Coverage Pointers - Volume XVI, No. 2

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.

Welcome to the second issue of Volume XVI of CP.  I am delighted to welcome about 50 new subscribers who joined after the PLRB Additional Insured Webinar this past week.  We had over 600 registered for the shortened version of “Tender Benders,” the presentation I share with Kipper Burke at the PLRB Claim Conference.  For those receiving this publication for the first time, let me give you the “talking points” so you can best use it:

  • We publish on alternating Fridays, the issue is generally sent out after business hours on Thursday;
  • Each issue is attached to a cover letter (this would be the cover letter and the issue is attached as a MS Word doc);
  • The issues have summaries of cases, primarily NY appellate and lower court decisions but also cases from other jurisdictions, arranged in topical order;
  • The issues are kept on Word format so that you can copy and paste summaries into your claim files so that they are more useful to you;
  • You may republish summaries internally in publications or in e-mails but please give us credit for creating them -- nothing was funnier than receiving one of our summaries (uncredited) in another lawyer’s newsletter about an hour after we published it – he did apologize;
  • On our website, you can find a search engine that will review the 16 years of past issues.  So, for example, if you’re looking for a case involving a  “livery exclusion”, type that in the search engine box and you’ll find every case where the term was used;
  • All of our columnists are available to you for inquiry and advice, if we can assist.


Fourth Department Tackles Notice:

Take a look at the Fourth Department’s decision on notice of occurrence in my column.  Who has the obligation to provide it and if it is provided by one insured, and not the other, are there consequences.


With this issue, and with Kathi Fijal’s retirement, we are tinkering with our columns just a bit.  Audrey will now take over the “Personal and Advertising – Coverage B” column from Beth with Beth focusing on construction design (and defect) cases.  Both will look at these topics nationally.  Margo’s column on substantive No Fault decisions, Dan Hunter’s focus on Serious Injury threshold, Cassie’s concentration on state legislation, regulation and Department of Financial Services work, Jen’s on bad faith and lower court decisions, Earl’s Pearls of wisdom, Steve’s Property and Potpourri sections, all will remain as will my general jabbering about casualty and liability insurance cases not otherwise covered.

Joel Appelbaum will be called upon sooner, rather than later, to add his insight and wisdom as well.

DRI 101 Series:

A special thanks to those who attended the DRI Webinar on Wednesday.  Don’t miss Part III:

“Coverage and Bad Faith Litigation” will be presented on July 23rd (1:00 – 2:30 p.m. Central) by Mike Marick of Meckler Bulger Tilson Marick & Pearson LLP and Kevin Willging, Senior Counsel and Second Vice President of Travelers.  This webcast will overview litigation of coverage and bad faith lawsuits and will address claims typically asserted, common motion practice, and strategic considerations.   

The per-site cost for the individual segments is $150 for DRI members and $180 for non-DRI members.  Please register online at!

A Salute to the Chief Armadillo – Linda Weaver:

Anyone who is an Armadillo will not be scratching her or his head about the title of this segment.

There is an organization of fun-loving insurance coverage attorneys called The Armadillos and it was founded and organized and maintained and encouraged by one Linda Weaver, a CNA Senior Claims Attorney out of Chicago.  This was her creation and has been (and continues to be) her personal passion.  She keeps us informed of goings and coming and changes and job opportunities and marriages and births and deaths and gossip and news and mergers and divestitures and of this and of that.  She schedules gatherings and cocktail parties and lunches and whatever else she thinks of and she thinks a lot!  She’s truly remarkable.

Linda advised her 940 Armadillos that she is retiring from CNA and will be working with her husband in his business.  She will continue her commitment to the Armadillos and remain as the glue that keeps this great organization of coverage lawyers together.

On behalf of the Armadillos, we salute you Linda and wish you well in your readjustment to a non-CNA life.  You are a true professional, because you give selflessly to those with whom you share passion.  Thank you for all you do and enjoy this next stage in your life.

Fitz’ Bitz:

Dear Subscribers:

I hope you’re enjoying your summer.  It is hard to believe that it is already the middle of July.  We are in the midst of planning the Law School for Insurance Professionals program, which will be held On September 19 in Albany, September 30, Syracuse, October 17 on Long Island, October 20 in New York City and October 20 in Buffalo, where it will likely be snowing.  If you’d like additional information, please feel free to reach out to me.

I report this week on two construction defect cases. The court in both found a duty to defend based upon the “damage to the work of others” allegations.  I hope you enjoy.     

Til next time,

Elizabeth A. Fitzpatrick
[email protected]
Editor’s Note:  Taking a shot at Buffalo, are you?  YOU who come from the land of Super Storm Sandy, yearly ice storms and hurricanes?  Remember who has the last word in putting out this little publication.


"Lexophile" is a word used to describe those that have a love for words, such as "you can tune a piano, but you can't tuna fish", or "to write with a broken pencil is pointless." 
A competition to see who can come up with the best lexphillies is held every year in an undisclosed location. This year's winning submission is posted at the very end. 

  • When fish are in schools, they sometimes take debate. 
  • A thief who stole a calendar got twelve months.   
  • When the smog lifts in Los Angeles U.C.L.A. 
  • The batteries were given out free of charge. 
  • A dentist and a manicurist married. They fought tooth and nail.   
  • A will is a dead giveaway.
  • With her marriage, she got a new name and a dress.
  • A boiled egg is hard to beat.
  • When you've seen one shopping center you've seen a mall. 
  • Police were called to a day care center where a three-year-old was resisting a rest.   
  • Did you hear about the fellow whose whole left side was cut off? He's all right now. 
  • A bicycle can't stand alone; it is two tired.
  • When a clock is hungry it goes back four seconds. 
  • The guy who fell onto an upholstery machine is now fully recovered.
  • He had a photographic memory which was never developed. 
  • When she saw her first strands of grey hair she thought she'd dye.
  • Acupuncture is a jab well done. That's the point of it. 


 And the cream of the crop:   

  • Those who get too big for their pants will be exposed in the end. 


Jen’s Gems:

After considering my last few notes, I noticed that I have not shared any Ella stories of late.  So, I felt that this would be the perfect issue to remedy that oversight.  The biggest change at our house is that we just made the big move of switching Ella to what we call a “big girl bed.”  In truth, we just took one side off the crib, but it is much more exciting to her if you give the change a fun name.  What is especially great about this move is that while my 6:30 a.m. wake up call use to be the sweet sound of her voice calling out “mama, dada,” now it involves her getting out of her bed and banging on my door.  Oh well, I am sure I will miss that sound in about ten years when she starts to pretend she no longer knows me.

In terms of my column this week, I would point your attention to an interesting case from Supreme Court, New York County which addresses the language of a suit limitation clause in relation to a claim for damage to Wind Turbines.  The issue in dispute is whether the phrase “happening becomes known to the Insured” refers to the date of the loss or the date of denial.  Ultimately, the Court held that if the carrier intended the clause to refer to date of loss it should have been more precise.  It is a good read that contains an interesting analysis of the cases cited by both sides in support of their positions.

