, 2015, this bill was delivered to the Governor for his signature.  This bill amends Article 5 of the Insurance Law which relates to the issuance of certificates of insurance.

The bill amends the definition of certificate of insurance to include addendums to documents prepared by an insurer or insurance producer as evidence of property/casualty insurance. 

Section 502 which sets forth the prohibitions was deleted in its entirety and updated with all new language which attempts to clarify the prior prohibitions.  Section 502 prohibits any person or governmental entity from willfully requiring, as a condition of awarding a contract for work, or if a contract has already been awarded as a condition for work to commence or continue the issuance of a certificate of insurance unless the certificate is:

  • A form promulgated by the insurer issuing the policy; or
  • Standard certificate of insurance form issued by an industry standard setting organization and approved for use by the superintendent or any other form approved by the superintendent.


Also prohibited is a person or governmental entity willfully requiring the inclusion of terms, conditions or language of any kind, including warranties or guarantees, that the insurance policy provides coverage or otherwise sets forth terms and conditions in a certificate of insurance if the insurance policy referenced does not expressly include those terms and conditions.  This provision does not impact the ability of the property owner or general contractor, for example, from requiring certain insurance related terms and conditions in the construction contract. 
This bill makes it clear that a “certificate of insurance shall not amend, extend or alter the coverage provided by the insurance policy to which the certificate of insurance makes reference.”

If it is determined by the superintendent, after notice and hearing, that any person, other than a governmental entity, willfully violated this article, the person may be ordered to pay to the state a penalty in a sum of $1000 for a first violation and a sum of $2000 for each subsequent violation.

Supplement to Circular Letter No. 22 (2005) – Filing of Actuarial Opinion Summaries
This letter seeks to clarify that ALL domestic property/casualty insurers must file a Statement of Actuarial Opinion with the NAIC, and domestic property/casualty insurers should also file an AOS with DFS. 

Of note is the discussion regarding those instances where an insurer believes its records contain “trade secrets…or if disclosed would cause substantial injury to the competitive position of the subject enterprise.”  In an effort to aid insurers with such concerns, insurers may request, pursuant to Public Officers Law §87(2)(d), that DFS “except such documents from disclosure”.  If DFS does receive a request for those excepted documents, DFS will notify the insurer and give the insurer a chance to respond to the request. 

A1923/S675 – Proposed New General Obligations Law Provision
An act to amend the GBL in relation to onerous or unreasonable conditions in the performance of disability related contracts.
This proposed GBL law would apply to all written contracts which provide for payment of benefits or the waiver of obligations in the event of disability, except for workers’ compensation policies.  This proposed law would prohibit those entities from imposing on a disabled person “onerous or unreasonable conditions for the payment or continued payment of the benefits.”  Conditions are “onerous or unreasonable” if by their continuous or repetitive nature require the disabled beneficiary to perform “unnecessary or duplicative acts in order to obtain or collect the benefits to which he or she is otherwise entitled under the contract.” 

These acts include:

  • Requiring the disabled person to undergo unreasonably repetitive medical examinations; or
  • Requiring the disabled person to provide finely-detailed or repetitious medical documentation of a disabling condition; or
  • Bargaining in bad faith or engaging in any Unfair Claim Settlement Practice Acts.

Should any party to the contract or contract beneficiary be injured by an action or failure to act in violation of the above, that individual may maintain an action to recover actual damages for the injury, including any interest and penalties incurred as a result of the violation along with reasonable costs and attorney’s fees.  The court will have the discretion to award exemplary damages, and the injured party has to demonstrate proof of injury by a preponderance of the evidence.


Jennifer A. Ehman
[email protected] 

03/09/15       State Farm Mut. Auto. Ins. Co. v. Freckleton
Supreme Court, Westchester County
Testimony that Insured Borrowed the Vehicle One or Twice Insufficient to Establish it was Available for Her Regular Use
Eiysha George was involved in an automobile accident while driving her boyfriend’s car.  State Farm issued an automobile policy to George’s relative.  George sought coverage under the State Farm policy.  State Farm denied on the basis that while its policy covered a relative of the policy holder operating a car that was not owned by the policy holder, such coverage only applied if the car was not furnished for the regular use of the relative. 

George provided testimony that she drove the car once or twice a week after borrowing it from her boyfriend on those days that he did not work or attend school.  She further testified that the car was kept at her boyfriend’s house, and that on the days she borrowed it she would have to travel to his house to get the keys and car.  Under these circumstances, the court found that the vehicle was not available for George’s regular use. 

State Farm’s motion was denied, the cross-motion was granted and the action was dismissed.   


Earl K. Cantwell
[email protected]


01/07/15            Philadelphia Indemnity Insurance Co. v. Carlton
Florida Appellate Term
Insurance Company Obtains Discovery Protective Order
In contested litigation, strategy of opposing parties is often to press insurance companies to the limit for disclosure of claims files, underwriting information, loss reserves, and depositions of claims supervisors and adjusters.  While discovery is liberal, there are limits to what a claimant can obtain, as evidenced in the recent case of Philadelphia Indemnity Insurance Co. v. Carlton,2015 WL 71669 (Fla. App., January 7, 2015).

A division of Philadelphia Indemnity issued Mr. Carlton a policy to insure a collectible vehicle in 2008.  He purchased the coverage after meeting a Mr. Doug Hostvedt at a car show where Hostvedt gave Carlton a business card and solicited insurance business.  The vehicle was allegedly stolen in 2013 when the policy was in effect.  Philadelphia Indemnity eventually denied coverage and rescinded the policy. It also filed a lawsuit in Broward County, Florida seeking a declaration that it had no duty to provide coverage. 

During discovery, Carlton sought to depose Mr. Hostvedt in Broward County.  The insurance company moved for protective order arguing that Hostvedt lives and works in Pennsylvania, and is not its employee.  Actually, he was an employee of a closely related but separate Pennsylvania-based corporation.  The insurance company’s motion was based on Florida Civil practice which provides that a person may be deposed in a county where the person resides or is employed.  The claimant countered that he was seeking to depose Mr. Hostvedt as a corporate officer of Philadelphia Indemnity in the venue where the insurance company had chosen to file its declaratory judgment action.  He cited a Florida case generally holding that a corporate officer may be deposed in the county where the corporation instituted a lawsuit even if they reside or transact business elsewhere.  The trial court denied the insurance company’s motion for a protective order, but this decision was reversed on appeal by a per curiam decision of the Appellate District Court.

The Appellate Court ruled it had not been established that Hostvedt was an officer, director, or managing agent of Philadelphia Indemnity, and that the actual company with which he is associated is not a party in the Broward County action.  Therefore, he could not be required to attend a deposition in Broward County.
The lessons of this case include the following:

  • An insurance company and its counsel should promptly interpose legitimate discovery objections.  An appropriate motion for a protective order should be made to preclude or limit discovery by way of deposition or document production.
  • Even if a witness is part of an insurance company or related to a subsidiary, or potentially related to the claims process, that person may not necessarily be a representative of a corporate party, an employee of the specific corporate party, or otherwise subject to discovery under appropriate procedural rules, at least not upon simple notice by claimant’s counsel in the venue location where the action is pending.  Even the case under discussion did not hold that Mr. Hostvedt could not be deposed. Rather, it simply held that any such deposition would appear to be necessary in Pennsylvania or other location where he resided, had a place of business, or otherwise worked.
Familiar scenarios where a motion for a protective order may be necessary and appropriate occur where claimants attempt to depose high ranking claims officials who had no involvement or supervision over a particular claim in question, and where claims handling documents may be prepared in anticipation of litigation, or subject to attorney/client privilege.

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