Until next issue…

Jennifer A. Ehman
[email protected]

A Century Ago – He Gets His Due:
Times Herald
Olean, New York
July 18, 1914

N. S. Burnell of Buffalo Arrested
Last Night on Charge by Young Girl

V. S. Burnell of Buffalo was fined $50 for disorderly conduct before Judge Keating in police court this morning after pleading guilty to the charge.

Burnell, who is a postal clerk, was arrested late last night on complaint of a girl working in William’s restaurant on North Union street, who claimed that the man made approaches toward her, while in an intoxicated condition.  Burnell when arraigned gave a hard luck story of being doped and not knowing what he was doing.  Obscene literature and postcards were taken from him when lodged in jail last night and were shown to the judge, who after considering the girl’s case and possession of the articles, passed the sentence upon him.

Thirty-eight cents constituted the man’s wealth and upon consent of the judge was allowed to telegraph to Buffalo for the money with which to pay the fine. 

Hunter’s Hints on Serious Injury Threshold:

Dear Coverage Pointers Subscribers:

It's summertime and living's easy, especially for New York appellate courts when it comes to Serious Injury Threshold decisions.  Only one case this week, courtesy of the Second Department.  As always, please contact me with any and all questions regarding New York State Serious Injury Threshold law.  I look forward to hearing from you.

Daniel T. Hunter
[email protected]

Cassie’s Capital Connection:

Greetings from Albany!  This week the topic of my column is a little different than my normal discussion of proposed legislation, insurance regulations and Circular Letters.  Instead, I am writing about litigation the Department recently undertook with the Attorney General’s Office against Lyft, a ridesharing service.  Lyft began operating in Rochester and Buffalo in April, and on the day it was to launch in New York City, DFS and the Attorney General’s office filed a request for a temporary restraining order enjoining Lyft from its launch of the program in New York on the basis that it is violating several provisions of the Insurance Law. 

One of the major concerns from the Department is that Lyft’s insurance provided to the drivers is in excess to the driver’s own personal auto policies.  While many if not most personal auto policies exclude coverage for individuals operating a livery service, there are a variety of potential coverage questions which could arise.  Is it a livery if the passengers are merely suggested a “donation” to pay for the ride?  Is there a gap in the coverage provided under the excess policy?  Will insurers be able or want to non-renew individuals who are drivers in these programs?  How will the price of private auto insurance and no-fault benefits be impacted?

Hopefully all of these questions don’t impair your ability to enjoy the weekend ahead which looks to be beautiful here at least.  Have a great weekend!

Cassandra Kazukenus
[email protected]

Was It Punishment Enough?

Dunkirk Evening Observer
Dunkirk, New York
July 18, 1914


Enraged Man Tears Clothing From
Sweetheart, Pays Fine

Rock Island, Ill., July 18.—August Schultz and Emma Hartman were sweethearts.  Last night they were out walking and quarreled.

Emma told August she was through with him.  August began tearing Emma’s clothes off.  He couldn’t get them all off, but what he couldn’t he forced Emma to take off under threats of beating her up.

She even had to remove her shoes and stockings.  When August was satisfied there was nothing more to come off he picked up the clothes and walked away.  Emma ran home and notified the police.  August was fined $20 on charges of disorderly conduct.

Peiper’s Purrings:

A light week from the Potpourri Section this week.  Since we only offer one decision, we’d invite you to take a look at it.  The First Department offers an insightful review of the duties of landlords to retain video recordings after a slip and fall.  The defendant in that case survived a discovery sanction motion, but just barely.  As a general rule, if you have video of an event you must save it.  We’d also recommend, as Justice Saxe did, that you also save all recordings produced from any other camera on that date and location.  An ounce of prevention, as they say.

That’s really it for this week.  Every year Coverage Pointers hits a Summer Slowdown, and this, my friends, is it.  Enjoy Summer, or what’s left of it.  The Bills open training camp this Sunday, so Fall is just around the corner.  I’ll leave it to you to decide if that is a good thing or a bad thing.  Cheers.

Steven E. Peiper
[email protected]

Houdini the Speeder:

Brooklyn Daily Eagle
July 18, 1914
“Handcuff King” is Mulcted for Speeding

Houdini, the “Handcuff King,” can break all sorts of confining apparatus on the stage.  But when it comes to breaking out of jail, once he is inside for some offense, he cannot or would not do it  Yesterday, Houdini, known off stage as Theodore Weiss, of 394 East Twenty-first Street, was speeding along Ocean Parkway between Avenues J and M, when he was stopped and arrested by motorcycle policeman Leonard Preston.

In the Flatbush Court this morning, Preston told Magistrate Dodd that Houdini was going thirty-two miles per hour.  Houdini indignantly denied this and said that his rate of speed was only twenty miles per hour.  Magistrate Dodd, however, imposed the fine of $25 or three days imprisonment. It would be easy for the great Houdini to break out of jail within a day but he chose to pay the $25 under severe protest.
Editor Note: I had to look up “mulcted” and it means a deprivation or fine. 

Baseball Sure Was Different 100 Years Ago – Imagine Pitchers Like That Today:

New York Times
July 18, 1914
Twenty-One-Inning Victory for Giants

Longest Game in the National  League Played in Pittsburgh

* * *
Pittsburgh, Penn, July 17 -- The most remarkable game of ball in the National League this year and the record game of the league for duration was played here today between the Giants and the Pirates and was not decided until twenty-one innings had been played, the Giants winning by a score of 3 to 1.  The pitchers opposing each other were Adams and Marquard and they both went the whole distance.

The former did not issue a single base on balls while the New Yorker only gave two.  They were both as steady as clockwork and until the shades of the night were falling, the men battled tooth and nail for victory.  Finally the break came, as it does in all such cases, and the home team went down to defeat, but not to disgrace.  They had made a gallant effort to get out of the slough of defeat that has been following them for weeks and failed because they were up against the best left-hander in the league on one of his best days…
Editor’s Note:  I believe this game remains in the record books as the longest game every play without a walk in Major League history. That pitcher was Charles Benjamin “Babe” Adams who pitched from 1906 to 1926 and spent nearly his entire career with the Pirates. Noted for his outstanding control, his career average of 1.29 walks per nine innings pitched was the second lowest of the 20th century and this 1920 mark of 1 walk per 14.6  innings was a modern record until 2005.  He shares the Pirates' franchise record for career victories by a right-hander (194), and holds the team mark for career shutouts (47).

Richard William "Rube" Marquard (October 9, 1886 – June 1, 1980) was a pitcher in the 1910’s and early 1920’s and achieved his greatest success with the New York Giants. He was inducted into the Baseball Hall of Fame in 1971.

Here Are The Headlines from Today’s Issue, Attached:

Dan D. Kohane
[email protected]

  • Question of Employment Stymies Motion to Dismiss by Those Denying Employment
  • Split Court Wrestles Over Sufficiency of Additional Insured’s Notice
  • Excellent Primer on Rescission Based on Material Misrepresentation – Here’s How to Do It
  • Uninsured Motorist Claim Allowed to Proceed with Finding of Physical Contact and Prompt Reporting
  • Coverage Established Under Two of Four Policies


Daniel T. Hunter
[email protected]

  • Motion to Vacate Order Granting Defendants' Summary Judgment Motion Denied


Margo M. Lagueras

[email protected]


  • Violation of Condition Precedent Bars Recovery Back to Inception of Claim
  • Three Year Old IME Is Insufficient to Deny Claim
  • Policy Exhaustion Prior to Arbitration Filing Bars Claim For Fees
  • Hobby Inapplicable Where IME Shows Resolved Injuries



  • Defendant Aborted EUO Establishing Prima Facie Breach of Condition Precedent
  • Plaintiff’s “Willful and Contumacious” Conduct Warrants Dismissal of Complaint


Property (and POTPOURRI)
Steven E. Peiper
[email protected]

  • Defendant’s Decision to Preserve Only Video Depicting the Incident Involving Plaintiff Avoids Discovery Sanction…Barely


Elizabeth A. Fitzpatrick
[email protected]

  • Coverage for Faulty Workmanship
  • Duty to Defend Construction Defect Claim


Audrey A. Seeley
[email protected]

  • Under Mandatory Automobile Insurance Statute, Coverage for First- and Third-Party Claims Is Not Void as to All Insureds When One Named Insured Commits Fraud Where the Insurer Does Not Demonstrate Prejudice


Cassandra A. Kazukenus
[email protected]

  • DFS and The Attorney General’s Office Allege That Lyft Seeks To Operate Outside of New York State Laws and Regulations


Jennifer A. Ehman
[email protected] 

  • Court Considers “Arising Out of Your Work” Additional Insured Endorsement
  • Phrase “Happening Becomes Known to the Insured” Contained in a Suit Limitation Clause Does Not Refer To Date of Event, But Date of Declination of Coverage
  • Question of Fact as to Whether Insured had a Good Faith Belief in Non-Liability


Earl K. Cantwell

[email protected]



Again, a special welcome to our new subscribers and as always, thank you to ALL subscribers for your continued support and kind words.


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
Hunter’s Hints 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]

07/16/14       Jorquera v. Fannwood Estates, LLC
Appellate Division, Second Department
Question of Employment Stymies Motion to Dismiss by Those Denying Employment
The plaintiff allegedly was injured when he fell off a ladder while preparing to paint a stairwell in building owned defendants. At his deposition, he testified in was employed by W.B. & Sons Construction Company (“WB”).  WB’s owner, Construction Corp. (hereinafter W.B.), at the time of his accident. W.B.'s owner, Briceno, denied at his deposition that the plaintiff ever worked for WB. Subsequently, the defendants commenced a third-party action against WB and Briceno, seeking contribution and common-law indemnification, and alleging breach of contract for failure to procure insurance.

Both defendants moved to dismiss the third party claim since there was no claim of grave injury, a necessary element in a common-law claim against an employer (while each still denied they were the employer).  

The lower court found, and the appellate court agreed, that both third-party defendants did not establish a right to summary judgment as it was still not clear who employed the plaintiff and only the employer is entitled to that dismissal.

Likewise, the third-party defendants also did not establish, prima facie, that they were not contractually obligated to procure insurance naming the defendants as additional insureds.
Editor’s Note:  Why isn’t the employment issued resolved at the Workers Compensation Board?  That’s the proper venue.

07/11/14       Spoleta Construction, LLC v. Aspen Insurance UK Limited
Appellate Division, Fourth Department
Split Court Wrestles Over Sufficiency of Additional Insured’s Notice
Shane VanDerwall was hurt on October 20 2008 while working on a construction project. Spoleta was the general contractor, VanDerwall worked for a subcontractor, Hub-Langie, a paving company (“Hub”). Under the trade contract, Hub agreed to defend and indemnify Spoleta for all claims arising out of Hub’s work and to name plaintiff on its general liability policy.

Hub secured a policy from Aspen which provided blanket AI coverage for

"any person or organization . . . when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy."

Here’s the timetable:

  • Late December 2009, Spoleta learned of the accident for the first time in late December 2009 in a letter from VanDerwall's attorney.


  • January 27, 2010, Spoleta’s liability carrier sent a letter to Hub notifying it of VanDerwall's "claim," noting Hub’s contractual agreement to defend and indemnify Spoleta, and requesting that Hub put its own insurance carrier on notice to allow the carrier to conduct its own investigation. There is no claim of additional insured status.
  • February 9, 2010, Hub sent Aspen a "General Liability Notice of Occurrence/Claim form regarding VanDerwall's alleged injury, with the January 2010 letter attached.


  • February 22, 2010, Aspen had requested and received a copy of the contract between Hub and Spoleta containing the defense, indemnification and additional insured requirements.
  • April 15, 2010 VanDerwall commenced the underlying action;


  • May 27, 2010, Spoleta’s counsel demanded that Aspen defend and indemnify it in the underlying action;
  • June 2, 2010 Aspen disclaims on late notice.


The lower court found the notice to Aspen untimely and granted Aspen judgment. 

Initially, the court concluded that the December 2009 letter was a notice of an "occurrence . . . which may result in a claim" and not a "claim" under the policy. The court finds that the December 2009 letter "neither makes any demand for payment nor advises that legal action will be forthcoming. Rather, the letter advised plaintiff that VanDerwall had retained an attorney in connection with personal injuries he had sustained during the course of his work on the construction project, requested that Spoleta forward the letter to its insurance carrier, and warned Spoleta that failure to notify its carrier could result in a denial of coverage and "personal responsibility for any obligations that may arise" from VanDerwall's accident.

The court concluded that the January 2010 letter and form that Hub sent to Aspen was sufficient to constitute notice of an occurrence.

The majority then concludes that the May 2010 letter constituted notice of a "claim" or "suit" based upon VanDerwall's April 15, 2010 commencement of the underlying action. The majority therefore agree with Spoleta that the lower court erred in dismissing the complaint against Aspen inasmuch as the documentary evidence does not conclusively establish a defense to Spoleta’s claim as a matter of law.  In other words, the original letter constituted notice of an occurrence on behalf of the name insured and additional insured.

Editor’s Interim Note:  There is a long line of cases requiring each insured to give its own notice, unless the parties are united in interest. How notice by one insured can be notice by another does not comport with existing case law, we submit.  And of course, if there was notice by both with the earlier letter, wouldn’t the insurer then have an obligation to deny coverage to both?

A strong two-judge dissent disagreed.

"As an additional insured under the policy issued by defendant, plaintiff had, in the absence of an express duty, an implied duty, independent of the named insured's obligation, to provide defendant with timely notice of the occurrence for which it seeks coverage". Where, as here, a contract of primary insurance requires notice "as soon as practicable" after an occurrence, "the absence of timely notice of an occurrence is a failure to comply with a condition precedent which, as a matter of law, vitiates the contract"

The dissent agreed that the December 2009 letter to plaintiff from the attorney of for  VanDerwall was, under the terms of the policy in question, "notice of an occurrence . . . which may result in a claim," and not notice of a claim.

The dissent did not agree with the majority that the January 27, 2010 letter from plaintiff's liability carrier to Hub, which was subsequently sent to Aspen by Hub constituted notice of an occurrence by the AI under the terms of the policy.

The dissent argued that the January 27, 2010 letter did not notify Aspen of an occurrence that may result in a claim under the policy. Instead, the letter merely stated that plaintiff was seeking defense and indemnification from Hub pursuant to the indemnification provision of the subcontract. The letter does not indicate that plaintiff is seeking coverage directly from Aspen as an additional insured on the policy nor does it ask Hub to provide notice of any kind to Aspen on Spoleta’s behalf.

Upon receipt of the January 27, 2010 letter, Aspen disclaimed coverage to Hub because of Hub’s failure to comply with the notice provisions of the policy, and then notified Spoleta’s liability carrier of such disclaimer. In the letter to plaintiff's liability carrier notifying it of the disclaimer to Hub, defendant stated that it had received the January 27, 2010 letter "making a claim of contractual indemnity" against Hub, and advised that plaintiff had not provided a copy of the contract containing the "claimed indemnity provision." Plaintiff's liability carrier did not respond to that letter

It was not until May 27, 2010 — more than four months after Spoleta was informed of VanDerwall's injury, and a month after Spoleta had been sued by VanDerwall — that plaintiff, through its attorney, notified Aspen that it was seeking coverage directly from Aspen as an additional insured. Defendant promptly disclaimed coverage because of plaintiff's failure to comply with the notice provisions of the policy, among other reasons.

Inasmuch as Spoleta clearly did not intend for the January 27, 2010 letter to serve as notice of an occurrence under the policy, and in fact did not even then realize that it was an additional insured under the Hub, the January 27, 2010 letter cannot serve as sufficient notice of an occurrence that might result in a claim for coverage under the policy by plaintiff.  The disclaimer was therefore proper.

Editors Second Note:      I would agree that the earlier notice was NOT notice of an occurrence or a request for coverage.  It was a request for contractual indemnification.  We do not believe that the carrier had an obligation to determine, without a request to do so, that Spoleta was or could be an additional insured unless a request for that status was included.

07/09/14       Lema  v. Tower Insurance Company of New York
Appellate Division, Second Department
Excellent Primer on Rescission Based on Material Misrepresentation – Here’s How to Do It
To establish the right to rescind an insurance policy, an insurer must show that its insured made a material misrepresentation of fact when he or she secured the policy.  A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented.  To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application.

Here, the insurer established its prima facie entitlement to judgment as a matter of law by submitting evidence demonstrating that the policyholder made a misrepresentation in the application for insurance that was material. Although the plaintiff represented in the application for insurance that the subject premises was a two-family dwelling, the insurer submitted evidence, which included photographs and the affidavit of its property field adjuster, showing that the subject premises contained three separate dwelling units, each with its own kitchen, bathroom, and separate entrance. Then, the insurer submitted an affidavit from its underwriting manager and its "Homeowners Selection Rules," which showed that it would not have issued the same policy if the application had disclosed that the subject premises was a three-family.

07/09/14       AutoOne Insurance Company v. Fernandez
Appellate Division, Second Department
Uninsured Motorist Claim Allowed to Proceed with Finding of Physical Contact and Prompt Reporting
AutoOne Insurance Company (“AutoOne”), commenced this proceeding to permanently stay arbitration of the respondent's claim for benefits under the uninsured motorist provisions of an insurance policy. Under New York law, in a “hit and run” case, there must be physical contact between the vehicles and the accident must be promptly reported to the police.   A “framed issue” hearing was conducted and the referee determined that "the accident with a hit and run vehicle was reported to the police within a reasonable time." With that decision, the respondent was permitted to proceed with his uninsured motorists claim.

On appeal, the Second Department saw no reason to disturb that finding, since it was based on the referee’s assessment of witness credibility.

07/09/14       New York State Thruway Authority v. Ketco, Inc.
Appellate Division, Second Department
Coverage Established Under Two of Four Policies

Ketco met its burden of establishing coverage with Travelers for commercial general liability coverage and umbrella coverage under two different policies.

However, with respect to a third policy, the “Thruway Policy”, Ketco did not prove it was a named or additional insured entitled to that policy’s protection.

With respect to a fourth policy, one issued to Conrad, a question of fact exists as to whether Ketco was an AI.
Editor’s Note: 
We cannot tell from the reported decision what proof was offered, but the burden of proof in establishing coverage rests with the party seeking it.


Daniel T. Hunter
[email protected]

07/16/14       Tatarinova v. Boo
Appellate Division, Second Department
Motion to Vacate Order Granting Defendants' Summary Judgment Motion Denied
The Plaintiff appealed an order from Kings County Supreme Court which granted Defendants' Motion for Summary Judgment dismissing the complaint on the ground that Plaintiff did not sustain a serious injury within the meaning of Insurance Law §5102(d).  Plaintiff failed to oppose Defendants' motion and, as such, Defendants' motion was granted.

The Appellate Division, Second Department notes that a party seeking to vacate an order entered upon default must demonstrate both a reasonable excuse for the default and a potentially meritorious opposition to the motion.  The Second Department notes that a motion to vacate a default is addressed to the sound discretion of the court, and, without going into detail, concluded that the Supreme Court properly exercised its discretion in denying Plaintiff's motion based on their failure to make the requisite showing.

Margo M. Lagueras
                                           [email protected]


06/19/14       Total Psychiatric Medical Services, PC v Allstate Ins. Co.
Erie County, Arbitrator Veronica K. O’Connor
Violation of Condition Precedent Bars Recovery Back to Inception of Claim
The EIP was injured in an accident on August 18, 2012.  At issue were a psychiatric evaluation, treatment and testing.  Allstate issued verification requests and subsequently issued denials based upon the results of a peer review and the failure of the Assignor to appear for scheduled IMEs.  The denials also indicated that the requested verification was never received. 

In October 2012, Applicant arranged for another record review relating to psychiatric treatment rendered on August 28 – 30, 2012.  The peer review doctor found that the testing performed on August 28th was not medically necessary, but that Applicant’s review of medical records on August 30th was.  Applicant did not issue any denials at this point due to the still outstanding verification. 

The Arbitrator determined that the Assignor violated a condition precedent to coverage by failing to appear for the scheduled and rescheduled IMEs.  In addition, no justification for the failure to appear was submitted.  This violation bars recovery of a claim regardless of whether the services were rendered before or after the denial was issued.  As the Applicant stands in the shoes of the Assignor, the claims were properly denied.

06/18/14       Buffalo Rehab Group PT v Allstate Ins. Co.
Erie County, Arbitrator Michelle Murphy-Louden
Three Year Old IME Is Insufficient to Deny Claim
The 19 year-old EIP was involved in a motor vehicle accident on May 19, 2009, sustaining a fractured ankle.  In May 2012, the EIP presented for initial physical therapy evaluation with complaints of left ankle pain and plantar foot irritation.  An x-ray revealed possible spur formation. 

An orthopedic IME was performed in July 2010.  At the time, the EIP was complaining of improved ankle pain.  The examination found normal range of motion, no tenderness and no swelling.  The IME doctor opined that no further orthopedic treatment was necessary.  Based on that opinion, Applicant’s claims were denied.

The Arbitrator, while not questioning the IME findings, noted that a change occurred in the EIP’s left ankle condition over the almost three years after the IME which caused the EIP to seek further treatment.  Respondent should have forwarded the new medical records to the IME doctor for her review and comment as to the medical necessity of the recent treatment rather than simply deny the claims based on a three-year old IME. 

06/18/14       Renovation Medical Surgical v Geico Ins. Co.
Erie County, Arbitrator Douglas S. Coppola
Policy Exhaustion Prior to Arbitration Filing Bars Claim For Fees
The issue was whether the carrier was obligated to pay attorney and filing fees if the arbitration was filed before the policy was exhausted.  The issue was not reached because, upon review of the submitted documents, it was determined that the policy exhausted before the arbitration was filed thus barring the claims for attorney and filing fees.

06/13/14       WJW Medical Products, Inc. v 21st Century Indemnity Ins. Co.
Erie County, Arbitrator Michelle Murphy-Louden
Hobby Inapplicable Where IME Shows Resolved Injuries
The issue was whether Applicant was entitled to reimbursement for a lumbosacral orthosis (LSO).  Applicant argued that the IME report should be disregarded because it was not notarized.  The Arbitrator disagreed with that argument noting that an arbitrator is not held to strict rules of evidence.  The Arbitrator further noted that the ruling in Hobby is inapplicable where the IME doctor’s opinion is based on normal examination findings.  This was not a case where there continued to be positive findings but the examining expert opined that further treatment would be of no benefit.  Here the examining doctor found the injury to be resolved.


07/17/14       American States Insurance Co. v Huff
Appellate Term, First Department
Defendant Aborted EUO Establishing Prima Facie Breach of Condition Precedent
Defendant did not failed to appear for his EUO but rather left before answering any questions regarding the accident or his injuries despite the fact that he was represented by counsel who explained to him the ramifications of his refusal to continue the EUO.  Plaintiff asserted that Huff breached a condition precedent to coverage which resulted in the denials of claims submitted by Huff’s medical providers that had taken assignments of benefits. 

Plaintiff then moved for a declaration that it did not owe coverage, as well as a stay of any arbitration or court action for no-fault benefits.  In support of its motion, plaintiff relied on the EUO transcript and an affidavit of its investigator who was present during the EUO.  The court disagreed with defendant that the EUO transcript was inadmissible because it was certified by the court reporter and considered a party admission.  In addition, the affidavit of the investigator confirmed that Huff did not seek another EUO.  Given that an assignee medical provider “stand in the shoes” of its assignor, the trial court properly granted plaintiff’s motion.

07/01/14       Jamhil Medical, PC v Allstate Insurance Co.
Appellate Term, Second Department
Plaintiff’s “Willful and Contumacious” Conduct Warrants Dismissal of Complaint
Defendant served discovery demands, including a notice to take the deposition of plaintiff’s owner and treating doctor, in March 2010.  In November, plaintiff served a notice of trial and certificate of readiness which defendant then moved to vacate and compel discovery.  Defendant argued that it sought discovery in connection with its belief that plaintiff failed to comply with the state and local licensing requirements and, in support, set forth detailed and specific reasons for its belief.  The Civil Court ordered plaintiff to produce its purported owner and employee for examination within 60 days of the order.  Plaintiff failed to comply and defendant then moved to dismiss the complaint.  Plaintiff submitted written responses to defendant’s discovery demands and opposed the motion to dismiss which was granted by the Civil Court.  On appeal, the court noted that it is within the discretion of the trial court whether to strike a pleading for failure to comply with court-ordered disclosure.  Here, plaintiff demonstrated willful and contumacious conduct by refusing to comply with court-ordered discovery and, in addition, failing to provide a reasonable excuse for its failure.  Therefore, dismiss with prejudice was warranted.
Steven E. Peiper

[email protected]

07/10/14       Duluc v AC & L Food Corp.
Appellate Division, First Department
Defendant’s Decision to Preserve Only Video Depicting the Incident Involving Plaintiff Avoids Discovery Sanction…Barely
Plaintiff sustained injury when she fell in defendant’s market in early August of 2009.  Within a week of the incident, plaintiff had retained counsel who, in turn, advised defendant to preserve “any and all video” depicting the fall.  Upon receiving the notice, defendant’s custodian of records preserved 84 seconds of the video which actually showed the plaintiff falling.  Defendant also reviewed 31 other cameras in the store which did not depict anything unusual or related to the fall. 

The cameras were on a system where, due to a limited amount of storage, the recordings were erased and written over every 21 days.  As such, by the end of August of 2009, the only video surviving from the date of the incident was the 84 seconds previously preserved. 

Eventually, defendants moved for summary judgment, and plaintiff cross-moved seeking to strike defendant’s answer as a sanction for destroying the previous video recordings from the date of the loss.  The court granted defendant’s motion, and denied plaintiff’s motion to strike.  In so holding, the court noted that the remedy of striking a pleading was inappropriate where, as here, there was no showing that the plaintiff’s act was willful, contumacious or in violation of a court order.  The court noted that the burden rests on the party requesting the sanction, and they had failed to meet that standard on this motion. 

In addition, the Court ruled that defendant preserved exactly what plaintiff requested.  Absent a specific request, the court was not inclined to require defendant to preserve hours of tape, for an indefinite period of time, in anticipation that plaintiff may request them at a later date. 

In a vigorous dissent, Justice Saxe noted that the striking of defendant’s Answer or an order of preclusion was excessive where the loss of the items was merely negligent.  However, an adverse inference charge would have been appropriate.  The adverse inference charge would permit the jury to determine that the video was harmful to the defendant, unless, of course, the jury found that the destruction was reasonable under the circumstances. 

While defendant was not required to preserve an indefinite amount of video, Justice Saxe seemed to be advocating that, at a minimum, defendant should have preserved all video from the location on the date of the loss.  Accordingly, Justice Saxe would have denied the motion for summary judgment, and permitted the adverse inference charge at the trial.


Elizabeth A. Fitzpatrick
[email protected]

07/11/14       J.B.D. Construction Inc. v. Mid-Continent Casualty Co.
11th Cir. Court of Appeals
Coverage for Faulty Workmanship
The underlying action for which coverage was sought involved a contract between Sun City and J.B.D. for the construction of a fitness center that would be constructed as an addition to an existing building.  A contract between Sun City and J.B.D. was entered on July 23, 2004 and construction was completed on January 18, 2007.

In the spring of 2007, Sun City and J.B.D. noticed damage caused by water leaks in the fitness center’s roof, windows and doors.  Numerous steps were undertaken by the parties to repair the damage and to eliminate the leaks.  Despite those efforts, Sun City refused to release the final payment because it believed the construction to be deficient.  J.B.D. thereafter initiated a lawsuit against Sun City for payment under the construction contract and Sun City filed a three count counterclaim against J.B.D. for breach of contract, breach of Florida statute 553.84 and negligence.

Allegations of a failure to provide labor services and materials in a workmanlike manner were alleged, as were breaches by J.B.D. in its duty of care, and further contending that construction defects and deficiencies by J.B.D. violated building codes and caused damage to the building and to the interior of the property, other building components and materials and other consequential and resulting damages to other property.

MCC had issued two commercial general liability policies to J.B.D. relevant to the claims at issue.  Upon receipt of the counterclaim, J.B.D. tendered to MCC for defense and indemnification, in response to which MCC issued a reservation of rights to J.B.D. advising it was investigating whether the policies afforded coverage.

On July 15, 2009, J.B.D. agreed to settle Sun City’s claims for $181,750.94 which it funded from its own accounts.  They thereafter notified MCC of its settlement and requested contribution reimbursement under the MCC policy for damages and legal costs.  Having received no response, they thereafter again contacted MCC on or about July 27, 2010, demanding reimbursement and did so once again on August 17, 2010.

On October 12, 2010, MCC forwarded reimbursement to J.B.D. a draft in the amount of $57,017.77 to cover their defense obligation for the identified attorney’s fees, minus the $5,000 deductible.  In response, J.B.D. issued correspondence to MCC insisting that MCC owed it a full reimbursement of the settlement and indicating its intention to file a bad faith lawsuit against MCC if MCC did not submit their remaining balance reimbursement check.

The court cited the property damage definition in MCC’s policy, as well as Exclusion J -- Damage to Property, and Exclusion L -- Damage to Your Work.  Interestingly, the court concluded that the parties agreed that the claim involved an “occurrence” and the issue was limited to the applicability of the cited exclusions.  In this regard, at footnote 4, the court noted:  “It was undisputed that the defective installation qualified as an ‘occurrence’ under the policy and that this ‘occurrence’ took place during a time period covered by the MCC policy.”

The court found that the costs to repair defective construction were not covered property damage, referencing the “your work” exclusion and finding that the MCC policy did not cover claims against J.B.D. for the cost to repair or replace any damage to the completed fitness center or its components either based on the repair or removal of the defective construction itself or based upon the repair of any damage arising out of J.B.D. or its subcontractor’s defective construction.  The policy, by amendment, did not include a subcontractor exception to the referenced exclusion.

The court, however, did find that the allegations of damage to property other than the fitness center caused by J.B.D. or its subcontractor’s defective work potentially came within MCC’s policy coverage and, therefore, triggered MCC’s duty to defend J.B.D. and the entire suit.  The court remanded to the lower court a determination of consequential damages consistent with MCC’s breach of the duty to defend.

06/27/14       Surety Mechanical Services Inc. v.  The Phoenix Ins. Company
United States District Court of New Jersey)
Duty to Defend Construction Defect Claim
In August 2006, Surety entered into a contract with Cape May County Vocational Technical School District to provide mechanical services for the school’s heating, ventilation and air conditioning system.  Some three years later, the school filed suit, alleging that Surety performed its work negligently, that it failed to perform its contractual obligations in a work-like manner and that it failed to perform the work in accordance with common industry standards and the expectations for the project.

Surety was insured under a commercial general liability policy issued by Phoenix from May 16, 2006 through May 16, 2009.  The tech school’s claim was submitted by Surety to Phoenix and Phoenix issued a letter declining coverage.  Both parties filed motions on the issue of whether Phoenix had a duty to defend Tech in the litigation.

Noting New Jersey law with respect to the duty to defend, the court noted that the exception to the broad duty to defend is that an insurance company is not obligated to defend its insured if it intends to dispute coverage based on a question of fact that is not material to the underlying litigation.  There, the insured bears the initial burden of defending itself, but the carrier must reimburse the insured if it is later determined that the claim was actually covered by the policy.

Noting that the Phoenix policy obligated Phoenix to indemnify Surety for any “property damage” caused by an occurrence, the court noted that, pursuant to New Jersey law, a CGL policy does not cover an accident of faulty workmanship but rather faulty workmanship which causes an accident.

Here, the court found a question of fact based upon a letter sent by Tech school’s attorney who stated that the daily onslaught of high humidity from Surety’s HVAC system caused doors to swell, desks to bow and ceiling tiles to dislodge.  The damage for this allegedly totaled $51,041.

The court found that as this would consist of work other than Surety’s work itself, a duty to defend would exist.  However, based upon the proof submitted, the court found that summary judgment to either party was not appropriate.


Audrey A. Seeley
[email protected]

07/07/14         Angarita v. Allstate Ind. Co.
Court of Appeals, Washington
Under Mandatory Automobile Insurance Statute, Coverage for First- and Third-Party Claims Is Not Void as to All Insureds When One Named Insured Commits Fraud Where the Insurer Does Not Demonstrate Prejudice.
On February 19, 2010, Ms. Villanueva was headed toward downtown Seattle.  Ms. Angarita was a passenger in her vehicle and Villanueva’s daughter was a backseat passenger in the same vehicle.  Villanueva’s vehicle was rear-ended by another vehicle operated by Mr. Butler.  Both vehicles pulled off the freeway into a nearby high school parking lot to inspect their vehicles.  Ms. Villanueva spoke to Mr. Butler and inspected her vehicle for damage.  Ms. Angarita claimed she could overhear the conversation but did not understand it due to her limited familiarity of English.  Ms. Angarita did discern that Mr. Butler provided Ms. Villanueva with his name and telephone number.  Ms. Angarita also wrote down Mr. Butler’s license plate number.  Ms. Angarita telephoned her husband, an auto mechanic, to assist Ms. Villanueva in obtaining an estimate of damage for her vehicle.

Thereafter, Ms. Angarita visited Ms. Villanueva’s chiropractor to obtain treatment for injuries allegedly from the motor vehicle accident.  On March 8, 2010, Ms. Villanueva’s attorney contacted Allstate requesting personal injury protection and uninsured motorist coverage from this accident.  On March 24, 2010, Ms. Villanueva’s attorney also advised Allstate that Ms. Angarita was injured in the motor vehicle accident and was also seeking insurance coverage.

Allstate conducted examinations under oath (“EUO”) of Ms. Villanueva and Ms. Angarita.  Ms. Villanueva testified at her EUO that after she and Mr. Butler pulled off of the highway, Mr. Butler did not stop to exchange information with her.  Months later, Ms. Villanueva admitted that this was a lie.

After Ms. Villanueva’s EUO, she immediately sent Ms. Angarita a text message asking her to testify that Mr. Butler left the accident scene.  Ms. Angarita apparently ignored that text message and testified truthfully at her EUO, but did not mention the text message.

Ms. Villanueva’s insurance policy with Allstate contained a “void-for-fraud” provision which provided:

Fraud or Misrepresentation
This entire policy is void from its inception if it was obtained or renewed through material misrepresentation, fraud or concealment of material fact made with the intent to deceive.  This means that Allstate may not be liable for any claims or damages that would otherwise be covered.

We may not provide coverage for any insured who has made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought under this policy.

Allstate denied insurance coverage to Ms. Villanueva and Ms. Angarita based upon Ms. Villanueva’s testimony at her EUO.  Thereafter, Ms. Angarita filed suit against Ms. Villanueva, Mr. Butler and Allstate.  The claim as against Allstate sought declaratory judgment under the Allstate policy issued to Ms. Villanueva.  Ms. Angarita’s motion for partial summary judgment with regard to personal injury protection coverage was granted.  A separate order was entered where the trial court held that Ms. Villanueva’s material misrepresentations voided her insurance policy only as to her and not as to Ms. Angarita or third-parties.  Therefore, Allstate was granted summary judgment in part denying coverage to Ms. Villanueva in this motor vehicle accident.

On appeal, Allstate contends that the trial court granting partial summary judgment in favor of Ms. Angarita for personal injury protection benefits was an error as the insurance policy voided the entire policy if any insured made a fraudulent statement.

The court disagreed, holding that, in Washington, automobile insurance is mandated by state statute to protect not only the named insured but innocent persons who use the public roadway.  In order for the legislative intent to be fulfilled, insurance coverage for other insureds and third-parties, such as pedestrians and passengers, cannot easily be voidable.  The court further held that, in the absence of prejudice to the insurer, the policy could not be voided as to all insureds based upon one insured’s fraudulent conduct.  The court continued on to hold that Allstate did not establish prejudice with respect to Ms. Angarita’s claim, but did do so with regard to Ms. Villanueva’s alleged fraud.  Further, the court stated that the facts in this case did not support a conclusion that Ms. Villanueva’s fraudulent act created prejudice to Allstate as to all of the insureds.

Cassandra A. Kazukenus
[email protected]

DFS and The Attorney General’s Office Allege That Lyft Seeks To Operate Outside of New York State Laws and Regulations

For those who have never heard of Lyft, I should start there.  Lyft is a service which matches drivers with passengers who request a ride though Lyft’s app.  The passenger pays with their phone, and the vehicles are identifiable by the fuzzy pink mustache attached to the grill of the vehicle.  Lyft has been operating in Rochester and Buffalo since April, and it was to start operating in two of the boroughs in New York City with the intent to spread throughout the rest of New York City eventually. 

Recently, DFS and the Attorney General made a motion for a temporary restraining order against the scheduled New York City launch of Lyft’s ridesharing service.  Prior to seeking the restraining order, DFS sent a cease and desist letter outlining the various laws Lyft has purportedly violating or in danger of violating if the ridesharing program begins operation.  

Per Lyft’s website, Lyft provides drivers of the program with excess liability coverage as well as excess uninsured/underinsured coverage.  Lyft’s website states that its “excess coverages will also drop down and act as primary insurance when the driver’s personal policy doesn’t respond.” 

The cease and desist letter sent by DFS indicates that DFS and Lyft met in June, and as a result of the meeting, DFS requested additional information about Lyft’s operations as well as a request to review the insurance policy which purports to insure all Lyft drivers in New York.  Per the cease and desist letter, DFS has reviewed the information provided by Lyft and determined “that Lyft is operating in violation of the New York Insurance and Financial Services Laws.”  Further, the Department asserts that the violations “place New Yorkers at risk, and inappropriately shift the insurance costs of a commercial enterprise to private citizens and their insurers.”

The cease and desist letter alleges that Lyft is violating:

  • Ins. Law §2102 – acting as an insurance producer without a license by soliciting, negotiating and selling an insurance policy
  • Ins. Law §2117 – procuring and selling an insurance policy written by an unlicensed and unauthorized insurer and otherwise aiding such insurer in doing business in New York
  • Ins. Law §2122 – calling attention by advertisement or otherwise to an unauthorized insurer
  • Ins. Law §2324 – Requiring that NY drivers obtain insurance from a specific insurer as a condition of membership in the Lyft program
  • Financial Services Law §408 – misrepresenting to NY drivers that all fares are a “donation” in an effort to evade state and municipal law.


Further, the cease and desist letter asserts that Lyft’s “flagrant non-compliance with New York’s Insurance and Financial Services Laws, its operations expose New York drivers and the New York private passenger automobile insurance market to intolerable risk, cost and uncertainty” because Lyft’s policy is excess to the driver’s personal auto policies.  DFS alleges that “Lyft is foisting risk that properly belongs in the commercial insurance market onto the private market, likely making private automobile insurance more expensive for all New Yorkers.”

After issuing the cease and desist letter, DFS and Attorney General Schneiderman filed a temporary restraining seeking to prevent Lyft from launching in New York City, and per their press release, the temporary restraining order was granted.  No decision has been made at this time whether Lyft may launch its service in New York City or whether it is operating in violation of the Insurance Law currently in Buffalo and Rochester. 


Jennifer A. Ehman
[email protected] 

07/08/14       Turner Construction Co. v. Commerce and Industry Ins. Co.
Supreme Court, New York County
Court Considers “Arising Out of Your Work” Additional Insured Endorsement
This decision arises out of an incident in which John Barton sustained injury while working at the Madison Square Garden construction site during the course of his employment with Falcon Street Company, Inc.  Barton sued Madison Square Garden and the general contractor, Turner Construction.

Turner tendered its defense to defendant’s insured, LVI Environmental Services, Inc.  The tender was primary based on deposition testimony provided by Barton in which he stated that at the time of the incident, he was moving an A-frame when the cart tipped over after striking a divot in the floor.  LVI had previously removed the floor tile in the area where Barton alleges his accident occurred with a chipping gun.  The utilization of the chipping gun to remove the ceramic tile created divots and other damage to the underlying concrete. 

While there was no dispute that a contract was in place requiring LVI to name Turner as an additional insured on a liability policy, defendant denied the tender.  The additional insured endorsement contained in defendant’s policy limited coverage to “liability arising out of your [LVI’s] work for the Additional insured by or for you.” It submitted that this endorsement was not triggered since Barton was not an employee of LVI and because LVI was not alleged to be negligent in Barton’s complaint. 

In considering this motion brought by Turner for a declaration that defendant was obligated to provide defense and indemnification, the court reasoned that the complaint, as well as the deposition testimony of Barton and other employees, allege that a divot in the floor was the cause of Barton’s accident.  The court then opined that these allegations form a basis on which defendant may be obligated to defend the owner and Turner as per the insurance policy since there is a possibility that Barton’s injuries arose out of LVI’s ongoing demolition operations performed for the owner and Turner.

The court then went on to note that the duty to indemnify, however, is determined by the actual basis for the insured’s liability to a third person.  Because the underlying action is still pending, any decision as to indemnity would be premature. 
Take Away:  In reviewing the decision, it is not entirely clear whether the court found that defendant had a duty to defend.  While the court references the depositions transcripts which point to the divot as the cause of the incident, the court only states that defendant “may” have a defense obligation.  It does not state that defendant does have a defense obligation.  Also, the court only issued an order related to indemnity, defense was not addressed. 

06/30/14       Flat Ridge 2 Wind Energy LLC v Those Underwriters at Lloyd’s
Supreme Court, New York County
Phrase “Happening Becomes Known to the Insured” Contained in a Suit Limitation Clause Does Not Refer To Date of Event, But Date of Declination of Coverage
The Underwriters issued a Wind Pro Insurance Policy to plaintiff.  The policy was designed specifically for the wind power generation industry and insured a 66,000 acre wind farm in Kansas. 

On May 19, 2012, a tornado struck the wind farm and surrounding areas.  As a result of the tornado, the wind farm, including several Wind Turbine Generators, suffered substantial damage and loss.  Plaintiff submitted a claim to the Underwriters. 

The issue decided in this action was whether the suit limitation clause contained in the Underwriters’ policy applied to bar this claim.  The clause stated:  “[n]o suit or action on this Policy for the recovery on a claim shall be sustainable in any court of law or equity, unless the insured shall have fully complied with all of the requirements of this Policy, nor unless commenced within twelve (12) months next after the happening becomes known to the Insured, unless a longer period of time is provided by applicable statute.”

Plaintiff brought this action on February 14, 2014.  The Underwriters argued that “happening becomes known to the Insured” referred to the date of the tornado.  Thus, this action commenced almost two years after the tornado was untimely.  Plaintiff opposed this position by arguing that this language did not refer to the event, but to the date of the Underwriters’ declination of coverage.  Further, even if it did refer to the incident date, the suit clause was extended by the six year statute of limitations in New York for breach of contract.   

In considering this issue, the court found that the action was timely.  It held that the interpretation of the “happening” language espoused by plaintiff is consistent with New York law.  It relied on a decision from the Southern District of New York which held that where the policy provision does not refer to the “inception” or “event” of the loss or damage, the limitations period will commence after the claim becomes “due and payable as opposed to the date of the loss or damage to the insured property.  Thus, the suit limitation clause would be computed form the time the cause of action accrued (i.e., date of partial denial), not on the happening of the event.  Only a limitation provision that uses the term of art “after the inception of the loss” or similarly precise language can tie a limitations period to the date of the accident or peril insured against. 

06/23/13       European Bldrs. & Contrs. Corp. v Arch Specialty Ins. Co.
Supreme Court, New York County
Question of Fact as to Whether Insured had a Good Faith Belief in Non-Liability
On March 12, 2008, while in the course of his employment with European Builders, Jozef Lezniak allegedly sustained injury while using an electrically powered hand tool during the course of construction work.  The work was being performed pursuant to contract between the property owner, BSW LLC, and European Builders. 

On the date of the accident, the manager of BSW notified European Builders’ president that Lezniak had sustained a cut to his hand.  In response to this information, European Builder’s president called the company’s insurance agent, and notified him of the accident.  The agent instructed him that he should only notify European Builders’ Workers Compensation carrier, and no other carrier.  European’s president followed this instruction.

On January 22, 2009, Lezniak filed suit against BSW seeking recovery for multiple fractures to the wrist and hand in addition to severed tendons, ligaments and nerves.  BSW then commenced a third-party action against European Builders.  BSW’s attorneys forwarded a copy of the third-party summons and complaint to European Builders and its insurance carrier, Arch.  This was Arch’s first notice of occurrence, claim or suit.  Arch denied coverage for European Builders based on late notice. 

In considering the issue of late notice, the court held that Arch met its prima facie case based on the evidence that it did not receive notice of the accident until approximately 14 months after it occurred.  It then considered whether European Builders had provided sufficient evidence of a good faith belief in non-liability to controvert this showing.  The court acknowledged that reliance on Workers’ Compensation as the employee’s exclusive remedy is, by itself, insufficient.  However, it reasoned that, here, European Builder’s president was specifically instructed by its insurance agent against notifying any other insurance carrier, and relied on the agent’s assurance that such conduct was an industry standard.  Also, the record indicated that European Builders only knew Lezniak cut his hand and was taken to the hospital, but was unaware that Lezniak was claiming that he suffered a more serious injury until it received notice of the third-party action. 

Thus, the court reasoned, absent further information as to European Builder’s knowledge of the extent of the injuries or that Lezniak was out of work, the record was insufficient to establish that European Builder’s lacked a good faith basis for its belief of non-liability. 

Earl K. Cantwell
[email protected]


Shourt v. Fire Insurance Exchange,2014 WL 628 920 (Cal. Ct. App. February 18, 2014).  The insured, Mr. Shourt, claimed he had his neighbors’ permission to create a fire break between their adjacent properties, and he then entered onto his neighbors’ property and cut down and removed several oak trees.  When he was sued for the property damage, he asked his insurance company, Fire Insurance Exchange, to defend him.  Coverage was denied on the essential basis that his homeowner’s policy only covered damage resulting from an accident and not from deliberate actions.

Mr. Shourt then sued Fire Insurance, but the trial court ruled in the insurance company’s favor and this was affirmed on appeal.  The court rejected the argument that because Mr. Shourt believed he had permission, and was not acting to harm his neighbors’ property, his actions and any loss/damage were accidental.  However, the court ruled that his entry on the adjoining property and destruction of the trees was not an accident or occurrence because it was not “unintentional or unexpected”.  The court declined to extend the analysis of accidental or intentional into the subjective mindset of the person causing the injury. 

This case is a reminder that an accidental occurrence does not include intentional or deliberate acts, even if they may be taken under some mistake or misapprehension.  The case is also notable for declining to explore or rely upon subjective intent of the insured/tortfeasor to analyze the accidental/intentional issue, with intent being secondary to the overall question whether the physical act which caused the loss was deliberate and intentional, as opposed to sudden and unexpected.

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